concluding that the trial court did not abuse its discretion in admitting the testimony of an expert witness who had no direct knowledge of the facts of the case and had not examined the evidence, but instead testified generally about cartel economics
How later courts described this case
- concluding that the trial court did not abuse its discretion in admitting the testimony of an expert witness who had no direct knowledge of the facts of the case and had not examined the evidence, but instead testified generally about cartel economics
Written by the judges who cited it.
The opinion
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 7, 2009 Decided June 22, 2010
Nos. 08-5390, 08-5391, 08-5392, 08-5393, 08-5394
UNITED STATES OF AMERICA EX REL. RICHARD F. MILLER AND
RICHARD F. MILLER,
APPELLEES
v.
BILL HARBERT INTERNATIONAL CONSTRUCTION, INC., ET AL.,
APPELLANTS
Appeals from the United States District Court
for the District of Columbia
(No. 1:95-cv-01231-RCL)
Alfred W. Putman, June Ann Sauntry, Barry Coburn,
Charles C. Murphy Jr., and Charles S. Leeper argued the
causes for appellants. With them on the briefs were Michael
R. Miner and Alicia Hickok. Bryan B. Lavine, Stephen P.
Murphy, and Brian P. Watt entered appearances.
Steve Frank, Attorney, U.S. Department of Justice, and
Paul R.Q. Wolfson argued the cause for appellees. With them
on the brief were Douglas N. Letter, Attorney, U.S.
Department of Justice, Keith V. Morgan, Assistant U.S.
Attorney, Robert B. Bell, Jennifer M. O’Connor, and Annie L.
2
Owens. R. Craig Lawrence, Assistant U.S. Attorney, and
Daniel S. Volchok entered appearances.
Before: SENTELLE, Chief Judge, GINSBURG and TATEL,
Circuit Judges.
Opinion for the Court filed PER CURIAM.
Separate opinion dissenting from Parts II.A.2 and II.G.4
filed by Circuit Judge TATEL.
TABLE OF CONTENTS
I. Background .......................................................................... 3
II. Analysis .............................................................................. 8
A. Statute of Limitations ................................................ 8
1. Relation Back Under the FCA ........................... 10
2. Claims Concerning Contracts 07 and 29 ........... 13
3. Claims Against BIE ........................................... 19
4. Remaining Claims ............................................. 24
B. Preemption ............................................................... 25
C. Personal Jurisdiction over HUK .............................. 27
D. Anderson’s Settlement ............................................. 29
E. BHIC Stipulation ..................................................... 30
F. Precluding BIE from Contesting Liability ............... 33
G. Evidentiary Issues .................................................... 35
1. BIE’s Guilty Plea ............................................... 36
2. Expert Testimony on Cartels ............................. 40
3. Ruggieri’s Testimony ........................................ 45
4. Evidence of HII and HC’s Wealth ..................... 46
H. Sufficiency of the Evidence ..................................... 50
1. Overarching Conspiracy .................................... 51
2. HUK’s Involvement in the Conspiracy ............. 55
3. Damages ............................................................ 62
III. Conclusion ...................................................................... 66
3
PER CURIAM: In this False Claims Act case, the jury
found five companies and one individual liable for rigging the
bidding on three contracts in Egypt funded by the USAID.
Trebling the jury’s award, the district court imposed over $90
million in damages. The defendants appeal, challenging
several of the district court’s rulings, as well as the
sufficiency of the evidence adduced against them. For the
reasons set forth in this opinion, we conclude (1) that the
plaintiffs’ claims on two of the contracts are barred by the
applicable statute of limitations, and (2) that certain testimony
and evidence introduced at trial unfairly prejudiced three
defendants. In all other respects, we affirm.
I. Background
Following the 1978 Camp David Accords, the United
States agreed to provide economic assistance to Egypt
through the U.S. Agency for International Development
(USAID), including funding for improving sewer systems in
Cairo and Alexandria. The sewer projects were divided into
numerous construction contracts and put out for bidding by
contractors prequalified by the USAID.
In 1995, Richard Miller, then a Vice President of the J.A.
Jones Construction Company (Jones), the 40% partner in a
series of identical joint ventures that bid on three of the
projects, filed a complaint under the False Claims Act (FCA).
31 U.S.C. § 3729 et seq. Enacted during the Civil War, the
FCA penalizes knowingly submitting or conspiring to submit
false or fraudulent claims to the United States Government,
§ 3729(a)(1)(A), (C), and authorizes private enforcement
through qui tam actions, which give individuals knowing of
fraud a monetary incentive to come forward, § 3730(b). In
his complaint, Miller alleged that in the course of his
employment, he discovered that the defendants, other
4
contractors, and a variety of related corporate entities and
individuals were all members of a conspiracy to rig the
bidding on contracts in Egypt. This so-called Frankfurt Club
would meet to discuss upcoming contract bids in Frankfurt,
Germany, the home of the conspiracy’s leader, Jones’s parent
corporation, Holzmann, A.G. Miller’s complaint focused on
the bidding for one particular contract, Contract 20A, and
named Holzmann, Jones, Harbert International, Inc. (HII)—
Jones’s partner on the other side of the joint venture—and
several related corporations as defendants.
In accordance with the FCA, Miller filed his complaint
in camera, and the district court placed it under seal. A qui
tam relator suing under the FCA brings his case “in the name
of the Government,” § 3730(b)(1), and his initial complaint
remains under seal for sixty days. Before the expiration of
that period, the Government must (1) intervene and “proceed
with the action, in which case the action shall be conducted
by the Government,” § 3730(b)(4)(A); (2) “notify the court
that it declines to take over the action, in which case [the
relator has] the right to conduct the action,” § 3730(b)(4)(B);
or (3) petition the court for an extension of the seal period by
showing “good cause,” § 3730(b)(3). If the Government
decides to intervene, it typically does so by filing an amended
complaint.
In this case, soon after Miller filed his complaint, the
Government opened a criminal investigation into the alleged
conspiracy and, fearing that active civil litigation would
interfere with that investigation, filed successive motions to
keep Miller’s complaint sealed. In the meantime, the
Government prosecuted many of the participants in the Cairo
and Alexandria bid-rigging arrangements, obtaining guilty
pleas or convictions from at least five U.S. corporations or
individuals.
5
In February 2001, the Government allowed Miller’s
complaint to be unsealed and filed its own Complaint in
Intervention, taking over control of the case. The
Government’s complaint adopted the claims that Miller had
asserted on Contract 20A and added claims on two other
contracts, Contracts 29 and 07, which it characterized as part
of the same Frankfurt Club conspiracy. It charged all the
defendants with substantive FCA violations for each of the
three contracts and with participating in the overarching
conspiracy. Miller later amended his complaint to do the
same. In essence, Miller and the United States alleged that
prior to each contract, some or all of the bidders prequalified
by the USAID met in Frankfurt to discuss the bidding. At
these meetings or thereafter, the bidders reached an
agreement that all but one would either bid high or refrain
from bidding, and the winning bidder would pay these
cooperators a “loser’s fee.”
Contract 20A, the first of the three contracts and the only
one identified in Miller’s original complaint, covered
installation of large-diameter, underground sewer pipe in
densely populated Cairo neighborhoods. The plaintiffs
alleged that the joint venture between HII and Jones (Harbert-
Jones), one of three prequalified bidders, sought and received
commitments from the other two companies to either overbid
or not bid for the contract. Thanks to this agreement,
Harbert-Jones ultimately won the contract for $115 million,
subsequently paying the other two bidders $2.2 and $3
million for their cooperation. The plaintiffs further alleged
that in order to hide $10 million in excess profits, the joint
venture engaged in a sale/leaseback transaction with an
affiliated corporation.
Contract 29, the second contract, involved the
construction of a wastewater treatment plant near Cairo. In
6
this instance, Harbert-Jones allegedly met with the only other
prequalified bidder and agreed to lose the bid in exchange for
a $4 million loser’s fee.
The third contract, Contract 07, covered the construction
of sewers in Alexandria. Because this time Harbert-Jones
was apparently unable to reach a bid-rigging agreement with
all other qualified bidders, it entered into a bilateral
agreement with one other bidder. Under that deal, the party
that won the contract would compensate the other with a
loser’s fee. Although the record is unclear on this point, the
fee would have been either 1.5 million U.S. Dollars or 1.5
million German Deutschmarks.
As relevant here, the Government’s Complaint in
Intervention and Miller’s amended complaint named the
following defendants:
Holzmann, see supra at 4;
Jones, see supra at 3;
HII, see supra at 4;
Harbert Corporation (HC), HII’s parent corporation;
Bilhar International Establishment (BIE), to which HII
assigned the contracts in question after bidding was
complete. (We hold, infra at 20, that the reference in
the original complaint to Harbert International
Establishment, Inc., was intended to refer to BIE);
Harbert Construction Services (U.K.), Ltd. (HUK), a
corporation owned 49% by BIE and 51% by a private
7
individual that provided various financial services in
connection with the bidding;
Bill Harbert International Construction, Inc. (BHIC), a
corporation which, though inactive at the time of
bidding, subsequently took partial ownership of BIE
and allegedly provided support for fraudulent billing
on inflated invoices as the ill-gotten contracts were
completed.
Bill Harbert, President of HII and a senior executive at
other corporate defendants; and
Roy Anderson, Vice President of HII and President of
BIE.
Five years of pleadings, motions, and discovery followed
Miller’s amended complaint and the Government’s
Complaint in Intervention. After declaring bankruptcy and
settling with the plaintiffs, Holzmann and Jones were each
dismissed from the case. Trial began in March 2007, and
following seven weeks of testimony, the jury found for the
plaintiffs on every count. This included conspiracy by all
defendants, as well as substantive violations by most
defendants with respect to most of the contracts. (For some
defendants’ involvement in some contracts, the district court
held that it lacked subject matter or personal jurisdiction. In
addition, at the conclusion of testimony, the court found all
claims against Bill Harbert were barred by the FCA’s statute
of limitations.)
The jury found that the United States suffered
approximately $34 million in damages from the defendants’
conduct. As required by the FCA, the district court trebled
these damages and added statutory penalties. See 31 U.S.C.
8
§ 3729(a). After subtracting amounts previously recovered by
the United States, it awarded $90.4 million in damages. The
defendants moved for judgment notwithstanding the jury’s
verdict on a variety of issues and sought a new trial on others.
Rejecting the defendants’ legal arguments and finding the
jury’s verdict amply supported by the evidence, the district
court denied all of the defendants’ motions in a 125-page
opinion. Miller v. Holzmann, 563 F. Supp. 2d 54 (D.D.C.
2008). This appeal followed.
II. Analysis
The defendants raise a number of issues. We first
address two threshold issues—whether the statute of
limitations bars any claims against the defendants and
whether the Foreign Assistance Act preempts the False
Claims Act. We next address personal jurisdiction over
HUK, the contradiction at trial of a stipulation regarding
BHIC’s existence, and the district court’s decision to preclude
BIE from contesting liability. Finally, we address the
defendants’ arguments concerning four evidentiary issues and
the sufficiency of the evidence.
A. Statute of Limitations
As relevant here, the FCA precludes a civil action filed
“more than 6 years after the date on which the violation . . . is
committed.” 31 U.S.C. § 3731(b)(1). The violations at issue
here occurred in the late 1980s and the 1990s. Miller filed his
initial complaint in 1995 alleging the defendants violated the
FCA in their dealings associated with Contract 20A. The
Government filed its Complaint in Intervention in 2001,
adopting Miller’s claims concerning Contract 20A and adding
its own claims concerning Contracts 07 and 29. In his Third
Amended Complaint, filed in 2006, Miller too added claims
concerning the latter contracts.
9
The defendants argue the statute of limitations bars all the
Government’s claims and bars Miller’s claims concerning
Contracts 07 and 29 because the events giving rise to those
claims occurred more than six years before the claims were
brought. The Government and Miller argue the claims relate
back to Miller’s initial complaint and therefore have the
benefit of the earlier filing date.1 BIE argues separately the
claims against it do not relate back because it was added as a
defendant after the statute of limitations had run.
The district court held the Government’s claims
concerning Contracts 07, 20A, and 29, as well as Miller’s
claims concerning Contracts 07 and 29, relate back to Miller’s
initial complaint. See 563 F. Supp. 2d at 139–42. We review
de novo whether “claims are barred by the statute of
limitations,” Jung v. Mundy, Holt & Mance, PC, 372 F.3d
429, 432 (D.C. Cir. 2004), and hold the statute of limitations
does not bar the Government’s claims concerning Contract
20A because they relate back to Miller’s timely filed
complaint but does bar all claims, both the Government’s and
Miller’s, concerning Contracts 07 and 29. The district court
also rejected BIE’s separate argument, as do we, because BIE
1
In a post-argument letter to the court, the Government
belatedly argues at least one claim concerning Contract 29 was
timely without regard to relation back because the underlying
events occurred less than six years before the Government filed its
Complaint in Intervention. Because the Government failed to raise
this point in the district court or in its briefs in this court, the point
is doubly forfeit and we do not consider it. See Bryant v. Gates,
532 F.3d 888, 898 (D.C. Cir. 2008). With the exception of the
arguments regarding recent decisions of the Supreme Court, the
same is true for the other arguments the parties raised in the various
post-argument letters. See id.; Fed. R. App. P. 28(j).
10
should have known within the required time it was an
intended defendant.
1. Relation Back Under the FCA
At the time of trial the FCA did not by its terms address
relation back, but the district court held the FCA nonetheless
implicitly permitted an otherwise untimely claim to relate
back under what is now Federal Rule of Civil Procedure
15(c)(1)(B). See 563 F. Supp. 2d at 139–40 n.137
(interpreting what was then Rule 15(c)(2)). In 2009, after trial
but before this appeal was briefed, the Congress amended the
FCA expressly to provide for relation back. The statute now
reads:
For statute of limitations purposes, any such Government
pleading shall relate back to the filing date of the
complaint of the person who originally brought the
action, to the extent that the claim of the Government
arises out of the conduct, transactions, or occurrences set
forth, or attempted to be set forth, in the prior complaint
of that person.
31 U.S.C. § 3731(c).
The statute as thus amended applies to this case on
appeal. Although most of the 2009 amendments to the FCA
apply only “to conduct on or after the date of enactment,” the
provision permitting relation back was made expressly
“appl[icable] to cases pending on the date of enactment.”
Fraud Enforcement and Recovery Act of 2009 (FERA), Pub.
L. No. 111-21, § 4(f)(2), 123 Stat. 1617, 1625 (emphasis
added).
The defendants’ arguments that the amended statute
cannot constitutionally be applied to this case are
11
unpersuasive. The Ex Post Facto Clause of the Constitution
applies only to penal legislation. See Calder v. Bull, 3 U.S. (3
Dall.) 386, 390–91, (1798) (opinion of Chase, J.); see also
Landgraf v. USI Film Prods., 511 U.S. 244, 266 n.19 (1994)
(citing Calder). The FCA is not penal. See Hudson v. United
States, 522 U.S. 93, 100–03 (overruling Court’s prior decision
that a civil FCA proceeding could be criminal under the
Double Jeopardy Clause). We need not address the
arguments concerning the Takings and the Due Process
Clauses of the Constitution because they were raised in only
two conclusory sentences. See Cablevision Sys. Corp. v.
