Petition for Writ of Certiorari — United States ex rel. Willis v. General Dynamics Corp.

~ “Pibeb

VY 95116 7 dec 1 8 1995

= OFFICE OF THE eRe

IN THE

Supreme Court of the United States

OCTOBER TERM, 1995

UNITED STATES OF AMERICA, ex rel.

‘ DONALD B. WILLIS

Petitioner

vs.

GENERAL DYNAMICS CORPORATION,

Respondent,

PETITION FOR A WRIT OF CERTIORARI

TO THE NINTH CIRCUIT COURT OF APPEALS

PETITION FOR A WRIT OF CERTIORARI

Donald B. Willis, pro se

51 Florence Court

Hollister, CA. 95023

(408) 637-9356

i

QUESTIONS - COST APPEAL NO. 94-16005

1. Under the Qui Tam provisions ( 31 U.S.C. 3730) of the

Faise Claims Act (FCA), is a Qui Tam relator liable for

costs of a prevailing defendant in an action that is not

clearly frivolous, clearly vexatious, or brought primarily for

purposes of harassment?

2. Do the Qui Tam provisions of the FCA provide express

provisions for award of costs to the prevailing party as

contemplated by Federal Rule of Civil Procedure

(F.R.C.P.) 54 (d)?

3. Is the Government liable under 31 U.S.C. 3730(f) for

the Attorneys’ Fees and Costs of the Qui Tam relator who

brings an action under the FCA ?

4. Could any potential private citizen qui tam relator read

the Qui Tam provisions of the FCA and comprehend that

he/she would be liable under F.R.C.P. 54(d) for a

prevailing defendant's costs in a good faith action?

5. Didn't congress use the general term expenses in the

discretionary award of 3730(d)(4) to allow the court to

adapt the severity of the award to fit the degree of bad

faith shown by the qui tam relator?

6. Can the intent of Congress be so construed as to allow

discretionary award of Attorneys’ Fees and Expenses

against a bad faith Qui Tam relator who brings a Clearly

frivolous action but require mandatory award of Costs

against a good faith Qui Tam relator who brings a non-

frivolous action?

ii

QUESTIONS - MERITS APPEAL NO. 93-16690

1. Is it not plain error and a miscarriage of justice when a

court, based on opinion testimony of lay witnesses,

determines that MIL-D-1000A is ambiguous and therefor

Level 3 Drawings need not be adequate to support build-

to-print contracts when Prima Facie evidence clearly

shows that, during contemporaneous — contract

performance, both the Air Force (AF) and General

Dynamics (GD) were participants in using GD's Level 3

Drawings in a follow-on build-to-print contract?

2. Is it not plain error and a miscarriage of justice when a

court, based on opinion testimony of lay witnesses,

determines that MIL-D-1000A is ambiguous and Level 3

Drawings need not be adequate to support build-to-print

contracts when Prima Facie evidence clearly shows that,

for over 30 years, Level 3 Drawings for build-to-print

contracts have been the Government's primary recourse

to obtain follow-on competitive procurement of identical

products and spare parts without being locked into the

Original contractor on sole-source contracts?

3. Is it not plain error when,

a) the defendant/appeliee makes false statements to

the court in its answer brief conceming the validity of

specific cited testimonies, and

b) the plaintiffs/appellants, while researching the false

statements, discover and verify in their answer brief that

the specific testimonies included hearsay, were not based

on witness's personal knowledge, included a witness who

gave conflicting testimony and was impeached, and

included opinion testimony of a lay witness conceming

MIL-D-1000 who had never read the document, and

c) the 9th Circuit, in its Opinion, cites the specific

testimonies as evidence material to its holdings?

iii

4. Since the district court and 9th Circuit have found that

errors and omissions are acceptable in Level 3 Drawings

produced in accordance with drawing standard MiIL-D-

1000A, has the Government been violating contractor's

rights and acting unlawfully by requiring such errors and

omissions, when discovered, to be corrected under a

contract Warranty of Technical Data clause?

iv

TABLE OF CONTENTS

QUESTIONS - COST APPEAL NO. 94-16005

QUESTIONS - MERITS APPEAL NO. 93-16690

TABLE OF AUTHORITIES

OPINIONS BELOW

JURISDICTION

STATUTORY PROVISIONS INVOLVED

STATEMENT OF THE CASE

|. PRE-TRIAL

ll. TRIAL PROCEEDINGS

REASONS FOR GRANTING THE PETITION

|. RULE 10 BASIS

ll. IMPORTANCE OF THE ISSUES

ill. AMPLIFYING ARGUMENT -

COST APPEAL

IV. AMPLIFYING ARGUMENT -

MERITS APPEAL

CONCLUSION

APPENDIX:

OPINION, 9TH CIRCUIT

FINDINGS OF FACT/CONCLUSIONS OF

LAW EASTERN DISTRICT, CA.

PAGE

B-1

ORDER, JUDGMENT

EASTERN DISTRICT, CA.

ORDER, COST AWARD

EASTERN DISTRICT, CA.

ORDER, PETITION FOR REHEARING

9TH CIRCUIT

EXHIBIT G-111, JUDGE ADVOCATE

LETTER

C-1

D-1

E-1

F-1

vi

TABLE OF AUTHORITIES

CASES PAGE(S)

Bond v. Stanton, 630 F.2d 1231 11

(7th Cir. 1980)

Cresswell v. U.S. , 146 Ct. Cl. 119, 13

173 F. Supp. 805 (1959)

Dickerson v. Pritchard, 551 F. Supp. 306 10

(W. D. Ark. 1982)

General Atronics Corp., ASBCA No. 37923, 12

91-3 BCA J] 24,047

Gradmann & Holler GMBH v. 10

Continental Airlines, 679 F.2d

272, 275 (1st Cir. 1982)

Johnson v. Snyder, 639 F.2d 316 11

(6th Cir. 1981)

Jones v. Dealers Tractor and Equipment 11

Co. , 634 F.2d 180 (5th Cir. 1981)

Liles Constr. Co. v. U.S. (Ct Cl 1972) 13

455 F.2d 527.

Maxwell Dynamometer Co. v. U.S., 181 Ct. Ci. 13

607, 386 F.2d 855 (1967)

Perry & Wallace inc. v. U.S. , 192 Ct. Ci.310, 13

427 F.2d 722 (1970)

Shadrick Contracting Co. ASBCA No. 13

14613, 71-1 BCA ¥ 8647

vii

United States ex rei. Kelly v. Boeing Co.,

9 F.3d 743 (9th Cir. 1993), cert. denied,

114 S.Ct. 1125 (1994)

United States ex rel. Kreindler &

Kreindier v. United Technologies

Corp. , 985 F.2d 1148 (2d Cir. 1993), cert

denied, 113 S.Ct, 2962 (1993)

United States ex rel. Stillwell v. Hu,hes

Helicopters, et al. (CA CD), 5/31/89,

Fed Contr Rep, Vol. 51 at 1094

OTHER AUTHORITIES

Senate Report No. 345, 99th Cong. 2d Sess.

(1986), reprinted in 1986 U.S. Code Cong.

& Admin. News 5266

7, 9, 10,

11,

OPINIONS BELOW

The Opinion of the Court of Appeals is scheduled for

publication and is set forth in Appendix A. The Order of

the Court of Appeals denying petitioners’ petition for

rehearing and rejecting suggestion for rehearing en banc

is set forth in Appendix E and is believed unreported.

The Findings of Fact and Conclusions of Law of the

District Court on the merits are set forth in Appendix B

and is believed unreported. The judgment of the District

Court is set forth in Appendix C and is believed

unreported.

The Order of the District Court awarding costs is set

forth in Appendix D and is believed unreported.

JURISDICTION

The Opinion of the 9th Circuit Court of Appeals was

entered on August 2, 1995. The Order of the 9th Circuit

Court of Appeals, denying the petition for rehearing and

rejecting the suggestion for rehearing en banc, was

entered on October 4, 1995. This petition has been filed

within 90 days of that date.

Jurisdiction of this Court is invoked pursuant to 28

U.S.C. 1254(1).

STATUTORY PROVISIONS INVOLVED

|. False Claims Act (31 U.S.C. 3729 et seq.)

3730(d) Award to qui tam plaintiff. (1) If the

Government proceeds with an action. . . Any such

person shall also receive an amount of reasonable

expenses which the court finds to have been necessarily

2

incurred, plus reasonable attorneys’ fees and costs. All

such expenses, fees and costs shall be awarded against

the defendant. (2) If the Government does not proceed

with an action. . . Such person shall also receive an

amount of reasonable expenses which the court finds to

have been necessarily incurred, plus reasonable

attorneys’ fees and costs. All such expenses, fees and

costs shall be awarded against the defendant... . .

(4) If the Government does not proceed with the action

and the person oOringirig the action conducts the action,

the court may award to the defendant its reasonable

attorneys’ fees and expenses if the defendant prevails in

the action and the court finds that the claim of the person

bringing the action was clearly frivolous, clearly vexatious,

or brought primarily for purposes of harassment.

3730(f) Government not liable for certain expenses.

The Government is not liable for expenses which a

person incurs in bringing an action under this section.

3730(g) Fees and expenses to prevailing defendants.

In civil actions brought under this section by the United

States, the provisions of section 2412(d) of title 28 shall

apply.

ll. Federal Rule of Civil Procedure 54

A. Superseded 1 Dec. 1993 after judgment and

1986 Amendments to FCA.

54(d) Except when express provision therefor is made

either in a statute of the United States or in these rules,

costs shall be allowed as of course to the prevailing party

unless the court otherwise directs. . .

3

B. Effective 1 Dec. 19931

54(d) Costs; Attorneys’ Fees

| (1) Costs other than Attorneys’ Fees. Except when

express provision therefor is made either in a statute of

the United States or in these rules, costs other than

attorneys’ fees shall be allowed as of course to the

prevailing party unless the court otherwise directs . .

(2) Attorneys’ Fees.. .

STATEMENT OF THE CASE

I. PRE-TRIAL

In the early 1970s, the Air Force (AF) awarded a

competitive contract to General Dynamics (GD) for

development of a Multiple Threat Emitter System

(MUTES). Upon completion of that contract, the AF and

GD entered into a written “Interpretation Agreement,

Level 3 Drawing Requirements - MiL-D-1000A and AFAD

71-700" which was signed by Col. Schuster of the AF and

R. McClendon and D. P. Fuller as representatives of GD.

Col. Schuster testified in this action that the Level 3

Drawings were intended for competitive build-to-print

production of MUTES systems. Mr. McClendon testified

that the drawings should allow another manufacturer to

build identical MUTES systems. Mr. Fuller testified he

authored or approved the statement of footnote 2. GD

included the Interpretation Agreement in its proposal for a

sole-source contract to provide 4 MUTES systems and

'Notes of Advisory Committee on Rules to 1993 amendment.

