for the fourth circuitpogoarchives.org/m/co/ubl-brief-filed-4th-20100701.pdf · record no. 09-2280...

RECORD NO. 09-2280

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In The

United States Court of Appeals For The Fourth Circuit

THOMAS M. UBL, United States Ex Rel,

Plaintiff – Appellant,

v.

IIF DATA SOLUTIONS; CHARLES PATTEN, SR.,

Defendants – Appellees, and

UNITED STATES GENERAL SERVICES ADMINISTRATION,

Party-in-Interest.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA

AT ALEXANDRIA

BRIEF OF APPELLANT

Victor A. Kubli Michael S. Lieberman KUBLI & ASSOCIATES, P.C. Stephen Stine 8605 Westwood Center Drive DIMUROGINSBERG, P.C. Vienna, Virginia 22182 908 King Street, Suite 200 (703) 749-0000 Alexandria, Virginia 22314 (703) 684-4333 Counsel for Appellant Counsel for Appellant

Case: 09-2280 Document: 39 Date Filed: 07/01/2010 Page: 1

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

DISCLOSURE OF CORPORATE AFFILIATIONS AND OTHER INTERESTS

Only one form needs to be completed for a party even if the party is represented by more than

one attorney. Disclosures must be filed on behalf of all parties to a civil, agency, bankruptcy or

mandamus case. Corporate defendants in a criminal or post-conviction case and corporate amici

curiae are required to file disclosure statements. Counsel has a continuing duty to update this

information.

No. _______ Caption: __________________________________________________

Pursuant to FRAP 26.1 and Local Rule 26.1,

______________________ who is _______________________, makes the following disclosure:

(name of party/amicus) (appellant/appellee/amicus)

1. Is party/amicus a publicly held corporation or other publicly held entity? YES NO

2. Does party/amicus have any parent corporations? YES NO

If yes, identify all parent corporations, including grandparent and great-grandparent

corporations:

3. Is 10% or more of the stock of a party/amicus owned by a publicly held corporation or

other publicly held entity? YES NO

If yes, identify all such owners:

4. Is there any other publicly held corporation or other publicly held entity that has a direct

financial interest in the outcome of the litigation (Local Rule 26.1(b))? YES NO

If yes, identify entity and nature of interest:

5. Is party a trade association? (amici curiae do not complete this question) YES NO

If yes, identify any publicly held member whose stock or equity value could be affected

substantially by the outcome of the proceeding or whose claims the trade association is

pursuing in a representative capacity, or state that there is no such member:

6. Does this case arise out of a bankruptcy proceeding? YES NO

If yes, identify any trustee and the members of any creditors’ committee:

CERTIFICATE OF SERVICE **************************

I certify that on _________________ the foregoing document was served on all parties or their

counsel of record through the CM/ECF system if they are registered users or, if they are not, by

serving a true and correct copy at the addresses listed below:

_______________________________ ________________________

(signature) (date)

Case: 09-2280 Document: 9 Date Filed: 12/03/2009 Page: 1Case: 09-2280 Document: 39 Date Filed: 07/01/2010 Page: 2

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TABLE OF CONTENTS

Page TABLE OF AUTHORITIES ....................................................................................iv JURISDICTIONAL STATEMENT ..........................................................................1 STATEMENT OF ISSUES .......................................................................................1 STATEMENT OF THE CASE..................................................................................2 STATEMENT OF FACTS ........................................................................................7

I. Overview of GSA Contracting Procedures at Issue in This Case.........7 II. IIF Obtained its GSA Contracts Through False Representations .........8

A. IIF and Its Award of GSA Contracts ..........................................8 B. During Ubl’s Case in Chief The Evidence Showed that

IIF Knowingly Made Material False Representations to Obtain Contract Awards .............................................................9

C. IIF Defended the Complaint Based Upon a

Misconstruction of the Government Knowledge Defense and by Having Factual Witnesses Testify as Experts ...............14

D. Jury Deliberations and the Verdict ...........................................15

E. IIF’s Post Trial Motion for Attorney Fees Was Granted

Against Ubl in the Amount of $501,546...................................15 SUMMARY OF ARGUMENT ...............................................................................16 ARGUMENT ...........................................................................................................18 STANDARDS OF REVIEW.........................................................................18


ii

I. THE TRIAL COURT ERRED IN FAILING TO ENFORCE THE MAY 6, 2008 SETTLEMENT AGREEMENT FOR $8,900,000 WITH THE IIF DEFENDANTS .....................................19

II. THE TRIAL COURT ERRED IN PERMITTING IIF TO

PRESENT EVIDENCE AND ARGUE THAT NGB’S ACCEPTANCE OF UNQUALIFIED LABOR NEGATES LIABILITY UNDER THE GOVERNMENT KNOWLEDGE DEFENSE ...........................................................................................23

A. The Trial Court Erred in Denying Ubl’s Motion in

Limine........................................................................................23 1. The Requirements in IIF’s Contracts with GSA

Could Not Be Altered by NGB ......................................25

2. The Government’s Knowledge Defense Is Inapplicable In This Case ...............................................31

B. The Trial Court’s Error Was Immensely Prejudicial to

Ubl.............................................................................................35 III. THE TRIAL COURT ABUSED ITS DISCRETION IN

STRIKING UBL’S GSA EXPERT, NEAL FOX...............................37

A. The Court Abused its Discretion in Finding Fox Was Not Qualified and Would Not Provide Helpful Testimony to the Jury ......................................................................................37 1. Standard of Review for Excluding An Expert

Witness ...........................................................................39

2. The Court Abused Its Discretion in Excluding Mr. Fox ..................................................................................40

B. The Court Abused Its Discretion in Finding Fox Could

Not Testify as to IIF’S New Defenses at Trial and Could Not Testify as to GSA’s Opinion of IIF’S Actions ..................46


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IV. THE TRIAL COURT ABUSED ITS DISCRETION IN PERMITTING IIF’S PRIVATE ACCOUNTANT TO TESTIFY AS TO GSA POLICIES AND PROCEDURES WHEN HE WAS NEVER IDENTIFIED AS AN EXPERT..............48

V. THE TRIAL COURT EXCLUDED RELEVANT

TESTIMONY FROM TWO FACT WITNESSES ON THE ERRONEOUS BASIS THAT THE FACT WITNESSES’ TESTIMONY INCLUDED ADDITIONAL INFORMATION NOT CONTAINED IN THEIR DEPOSITION TESTIMONY .........50

VI. THE TRIAL COURT ERRED IN PERMITTING IIF TO

ELICIT TESTIMONY THAT NGB WAS AWARE OF THE LAWSUIT AND HAD NOT CANCELLED IIF’S CONTRACT AS WELL AS INTRODUCING EVIDENCE AND ARGUMENT THAT THE GOVERNMENT HAD NOT INTERVENED IN THIS ACTION ....................................................53

VII. THE TRIAL COURT ERRED IN AWARDING IIF

$501,546.00 IN ATTORNEY FEES FOR THE TIME PERIOD OF MARCH 24, 2009 TO OCTOBER 27, 2009................................55

A. The Court Erred In Finding Ubl’s Claims to be “Clearly

Frivolous”..................................................................................55

B. The Court Erred In Finding that As of March 24, 2009 Ubl Should Have Known That He Had No Reasonable Chance of Success.....................................................................67

C. Defendant’s Fees For the Five Attorneys Billed Were

Unreasonable.............................................................................70

CONCLUSION........................................................................................................72 CERTIFICATE OF COMPLIANCE CERTIFICATE OF FILING AND SERVICE


iv

TABLE OF AUTHORITIES

Page(s) CASES American Sys. Consulting, Inc.,

B 294644, 2004 CPD ¶ 247 (Dec. 13, 2004).................................................26 Christianburg Garment Co. v. EEOC,

434 U.S. 412 (1978).......................................................................................57 Fiberglass Insulators, Inc. v. Dupuy,

856 F.2d 652 (4th Cir. 1988) ..........................................................................22 Friendship Heights Assocs. v. Vlastimil Koubek, A.I.A.,

785 F.2d 1154 (4th Cir. 1986) ............................................................40, 41, 42 Garrett v. Desa Industries, Inc.,

705 F.2d 721 (4th Cir. 1983) .................................................................. passim Hensley v. Alcon Laboratories, Inc.,

277 F.3d 535 (4th Cir. 2002) ..........................................................................22 Houston v. Norton,

215 F.3d 1172 (10th Cir. 2000) ......................................................................57 Koon v. United States,

518 U.S. 81 (1996).........................................................................................19 Kopf v. Skyrm,

993 F.2d 374 (4th Cir. 1993) ..........................................................................40 McDonnell v. Miller Oil Co.,

134 F.3d 638 (4th Cir. 1988) ..........................................................................19 Melton v. Pasqua,

339 F.3d 222 (4th Cir. 2003) ..........................................................................18


v

Moore v. Beaufort County, 936 F.2d 159 (4th Cir. 1991) ..........................................................................22

Perot Systems Government Services, Inc.,

B-402138, 2010 CPD ¶ 64, 2010 WL 884032 (Jan. 21, 2010) ...............26, 28 Persinger v. Norfolk & Western Railway Co.,

920 F.2d 1185 (4th Cir. 1990) ........................................................................45 Pfingston v. Ronan Eng’g Co.,

284 F.3d 999 (9th Cir. 2002) .................................................................... 57-58 Rafizadeh v. Continental Common, Inc.,

553 F.2d 869 (5th Cir. 2008) ..........................................................................58 Rowland v. Am. Gen. Fin., Inc., 340 F.3d 187 (4th Cir. 2003) ..........................................................................19 Sanford’s Domestic/International Trade,

B-230580, B-230580-2 88-2 CPD ¶ 214 (Sept. 6, 1998) ..............................64 Science Applications International,

B-401773, 2009 CPD ¶ 229 (Nov. 10, 2009) .......................................... 26-27 Scott v. Sears, Roebuck & Co.,

789 F.2d 1052 (4th Cir. 1986) .................................................................. 45-46 Tarheel Specialties, Inc.,

B-298197; B-298197.2, 2006 CPD ¶ 140 (July 17, 2006)................26, 29, 30 United States v. Basham,

561 F.3d 302 (4th Cir 2009) .....................................................................19, 72 United States v. Cheek,

94 F.3d 136 (4th Cir. 1996) ............................................................................18 United States v. Collins,

415 F.3d 304 (4th Cir. 2005) ..........................................................................18


vi

United States v. Cripps, 460 F. Supp. 969 (E.D. Mich. 1978) .............................................................33

United States v. Cushman & Wakefield, Inc., 275 F. Supp. 2d 763 (N.D. Tex. 2002) ..........................................................33

United States v. Nat’l Wholesalers,

236 F.2d 944 (9th Cir. 1956) .........................................................................33 United States v. Perkins,

470 F.3d 150 (4th Cir. 2006) ..........................................................................40 United States v. Safavian, 528 F.3d 957 (D.C. Cir. 2008).......................................................................49 United States ex rel. Atkins v. McInteer,

470 F.3d 1350 (11th Cir. 2006) ......................................................................55 United States ex rel. Berge v. Board of Trustees of the University of Alabama,

104 F.3d 1453 (4th Cir. 1997), cert denied, 522 U.S. 916 (1997).......................................................................................54

United States ex rel. Butler v. Hughes Helicopters, Inc.,

71 F.3d 321 (9th Cir. 1995) ............................................................................33 United States ex rel. El-Amin v. The George Washington Hospital,

533 F. Supp. 2d 12 (D.D.C. 2008).................................................................55 United States ex rel. Grynberg v. Praxair, Inc.,

389 F.3d 1038 (10th Cir. 2004) ..........................................................19, 32, 57 United States ex rel. Gudur v. Deloitte Consulting LLP,

512 F. Supp. 2d 920 (S.D. Tex. 2007)...........................................................32 United States ex rel. Hagood v. Sonoma County Water Agency,

929 F.2d 1416 (9th Cir. 1992) ........................................................................32 United States ex rel. Harrison v. Westinghouse Savannah River Co.,

352 F.3d 908 (4th Cir. 2003) ..........................................................................31


vii

United States ex rel. J. Cooper & Assocs. v. Bernard Hodes Group, Inc., 422 F. Supp. 2d 225 (D.D.C. 2006)...............................................................58 United States ex rel. Mayman v. Martin Marietta Corp.,

894 F. Supp. 218 (D. Md. 1995)....................................................................33

United States ex rel. Norman Rille and Neal Roberts v. EMC Corporation, No. 1:09-cv-00628-GBL-TRJ .......................................................................28

United States ex rel. Stone v. Rockwell International Corp.,

282 F.3d 787 (10th Cir. 2002), rev’d in part on other grounds, 549 U.S. 457 (2007).......................................................................................33

United States ex rel. Vuyyuru v. Jahdav,

555 F.3d 337 (4th Cir. 2009) ..........................................................................58

Winter v. Cath-DR/Balti Joint Venture, 497 F.3d 1339 (Fed. Cir. 2007) .....................................................................34

STATUTES 10 U.S.C. § 2304......................................................................................................26 18 U.S.C. § 1001......................................................................................................65 28 U.S.C. § 1291........................................................................................................1 28 U.S.C. § 1331........................................................................................................1 31 U.S.C. §§ 3729 et seq........................................................................................1, 3 31 U.S.C. § 3729(a)(1)(A)-(B) ................................................................................34 31 U.S.C. §§ 3729-32 ................................................................................................1 31 U.S.C. § 3732........................................................................................................1 41 U.S.C. § 253........................................................................................................26


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RULES Fed. R. Civ. P. 9(b) ................................................................................................3, 4 Fed. R. Civ. P. 26(e).....................................................................................14, 17, 52 Fed. R. Civ. P. 37(c)(1)............................................................................................48 Fed. R. Civ. P. 50 .......................................................................................................6 Fed. R. Evid. 702 .........................................................................................39, 40, 41 REGULATIONS 48 C.F.R. § 2.101 ...............................................................................................10, 63 48 C.F.R. § 6.102(d) ................................................................................................26 48 C.F.R. § 8.402(a).................................................................................................25 48 C.F.R. § 8.404(a).................................................................................................26 48 C.F.R. § 15 ......................................................................................................7, 26 48 C.F.R. § 15.402 .....................................................................................................8 48 C.F.R. § 15.403-1..................................................................................................8 48 C.F.R. § 3729(b) .................................................................................................25 48 C.F.R. § 3729(b)(4).............................................................................................67 48 C.F.R. § 3730(d)(4).............................................................................6, 56, 57, 58


ix

OTHER AUTHORITIES Advisory Committee Notes to Federal Rules of Civil Procedure 26(e) ..................53 John Cibinic, Jr., Ralph C. Nash, Jr. & James F. Nagle, Administration of Government Contracts (4th ed. 2006) ........................................34 Moore’s Federal Practice § 26.131[1] ....................................................................52


JURISDICTIONAL STATEMENT

The federal courts have jurisdiction of this action under 28 U.S.C. § 1331

and 31 U.S.C. §§ 3729-32 (2000). Venue was proper in the District Court for the

Eastern District of Virginia (“the court”) under id. § 3732, because at least one

Defendant/Appellee transacted business in the District, and at least one act

proscribed by 31 U.S.C. § 3729 occurred in that District.