FCC, 597 F.3d 1306, 1312 (D.C. Cir. 2010) (“Federal courts
should not . . . decide [a] constitutional question unless it is
presented with the clarity needed for effective adjudication.”)
(brackets in original) (internal quotation marks omitted);
Cement Kiln Recycling Coalition v. EPA, 255 F.3d 855, 869
(D.C. Cir. 2001) (“A litigant does not properly raise an issue
by addressing it in a cursory fashion with only bare-bones
arguments.”) (internal quotation marks omitted).
The defendants argue the Congress did not intend that the
amendment reach cases in which the Government had already
intervened because it referred to “cases pending” rather than
to “all pending cases.” In Lindh v. Murphy, 521 U.S. 320
(1997), upon which the defendants rely, the Supreme Court
discussed in a footnote the use and omission of “all” and
“any” in statutory provisions. See id. at 328–29 n.4. There
the Court interpreted a retroactivity provision that on its face
applied only to one of several chapters in the statute. See id.
at 326–27 (quoting Antiterrorism and Effective Death Penalty
Act of 1996, Pub. L. No. 104-132, § 107, 110 Stat. 1214,
1226 (“Chapter 154 . . . shall apply to cases pending on or
after the date of enactment of this Act”)); see also Martin v.
Hadix, 527 U.S. 343, 356 (1999) (explicating Lindh). Unlike
the statute interpreted in Lindh, the clause in the FERA
12
specifying the effective date of the provision concerning
relation back is not limited in scope to a particular type of
case or subset of cases.
The defendants, citing the Supreme Court’s recent
decision in Carr v. United States, 560 U.S. __, No. 08-1301
(June 1, 2010), would also have us infer, from a temporal
sequence or choice of verb tense, that Congress intended to
limit the effect of the statute to cases in which the
Government has not yet intervened. We have no need to draw
inferences, however, when the statute is clear on its face. See
Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997) (“Our
first step in interpreting a statute is to determine whether the
language at issue has a plain and unambiguous meaning with
regard to the particular dispute in the case. Our inquiry must
cease if the statutory language is unambiguous and the
statutory scheme is coherent and consistent.”) (internal
quotation marks deleted). The amendment “applies to cases
pending on the date of enactment.” Pub. L. No. 111-21,
§ 4(f)(2), 123 Stat. 1617, 1625. Because this case was
pending on the date of enactment, the amendment applies.
Q.E.D.
The defendants urge us to adopt an “equitable doctrine of
relation back” and so not to allow the Government’s claims to
relate back in this case because it delayed filing its own
complaint and unsealing Miller’s complaint until several
years after the statute of limitations had run. We reject this
argument because the statute, as amended, permits both
relation back and—if good cause be shown—maintaining the
relator’s complaint under seal indefinitely beyond the sixty
days. See 31 U.S.C. § 3730(b)(3).
Although the Government may take advantage of the
relator’s filing date, the FCA still does limit the claims it may
13
add. Under the new provision, the Government’s complaint
can relate back to the original complaint only “to the extent
that the claim of the Government arises out of the conduct,
transactions, or occurrences set forth, or attempted to be set
forth, in the prior complaint.” 31 U.S.C. § 3731(c). The
defendants do not argue the scope of the Government’s claims
concerning Contract 20A impermissibly expands beyond that
of Miller’s. Accordingly we hold the Government’s claims
concerning Contract 20A are not barred by the statute of
limitations because they relate back to Miller’s original timely
complaint.
2. Claims Concerning Contracts 07 and 29
In contrast, the Government’s claims concerning
Contracts 07 and 29 do not meet that standard because they
have little to do with Miller’s claims concerning Contract
20A. As we noted in Meijer, Inc. v. Biovail Corp., 533 F.3d
857 (D.C. Cir. 2008), ordinarily “[t]he underlying question [in
analyzing relation back] is whether the original complaint
adequately notified the defendants of the basis for liability the
plaintiffs would later advance in the amended complaint.” Id.
at 866 (citing 6A Charles Alan Wright, Arthur R. Miller, &
Mary Kay Kane, Federal Practice & Procedure § 1497 (“if
the alteration of the original statement is so substantial that it
cannot be said that defendant was given adequate notice of the
conduct, transaction, or occurrence that forms the basis of the
claim . . . then the amendment will not relate back”)).
This focus upon notice is in tension with the requirement
that a complaint alleging a violation of the FCA be filed under
seal and not served “on the defendant until the court so
orders.” 31 U.S.C. § 3730(b)(2). We have not had occasion
to address this tension before because in no prior case in this
circuit had the Government kept the complaint under seal and
14
refrained from serving it on the defendant until after the
statute of limitations had run.2 The Second Circuit, however,
considered this tension when it held the FCA, before it was
amended, did not implicitly permit relation back: “The
secrecy required by § 3730(b) is incompatible with Rule
15(c)(2) [now 15(c)(1)(B)], because (as is well-settled) the
touchstone for relation back pursuant to [that] Rule[] is
notice.” United States v. Baylor Univ. Med. Ctr., 469 F.3d
263, 270 (2006).
Under the statute as amended to allow relation back, the
inquiry cannot be whether the defendant had actual notice of
the claim before the statute of limitations had run because the
FCA specifically requires that the complaint be filed under
seal. The timely filed private party’s complaint, however, still
limits the permissible scope of the Government’s later-filed
complaint because, as mentioned above, the statute requires
that in order to relate back a new claim must arise from the
same conduct, transactions, or occurrences as did the timely
complaint.
Cases concerning relation back under Rule 15, despite
their focus upon notice to the defendant, are useful in
analyzing relation back under the FCA because the standards
in the FCA and in Rule 15 are substantively identical. As we
have seen, the FCA allows relation back only “to the extent
that the claim of the Government arises out of the conduct,
transactions, or occurrences set forth, or attempted to be set
forth, in the prior complaint,” 31 U.S.C. § 3731(c); Rule
15(c)(1)(B) allows relation back only to the extent the new
2
Although the defendants were aware of the criminal
investigation involving the same conduct, they did not have notice
until 2001 of the precise allegations in the Government’s FCA
complaint.
15
pleading “asserts a claim or defense that arose out of the
conduct, transaction, or occurrence set out—or attempted to
be set out—in the original pleading.”
Relation back generally is improper when the new
pleading “asserts a new ground for relief supported by facts
that differ in both time and type from those the original
pleading set forth,” Mayle v. Felix, 545 U.S. 644, 650 (2005);
“attempts to introduce a new legal theory based on facts
different from those underlying the timely claims,” United
States v. Hicks, 283 F.3d 380, 388 (D.C. Cir. 2002); or,
although it “shares ‘some elements and some facts in
common’ with the original claim . . . its effect is ‘to fault [the
defendants] for conduct different from that identified in the
original complaint,’” Jones v. Bernanke, 557 F.3d 670, 674
(2009) (quoting Meijer, 533 F.3d at 866).
Courts have refused to relate back “amendments alleging
the separate publication of a libelous statement, the breach of
an independent contract, the infringement of a different
patent, or even a separate violation of the same statute.” 6A
Wright, Miller, & Kane, supra, § 1497 (footnotes deleted)
(collecting cases). For example, in United States ex rel.
Bledsoe v. Community Health Systems, 501 F.3d 493 (2007),
the Sixth Circuit applied the relation back provisions of Rule
15 in a qui tam case involving claims for reimbursement from
Medicare and Medicaid submitted under certain Current
Procedural Terminology (CPT) codes used for billing medical
services. The timely documents alleged improper billing
under Code 94799 for services related to “emergency room”
and “02 Equip./Daily” but the amended complaint also
alleged “improper[] billing . . . under that [same] code for a
‘call back’ charge for which no procedure is associated”; the
court held the latter allegation did not relate back because the
former allegation would not have “alert[ed]” the defendant
16
that billing related to call backs was involved. Id. at 518–19.
The timely documents also made “several allegations of
improper billing under CPT code 99201,” including
allegations concerning miscoding of supplies, but the
amended complaint added allegations of improper billing “for
cardiopulmonary resuscitation under [that] code”; again the
court held the latter allegations did not relate back because the
original documents would not have “alert[ed] [the]
[d]efendants . . . that cardiopulmonary resuscitation
procedures were involved.” Id. at 513, 518–19. Although in
each instance the allegations in the timely documents and in
the amended complaint addressed improper billing under the
same billing code, the court held the new allegations did not
relate back because they did not “arise from the same
conduct, transaction or occurrence” involved in the timely
complaint. Id. at 519.
In this case, all three contracts are similar only in that
each was funded by the USAID and required work related to
sewer systems in Egypt. The differences among them,
however, are significant. Based upon the allegations in the
complaint, the critical facts regarding each contract are the
work to be performed, who was prequalified to participate in
the bidding that was allegedly rigged, when the contract was
awarded, who won the contract, and the amount of the
winning bid. The following table summarizes these facts for
each contract and thus shows the important differences.
Contract Awarded Winning Project Prequalified Recipient
bid
20A 1988 $114.9 19 km of George A. Fuller Co., Harbert-
million underground Fru-Con Construction Jones 20A
sewer pipe in Co., and Harbert-Jones Joint
Cairo 20A Joint Venture Venture
29 1989 $114.9 Wastewater At least Sadelmi U.S.A. Sadelmi
17
million treatment and Harbert-Jones 29 U.S.A.
plant in Cairo Joint Venture
07 1990 $44.6 Sewer in Morrison-Knudsen, Harbert-
million Alexandria FruCon, Maclean Jones 07
Grove, Tidewater, and Joint
Harbert-Jones 07 Joint Venture
Venture
18
As reflected in the table, each contract required work to
be performed on a different project and was awarded in a
different year to a different winning bidder drawn from a
different pool of prequalified bidders. Allegations concerning
Contract 20A do not fairly encompass Contracts 07 or 29
because each contract is unique and no two involved the same
“conduct, transaction[], or occurrence[].”
Miller and the Government argue the use of the plural in
Miller’s complaint—“conspired to rig the bidding for
construction contracts paid for by the [USAID]” (emphasis
added)—together with the allegation there was a “club []
organized to control prices” and the contention that
“discovery in this case will reveal [] other AID contracts,”
broadened the scope of the complaint beyond Contract 20A.
As we held in Meijer, however, using the plural form does not
cause new allegations to relate back when, as here, the new
allegations do not involve “conduct, transactions, or
occurrences” common to the timely pleading. See 533 F.3d at
866. As in Meijer, our decision here is impelled by more than
the limited relevance of the plural form. Miller’s allegations
concerning any contracts beyond 20A were nothing more than
“‘naked assertion[s]’ devoid of ‘further factual
enhancement,’” viz., the existence of a price-fixing “club,”
and that discovery would reveal other rigged contracts.
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007))
(brackets in original). Allowing such broad and vague
allegations to expand the range of permissible amendments
after the limitation period has run would circumvent the
statutory requirement in the FCA that the amendments
“arise[] out of the conduct, transactions, or occurrences” in
the original complaint, 31 U.S.C. § 3731(c); it would also, we
note, circumvent the recent teachings of Iqbal and Twombly
by allowing amendments to relate back to allegations that
19
were themselves nothing more than “naked assertions.” That
potential for abuse is avoided by the relation back provision in
the FCA, the amendment of which postdates Twombly,
cabining the scope of otherwise untimely amendments by
imposing the same “conduct, transactions, or occurrences”
requirement. 31 U.S.C. § 3731(c).
Turning to Miller’s claims concerning Contracts 07 and
29, we hold they are barred by the statute of limitations
because he added them after the limitation period had run.
Miller may not take advantage of the relation back provision
in the FCA, which applies only to the Government’s
pleadings. See id. If his claims are to relate back then they
must do so under Rule 15(c)(1)(B), which permits relation
back for claims “that arose out of the conduct, transaction, or
occurrence set out . . . in the original pleading.” We need not
decide whether Rule 15(c)(1)(B) applies to claims made by a
relator in litigation under the FCA because we have
determined the claims concerning Contracts 07 and 29 do not
meet that standard, which for our purposes is substantially the
same as the standard in the amended FCA.
3. Claims Against BIE
Prior to 2006 both Miller’s and the Government’s
complaints named Harbert International Establishment, Inc.
(HIE, Inc.) among the defendants; they did not name Bilhar
International Establishment (BIE). In amended complaints
filed in 2006, Miller and the Government replaced references
to “Harbert International Establishment, Inc.” with references
to “Bilhar International Establishment f/k/a Harbert
International Establishment.” The statute of limitations bars
all claims against BIE unless the amended complaints relate
back to a timely complaint. The district court held the
amended complaints relate back because BIE should have
20
known it was the intended defendant. Miller v. Holzmann,
2007 WL 778599, 2007 U.S. Dist. LEXIS 15598 (D.D.C.
Mar. 6, 2007). We agree with the district court.
(a) History of the Companies
A company called Harbert International Establishment
was formed in Liechtenstein in 1975. At all relevant times
Bill Harbert owned at least part of that company and at
various times BHIC and HII owned the remainder. In
September 1993 Harbert International Establishment changed
its name to Bilhar International Establishment. The next
month a new company was formed in Liechtenstein, also
called Harbert International Establishment. It acquired many
of the assets of BIE (formerly HIE), including both the name
Harbert International Establishment and that company’s
interest in Contract 20A. After transferring its assets to the
new HIE, the old HIE (by then BIE) ceased operating. In
1999 Bill Harbert’s son formed Harbert International
Establishment, Inc. in Alabama.
(b) Analysis
Rule 15(c)(1)(C), which for present purposes is
substantively the same as the version of then-Rule 15(c)(3)
applied by the district court, provides an amendment relates
back when:
the amendment changes the party or the naming of the
party against whom a claim is asserted . . . if, within the
[120 days] provided by Rule 4(m) for serving the
summons and complaint, the party to be brought in by
amendment:
(i) received such notice of the action that it will not be
prejudiced in defending on the merits; and
21
(ii) knew or should have known that the action would
have been brought against it, but for a mistake
concerning the proper party’s identity.
Fed. R. Civ. P. 15(c)(1)(C) (emphasis added).
Relation back under this provision “is most obviously
appropriate in cases [such as this] where the plaintiff has sued
a corporation but misnamed it.” Roberts v. Michaels, 219
F.3d 775, 778 (8th Cir. 2000). BIE does not claim the
misnaming prejudiced it and the plaintiffs do not dispute
BIE’s defense that it did not actually know it was the intended
defendant; the dispute between the parties is whether BIE
should have known it was the intended defendant.
The same attorney represented BIE, HIE, and HIE, Inc.
That attorney acknowledges she knew the plaintiffs had erred
in naming HIE, Inc., but as between her two other clients with
similar names she “felt that it was likely that the Government
had intended to sue Harbert International Establishment[,] . . .
not Bilhar International Establishment.”
In determining what BIE, in the person of its attorney,
knew or should have known, we consider the allegations in
Miller’s Second Amended Complaint3 as follows:
3
The parties agree this is the complaint to which BIE should
have referred in order to determine the identity of the intended
defendant. BIE states, “Similar allegations appear in the
government’s Complaint in Intervention,” and does not identify any
significant differences between the complaints for these purposes.
22
Allegation Comment
(1) BHIC “controls and BHIC owned 79% of BIE but
operates” the defendant. none of HIE.
(2) The defendant is “a This allegation does not advance
Liechtenstein corporation the inquiry because both HIE
which, upon information and BIE were organized in
and belief, has as its Liechtenstein and neither has its
principal place of business principal place of business in
Birmingham, Alabama.” Alabama.