Paragraph (1). Former subdivision (d), providing for taxation of costs

by the clerk, is renumbered as paragraph (1) and revised to exclude

applications for attorneys’ fees. Paragraph (2). This new paragraph

establishes a procedure for presenting claims for attorneys’ fees,

whether or not denominated as “costs.". . .

deliver MUTES Level 3 Drawings. Upon completion of

that sole source contract (-0103), the Level 3 Drawings

were not ready for delivery and the AF awarded GD a

second sole-source contract (-0366) in 1982 for 4

additional MUTES and completion of the delivery of the

Level 3 Drawings.

In mid 1986, using the Level 3 Drawings GD had

delivered to date, the AF issued a Solicitation for a

competitive build-to-print procurement of up to 14 MUTES

systems followed by a bidders' conference where

contractor questions were addressed concerning the

anticipated build-to-print contract. GD attended the

bidders conference, did not question the use of its Level 3

Drawings in the build-to-print solicitation and submitted an

unqualified proposal for the build-to-print contract.2

The AF awarded the build-to-print contract to Aydin

Corporation West (Aydin) in March 1987. Aydin

discovered that some of the microfilm of the GD Level 3

Drawings was illegible. in July of 1987, the AF and GD

entered into the Aperture Card contract? specifically to

provide Aydin with a legible set of microfilm of the Level 3

Drawings to use in manufacturing MUTES systems on its

build-to-print contract. GD delivered the microfilm in

August of 1987 and invoiced for payment with no

disclaimer that the Level 3 Drawings were unfit for the

intended use.

Also in August of 1987, GD submitted a DD250

evidencing that delivery of the Level 3 Drawings on the -

2GD Technical Proposal at 1. stated “We recognize that this

procurement is a build-to-drawing for systems which are the same as

AN/MST-T1A MUTES Number 8 with the above changes, as identified

in Data Package 654M1000 AG and supplied with the solicitation.”

3in the opinion, Appendix A-4, the 9th Circuit incorrectly states "the AF

and Aydin therefore contracted for a new set of these aperture cards

(the Aperture Card Contract).” The opinion did not address alleged GD

FCA violations under the Aperture Card contract.

ey ™

5

0366 contract was final and followed in 1989 with an

invoice for payment.

In mid 1988, Aydin informed the AF that the Level 3

Drawings were defective and would not support

manufacture of the MUTES systems. In early 1989, the

AF confirmed that the drawings were defective and, since

they had warranted the drawings to be adequate for the

build-to-print contract4, modified the contract to pay Aydin

over $20 million to correct problems caused by the

defective drawings.

In October 1989, plaintiffs filed an action under the

FCA against GD for knowing delivery of defective Level 3

and other drawings under the -0366 contract and

obsolete microfilm under the Aperture Card contract. The

Government elected not to intervene in the action

although the Staff Judge Advocates at both McClellan

and Eglin Air Force Bases recommended entry into the

case (Appendix F, Trial Exhibit G-111).

ll. TRIAL PROCEEDINGS

The non-jury trial was bifurcated into Jurisdictional and

Merit Phases. The jurisdictional phase began on

September 15, 1992 and was decided in favor of plaintiffs

on October 1, 1992 based on absence of public

disclosure. The court made the following finding;

"Therefore, | find that prior to the filing of plaintiffs’

complaint on October 12, 1989, the Government

had knowledge of the fact that General Dynamics’

technical data package contained errors and

discrepancies and that it was inadequate to enable

another manufacturer to build the MUTES and all

other essential facts and informatior upon which

this action is based in the complaint."

4in the opinion, Appendix A-4, the 9th Circuit incorrectly states "the AF

did not warrant that the drawings were adequate for build-to-print

contracts.”

6

The Merits phase began on February 17, 1993. By

amended pre-trial order, the majority of the testimony was

taken outside the court's presence attended only by

opposing counsel and the court reporter. GD based their

defense on premises that 30 year old drawing standard

MIL-D-1000A was ambiguous, that the AF misused the

Level 3 Drawings in a build-to-print contract and that the

AF was Satisfied with GD's contract performance. GD,

however, provided no evidence nor even claimed that

they had ever notified the AF that MIL-D-1000A was

ambiguous or that the Level 3 Drawings were not

intended for or adequate to support the follow-on build-to-

print contract with Aydin.

In August of 1993, the district court issued their

Findings of Fact and Conclusions of Law with judgment in

favor of GD. Upon review of those Findings of Fact, the

plaintiffs discovered that they were an almost verbatim

copy of the GD proposed findings of fact? and many were

Clearly in direct conflict with contract terms and conditions

which the court had not found ambiguous. The plaintiffs

filed a timely appeal (93-16690) on the merits and GD

filed a cross-appeal (93-16823) on jurisdiction. The

plaintiffs’ opening brief requested de novo review of over

30 specific contract terms and conditions as they applied

to and clearly conflicted with the findings of fact.©

In the judgment, the district court found the action to

be closely litigated and not frivolous and denied attorneys’

fees and expenses to GD (Appendix B-24, No. 19).

Following judgment, GD submitted a $246,000 bill of costs

which the court Clerk denied. GD requested

reconsideration of the clerk's action which resulted in the

court awarding costs to GD under FRCP 54(d). The

5GD's 94-16005 Answer Brief at footnote 8 states, “the District Court's

72 post-trial findings of fact are based entirely on the proposed facts

esented by General Dynamics.”

Sth Circuit Opinion addressed none of the appellants’ de novo

review requests.

7

plaintiffs timely appealed the cost award (94-16005). After

perfecting the appeals, one of plaintiffs counsel was

deceased and the other withdrew. No other counsel could

be located who could comprehend this complex action in

the time allowed so the plaintiffs completed the appeal

process pro se.

REASONS FOR GRANTING THE PETITION

_ |. RULE 10 BASIS

This petition addresses very important questions of

federal law, decided by the 9th Circuit, which have not but

should be settled by this court. The 9th Circuit decisions

also conflict with interpretations of other courts, including

the 2nd, Sth, 6th and 7th Circuits. In addition, the 9th

Circuit decisions involve highly questionable judicial

proceedings at both the circuit and district court levels.

ll. IMPORTANCE OF THE ISSUES

The 9th Circuit decisions result in negative impacts to

the public welfare which are unmeasurable and extend far

beyond this instant case.

The finding that a qui tam relator is liable for costs of a

prevailing defendant in a non-frivolous FCA action evokes

two negative results. First, no potential good faith relator

will now step forward to expose fraud knowing that he/she

will be liable for potentially hundreds of thousands of

dollars of defendant's expenses when, as in this case, a

court could decide that a contract is ambiguous even

though both parties have contemporaneously agreed on

a common interpretation. This will result in untold billions

of taxpayers’ dollars being consumed by unreported

fraud. Second, all prior district courts have denied such

costs to prevailing defendants with obvious concurrence

of defendants’ attorneys since no appeals are on record.

With the 9th Circuit ruling, the district courts will now be

8

faced with maintaining precedent of denying costs or

accepting the 9th Circuit position. Regardiess of the

outcome, the shunned party will request reconsideration

and/or appeal the result. This will result in pure waste of

precious districtfappeal court time with associated

unnecessary expenditure of public funds.

The 9th Circuit ruling that MIL-D-1000 is ambiguous

and therefor that Level 3 drawings are not intended or

need be adequate for "build-to-print" contracts may be far

more costly to the taxpayers. For some 30 years, the

Department of Defense (DOD) has continually purchased

drawings from the development contractor to

competitively procure future identical systems and spare

parts. DOD has routinely used those drawings in the most

economical fashion of “build-to-print" contracts. The 9th

Circuit ruling means that all current DOD contracts

purchasing Level 3 drawings are worthless, i.e. the

contractor may deliver, with impunity, drawings which are

not usable. DOD also has repositories full of Level 3

drawings which are used to procure identical systems and

spare parts for systems in the field. Under this ruling, the

original contractor may take legal action to force DOD to

desist in using their drawings for purchasing build-to-print

identical systems/spare parts. The only DOD recourse

would be to purchase these items on sole-source

contracts with the original contractor at non-competitive

prices. It is also conceivable that, where DOD has

required correction of errors or omissions in the Level 3

drawings under a contract Warranty of Data clause such

as ASPR 7-104.9, the contractor may take legal action to

recover the costs of the corrections. The petitioner cannot

even estimate the eventual costs to the taxpayers of this

ruling.

ill. AMPLIFYING ARGUMENT - COST APPEAL

The proper interpretation of the FCA is that qui tam

relators are not liable for the costs of a prevailing

9

defendant in a non-frivolous action. Three courts have

interpreted the FCA in this light. The Eastern District (CA)

noted in United States ex rel. Stillwell at 1101 that:

"Third, a plaintiff who files a frivolous claim under

the Act can be held liable for attorney's fees and

costs under 31 U.S.C. section 3730(d)(4).”

The 2nd Circuit in United States ex rel. Kriendler at 1154

stated;

“Because the Qui Tam relator’ . . . (3) may be

liable for costs if the suit is frivolous, the relator's

personal stake in the case is sufficiently ensured."

The 9th Circuit in United States ex rel. Kelly quotes

3730(d)(1), (2) and (4), cites and quotes the 2nd Circuit in

United States ex rel. Kriendier at 749, and further states

at 752;

“a relator who pursues a frivolous action can be

ordered to pay the defendant's costs and

attorneys’ fees.”

In the opinion at Appendix A-13, the 9th Circuit retracts its

Statements as “imprecise word choice in dicta.” However,

all three courts initial interpretation of the FCA is

consistent with the petitioner, all other QUI Tam relators,

all prior District Courts and all prior attorneys of prevailing

defendants in non-frivolous actions. This is consistent with

the intent of Congress in adopting the 1986 amendments

to the FCA as expressed in Senate Report 345:

at 5288, “The committee's overall intent in

amending the qui tam section of the FCA is to

encourage more private enforcement suits.", at

5267," S. 1562 increases incentives, financial and

otherwise, for private individuals to bring suits. .

.", and at 5293, “If a potential plaintiff reads the

present statute and understands. . .”.