This Court possesses jurisdiction under 28 U.S.C. § 1291 (2000). The

Orders appealed from were entered on October 27, 2009, April 28, 2010 and

December 4, 2010. Timely notices of appeal were filed by Relator on November

9, 2009, January 4, 2010 (Amended Notice) and May 5, 2010 (Second Amended

Notice).

STATEMENT OF ISSUES

1. Whether the trial court erred in failing to enforce the IIF Defendants’

May 6, 2008 settlement agreement?

2. Whether the trial court erred in permitting IIF to present evidence and

argue that the National Guard’s acceptance of unqualified IIF labor under IIF’s

U.S. General Services Administration contract may negate False Claims Act

liability under the government knowledge defense?

3. Whether the trial court abused its discretion in striking Ubl’s U.S.

General Services Administration expert witness?


2

4. Whether the trial court abused its discretion in permitting IIF’s

accountant to testify as to U.S. General Services Administration policies and labor

categories when he was never identified as an expert witness?

5. Whether the trial court abused its discretion in excluding relevant

testimony from two fact witnesses on the grounds that the anticipated testimony

included information not included in their deposition testimony?

6. Whether the trial court abused its discretion in permitting IIF to elicit

testimony that NGB was aware of this lawsuit and had not cancelled IIF’s contracts

as well as introducing evidence and argument that the Government had not taken

legal action against IIF?

7. Whether the trial court abused its discretion in awarding defendants

$501,546 in attorneys’ fees for the time period of March 24 to October 27, 2009?

STATEMENT OF THE CASE

As Judge O’Grady noted in his April 28, 2010 Memorandum Opinion,

“[t]his case proceeded down a long and tumultuous procedural path,”1 culminating

in a seven day jury trial… “where after deliberation, the jury returned a verdict in

Defendants’ favor on all counts.” (J.A. 1983). Unfortunately, the court’s errors in

refusing to enforce an $8.9 million settlement between the parties, followed by the

court’s multiple erroneous trial rulings have prejudiced Appellant Thomas Ubl

1 “J.A. #” designates the joint appendix page.


3

(“Ubl”) and destroyed the core legal mandate supporting the rationale and indeed

entire raison d’etre of the U.S. General Services Administration’s (“GSA’s”)

Government-wide contracting program. These serious errors by the court require

correction. This Court should vacate the court’s judgment in favor of the

Appellees.

On June 2, 2006, Ubl, initiated this qui tam action under the False Claims

Act (“FCA”), 31 U.S.C. §§ 3729 et seq., by filing a Complaint, under seal, alleging

that his former employer, IIF Data Solutions, Inc. (“IIF”), and its vice-president,

Charles Patten, Sr. (“Patten”), (collectively “IIF”) fraudulently induced an award

of GSA Multiple Award Schedule (“MAS”) contracts,2 and thereafter submitted

false claims under those MAS contracts. (Dkt. 1). Ubl worked for IIF in 2001-02,

starting soon after IIF received a lucrative GSA Schedule Information Technology

(“IT”) contract and continuing during the time IIF obtained two additional GSA

contracts (MOBIS3 and Environmental) utilizing the sales and pricing data

supplied to GSA to obtain the IT contract.

The Complaint was unsealed and served on IIF, which moved to dismiss

under Fed. R. Civ. P. 9(b). (Dkt. 16). On March 30, 2007, the motion was granted

2 MAS contracts also are referred to as Federal Supply Schedule (“FSS”) contracts, an older description. Cases cited herein occasionally refer to FSS contracts. 3 MOBIS stands for Management Organizational & Business Improvement Services. (J.A. 1371).


4

with leave to amend (Dkt. 30), and Ubl filed an Amended Complaint on April 13,

2007. (J.A. 41-59). IIF’s motion to dismiss under Rule 9(b) was denied by Judge

T.S. Ellis, III, and after discovery, several IIF motions for summary judgment, to

dismiss and to exclude evidence were denied by Judge Liam O’Grady. (Dkt. 45,

187, 234) (J.A. 137). Just prior to the scheduled trial date of May 6, 2008, the

court decided several pre-trial motions. Among those germane to this appeal are

IIF’s Daubert Motion to Exclude Neal Fox and G. Thorn McDaniel, III

(respectively, Ubl’s GSA and damages experts), denied on April 29, 2008 (J.A.

138, 315, 348), and Ubl’s Motion to Exclude Evidence Regarding the United

States’ Decision Not to Intervene (J.A. 314a), granted on April 30, 2008. (J.A.

348).

On May 6, 2008, when the jury trial was to commence, IIF and Ubl reached

a settlement during mediation before Magistrate Judge Jones, which was

memorialized in a written settlement agreement. Under the settlement, IIF agreed

to pay the United States $8,900,000, including Ubl’s attorney fees and costs (inter

alia). (J.A.435-437). Settlement agreement paragraph 21 states that the agreement

is void without Government approval, but that “if the Government does not

approve this agreement, the parties shall cooperate in good faith to effectuate

changes to this Agreement that will be satisfactory to the Government.” (J.A.

436). The Department of Justice (“DOJ”), whose representative was present in


5

chambers during the final construction of the agreement, later objected to several

aspects of the settlement agreement relating to allocation between the United States

and Ubl of the $8.9 million in proceeds.

On March 19, 2009, IIF added Robert Cynkar as counsel. (Dkt. 280).

On April 17, 2009, IIF filed a motion to dismiss for lack of subject matter

jurisdiction, which was denied on May 5, 2009. (Dkt. 287). On May 15, 2009, the

Court re-scheduled the jury trial for October 19, 2009 (Dkt. 290), although the

Government and Ubl remained in discussions relating to the settlement agreement

with the aid of Magistrate Judge Jones. See, e.g., Docket Sheet, June 25, 2009.

Through September of 2009, discussions between Ubl and the Government

continued toward resolving DOJ’s objections to the settlement agreement issues.

On September 17, 2009, the DOJ and Ubl reached an agreement in principle. (J.A.

432). Based on the Government’s approval in principle, Ubl filed a motion to

enforce the settlement agreement. (J.A.419-437). Despite the resolution-in-

principle of the settlement agreement issues, on October 9, 2009 (ten days before

the trial was scheduled to commence), the court heard argument (J.A. 438-453) and

denied Ubl’s motion to enforce the settlement agreement or take the case off the

docket for further proceedings (Dkt. 309), thereby disregarding and frustrating the

cooperative terms and conditions of the settlement.


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The case proceeded to trial on October 19, 2009. During the seven-day jury

trial, the court limited the testimony of several important Ubl witnesses, and

excluded Ubl’s GSA expert, Neal Fox. (J.A. 977-1033). After Ubl presented his

case-in-chief, the court declined to grant IIF’s motion under Fed. R. Civ. P. 50. On

October 27, 2009, the jury returned a verdict for IIF on the Amended Complaint

and for Ubl on IIF’s counterclaim alleging theft of trade secrets. (J.A.1649).

Judgment was entered that day. (J.A. 1661).

On November 12, 2009, IIF filed a motion for attorneys’ fees arguing that

Ubl’s case was “clearly frivolous” within the meaning of FCA § 3730(d)(4) (Dkt.

341), which was granted as to Ubl on December 4, 2009. (J.A. 1951). On April

28, 2009 the Court assessed $501,546.00 in attorneys’ fees against Ubl. (J.A.

2008).

On November 9, 2009, Ubl timely filed a Notice of Appeal of the October

27, 2009 Judgment Order. (J.A. 1674). On January 4 and 6, 2010, an Amended

Notice of Appeal was timely filed to the Court’s December 4, 2009 Order granting

attorney fees against Ubl. (J.A. 1954). On May 5, 2010, a subsequent Amended

Notice of Appeal was timely filed by Ubl to include an appeal of the April 28,

2010 award of $501,546 in attorney fees against him. (Dkt. 379).


7

STATEMENT OF FACTS I. Overview of GSA Contracting Procedures at Issue in This Case

The GSA’s MAS program provides a simplified mechanism by which U.S.

agencies may acquire commercial services and supplies without the burden of full

and open competition for each individual agency order. The GSA awards MAS

contracts for each commercial service or supply. The items and the prices for the

items are established through initial negotiations between the GSA’s warranted

Contracting Officer and the potential MAS contractor; and the negotiated items

and prices are set forth in the resulting GSA MAS contract award.

The MAS contractor then publishes its MAS catalog to the federal agencies,

and those agencies use the MAS catalog to order the approved items, services or

supplies. Significantly, since the prices already have been vetted in connection

with the original MAS contract award, the federal agencies may place orders

without a cost and pricing audit, or the full and open competition otherwise

required by the Truth in Negotiations Act, the Competition in Contracting Act and

Title 48 of the Code of Federal Regulations, Federal Acquisition Regulation

(“FAR”) Part 15.

In the initial negotiations, the would-be MAS contractor must provide the

GSA with either: (1) correct, accurate and complete “cost or pricing data” and

submit to an audit, or (2) if the offeror has the requisite commercial sales, its


8

complete commercial sales history for the services or items supplied, including

pricing and discount information, and a commercial price list. In the latter case,

the GSA Contracting Officer uses that information, in lieu of more detailed and

cumbersome “cost or pricing data,” to evaluate the reasonableness of offered price,

to negotiate a Government discount and to then make an award decision. E.g. FAR

15.402; 15.403-1.

Offerors providing false commercial sales, pricing and discount information

in a proposal to obtain a MAS contract deny the GSA Contracting Officer what she

needs to protect the Government’s interests, i.e., to award MAS contracts to

experienced and responsible contractors at prices tested in the commercial

marketplace which therefore are fair and reasonable; and thereby to meet the GSA

Contracting Officer’s “fiduciary responsibility to the American taxpayer and to

customer agencies to take full advantage of the government’s leverage in the

market in order to obtain the best deal for the taxpayer” and to obtain the Most

Favored Customer status for the government by obtaining the offeror’s best price.

(J.A. 1368).

II. IIF Obtained its GSA Contracts Through False Representations

A. IIF and Its Award of GSA Contracts

IIF was established in 1998 by Patten and his wife. At the time, Patten was

in the National Guard. While he was still employed by the Guard, Patten began


9

negotiating to obtain National Guard contracting work for IIF from The McVey

Corp., Inc. (“TMCI”). Patten retired from the National Guard in August, 1998, and

subsequently, IIF and TMCI entered into a contract to perform subcontracting

work for Amerind, Inc., a prime contractor performing services for the National

Guard Bureau (“NGB”). IIF’s work for TMCI concluded in May, 1999, and

shortly thereafter, IIF began performing work directly as a subcontractor for

Amerind providing services to NGB.

In August 2000, IIF submitted a proposal to GSA for a MAS contract for IT

services which involved labor categories ranging from program manager to quality

assurance analyst. In November 2000, GSA awarded IIF a MAS contract for six

labor categories as specific prices. In 2001, IIF sought several additions to the

labor categories, and in July 2001, GSA added these to labor categories to IIF’s

MAS IT contract. In 2002, IIF obtained two additional GSA MAS contracts:

MOBIS and Environmental. Virtually all of the orders under these three GSA

contracts were placed by NGB, where (as noted) Patten had worked.

B. During Ubl’s Case in Chief The Evidence Showed that IIF Knowingly Made Material False Representations to Obtain Contract Awards

In their proposals to the GSA for the MAS contracts, IIF provided false prior

sales and discounting information to induce GSA to award the contract at specific

prices. For example, IIF reported to GSA commercial prices based on negotiated


10

discounts for a 60-hour work week with TMCI, and asked GSA not to take those

lower labor rates into account in determining the MAS contract price (J.A. 1302).

In reality, there were no such discounts, much less negotiated discounts.

IIF also submitted to GSA a “January 2000 commercial price list” of the

labor categories IIF supposedly had sold in the open market at the established

catalog or market prices therein (J.A. 1329). In fact, IIF had never previously used

the commercial price list that was presented to the GSA (J.A. 582-589). Indeed,

IIF could not recall selling any of the items on the commercial price list at the

prices listed therein (J.A. 583, 587); the price list itself was backdated (J.A. 586-

587); and the price list lacked the statement expressly required by the GSA’s MAS

contract solicitation that warned GSA that the proffered price list was not actually

used in the marketplace (J.A. 589, 1294 at (c)(1)). Further, IIF reported to GSA

standard discounts off of IIF’s so-called commercial sales prices (J.A. 1303), when

in fact there never were previous sales of the labor categories at the listed prices

and, necessarily, no standard discounts of such non-existent sales prices. (J.A.

1305).

Finally, IIF reported to GSA a specific “hourly rate on PO [Purchase Order]”

purportedly issued by Amerind (J.A. 1305) in order to establish that the prices

proposed for each of the offered labor categories were “market tested” and

therefore fair and reasonable. (J.A. 61) (citing FAR 2.101). In fact, there were no


11

“hourly rates on PO” for the listed labor categories (or indeed any labor

categories). (J.A.1151-53; 1228-1231; 1305). Instead, the sales to Amerind were

fixed-price, billed monthly. They were not sales of labor categories at hourly rates

(much less from a catalog or price list for such labor categories at the hourly rates

listed therein) as IIF told the GSA. (J.A. 1115-53; 1228-1231). The prices IIF

proposed for the offered labor categories were not market-tested. IIF simply made

them up.