(3) The defendant “holds a 49 This allegation applied, at one
percent share” of HUK. time or another, to both BIE and
HIE. By the time the complaint
was filed BIE had sold its 49%
interest in HUK to HIE.
(4) Bill Harbert was Chairman This allegation applied equally
and Roy Anderson was to BIE and to HIE.
President of the defendant.
(5) “In 1991, as a consequence The same paragraph describes
of a reorganization of the HII as managing the 20A Joint
Harbert entities, Contract Venture, suggesting the
20A was assigned to referenced assignment of
Harbert International Contract 20A came from HII.
Establishment, which is The paragraph better describes
owned and controlled by BIE. As stated above, BHIC
[BHIC], and these owned the majority of BIE, not
companies began of HIE. The assignment of
participating directly in the Contract 20A did not change in
conspiracy.” 1991. In 1989 HII assigned it to
BIE, which was then known as
HIE. In 1993, after the new
company was created and
named HIE, BIE reassigned
Contract 20A to the new HIE.
23
Of these five allegations, Nos. 2 and 4 are of no help in
identifying the correct defendant because they favor neither
HIE nor BIE. Of the three allegations that better describe one
company than they do the other, only one more accurately
applies to HIE: At the time of the complaint, HIE owned 49%
of HUK. Allegations 1 and 5 indicate BIE was the intended
defendant: BHIC, not HIE, owned the majority of BIE, and
HII assigned part of its interest in Contract 20A to the
company that, at the time, was named HIE and was owned
primarily by BHIC. Thereafter the assignee participated in
the conspiracy. This latter datum, which unlike the others
reaches the intended defendant’s substantive involvement in
the bid rigging, should have led counsel to the conclusion that
BIE was the intended defendant.
This discussion undoubtedly seems obscure to anyone
unfamiliar with the various companies in the Harbert group of
companies. When an attorney for several of these companies,
however, receives a complaint she knows mistakenly names
as the defendant one company in the group, and she
represents two other companies in the group with names
similar to that of the named defendant, it should be obvious
that she needs to consider the history and corporate structure
of both companies and to determine which company is the
intended defendant.
BIE argues the Government and Miller could have
determined the correct name because the relevant parts of the
structure of the Harbert complex were disclosed in certain
financial documents of which they had copies. The
appropriate inquiry under Rule 15, however, is what the
intended defendant “should have known.” Fed. R. Civ. P.
15(c)(1)(C)(ii). After this case had been submitted the
Supreme Court clarified the issue in Krupski v. Costa
Crociere S.p.A., 560 U.S. __, No. 09-337 (June 7, 2010). In
24
Krupski the plaintiff sued Costa Cruise Lines N.V. instead of
the related company Costa Crociere S.p.A.4 Although the
plaintiff could have determined the correct identity of the
intended defendant, the Court explained,
Rule 15(c)(1)(C)(ii) asks what the prospective defendants
knew or should have known during the Rule 4(m) period,
not what the plaintiff knew or should have known. . . .
That a plaintiff knows of a party’s existence does not
preclude her from making a mistake with respect to that
party’s identity.
Id. at __, slip op. at 8–9.
BIE argues for the first time in a footnote in its brief on
appeal that the 120-day period in Rule 4(m), referred to in
Rule 15(c)(1)(C), started to run when the suit was filed in
1995 rather than when the complaint was unsealed in 2001.
We do not ordinarily consider an argument made for the first
time on appeal. In any event, as we stated in Hutchins v.
District of Columbia, 188 F.3d 531, 539 n.3 (D.C. Cir. 1999)
(en banc), “[w]e need not consider cursory arguments made
only in a footnote.”
4. Remaining Claims
To summarize, the only claims left standing are Miller’s
claims concerning Contract 20A, as originally pleaded and
subsequently amended, and the Government’s claims
concerning the same contract, which relate back to Miller’s
claims for purposes of the statute of limitations. All the
4
Crociera means cruise in Italian. See Krupski, 560 U.S. at
__, slip op. at 17.
25
Government’s and Miller’s claims concerning Contracts 07
and 29 are time barred.
B. Preemption
BIE, HUK, and BHIC alone argue this case should have
been dismissed because the Foreign Assistance Act (FAA), 22
U.S.C. § 2151 et seq., preempts the False Claims Act. The
district court rejected this argument in Miller v. Holzmann,
2007 WL 710134 at *11, 2007 U.S. Dist. LEXIS 16105 at
*35–36 (D.D.C. Mar. 6, 2007). We address the question of
preemption de novo, Bldg. & Constr. Trades Dep’t, AFL-CIO
v. Allbaugh, 295 F.3d 28, 32 (D.C. Cir. 2002), and affirm.
The FAA, which governs how the United States provides
aid to foreign countries, includes its own false claim
provision. That provision authorizes the President to bring a
suit on behalf of the United States, but does not authorize a
private party to bring a qui tam action. See 22 U.S.C.
§ 2399b(b). In contrast, the FCA allows a private party, in
addition to the Attorney General, to bring a civil suit. See 31
U.S.C. § 3730(a), (b).
The defendants argue the qui tam provision of the FCA
conflicts with the lack of such a provision in the FAA because
“a precisely drawn, detailed statute pre-empts more general
remedies.” Brown v. Gen. Servs. Admin., 425 U.S. 820, 834
(1976). They assert “[a]llowing a qui tam relator the right to
file an action against foreign aid contractors . . . would
effectively nullify the FAA’s more restrictive [remedial]
provision.” With this argument they suggest that, for fraud
involving foreign aid, the false claim provision in the FAA,
enacted in 1968, implicitly displaced the qui tam provision in
the FCA, which has been around in some form since 1863.
See Act of March 2, 1863, ch. 67, § 4, 12 Stat. at 698, Rev.
Stat. § 3491.
26
“[W]hen two statutes are capable of co-existence, it is the
duty of the courts, absent a clearly expressed congressional
intention to the contrary, to regard each as effective.” Morton
v. Mancari, 417 U.S. 535, 551 (1974). The FCA and the FAA
are surely capable of co-existence. In a case involving
foreign aid, such as this one, the Government could bring suit
under either the FCA or the FAA. Indeed, the FCA expressly
contemplates the possibility the Government will have a
choice of remedy. See 31 U.S.C. § 3730(c)(5) (“the
Government may elect to pursue its claim through any
alternate remedy available to the Government”). A choice
does not create a conflict, let alone an “irreconcilable
conflict.” See United States v. Batchelder, 442 U.S. 114, 118,
122 (1979) (“overlapping statutes” with “partial redundancy”
“fully capable of coexisting”); cf. EC Term of Years Trust v.
United States, 550 U.S. 429, 435 (2007) (nine-month
limitations period for a claim under specific statute conflicts
with four-year period provided by a more general statute).
Finally, the Government need not face the prospect posed
by the defendants of a private plaintiff in a qui tam case
somehow interfering in a case brought by the Government
under the FAA. The FCA requires the private plaintiff to
present his claim to the Government before it is served on the
defendant. The Government may “proceed with the action,
. . . dismiss the action notwithstanding the objections of [the
relator], . . . settle the action . . . notwithstanding the
objections of [the relator],” or keep the complaint under seal
during an investigation. 31 U.S.C. §§ 3730(b), (c). Indeed,
the FCA specifically authorizes the Government to restrict the
relator’s involvement, such as by limiting his discovery, if his
involvement otherwise “would interfere with the
Government’s investigation or [with] a prosecution of a
criminal or civil matter arising out of the same facts.”
§ 3730(c)(4).
27
In sum, although the false claims provisions of the FAA
and the FCA do overlap, the two statutes are fully capable of
coexisting. Therefore, the FAA does not preempt the FCA.
C. Personal Jurisdiction over HUK
HUK challenges the district court’s assertion of personal
jurisdiction over it. Miller v. Holzmann, 2007 WL 778568,
2007 U.S. Dist. LEXIS 15599 (D.D.C. Mar. 6, 2007); United
States ex rel. Miller v. Bill Harbert Int’l Constr., Inc., 501 F.
Supp. 2d 51, 53 & n.3 (D.D.C. 2007). Reviewing the district
court’s assertion of personal jurisdiction de novo, McAninch
v. Wintermute, 491 F.3d 759, 765 (8th Cir. 2007); see also FC
Inv. Group LC v. IFX Markets, Ltd., 529 F.3d 1087, 1091
(D.C. Cir. 2008) (reviewing dismissal), we hold HUK had
sufficient contacts with the United States to subject the
company to the jurisdiction of its courts.
A court may exercise personal jurisdiction over a
defendant not present within the forum if the defendant has
“certain minimum contacts with [that forum] such that the
maintenance of the suit does not offend traditional notions of
fair play and substantial justice.” Int’l Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945) (internal quotation
marks deleted). The exercise of personal jurisdiction “must
have a basis in some act by which the defendant purposefully
avails itself of the privilege of conducting activities within the
forum State, thus invoking the benefits and protections of its
laws.” Asahi Metal Indus. Co. v. Superior Ct. of Cal., 480
U.S. 102, 109 (1987) (internal quotation marks omitted).
Personal jurisdiction is proper where the defendant has
“purposefully directed his activities at residents of the forum
and the litigation results from alleged injuries that arise out of
or relate to those activities.” Burger King Corp. v. Rudzewicz,
471 U.S. 462, 472 (1985) (internal quotation marks omitted).
28
HUK argues against personal jurisdiction based upon our
decision in Creighton Ltd. v. Gov’t of State of Qatar, 181 F.3d
118 (1999). There we held the Government of “Qatar lacks
the minimum contacts with the United States that would make
it amenable to suit here” even though it had “entered into a
contract with a company based in the United States.” Id. at
127–28. The contract had been “offered, accepted, and
performed in Qatar.” Id. at 128. In addition, the “contract
was made subject to the laws of Qatar, payment was made in
Qatari riyals to Creighton’s bank account in Qatar, and the
alleged breach occurred in Qatar.” Id. HUK’s contacts with
the United States were a good deal more substantial than
those of Qatar.
At all relevant times HUK was, not surprisingly, based in
the United Kingdom. It had no office, bank account, real
property, or employees in the United States. It was not a
party to Contract 20A, nor was it a member of the joint
venture that bid for that contract. On the other hand, HUK
was intimately involved with the Harbert-Jones Joint Venture
bid for Contract 20A. From 1985 to 1988, fully 50% of
HUK’s work was on the preparation of the bid for Contract
20A and one of its employees signed the tender. HUK knew
that the United States Government was funding the contract
and that all payments to HUK for work done in connection
with the contract were funded by payments from the United
States Government via bank accounts in the United States
belonging to one of the other Harbert companies. In addition,
the district court found, and HUK does not dispute, the
following facts: HUK “was created by American citizens,
acting as agents for . . . American corporations, for the
specific purpose of providing services to companies that were
bidding on projects that were going to be funded by agencies
of the United States.” Miller v. Holzmann, 2007 WL 39371 at
29
*7–8, 2007 U.S. Dist. LEXIS 501, *25–26 (D.D.C. Jan. 8,
2007).
Considering these facts, we conclude “the defendant’s
conduct and connection with the forum State are such that he
should reasonably anticipate being haled into court there.”
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286,
297 (1980); see McGee v. Int’l Life Ins. Co., 355 U.S. 220,
223 (1957) (personal jurisdiction over Texas company proper
in California court “based on a contract which had substantial
connection with” that state). Accordingly, we hold HUK’s
contacts with the United States were sufficient to give the
district court personal jurisdiction over it.
D. Anderson’s Settlement
For a time Anderson and the Government tried to settle
the Government’s case against him. He argues they reached
an agreement and have an enforceable settlement; the
Government argues the settlement was never made final and
should not be enforced.
The district court dismissed “all of the relator’s claims on
all contracts against defendant Anderson, and all of the
Government’s claims but one claim on contract 29 against
defendant Anderson . . . as untimely under the FCA’s statute
of limitations.” United States ex rel. Miller v. Bill Harbert
Int’l Constr., Inc., 505 F. Supp. 2d 1, 19 (D.D.C. 2007). At
trial Anderson was found liable for $149,615.20 on that one
claim. 501 F. Supp. 2d 51, 58 (D.D.C. 2007).
Anderson joined the other defendants’ argument that the
statute of limitations bars all claims concerning Contract 29.
Having agreed with the defendants on that point, we have no
need to reach Anderson’s alternative argument that the
30
Government and he entered into a final and binding
settlement agreement.
E. BHIC Stipulation
Prior to trial, the parties jointly stipulated that BHIC “did
not exist at the time Contracts 20A, 29, [or] 07 were bid or
entered into.” This stipulation simplified the more complex,
but mostly irrelevant, circumstances surrounding the
formation of BHIC. In 1986, an entity named BLH
Enterprises, Inc. was formed but had no employees or
operations for six years. In December 1991, BLH changed its
name to Bill Harbert International Construction, Inc. Then, in
1992, more than a year after Harbert-Jones entered into the
last contract, BHIC acquired employees and began operations.
At that point, BHIC also became the majority owner of BIE
and provided support services such as administrative
accounting to that company.
During trial, the Government introduced evidence that
the defendants argue contradicted the joint stipulation of fact
that BHIC did not exist at the time companies were bidding
on and entering into the relevant contracts. The evidence
introduced was a document submitted by BHIC in 1992 for
prequalification to bid on another contract not at issue in this
case. That document included the information about BLH’s
formation and its subsequent name change, indicating that
BHIC had, in fact, existed when Harbert-Jones and other
companies bid on and entered into Contracts 20A, 29, and 07.
The Government emphasized this contradiction with the joint
stipulation, asking Alf Hill, the project manager for Contract
20A, to read aloud the part of the document explaining
BHIC’s history. The Government then asked, “So according
to this document which was submitted to the Government,
BHIC existed since 1986, right?” The project manager
31
replied, “Yes.” Over BHIC’s objection that the witness had
not seen the document before and that the document had not
been authenticated, the district court allowed the document to
be submitted into evidence and refused to strike the testimony
relating to BHIC’s date of incorporation. In closing
arguments, the Government pointed back to that document,
saying “Why are we suing BHIC? . . . Take a look at that
document.” The Government further clarified its point later
in its closing argument, saying, “BHIC was in existence at the
time Bill Harbert, Roy Anderson, and Tommy Kitchens were
doing what they were doing rigging the bids, dealing with the
profits on Contract[s] 20A, 07 and 29.”
After trial, BHIC argued in support of a new trial that this
evidence was contrary to the stipulation, prejudicial, and
undermined the credibility of BHIC counsel, who relied in
opening statements on the joint stipulation. The district court
denied BHIC’s motion for a new trial, and clarified its
reasoning for allowing the Government to introduce the
evidence that BHIC had incorporated in 1986:
[P]laintiffs did not stipulate that neither BHIC nor any
predecessor company existed ‘at the time Contracts 20A,
29, 07 were bid or entered into.’ Plaintiffs did not seek to
disprove the stipulated fact that BHIC did not exist prior
to 1992. Rather, they sought to prove that BHIC, by its
own admission, is a direct outgrowth of any entity that
did exist when the bid-rigging occurred.
Miller v. Holzmann, 563 F. Supp. 2d 54, 104 n.61 (D.D.C.
2008).