No potential plaintiff could read the qui tam provisions of

the FCA and understand that he/she would be liable for a

prevailing defendant's costs under some obscure

undesignated rule (F.R.C.P. Rule 54). The Senate Report

10

at 5294 clearly notes that 3730(d)(4), discussed as

3730(d)(6), is intended only to penalize the bad faith

relator who brings a frivolous, vexatious or harassing

action.

In its opinion at Appendix A-12, the 9th Circuit finds,

"Although the question is close, we reject this

argument because under the FCA, fees,

expenses, and costs are three distinct categories.

‘Costs,, under the FCA is not a subset of

‘expenses'’."

Section 3730(f) of the FCA states that the government is

not liable for the “expenses” of the person bringing the

action. Senate Report at 5294 states;

“Paragraph ( ) also clarifies that the Government will

in no way be liable for fees or expenses incurred by

a private individual who brings a civil false claims

action.”

The Senate report makes it obviously clear that fees,

expenses, and costs are not three distinct categories and

fees and costs are a subset of expenses in 3730(f). The

Congress use of the term expenses in 3730(f) could not be

more aptly defined than by the court in Dickerson ,

“Expenses includes all expenditures actually made

by a litigant in connection with the action.”

A myriad of courts have defined “costs” as “taxable

expenses” including the 1st Circuit in Gradmann. Ironically,

GD in its Motion for Review of Clerk's Denial of Costs,

stated, ". . . do not provide guidance with respect to the

taxability of GD's expenses.”

Section 3730(g) addresses fees and expenses to

prevailing defendants but, in the 9th Circuit opinion at

Appendix A-12, it is noted that costs are awarded under

3730(g). Those costs are certainly a subset of expenses

Section 3730(d)(4) of the FCA does provide an

express provision for the award of costs as envisioned

under F.R.C.P. 54(d). A simple review of the Notes of the

Advisory Committee on Rules (See Footnote 1 infra.)

discloses that the term costs as used therein was revised

11

to exclude attorneys’ fees. Also, the 5th Circuit in Jones,

the 6th Circuit in Johnson and the 7th Circuit in Bond alll

held that attorneys’ fees should be characterized as an

item of costs as under the provision of Rule 54(d). Since

3730(d)(4) specifically covers attorneys’ fees and

expenses, F.R.C.P. 54(d) is preempted by the FCA

provisions.

Congress would also have had no reason to include

the term "costs" in sections 3730(d)(1) and (2) had they

anticipated cost awards under Rule 54(d). The Senate

Report also makes no reference whatsoever to Rule

54(d) and, in the discussion of section 3730(d) and its

Subsections at 5292-5294, speaks only of fees and

expenses with not a single mention of the word "costs."

Finally, this petitioner has reviewed hundreds of

authorities and literature concerning the interrelationship

of the terms fees, expenses and costs. This review

revealed that, among the courts and experts, there is no

accepted specific relationship. As examples in this case,

the Rules Committee commenting on the 1993 changes

to F.R.C.P. 54(d) noted that the term “costs” included

attorneys’ fees and expenses and under U.S.C. 31

3730(f), it is clear that the term “expenses” includes

attorneys’ fees and costs. This simply means that a

zealous attorney can express any fortuitous relationship,

quote authorities supporting that position and go forward

in the court with a reasonable chance of success.

Therefore, the use of the terms “attorneys' fees", "costs"

and “expenses” in a statute must be interpreted based on

the intent of the authors of the statute. In the case of the

FCA, it is clear that Congress intended section 3730(d)(4)

to deny costs to a prevailing defendant in a non-frivolous

action.

12

IV. AMPLIFYING ARGUMENT - MERITS APPEAL

The Armed Services Board of Contract Appeals has

provided the definition of Level 3 Drawings. in Genera/

Atronics, Finding of Fact number two states;

“Level 3 drawings are “build-to-print” production

drawings with ali of the manufacturing process

instructions required to manufacture an item.”

The district and 9th circuit court rulings, that MiL-D-1000

is ambiguous and therefore Level 3 drawings are not

intended or need be adequate for build-to-print contracts,

are in direct conflict with established rules of Government

contract interpretation as supported by the courts.

Moreover, these rulings were based on opinion testimony

of lay witnesses when the dispute was initiated at trial

some 6 years after the contract was completed.

Prior to the -0103 contract, the AF and GD entered

into a written interpretation agreement regarding the MiL-

D-1000 requirement for delivery of Level 3 drawings. That

agreement was included in the GD proposal for the

contract. Col. Schuster, the AF officer who signed the

agreement, testified at trial that the Level 3 drawings were

for complete MUTES systems and build-to-print contracts.

Witnesses R. McClendon and D. P. Fuller, who signed

the agreement as representatives of GD, did not take

exception to Col. Schuster's testimony. in Pery &

Wallace , the court of claims stated:

“A party who willingly and without protest eriters

into a contract with knowledge of the other party's

interpretation of it is bound by such interpretation

and cannot later claim that it thought something

else was meant.”

During the -0366 contract, the AF issued a solicitation for

a competitive build-to-print contract using the GD Level 3

drawings. GD prepared and submitted a compliant

proposal for that award. fhe AF awarded the contract to

Aydin Corporation. GD was fully aware in that contract

action of the AF interpretation that the drawings were

13

intended and adequate for a build-to-print contract. A

contracting party is bound by its knowledge of the other

parties interpretation of the contract unless it indicates

timely di prior to a dispute arising. See

Shadrick ing Co., Maxwell Dynamometer Co.

and Liles Constr. Co. . The court of claims in Cresswell

also found;

“[2] If one party to a contract knows the meaning

that the other intended to convey by his words,

then he is bound by that meaning. The same is

true if he had reason to know what the other party

intended.”

GD and the AF also entered into an Aperture Card

contract specifically to provide legible copies of the Level

3 drawings for Aydin Corp. to build the MUTES systems

under the build-to-print contract. Again, GD was bound by

knowledge of the AF interpretation that the Level 3

drawings were adequate and intended for that build-to-

dispute on MIL-D-1000 ambiguity surfaced during this

trial

In reality, GD committed a violation of the FCA

regardiess of which interpretation of MIL-D-1000A is

considered. if the interpretation is that Level 3 drawings

must support @ build-to-print contract, then the knowing

delivery of drawings that were not adequate for build-to-

print under the basic -0366 MUTES contract was a

violation. If the interpretation is that Level 3 drawings are

Not to support a build-to-print contract, then GD's delivery

of microfilm of the Level 3 drawings under the Aperture

Card contract, knowing they were inadequate for the AF

to provide to Aydin to manufacture MUTES on the build-

to-print contract, was a violation.

Also, the well established DOD practice of using Level

3 drawings in build-to-print contracts was obviously known

to GD, one of the world's largest defense contractors. The

General Manager of the GD Fort Worth division, Mr.

14

Adams, testified concerning Level 3 drawings, “And then

you pass them out and presume they give them to

someone to build-to-print.”

The GD evidence accepted and used by the courts in

this case was often inadmissible. As a mammoth

corporation and without Government intervention, GD

was able to recruit friendly government witnesses and

entail a bevy of attorneys to orchestrate their testimony.

Their goal was to convince the courts that MIL-D-1000

was ambiguous, that Level 3 drawings were not intended

nor need be adequate for build-to-print contracts and that

the AF was happy with GD's contract performance. This

goal was enhanced by the district court discouraging

objections by stating;

“We don't have a jury here and I'm fully capable to

cull out the information that is reliable and is the

kind of information that I'm going to use and that

which is not reliable."

The ability to use testimony of questionable admissibility

was also furthered by the fact that nearly all of the

testimony was taken outside the presence of the court

with only counsel and the court reporter.

This is clearly noted by looking at the testimony taken

from GD's answer brief and quoted in the 9th Circuit

opinion as material to its holdings. In the opinion at

Appendix A-9, Col. Riders testimony as to the

Govemment's interest in purchasing the drawings is

quoted as;

"to support repair and was to support the

acquisition of spare parts" and “it was generally

recognized. . . that Level 3 data rarely supported

build-to-print.”

Plaintiffs, in their reply brief, specifically pointed out that

Col. Rider had aiso testified

“My conclusion that the data was intended only to

purchase spare parts was based on

conversations”

15

which was hearsay. Plaintiffs also pointed out that Col.

Rider was not part of the initiation of the contract and had

no personal knowledge of the parties intent. In the opinion

at Appendix A-9, Col. Devenny's testimony as to whether

data for competitive procurement meant data for a build-

to-print contract is quoted as,

"No. Data for competitive procurement means

enough data to sustain a true level of competition,

which can mean a variety of levels of data.”.

Plaintiffs, in their reply brief, specifically pointed out that

Col. Devenny had testified that he had never read MIL-D-

1000A, the standard for competitive procurement of data.

The opinion at Appendix A-9 quotes testimony of James

Gavin;

"We've been using those drawings for ten or 12

years without any difficulty . . . And | stand by the

data. We've been using the drawings and

continued to use those drawings. The United

States government is very happy with the

drawings, and we're going to continue to be happy

with them.”

Plaintiffs, in their reply brief, pointed out that Mr. Gavin

also testified that,

“| know that we had problems with those drawings"

and “the drawings were not adequate for the

intended purpose of build-to-print."

Common serise would also indicate that the AF was not

very happy with GD drawings when they had to pay the

follow-on contractor over $20 million to make them usable

for the intended purpose. Plaintiffs also pointed out that

Mr. Gavin was impeached in testifying that the drawings

were only intended for spare parts. Mr. Gavin also

provided that impeached information to the AF Office of

Special Investigation (OSI) which was a primary reason

the Government did not intervene in this action (Appendix

F-1, para. 2. and 3.)

16

Based on the facts that,

1) the 9th Circuit used these testimonies in the opinion

as material to their holdings despite the specific

objections by the plaintiffs,

2) the 9th Circuit did not address in the opinion any of

the plaintiffs’ de novo review requests,

3) the 9th Circuit did not address in the opinion any of

the plaintiffs’ alleged GD violations of the FCA,

4) the 9th Circuit opinion identified Aydin, not GD, as

the contractor on the Aperture Card contract under which

plaintiffs alleged a GD FCA violation,

and 5) the words in the opinion were rooted primarily

in GD's briefs, this petitioner sincerely questions whether

the 9th circuit read and/or understood the pro se

plaintiffs’ briefs.

The petitioner believes that the magnitude of the

errors made by the lower courts will be evident should the

Supreme Court decide to review those briefs.