IIF’s false representations to GSA formed the basis for its award of the MAS

IT contract and the labor category prices therein. IIF’s fabricated and backdated

commercial price list – and the fictive pricing data therein -- was one of the

explicitly-stated “Bas[e]s for Negotiation and Award.” (J.A. 1332-1333)

[“Commercial Price List effective January 2000”) (“This contract includes the

following . . . Commercial Price List dated January-1-2000”). The listed Amerind

purchase orders and supposed labor category “hour rates” therein were an explicit

“basis” for the GSA’s ultimate “negotiation and award” of the IT MAS contract to

IIF. (J.A. 1333). IIF’s subsequent two contracts (the “Environmental” and

“MOBIS” contracts) were obtained on the basis of the IT contract award, as the

awards themselves expressly state. (J.A. 1366-69; 1370-1373) (Sections 3,

“Justification,” therein).


12

IIF also induced the award of the IT contract by falsely claiming in its

August 23, 2000 offer (J.A. 1288) that it had previously “sold” Analyst II labor to

Amerind for $37.80 per labor hour (J.A. 1305), which required a minimum of four

years IT experience and a four year bachelor degree. In fact, unbeknownst to

GSA, these “Analyst II” services were performed by Charles Patten, Jr., a recent

high school graduate with virtually no IT experience. (J.A. 878). Likewise, IIF

billed Vince Apesa as an Analyst II, even though his resume and testimony

indicated that he had less than four years of IT experience. (J.A. 920).

Once GSA awarded the IT MAS contract to IIF (and later the Environmental

and MOBIS contracts), the company continued its pattern of lying about its

unqualified labor, of exploiting its GSA contracts by billing GSA for labor

categories at inflated prices and by misclassifying many of the labor personnel it

provided into higher-priced categories for which the individuals who performed

the work did not remotely qualify. See June 2001 through June 2002 IIF invoices

billing IT contract services to GSA. (J.A. 1374-75, 1381-82, 1386-87, 1391-92,

1445-46, 1450-51, 1459-60, 1477-78, 1151-1512). Specifically, IIF consistently

billed for work by individuals who lacked the education or experience to qualify

for the labor categories at which they were (over) billed and even billed Kim

Trimble for IT services for three-quarters of her time when she was not performing


13

any IT related services for NGB.4 As one of many examples, IIF continued to

report Mr. Patten’s son, a recent high school graduate, with no more than five

months of IT experience and no bachelor’s degree as an Analyst II. (J.A. 593-597;

1317).

At trial, Ubl introduced the testimony of several GSA Contracting Officers

(“COs”), including the CO who awarded the IT contract, that false commercial

pricing information contained in an offer was capable of affecting their award

decision, and that if such information were discovered, a recommendation of no

award would likely be issued. (J.A. 506-509). In other words, the fabricated and

backdated commercial price list and other false sales and pricing information were

material.

Under its IT, Environmental and MOBIS contracts, IIF submitted to GSA a

total of at least 2,100 invoices claiming over $74 million. The United States paid

these invoices in full. (E.g., J.A. 1374-75, 1380-81, 1386-87, 1391-92, 1397-98,

1445-46, 1450-51, 1459-60, 1477-78, 1511-1512). Ubl’s damages expert, Thorne

McDaniel, who did not testify due to the court’s exclusion of a predicate expert

witness, Fox (see Argument III, infra at n. 11), estimated in his report that IIF’s

4 See testimony of Charles Patten, Sr. (J.A. 593-598); Charles Patten Jr, (J.A. 878-881);Vince Apesa (J.A. 920); Kim Trimble, (J.A. 749, 783-800) and other documentary evidence (e.g. Apesa resume, J.A.1282-87).


14

actual overcharges to the government for unqualified labor or improperly awarded

task orders totaled over $18 million. (J.A. 225).

Besides excluding Ubl’s experts, the court also prevented several fact

witnesses from giving critical testimony as to IIF’s fraudulent activities, on the

grounds that Ubl violated Fed. R. Civ. P. 26(e) by not informing IIF that the

witnesses’ anticipated testimony would include material not disclosed during their

depositions, which Ubl had just learned. See Argument V, infra.

C. IIF Defended the Complaint Based Upon a Misconstruction of the Government Knowledge Defense and by Having Factual Witnesses Testify as Experts

IIF defended Ubl’s Complaint in significant part by arguing that regardless

of any false statements to the GSA in obtaining the MAS contracts or in providing

unqualified personnel to fulfill the contracts, the ordering agency, NGB, was

permitted to ignore the requirements of the GSA MAS contract and hire personnel

at labor categories and rates for which the person lacked either the education or

experience stated in the GSA MAS contracts (as long as the ordering agency was

happy with the work). Ubl explained to the court that IIF’s argument was clearly

wrong as a matter of fact and as a matter of law. However, the trial court rejected

Ubl’s objections. (J.A.1026-1028). See Argument II, infra.

Furthermore, during IIF’s case, over Ubl’s objection, the court permitted IIF

to elicit expert testimony from a factual witness, accountant Robert Taylor, to the


15

effect that a GSA MAS contractor may provide and bill labor even if it does not

satisfy the definition for the MAS contract labor category and price under which

such labor is billed. (J.A.1059). Moreover, Taylor also was permitted to testify

that the “government” for purposes of the administration of GSA MAS contracts is

the ordering agency (here, NGB) and not the GSA. (J.A. 1080).

D. Jury Deliberations and the Verdict

After approximately seven hours, the jury returned a verdict denying Ubl’s

claims and also denying IIF’s counterclaim. Judgment was entered that day,

October 27, 2009. (J.A. 1661).

E. IIF’s Post Trial Motion for Attorney Fees Was Granted Against Ubl in the Amount of $501,546

After trial, IIF’s motion for attorney fees was granted by the court on

December 4, 2009, and on April 28, 2010, the court issued a Judgment Order and

Memorandum Opinion awarding attorney fees against Ubl in the amount of

$501,546, and setting forth what it considered to be “the most prevalent examples

of the frivolous nature of Ubl’s case.” (J.A. 1987-1999). In part, the court relied

upon the notion that it was NGB which “had the responsibility for determining

whether a particular employee met the relevant qualifications” and hence there was

no basis for alleging that IIF’s billing of personnel who failed to satisfy the

definitions of the labor categories and prices at which they were billed rose to the

level of fraud. Similarly, the court found that certain misrepresentations were a


16

“hyper-technical” construction of whether IIF listed rates were “on” purchase

orders, that IIF’s backdated and previously unused commercial pricelist was an

oversight, and that other erroneous pricing information was mere “technical” error.

(J.A. 1987-1999).

Accordingly, despite the court’s denial of IIF’s motion for summary

judgment, despite the fact that IIF entered into a settlement agreement with Ubl for

$8.900,000 on the day the first trial was scheduled to commence, and despite the

fact that Ubl repeatedly demonstrated during the trial that IIF had submitted false

information in order to obtain its MAS contracts, the court concluded that Ubl’s

claims were “clearly frivolous” and had no reasonable chance of success. (J.A.

1984-1989). In this appeal, Ubl challenges the court’s conclusions in this regard

and its award of $501,546 in attorney fees. See Argument VIII, infra.

SUMMARY OF ARGUMENT

In this qui tam action, the trial court initially erred in not enforcing an $8.9

million settlement agreement after the Government and Ubl resolved their

differences and the Government was prepared to obtain the proper authorized

signatures. (Issue 1).

Then, at trial the court made numerous erroneous rulings that were highly

prejudicial to the Relator’s case and led to a defense verdict. First, the court

allowed IIF to misapply the government knowledge defense by arguing that the


17

National Guard’s purported knowledge of IIF’s fraudulent conduct absolved IIF

from liability even though the contracts at issue were with the GSA and

administered by the GSA and by law, the National Guard could not change the

contracts or ratify IIF’s fraud. (Issue 2). In addition, the court excluded Ubl’s

GSA expert (the former GSA Assistant Commissioner of Acquisitions, the third

ranking position at GSA and who oversaw GSA’s MAS program) from testifying

based upon the erroneous conclusion that his testimony would not be helpful to the

jury (issue 3), even though the court then (erroneously) allowed IIF’s private

accountant, who was not designated as an expert, to provide his opinions on some

of the same issues regarding IT qualifications, GSA contract requirements and

GSA policy. (Issue 4). In addition to excluding the Relator’s expert, the court also

erroneously excluded important testimony from two fact witnesses under a

misapplication of Rule 26(e) because Relator did not inform the defense that the

fact witnesses’ anticipated testimony differed from their deposition testimony

(which Relator had just learned). (Issue 5). The last trial error before the Court is

that the trial court erroneously permitted the defense to elicit testimony and argue

that NGB was aware of the lawsuit and had not cancelled IIF’s contracts, as well as

introducing evidence and argument that the Government had not instituted legal

proceedings against IIF, both in contravention of law and an earlier court pre-trial

order. (Issue 6).


18

After trial, the trial court abused its discretion by awarding defendants’ over

$500,000 in attorney fees based upon the clearly erroneous conclusion that the

Relator’s should have known that he could not have prevailed in this case and that

his claims were clearly frivolous. (Issue 7).

Due to these errors, Ubl asks that the judgments of the court be vacated and

the case remanded for enforcement of the settlement agreement or a new trial.

ARGUMENT

STANDARDS OF REVIEW

Issue: 1: Appellate courts review a court’s finding as to the validity of a

settlement agreement de novo. Melton v. Pasqua, 339 F.3d 222 (4th Cir. 2003).

Issue 2: Whether the court erred in permitting IIF to present evidence and

argue that NGB’s acceptance of unqualified labor may negates False Claims Act

liability under the “government knowledge” defense is reviewed de novo because

the issue regarding the propriety of the argument and defense is a legal issue. See

United States v. Collins, 415 F.3d 304 (4th Cir. 2005) (as this issue raises a question

of law, the appropriate standard of review is de novo. United States v. Cheek, 94

F.3d 136, 140 (4th Cir. 1996)).

Issue 3: Appellate courts review a court’s exclusion of an expert witness for

abuse of discretion. Garrett v. Desa Industries, Inc., 705 F.2d 721, 724 (4th Cir.

1983).


19

Issues 4 - 6: Appellate courts review a district court’s evidentiary rulings for

abuse of discretion. Rowland v. Am. Gen. Fin., Inc., 340 F.3d 187, 194 (4th Cir.

2003). However, a district court by definition abuses its discretion when it makes

an error of law. McDonnell v. Miller Oil Co., 134 F.3d 638, 640 (4th Cir. 1988),

citing Koon v. United States, 518 U.S. 81 (1996).

Issue 7: Appellate courts review a district court’s decision to award

attorney fees under an abuse of discretion standard, McDonnell v. Miller Oil Co.,

134 F.3d 638, 640 (4th Cir. 1988); however, a “clearly frivolous” finding is a

difficult standard and rarely met. United States ex rel. Grynberg v. Praxair, Inc.,

389 F.3d 1038, 1058 (10th Cir. 2004).

All issues: The cumulative error doctrine requires a reversal when two or

more individually harmless errors prejudice a party to the same extent as a single

reversible error and deny a party a fair trial. United States v. Basham, 561 F.3d

302, 330 (4th Cir 2009).

I. THE TRIAL COURT ERRED IN FAILING TO ENFORCE THE MAY 6, 2008 SETTLEMENT AGREEMENT FOR $8,900,000 WITH THE IIF DEFENDANTS On May 6, 2008, Ubl and IIF and Charles Patten Sr. executed a written

Settlement Agreement in the Chambers of Magistrate Judge Jones. (J.A. 435-37).

Under the Settlement Agreement, IIF and Patten were required to pay $8.9 million

“inclusive of all damages, costs and fees.” (J.A. 435 ¶ 1).


20

The Settlement Agreement also addressed the role of the United States, as

the real party-in-interest in this FCA action, in the action. Namely, it provided that

“[i]f the Government has not approved this Agreement by June 7, 2008, all

payments due under this Agreement shall be held in escrow pending Government

approval or disapproval.” (J.A. 436 ¶ 20). In anticipation of the possibility that the

Government might require modifications to the Settlement Agreement, Ubl and the

Defendants further agreed that the Settlement Agreement is “void without

Government approval. If the Government does not approve this Agreement, the

parties shall cooperate in good faith to effectuate changes to this Agreement that

will be satisfactory to the Government.” (J.A. 436 ¶ 21).

As Ubl and Defendants contemplated in drafting and executing their

Settlement Agreement, the Government did object to a number of the terms therein

relating principally to the allocation of proceeds between Ubl and the Government.

After a lengthy period of negotiations, Ubl and the Government resolved their

disputes, and Government counsel authorized Ubl’s counsel to represent to the

court in Relator’s Motion to Enforce Settlement and Enter Judgment Pursuant to

Such Settlement (J.A. 419-434) that:

Relator’s counsel and Government trial attorneys have resolved in principle between them the issues of the total Settlement Amount specified in the May 6, 2008 Agreement (“Settlement Amount”), the allocation of the Settlement Amount between the United States, Relator, and Relator’s Counsel, and the terms specified in the May 6, 2008 Agreement with respect to the upfront payment and payout


21

terms. Government trial attorneys are prepared to recommend to officials with authority within the United States Department of Justice and the relevant agencies approval under such terms, should the Court grant enforcement of the May 6, 2008 Agreement between Relator and Defendants.

(J.A. 432-433). Hence, as of September 25, 2009, Ubl and the Government had

resolved their disagreements and the Settlement Agreement term that requires

Government approval was being satisfied.

Nevertheless, on October 9, 2009, after a hearing, the Court not only denied

Relator’s Motion to Enforce Settlement because the Government had not yet

signed the agreement, but also refused to grant the Government a period of time to

complete its internal administrative process for signature. The Court stated that:

the continued negotiations have resulted in material changes to the initial agreement to agree that was entered into by two of the three parties. And the third party is missing from the consent. And as a result, there has never been a binding, enforceable contract entered into.

(J.A. 449-450). The supposed “material changes” were not identified -- and indeed

there were no material changes that could constitute a legal excuse to relieve IIF

and Patten from their obligations under their executed Settlement Agreement.