Even if the stipulation is read so narrowly, the
Government violated it. The Government elicited testimony
and claimed in closing argument that BHIC itself existed
since 1986, not that a BHIC predecessor existed since then.
32
Not only that, but the evidence establishes BLH was not in
fact a predecessor to BHIC, but actually the same company.
The only difference was a change in name. The document
introduced by the Government included the articles of
incorporation for BLH and the amendment to those articles
that change its name to BHIC. The evidence did not seek to
prove BHIC was an “outgrowth” of another entity. It
established that BHIC existed at the time of the contract
bidding.
Stipulations of fact bind the court and parties. Gander v.
Livoti, 250 F.3d 606, 609 (8th Cir. 2001); see also
Verkouteren v. District of Columbia, 346 F.2d 842, 844 n.2
(D.C. Cir. 1965). This is their very purpose, their “vital
feature.” 9 Wigmore, Evidence § 2590 (Chadbourn rev.
1981). Once a stipulation of fact is made, “the one party need
offer no evidence to prove it and the other is not allowed to
disprove it.” Id. § 2588. When the Government claimed that
BHIC existed since 1986, it directly contradicted the joint
stipulation that BHIC did not exist until after the bidding for
the three contracts.
The contradictory statements constitute substantial
prejudice to BHIC. In his opening argument, BHIC’s counsel
emphasized the stipulated fact, saying, “[I]f you remember
those key events, the last of those was in May 1991, more
than a year before BHIC begins its operations in July of 1992.
The plaintiffs do not and will not contest that BHIC did not
even come into existence, it didn’t even exist at the time that
Contracts 20A, 29 and 07 were bid and entered into.” We
agree with BHIC that allowing the Government to contradict
the stipulation called into question the credibility of BHIC’s
counsel, severely impeding counsel’s ability to effectively
advocate for his client. The district court recognized this
problem, but stated that it had “confidence that after hearing
33
testimony concerning the complex corporate restructuring
from which most of these defendants emerged, the jury was
able to appreciate the distinction between plaintiffs’ argument
[that BLH ultimately became BHIC] and the stipulated fact.”
563 F. Supp. 2d at 104 n.61. But we do not immediately see
what distinction separates the Government’s assertion that
“BHIC existed since 1986,” and the stipulated fact that
“BHIC did not exist at the time Contracts 20A, 29, 07 were
bid or entered into.” We therefore cannot conclude that the
jury made such a distinction. The district court abused its
discretion when it allowed the Government to contradict the
stipulation and thereby undermine BHIC’s defense. We
remand for a new trial for BHIC.
F. Precluding BIE from Contesting Liability
The district court held that BIE was estopped from
contesting liability under the FCA as to Contracts 20A and 29
because of its guilty plea in a separate criminal proceeding.
United States ex rel. Miller v. Bill Harbert Int’l Constr., Inc.,
2007 WL 851857, 2007 U.S. Dist. LEXIS 17667 (D.D.C.
Mar. 14, 2007). In February 2002, BIE pleaded guilty to an
indictment charging violations of the Sherman Act, 15 U.S.C.
§ 1, by its involvement in the bid-rigging conspiracy from
1988 to 1996. BIE contends that it was error to preclude it,
based on the doctrine of collateral estoppel, from contesting
liability under the FCA because a Sherman Act conspiracy
does not require an overt act, while an FCA conspiracy does.
Therefore, BIE argues, it might have been able to show that
although it was guilty of a Sherman Act violation, it was not
liable under the FCA. As BIE sees it, because collateral
estoppel affects only issues that were actually litigated and
necessarily decided in the first action, Jack Faucett Assocs. v.
Am. Tel. & Tel. Co., 744 F.2d 118, 125 (D.C. Cir. 1984),
issues relating to the overt acts necessary for the FCA
34
conspiracy were not precluded by the guilty plea in the
Sherman Act prosecution, which did not require the proof of
such acts. The district court disagreed, reasoning that the
overt acts BIE admitted in its guilty plea and accompanying
memorandum were essential to its Sherman Act plea because
they supplied the factual basis for the plea. Miller v.
Holzmann, 563 F. Supp. 2d 54, 80–81 (D.D.C. 2008). The
district court reasoned that the preclusive effects of a guilty
plea in a prior criminal proceeding extend not only to the
essential elements of the crime charged, but also to the facts
admitted in the accompanying Rule 11 proceeding. As the
court explained, Rule 11 “mandates that before entering
judgment on a guilty plea, a court must ‘mak[e] such inquiry
as shall satisfy it that there is a factual basis for the plea.’” Id.
at 79 (quoting Fed. R. Crim. P. 11(f) (brackets in the district
court opinion)). Thus, because the facts admitted in the Rule
11 proceeding are essential to the entry of judgment, it is
consistent with the underpinnings of the collateral estoppel
doctrine that a defendant should be precluded from
relitigating those facts as well as those related to the essential
elements of the crime. Therefore, the court concluded that
having admitted liability with respect to Contracts 20A and 29
in the previous proceeding, BIE was properly precluded from
contesting its liability for conspiracy with respect to those
contracts. Id. at 81.
We need not ultimately decide this issue. The district
court relied not only on collateral estoppel, but also on the
equitable doctrine of judicial estoppel, which states that if a
party successfully assumes a certain legal position in one
proceeding, “he may not thereafter, simply because his
interests have changed, assume a contrary position.” Id. at 81
n.14 (quoting Davis v. Wakelee, 156 U.S. 680, 689 (1895)).
As applied to BIE’s circumstances, the court found that BIE
was advancing a position contrary to the one the criminal
35
court relied on when it accepted BIE’s guilty plea, and that
judicial estoppel was therefore appropriate. Id.
Before this court, BIE has not asserted any error in this
alternative reason for estopping BIE. Because BIE has
forfeited the argument that the judicial estoppel was
erroneous, we need go no further in our analysis. Even if we
were to reject the district court’s reasoning on the collateral
estoppel theory, we would nonetheless affirm its ruling
precluding BIE from contesting liability. See Kauthar SDN
BHD v. Sternberg, 149 F.3d 659 (7th Cir. 1998) (“in
situations in which there is one or more alternative holdings
on an issue, . . . failure to address one of the holdings results
in a waiver of any claim of error with respect to the court’s
decision on that issue”).
G. Evidentiary Issues
The defendants argue the district court committed
reversible error in four evidentiary rulings: (1) admitting into
evidence against all defendants BIE’s prior guilty plea;
(2) allowing the Government to present expert testimony on
the economics of generic cartels; (3) allowing Luigi Ruggieri,
an officer of the company that received Contract 29, to testify
about his subordinate’s meeting with Peter Schmidt, a
Holzmann executive in Frankfurt; and (4) permitting the
Government to question a witness about the wealth of HII,
HC, and a related management company that was not a
defendant in this case. We review for abuse of discretion the
district court’s decisions to admit evidence. United States v.
Watson, 409 F.3d 458, 462 (D.C. Cir. 2005). However, to the
extent the defendants argue the district court misinterpreted
the Federal Rules of Evidence, we review those
interpretations de novo. United States v. Gewin, 471 F.3d
197, 200 (D.C. Cir. 2006). Applying those standards, we hold
36
that the district court did not err in the first two decisions. We
also hold that Ruggieri’s testimony was irrelevant to the
remaining Contract 20A claims, and therefore that claim is
moot. We do, however, hold that allowing the Government to
elicit evidence of HII and HC’s wealth constituted an abuse of
discretion. Therefore, claims against HII and HC must be
remanded for new trial.
1. BIE’s Guilty Plea
As explained above, see supra at 33, BIE pleaded guilty
to violating the Sherman Act, 15 U.S.C. § 1, by engaging in
the bid-rigging conspiracy. Pursuant to Rule 11 of the
Federal Rules of Criminal Procedure, BIE also submitted a
memorandum describing the conspiracy and BIE’s role. This
guilty plea and accompanying memorandum explained that
BIE and others rigged bids by “submitting bids on USAID-
funded Contracts 20A, 29 and 07” and “making payments to
co-conspirators who agreed to not compete for USAID-
funded contracts 20A and 08 pursuant to the bid-rigging
conspiracy.” Pl. Ex. 562A, at Joint App’x Pl. Exs. 568–69
(Joint Rule 11 Memorandum, United States v. Bill Harbert
Int’l, No. 01–00302 (N.D. Ala. Feb. 4, 2002), as redacted).
When the Government sought to introduce evidence of
BIE’s guilty plea in the district court, the defendants argued
that admitting the guilty plea and accompanying Rule 11
memorandum into evidence would improperly impute BIE’s
involvement to the remaining defendants. The district court
disagreed, concluding that the plea and accompanying
memorandum were evidence of the factual admissions
therein, and were therefore “relevant pieces of evidence that
are admissible against all defendants.” United States ex rel.
Miller v. Bill Harbert Int’l Constr., Inc., Civ. No. 95-1231,
slip op. at 4 (D.D.C. Mar. 21, 2007) (Mem. Op. & Order Den.
37
Mot. to Sever). Of course, the plaintiffs would “still bear the
burden of establishing a link between the ‘others’ who BIE
allegedly conspired with, and specific defendants in this
case.” Id. at 4 n.3. The court therefore allowed the
Government to use the plea in its opening statement and again
at the end of its case-in-chief, when counsel read the text of
the memorandum to the jury.
The defendants contend that this use of BIE’s guilty plea
should have been excluded as hearsay. They dispute the
plaintiffs’ contention that it is admissible under the hearsay
exception set forth in Federal Rule of Evidence 803(22).
They further argue that the danger of unfair prejudice
substantially outweighed its probative value. See Fed. R.
Evid. 403. We disagree.
Rule 803(22) permits a judge to admit “[e]vidence of a
final judgment, entered after a trial or upon a plea of guilty
. . . to prove any fact essential to sustain the judgment, but not
including, when offered by the Government in a criminal
prosecution for purposes other than impeachment, judgments
against persons other than the accused.” First, we note that
the exception to Rule 803(22)—the clause beginning “but not
including”—does not apply. Because this case is not a
criminal prosecution, the rule does not preclude introduction
of the plea documents as evidence of the judgment “against
persons other than the accused” (i.e., the other defendants) for
reasons other than impeachment. That is, because this is a
civil case, BIE’s guilty plea may be admitted under Rule
803(22) against all the defendants as long as the plea was
admitted “to prove any fact essential to sustain the judgment.”
The defendants argue the guilty plea was not admitted to
establish any fact. Instead, they assert, BIE’s guilty plea was
submitted only as evidence of the legal conclusion that BIE
38
was guilty of conspiracy. But the Rule 11 memorandum
clearly states more than the bare conclusion that BIE was
guilty. Instead, it asserts the several facts already mentioned:
that BIE and others submitted bids and made payments as part
of a bid-rigging conspiracy involving Contracts 20A, 29, and
07. Each of those facts is essential to sustain the legal
conclusion of BIE’s guilt under Section 1 of the Sherman Act,
and therefore fell within the scope of the rule. Other facts that
were not essential to that conclusion—such as specific
references to the defendants—were redacted by the district
court. See United States ex rel. Miller v. Bill Harbert Int’l
Constr., Inc., 2007 WL 842079, 2007 U.S. Dist. LEXIS
18560, at 3 (D.D.C. Mar. 16, 2007). We hold therefore that
the district court properly interpreted the scope of Rule
803(22) and properly admitted BIE’s guilty plea and Rule 11
memorandum under that rule.
Nor was the admission of BIE’s guilty plea improper
under Rule 403. Rule 403 states that relevant evidence may
be excluded if, inter alia, the evidence’s “probative value is
substantially outweighed by the danger of unfair prejudice,
confusion of the issues, or misleading the jury.” Fed. R. Evid.
403. But to quote the district court, “properly admitted but
potentially incriminating evidence does not equate to unfairly
prejudicial evidence that must be excluded.” United States ex
rel. Miller v. Bill Harbert Int’l Constr., Inc., Civ. No. 95-
1231, slip op. at 4–5 (D.D.C. March 21, 2007) (Mem. Op. &
Order Den. Mot. to Sever). In assessing prejudice and
probativeness, the district court, not this court, “is in the best
position to perform this subjective balancing.” United States
v. Cassell, 292 F.3d 788, 795–96 (D.C. Cir. 2002) (quoting
United States v. Washington, 969 F.2d 1073, 1081 (D.C. Cir.
1992)). We are therefore “extremely wary of second-
guessing” the district court, United States v. Law, 528 F.3d
888, 898 (D.C. Cir. 2008) (quoting Henderson v. George
39
Wash. Univ., 449 F.3d 127, 133 (D.C. Cir. 2006)), and review
its decision “only for ‘grave abuse,’” Cassell, 292 F.3d at 796
(quoting Washington, 969 F.2d at 1081).
BIE’s guilty plea did carry with it the potential to cause
prejudice or confuse the jury—it might have presumed that
the “co-conspirators” referred to in the plea were the other
defendants in the case. The district court recognized that
potential, acknowledging that the “documents pose certain
problems insofar as they refer to other parties who are
defendants here,” United States ex rel. Miller v. Bill Harbert
Int’l Constr., Inc., 2007 WL 842079, 2007 U.S. Dist. LEXIS
18560, at 3 (D.D.C. March 16, 2007), and that a jury might
assume the other parties were also guilty under BIE’s plea just
because the case caption listed them. Therefore, the court
struck any names other than BIE’s in the case caption and
elsewhere on the document. See id. With that redaction, the
court held that “the recitation of facts admitted to by BIE is
highly probative, and, under these conditions [of redaction],
poses relatively little risk of undue prejudice.” Id. at 3–4.
The court further mitigated the potential problem by twice
instructing the jury that “[t]he fact that BIE pleaded guilty
may not in any respect be considered against any other
defendants, nor may any inference be drawn against them by
reason of BIE’s plea of guilty.” Given these protective
measures against undue prejudice, the district court clearly
did not abuse its discretion in admitting against all defendants
the evidence of BIE’s guilty plea.
HII separately argues the guilty plea was particularly
prejudicial to it because the Government implied in its
opening statement that HII was trying to avoid responsibility.
According to HII, this implication would look particularly
reprehensible when juxtaposed with BIE’s guilty plea. The
jury, HII asserts, might have seen the guilty plea as evidence
40
of BIE “taking responsibility” while HII avoided doing the
same. Again, we disagree. HII’s argument rests on a short
passage from the Government’s opening statement, in which
counsel argued that “just because [HII] assigned [the
contracts] out to Harbert International Establishment, they
don’t assign away their responsibilities.” As the plaintiffs
argue, that brief comment did not suggest that HII had been
implicated in the earlier criminal case against BIE, but instead
noted only “that HII did not escape liability for its own
actions when it assigned Contracts 20A and 07 to BIE.”
Thus, the Government’s comment does not disturb our
holding that the district court did not abuse its discretion in
admitting against all defendants the evidence of BIE’s guilty
plea.
2. Expert Testimony on Cartels
Preston McAfee, a professor of economics and business
strategy at California Institute of Technology, testified for the
Government as an expert witness on how bid-rigging cartels
work. McAfee had no direct knowledge of the facts in this
case, and testified that he had not examined the evidence to
conclude whether there actually was any bid rigging in this
case. Instead, he testified about “how auction and bidding
work, how collusion in auctions work[s], and the incentives
that are created for seeking cost-reducing technologies.” For
example, he explained that an economically rational member
of a cartel must factor into its calculation of costs the risks
associated with bid rigging (i.e., being found out and
prosecuted). The cartel member’s bid must be higher than
that of a competitive bidder in order to cover those costs.
