|||UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
15 F.3d 1040
|||Issued: February 2, 1994.
|||YOUNG-MONTENAY, INC., PLAINTIFF-APPELLANT,
THE UNITED STATES, DEFENDANT-APPELLEE.
|||Appealed from: U.S. Court of Federal Claims. Judge Hodges, Jr. Nonprecedential
Opinion Issued October 21, 1993.
|||Andrew J. Kilpatrick. Jr., Andrew J. Kilpatrick, Jr., P.A., of Jackson,
Mississippi, argued for plaintiff-appellant.
|||Arnold M. Auerhan, Attorney, Commercial Litigation Branch, Department
of Justice, of Washington, D.C., argued for defendant-appellee. With him
on the brief were Frank W. Hunger, Assistant Attorney General, David M.
Cohen, Director and Jeanne E. Davidson, Assistant Director.
|||Before Michel, Lourie and Schall, Circuit Judges.
|||MICHEL, Circuit Judge.
|||Young-Montenay, Inc. ("Young-Montenay") sought to recover costs
incurred because of alleged government-caused delays on a boiler renovation
project for the Department of Veterans Affairs ("VA"). Upon denial
of its claims by the contracting officer, Young-Montenay sought relief from
the United States Court of Federal Claims. In an amended answer, the government
raised a special plea in fraud pursuant to 28 U.S.C. § 2514, and asserted
counterclaims based upon the False Claims Act, 31 U.S.C. § 3729, and the
Contract Disputes Act, 41 U.S.C. § 601 et seq. (1993). On January 6, 1993,
the court granted the government's motion for summary judgment on its special
plea in fraud and on both counterclaims. Young-Montenay, Inc. v. United
States, Order No. 90-3862C. The court awarded treble damages in the amount
of $147,000.00 and a statutory penalty of $5,000.00, pursuant to 31 U.S.C.
§ 3729. Young-Montenay now appeals the summary judgment, merits on all three
claims. We affirm the judgment in its entirety.
|||On October 27, 1982, Young-Montenay entered into a contract with the VA
to perform certain renovations to boiler equipment, instrumentation and
controls at the VA Medical Center in Kerrville, Texas. This dispute, however,
arises over a purchase order for a new "burner package" for the
VA Medical Center provided by Keeler Door-Oliver Burner Company ("Keeler")
to Young-Montenay. Young-Montenay submitted to Keeler a purchase order for
the burner package at a price of $104,000.00. Keeler issued its original
invoice in the amount of $104,000.00. Subsequently, a dispute arose between
Young-Montenay and Keeler as to whether the burner package supplied by Keeler
was a complete package in accordance with the plans and specifications and
whether Young-Montenay would eventually owe Keeler $153,000.00. As a result
of the dispute, Young-Montenay altered the original invoice by deleting
$104,000.00 from the bill and substituting $153,000.00.
|||Under the contract, progress payments were to be made by the government
to Young-Montenay as work proceeded with the retainage of 10% until final
completion and acceptance of the contract work. On January 18, 1984, Young-Montenay
submitted to the VA its sixth progress payment request seeking $154,362.00.
In partial support of the request, Young-Montenay submitted the altered
Keeler invoice in the amount of $153,000.00.*fn1
|||STANDARD OF REVIEW
|||The standard of review on factual issues in an appeal from the entry of
summary judgment is as follows:
|||In reviewing the granting of a summary judgment by a trial court, an appellate
court determines for itself whether the standards for summary judgment have
been met and is not bound by the trial court's ruling that there was no
material dispute present in the case.
|||Mingus Constructors, Inc. v. United States, 812 F.2d 1387
, 1390 (Fed. Cir. 1987). Our court evaluates the conflicting evidence proffered
by the parties de novo, in the light most favorable to the non-moving party.
The Confederated Tribes of the Colville Reservation v. United States, 964
, 1107 (Fed. Cir. 1992).
|||Under 28 U.S.C. § 2514, the government bears the burden of proving that
the claimant (1) knew the claim was false and (2) intended to deceive the
government by submitting it. McCarthy v. United States, 229 Ct. Cl. 361,
670 F.2d 996, 1004 (Ct. Cl. 1982).
|||In the present case, the trial court did not err in determining on this
record that as a matter of law the invoice submitted in the amount of $153,000.00
by Mr. Eisenhut of Young-Montenay to the government was false and that he
knew it. In his own deposition testimony of April 30, 1992, Eisenhut stated:
|||Q: At the time you submitted [the 6th payment request to the government
on the Kerrville project], you knew that the price for the three Keeler
-- three Faber burners provided by Keeler was $104,000?
|||Q: You know that because of the purchase order you submitted to Faber;
|||Q: And you may have also seen an invoice in the amount of $104,000; correct?
|||Q: But either way you knew when you submitted the 6th progress payment
to the government the actual cost to Young-Montenay of the three Faber burners
was $104,000; correct?
|||It is immaterial whether Eisenhut believed Young-Montenay would subsequently
owe Keeler $153,000.00, for at the time of the submission of the invoice
to the government, he knew Young-Montenay then owed Keeler only $104,000.00.
|||Nor did the trial court err in holding that Eisenhut intended to deceive
the government. It is undisputed that he whited-out the price on the invoice,
$104,000.00, and wrote in $153,000.00. In addition, in his deposition, he
admitted that he intended to "frontload" as much as he could on
|||Q: Now, earlier you talked about the importance of frontend loading a
|||Q: Was this your attempt to get money on the frontend of this project?