CONCLUSION

In view of the foregoing reasons, the petitioner

requests that a writ of certiorari issue to review the

judgment and opinion of thie 9th Circuit Court of Appeals

for both the Cost and Merits appeals.

Dated: Dec. 8, 1995 Respectfully Submitted,

gf Lit Vd Ate ssh

Donaid B. Willis, pro se

51 Florence Ct.

Hollister, CA 95023

(408) 637-9356

se ta

(ae tiiac SIs :

A-1

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,

ex rel. Murray W. Lindenthal; Nos. 93-16690

Donald B. Willis 94-16005

Plaintiffs-Appeliants, D.C. No.

CV-89-01411-WBS

V.

GENERAL DYNAMICS CORPORATION

Defendant-Appellee.

UNITED STATES OF AMERICA,

ex rel. Murray W. Lindenthal: Nos. 93-16823

Donald B. Willis D.C. No.

Plaintiffs-Appellees, CV-89-01411-WBS

V. OPINION

GENERAL DYNAMICS CORPORATION

Defendant-Appeliant.

Appeals from the United States District Court

for the Eastern District of California

William B. Shubb, District Judge, Presiding

Argued and Submitted

July 12, 1995 - San Francisco, California

Filed August 2, 1995

Before: Cynthia Holcomb Hall, Charlies Wiggins,

and Edward Leavy, Circuit Judges

Opinion by Judge Hall

APPENDIX A

A al Bak ln I FS I NM Sol i GEE I i Sl A ON

A-2

OPINION

HALL, Circuit Judge

These appeals arise out of an action under the False

Claims Act (FCA).1 The relators prosecuted the action on

their own after the Government declined to intervene.

The relators’ theory of the case is as follows: General

Dynamics (GD) contracted with the Air Force (AF) to

produce, and provide engineering drawings for, an

elaborate radar system called MUTES. MUTES is a

mobile system used to train pilots by simulating the

signals of various enemy radar. After a period of years,

the AF solicited bids on a competitive basis from other

companies who wanted to build MUTES. The AF awarded

the follow-on contract to Aydin Corporation. The drawings

GD had supplied to the AF proved inadequate for Aydin to

produce MUTES according to its contract, and the AF was

therefore forced to renegotiate the terms of its contract

with Aydin at a cost of over $20 million.

The relators, who are insiders at Aydin, claim that GD

knowingly provided inadequate drawings to the AF, and

that this “fraud” actually damaged the United States in the

amount the AF had to pay to alter the terms of the follow-

on contract.

The district court held a bench trial to determine

whether jurisdiction lay under the FCA. It found it had

jurisdiction. The court then held a second bench trial on

the merits of the FCA claim. After finding that GD had not

knowingly submitted any false claims to the AF, the court

entered judgment for GD. GD, as the prevailing party,

then requested an award of costs. The court awarded it

approximately twenty percent of its claimed costs. The

relators appeal the judgment on the merits of their claim,

and GD cross-appeals the district court's conclusion that it

1 See31 U.S.C. § 3729 et seq.

APPENDIX A

A-3

had jurisdiction under the FCA. The relators separately

appeal the judgment for costs.2

The district court had federal question jurisdiction

under 28 U.S.C. § 1331. This court has jurisdiction over

the appeal under 28 U.S.C. 1291, over the cross-appeal

under 28 U.S.C. 1291 and Fed. R. App. P. 4(a)(3), and

over the appeal from the costs judgment under 28 U.S.C.

1291.

in the 1970s GD conceived of MUTES (Multiple Threat

Emitter Systems). MUTES is a complex mobile system

that simulates the threat of enemy forces. The AF uses it

to train pilots. Based on GD's idea, the AF conducted a

competitive procurement for the award of a contract to

build and produce engineering drawings for MUTES. GD

won this contract, and it became effective in February

1978. This contract is generally referred to as "0103."

The district court found that 0103 obligated GD to

provide a technical data package including engineering

drawings so that the AF could then use the drawings to

procure spare parts. The contract further required that

some of those drawings meet a set of requirements called

“Level 3.” Level 3 requirements are described in a

Department of Defense document entitled “MIL-D-

1000A." Although MIL-D-1000A does not specify precisely

the kind of data to be included on Level 3 drawings, it

does describe Level 3 drawings as those that would allow

a competent manufacturer to reproduce the item based

on the drawings.

In the following years, as a result of normal quality

control audits, the parties evaluated the drawings and the

MUTES system. As a result of these internal audits, GD

made changes to its drawings. The AF, however, at all

2 These appeals have been consolidated.

APPENDIX A

A-4

times considered GD's drawings to be satisfactory under

the 0103 contract.

In 1982, GD and the AF entered into a second

contract, referred to as "0366." 0366 required GD to build

more MUTES and to deliver new copies of the drawings

that had been revised as a result of the internal audits.

GD made approximately 6098 changes to its original

drawings.

In late 1986 and early 1987, the AF initiated an effort

to solicit proposals from other contractors to build more

MUTES. Although the AF intended to award the follow-on

contract on a performance basis, an AF contracting

Officer ultimately decided to solicit bids on a build-to-print

basis.4 As a part of this solicitation of bids, the AF

warranted that certain of GD's drawings - which would be

provided to the winner of the follow-on contract - met

Level 3 specifications. The AF did not warrant that the

drawings were adequate for build-to-print contracts.

In 1987, the AF awarded the follow-on contract to

Aydin on a build-to-print basis. Aydin had difficulty

reproducing the MUTES systems, and was forced to seek

permission from the AF to alter some of GD's drawings.

Moreover, many of the “aperture cards" the AF provided

to Aydin, which contained engineering data, were illegible

due to poor handling and copying by the AF. The AF and

Aydin therefore contracted for a new set of these aperture

cards (the Aperture Card Contract).

3 According to GD, a performance specification contract obligates

the contractor to produce a system, for the contract price, that

meets the performance requirements of the contract, regardiess

whether the drawings are perfectly accurate.

4 & “build-to-print” contract requires the contractor to build the

product precisely according to the tecchnical data package

supplied by the government - and requires the government to pay

additional sums every time the contractor has to change a drawing

because of an error or omission.

APPENDIX A

A-5

Aydin's continuing difficulties led in 1989 to a

renegotiation of the follow-on contract in which the AF

agreed to pay an additional $22 million in exchange for

Aydin's agreement to continue to produce MUTES on a

performance specification, rather than a build-to-print,

basis. The relators filed their sealed complaint soon

afterward in October, 1989.

The district court heid trial in two phases. Phase | was

a bench trial to determine whether the court had

jurisdiction under the FCA. The court ruled that although

the claim would have been barred under the version of

the FCA in force prior to 1986 because the government

had the knowledge forming the basis of the claim, the

claim was saved by a 1986 amendment, which the court

applied retrospectively. The court ruled that the new

provision bars claims only when they are based upon

certain public disclosures, and that these claims were not

based upon any public disclosures within the meaning of

the FCA. The court therefore asserted jurisdiction.

Phase |i was a bench trial on the merits of the relators’

claims. The court found that the terms of both contracts,

including the incorporation of the Level 3 specification, to

be ambiguous, and therefore accepted extrinsic evidence

regarding the understanding of the parties as to whether

the drawings were expected to be error free or suitable for

“build-to-print" follow-on contracts and, therefore, that

none of the DD Form 250's® or claims for payment

constituted false or fraudulent claims. It also concluded

that, even had GD submitted false claims, it did not have

the scienter required in order for liability to attach.

After the entry of judgment, GD filed a bill of costs,

which was eventually referred to a magistrate judge. The

magistrate judge issued findings and recommendations,

5 When a contractor has finished a portion of work called for in the

contract, it submits to the AF a "DD Form 250,” which describes

the work completed and the amount the AF is to pay for that work.

APPENDIX A

A-6

which the district court reviewed de novo and adopted.

The district court then awarded GD $50,271.27 in costs.

Hi, Wl.

(9 pages of Jurisdictional Cross-Appeal not copied)

IV.

Turning to the merits, the relators" theory at trial was

that GD breached its contract with the AF and provided

drawings that did not meet the Level 3 specifications, as

evidenced by the fact that they were inadequate for the

“build-to-print" contract awarded to Aydin. Thus, GD's

submission of DD Form 250's and claims for payment for

work described in those forms - if that work did not in fact

meet Level 3 specifications - would constitute “false”

claims.19 Central to the merits of this case, therefore, is

the question whether GD's drawings satisfied the

requirements of contracts "0103" and "0366" that the

drawings meet the Level 3 specifications.

A. The district court did not err in admitting extrinsic

evidence to determine the parties’ expectations.

Contracts 0103 and 0366 both required GD to submit

"Level 3" engineering drawings. Level 3 is defined by a

Department of Defense document entitled "Military

Specification: Drawings, Engineering and Associated

Lists" and labelled "MIL-D-1000A.” Both contracts

incorporate MIL-D-1000A by reference.

10 The FCA provides that "[aJny person who. . . knowingly

presents, or causes to be presented, to an officer or employee of

the United States Government or a member of the Armed Forces

of the United States a false or fraudulent claim for payment or

approval. . . is liable to the United Staes Government.” 31

U.S.C. § 3729(a).

APPENDIX A

ee mene TE

A-7

MIL-D-1000A states that "[e}ngineering drawings and

associated lists prepared to this level (Level 3) shall

provide engineering definition sufficiently complete to

enable a competent manufacturer to produce and

maintain quality control of item(s). . . without additional

product design effort, additional design data, or recourse

to the original design activity." It further establishes that

the intended use for Level 3 drawings is "[t]o provide

engineering data for support of quantity production to

permit competitive procurement for items substantially

identical to original drawings.”

Nowhere does MIL-D-1000A state that Level 3

drawings must be error free or adequate to support a

“build-to-print" contract. Thus, GD posits, it is impossible

to determine, simply by reference to the contracts and to

MIL-D-1000A, whether the fact that GD's drawings were

inadequate for the follow-on contract means they did not

meet the requirements of contracts 0103 and 0366. The

district court therefore found that the “contract terms

regarding what information had to be contained in the

drawings are ambiguous, and the intent of the parties

must accordingly be determined with reference to

extrinsic evidence."11

[5] We agree that extrinsic evidence was properly

admitted to flesh out the meaning of "Level 3." "Where . .

. . Contractual language. . . is unclear and suggests

several speculative interpretations, the scope of the

language must be read in accordance with the parties"

contemporaneous construction, and extrinsic evidence is

admissable to show what the parties intended it to mean.”