McAfee also explained what could be inferred from the
assumption that a cartel existed. For example, he testified that
if a cartel existed, one could infer that members of the cartel
must be able to successfully influence the bidding process if
41
they are to succeed in the object of the conspiracy—that is,
rigging the bids. But the individual who prepares the bid need
not know about the cartel, as long as that person is
“influenced by somebody who knows about the cartel.” In
sum, the professor explained that “[c]artels are formed . . . to
subvert competition and increase prices” and testified how a
cartel member achieves that purpose.
Rule 702 of the Federal Rules of Evidence provides that
“[i]f 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.” Fed.
R. Evid. 702. However, not all scientific testimony is created
equal; some expert opinions are more helpful or more valid
than others. Recognizing this fact, in 1993, the Supreme
Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509
U.S. 579 (1993), held that trial judges must act as gatekeepers
to exclude unreliable expert testimony. Under Daubert and
the Court’s further clarification in Kumho Tire Co. v.
Carmichael, 526 U.S. 137 (1999), testimony admitted under
Rule 702 must be both reliable and relevant. Id. at 152. In
2000, the Supreme Court amended Rule 702 to reflect the
Daubert line of cases, outlining general standards that the trial
court must use to assess the reliability and relevance of
testimony. An expert witness may therefore testify only “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.” Fed. R. Evid. 702.
The defendants moved in limine to exclude McAfee’s
testimony, arguing the testimony did not meet the standards of
Rule 702 because it was too broad, too generic, and based too
42
heavily on assumptions rather than analysis of the actual
evidence. They argued that McAfee’s testimony was not
related to the facts of the case. Instead, McAfee simply
assumed that a cartel actually existed between the defendants
and other companies in order to make his testimony relevant.
The defendants also stressed that McAfee had not tried to
determine whether a cartel existed in this case, even though
there are economics-based strategies to identify whether bids
are in fact collusive. Because of these weaknesses, McAfee’s
testimony would not assist the jury in understanding the
evidence as required by Rule 702.
The district court denied the motions, and reaffirmed and
explained its decision when it denied motions for a new trial.
In its opinion denying a new trial, the court explicitly held
that McAfee’s testimony satisfied the requirements of
Daubert and Rule 702. Miller v. Holzmann, 563 F. Supp. 2d
54, 96 (D.D.C. 2008). Quoting the advisory committee’s note
to Rule 702, the court stated that in some cases an expert may
give valuable testimony to the factfinder by explaining
general principles “without ever attempting to apply these
principles to the specific facts of the case.” Id. at 90 (quoting
Fed. R. Evid. 702 advisory committee’s note) (emphasis
omitted). According to the advisory committee’s note, “[f]or
this kind of generalized testimony, Rule 702 simply requires
that: (1) the expert be qualified; (2) the testimony address a
subject matter on which the factfinder can be assisted by an
expert; (3) the testimony be reliable; and (4) the testimony
‘fit’ the facts of the case.” Fed. R. Evid. 702 advisory
committee’s note. The district court initially held that
McAfee was a qualified expert. 563 F. Supp. 2d at 92 & n.40;
see also id. at 96 (listing McAfee’s credentials as evidence
that he was “well-qualified to testify on generally-accepted
economics principles”). The court then proceeded to analyze
McAfee’s testimony under the rest of the advisory
43
committee’s note’s rubric, first assessing relevance (addressed
by the second and fourth criteria), then reliability (addressed
by the third).
First, the district court held McAfee’s testimony to be
relevant. The testimony addressed a subject matter
appropriate for expert testimony—the second criterion under
the Rule 702 advisory committee’s note—because McAfee
explained complex processes and economic theory such as the
federal government’s procurement process, auction
incentives, and the effect of collusion on auctions. Id. at 92.
These topics “are precisely the sort of specialized, technical
matter concerning which a lay jury may benefit from a
qualified expert’s tutelage.” Id. The testimony also “‘fit’ the
facts of the case” as required by the fourth criterion. The
defendants argued that the assumptions on which McAfee
based his testimony were not based in the facts of the case,
and therefore did not “fit.” But the district court disagreed.
The court pointed out that, contrary to the defendants’
assertions, “McAfee never assumed that a cartel existed in
this case.” Id. at 94. Instead, McAfee made it clear he was
describing generic circumstances, “leaving the jury to
determine which scenario best ‘fit’ the facts in this case.” Id.;
see also id. at 94 n.45 (holding that McAfee’s testimony also
did not create unfair prejudice under Rule 403 because he
“repeatedly” explained he was not familiar with the facts, and
that he did not know whether collusion occurred here). His
testimony, while not derived from the facts in the case, was
sufficiently connected to the facts to be relevant and helpful to
the jury. Id. at 95.
Last, the district court turned to the third criterion—
reliability—noting that “the law grants a district court the
same broad latitude when it decides how to determine
reliability as it enjoys in respect to its ultimate reliability
44
determination.” Id. at 95 (quoting Kumho, 526 U.S. at 141–
42). Citing Daubert’s observations about how to determine
whether expert testimony is reliable—from whether a theory
has been subjected to peer review, to its potential rate of error,
to whether a theory is generally accepted in the relevant
field—the court determined that McAfee’s testimony was
reliable. Id. at 96. McAfee has published over twenty peer-
reviewed articles on his theories about the nature of auctions
and bidding. His testimony on economics “embodied basic
principles” that are “taught in undergraduate economics
courses” and “generally accepted in the field of economics.”
Id. Therefore, concluded the district court, McAfee’s
testimony satisfied the reliability criterion.
As the preceding summary of the court’s reasoning
demonstrates, the district court thoroughly and thoughtfully
analyzed the application of Rule 702 to McAfee’s testimony.
We also note that district courts have “broad discretion in
determining whether to admit or exclude expert testimony.”
United States v. Gatling, 96 F.3d 1511, 1523 (D.C. Cir. 1996).
The court clearly did not abuse that discretion.
The defendants also argue that McAfee’s testimony
should have been excluded under Rule 403 because the
professor used “highly charged terms” such as “cartel
member” and “colluders,” and even once made an analogy to
bank robbers. As Daubert explained, Rule 403 exclusion
based on unfair prejudice is particularly important in the case
of expert evidence, which “can be both powerful and quite
misleading because of the difficulty in evaluating it.” 509
U.S. at 595 (quoting Jack B. Weinstein, Rule 702 of the
Federal Rules of Evidence Is Sound; It Should Not Be
Amended, 138 F.R.D. 631, 632 (1991)). But, as explained
above, see supra at 38, the district court is best able to apply
the balancing test of Rule 403 and determine whether
45
evidence’s potential for undue prejudice substantially
outweighs its probative value. This is true for expert
testimony as well as for other types of evidence. Mindful,
therefore, of our responsibility not to second-guess the district
court’s application of the Rule 403 balancing test, we
conclude the district court did not improperly apply the rule
here. McAfee used terms descriptive of the theories he
explained, but he also repeatedly emphasized that he was not
applying the terms to the facts in this case or these defendants.
The district court did not abuse its discretion when it
determined that McAfee’s use of terms like “cartel members”
and “colluders” did not make his testimony’s potential for
undue prejudice substantially outweigh its probative value.
Indeed, it is difficult to conceive of expert testimony relevant
to the issues of this case in which the witness would not
employ terms like “cartel members” and “colluders.” We
note that Rule 403 provides the exclusion of evidence if its
“probative value is substantially outweighed by the danger of
unfair prejudice,” not simply “prejudice.” In some sense, any
evidence that is probative might be arguably prejudicial. That
is, the purpose of offering evidence is to influence the
decision of the jury. We can hardly say that the district court
abused its discretion by admitting expert testimony that used
terms entirely relevant to the issues at trial.
3. Ruggieri’s Testimony
Luigi Ruggieri was an officer of Asea Brown Boveri
Ltd., the parent company of Sadelmi U.S.A., Inc. (SUSA), the
company that received Contract 29. Over the objection of the
defendants, the district court allowed Ruggieri to testify about
a conversation he had with his subordinate, Giovanni
Greselin, about a meeting between Greselin and Peter
Schmidt, the Holzmann executive who hosted the conspiracy
meetings in Frankfurt. In his testimony, Ruggieri stated that
46
Schmidt met with Greselin and a “gentleman from Harbert” in
Frankfurt. There, Schmidt proposed to Greselin that they
agree on which of their companies would bid lower for
Contract 29, with compensation going to the losing bidder.
Ruggieri also testified, without objection from the defendants,
to his personal involvement in the conspiracy. He said that he
saw, then shredded, a document signed by Greselin outlining
the bid rigging between Harbert-Jones and SUSA. Ruggieri
then authorized Greselin to go ahead with the agreement and
pay Harbert-Jones a loser’s fee in cash.
Ruggieri’s testimony dealt only with the bid rigging of
Contract 29. We have already dismissed all the claims
against the defendants regarding Contract 29 for violation of
the statute of limitations. See supra at 24–25. The defendants
do not argue that the part of Ruggieri’s testimony to which
they object—his testimony about the conversation between
Greselin and Schmidt—tainted the jury’s consideration of the
remaining claims under Contract 20A or provided the only
link between any one of the defendants and the conspiracy
involving 20A. Therefore the defendants’ arguments
regarding the admissibility of Ruggieri’s testimony under Fed.
R. Evid. 801(d)(2)(E) are moot. We need not address them
here.
4. Evidence of HII and HC’s Wealth
Raymond Harbert is Bill Harbert’s nephew and CEO of
Harbert Management Company, a company formed in 1993
(after most of the underlying events in this case) that manages
assets for third parties, including HC. When Raymond
Harbert testified, Miller’s counsel asked him about the assets
of HII, HC, and Harbert Management Company. From the
exchange, counsel elicited that HII currently owns or is
associated with seven or eight power plants in California,
47
owns various cash assets, and makes approximately $40 to
$50 million in annual revenues. Raymond Harbert also
confirmed that between approximately 1990 and 1993, HII
sold somewhere between $250 million and $500 million in
assets, including selling its 50% ownership in BIE. Raymond
Harbert also testified that HC was a holding company with
assets in the form of stock in subsidiary companies, and that
Harbert Management Company currently manages over $100
million in assets for HC. He also testified that Harbert
Management Company manages assets for other Harbert
entities, including individuals of the Harbert family, for a total
of around $9 billion in assets. In its closing, the Government
recalled this testimony and juxtaposed the wealth of all the
Harbert companies with the relative poverty of those in
countries benefitting from projects funded by the USAID,
saying that the excess money the Government paid to the
conspirators “could have [been] used for less fortunate people
in other countries.”
Counsel for HII and HC objected to this testimony on the
grounds that information about the companies’ wealth was
both irrelevant and prejudicial, and reiterate this argument on
appeal. We agree. To be admitted, evidence must be
relevant. Fed. R. Evid. 402. That is, the evidence must have
a “tendency to make the existence of any fact that is of
consequence to the determination of the action more probable
or less probable than it would be without the evidence.” Fed.
R. Evid. 401. None of Raymond Harbert’s testimony
described above satisfies this definition. No fact concerning
the present size and scope of Harbert Management Company
was of consequence to the determination of the action. The
present size and scope of Harbert Management Company, a
company that was not a defendant and manages assets for
many non-defendants, including Raymond Harbert, his
mother, and other members of the Harbert family, had nothing
48
to do with the liability of any of the defendants or the measure
of damages. Indeed, the district court recognized this
irrelevance in its opinion denying a new trial, though it
deemed the irrelevant evidence not prejudicial. 563 F. Supp.
2d at 111 n.73. However, arguments to the jury about a
defendant’s wealth are grounds for new trial. Koufakis v.
Carvel, 425 F.2d 892, 902 (2d Cir. 1970) (“Remarks . . .
which can be taken as suggesting that the defendant should
respond in damages because he is rich and the plaintiff is
poor, are grounds for a new trial.”) (citing Washington
Annapolis Hotel Co. v. Riddle, 171 F.2d 732, 740 (D.C. Cir.
1948) (“A mistrial should have been declared on account of
these remarks [suggesting that the defendant should respond
in damages because it was rich and the plaintiff poor].”)).
Nor was evidence of the wealth of HII and of HC
relevant. The district court said the testimony concerning HII
and HC was properly admitted because it could help the jury
decide whether one company was the alter ego of the other, a
theory presented by the Government as a way to implicate HC
in the conspiracy. 563 F. Supp. 2d at 111. “Under the alter
ego theory, the court may ignore the existence of the
corporate form whenever an individual so dominates an
organization ‘as in reality to negate its separate personality.’”
Founding Church of Scientology of Wash., D.C., Inc. v.
Webster, 802 F.2d 1448, 1452 (D.C. Cir. 1986) (quoting
Quinn v. Butz, 510 F.2d 743, 758 (D.C. Cir. 1975)). Applied
to this case, HII would be the alter ego of HC: if the jury had
decided HII was part of the conspiracy, and that it was the
alter ego of HC, the jury could have found HC liable for the
conspiracy even if there was no direct evidence that HC had
itself joined the conspiracy. But the evidence described above
does not help establish whether HII was the alter ego of HC.
Instead, Raymond Harbert testified only as to how much
money HII made from selling assets in the 1990s, how much
49
money HII makes now, and how many assets HC now has.
Under Rule 401’s terms, the evidence made it no “more
probable or less probable” that one corporation was the alter
ego of the other. The only way the information could have
affected the jury was to prejudice it.
The Government and Miller argue before us that all the
testimony at issue was nonetheless admissible because the
counsel for HII and HC brought up the subject of its wealth
first, and in any case “the amount of wealth evidence elicited
and referred to at trial was not large and was not significant
enough” to warrant a new trial. We disagree on both points.
First, the plaintiffs cite only two references to support their
“But they started it!” argument: counsel’s opening and closing
statements.5 Neither reference is convincing. The first time
HII and HC’s counsel referenced the corporations’ money
was to point out Miller’s monetary interest in the case. This
is a perfectly acceptable point for counsel to make. Cf. United
States v. Smith, 232 F.3d 236, 242 (D.C. Cir. 2000)
(“Routinely, defense counsel cross-examines government
witness about an informant’s bias—whether it be a plea
5
In a footnote, the plaintiffs also cite two other statements to
support their assertion that HII and HC brought up their wealth
“throughout trial.” The first reference only obliquely touches on
those companies’ wealth when counsel asked Miller about wealthy
corporations in general. Nothing was said about HII or HC in
particular. The second reference is even less pertinent. There,
counsel asked a witness if she thought John Harbert, Bill Harbert’s
nephew who was also involved in the Harbert companies, ever “felt
that he needed to investigate or look over the shoulder of Mr. Bill
Harbert.” In response, the witness testified the two might have been
a little suspicious of each other and recalled that John Harbert spent
a lot of money on his hunting dogs. Whatever insight that
testimony gave into the relationship between those two men, it had
nothing to do with HII and HC’s wealth.
50
agreement, a financial arrangement, or both.”); 3 Federal Jury
Practice and Instructions § 101.43 (5th ed.) (jury instruction
stating that, in assessing the credibility of a witness, jury may
consider whether the witness has any bias or prejudice). It is
unrelated to the testimony later elicited by the plaintiffs about
the various Harbert companies’ wealth. Even less convincing
is the plaintiffs’ reliance on counsel’s closing statements,
which of course came after the plaintiffs had already elicited
Raymond Harbert’s testimony.