Furthermore, as the Motion to Enforce explicitly stated, the supposedly “missing”

party (i.e., the Government) had just indicated that it was prepared to approve the

Settlement Agreement.


22

The court has the inherent authority, arising from its equitable power, to

enforce the Settlement Agreement. Hensley v. Alcon Laboratories, Inc., 277 F.3d

535, 540 (4th Cir. 2002). “In deciding whether a settlement agreement has been

reached, the Court looks to the objectively manifested intentions of the parties.”

Moore v. Beaufort County, 936 F.2d 159, 162 (4th Cir. 1991). The courts have

noted that public policy favors settlements, and therefore construe settlements in

favor of enforceability. Fiberglass Insulators, Inc. v. Dupuy, 856 F.2d 652, 654

(4th Cir. 1988).

Here, Ubl and IIF and Patten had a meeting of the minds on May 6, 2008

and objectively manifested their intentions of entering into the Settlement

Agreement which they signed in the Chambers of a Federal Magistrate Judge. The

parties expressly contemplated the need for Government approval and the

concomitant possibility that the Government may require modifications.

Accordingly, they committed themselves to “cooperate in good faith to effectuate

changes to this Agreement that will be satisfactory to the Government.” (J.A.

436). Yet precisely when the Government indicated that its objections to the

proceeds allocation issues had been satisfied and that it was prepared to

recommend approval of the Settlement Agreement, the court ruled it to be

unenforceable.


23

In effect, the court’s decision placed Ubl in a catch-22 situation. On the one

hand, the Government had resolved in principle all issues with Ubl and simply

wished the court to put its blessing on the May 6, 2008 settlement agreement by

finding it to be enforceable before the Government went through the cumbersome

process of obtaining the proper sign offs from the authorized DOJ officials. On the

other hand, the court ruled that the settlement agreement was not enforceable until

the Government had officially signed off on the May 6 settlement agreement. The

court’s decision was clearly erroneous. At a minimum, the court should have taken

the case off the active docket, as Ubl suggested in the Motion to Enforce (J.A.

433), and set a date certain for the final agreement to be implemented.

II. THE TRIAL COURT ERRED IN PERMITTING IIF TO PRESENT EVIDENCE AND ARGUE THAT NGB’S ACCEPTANCE OF UNQUALIFIED LABOR NEGATES LIABILITY UNDER THE GOVERNMENT KNOWLEDGE DEFENSE

A. The Trial Court Erred in Denying Ubl’s Motion in Limine

During the trial in the instant matter, it became clear that IIF intended to

present evidence and argument that it submitted no false claims to GSA because

the ordering agency, NGB, approved the IIF personnel and was satisfied with their

work. Because this contention is not a valid defense to an FCA claim, Ubl filed a

“Motion in Limine to Preclude Admission of Evidence That the National Guard

Bureau Was Entitled to Vary the Terms of Defendants’ Federal Supply Schedule

Contracts.” (J.A. 1529-1536). In response, IIF argued that Ubl was trying to “turn


24

this fraud case into a breach of contract action.” (J.A. 1026). IIF relied on the

government knowledge defense, arguing that it was entitled to introduce “evidence

of the [National] Guard’s knowledge of what IIF was doing” because “it is well

established that the government’s full knowledge of the material facts underlying

any representations implicit in a contractor’s conduct negates any knowledge that

the contractor had regarding the truth or falsity of those representations.”

(J.A.1026). Ubl in turn pointed out that the government knowledge defense was

inapplicable because “the knowledge of the National Guard has no bearing on the

knowledge and the consent of GSA, who was administering the program and who

made the finding of fair and reasonable pricing.” (J.A. 1027-28).

Despite the clear legal mandates of GSA MAS contracting, the court

erroneously denied Ubl’s Motion in Limine and accepted IIF’s government

knowledge defense because it found “when you are dealing with fraud such as this,

certainly it is relevant what occurred between the National Guard and IIF Solutions

in fulfilling the terms of the contract.” (J.A. 1028). Later, in its April 28, 2010

Memorandum Order, the court explained: “it appeared that it was NGB which had

the responsibility for determining whether a particular employee met the relevant

qualifications.” (J.A. 1987).


25

The court’s misapplication of the government knowledge defense premised

upon a severe and serious misapprehension of GSA contracting was perhaps its

most fundamental error in the trial. The court permitted testimony and argument

that NGB’s alleged acceptance of IIF’s unqualified labor personnel negated IIF’s

fraudulent intent, i.e., whether IIF submitted false statements to the government

“knowingly” as the FCA defines that term. See FCA § 3729(b). As set forth

below, IIF’s three MAS contracts were with GSA, not NGB. (J.A. 1288, 1366,

1370). That NGB may have been “happy” with the work performed by IIF cannot

nullify the fact that IIF fraudulently obtained these three GSA contracts and then

used them to overbill GSA by millions of dollars.

1. The Requirements in IIF’s Contracts with GSA Could Not Be Altered by NGB

The GSA’s MAS program provides federal agencies with a “simplified

process for obtaining commercial supplies and services at prices associated with

volume buying.” FAR 8.402(a). Under the GSA’s MAS program, the GSA fully

vets and negotiates the proposed MAS contractor’s items and prices prior to the

MAS contract award. Once the GSA Contracting Officer approves the items and

negotiates a reasonable price, the items and negotiated prices are fixed in an MAS


26

contract and may not be varied.5 See Competition in Contracting Act, 10 U.S.C. §

2304; 41 U.S.C. § 253; see also 48 C.F.R. § 8.404(a).

An ordering agency such as NGB has no legal authority to vary the terms of

GSA’s MAS contracts. If a MAS contractor or ordering agency deviates from the

GSA vetted and negotiated items and prices in the vendor’s MAS contract, the

above carefully crafted and heavily regulated framework for ensuring that the

Government receives a fair and reasonable price is destroyed. “When a concern

arises that a vendor is offering services outside the scope of its MAS contract, the

relevant inquiry is not whether the vendor is willing to provide the services that the

agency is seeking, but whether the services or positions offered are actually

included on the vendor’s MAS contract, as reasonably interpreted.” Tarheel

Specialties, Inc., B-298197; B-298197.2, 2006 CPD ¶ 140 (July 17, 2006)

(emphasis added); American Sys. Consulting, Inc., B 294644, 2004 CPD ¶ 247

(Dec. 13, 2004); see also Science Applications International, B-401773, 2009 CPD

5 Given the GSA’s vetting and negotiation of the terms and prices in the GSA MAS contracts they award, agency orders under those MAS contracts are considered to satisfy the requirements of full and open competition, FAR 6.102(d) (3), and are not subject to FAR Part 15, which prescribes competitive procedures for most negotiated contracts. FAR 8.404(a). The MAS contractor’s catalog with the approved items and prices may be used by agencies throughout the Government and those “[a]gencies are not required to conduct competitive acquisitions when making purchases under the FGSS . . . .” REEP, Inc., B-290665, 2002 CPD ¶ 158. See also, Perot Systems Gov’t Serv’s., B-402138, 2010 CPD ¶ 64.


27

¶ 229 (Nov. 10, 2009) at 1 (under an MAS acquisition, all items ordered must be

included on the vendor’s schedule contract).

As the U.S. Government Accountability Office (“GAO”) stated in a recent

report to Congress:

Where an agency announces its intention to order from an existing GSA contractor, all items ordered are required to be within the scope of the vendors’ contracts [citing Tarheel Specialties, Inc., B-298197, 298197.2, 2006 CPD ¶ 140 (July 17, 2006)]. Orders issued outside the scope of the underlying GSA contract do not satisfy legal requirements under the Competition in Contracting Act for competing the award of government contracts and limit the government’s ability to know if it is paying a fair and reasonable price.

(J.A. 1623) [GAO Report 08-360, Army Case Study Delineates Concerns with Use

of Contractors as Contract Specialists (March 2008) at 24] [emphasis added]. “[I]t

is the responsibility of the ordering activity to follow ordering procedures and stay

within scope. It is also the responsibility of the contractor to follow Terms &

Conditions of its contract.” (J.A. 1646).

Consistent with these long-standing and core requirements of the GSA’s

MAS contracting program, the MAS contracts at issue in this case explicitly state

that:

The Contractor [IIF] shall only tender for acceptance those items that conform to the requirements of this contract.

(J.A. 1287, 1367, 1372) [emphasis added]. IIF’s IT MAS contract further states

that:


28

All delivery orders or task orders are subject to the terms and conditions of this contract. In the event of conflict between a delivery order or task order and this contract, the contract shall control.

(J.A. 1290 [emphasis added]).6

In sum, GSA MAS contractors and ordering agencies, such as NGB,

definitively may not vary the terms of their MAS contract, and IIF was not free to

charge personnel under labor categories and at prices for which the personnel did

not qualify. Decisions of the GAO confirm this clear rule. For example in Perot

Systems Government Services, Inc., B-402138, 2010 CPD ¶ 64, 2010 WL 884032

(Jan. 21, 2010), the ordering agency (the Veterans Administration) solicited offers

for an order for IT labor to be acquired under an IT MAS contract. When GSA

MAS contractor Perot proposed IT labor category rates that varied from the rates in

its GSA MAS IT contract, the GAO ruled that Perot’s bid for the Veteran’s

Administration order properly was rejected, because:

Perot quoted prices that were not on its current MAS contract and thus were neither published nor determined to be fair and reasonable by GSA. This being the case, Perot’s quotation was inconsistent with the terms and conditions of the RFQ [Request for Quotation] and MAS regulations, and therefore unacceptable. Thus, GSA properly eliminated it from consideration.

Id. at *3 (emphasis added). 6 The United States reiterated this core element of the GSA’s MAS program in United States ex rel. Norman Rille and Neal Roberts v. EMC Corporation, No. 1:09-cv-00628-GBL-TRJ, U.S. First Am. Compl. in Intervention ¶ 17. (J.A. 1541).


29

Similarly in Tarheel (see supra), the U.S. Department of Homeland Security

solicited an order under GSA MAS contracts for labor categories. Consistent with

the mandates of the GSA’s MAS program, the agency’s solicitation advised MAS

contractors that:

the [offeror’s proposal] must identify each category of labor proposed for performance mapped to the applicable GSA Schedule labor category, provide the GSA Schedule price, show the proposed discounts for the rate, and the rate proposed for the particular labor category inclusive of the discount.

id. at *2.

When Tarheel protested the award on the grounds that awardee’s, USIS,

GSA MAS contract did not contain all of the labor categories required by the

agency’s order solicitation, the GAO reiterated that:

Where an agency announces its intention to order from an existing GSA MAS contractor, it means that the agency intends to order all items using GSA MAS procedures and that all items are required to be within the scope of the vendor’s MAS contract. See Armed Forces Merchandise Outlet, Inc., B-294281, Oct. 12, 2004, 2004 CPD ¶ 218 at 4. Non–MAS products and services may not be purchased using MAS procedures; instead, their purchase requires compliance with the applicable procurement laws and regulations, including those requiring the use of competitive procedures. OMNIPLEX World Servs. Corp., B-291105, Nov. 6, 2002, 2002 CPD ¶ 199 at 4-5.

Tarheel, 2006 CPD ¶ 140 at *3 (emphasis added).


30

After examining labor categories in both the Tarheel and USIS GSA MAS

contracts, the GAO found that neither contract contained the labor categories

solicited by the agency. With regard to Tarheel, the GAO noted:

Tarheel’s MAS contract is for guard services and the labor categories that it proposed in response to this RFP were not listed in or mapped to the labor categories listed in Tarheel’s MAS contract. Thus, the agency properly determined that Tarheel’s proposal was unacceptable under this RFP, since the RFP required the labor categories to be on an applicable MAS contract.

Id. (emphasis added). In addition, the GAO found that “USIS’s proposal should

have been regarded as unacceptable as well because USIS’s MAS contract also

did not contain all of the labor categories that were required to perform the RFP

requirements.” Id. (emphasis added). The “experience,” “education” and “job

function” requirements of USIS’s MAS contract labor categories failed to satisfy

the experience, education and job function requirements in the agency’s order

solicitation. Id. at *5-7. Consequently, GAO held that “it was not proper for the

agency to place the order against USIS’s MAS contract.” Id. at *8.

As noted above, in this case the court’s denial of Ubl’s motion in limine was

predicated upon its erroneous view that the ordering agency (in this case, NGB)

could vary the education and job function requirements of IIF’s GSA MAS

contract with GSA and accept personnel who did not qualify under the labor

category for which IIF billed GSA. If the court’s interpretation were to be upheld


31

by this Court, the very rationale for GSA’s massive MAS contracting program, as

explained above, would be vitiated and rendered a nullity.

2. The Government’s Knowledge Defense Is Inapplicable In This Case

In addition to discarding the bedrock of the GSA’s MAS program, the

court’s ruling denying Ubl’s motion in limine ran far afoul of the more general

limitations of the “government knowledge” defense. This defense has posited that

the relevant federal agency’s full knowledge and approval of the conduct alleged to

be false may negate the falsity or knowledge elements of a FCA violation. See

United States ex rel. Harrison v. Westinghouse Savannah River Co., 352 F.3d 908

(4th Cir. 2003) (discussing government knowledge defense).

Here, the government knowledge defense is entirely unavailable. IIF’s

contracts were with the GSA, not NGB. The trial record established that IIF

invoiced its unqualified IT labor force to GSA, not NGB. (See June 2001 through

June 2002 IIF invoices billing IT contract services to GSA (J.A. 1374-75, 1381-82,

1386-87, 1391-92, 1397-98, 1445-46, 1450-51, 1459-60, 1469-70, 1477-78, 1511-

1512)). The record also established that IIF never told GSA that it was billing

numerous individuals on the IT contract in labor categories for which they were

unqualified. (J.A. 991-992). (Indeed, as discussed below, had he not been

excluded, Ubl’s GSA expert Neal Fox would have testified that GSA would have

cancelled IIF’s contracts had they known of IIF’s unqualified labor force).


32

Moreover, in failing to meet its burden to prove its affirmative defense, IIF

presented no evidence that any GSA official knew, much less approved, IIF’s

billing of unqualified personnel at inflated rates. Yet, under the misplaced mantra

of “government knowledge” as argued by IIF, the court permitted IIF to reduce this

FCA case to a popularity contest over whether NGB was “happy” with IIF’s

personnel and work.