|||A: Yes, sir.
|||Q: So you tried to get money up front by submitting a supporting invoice
in the amount of $153,000; correct?
|||Q: Even though you knew the actual cost to Young-Montenay was $104,000;
|||Q: And that way you could get $49,000 over and above the actual cost as
front end [sic] or up[-]front money; correct?
|||A: I think -- seems like we sent the invoice in and they hadn't approved
much for all the activity we had gone through, and yes, that was an attempt
to get up[-]front money.
|||Clearly, no genuine issue of fact was shown, for there was virtually no
evidence to the contrary, and the conclusory, speculative affidavits of
two company officials cannot raise one.*fn2
Thus, pursuant to Rule 56 of the Rules of the United States Court of Federal
Claims, the government was entitled to summary judgment on its special plea
in fraud. Paxson Elec. Co., Inc. v. United States, 14 Cl. Ct. 634, 642 (1988),
citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242
, 247, 91 L. Ed. 2d 202
, 106 S. Ct. 2505
(1986) (grant of summary judgment is appropriate when there are no genuine
issues of material fact and the moving party is entitled to summary judgment
as a matter of law). The contractor's claim for its delay costs and increased
expenses is extinguished under 28 U.S.C. § 2514, since section 2514 specifically
provides that "any person who corruptly practices or attempts to practice
any fraud against the United States in the proof, statement, establishment,
or allowance" of a claim forfeits that claim.
|||II. False Claims.
|||In order to recover damages for violation of the False Claims Act, the
government must establish that
|||(1) the contractor presented or caused to be presented to an agent of
the United States a claim for payment;
|||(2) the claim was false or fraudulent;
|||(3) the contractor knew the claim was false or fraudulent; and
|||(4) the United States suffered damages as a result of the false or fraudulent
|||Miller v. United States, 213 Ct. Cl. 59, 550 F.2d 17, 23 (Ct. Cl. 1977).
|||As Eisenhut admitted, he knew the invoice was false. Thus, the only issue
remaining is whether the government suffered any damages. We hold that the
government was damaged by paying money before it was due to the contractor
and that the trial court determined the proper amount of damages, which
it lawfully trebled.
|||The False Claims Act provides civil penalties of not less than $5,000.00
and not more than $10,000.00 plus three times the amount of damages which
the government sustained. 31 U.S.C. § 3729(a) (1988). In granting the government
summary judgment, the trial court awarded $5,000.00 as the statutory penalty
and $147,000.00 in treble damages, three times the amount of the difference
between the amount of the original Keeler invoice and the amount of the
altered Keeler invoice which was submitted by Young-Montenay to the VA.
That is a reasonable measure of damages. No authority has been cited to
mandate acceptance of the contractor's arguments for lesser measures.*fn3
Moreover, although the government sought only $98,000.00 in damages in its
filings at the summary judgment stage, no authority has been cited to us
that the trial court cannot award more so long as the trial court complies
with the provisions of 31 U.S.C. § 3729, which it has. Accordingly, we affirm
the trial court's award of $147,000.00.*fn4
Keeler did issue a second invoice in the amount of $153,000.00 for the burner
contended that the affidavits of Richard Sechrist and James Verberg, both
former employees of Keeler, establish genuine issues of material fact for
trial. In their testimony, both Verberg and Sechrist testified that they
"[did] not recall why [the second invoice in the amount of $153,000.00]
was submitted, however, it would not have been prepared or submitted without
a valid, legitimate business reason." See Joint Appendix at 40 and
43 respectively. Young-Montenay argued that if the second invoice correctly
reflected the total cost of the burner package and if Eisenhut believed
that $153,000.00 was the ultimate price he would have to pay, then Eisenhut's
altered invoice was not false.
Yet, neither of the affiants personally recalled the reason for the modification
of the invoice. Each affiant merely speculated that it "would not
have been prepared or submitted without a valid, legitimate business reason."
Id. In any event, Eisenhut should have waited to receive the second invoice
from Keeler rather than altering the original invoice.
does not challenge the penalty of $5,000.00, but disputes the imposition
of treble damages in part because the government has allegedly not established
any actual damage. According to Young-Montenay, the only damage, if any,
suffered by the government would be for the loss of interest on the extra
$49,000.00 ($153,000.00 - $104,000.00), limited to the period of time the
government was deprived of the use of its funds due to early payment.
Yet, the government properly responds that it sustained actual damages
as a result of Young-Montenay's fraud. First, the government was denied
the use of the overpaid money. Second, once Young-Montenay received an
early payment, the contractor had less incentive to complete the project
in a timely or satisfactory manner. In fact, the completion of the project
was delayed over 1,180 days. Thus, the government's interest in retaining
financial incentives to assure timely completion was compromised and harmed
by the fraud.
|||*fn4 No separate
section discussing the government's counterclaim under the Contract Disputes
Act is included in our analysis because, having upheld the Court of Federal
Claims' grant of summary judgment on the government's special plea in fraud
pursuant to 28 U.S.C. § 2514 and its counterclaim under the False Claims
Act, the government is precluded from further recovery under the Contract
Disputes Act, for its two counterclaims merge. In any event, whether the
Contract Disputes Act was violated has become moot because the government
has not raised this issue on appeal.
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