As for the argument that there was not enough prejudice
to warrant a new trial, again we disagree. Evidence need not
be reinforced and reiterated again and again for it to be
prejudicial enough to warrant a new trial. Here, it is enough
that there were several inappropriate references to multiple
different companies’ wealth, especially given that the
Government’s counsel emphasized the wealth of the Harbert
companies in his closing statement and insinuated that the
money would be in better hands if it were taken from the
defendants. We therefore vacate the judgments with respect
to HII and HC and remand for a new trial for those two
defendants.
H. Sufficiency of the Evidence
Finally, the defendants argue that the evidence was
insufficient to support the jury verdict. Given our resolution
of the foregoing issues, however, we need address only the
arguments made by HUK and BIE. See Part II.D (claims
against Anderson, which were limited to Contract 29, are
time-barred); Part II.E (Government’s contradiction of
stipulation regarding BHIC requires new trial); Part II.G.4
(evidence of HII and HC’s wealth requires new trial).
The jury found HUK liable for conspiracy, as well as for
substantive FCA violations with respect to Contract 20A. To
51
hold HUK liable for conspiracy, the jury must have found (1)
that an agreement existed to have false or fraudulent claims
allowed or paid by the United States; (2) that HUK willfully
joined that agreement, either at the conspiracy’s inception or
afterwards; and (3) that one or more conspirators knowingly
committed one or more overt acts in furtherance of the object
of the conspiracy. See Miller v. Holzmann, 563 F. Supp. 2d
54, 114 n.83 (D.D.C. 2008); see also, e.g., Halberstam v.
Welch, 705 F.2d 472, 478 (D.C. Cir. 1983) (describing the
elements of common law civil conspiracy). HUK challenges
all three findings. Although estopped from challenging its
liability, see Part II.F, BIE joins HUK in contending that the
jury erred in its calculation of damages.
The district court denied the defendants’ motion for
judgment as a matter of law with respect to the sufficiency of
the evidence. Although we review that decision de novo, we
“do not . . . lightly disturb a jury verdict.” McGill v. Muñoz,
203 F.3d 843, 845 (D.C. Cir. 2000). We “draw all reasonable
inferences in favor of the nonmoving party and . . . may not
make credibility determinations or weigh the evidence.”
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133,
150 (2000). We “disregard all evidence favorable to the
moving party [here, the defendants] that the jury is not
required to believe,” id. at 151, and will reverse a jury’s
decision “only if the evidence and all reasonable inferences
that can be drawn therefrom are so one-sided that reasonable
men and women could not have reached a verdict in
plaintiff[s’] favor.” McGill, 204 F.3d at 845 (internal
quotation marks omitted).
1. Overarching Conspiracy
The plaintiffs alleged and the jury found an overarching
conspiracy spanning Contracts 20A, 29, and 07. HUK
52
contends that the evidence does not support this finding and
that we must therefore reverse both the conspiracy and
substantive verdicts against it. We must reverse the
conspiracy verdict, HUK urges, because record evidence
shows only that Peter Schmidt “was involved in three separate
and distinct episodes of discussing bid-rigging.” Citing
Kotteakos v. United States, 328 U.S. 750, 774 (1946), the
defendants also argue that we must reverse the substantive
verdict because the overarching conspiracy theory created
“dangers of transference of guilt from one [defendant] to
another.” In other words, HUK argues, the jury may well
have relied on its conspiracy verdict to hold HUK liable for
substantive FCA violations based on the actions of its co-
conspirators. See Halberstam, 705 F.2d at 481.
As we explained in United States v. Tarantino, 846 F.2d
1384, 1393 (D.C. Cir. 1988), a jury must consider three
factors to determine whether potentially connected conduct
constitutes an overarching conspiracy: (1) “whether the
conspirators share[d] a common goal”; (2) “the degree of
dependence inherent in the conspiracy”; and (3) “the overlap
of participants” between the arguably separate schemes.
Pointing out that Tarantino involved a drug conspiracy, HUK
argues that this framework is inapplicable, or at least more
demanding, where, as here, the conspiracy is of a commercial
nature. But we have repeatedly applied this three-part inquiry
to non-drug conspiracies without altering its contours. See,
e.g., United States v. Hemphill, 514 F.3d 1350, 1363–64 (D.C.
Cir. 2008) (single conspiracy to steal from Washington
Teachers Union); United States v. Gatling, 96 F.3d 1511,
1520 (D.C. Cir. 1996) (single conspiracy to commit bribery in
connection with illegal issuance of section 8 housing
subsidies); cf. United States v. Anderson, 326 F.3d 1319,
1327–28 (11th Cir. 2003) (applying this three-part framework
and upholding a jury finding of an overarching conspiracy in
53
Anderson’s criminal case on the same facts as in the case
before us). To apply that test to the overarching conspiracy
the jury found in this case, we must consider testimony and
evidence regarding the bidding on each contract even though,
as explained in Part II.A.2, Contracts 29 and 07, by
themselves, cannot give rise to substantive liability against
any defendant. Cf. Hemphill, 514 F.3d at 1363–64
(considering evidence relating to multiple schemes as proof of
one overarching conspiracy).
In assessing the first factor—whether defendants
involved in allegedly conspiratorial conduct shared a common
goal—“a conspiracy’s purpose should not be defined in too
narrow or specific terms.” Gatling, 96 F.3d at 1520. Thus,
we have found “obtaining money in exchange for
[government] subsidies,” id., and “steal[ing] money from [a]
union,” Hemphill, 514 F.3d at 1364, to be sufficiently specific
common purposes. Reviewing the evidence, the district court
determined that the jury could have reasonably found an
overarching conspiracy with a common purpose of “limiting
competition” in bidding on projects in Egypt funded by the
USAID. Miller, 563 F. Supp. 2d at 138–139 & n.131. We
agree.
The jury heard testimony revealing just such a common
purpose, including for example Anderson’s statement that all
prequalified contractors working in Egypt were part of a
“Frankfurt Club” that “set up” the bids on Egyptian contracts.
John Ollis, Vice President of Holzmann, inferred from
Anderson’s comments that “the jobs that we were bidding,
there had been some kind of arrangements made among the
bidders to collaborate on how much would be bid. In the
vernacular, bid-rigging.” The defendants contend that even if
the other participants shared the common goal of limiting
competition in Egypt, “Schmidt had a separate goal—pursing
54
Holzmann’s interests in Europe.” In support, they point to
testimony that Schmidt offered to make a trade with SUSA, a
prequalified bidder on Contract 29, under which SUSA would
win that contract in exchange for Harbert-Jones winning a
later contract in Europe. During the second Contract 29
meeting, however, Schmidt abandoned this plan, and in any
event, Schmidt’s fleeting desire to use the conspiracy to
accomplish an additional goal is insufficient to undermine the
jury’s finding of a common purpose across all three contracts.
The second factor, interdependence, requires that each
defendant’s actions “facilitate the endeavors of other alleged
coconspirators or facilitate the venture as a whole.” United
States v. Carnagie, 533 F.3d 1231, 1238 (10th Cir. 2008)
(internal quotation marks omitted); see also Tarantino, 846
F.2d at 1392–93. We have upheld a jury’s finding of
interdependence where “the assistance one branch of a
conspiracy provides to another is fairly minimal” and where
“given the overlap in participation and timing . . . accusations
relating to one of the schemes could trigger an investigation
that would lead to exposure” of the others. Gatling, 96 F.3d
at 1522. This standard is clearly satisfied here. For one thing,
a written bid-rigging agreement between Holzmann and
Archirodon (Fuller’s parent company) regarding Contract
20A expressly contemplated future collusion on Contract 29.
Similarly, a SUSA manager testified that Schmidt offered
SUSA a deal in which “the loser” on Contract 29 would bid
high on that contract and “the winner” would compensate “the
loser” “in kind,” by bidding high on another “contract[] to be
bid in Egypt similar to [Contract 29].” The jury could also
have reasonably inferred interdependence from financial
statements for the “Harbert-Jones Egypt Joint Venture,”
which included Contract 20A, Contract 07, and other projects.
55
The third factor—overlap among participants—is “less
significant” than the others, requiring “only that the main
conspirators work with all the participants.” Hemphill, 514
F.3d at 1363 (citing United States v. Mathis, 216 F.3d 18, 23–
24 (D.C. Cir. 2000)). Again, record evidence satisfies this
standard. The defendants concede that Schmidt, on behalf of
Jones and its parent company, Holzmann, was involved in all
three contracts. The jury also heard evidence (1) that another
prequalified bidder, Fru-Con (through its parent company,
Bilfinger & Berger), received payoffs for cooperating on
Contracts 20A and 07; (2) that BIE admitted conspiring to rig
bids on Contracts 20A and 29; and (3) that Anderson
participated in meetings on Contracts 20A and 07, may well
have participated in a meeting on Contract 29, and had
authority over all three contracts. Thus, the jury could have
reasonably concluded that Schmidt and possibly Anderson
worked with all participants and that BIE and HII (through
Anderson) were directly involved in rigging bids on multiple
contracts. The defendants respond that with the exception of
Schmidt and Anderson, each individual met with competitors
to discuss but one contract. True enough, but because the
conspiracy was between corporations, the identity of the
individuals representing those corporations at bid-rigging
meetings is irrelevant. In sum, then, sufficient evidence
supports the jury’s finding of an overarching conspiracy.
2. HUK’s Involvement in the Conspiracy
Even if a reasonable jury could have found an
overarching conspiracy, HUK insists that the evidence is
insufficient to show that it willfully joined that conspiracy. In
evaluating this argument, we note that “in most civil
conspiracy cases,” the jury “ha[s] to infer an agreement from
indirect evidence.” Halberstam, 705 F.2d at 486. A jury may
infer that a defendant willfully joined the conspiracy if he
56
understood the scheme’s “essential nature and general scope.”
Hobson v. Wilson, 737 F.2d 1, 52 (D.C. Cir. 1984) (internal
quotation marks omitted), overruled in part on other grounds
by Leatherman v. Tarrant County Narcotics Intelligence &
Coordination Unit, 507 U.S. 163 (1993). Under basic
principles of agency law, corporate defendants are charged
with constructive knowledge of all material facts that their
agents and officers learn in the scope of their employment.
See 2 William Fletcher, Cyclopedia of the Law of
Corporations § 790 (2010); see also BCCI Holdings
(Luxembourg), S.A. v. Clifford, 964 F. Supp. 468, 478 (D.D.C.
1997). Thus, to uphold the jury’s finding that HUK joined the
conspiracy, we must be sure that the record contains sufficient
evidence for the jury to have reasonably found that (1) an
HUK employee, officer, or director knowingly joined the
conspiracy and (2) in so doing, acted within the scope of his
HUK duties.
At trial, the plaintiffs presented testimony and evidence
that revealed HUK’s involvement in bidding on Contract
20A. In April 1988, the USAID and an Egyptian government
agency called the Cairo Wastewater Organization solicited
bids on Contract 20A from three prequalified contractors:
George A. Fuller Co. (Fuller); Fru-Con Construction
Company; and the Harbert-Jones 20A Joint Venture.
A month later, Schmidt invited a group of prequalified
contractors to meet in Frankfurt. Schmidt suggested that the
others bid high on Contract 20A in exchange for a payoff.
Although no agreement was reached at that meeting, several
weeks later Schmidt and an executive of Bilfinger & Berger
(B&B) (Fru-Con’s parent company) agreed that Fru-Con
would submit a high bid in exchange for a payoff equivalent
to 2–3% of the contract value.
57
The Harbert-Jones joint venture convened a bid
reconciliation meeting in June. Jones’s estimator, Carl Nagel,
proposed that Harbert-Jones bid $95.2 million. Ian Young,
HUK’s lead estimator, represented Harbert at the meeting,
where the Harbert team suggested to the Jones team that they
include more conservative estimates. Based in part on these
suggestions, the two sides initially agreed to bid $103 million.
After Anderson arrived at the meeting and once additional
“philosophy changes,” including more expensive methods of
construction, were incorporated into the bid, the joint proposal
increased to $130 million. Shortly thereafter, Harbert-Jones
submitted a $125 million bid, which Young signed.
On August 3, the final day to submit bids, Schmidt and
an officer of Fuller’s parent, Archirodon, signed a written
agreement stipulating that Fuller would refrain from bidding
on Contract 20A in exchange for Archirodon receiving either
5% of the contract value or 3% and a subcontract. In
addition, Holzmann committed to “caus[ing]” Harbert-Jones
to “reciprocate” by helping Fuller obtain another contract of
similar value from the USAID, such as Contract 29. On the
same day, Young directed that the Harbert-Jones bid be
increased by 3.5%, to $129 million.
The bids were opened the next day. Fru-Con had bid
$152 million, Harbert-Jones had bid $129 million, and Fuller
had not bid at all. Although the lower of the bids, Harbert-
Jones’s was substantially higher than the project’s consultant
had expected. As a result, the Cairo Wastewater Organization
and the USAID opted to scale down the contract and solicit
re-bids.
In December, Anderson, Schmidt, and Archirodon
representatives met to discuss the new round of bidding. In a
handwritten addendum to the August agreement, they agreed
58
that Fuller would receive a subcontract worth at least $2.5
million plus $500,000 cash. Later that month, Fru-Con bid
$139 million for the scaled-down version of Contract 20A,
and Harbert-Jones bid $115 million. Harbert-Jones won the
contract, eventually submitting 33 invoices totaling over $107
million.
In January 1990, Schmidt, Anderson, and a representative
from Archirodon negotiated a payment schedule for the
agreed-upon $3 million payoff. Holzmann made payments to
Archirodon over the next year. Testimony and other evidence
suggest that Harbert-Jones funneled money for these payoffs
through HUK. For example, Holzmann billed HUK for
services it never requested nor received, and HUK paid those
invoices.
According to HUK, this evidence is insufficient to
support the jury’s finding that the company agreed to join the
overarching conspiracy. We disagree. The jury could have
reasonably concluded that Ian Young, HUK’s lead estimator,
knowingly joined the conspiracy on behalf of HUK.
Specifically, Young’s interactions with Roy Anderson, his
behavior at the Harbert-Jones bid-reconciliation meeting, and
his involvement in increasing the bid on the same day that
Schmidt secured Archirodon’s no-bid promise all suggest he
knowingly joined the conspiracy while acting within the
scope of his employment for HUK.
The jury had reason to believe that Anderson knew of the
conspiracy by the time of the June 1988 bid-reconciliation
meeting. Specifically, it heard testimony and viewed
evidence that Anderson was the Vice President of HII, the
60% partner in the joint venture; that he was the “lead man”
on the Egypt jobs; that he held powers of attorney from the
President of HII, Bill Harbert, authorizing him “without
59
reservation” to represent HII in the bidding; and that he may
have been present at the May 1988 meeting in which Schmidt
proposed the bid-rigging scheme, see Miller, 563 F. Supp. 2d
at 116 n.87 (“In light of Anderson’s explicit status as HII’s
point-man in Europe for international contracting and his
attendance at the December 1988 renegotiation with Fuller, it
would be reasonable to infer that if a HII representative
attended the May meeting, it would have been Anderson.”).