Lockheed Aircraft Corp. v. United States, 553 F.2d 69, 89

(Ct. Cl. 1977) (citations omitted). Here, the relators claim

that language in MIL-D-1000A stating that drawings

meeting the Level 3 specifications should allow a

11 The “extrinsic evidence” consisted of testimony from several

witnesses from the AF and from GD and declarations and/or

deposition testimony from over 30 declarants/witnesses.

APPENDIX A

A-8

competent manufacturer to build the product without

resort to additional engineering unambiguousiy means

ine cad Ch ee ee ee

“build-to-print" contract. 1

[6] MiL-D-1000A, however, is not so precise. It also

states, for instance, that the “numbers and types of

engineering drawings selected is predicated on sound

engineering judgment.” As an example, the specification

states that a Level 3 drawing for a simple device might

only require “a few detailed drawings” whereas Level! e

drawings for a sophisticated system could require

“nundreds of individual drawings.” /d. Thus, we agree that

MIL-D-1000A does not unambiguously define the parties’

expectations regarding the degree of accuracy or the

Suitability for future uses. it certainly does not

unambiguously state that Level 3 drawings must be

suitable for build-to-print follow-on contracts. We reject

the plaintiffs’ argument that the district court erred in

admitting extrinsic evidence regarding the parties’

expectations.

| B. The district court did not err in concluding that GD's

drawings met the parties’ expectations and were therefore

not the basis of any “false claims.”

Based on the testimony and documentary evidence,

the district found that the AF did not intend its contracts to

require GD to provide drawings that could be used for

~ follow-on contracts on a build-to-print basis. Rather, the

AF “intended to procure from General Dynamics Level 3

drawings only for general Dynamics-built equipment.” The

court also concluded that "[djrawings adequate to satisfy

the Level 3 requirements of Generali Dynamics’ MUTES

12 We note that the relators, perhaps unintentionally, resort to

extrinsic evidence to support the contention that the terms are not

ambiguous.

APPENDIX A

Eee

A-9

contracts are not necessarily adequate to support a build-

to-print follow-on contract with a different contractor,” and

t “General Dynamics’ drawings met the Level 3

requirements of its MUTES contracts." We review the

district court's findings based on the extrinsic evidence for

Clear error, and the principles of law applied to those facts

de novo. Stephens v. City of Vista, 994 F.2d 650, 655

(9th Cir. 1993).

None of these findings is clearly erroneous. One AF

Officer, for instance, testified in deposition that the

government's interest in purchasing the drawings was “to

support repair and was to support the acquisition of spare

parts,” and that "ijt was generally recognized. . _ that

Level 3 data rarely supported build-to-print.” Another

Officer, when asked whether data for competitive

procurement meant data for a build-to-print contract

responded: “No. Data for competitive procurement means

enough data to sustain a true level of competition, which

can mean a variety of levels of data.”

Similarly, evidence amply supports the conclusion that

the drawings satisfied GD's contractual obligations to the

AF. For example, the AF Program Manager responsible

for the MUTES program testified in deposition that "We've

been using those drawings for ten or 12 years without any

difficulty . . . And | stand by the data. We've been using

the drawings and continued to use those drawings. The

United States government is very happy with the

drawings, and we're going to continue to be happy with

them."

[7] We therefore affirm the district court's findings that

GD's drawings met the AF expectations and satisfied

GD's contractual obligations. Logically, then, any claims

for payment based on work that satisfied GD's contractual

obligations to the AF could not have been “false or

fraudulent" within the meaning of the FCA. We also

therefore affirm the district court's conclusion that none of

the DD Forms or claims for payment under the MUTES

APPENDIX A

A-10

contracts contained any false claim for payment or

fraudulent statement.

V.

Because we conclude that GD did not submit any

false claims, we need not reach the question whether it

submitted false claims "knowingly" so as to allow liability to

attach under the FCA. The FCA imposes liability on "[a]ny

person who. ._ . knowingly presents, or causes to be

presented. . . a false or fraudulent claim for payment."

31 U.S.C. § 3729(a)(1). Knowing submission of claims

that, as here, are not false or fraudulent, obviously does

not give rise to liability.

Vi.

After entry of judgment, GD submitted a bill of costs

requesting over $200,000 in costs. The clerk denied the

bill of costs. GD moved the district court to review the

denial of costs. The district court reviewed the denial,

ordered costs to be awarded, and referred the matter to a

magistrate judge. The magistrate judge disallowed a

significant portion of GD's bill of costs and recommended

an award of $50,271.27. The district court reviewed the

magistrate judge's findings and recommendations,

adopted them, and entered judgment awarding costs to

GD.

The relators appeal from the district court's order

awarding costs. They argue that because the district court

had previously declined to award GD attomey's fees and

expenses under authority of the FCA upon a finding that

the relators' claim was not “frivolous, clearly vexatious, or

brought primarily for purposes of harassment,” it lacked

authority to award costs under Rule 54(d). The relators

also argue that, even if the district court did have authority

APPENDIX A

A-11

to award costs, it abused its discretion in doing so. We

address these arguments in turn.13

A. The district court had authority to award costs

under Rule 54.

Rule 54 provides:

Except when express provision therefor is made

either in a statute of the United States or in these

rules, costs other than attorneys’ fees shall be

allowed as of course to the prevailing party unless

the court otherwise directs. .. .

Fed. R. Civ. P. 54(d)(1). The relators contend that the

court lacked authority under Rule 54(d) because 31

U.S.C. § 3730 constitutes an “express provision”

regarding costs, which displaces the authority the court

would otherwise have under Rule 54(d).

Although several subsections of section 3730 do

expressly mention costs, the subsection governing the

relators in this case does not. The relevant subsection

States:

lf the Government does not proceed with the

action and the person bringing the action conducts

the action, the court may award to the defendant

its reasonable attorneys’ fees and expenses if the

defendant prevails in the action and the court finds

that the claim of the person bringing the action was

Clearly frivolous, clearly vexatious, or brought

primarily for purposes of harassment.

13 We generally review a decision to award costs for an abuse of

discretion. National Info. Servs. inc. v. TRW, Inc., 51 F.3d 1470,

1471 (9th Cir. 1995), amended 52 F.3d 334 (1995). However,

whether a district court has the authority to award costs after

denying fees and expenses under the FCA is a question of law we

review de novo.

APPENDIX A

A-12

31 U.S.C. § 2730(d)(4) (emphasis added). On its face,

this subsection does not constitute an “express provision”

regarding "costs"; the word "costs" is simply absent from

this provision. .

[8] Relators, however, suggest that the term

~ “expenses” includes “costs,” that this subsection thus is

an express provision relating to costs, and that the FCA

therefore only provides for costs to a defendant who

prevails against a relator proceeding on his behalf when

the relators claim is clearly vexatious. Although this

question is close, we reject this argument because under

the FCA, fees, expenses, and costs are three distinct

categories. "Costs," under the FCA, is not a subset of

“expenses.”

Section 3730(d)(2), for instance, establishes that

when a relator proceeds on his own behalf and prevails ,

he shall receive “an amount for reasonable expenses

which the court finds to have been necessarily incurred,

plus reasonable attomeys' fees and costs.” 31 U.S.C. §

3730(d)(2) (emphasis added). Similarly, section 3730(g)

provides that when the government intervenes but does

not prevail, 28 U.S.C. § 2412(d) shall apply. Section

2412(d), as does section 3730(d)(2), distinguishes

between fees, expenses, and costs. See 28 U.S.C. §

2412(d)(1)(A) ("a court shall award to a prevailing party

other that the United States fees and other expenses, in

addition to any casts") (emphasis added). The language

of these two sections strongly suggests that costs, under

the FCA, constitute a category distinct from expenses: as

a matter of loc‘c, a court could not award costs in addition

to expenses if costs were merely a subset of expenses.

In a nutshell, then, our analysis is as follows: two other

subsections of section 3730 distinguish between

expenses and costs and suggest that the two categories

are discrete. Section 3730(d)(2) does so explicitly while

section 3730(g) does so by reference to another statute. It

would therefore be incongruous to conclude that section

APPENDIX A

A-13

3730(d)(4), which refers only to "fees" and “expenses”

constitutes an express provision regarding "costs,"

despite that is silent regarding "costs."

The relators, however, invoke as support for their

position several authorities that we find unpersuasive.

First, they quote language from United States ex rel. Kelly

v. Boeing Co. , 9 F.3d 743 (9th Cir. 1993), cert. denied,

114 S. Ct. 1125 (1994), which was a constitutional

challenge to the qui tam provisions of the FCA. Some

language from that opinion would support the position that

“costs” are included in the term “expenses” and may only

be awarded upon a finding of frivolousness or

vexatiousness. See, e.g., 9 F.3d at 749 ("the qui tam

plaintiff may be liable for costs if the suit is frivolous"); 9

F.3d at 752 ("a relator who pursues a frivolous action can

be ordered to pay the defendant's costs and attorneys’

fees").

This language, however, is not a holding. The

appellant in Kelly raised no issues regarding costs,

expenses, or fees, and this court addressed none. The

relators' argument relies merely on imprecise word choice

in dicta. The language is simply not binding on this panel

in this case.

Similarly, other courts addressing other questions

have used language that might give rise to an inference

that costs are a subset of expenses. See, e.g., Crawford

Fitting Co. v. J. T. Gibbons, Inc., 482 U.S. 437, 441-42

(1986) ("Section 1920 enumerates expenses that a

federal court may tax as a cost under the discretionary

authority found in Rules 54(d)."); but see Hairline

Creations, Inc. v. Kefalas, 664 F.2d 652, 655 (7th Cir.

1981) (" ‘costs’ are not equivalent to ‘expenses,’ but

include only such items as court fees and witness fees").

[9] These cases are not directly relevant to our inguiry,

however. The question in our case is not whether, as a

general matter, costs are included in expenses. Rather,

the question is much more precise: under the FCA, does

APPENDIX A

A-14

the category "expenses" include "costs." Only if it does

would section 3730(d)(4)'s provision for fees and

expenses constitute an express provision for costs that

would replace the discretion to award costs a court would

otherwise have under Rule 54(d). Because we conclude

that section 3730(d)(4) does not constitute an express

provision regarding costs, we hold that the district court

did not err in awarding costs under Rule 54.

B. The distnct court did not abuse its discretion in

awarding costs.

The relators also argue that even if the district court

had authority to award costs, it abused its discretion in

doing so. This argument is without merit.