The government knowledge defense is only cognizable if the relevant

government officials know of the specific falsity at issue. United States ex rel.

Hagood v. Sonoma County Water Agency, 929 F.2d 1416, 1421 (9th Cir. 1992)

(“relevant government officials”); United States ex rel. Gudur v. Deloitte

Consulting LLP, 512 F. Supp. 2d 920, 932 (S.D. Tex. 2007) (“[N]o violation exists

where relevant government officials are informed of the alleged falsity . . . .”);

United States ex rel. Grynberg v. Praxair, Inc., 207 F. Supp. 2d 1163, 1178 (D.

Colo. 2001) (“known to and approved by the responsible government

authorities.”).

No one in NGB, including its contracting officers, is a relevant government

official in this case because, as discussed at length in section II.A.1, supra, the

NGB has no actual authority, express or implied, to enter into or terminate IIF’s

GSA contracts. Likewise, NGB could not deviate or diminish the terms and

conditions, of IIF’s GSA contracts, including the experience and education


33

requirements of the labor categories. See United States ex rel. Stone v. Rockwell

International Corp., 282 F.3d 787, 812, n.11 (10th Cir. 2002), rev’d in part on

other grounds, 549 U.S. 457 (2007) (noting that legally relevant authority for

purposes of government knowledge defense applies to officials “with authority to

act under the contract.”). Thus only GSA contracting officers or other GSA

authorized representatives possess the requisite authority to be relevant

government officials for GSA’s MAS contracts. Id.; United States ex rel. Butler v.

Hughes Helicopters, Inc., 71 F.3d 321, 326, 328 (9th Cir. 1995) (applying

government knowledge authority to technical representatives).

Likewise, NGB could not ratify or agree to IIF’s fraud upon GSA. Indeed,

government employees, including procurement officials, lack the authority to

waive fraudulent conduct. See United States v. Nat’l Wholesalers, 236 F.2d 944,

950 (9th Cir. 1956) (“[W]e do not believe that the Congress ever intended that

contracting officers should have the power to vitiate the False Claims statute.”);

see also United States v. Cushman & Wakefield, Inc., 275 F. Supp. 2d 763, 771

(N.D. Tex. 2002) (“A violation of the rights of the United States may not be

waived or ratified by the unauthorized acts of its agents.”); United States ex rel.

Mayman v. Martin Marietta Corp., 894 F. Supp. 218, 223 (D. Md. 1995) (“[A]

government officer cannot authorize a contractor to violate federal regulations.”);

United States v. Cripps, 460 F. Supp. 969, 973-74 (E.D. Mich. 1978) (stating that a


34

federal employee who urges someone to defraud the government acts ultra vires).

Moreover, because they lack the authority to waive fraud, acquisition officials

cannot “ratify” such conduct. See John Cibinic, Jr., Ralph C. Nash, Jr. & James F.

Nagle, Administration of Government Contracts 31, 48 (4th ed. 2006) (“[I]llegal

actions cannot be ratified because officials lack the authority to enter into illegal

agreements.”); cf. Winter v. Cath-DR/Balti Joint Venture, 497 F.3d 1339, 1347

(Fed. Cir. 2007) (noting that authority is a prerequisite to ratification).

Only GSA officials, such as the GSA contracting officers who issued the

contracts to IIF, could have permitted IIF to forego the education and experience

requirements of its labor categories. GSA alone administers and controls IIF’s

GSA MAS contracts (e.g., J.A. 1330, blocks 16 and 9), and thus, GSA alone is the

responsible and relevant government agency. That GSA is the relevant

government agency is further demonstrated by the fact that: (1) GSA, not NGB,

entered into the three MAS contracts with IIF, and (2) IIF knowingly submitted its

false claims (the invoices containing the false representations that personnel

performing services qualified for the labor category and price billed) to GSA for

payment, not to NGB. Thus, IIF knowingly made the false claims, and the false

statements in support of those false claims to GSA in violation of 31 U.S.C. §

3729(a)(1)(A)-(B). Whether the NGB as the ordering agency was happy with IIF’s

work under IIF’s GSA MAS contract or approved the IIF personnel who


35

performed that work is immaterial as a matter of law to any government

knowledge defense. The fact that the NGB liked IIF cannot as a matter of law

excuse IIF from FCA liability for lying to obtain its GSA MAS contracts; and then

using those GSA contracts to knowingly bill the GSA for unqualified labor

delivered to the NGB at inflated rates.

B. The Trial Court’s Error Was Immensely Prejudicial to Ubl As a result of the court’s erroneous denial of Ubl’s motion in limine, the

court permitted testimony and explicit argument to the jury that NGB could select

IIF personnel who did not qualify for the labor category and price at which IIF

billed them so long as NGB was satisfied with the work. This testimony and

argument was immensely prejudicial to Ubl’s case. It reduced this FCA case to the

equivalent of a breach of contract action where the ultimate question for the jury

was not whether IIF knowingly billed GSA for unqualified labor, but rather

whether NGB was “happy” with IIF’s work – even if the personnel did not satisfy

the labor category definition for the prices at which they were billed. Thus, IIF

was allowed to present testimony that NGB was pleased with IIF’s work, and in

the view of NGB, IIF had selected the right people for the job. See e.g., J.A.1034-

35 [Staresina], J.A. 1083a-d [Lowman].

In closing argument, IIF counsel heavily emphasized this point to the jury by

arguing that NGB personnel “were happy with IIF. IIF picks the right people for


36

the right job,” (J.A. 1084); and that IIF fills its MAS contract labor category

assignments with people “who can get the job done. . . . That’s what these labor

categories are all about.” (J.A. 1084a) (emphasis added).7 Contrary to all law and

precedent (and, indeed, the explicit terms of IIF’s GSA MAS contracts), the court

permitted IIF to argue to the jury that the labor categories and prices established in

IIF’s MAS contracts:

aren’t specific requirements. That’s not the way they were intended. They are pointers. They are guides to pointing towards people that probably have a specific capability. That’s what they are. There is nowhere in this Schedule application . . . do you find anywhere how to read those labor categories, do you find any mention that these labor categories are a term and condition that you cannot touch.

(J.A. 1084b) (emphasis added).

Thus, IIF was allowed to contend to the jury that the labor of Charles Patten

Jr., the son of defendant Patten, who was a young man with a high school degree

and who lacked both the four-year college degree and the four years of experience

described in IIF’s “Analyst II” labor category, could be billed as an Analyst II at an

Analyst II rate solely because NGB was satisfied with his work. (J.A. 1086-87).

7 In closing argument, IIF’s counsel also made much of the fact that the NGB’s:

Major Staresina was not willing to concede that you had to have four years or a four-year degree. He was more concerned about can this individual do the job for my customer.

(J.A. 1086).


37

Put simply, the court got it wrong. The court adopted a deeply flawed view

of the fundamentals of the GSA’s MAS contracting program; and on the basis of

this faulty premise, it permitted IIF to use an inapplicable government knowledge

defense to turn this FCA case into nothing more than a popularity contest where

NGB satisfaction with the IIF personnel and their work precluded any FCA

violations for IIF’s billing of unqualified personnel at inflated rates.

III. THE TRIAL COURT ABUSED ITS DISCRETION IN STRIKING UBL’S GSA EXPERT, NEAL FOX

A. The Court Abused its Discretion in Finding Fox Was Not

Qualified and Would Not Provide Helpful Testimony to the Jury

As part of his case in chief, Ubl sought to introduce the testimony of GSA

expert Neal Fox. Fox served as the GSA Assistant Commissioner for Acquisition,

the third highest-ranking position at GSA (J.A. 985-986) from mid 2002 through

2005. (J.A. 984, 986-987).8 In this position, Fox directly oversaw GSA

procurement of IT contracts and described the IT Schedule contracts as being very

active and requiring the bulk of his time. (J.A. 986-987). Fox supervised

approximately 50 contracting officers on the IT schedule contract, and interacted

with and managed IIF’s contracting officers Deborah Lague and Van Tran 8 Fox obtained a bachelor’s degree in economics and a Master’s degree in business administration, and took an intensive, twenty-week course in DoD procurement. (J.A. 983). Prior to joining GSA, he had five years of service with the Air Force, where he “focused on information technology procurement” and served as the director of Commercial Information Technology Procurement, and purchased information technology product and services for the entire Air Force. (J.A.984).


38

(J.A.987, 989-990). He also directly managed the MOBIS and Environmental

contracts (J.A. 991), and, in doing so, oversaw IIF’s IT, MOBIS, and

Environmental contracts from 2002-05. (J.A. 996-997).

Had Fox been permitted to testify as to the contents of his expert report,9 he

would have explained to the jury that based on his review of their resumes, a large

number of employees that IIF placed on the IT contract lacked the education and

the experience requirements necessary to qualify for any labor category on the

contract and that other IIF employees were misclassified into higher (and pricier)

labor categories than for which they actually were qualified (e.g., individuals

classified as an Analyst II or Analyst III when only qualified for Analyst I).10

9 This was the same report that the court had previously upheld when it rejected IIF’s Daubert challenge claiming that Fox was not qualified and would not provide helpful testimony to the jury. (J.A. 141-142). 10 As Fox explained in his expert report, a substantial number of IIF’s workforce was unqualified for the labor categories and prices at which they were billed to the GSA. Fox examined the 13 months of detailed invoices in 2001-02 provided by IIF during discovery. The invoices contained summaries for each of IIF’s employees, including the hours that they worked and the labor category in which IIF classified and billed them. IIF employed approximately 55 individuals during this time, but provided resumes for only 21 of them in discovery. Fox examined these resumes to determine if the individuals possessed the appropriate education and experience to meet the labor category requirements. Approximately half were either completely unqualified for any labor category or underqualified for their assigned labor category. (J.A. 163,165-166) (Fox Report at p. 2 and Ex. 1 to Report). Ubl’s damages expert, Thorn McDaniel, based his damages report on Fox’s findings. (J.A. 225-227, 1023-24).


39

Despite Fox’s vast experience, knowledge, and training in GSA procurement

and the nature of IT services, the court prevented him from testifying as to IIF’s

unqualified labor force on the basis that he “ha[d] no practical, no personal

knowledge of these terms and the labor categories they fit,” and that he was “not in

nearly as qualified a position as the jury to determine the qualifications and the

labor categories that they fit.” (J.A. 1019-1020). In so ruling, the district court

plainly abused its discretion, and the court’s erroneous ruling deprived the jury of

the opportunity to understand the full extent of IIF’s fraud, and to learn what GSA

– the government entity that contracted with IIF- would have done had the agency

known of that fraud.

1. Standard of Review for Excluding An Expert Witness

This Court reviews a district court’s exclusion of an expert witness for abuse

of discretion, Garrett v. Desa Industries, Inc., 705 F.2d 721, 724 (4th Cir. 1983),

and the court has well established standards for evaluating whether a trial court

abused its discretion in excluding an expert witness. First, Fed. R. Evid. 702

states:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.


40

This Court has held that “the use of the disjunctive indicates that a witness may be

qualified as an expert on any one of the five listed grounds.” Friendship Heights

Assocs. v. Vlastimil Koubek, A.I.A., 785 F.2d 1154, 1159 (4th Cir. 1986) (citing

Garrett, 705 F.2d at 724). “Where the expert’s qualifications are challenged, the

test for exclusion is a strict one, and the purported expert must have neither

satisfactory knowledge, skill, experience, training nor education on the issue for

which the opinion is proffered.” Kopf v. Skyrm, 993 F.2d 374, 377 (4th Cir. 1993).

Importantly, the “subject matter of Rule 702 testimony need not be arcane or

even especially difficult to comprehend.” Kopf, 993 F.2d at 377. See also United

States v. Perkins, 470 F.3d 150, 155 (4th Cir. 2006). “Helpfulness is the touchstone

of Rule 702. The rule must be broadly interpreted.” Friendship Heights, 785 F.2d

at 1159 (internal citations omitted). Thus, “testimony from an expert is presumed

to be helpful unless it concerns matters within the everyday knowledge and

experience of a lay juror.” Kopf, 993 F.2d at 377. In this case, none of the matters

upon which Fox would have testified was within the common knowledge of lay

jurors.

2. The Court Abused Its Discretion in Excluding Mr. Fox

In excluding Fox as an expert, the district court abused its discretion and

misapplied the Rule 702 standards in three fundamental ways:


41

First, in ruling that Fox was not qualified to testify as an expert, the court

considered only whether Fox had specific experience in analyzing the qualification

of employees to meet their labor category. The court ignored Fox’s many years of

experience, knowledge, training, and skill in analyzing the requirements of IT

contracts for the Air Force and GSA. This Court held in Garrett that a trial court

errs in considering, as the district court did here, only an expert witness’ specific

experience and not all of Rule 702’s five factors. Garrett, 705 F.2d at 724.

Indeed, this Court’s decisions in Garrett and Friendship Heights demonstrate the

very error the court committed in this case, namely, failing to recognize that an

expert’s lack of specific experience with regard to the particular subject matter for

which he will testify is not a basis for exclusion if, as is the case here, the expert’s

knowledge and relevant experience in his field, and/or his training and skill in his

field render him qualified to render an expert opinion on the subject matter.

In Garrett, the trial court excluded an expert’s testimony as to the design and

manufacture of a stud driver because he “had no experience in the manufacture or

use or working of stud guns prior to [his] examination in this case.” Id. at 724.

This Court reversed the trial court for an abuse of discretion, and held the expert

was “qualified by his education, knowledge, training, and skill as a holder of a

Masters degree in mechanical engineering, professional engineer, and gunnery

officer.” Id. Notably, the Court also reasoned that:


42

[the expert] not only was a mechanical engineer, but he had examined and tested stud drivers prior to trial and had previous experience with similar mechanisms as a gunnery officer. The stud driver is not so complicated a tool that someone with [the expert’s] education and knowledge could not, even with his limited experience prior to this action, provide expert testimony.

Id. at 725.