The jury also heard evidence suggesting that Anderson could
have passed his knowledge along to Young: Colin Towsey,
the Managing Director of HUK, testified that Anderson and
Young “had interactions . . . with respect to the bidding on
Contract 20A,” and “had discussions about what the
estimating work would be.”
In addition, the jury could have reasonably inferred that
Young knew of the conspiracy based on evidence that he
sought to increase the bid at the Harbert-Jones bid
reconciliation meeting. Nagel, Jones’s estimator, testified that
although Jones’s pre-meeting proposal was $95.2 million,
Young’s “arm twist[ing]” “pressured” the Jones team to
include more expensive methods of construction, thus
significantly increasing the bid, first to $103 million and later,
after Anderson’s arrival, to $130 million. Nagel testified that
he thought that even the $103 million figure was “inflated.”
According to Nagel, the Jones team deferred to Young
because Harbert was the majority owner of the joint venture,
giving Harbert “the hammer” in the negotiations. Similarly,
Young’s August 3 order to increase the bid by 3.5%—the
same day Schmidt secured a no-bid agreement from
Archirodon—could also lead a reasonable jury to conclude
that he knew about the bid rigging. Reinforcing these
inferences, the plaintiffs’ expert explained that in order to
make collusive agreements profitable, managers must exert
influence on the prices their companies set.
60
HUK challenges this view of the evidence, arguing that
an innocent explanation supports Young’s actions and that
“[c]onduct that is as consistent with other equally plausible
explanations as with illegal conspiracy, without more, does
not support an inference of conspiracy.” See Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986);
Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 768
(1984). According to HUK, at the bid-reconciliation meeting
Young simply believed that more conservative construction
techniques should be used. This explanation is bolstered,
HUK tells us, by Nagel’s statement on cross-examination that
reasonable and experienced estimators could disagree about
the need for such methods. Similarly, HUK contends that
Young’s August 3 order to increase the bid by 3.5% was
completely innocent—the letter was one of two prepared in
advance to deal with volatile steel prices. As the district court
observed, however, these arguments largely ignore the
standard of review for sufficiency challenges: “In essence,
HUK merely posits that another—in its opinion, better—
explanation of the facts exists. But at this stage in the
litigation, the relevant question is whether the view adopted
by the jury in reaching its verdict was at all reasonable.”
Miller, 563 F. Supp. 2d at 121 n.98 (citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 251 (1986)). Here the jury
had sufficient evidence to conclude that Young’s efforts to
increase the bid were motivated by knowledge of a bid-
rigging conspiracy. Moreover, in crediting the plaintiffs’
version of the facts over HUK’s more innocent explanation,
the jury would have had no need to speculate, as HUK claims
it did. Testimony regarding Young’s interactions with
Anderson, the existence of a bid-rigging agreement between
Harbert-Jones and Fru-Con, the timing of Young’s actions,
and the expert testimony about collusive agreements all
support the jury’s inference that Young knowingly joined the
conspiracy. Cf. Matsushita, 475 U.S. at 596–97 (where
61
plaintiffs fail to show that defendants had any plausible
motive to engage in conspiracy, conduct consistent with other,
equally plausible explanations does not give rise to an
inference of conspiracy).
Sufficient evidence also supports the jury’s finding that
Young acquired knowledge of the conspiracy while acting
within the scope of his employment for HUK. Not only was
Young an HUK employee when Contract 20A was bid, but in
his testimony, Colin Towsey, HUK’s Managing Director,
revealed that Young worked on the bid as part of his HUK
employment. HUK counters that Towsey’s testimony
suggests that during the relevant period Young was actually
working for BIE, HUK’s 49% owner. But Towsey’s
testimony establishes only that HUK “provide[d] some
engineering and estimating support” to BIE. Towsey never
said that Young worked primarily or exclusively for BIE; in
fact, Towsey indicated that Young worked in HUK’s London
office during this time, that he remained on HUK’s payroll,
and that “[h]e was certainly the head of [HUK’s] estimating
team” in connection with Contract 20A. Thus, based on
Towsey’s testimony the jury could have reasonably found that
Young learned of the conspiracy and contributed to it in his
capacity as an HUK employee. In sum, then, Young’s actions
provided sufficient evidence for the jury to conclude that
HUK knowingly joined the conspiracy.
HUK next challenges the jury’s finding that it committed
substantive FCA violations, i.e., that it “knowingly
present[ed], or cause[d] to be presented, a false or fraudulent
claim” and “knowingly ma[de], use[d], or cause[d] to be
made or used, a false record or statement material to a false or
fraudulent claim” with respect to Contract 20A. 31 U.S.C.
§ 3729(a). We have no need to address this argument.
Because the jury had sufficient evidence to find that HUK
62
conspired to submit false bids, supra at 58, HUK was liable
for its co-conspirators’ foreseeable actions in support of the
conspiracy. See, e.g., Halberstam, 705 F.2d at 481. And as
explained in Part II.G.1, BIE’s admission that it both
conspired to and did submit false claims with respect to
Contract 20A was properly admitted against all of the
defendants. That admission thus provides sufficient evidence
for the jury to have found HUK liable for false claims
submitted on Contract 20A. We therefore turn to the
defendants’ challenges to the jury’s calculation of damages.
3. Damages
As the parties agree, the measure of damages is the
difference between what the United States paid and what it
would have paid had there been no bid-rigging agreement.
Because the plaintiffs’ claims on Contracts 29 and 07 are
barred by the statute of limitations, see Part II.A.2, we need
consider damages only as to Contract 20A. After being
instructed on the proper standard, the jury awarded damages
of $29.9 million on that contract. HUK and BIE challenge the
award on two independent grounds. First, they contend that
the plaintiffs presented insufficient evidence to support the
jury’s finding. Second, they argue that the district court
permitted the plaintiffs to argue an improper damages theory
to the jury and that this error requires a new trial.
Regarding the sufficiency of the evidence, the defendants
assert that “plaintiffs failed altogether to prove that USAID
incurred [any] loss” from the bid rigging on Contract 20A.
This claim rests on the contention that no defendant attended
the bid-rigging meetings led by Schmidt on behalf of
Holzmann—indeed, that no defendant even knew about the
meetings—and that Harbert-Jones therefore could not have
raised its bid based on Schmidt’s agreements with the other
63
Contract 20A bidders. Our earlier discussion explains why
this argument fails: a reasonable jury could have concluded
that Anderson and Young, representing the Harbert side of the
Harbert-Jones venture, knew about the bid-rigging plan when
they attended the venture’s June 1988 bid-reconciliation
meeting and that, based on that knowledge, they aggressively
advocated a higher bid.
Moreover, the jury heard substantial evidence that the
payment Harbert-Jones ultimately received for its work on
Contract 20A was well above what it could have obtained
through a competitive bidding process. Although the joint
venture’s bid rose and fell several times between the June
1988 bid reconciliation meeting and the final award of the
contract, in the end, executives at Jones described their profits
as “exorbitantly wonderful.” Indeed, the plaintiffs’ expert
testified that Harbert-Jones reaped profits of 52%; other
witnesses testified that the norm for construction jobs of this
type is 7 to 15%. The plaintiffs’ expert also detailed several
complicated financial transactions that BIE undertook to hide
$25 million of this profit. Contrary to the defendants’
argument, it required no speculation for the jury to conclude
that the defendants overcharged on Contract 20A.
As to the amount of the award, the defendants argue that
even if the plaintiffs successfully proved some degree of bid
inflation, “there is no correlation between the $29,920,000
jury award and any of the various amounts plaintiffs urged the
jury to assess.” When considering a sufficiency of the
evidence challenge to a jury’s damages award, “[o]ur inquiry
ends once we are satisfied that the award is within a
reasonable range and that the jury did not engage in
speculation or other improper activity.” Carter v. Duncan-
Huggins, Ltd., 727 F.2d 1225, 1239 (D.C. Cir. 1984).
Especially in a case like this, “[w]here the jury finds a
64
particular quantum of damages and the trial judge refuses to
disturb its findings,” we must be “certain indeed that the
award is contrary to all reason” before reversing the jury and
the district court. Id. (internal quotation marks omitted). And
in determining what constitutes a “reasonable range” for the
jury’s award, we make allowances for the fact that the
defendants’ own misconduct has foreclosed any exact
calculation of what a competitive bid would have been on
Contract 20A. See Bigelow v. RKO Radio Pictures, Inc., 327
U.S. 251, 264 (1946) (“[W]here the defendant by his own
wrong has prevented a more precise computation, the jury
may not render a verdict based on speculation or guesswork[,]
[b]ut [it] may make a just and reasonable estimate of the
damage based on relevant data.”).
At trial, the plaintiffs suggested several methods for
estimating the extent of the bid inflation on Contract 20A.
We highlight two, each of which demonstrates that the jury’s
award falls “within a reasonable range.” Carter, 727 F.2d at
1239.
First, the plaintiffs urged the jury to begin with the
defendants’ actual final costs on Contract 20A of $52 million,
and then add a generous 25% profit margin (as described
above, the jury heard testimony that profit on a contract like
20A would normally have been 7 to 15%), thus yielding a
final bid of $65 million. Since Harbert-Jones ultimately
submitted invoices totaling $107 million, this calculation
suggested damages of $42 million ($107 million minus $65
million), comfortably above the jury’s actual $29.9 million
award.
Alternatively, the plaintiffs suggested that the jury could
estimate the competitive bid amount for the final Contract
20A specification by starting with either of two “free of
65
influence” estimates for the original, larger version of the
contract, and then discounting whichever estimate it chose for
the subsequent scope of work changes. The two estimates the
plaintiffs suggested as a baseline were: (1) $95 million, the
bid proposal prepared by Jones before its June 1988
reconciliation meeting with the Harbert side of the venture,
and (2) $80 million, the bid amount apparently considered by
Fuller before deciding not to bid on Contract 20A.
Proportionately reduced for the subsequent changes to
Contract 20A that led Harbert-Jones to lower its bid from
$129 to $115 million (an 11% reduction), these estimates
suggest that the competitive bid amount on the final contract
would have been between $71 and $85 million, indicating
damages of $22 to $36 million. The jury’s actual award—
$29.9 million—falls squarely within this range. The jury’s
award thus easily survives our deferential standard of review.
Finally, the defendants argue that the district court
allowed the plaintiffs to present an improper damages theory
to the jury. Specifically, they contend that by allowing the
plaintiffs’ counsel to refer occasionally to the proper measure
of damages as what the Government “should” have paid
rather than what it “would” have paid absent the bid rigging,
the district court allowed the plaintiffs to suggest that the jury
calculate damages by disgorging the defendants’ Contract
20A profits. Cf. United States ex rel. Harrison v.
Westinghouse Savanna River Co., 352 F.3d 908, 923 (4th Cir.
2003) (finding disgorgement of all government payments on a
fraudulently obtained contract to be an inappropriate remedy
under the FCA). “[W]here a jury was permitted to consider
an improper standard of damages,” the defendants argue, “the
reviewing court must reverse unless it can be assured that the
verdict was not based on [the] erroneous standard.” In its
post-trial order, however, the district court pointed out that its
jury instructions set out the proper damages standard and
66
found that these instructions “eliminated any confusion
engendered by plaintiffs’ counsel[].” 563 F. Supp. 2d at 108
n.68.
Reviewing the district court’s denial of a new trial for
abuse of discretion, we find none. To begin with, we doubt
very much that the few offhand references to what the
Government “should have paid” could have misled the jury.
As the plaintiffs point out, “what the Government ‘should
have paid’ can readily be understood as what the Government
ought to have paid on the contracts absent Defendants’
wrongdoing.” Indeed, in describing the proper measure of
damages in his closing argument, the plaintiffs’ counsel used
the phrase “should have paid” in just this way: “[T]he
measure of the damage will be . . . that difference between
what [the Government] paid and what [it] should have paid if
the bidding had not been rigged and the competition had been
free, robust, and vibrant.” But even if these scattered “should
have paid” references may have confused the jury, we agree
with the district court that its instructions eliminated any
prejudice. The court explained to the jurors that “the measure
of damages to the United States is the difference between
what the United States paid and what it would have paid had
there been no bid-rigging agreement.” As the district court
was entitled to presume that the jurors “follow[ed] the
instructions they [were] given,” United States v. Mouling, 557
F.3d 658, 665 (D.C. Cir. 2009), its denial of the defendants’
motion for a new trial was well within its discretion.
III. Conclusion
For the foregoing reasons we (1) vacate the judgment of
the district court, pursuant to the statute of limitations, with
respect to the claims concerning Contracts 07 and 29; (2)
vacate the judgment against the defendants HII, HC, and
67
BHIC and remand the matter for a new trial because the
district court erred in admitting testimony about the wealth of
HII and HC and statements contrary to the stipulation about
BHIC’s existence; and (3) affirm the judgment with respect to
the claims concerning Contract 20A against the remaining
defendants, namely BIE and HUK.
So ordered.
TATEL, Circuit Judge, dissenting from Parts II.A.2 and
II.G.4: In Part II.A.2 the court finds the Government‘s claims
on Contracts 29 and 07 barred by the False Claims Act‘s
statute of limitations, and in Part II.G.4 it rules that testimony
and evidence regarding the defendants‘ wealth was so
prejudicial as to require a new trial for HII and HC. I
respectfully dissent from both rulings.
I.
Under the False Claims Act (FCA) as recently amended,
the Government‘s complaint in intervention inherits the filing
date of the qui tam relator‘s complaint that initiated the action
―to the extent that the claim of the Government arises out of
the conduct, transactions, or occurrences set forth, or
attempted to be set forth, in the prior complaint.‖ 31 U.S.C.
§ 3731(c). In this case, the ―conduct, transactions, or
occurrences set forth, or attempted to be set forth‖ in Richard
Miller‘s 1995 complaint involved a Frankfurt-based
conspiracy to rig bidding for multiple USAID contracts in
Egypt. This court denies relation back of much of the
Government‘s complaint in intervention because two
contracts the Government alleges were part of that
conspiracy, Contracts 29 and 07, were not mentioned in
Miller‘s original complaint. Yet in the very first sentence in
which Miller described the conduct at issue, he left no doubt
that he was accusing the defendants of fraud spanning more
than one USAID project: ―Defendants conspired to rig the
bidding for construction contracts paid for by the United
States Agency for International Development.‖ Miller
Compl. ¶ 1 (emphasis added). Emphasizing that he was
alleging fraud involving more than one contract, he continued,
―The particular transaction about which most is known is
Contract 20A.‖ Id. (emphasis added). After detailing the bid
rigging on Contract 20A, id. ¶¶ 1, 15–30, Miller again made
clear that the conspiracy he was alleging was not limited to
that particular contract: ―Plaintiff has received information
2
that there was a ‗club‘ in Frankfurt, Germany of contractors
qualified to perform AID contracts in Egypt; the club was
organized to control prices in what should have been full and
open competition for AID contracts.‖ Id. at ¶ 33. Indeed,
Miller predicted that discovery would uncover additional
rigged contracts: ―Upon information and belief, discovery in
this case will reveal that other AID contracts in Egypt were
subject to similar and related collusive agreements on price
that resulted in the submission of other false or fraudulent
claims to the U.S. Government.‖ Id. Finally, in the
complaint‘s formal counts, Miller neither mentioned Contract
20A nor limited his claim for damages to the allegedly false
claims on that contract (estimated earlier in the complaint at
$40 million). Instead, he ―incorporate[d] the allegations of‖
the preceding paragraphs by reference, id. ¶¶ 34, 37, including
the allegation of ―other false or fraudulent claims‖ arising
from ―other AID contracts in Egypt,‖ id. at ¶ 33, and sought
―actual damages in an amount to be proven at trial,‖ id. ¶¶
36, 39.