[10] This court recently held:

The unsuccessful litigant can overcome this

presumption [in favor of the award of costs under

Rule 54(d)] only by pointing to some impropriety on

the part of the prevailing party that would justify a

denial of costs. . . A district court therefore must

award costs unless the prevailing party is guilty of

some fault, misconduct, or default worth of

punishment.

National Info. Servs. v. TRW, Inc., 51 F.3d 1470, 1472

(9th Cir.) amended, 52 F.3d 334 (1995). The relators list

in their brief twelve reasons supporting their assertion that

the district court abused its discretion. None of these

reasons relates to any impropriety or misconduct by GD.

Moreover, the district court, in a written order, considered

many of the factors the relators raise on appeal, as well

as Caselaw guiding the decision whether to award costs,

before ordering that GD should recover its costs. Finally,

the magistrate judge, whose findings the district court

adopted, carefully analyzed GD's bill of costs and reduced

APPENDIX A

A-15

the requested award by over seventy-five percent. We

hold that the district court did not abuse its discretion in

awarding costs under Rule 54(d).

Vil.

We AFFIRM the district court's assertion of jurisdiction

(No. 93-16823) and AFFIRM the judgment entered in

favor of General Dynamics (No. 93-16823). We also

AFFIRM the award of costs (No. 94-16005). Each party

shall bear its own costs on appeal.

APPENDIX A

et eee es

-.. Serta aires 5 at

B-1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

fo OD ee

FILED AUG 5,1993

BY DEPUTY CLERK

UNITED STATES OF AMERICA, ex

rel., MURRAY W. LINDENTHAL and

DONALD B. WILLIS,

NO. CIV. S-89-1411WBS\WFM

Plaintiffs,

V.

FINDINGS OF FACT AND

CONCLUSIONS OF LAW

GENERAL DYNAMICS CORPORATION,

Defendant.

—-——00000-——-—

On September 15, 16, 17, 18, 22, 23, 24, 25, 29,

30 and October 1, 1992 trial was held before this court on

Phase | of this case to determine jurisdiction, at which

time the court heard the testimony of Murray W.

Lindenthal, Donald B. Willis, Frank J. Gaffney, Col.

Thomas DeVenny, Larry Kabase, Richard Mitchell, Dr.

John Amoild, Peter Mitchell, Jonn Puccione, Dorey Talley,

Joseph Giangrosso, James Gavin, Col. Warrick W. Rider,

Henry Wolanski, Charlene Ivey, and Charlies Schuster,

and documentary evidence was received. On October 1,

1992, the court found jurisdiction and stated its findings of

fact and conclusions of law orally on the record in open

court following the close of evidence on that phase. On

February 17, 18, 19, March 3, 4, 5, 30, Aprii 1, 2, 8, 9, 13,

APPENDIX B

B-2

14, 15, 16, 27 28, 29, and 30, 1993, the court received

evidence in Phase Il to determine the remaining issues in

the case, at which time the court heard the testimony of

Dorey Talley, Henry Wolanski, Murray W. Lindenthal,

Michael Hill, Dr. Jonn Arnold, Donald B. Willis, and John

Puccione, and further documentary evidence was

received. Pursuant to the Supplemental Pretrial Order of

January 26, 1993, the court also received and cons/uered

the declaration and/or deposition testimony of Charles

Wooten, Melvin Leon Mayes, Richard Adams, Frank J.

Gaffney, Loy M. Fraser, Edwin E. Clark, Clifford D.

Verwers, Lee Lemay, James E. Pauwels, Bradiey M.

Rudd, Donald E. Saddoris, Maurice Comeau, Earl

Benson, Jerry M. Nimerick, Harry Schuss, Lee Staggs,

Richard Endres, Dan P. Fuller, Murray W. Lindenthal,

Charlene Ivey, Diane M. Wickstrom, Ralph F. Clements,

Donald Tadlock, Donald L. Grskovich, Robert McClendon,

Harrell McLemore, Earl Anderson, Creed Thomass

Childress, Palle S. Christensen, Col. Thomas DeVenny,

James Gavin, Joseph Giangrosso, Col. Warrick W. Rider,

Joseph Sullivan, and William Zant.

All objections upon which the court has not already

ruled, and all arguments in support of and in opposition to

those objections, have been considered by the court as

going to the weight of the evidence to which the

objections have been made.

The matter was submitted to the court for decision

following final arguments on July 26, 1993. The court

being fully advised in the premises, now makes the

following Findings of Fact and Conclusions of Law

pursuant to Rule 52(a) of the Federal Rules of Civil

Procedure: ‘

FINDIN F FACT

1. Plaintiffs, Murray W. Lindenthal and Donald B.

Willis, employees of Aydin Corporation (West), have

APPENDIX B

B-3

brought this action pursuant to the qui tam provisions of

the False Claims Act, 31 U.S.C. § 3729 et sea., seeking to

recover damages on behalf of the United States.

2. Defendant General Dynamics Corporation duly

exists under the laws of Delaware and is registered to do

business in California.

3. Aydin Corporation (West) is a division of a

company engaged in the business of manufacturing

electronic and related equipment for the Armed Forces of

the United States.

4. In the mid-1970's, General Dynamics first

described to the Air Force a concept for a multiple threat

emitter systems (MUTES). A MUTES set consists of a

tractor cab pulled semi-trailer on which is mounted two

house-like structures within each of which are electronic

and radar devices capable of transmitting signals | to

aircraft and registering signals from aircraft so that in use |

a MUTES is located on the ground to simulate the threat

of enemy defense forces to air crews, with the crews

training by attempting to avoid the simulator threats from

the MUTES sets.

5. The Air Force wrote a set of performance

specifications based on General Dynamics’ concept and

conducted a competitive procurement for the award of a

contract to develop a prototype unit that could

demonstrate the feasibility of the MUTES concept.

General Dynamics won that contract. No drawings or

reprocurement data were required under the MUTES

prototype contract. The successful development and

testing of the MUTES prototype ultimately led the Air

Force to award to General Dynamics Contract No.

F08635-78-C-0103 (hereinafter, "0103").

6. Effective February 10, 1978, General Dynamics

and the Air Force entered into Contract 0103 which was

signed by Philip R. Cowen, Vice President and Deputy

General Manager Contracts, on behalf of General

Dynamics on April 11, 1978, and by Major Paul D. Harris

APPENDIX B

B-4

on behalf of the Air Force on April 14, 1978, for the

manufacture and supply of the MUTES.

7. Contract 0103 called for General Dynamics to

supply certain items to the United States Air Force

pursuant to the terms and conditions specified in that

contract and to do so, prior to subsequent amendments,

for a total amount of $11,500,000. The contract contained

a contract data requirement list, item AOOD, specifying

the delivery to the Government of "Level 3 data" for at

least certain data, including all equipment built by General

Dynamics.

8. “Level 3 data" is a phrase used in

MIL-D-1000A to describe generally drawings of

manufactured hardware which contain sufficient detail to

enable a_ technically competent manufacturer to

reproduce the relevant hardware items depicted on each

drawing by using only the drawings, without undertaking

any additional engineering design effort. The extent of

data necessary to satisfy 4 MIL-D-1O0O0A is tailored

through negotiation to fit the needs of a particular

procurement. Since MIL-D-1O000A does not specify the

kind of data required to be placed on a Level 3 drawing,

the specific data required to be placed on a Level 3

drawing is arrived at by agreement between the

government and the contractor.

9. Both prior to and after the award of the 0103

Contract, General Dynamics and the Air Force met

regularly and frequently, attempting to reach agreement

as to the scope and the specific kind of information that

was required to be placed on General Dynamics’ Level 3

drawings. The contract terms regarding what information

had to be contained in the drawings are ambiguous, and

the intent of the parties must accordingly be determined

with reference to extrinsic evidence.

10. The Air Force never intended to purchase from

General Dynamics drawings that would be used for

reprocurement of MUTES systems on a build-to-print

APPENDIX8

B-5

basis. The MUTES which General Dynamics designed

and built were purchased by the Air Force buying activity

at Eglin Air Force Base in Florida, and were to be

maintained by the Air Force's "Red Force Center," which

is part of the Logistics Command at McClellan Air Force

Base in Sacramento. The drawings were intended to be

used by the Red Force Center primarily for its

procurement of spare parts. Red Force Center | provided

instructions to the program office at Eglin Air Force Base

with regard to the kind of information that was required to

be in the drawings.

11. The Air Force intended to procure from

General Dynamics Level 3 drawings only for General

Dynamics-built equipment. For MUTES components and

assemblies not built by General Dynamics and not

appearing in a vendor catalog, General Dynamics was

required to deliver specification control drawings or source

control drawings identifying the vendor and/or describing

the form, fit and function of the product. General

Dynamics’ specification control drawings were not

required to meet the Level 3 drawing standards of

MIL-D-1000A. Drawings adequate to satisfy the Level 3

requirements of Generali Dynamics’ MUTES contracts are

not necessarily adequate to support a_ build-to-print

follow-on contract with a different contractor.

12. Subsequent to April, 1978, the 0103 Contract

was amended from time to time to add at least two

additional MUTES sets, and additional specifications,

procedures and spare parts.

13. The Air Force regularly monitored and

inspected all aspects of General Dynamics’ performance

of the First Contract, including the continued development

of the hardware, whether the performance specifications

were being achieved, the manufacture of the hardware,

testing and inspection of the hardware, and the

preparation of the Level 3 drawings. These functions were

carried out by the Air Force's Program, Contracting, and

APPENDIX B

B-6

Engineering Offices at Eglin Air Force Base, the

Engineering Department of the Red Force Center at

McClellan Air Force Base, and the Air Force Plant

Representative Office, where General Dynamics

developed and manufactured the MUTES and developed

and maintained the drawings.

14. The 0103 Contract set forth a schedule of

specific events at which the Air Force would review

General Dynamics’ performance, including the continued

development of the hardware, whether the performance

specifications were being achieved, the manufacture of

the hardware, testing and inspection of the hardware, and

the preparation of the Level 3 drawings.

5. The intent of the Air Force's in-process drawing

reviews was to drive major errors from the drawings. What

is considered a major error depends on how the drawings

are going to be used. in the case of the MUTES drawings,

major errors are those errors which would prohibit a

competent contractor from reprocuring spares.

16. During 1980 and 1981, the Air Force

conducted a series of Physical Configuration Audits in

which General Dynamics participated. The Physical

Configuration Audits constituted the formal examination

and comparison of the MUTES hardware with the Level 3

engineering drawings. The results of the audits were

documented in minutes which were transmitted and

approved by both General Dynamics and the Air Force.