Likewise, in Friendship Heights, the district court refused to allow an expert

in a construction case to opine why a building’s paint peeled, because she lacked

“practical experience” in the properties of concrete coatings. Discussing the

Garrett decision at length, this Court found that the record demonstrated that the

expert had ample education, knowledge, and training necessary to opine why paint

might peel off concrete, and held that even if the court were correct that she lacked

“practical experience, the expert’s education, knowledge, and training qualified her

as an expert.” Accordingly, this Court reversed the trial court for abusing its

discretion. See Friendship Heights, 785 F.2d at 1159-60.

The court in this case made the identical error in focusing exclusively on

whether Fox had practical experience evaluating IIF’s labor categories. The court

disregarded Fox’s extensive education and overlooked his twenty-week training in

procurement. Most importantly, the court ignored Fox’s extensive experience and

knowledge of purchasing and procuring IT services for the entire Air Force over a

span of five years and ignored the three years Fox spent at GSA, devoting most of

his time to overseeing the IT schedule contracts and supervising the very GSA


43

Contracting Officers who administrated the IIF GSA MAS contracts in issue in this

case. Fox’s extensive body of work relating to the Air Force’s IT procurement and

GSA’s IT schedule contracts confirms that he possesses the requisite knowledge,

training, skill, and relevant experience as to the nature and requirements of GSA’s

IT contracts so that he could opine as to whether IIF’s employees qualified for the

labor categories and prices at which IIF billed them.

Moreover, as discussed in his expert report, Fox examined IIF’s labor

category descriptions and education and experience requirements and compared

them to the resumes of IIF employees who were supposedly performing IT

services under IIF’s various labor categories. (J.A.162-163). Just as in Garrett,

Fox’s evaluation of IIF’s employees’ qualifications “is not so complicated that

someone with [his knowledge, education, training, and skill] could not, even with

his limited experience prior to this action, provide expert testimony.” Garrett, 705

F.2d at 725. Fox was eminently qualified to address IIF’s employees’

qualifications, and the court abused its discretion in holding otherwise.

Second, the court also abused its discretion in holding Fox could not provide

helpful testimony to the jury because examining the employee resumes was a task

the jury could do for themselves. (J.A. 1019-20). Part of the court’s error lay in its

misunderstanding of the nature of Fox’s analysis and the specialized knowledge

that is needed to undertake it. Fox first determined whether each of the individuals


44

had the minimum education and experience to meet their labor categories; then,

Fox compared the work experience listed on an employee resume to the IT labor

category and work descriptions for the labor category in which the employee was

classified. Based on his experience working in IT procurement and his knowledge

of GSA IT Schedule contracts, Fox could determine whether: (1) an individual

possessed any relevant IT experience matching the descriptions of the labor

category (the determination of whether the employee was unqualified) and (2) if

the person did have some degree of relevant IT experience, whether that individual

was placed in a higher labor category than that for which they were qualified (the

determination of whether the employee was underqualified).11

This determination is no intuitive endeavor. The analysis requires a precise

understanding of the IT skill set delineated in IIF’s labor category position

descriptions (J.A.1314-1322). Those descriptions contain wording related to IT

task performance that a lay jury simply would not know how to interpret. For

instance, some of the requirements for an Analyst I (the most basic IT

professional) are to “exercise analytical techniques when gathering information

from users” and “devis[ing] and design[ing] computer system requirements for the 11 For instance, Fox made a number of assessments that individuals who were classified as an Analyst II were underqualified and should have been classified as an Analyst I. (J.A. 165-166). Likewise, he made a number of assessments that several individuals who were classified as Senior Analyst were underqualified and outside the scope of IT contract. (J.A. 165-166). Fox would have testified that they should have been classified no higher than Analyst III at best.


45

solution of moderately difficult business problems or for segments of more

complex problems.” (J.A. 1316-1317). Moreover the Analyst I’s minimum

experience requirement is defined as:

Minimum Experience: Zero (0) to two (2) years experience in analysis that results in the design and development of an application, an analysis report, recommendation or specification in a Government or commercial contracting environment.

A lay jury could not reasonably be expected to understand the meaning of this IT

terminology. Fox’s expertise in determining whether an individual possessed the

education and the relevant IT experience to meet these standards would have

assisted the jury in determining whether IIF employees were unqualified or

underqualified for the IT labor categories in which they were billed – which is

precisely the analysis the court erroneously precluded as being unhelpful to the

jury.12

An expert should be excluded as unhelpful only when he opines as to a

matter so inherently obvious and within the jury’s common knowledge that expert

testimony is not needed. See, e.g., Persinger v. Norfolk & Western Railway Co.,

920 F.2d 1185, 1188 (4th Cir. 1990) (expert testimony about how difficult it is to

lift heavy things is not “helpful” and is thus excludable); Scott v. Sears, Roebuck &

12 The analysis by Fox would have been particularly helpful to the jury given IIF’s assertion that the labor category definitions in its GSA MAS contracts should be read in the disjunctive, i.e., as requiring either the stated experience or the stated education.


46

Co., 789 F.2d 1052, 1055 (4th Cir. 1986) (expert testimony that individuals who

wear high heels tend to avoid walking on grates excluded as not helpful). Fox’s

analysis clearly would have assisted the jury in a manner well beyond what they

could have determined by their common sense alone and the court abused its

discretion in excluding his testimony.

Third, the court abused its discretion by twice declining Ubl’s invitation to

permit voir dire of Fox to establish his qualifications and the helpfulness of this

testimony. (J.A. 1011-12; 1027). This error was particularly egregious given the

court’s statement that it had not even seen Fox’s report. (J.A. 994). Had the court

read Fox’s report and, during voir dire inquired further of Fox, the court would

have been able to determine the extent of his qualifications and the relevance and

helpfulness of his testimony. Instead, the court rendered an erroneous and

devastating ruling that irreparably damaged Ubl’s case.

B. The Court Abused Its Discretion in Finding Fox Could Not Testify as to IIF’S New Defenses at Trial and Could Not Testify as to GSA’s Opinion of IIF’S Actions.

The court also abused its discretion in refusing to permit Fox to testify as to

how GSA views the new defenses presented at trial by IIF to the effect that NGB

could vary terms of the GSA MAS contracts (by altering or ignoring) the education

and experience requirements of the GSA’s IT, MOBIS, and Environmental

contracts. (J.A. 994-995). This testimony was not contained in Fox’s report for


47

the simple reason that until trial IIF never had articulated the erroneous argument

that an ordering agency can change the GSA’s contracts. Several days before

Fox’s trial testimony, Ubl provided notice to the district court that he intended to

have Fox address these new IIF defenses (J.A. 661-662) but the court precluded his

testimony as to these new issues.

Had the court permitted Fox to testify as to GSA’s view of IIF’s action Fox

would have explained that ordering agencies, such as NGB, have no right to

change any of the terms of MAS contracts that IIF signed with GSA (as the MAS

contracts clearly state). He also would have also testified that IIF never told GSA

how they were misclassifying their unqualified labor force; and that had he known

of IIF’s actions, he would have considered it to be an egregious fraud and

recommended that all of IIF’s contracts be cancelled immediately.

Fox’s experience, knowledge, and high-ranking position at GSA rendered

him eminently qualified to provide such an opinion. Absent that opinion, IIF was

able to present its surprise defense to the jury and to keep the jury from learning of

how GSA in administrating its MAS contracts viewed IIF’s conduct. As a

consequence, the jury was left with the false impression that the NGB was the

appropriate government agency to decide whether IIF could disregard the labor

category definitions and that IIF could charge anyone at any labor category and

price it wished -- as long as the NGB was satisfied with IIF’s work.


48

Under Fed. R. Civ. P. 37(c)(1), a party’s undisclosed expert opinion may be

excluded at trial unless “the failure was substantially justified or is harmless.”

Here Ubl was substantially justified in providing ample notice that Fox would

testify as to IIF’s new argument that NGB could obviate the terms of the contract

and provide a government knowledge defense.

IV. THE TRIAL COURT ABUSED ITS DISCRETION IN PERMITTING IIF’S PRIVATE ACCOUNTANT TO TESTIFY AS TO GSA POLICIES AND PROCEDURES WHEN HE WAS NEVER IDENTIFIED AS AN EXPERT

Although the trial court refused to permit Fox, a former high-ranking GSA

official to testify as to how GSA would have viewed IIF’s actions, the court

permitted, over Ubl’s objections (J.A. 1059), IIF’s private accountant, Robert

Taylor, to broadly opine about the functioning of GSA’s MAS contract program

(J.A. 1055-1058), and to claim that an ordering agency is entitled to engage

contractor personnel at labor categories and prices for which those personnel are

unqualified. (J.A. 1059-1060). In essence, Taylor rendered the equivalent of

expert testimony as to the relationship between the GSA schedule program and the

ordering agency even though he was never identified or qualified as an expert

witness. This surprise expert opinion in the midst of trial was precisely the

opposite of what Fox (who formerly ran the GSA’s MAS program) would have

testified regarding labor categories and whether the contractor is required to meet

their requirements. Moreover, as discussed in Argument II, infra, Taylor’s


49

testimony runs completely contrary to both the provisions of the GSA contracts

and the case law that uniformly states that an ordering agency may not vary the

terms of a GSA MAS contract.

The district court permitted this line of questioning, and Taylor’s testimony,

because the court fully embraced IIF’s erroneous argument that the NGB’s

acceptance of IIF’s unqualified labor force demonstrated government knowledge

and therefore lack of fraudulent intent. The prejudice rendered by Taylor’s

testimony was substantial. Having been denied the opportunity to hear from Ubl’s

expert, Fox, as to GSA’s view of IIF’s fraudulent conduct and new defense, the

jury was left with Taylor’s erroneous opinion that a contractor was entitled to

disregard or vary the labor category, education and experience requirements that

GSA had approved and that nothing IIF did in providing unqualified labor was out

of the ordinary or improper. The court clearly abused its discretion in permitting

this misleading and erroneous testimony. See United States v. Safavian, 528 F.3d

957, 967 (D.C. Cir. 2008) (trial court committed reversible error by allowing one

party to use the equivalent of expert testimony but did not grant the other party the

same latitude).


50

V. THE TRIAL COURT EXCLUDED RELEVANT TESTIMONY FROM TWO FACT WITNESSES ON THE ERRONEOUS BASIS THAT THE FACT WITNESSES’ TESTIMONY INCLUDED ADDITIONAL INFORMATION NOT CONTAINED IN THEIR DEPOSITION TESTIMONY

Gigi Washington was the human resources manager for IIF in the summer of

2002, where she reviewed the resumes of employees who were hired to work on

the IT, Environmental and MOBIS GSA contracts and compared the education and

experience requirements of the GSA labor category for which the employee was

hired with the actual education and experience of that employee. In doing so,

Washington discovered that IIF had hired numerous employees who failed to

satisfy those GSA education and experience requirements. Over the months,

Washington’s concerns increased until she concluded that IIF was actively

defrauding the government, and therefore, she voluntarily terminated her

employment. (J.A. 630-636). Washington also recalled Ubl’s voicing similar

concerns in 2002 about improper activity in that Patten and Trimble were billing

their time illegally to the government and working outside the office on other

matters while billing the government. (J.A. 645, 650-653).

When Ubl sought to introduce this testimony, IIF objected to Washington

testifying as to these matters because her deposition testimony was inconsistent

with this proffered testimony. (J.A. 635-636). Although Ubl’s counsel explained

that he learned only a day or two before that Washington now recalled events more


51

clearly than at her deposition (J.A. 637), the court excluded most of the above

testimony, stating that “there is an ongoing obligation to notify counsel if people

are going to change their position after they have been deposed. Discovery is an

ongoing obligation.” (J.A. 637).13

Before concluding the day’s hearing after Washington testified, the court

also instructed counsel that:

if they [fact witnesses] are going to be testifying after a deposition has been taken and that testimony is going to change, then you are going to get the same ruling from me that you have gotten this afternoon unless you can show me that somehow you have cured any prejudice.

(J.A. 657). In light of the court’s statement, Ubl’s counsel informed the court that

another fact witness recently had indicated a better recollection of events than at

her deposition and that counsel would inform IIF’s counsel as to the particulars

after the conclusion of the day’s proceedings. (J.A. 663). Thereafter, Ubl’s

counsel informed IIF’s counsel that fact-witness Barbara Raine, a former IIF

employee who wrote the IIF labor categories with Mr. Patten and who observed

the activities of Ms. Trimble, would testify that most of Ms. Trimble’s duties were

administrative overhead and therefore, not properly billable to the government as

IT services under the GSA contract. In addition, Raine would testify that in her 13 Ubl thereafter was limited to asking one question to Ms. Washington, to wit: whether she and Ubl ever spoke about questionable practices at IIF while she worked there. (J.A. 653).


52

thirty-year experience in government contracting, she routinely wrote labor

position descriptions; that the GSA expected contractors to be bound by those

labor category descriptions; and that GSA contractors are required to have a

minimum experience and minimum education for a labor category. (J.A. 671-675).

In response, IIF’s counsel telephoned (and sought to tape record with permission)

Raine while interviewing her for 35-40 minutes.

Claiming Raine’s testimony was “a sea change a total revamping,” IIF then

moved to exclude her testimony. (J.A. 664, 668-669). The court granted the

motion in large measure, excluding Raine’s testimony about Trimble’s

administrative duties that were improperly billed to GSA and her experience

regarding labor category requirements because her proffered testimony supposedly

was different than her deposition and Ubl’s notification came too late to put

defense counsel on notice of the change.

The court reasoned that Fed. R. Civ. P. 26(e) required counsel to notify the

opposing party if it learned that a non-party fact witness, such as Washington or

Raine, recalled additional information following her deposition. (J.A. 674-675,

685). The court’s ruling was plainly erroneous and an abuse of discretion that

precluded the introduction of highly probative testimony. The law is clear that the

supplementing duties of Rule 26(e) do not extend to deposition testimony, other

than that of expert witnesses. Moore’s Federal Practice § 26.131[1]. See also


53

Advisory Committee Notes to Federal Rules of Civil Procedure 26(e) (“The

revision also clarifies that the obligation to supplement responses to formal

discovery requests applies to interrogatories, requests for production, and requests

for admissions, but not ordinarily to deposition testimony.”). Here, important and

relevant testimony of two critical fact witnesses that went to the heart of issues

critical for the jury’s determination of IIF’s false billing erroneously was excluded,

in one case even after defense counsel had the opportunity to interview the witness

before her testimony. The court abused its discretion in excluding this highly

probative testimony.