From the face of Miller‘s complaint, it is thus clear that
the ―conduct, transactions, or occurrences set forth, or
attempted to be set forth‖ encompassed bid-rigging not just on
Contract 20A (identified by Miller in his original complaint)
but also on Contracts 29 and 07 (later added by the
Government in its complaint in intervention). The
Government‘s claims on Contracts 29 and 07 ―arise[] out of‖
the Frankfurt-based bid rigging conspiracy originally alleged
by Miller—indeed, the ―collusive agreements‖ on these
contracts were precisely what Miller predicted discovery
would unearth. Id. ¶ 33. For this reason, the Government‘s
claims relate back to Miller‘s original complaint and are
therefore not barred by the FCA‘s statute of limitations. As
we have said, ―an amendment offered for the purpose of
adding to or amplifying the facts already alleged in support of
3
a particular claim may relate back.‖ United States v. Hicks,
283 F.3d 380, 388 (D.C. Cir. 2002).
According to the court, ―[a]llegations concerning
Contract 20A do not fairly encompass Contracts 07 or 29
because each contract is unique.‖ Ct. Op. at 18. In support, it
says that ―each contract required work to be performed on a
different project and was awarded in a different year to a
different winning bidder drawn from a different pool of
prequalified bidders.‖ Id. This misses the point. Of course
the three contracts were different. As is typical in
government contracting, USAID and the Egyptian
government divided the sewer improvements into multiple
contracts signed on different dates. What matters for relation
back purposes is that the three contracts were all part of the
―conduct,‖ i.e., the Frankfurt-based bid-rigging conspiracy,
alleged in Miller‘s original complaint.
The three contracts, moreover, are not nearly as different
as the court suggests. Although each contract was awarded to
a ―different winning bidder,‖ id., the winners on Contracts
20A and 07 were identical in structure—each was owned 60%
by HII and 40% by Jones—and the defendants‘ financial
statements treated them as a single entity, the ―Harbert-Jones
Egypt Joint Venture.‖ Indeed, had Holzmann not agreed that
Harbert-Jones would overbid the contract in exchange for a
$4 million loser‘s fee from its competitor, HII and Jones
might have won Contract 29 as well. Moreover, while it is
true that the pool of bidders varied among contracts, there
were important overlaps: HII and Jones, through their joint
ventures, were prequalified to bid on all three, and Fru-Con
was prequalified for Contracts 20A and 07. Indeed, ―Fru-Con
(through its parent company, Bilfinger & Berger), received
payoffs for cooperating on Contracts 20A and 07,‖ Ct. Op. at
55. In addition, Fuller, which was prequalified for Contract
4
20A, also submitted prequalification information on Contract
29 but was ultimately found ineligible. And when Fuller‘s
parent corporation and Holzmann rigged the bidding on
Contract 20A, they signed an agreement ―expressly
contemplat[ing] future collusion on Contract 29.‖ Id. at 54.
The court relies on Meijer, Inc. v. Biovail Corp., 533 F.3d
857 (D.C. Cir. 2008), but that case is very different from this
one. There, a group of wholesale drug purchasers alleged that
Biovail, a drug manufacturer, misused a patent it owned to
keep ―generic versions‖ of one of its brand name drugs off the
market. The complaint named one particular generic
competitor, developed by a company called Andrx, that
Biovail had blocked. Id. at 866. In their amended complaint,
the plaintiffs alleged for the first time that Biovail, along with
its exclusive distributor, Forest Laboratories, also violated the
antitrust laws through their ―decision not to sell their own
generic.‖ Id. (emphasis added). We disallowed relation back
of this new allegation even though the original complaint
accused the defendants of blocking ―generic versions‖ of the
drug. Id. (emphasis added). According to my colleagues,
Miller‘s use of the plural—―Defendants conspired to rig the
bidding for construction contracts,‖ Miller Compl. ¶ 1—
likewise cannot support relation back of the Government‘s
subsequent allegations.
Our decision in Meijer, however, rested on the fact that
―the whole thrust of the amendments [was] to fault both
Biovail and Forest . . . for conduct different from that
identified in the original complaint.‖ Meijer, 533 F.3d at 866.
As we interpreted the plaintiffs‘ original complaint, it alleged
that Biovail, acting alone through misuse of its patent, was
―bent upon preventing the FDA from granting final approval
of the generic drug proposed by Andrx (and perhaps others).‖
Id. The plaintiffs‘ amended complaint, however, differed in
5
two important respects. First, it added claims against Forest,
―alleg[ing] for the first time that Biovail and Forest
unlawfully conspired to extend their lawful monopoly.‖ Id.
Second, it alleged an entirely different means of unlawful
monopolization, i.e., that Biovail and Forest ―planned
preemptively to introduce their own generic Diltiazem HCl,
and that they unlawfully abandoned that plan.‖ Id. Thus, our
decision in Meijer flowed from the well established principle
that ―an amendment . . . that attempts to introduce a new legal
theory based on facts different from those underlying the
timely claims may not‖ relate back. Hicks, 283 F.3d at 388.
Here by contrast the Government‘s theory of liability on
Contracts 29 and 07 is identical to that first pleaded by Miller,
namely that the defendants entered into a Frankfurt-based
conspiracy to rig the bidding on USAID contracts in Egypt,
and that through that conspiracy, the defendants rigged the
bidding not just on Contract 20A, but also on Contracts 29
and 07. Indeed, in Meijer we suggested that relation back
may well have been appropriate had the plaintiffs there—like
the Government here—simply added additional examples of
the unlawful conduct alleged in the original complaint. 533
F.3d at 866 (describing plaintiffs‘ original allegations
regarding ―generic versions‖ of Biovail‘s drug as
encompassing ―the generic drug proposed by Andrx (and
perhaps others)‖ (emphasis added)).
My colleagues also rely on Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 557 (2007), and Ashcroft v. Iqbal,
129 S. Ct. 1937 (2009), in which the Supreme Court held that
to survive a motion to dismiss, a complaint must provide
more than ―‗naked assertion[s]‘ devoid of ‗further factual
enhancement.‘‖ Id. at 1949 (quoting Twombly, 550 U.S. at
557). Characterizing Miller‘s conspiracy allegation as such
an assertion, the court concludes that it cannot support
6
relation back of the Government‘s claims on Contracts 29 and
07. This argument suffers from two fundamental defects. To
begin with, the defendants raised it neither here nor in the
district court, and as we have repeatedly said, ―appellate
courts do not sit as self-directed boards of legal inquiry and
research, but essentially as arbiters of legal questions
presented and argued by the parties before them.‖ Carducci
v. Regan, 714 F.2d 171, 177 (D.C. Cir. 1983). Second, and
setting aside the fact that the allegations in Miller‘s original
complaint, which identified the conspiracy as based in
Frankfurt, described the scope of its operations (USAID
contracts in Egypt), and detailed its bid-rigging on Contract
20A, are a far cry from the ―naked assertions‖ that doomed
the complaints in Twombly and Iqbal, those two cases have no
applicability to the question before us. In Twombly and Iqbal
the Supreme Court interpreted Federal Rule of Civil
Procedure 8(a)(2), which sets the standard that a complaint
must satisfy to survive a motion to dismiss. Nothing in either
case even hints that the Supreme Court intended Rule 8(a)‘s
standards to apply to relation back, which is governed by the
entirely different language of Rule 15(c), now incorporated
into the FCA. In fact, my colleagues‘ invocation of Twombly
and Iqbal contradicts the FCA‘s plain text, which provides
that claims relate back not only to ―conduct, transactions, or
occurrences set forth,‖ in an earlier complaint, but also to
―conduct, transactions, or occurrences . . . attempted to be set
forth.‖ 31 U.S.C. § 3731(c) (emphasis added); cf. Krupski v.
Costa Crociere S.p.A., 560 U.S. __, No. 09-337, slip op. at 13
(June 7, 2010) (emphasizing, with respect to relation back of
parties, that Rule 15 ―plainly sets forth an exclusive list of
requirements for relation back,‖ and ―mandates relation back
once the Rule‘s requirements are satisfied‖ (emphasis
added)). Indeed, two other circuits have expressly held, in
language we have cited with approval, that an ―amended
claim arises from the same conduct and occurrences upon
7
which the original claim was based,‖ and therefore relates
back, even if (unlike here) ―the original claim contained
insufficient facts to support it.‖ Dean v. United States, 278
F.3d 1218, 1222 (11th Cir. 2002); see also id. (―One purpose
of an amended claim is to fill in facts missing from the
original claim.‖); United States v. Thomas, 221 F.3d 430, 436
(3d Cir. 2000) (an amendment that ―seeks to correct a
pleading deficiency by expanding the facts but not the claims
alleged‖ in an earlier filing ―would clearly fall within Rule
15(c)‖); Hicks, 283 F.3d at 388 (quoting Dean and Thomas).
In FCA cases, the time for defendants to file Iqbal motions,
and thus to ensure that Rule 8(a)‘s pleading standards are not
―circumvent[ed],‖ Ct. Op. 18, is when the relator‘s complaint
is unsealed. And where, as here, the Government files a
complaint in intervention and the relator an amended
complaint, it is those two complaints, not the relator‘s initial,
sealed complaint, that are tested against the Iqbal standard.
When Miller filed his 1995 complaint, he knew that
contracts other than 20A were involved in the Frankfurt Club
conspiracy. Congress added the relation back provision to the
FCA precisely for situations like this—to allow ―a complete
and thorough investigation of the merits of a qui tam relators‘
allegations.‖ S. Rep. No. 110-507, at 28–29 (2008) (report on
the False Claims Correction Act of 2008, a FERA
predecessor). By interpreting Miller‘s complaint as limited to
the one contract he was able to identify by number when he
first filed, and by applying Twombly and Iqbal to Miller‘s
original, sealed complaint, this court deprives the Government
of the fruits of just such an investigation and frustrates
congressional intent.
II.
After the jury returned its verdict, HII and HC sought a
new trial, arguing that the plaintiffs‘ counsel‘s questioning of
8
one witness, together with his closing argument, introduced
unfairly prejudicial evidence about the defendants‘ wealth.
The district court found that much of the wealth evidence was
relevant and that in any event, it was not so prejudicial as to
require a new trial. Miller v. Holzmann, 563 F. Supp. 2d 54,
110–13; see Fed. R. Civ. P. 61 (all trial errors are harmless
unless they affect ―substantial rights‖). This court now finds
that the district court abused its discretion in failing to order a
new trial for HII and HC. I cannot agree. Faced with ―only a
cold record,‖ Edwards v. Sears, Roebuck & Co., 512 F.2d
276, 281 (5th Cir. 1975), I would defer to the judgment of the
experienced district judge who conducted this seven-week
trial and observed the witnesses.
The plaintiffs‘ counsel elicited information from
Raymond Harbert about the assets and structure of HII, HC,
and non-party Harbert Management Company. The district
court found this testimony—at least with respect to HII and
HC—relevant to the Government‘s alter ego theory, i.e., its
argument that as HII‘s parent, HC completely controlled HII
and ignored its separate corporate existence, making it
responsible for HII‘s actions. The district court grounded its
relevance finding in circuit precedent establishing that the
undercapitalization of a subsidiary corporation may suggest
the existence of just such an improper relationship. Miller,
563 F. Supp. 2d at 111 (discussing Labadie Coal Co. v. Black,
672 F.2d 92 (D.C. Cir. 1982)). In other words, according to
the district court, Raymond Harbert‘s testimony was relevant
because it could have suggested to the jury that adherence to
the corporate form might have permitted HC ―to evade the
impact of a judgment against an inadequately capitalized
HII.‖ Id.
Having found some of Raymond Harbert‘s testimony
relevant, the district court applied Federal Rule of Evidence
9
403, asking whether the testimony presented a risk of unfair
prejudice that substantially outweighed its probative value.
Although recognizing that ―knowledge that a defendant has
the resources to pay a judgment may increase jurors‘ comfort
level in making a large damages award,‖ the district court
found that ―a bare handful of remarks in the course of a
seven-week trial‖ fell short of ―creat[ing] such unfair
prejudice as to substantially outweigh the significant
probative value‖ of the evidence. Id. at 112. A new trial was
unnecessary, the district court explained, because ―plaintiffs
here never even approached the sort of egregious misconduct
and overt pandering that have compelled reversal or a new
trial in other cases.‖ Id.
With little explanation, this court now rejects the district
court‘s relevance analysis. Ct. Op. at 48–49. More troubling,
the court disregards the district court‘s determination of
prejudice. But even if, as this court finds, much of the wealth
testimony was in fact irrelevant, we owe substantial deference
to the district court‘s determination that the testimony was not
so prejudicial as to ―affect . . . substantial rights.‖ Fed. R.
Civ. P. 61. Indeed, because we have long recognized that the
district court‘s proximity to the trial places it in a far better
position to determine prejudice, ―[w]e review a trial court's
evidentiary rulings for abuse of discretion . . . [and] [e]ven if
we find error, we will not reverse an otherwise valid judgment
unless appellant demonstrates that such error affected her
‗substantial rights.‘‖ Whitbeck v. Vital Signs, Inc., 159 F.3d
1369, 1372 (D.C. Cir. 1998) (citations omitted).
Given that the trial lasted for seven weeks, that the
evidence was hardly close, and that the court points to only
one series of questions and a single comment in which the
defendants‘ wealth was raised, I cannot say that the district
court abused its discretion in refusing to order a new trial.
10
See, e.g., United States v. Mejia, 597 F.3d 1329, 1342 (D.C.
Cir. 2010) (―embellishment‖ in prosecutor‘s closing argument
did not require a new trial ―where the statement was isolated
and the case was not close‖). Although my colleagues may
well be correct that ―[e]vidence need not be reinforced and
reiterated again and again for it to be prejudicial enough to
warrant a new trial,‖ Ct. Op. at 50, such limited evidence does
tend to suggest limited prejudice. Cf. Koufakis v. Carvel, 425
F.2d 892, 901–05 (2d Cir. 1970) (district court‘s refusal to
order a new trial constituted an abuse of discretion where
counsel made inappropriate comments ―[t]hroughout his
presentation at trial and in summation,‖ including ―many
references‖ likening defendant to a Mafia boss; engaged in
―repeated name-calling, such as referring to [defendant] . . . as
‗liar,‘ ‗faker,‘ ‗phony,‘ and ‗perjurious‘‖; and made it a
―theme[]‖ throughout trial ―that the case was one which pitted
a ‗little‘ and virtuous man of modest resources against a
powerful and unscrupulous man with untold wealth.‖).
Because the district court was in a far better position than we
to weigh the evidence and determine its effect on substantial
rights, I would defer to its judgment.
III.
For the foregoing reasons, I would affirm the district
court‘s ruling that the Government‘s claims on Contracts 29
and 07 relate back to Miller‘s 1995 complaint, as well as its
finding that the plaintiffs‘ references to wealth do not require
a new trial. And because I agree with the remainder of the
district court‘s rulings, substantially for the reasons given, I
would affirm as to all three contracts and, except for BHIC,
see Ct. Op. at 30–33, as to all defendants.