The Audit results and minutes were also disclosed to

Bell/Textron Corp., which, at the request of the Air Force,

acted as an indeperident evaluator of General Dynamics’

drawings.

17. On August 26, 1981, General Dynamics

responded to DR No. 81-3D-391 that its configuration

management directives had been rewritten to adequately

document the use of non-returnable drawings, and that its

quality control engineers had been advised of the

importance of obtaining all drawing-related documentation

APPENDIX B

B-7

with the appropriate drawings prior to performing any final

inspection operation.

18. During the final Physical Configuration Audit,

the Air Force audit team discovered discrepancies

between General Dynamics’ drawings and the hardware.

The Air Force considered some of these discrepancies to

be minor in nature, and other discrepancies were noted

and disclosed to General Dynamics on_ individual

discrepancy sheets.

19. During the course of the Physical Configuration

Audits, the Air Force paid particularly close attention to the

drawings depicting the MUTES electronic components (as

opposed to mechanical components) and sought to

ensure the accuracy of those drawings so as to enable

the Air Force to procure spare electronic components

based on those drawings.

20. At the completion of the final Physical

Configuration Audit in July 1981, despite the presence of

some errors in the drawings sampled by the Air Force, the

Air Force determined that all of the drawings, whether or

not specifically | reviewed during the audit, satisfied

General Dynamics’ obligation | under the 0103 Contract.

21. Contract No. F08635-82-C-0366 (hereinafter

"0366"), entered into by the Department of the Air Force

and General Dynamics Corporation, Fort Worth Division,

was signed by John P. Sullivan of the United States of

America on August 6, 1982, was signed by T.S. Webb,

Vice President of the F-16 programs at General Dynamics

on July 30, 1982, and had an effective date of August 13,

1982. Contract 0366 called for General Dynamics to

manufacture and deliver four more MUTES and to

document changes to the MUTES drawings. Under the

0366 Contract, General Dynamics was required to deliver

to the Air Force only those drawings that were revised.

22. General Dynamics made approximately 6098

changes to the MUTES data under the 0366 Contract and

generated 1580 Engineering Change Notices ("ECNs").

APPENDIX B

B-8

All of the ECNs were incorporated into the MUTES

drawings before delivery to the Air Force. All the changes

made to the MUTES drawings by General Dynamics were

delivered to the Air Force.

23. General Dynamics presented to the

Government, contemporaneous with final delivery of each

MUTES system, or technical data package ("TDP"), a DD

Form 250. A DD Form 250 is a Government form which is

presented to the Government by the contractor along with

an item that is deliverable under the contract. The

Government then inspects the item, and if it is found to be

acceptable, the Government signs the DD Form 250 and

returns it to the contractor. The contractor then submits

the DD Form 250 to its Finance Department so that the

cost associated with that item is included in the next

request for payment submitted to

the Government.

24. A DD Form 250 was fumished by General

Dynamics to the Government as_ supporting

documentation accompanying an invoice for final payment

on each MUTES and the final TDP. The following invoices

were prepared by General Dynamics and presented to the

government for payment with DD Form 250s on the

following dates:

»

Invoice at__ Invoice DD 250

Exhibit Date DD250 Nr. Date Item

FW8106257 10/12/81 FWD0332 10/05/81 MUTES S/N2

FW82002840 02/09/82 FWD0453 02/09/82 MUTES S/N3

\*W82009487 04/28/82 FWD0545 04/28/82 S/N 4

FW82010384 05/06/82 FWD0379 04/28/82 0103 Data

FW84022809 11/01/84 FWDO0062 10/29/84 MUTES S/N 5

F285004117 03/14/85 FWDO0067 03/13/85 MUTES S/N 6

FW85015318 06/28/85 FWD0077 06/28/85 MUTES S/N 7

FWD5023379 11/08/85 FWD0102 11/07/85 MUTES S/N 8

FWM86008764 07/14/86 FWD0122 06/09/86 Data S/N 7

FW89000717 01/19/89 FWD0128 08/17/87 Data S/N5,6,8

APPENDIX B

EE LONI LLL ETO LIEGE NER ETT I 2A SRE eR BY

B-9

25. Following General Dynamics' submittal of the

drawings and DD Form 250, the Air Force conducted a

review and inspection of the drawings to determine

whether the drawings contained the kind of information

and criteria that the Government required. Following its

review of the drawings, the Air Force signed the DD Form

250, and approved and accepted the drawings.

26. The DD Form 250s which General Dynamics

Submitted to the Air Force along with each deliverable

item under the MUTES Contracts were intended to

apprise the Air Force that deliverable items were being

Submitted for acceptance and did not contain any false

Statement, claim, representation or record. Nor did

General Dynamics omit any required information from the

forms.

27. General Dynamics’ progress payment requests

were not false claims, contained no false statement, and

did not omit any required information.

28. General Dynamics’ invoices were not false

Claims and contained no false or fraudulent statements.

Nor did General Dynamics omit any required information

from its invoices.

29. General Dynamics' Program Status Reports,

which were submitted only on the 0366 contract were

accurate, contained no false or fraudulent statements, did

not omit required information, and did not represent a

Claim for payment.

30. General Dynamics' drawings met the Level 3

requirements of its MUTES contracts. Each of the MUTES

Systems delivered by General Dynamics to the Air Force

Satisfied the MUTES performance specifications. The Air

Force accepted General Dynamics' TDPs with full

knowledge of the condition of the data contained therein,

and has been highly satisfied with the performance of

General Dynamics' MUTES.

31. There were errors and/or omissions in General

APPENDIX B

B-10

Dynamics’ TDPs. However, those errors and/or omissions

were no more serious or numerous than those which

would be expected to be contained in the data package

submitted by any other competent contractor. Moreover,

the majority of the errors and/or omissions were not

General Dynamics’ responsibility, Plaintiffs produced

evidence of 54 claimed errors (Exhibit 67), selected not at

random but to demonstrate the kinds of errors alleged to

be contained in General Dynamics’ package. Twenty

three of those did not result in any Engineering Change

Orders ("ECOs"), four were admittedly not caused by

General Dynamics, and another twenty one could fairly be

categorized as miner clerical or typographical errors.

32. Although General Dynamics' MUTES Program

Manager and Chairman of the Change Control Board,

Henry Wolanski, initially believed -and testified that

approximately 6,000 identified and approved ECNs had

been completed and incorporated into the corrected

drawings delivered to the Government at the end of

Contract 0366, that belief and testimony was based upon

an innocent misunderstanding. In fact, there were only

ever about 1,500 ECNs identified by General Dynamics.

33. Neither the number nor the nature of the ECNs

were sufficient either to place General Dynamics on notice

that its TDP did not meet the requirements of the contract

or to create any inference that General Dynamics knew

that its package did not comply with the contract.

34. General Dynamics did not have any knowledge

that its drawings did not comply with its contractual

obligation. Nor was General Dynamics deliberately

ignorant or in reckless disregard as to the compkance of

its drawings with the contract.

35. A TDP for an item as complex as a MUTES

contains literally millions of opportunities for error, and it is

impossible for current contractor data systems to produce

an error free package. Therefore, both General Dynamics

and the Government knew that General Dynamics’ TDP

APPENDIX B

B-11

was not and could not be error free. However, General

Dynamics had no knowledge of any specific errors in its

TDP at the time the package was furnished to the

Government, nor was General Dynamics deliberately

ignorant or in reckless disregard as to the existence of

any specific errors in its TDP. Likewise, General Dynamics

was not aware of any specific omission of information

required for inclusion in its drawings, nor was General

Dynamics deliberately ignorant or in reckless disregard as

to any such omission.

36. No categories of information were omitted from

General Dynamics’ drawings. The Air Force's drawing

reviews ensured that all questions as to categories of

information and the format of the drawings (i.e., where in

the drawings certain categories of information would be

located), were discussed and resolved between General

Dynamics and the Air Force.

37. No obligation existed under the MUTES

contracts to deliver to the Air Force "individual notes,

notebooks, obsolete drawings, marked up drawings, and

other makeshift means of manufacturing the MUTES"

prepared by General Dynamics or its subcontractors, as

plaintiffs have alleged. .

38. General Dynamics’ configuration ieniisenans

and quality assurance functions were carried out properly

and in conformity with the MUTES contracts’

requirements. The configuration management programs

of General Dynamics which were in effect during General

Dynamics’ performance of the MUTES contracts were

submitted to the Air Force and approved by the Air Force

as compliant with General Dynamics' contractual

requirements. The Air Force had complete knowledge and

understanding of General Dynamics’ configuration

management programs arid the manner in which General

Dynamics resolved any problems that arose.

39. General Dynamics made reasonable and good

APPENDIX B

B-12

faith efforts to correct deficiencies in engineering practices

related to configuration management procedures.

40. At no time did General Dynamics knowingly,

consciously or recklessly disregard documenting changes

made to MUTES hardware, nor did General Dynamics’

Change Control Board at any time discourage the

submission of ECNs to document changes or correct

drawing errors.

41. As part of General Dynamics’ compliance with

MILQ9858A, which sets forth general requirements for

companies to have a Quality Assurance program capable

of detecting and promptly correcting conditions adverse to

quality, General Dynamics regularly conducted internal

Quality Evaluation Audits to insure that quality deficiencies

of any kind would be detected and that recommended

corrective actions would be evaluated.

42. When General Dynamics’ internal auditors

flagged instances of non-compliance with a particular

procedure or instances in which a procedure did not

satisfy 9858A, that did not mean that General Dynamics

was in violation of the entirety of 9858A. Overall

compliance with 9858A was assured by having

procedures for identifying and correcting those conditions.

43. General Dynamics’ internal Quality Evaluation

Audits were always available for the Air Force to review. In

addition, each Quality Assurance Report that was issued

by General Dynamics’ Quality inspectors was sent to the

Air Force. Each Quality Evaluation Audit that General

Dynamics conducted was closed out by corrective actions

which were approved by the Quality Assurance

department through coordination with the departments

that were the subject of the audit.

44. General Dynamics’ internal audits do not in any

way suggest that Quality Assurance did not perform its

inspection and safeguarding role in the proper manner.

Nor did the audits conclude that engineers were failing to

document changes made to MUTES hardware.

APPENDIX B

B-13

45. Quality Evaluation Audit 79-39 was conducted

in 1979 to evaluate the MUTES program's compliance

with 9858A. The audit found that there was effective

coordination which enhanced the quality aspects of the

program and that Quality Control was effectively

monitoring the system consistent with established

procedures. None of the findings or observations in

Quality Evaluation Audit 79-39 indicated in any way that

General Dynamics' MUTES drawings were inaccurate or

incomplete or that General Dynamics failed to compare

MUTES drawings to hardware.