VI. THE TRIAL COURT ERRED IN PERMITTING IIF TO ELICIT TESTIMONY THAT NGB WAS AWARE OF THE LAWSUIT AND HAD NOT CANCELLED IIF’S CONTRACT AS WELL AS INTRODUCING EVIDENCE AND ARGUMENT THAT THE GOVERNMENT HAD NOT SUED IIF.

On April 18, 2008, just prior to the first scheduled trial, Ubl filed a Motion

In Limine to prohibit IIF from presenting evidence or argument pertaining to the

Government’s non-intervention in this qui tam action or evidence regarding its

investigation of this matter. (J.A. 314a-d). On April 30, 2008, upon

reconsideration, the district court granted Ubl’s motion, finding that the proposed

evidence was irrelevant and constituted an “inadmissible commentary on the

merits of the suit.” (J.A. 348).


54

Nevertheless, beginning with IIF’s opening statement (J.A. 487, 488),

through trial (J.A. 602-602a-b, 603-604, 1035-1036), and concluding with its

closing argument (J.A. 1084, 1284c),14 IIF repeatedly referenced and elicited

testimony about these highly prejudicial and irrelevant matters, over Ubl’s

objections (J.A. 474-483), by arguing that the Government, being aware of the

allegations in the lawsuit, has not taken any steps to cancel those contracts nor has

requested that any funds paid to the Government be returned.

As the trial court correctly ruled in April of 2008, whether or not the

Government (e.g., the GSA or the NGB) is directly suing IIF in this action, and

whether or not the Government is still paying IIF despite the allegations in this law

suit, are irrelevant to the elements of the FCA claims against IIF and constitute an

“inadmissible commentary on the merits of this case.” Yet, those extremely

prejudicial comments were made time and time again throughout trial. The courts

– including this Court – uniformly have recognized the inappropriateness of these

types of arguments. See United States ex rel. Berge v. Board of Trustees of the

University of Alabama, 104 F.3d 1453, 1458 (4th Cir. 1997), cert denied, 522 U.S.

916 (1997) (“the government will not necessarily pursue all meritorious claims;

otherwise there is little purpose to the qui tam provision permitting private 14 During closing, IIF’s counsel stated: “How come the alleged victim, the National Guard Bureau, isn’t suing Mr. Patten? When have you ever heard of the victim of an alleged fraud still continuing to pay the alleged wrongdoer? When have you ever heard?” (J.A. 1284c).


55

attorneys general.”); United States ex rel. Atkins v. McInteer, 470 F.3d 1350, 1360

n.17 (11th Cir. 2006) (lack of government action does not mean that it considers the

evidence of wrong doing insufficient or the fraud allegations to be without merit);

United States ex rel. El-Amin v. The George Washington Hospital, 533 F. Supp.

2d 12, 22 (D.D.C. 2008) (evidence of government non-intervention and evidence

that government continued to pay the defendant’s claims and elected not to

exercise one of its various administrative remedies ruled inadmissible).

The district court clearly erred in allowing IIF to argue to the jury that NGB

continued to pay IIF and did not sue IIF based on the fraud allegations. Such

evidence and arguments are extraordinarily prejudicial and ignore the entire

purpose of the FCA’s qui tam provisions, i.e., to enlist insiders who can

supplement the Government’s own fraud fighting resources.

VII. THE TRIAL COURT ERRED IN AWARDING IIF $501,546.00 IN ATTORNEY FEES FOR THE TIME PERIOD OF MARCH 24, 2009 TO OCTOBER 27, 2009.

A. The Court Erred In Finding Ubl’s Claims to be “Clearly

Frivolous”

The legal and evidentiary bases for Ubl’s claims were tested and retested

throughout the long pre-trial phase of this case and repeatedly validated by the

district court. Specifically:

-- The district court denied IIF’s motion to dismiss the Amended Complaint, because the Amended Complaint stated FCA violations (Dkt. 45);


56

-- The district court denied a second IIF motion to dismiss that argued that the Amended Complaint should have been filed under seal (Dkt. 287);

-- The district court denied IIF’s motion for summary judgment because

“the [District] Court finds numerous materials facts in dispute” (emphasis added) (J.A. 137);

-- IIF then settled for $8.9 million (J.A. 435-437); -- When the district court refused to enforce the settlement, the case

went to trial; -- At trial, Relator presented substantial evidence in support of each

element of his claims (after which the court declined to grant Defendants’ Fed. R. Civ. P. 50(a) motion);

-- The case went to the jury; -- The jury took approximately seven hours to return a verdict (and

posed a written question that revealed it was carefully considering the Relator’s claims and related evidence); and

-- The jury flatly rejected IIF’s punitive counterclaim against Ubl – and

with it any notion that the Relator somehow maliciously had taken any IIF trade secrets.

Nevertheless, the district court ruled that Ubl’s case was “clearly frivolous”

under FCA § 3730(d)(4) and assessed him over $500,000 in attorneys’ fees. The

district court repeatedly validated the legal and evidentiary bases of Ubl’s claims,

and then after trial ruled that the same claims and evidence rendered his action

“clearly frivolous.” The district court’s order constitutes an egregious and

unprecedented abuse of its powers generally and FCA Section 3730(d)(4) in

particular.


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In applying § 3730(d)(4), courts have “instructed that the proper legal

standard is the one articulated by the Supreme Court in Christianburg Garment Co.

v. EEOC, 434 U.S. 412, 421-22 (1978):

[t]he plaintiff’s action must be meritless in the sense that it is groundless or without foundation. The fact that a plaintiff may ultimately lose his case is not in itself a sufficient justification for the assessment of fees. . . . [A] plaintiff should not be assessed his opponent’s attorney’s fees unless a court finds that his claim was frivolous, unreasonable, or groundless, or that the plaintiff continued to litigate after it clearly became so. . . .

United States ex rel. Grynberg v. Praxair, Inc., 389 F.3d 1038, 1058 (10th Cir.

2004) (quoting Houston v. Norton, 215 F.3d 1172, 1174 (10th Cir. 2000)). The

Christianburg standard:

is a difficult standard to meet, to the point that rarely will a case be sufficiently frivolous to justify imposing attorney fees on the plaintiff.

Grynberg, 215 F.3d at 1059 (internal citation omitted).

In applying this standard:

it is important that a district court resist the understandable temptation to engage in post hoc reasoning by concluding that, because a plaintiff did not ultimately prevail, his action must have been unreasonable or without foundation. This kind of hindsight logic could discourage all but the most airtight claims, for seldom can a prospective plaintiff be sure of ultimate success.

Christiansburg, 434 U.S. at 421-22. Hence “an award of fees under the False

Claims Act is reserved for rare and special circumstances.” Pfingston v. Ronan


58

Eng’g Co., 284 F.3d 999, 1006-07 (9th Cir. 2002); see also Rafizadeh v.

Continental Common, Inc., 553 F.2d 869, 875 (5th Cir. 2008).

The phrase “clearly frivolous” means having no reasonable chance of

success. United States ex rel. Vuyyuru v. Jahdav, 555 F.3d 337, 356 (4th Cir. 2009).

A claim is clearly frivolous only if it is “utterly lacking in legal merit and

evidentiary support.” United States ex rel. J. Cooper & Assocs. v. Bernard Hodes

Group, Inc., 422 F. Supp. 2d 225, 238 (D.D.C. 2006).

In its initial Order holding Ubl liable under FCA § 3730(d)(4), the court did

not explain the basis for its conclusion that Ubl’s action was “clearly frivolous.”

(J.A. 1951). Later, in its Order setting the quantum of attorneys’ fees and costs

assessed against Ubl, the court finally offered a number of supposed rationales for

its finding that Ubl’s action had no reasonable chance of success, Vuyyuru, 555

F.3d at 356, and was “utterly lacking in legal merit and evidentiary support.”

Cooper & Assocs., 422 F. Supp. 2d at 238. The district court’s reasoning is set

forth below in italics (and found at J.A. 1284-89):

First, with regard to Relator’s claims concerning the “fraudulent” nature of IIF’s labor categories, the testimony at trial, both by IIF employees and employees of the GSA and NGB, demonstrated that IIF’s labor categories were reasonable. Moreover, as Defendants note, it appeared that it was NGB which “had the responsibility for determining whether a particular employee met the relevant qualifications.” Def. First Brief at 9-10. Ubl proffered no basis for the notion that IIF’s representations in those labor categories rose to the level of fraud, and if anything, the evidence submitted at trial proved that these definitions carried neither


59

objective falsity nor the requisite intent necessary to substantiate an FCA claim. Relator’s lawyers’ deposition of Katherine Jocoy of the GSA should have alerted them to this defect well before trial. This assertion by the district court is disturbingly misplaced for several

reasons. First, the issue of whether the labor categories in IIF’s GSA contract are

“reasonable” has never been an issue. This case is about IIF using false

commercial sales and pricing information to obtain GSA contracts that permit IIF

to sell certain labor categories at specific prices throughout the Government; and

the charging of personnel at labor categories and prices for which those personnel

were unqualified.

Second, as discussed at length above, the court erred egregiously in

concluding that the NGB and not the GSA “had the responsibility for determining

whether a particular employee met the relevant qualifications” for the labor

categories in the GSA contracts with IIF. As discussed at length (supra), the GSA,

and not the NBG or other ordering agencies, established the labor categories and

prices in the GSA contracts; and neither IIF, the NGB nor any other ordering

agency could vary them.

Third, the court’s assertion that labor category definitions are not susceptible

of objective meaning is plainly wrong. For example, an individual either has or

does not have the bachelor’s degree required to qualify as an Analyst II (or the four

years of pertinent experience). Nothing could be more objectively verifiable.


60

Patten and his son admitted at trial that the son had just graduated from high school

and lacked both a college degree and four years pertinent experience, and yet was

billed as Analyst II (requiring a bachelor’s degree and four years of pertinent

experience) at an Analyst II price.15

Finally, GSA Contracting Officer Jocoy said nothing to suggest otherwise –

and nor could she, as the acquisition of a bachelor’s degree (or not) and a number

(of years’ experience) are objectively verifiable. The issue of whether labor

category definitions are read in the conjunctive or disjunctive is immaterial

because the vast majority of IIF’s unqualified employees were billed under labor

categories for which they met neither. Ms. Jocoy stated (with respect to an Analyst

I example) that the individual must satisfy both the Experience and Education

requirements. (J.A.733-734). Similarly, GSA’s Ms. Tran, who evaluated IIF’s

original proposal, testified that IIF could provide whomever it wanted under its

GSA schedule contracts “as long as they fulfill those three requirements:

education, functional responsibility, and experience. We don’t look at people.

We look at the labor category description.” (J.A. 949) (emphasis added). In any

15 It is disturbing that the court found “no basis for the notion that IIF’s representations in those labor categories rose to the level of fraud” when IIF admittedly was billing (as just one example) the time of this recent high school graduate at a labor category and price for an individual with a bachelor’s degree and four years’ pertinent experience.


61

event, the deposition that purportedly should have “alerted” Ubl to any defect was

taken three days before the start of trial, on October 16, 2009.

Second, Relator’s allegations regarding IIF’s putative knowing submission of a fraudulent commercial price list was similarly baseless. Like Ms. Jocoy’s deposition, Relator’s lawyers’ deposition of Ms. Van Tran of the GSA should have alerted Relator to the defects in his claim premised on the commercial price list, as the commercial price list is not typically relied upon and it is commonplace in the industry for a contracting company to list labor categories in their price lists even if they have not sold all of those categories previously. The court ruled that the price list was “not typically relied upon” by GSA

Contracting Officers, and hence, a case premised in part upon the false pricing data

therein was “clearly frivolous.” In fact, IIF’s fabricated and backdated commercial

price list was one of the explicitly-stated “Bas[e]s for Negotiation and Award” of

the GSA contract. (J.A. 1332-1333). Contracting Officer Lague, who awarded the

IT contract, explained that an offeror’s provision of false commercial pricing

information was capable of affecting her award decision and that if she discovered

such false information she would “recommend no award.” (J.A. 506-509).

Ms. Tran acknowledged that the GSA demands an offeror’ commercial price

list to determine “what kinds of discounts they are offering to other customers.”

(J.A. 947-948). She stated that labor category vendors typically do not have price

lists, in which case the GSA “only look[s] at those labor categories that have been

sold.” (J.A. 948). Ms. Tran specifically confirmed that the IIF price list was “part

of the contract” (i.e., the GSA MAS IT contract awarded to IIF) (J.A. 952)


62

(discussing trial exhibit 114) (J.A. 1330-32); and further that the GSA relied on the

“service matrix,” which is based on IIF’s reported commercial sales (J.A. 952-53)

(discussing “service matrix” in trial exhibit 114) (J.A. 1330), which sales in turn

were purported to be based on the commercial price list that the GSA explicitly

declared to be a basis for the IT contract award to IIF (and indeed incorporated into

the IT contract itself). The “service matrix” is based upon the commercial pricing

data reported in IIF IT contract offer. See Trial Ex. 113 at IIF 3854. (J.A. 1303).

The commercial data reported includes IIF’s supposed “list” prices for offered

labor categories. Id. Those “list” prices match (and are derived from) the fictive

prices in the fake IIF commercial price list. See Tr. Ex. 113 at IIF 4004. (J.A.

1329).

Furthermore, Ms. Tran, whose testimony was relied upon by the court in

finding that Ubl should have known in March of 2009 that his claim was baseless,

was deposed during the trial of this matter in October of 2009. Nevertheless, the

court assessed sanctions based on this testimony, effective approximately seven

months earlier in March of 2009.

Third, Relator claimed that IIF fraudulently represented that there were hourly rates “on” particular purchase orders in its IT Schedule application. The evidence at trial indicated that the work IIF did for Amerind implicated hourly rates even if the purchase orders failed to specifically list those rates. Even if this act were construed to be a mistake on IIF’s part, elevating it further to the level of fraud is simply implausible. Rather, Ubl’s claims proved to be premised on Ubl’s own hypertechnical construction of whether IIF


63

listed rates “on” purchase orders, rather than any objectively persuasive evidence. IIF did not sell to Amerind specific labor categories at specific hourly rates,

and yet it reported to the GSA that it had done so. There were no labor categories

or labor category prices “on” the Amerind purchases to IIF (which were introduced

into evidence), and yet IIF told GSA that there were. GSA Contracting Officers

rely on offerors to provide accurate commercial sales and pricing information in

order to negotiate and award GSA contracting containing “most-favored customer”

prices for subsequent Government-wide sales of these items at the vetted prices.

Specifically, when a contractor has substantial commercial sales of the service or

supply proposed for inclusion on a MAS contract, the GSA uses an abbreviated

method to evaluate the proposed price for the service or supply pursuant to FAR

Part 12. Offerors proposing such commercial services or supplies do not need to

submit “cost or pricing data.” 48 C.F.R. § 2.101. Instead, they are required to

disclose their past commercial sales of the services or supplies and associated

discounting practices; and to submit their current published commercial price list.

As the Comptroller General has explained:

[T]he purpose of the standard clause requiring submission of current published commercial price lists is to ensure that offered discount practices for items listed on the FSS are based on prices that have been tested by the offeror in the commercial marketplace. We further noted that the additional requirement that offerors certify to substantial commercial sales of the item goes the extra step of ensuring that its item prices have not merely been offered to the


64

commercial public – leaving open the possibility that the prices were rejected by the market-place – but that the prices have been reasonable enough to generate sales of the items.

Sanford’s Domestic/International Trade, B-230580, B-230580-2 88-2 CPD ¶ 214

(Sept. 6, 1998).

Given the above framework for the GSA’s vetting and setting of the items

and prices prior to agency ordering, the GAO has emphasized that the prior sales

reported in the offer to obtain an MAS contract must be sales of the actual items

proposed. Thus, in Koehring Cranes & Excavators, B-245731.2, B-245731.3, 92-

3 CPD ¶ 362, where the FSS contract awardee’s item, (i.e., a scrap handler)

proposed for inclusion in a FSS contract differed from those it had sold

commercially, the GAO did not view this distinction to be “hypertechnical:” rather,

it agreed that the pricing of the awardee’s prior sales could not be used to negotiate

and set the price for the items proposed for inclusion on the FSS contract, sustained

the protest, advised the agency to terminate the improperly awarded FSS contract,

and recommended payment of attorney fees to the protester.

In Todd-Phelps Sporting Goods Mfg. Corp., Todd-Phelps submitted a

proposal that including its commercial catalog supposedly containing the items it

proposed to sell under the solicited FSS contract. Todd-Phelps, GSBCA Nos.

5496-D, 5501-02-D, 80-1 B.C.A. ¶ 14,441. The GSA discovered that this

“commercial” catalog was only a Government catalog (id. at *11) and debarred


65

Todd-Phelps. Todd-Phelps pleaded guilty to criminal false statements under 18

U.S.C. § 1001. Id. at *16. IIF did precisely the same thing here, and yet the court

not only minimized this as “hypertechnical,” but ruled that that it was “clearly

frivolous” for Ubl to suggest otherwise.

The GSA Contracting Officer who awarded the IT contract, Deborah Lague,

testified that IIF’s accurate submission of commercial pricing information was

required because the GSA was obligating taxpayer dollars and needed to ensure

that the prices contracted with GSA were “fair and reasonable.” (J.A. 505). She

explained that an offeror’s provision of false commercial pricing information was

capable of affecting her award decision, that if she discovered such false

information she would “recommend no award,” and that if she discovered that an

offeror had lied about “past sales,” “past pricing” or “past performance,” she

would “recommend no award.” (J.A. 506-509). In other words, if the Contracting

Officer who awarded the IT contract to IIF had she discovered that IIF had

provided the false sales and pricing information, she would “recommend no

award.”

Lastly, Relator’s claims regarding the falsity of IIF’s representations about TMCI’s authorization of a 60-hour work week, the “negotiated” discounts with TMCI, and IIF’s reporting of labor categories and rates it had sold to TMCI all proved groundless. At most, some of these allegations proved to be oversights on IIF’s part, but Relater demonstrated no basis for the assertion that any of these acts rose to the level of knowingly fraudulent behavior.


66

Ubl alleged that IIF reported to GSA commercial prices based on

supposedly negotiated discounts for a 60-hour work week with a company

called TMCI, and asked GSA to not take those lower labor rates into

account in determining a fair and reasonable MSA contract price (J.A.

1302). In his case in chief, Ubl presented (for example) TMCI’s Chief

Operating Officer Robin Davis’ testimony that there simply were no such

discounts, (much less negotiated discounts) and that TMCI never authorized

IIF to work a 60 hour work week in exchange for their discounted labor

rates. (J.A. 617). Ubl also introduced the TMCI proposal, the TMCI

contract and the TMCI invoices, all of which revealed no such discounts and

no authorization for IIF to work a 60 hour work week. (J.A. 1088, 1096,

1133). Davis’ testimony and the pertinent documentary evidence therefore

demonstrated that there were no negotiated discounts with TMCI on the

basis of TMCI’s authorization for IIF to work a 60 hour work week, as IIF

falsely represented to the GSA in its IT contract proposal, and these

“discounted labor rates” never should have been excluded when determining

IIF’s proper hourly rates. There was no basis for the court’s finding that

these representations were mere “oversights” and certainly, the issue was

properly one for a jury.


67

In sum, the court’s explanations for finding Ubl’s claims to be

“clearly frivolous” betray a fundamental misunderstanding of the pertinent

law; and they misstate and ignore the evidence relating to those

explanations. More generally, the court’s explanations ignore the fact that

the court itself found that this same evidence (actually, less evidence)

demonstrated “numerous” factual disputes material to valid FCA claims and

ignore the high legal standard for “clearly frivolous” under Section

3729(b)(4).

B. The Court Erred In Finding that As of March 24, 2009 Ubl Should Have Known That He Had No Reasonable Chance of Success

In its Orders of December 4, 2009 (J.A. 1951) and April 28, 2010 (J.A.

2008), the court determined that Ubl should have known that his case clearly had

no chance of success as of March 24, 2009, when IIF sent a letter to Judge Jones

purportedly withdrawing from the settlement agreement. (J.A. 395a-c). The court

erred in finding that the March 24, 2009 letter put him on notice that he could not

succeed in this case, and indeed, there was no reasonable basis for him to have ever

so concluded.16

First, the trial court failed to take into consideration that IIF’s defense of

NGB “government knowledge” was novel, incorrect as applied in this case and not 16 There is nothing in the March 24, 2009 letter (J.A. 395a-c) touches upon the specific merits of the case.


68

even part of this case until the beginning of trial in October 2009. See Argument

II, supra. As set forth in the court’s April 28, 2010 Memorandum Opinion, the

premise that IIF’s labor categories were not a basis for fraud arose from the trial

court’s mistaken belief that “as Defendants note, it appeared that it was NGB

which had the responsibility for determining whether a particular employee met the

relevant qualifications.” (J.A. 1987).

Moreover, the court erroneously relied upon the deposition of Katherine

Jocoy of the GSA for the proposition that her testimony should have alerted Ubl to

the lack of fraud well before trial. However, Ms. Jocoy’s deposition de bene esse,

which was read to the jury, occurred on October 16, 2009, just three days before

trial. (J.A. 1739).

Similarly, the court erroneously concluded that the knowing submission of a

fraudulent commercial price list was not a basis for a fraud allegation, relying on

the de bene esse deposition testimony of Ms. Van Tran of the GSA. Yet, Ms. Van

Tran’s deposition was taken in the middle of trial on October 21, 2009, (J.A.

1784), so her testimony could not have put Ubl on notice regarding the commercial

price list issue, even if she correctly testified, which she did not.

As to the third ground set forth by the court for its finding that the case was

frivolous (J.A. 1988), the court erroneously posited that IIF’s misrepresentation as

to its prior hourly rates were simply a “mistake” or that Ubl was basing his claim


69

on a “hypertechnical” construction of GSA requirements, and, hence, that IIF’s

misrepresentations did not mean the misstatements were fraudulently made.

Similarly, as to the fourth ground set forth by the court as its basis for sanctioning

Ubl, the court erroneously characterizes IIF’s misstatements that it had

“negotiated” a rate discount with TMCI for a 60-hour work week proved, at most,

in the court’s opinion, to have been “oversights.” (J.A. 1988). Yet, the facts

regarding both of these matters (and their being false representations) were

basically undisputed, so if the lack of fraudulent intent was so clear, then the issue

could have been easily raised by way of a summary judgment motion. Similarly,

IIF’s claim that the NGB had the responsibility for determining whether a

particular employee met the relevant qualifications for a labor category could also

have been easily put at issue in the early stages of the proceedings (by summary

judgment). IIF had no need to wait for trial. If NGB could decide whether an IIF

employee met the GSA labor category definition, even when the employee did not,

then all IIF had to do was present this issue to the court by way of a motion for

summary judgment on or before March 24, 2009. But, IIF did not do so because

(1) this was a new strategy just instituted by their new counsel at the beginning of

trial in October 2009, and (2) IIF’s counsel evidently understood that such a

proposition was legally and factually baseless.


70

Finally, none of these false statements were “technical defects” as the court

concluded, especially where it was proven at trial (for example) that Defendant

Patten’s son, then a recent high school graduate, was billed as an Analyst II

requiring a college bachelor’s degree and/or four years of IT experience. It defies

credulity that Patten Sr could have believed that Patten Jr.’s five-month IT course

was the equivalent of a four year college degree or four years of IT experience.

Similarly, it defies credulity for Patten Sr. to claim that he had no knowledge that a

backdated commercial price list used to obtain his GSA MAS contract was not

improper. Ubl had more than good cause to believe that IIF’s so called “technical

defects” were knowingly done or undertaken in reckless disregard for the truth.

This evidence alone was sufficient for Ubl to have alleged fraudulent intent, and

the court’s conclusion to the contrary was clear error.

For all of these reasons, the trial court clearly erred and abused its discretion

in awarding attorney fees from March 24, 2009.

C. Defendant’s Fees For the Five Attorneys Billed Were Unreasonable

In tailoring the attorney fees award, the court ignored the fact that this case

was set to commence trial on May 6, 2008 when at the very last minute, a

Settlement Agreement was entered into between Ubl and IIF and Patten. Yet, with

no further discovery, and minimal pre-trial hearings before the second trial date,

the court concluded that spending nearly 3000 hours defending this case was


71

reasonable (totaling over $500,000 in fees) for time expended between March 24

and October 27, 2009. (J.A. 2005) (Table 2). The court went so far as to

commend defense counsel for reducing its over 900 multi-page trial exhibits

(totaling over 20,000 pages) down to less than 100 exhibits for trial. (J.A. 1992).

That defense counsel unreasonably filed over 20,000 pages of exhibits and then

pared them down hardly makes that action and the fees associated therewith

reasonable.

Moreover, although this case was set for trial in May, 2008, there are dozens

and dozens of additional meetings with multiple attorneys all charging for their

time, and yet the court merely reduced those fees by 10%. (J.A. 1993, 2006).

A review of the fee petition of Mr. Workmaster reveals little of substance

except repeated tasks of “continued trial preparations” or “continued preparing trial

outline” in the hundreds of hours. (Dkt. 366, Exhibit H.).

Mr. Cynkar’s petition (Dkt. 366, Exhibit F) similarly contains repeated

entries such as: “undertook miscellaneous trial preparation tasks” or

“miscellaneous trial issues” with most entries identifying conferences and

telephone calls with co-counsel.

For all of these reasons the court abused its discretion in finding it

reasonable for counsel to have expended almost 3000 hours between March 24 and


72

October 27, 2009 in defending this case which had previously settled on the day of

the scheduled trial.

CONCLUSION Based on the foregoing individual arguments or based upon the cumulative

error doctrine, see United States v. Basham, 561 F.3d 302, 330 (4th Cir. 2009), the

orders of October 27, 2009, December 4, 2009 and April 28, 2010 should be

vacated and the case remanded for enforcement of the settlement agreement or a

new trial.

Oral Argument is requested.

Respectfully Submitted,

/s/ Victor A. Kubli Victor A. Kubli KUBLI & ASSOCIATES, P.C. 8605 Westwood Center Drive Vienna, Virginia 22182 (703) 749-0000 Michael S. Lieberman Stephen Stine DIMURO GINSBERG, P.C. 908 King Street, Suite 200 Alexandria, Virginia 22314 (703) 684-4333 Counsel for Appellant


CERTIFICATE OF COMPLIANCE

1. This brief complies with the type-volume limitation of Fourth Circuit Order filed June 24, 2010, granting Appellant leave to file a brief not in excess of 17,500 words.

[ X ] this brief contains 17,327 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii), or

[ ] this brief uses a monospaced typeface and contains [state the number of] lines of text, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii).

2. This brief complies with the typeface requirements of Fed. R. App. P.

32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because:

[ X ] this brief has been prepared in a proportionally spaced typeface using Microsoft Word 2000 in 14pt Times New Roman; or [ ] this brief has been prepared in a monospaced typeface using [state name and version of word processing program] with [state number of characters per inch and name of type style].

Dated: July 1, 2010 /s/ Victor A. Kubli Counsel for Appellant


CERTIFICATE OF FILING AND SERVICE I hereby certify that on this 1st day of July, 2010, I caused this Brief of

Appellant to be filed electronically with the Clerk of the Court using the CM/ECF

System, which will send notice of such filing to the following registered CM/ECF

users:

Robert J. Cynkar Christopher I. Kachouroff CUNEO, GILBERT & LADUCA, LLP DOMINION LAW GROUP, P.C. 106-A South Columbus Street 12741 Darby Brooke Court, Suite 202 Alexandria, Virginia 22314 Lake Ridge, Virginia 22192 (202) 789-3960 (703) 365-9900 Counsel for Appellees Counsel for Appellees Jason N. Workmaster McKenna, Long & Aldridge, LLP 1900 K Street, Nw Washington, DC 20006 (202) 496-7422 Counsel for Appellees I further certify that on this 1st day of July, 2010, I caused the required

number of bound copies of the foregoing Brief of Appellant and Joint Appendix to

be hand-filed with the Clerk of this Court and for a copy of the Joint Appendix to

be served, via UPS Ground Transportation, to all case participants, at the above

listed addresses.

/s/ Victor A. Kubli Counsel for Appellant


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