46. Quality Evaluation Audit 81-04 was conducted

by General Dynamics in 1981 to audit whether certain

engineering laboratories were complying with procedures

for controlling drawings. The Air Force was already aware,

prior to QEA 81-04, of each of the drawing discrepancies

listed in QEA 81-04 which concerned MUTES and the

manner in which they were resolved. The observation by

the auditor that “parts are being built in reverse order .. .

the hardware is built initially, then an ECN is generated to

update the drawing to the hardware . . ." does not imply

that General Dynamics failed to document changes to the

hardware. To the contrary, the statement itself indicates

that General Dynamics was documenting such changes

through ECNs.

47. The drawing booth in the Design Development

Lab was not “uncontrolled” or “out of control”, nor did the

manner in which it was staffed or maintained violate

9858A or any other requirement in General Dynamics’

MUTES contracts, configuration management plan, or any

General Dynamics quality control procedure. Nor did the

manner in which General Dynamics maintained its

drawing booths have any affect on the accuracy or

completeness of General Dynamics’ MUTES drawings or

whether they met Level 3 requirements.

48. General Dynamics’ integrated Circuit Lab

APPENDIX B

CC

B-14

("ICL") was not “out of control.” At the time that QEA

81-04 was initially written by Mr. Hill, the auditor, and was

reviewed by Dr. Talley, V.P. of Quality, neither Mr. Hill nor

Dr. Talley were aware of the procedures that were in place

in the ICL. Dr. Talley's handwritten note saying, “out of

control," pertained only to the ICL. Following Messrs. Hill,

Wooten, and Clark's review of the ICL's procedures, Dr.

Tally concluded that the ICL was operating under

appropriate controls.

| 49. In the event that an engineer or technician

used an obsolete drawing in building a part, General

Dynamics had adequate safeguards to ensure that the

part would conform to the latest drawing revision prior to

the part being delivered. One of those safeguards was

that Quality Assurance inspected every part to the latest

drawings. Quality Assurance received the latest drawings

immediately upon their release so that they did not use

obsolete drawings in their inspections.

50. As a result of QEA 81-04, corrective actions

were discussed and implemented to the satisfaction of the

Quality Assurance department.

51. QEA 81-12 was an internal audit performed to

evaluate how ECNs were being incorporated in the

hardware. That audit observed some instances where it

could not be determined whether the ECN had been

implemented on the hardware. Nothing in that audit

suggested that changes were made to hardware without

ECNs or that General Dynamics' drawings did not meet

Level 3 requirements.

52. QEA 81-34 was conducted primarily to

evaluate how quickly released ECNs made their way to

the drawing booths. The audit was not an audit of the

MUTES program, and none of the drawings that were

sampled were MUTES drawings. The statement of the

head of the audit group, Charlies Wooten, after the initial

sampling of drawings, that "an adequate confidence level

is not justified" did not in any way refer to the accuracy of

APPENDIX B

B-15

any drawings. That audit did not show that changes were

made to MUTES hardware that were not documented.

QEA 81-34 was completed and corrective action was

implemented with the approval of the Quality Assurance

department.

53. Each of the matters raised in General

Dynamics’ internal audits was closed out to the

Satisfaction of the Quality Assurance department.

Corrective actions were implemented in 1981, and an

internal audit (QEA 83-22) conducted in 1983 concluded

that there were no instances of non-compliance with

9858A or 1520.

54. In late 1986 and early 1987, the Air Force .

(through its Sacramento Air Logistics Center at McClellan

Air Force Base) initiated an effort to competitively procure

additional MUTES sets by way of preparing a solicitation

for proposals and circulating that solicitation to possible

competitive manufacturers.

55. The solicitation required offering companies to

propose to furnish up to fourteen MUTES sets, and

related parts and services, based on a TDP included in

the solicitation.

56. The Air Force's original intention was to award

the follow-on MUTES contract as a_ performance

Specification contract, using the drawings as a guide to

assist the contractor in meeting the performance

Specifications. This would have required the contractor to

undertake engineering design effort wherever the TDP

was inadequate, incomplete, erroneous or referred to

obsolete parts, in which case the contractor would have to

Satisfy the MUTES performance specifications at no

additional cost to the government. However, the Air

Force, as the result of the decision of contracting officer

Diane Wickstrom, ultimately determined to solicit bids on

a build-to-print basis.

57. In connection with its solicitation, the Air Force

warranted that the TDP was already at a Level 3 status

APPENDIX B

lillian A a

B-16

| and that the only drawings that needed to be brought to

| Level 3 status were new drawings that resulted from a

substitution for an obsolete part.

58. General Dynamics did not offer in its

unsuccessful proposal or its best and final offer for the

follow-on MUTES contract, any assurance or statement or

representation that the TDP which the Air Force delivered

to potential bidders with its Request for Proposal was

suitable for a build-to-print contract for entire MUTES.

59. The Air Force understood that General

Dynamics’ unsuccessful proposal and its best and final

offer for the follow-on MUTES contract were intended to

apprise the Air Force only that General Dynamics was

prepared to build the follow-on MUTES as requested by

the Air Force for a fixed price.

60. General Dynamics’ unsuccessful proposal and

its best and final offer for the follow-on MUTES contract

did not contain any false statement, claim, representation

or record.

61. General Dynamics did not have any knowledge

of, nor was General Dynamics deliberately ignorant of or

recklessly disregard any false statements, claims,

representations or records of any information contained in

its unsuccessful proposal or its best and final offer.

62. Aydin offered to perform the contract called for

by the solicitation for approximately Seventy-Eight Million

Dollars ($78,000,000). In response to the solicitation,

General Dynamics bid approximately Ninety-Eight Million

Dollars ($98,000,000).

63. As a result of this solicitation, on or about

March 31, 1987, the Air Force awarded Contact No.

F04606-87-D-0002 to Aydin, calling for Aydin to use the

TDP to manufacture and deliver up to fourteen MUTES

sets with associated parts and services for a basic price of

about Seventy-Eight Million Dollars ($78,000,000).

64. Aydin's contract with the Air Force was a “build-

APPENDIX B

B-17

to-print" contract, which meant that Aydin was not

permitted to deviate from or change the drawings without

Air Force approval. Aydin was thus required to build the

MUTES according to the TDP without resort to additional

design effort, except for design efforts needed when a

part was found to be obsolete. If a drawing was found to

be inadequate, incomplete or erroneous, Aydin would not

be permitted to change the drawing without going through

formal drawing change procedures, including Air Force

approval. Such changes to the drawings would also

require additional compensation by the Air Force to Aydin.

65. After Aydin was awarded the follow-on MUTES

contract, Aydin complained to the Air Force that some of

the aperture cards in the TDP which the Air Force had

supplied with its Request for Proposal were illegible, out of

order and contained non-MUTES cards that did not

belong in the MUTES TDP. These problems were caused

generally by the Air Force's copying and handling of the

aperture cards.

66. To alleviate the TDP's legibility problems, the

Air Force, in June 1987, purchased from General

Dynamics a legible set of the MUTES aperture cards that

were then in General Dynamics’ data center (Contract No.

F04606-87-M-3621, the “Aperture Card Contract”). The

Air Force's need to procure a duplicate set of General

Dynamics’ drawings was not caused by any deficiencies in

those drawings.

67. The Aperture Card Contract did not contain

any requirement for Level 3 drawings, and no

representations were made by General Dynamics

regarding the Level 3 nature of the copies of the drawings

submitted under the Aperture Card Contract. Neither the

invoice nor the DD Form 250 which General Dynamics

submitted to the Air Force under the Aperture Card

Contract constituted a false claim.

68. Many of the problems which Aydin had building

APPENDIX B

B-18

the MUTES according to the General Dynamics drawings,

were caused by Aydin's decision to use alternate vendors,

not deficiencies in the drawings. During the course of

Aydin's performance of its contract, the Air Force

permitted Aydin to purchase components from vendors

who were not identified in the specification control

drawings in the MUTES TDP. When a new vendor was

approved by the Air Force, the Air Force required that the

specification control drawing for that vendor-supplied

component had to be changed by means of an ECO.

Aydin's election to utilize different vendors, which

necessitated changing the specification control drawings,

was not caused by any errors or deficiencies in General

Dynamics’ TDP.

69. In the course of its performance of the MUTES

contract, Aydin processed numerous ECOs. Many if not

most of them were not caused by deficiencies in General

Dynamics’ drawing package. For example, during the

course of Aydin's performance of its contract, Aydin and

its vendors suggested certain changes or improvements

in the MUTES hardware. Aydin also sometimes created

ECOs to change its own ECOs, and elected to make

changes in the parts list and associated list by submitting

multiple “administrative” ECOs. Many of Aydin's ECOs

due to obsolete parts were outside of General Dynamics’

responsibility because they were for vendor-controlied

components. In addition, the Air Force often directed

Aydin to make certain changes in the MUTES design and

to document those changes in ECOs. None of these

ECO'’s were caused by any errors or deficiencies in

General Dynamics’ drawings.

70. The majority of the ECOs which plaintiffs

attribute to General Dynamics’ drawing errors were minor

in nature, and many were to correct Aydin errors.

71. On May 31, 1989, Aydin and the Government

signed modification PO00012 to the Aydin Contract which

APPENDIX B

B-19

established a not-to-exceed price increase of Twenty-Two

Million Eight Hundred Fifty Thousand, Five Hundred

Twenty-Four Dollars ($22,850,524) in consideration for

changing the contract from one of build-to-print to one in

which Aydin assumed the full risk and cost responsibility

for building the MUTES to performance specifications.

P00015 subsequently increased the contract price by

Twenty One Million Nine Hundred Eighty Nine Thousand,

Four Hundred Dollars ($21,989,400), thus fixing the price

which had been established by the not-to-exceed P00012.

72. Modifications P00012 and P00015 were

necessitated by the decision to award the Aydin contract

on a build-to-print basis, and not as a direct result of

errors in the drawings or any action or omission of

General Dynamics.

CONCLUSIONS OF LAW

1. This court has jurisdiction of this action under

the False Claims Act (28 U.S.C. § 1331 and 31 U.S.C. §

3729.et seq.)

2. The 1986 amendments to the False Claims Act

are applicable to the trial and decision of this case, even

though the pertinent contracts were entered into prior to

the 1986 amendments, because some of the documents

which plaintiffs allege to have constituted the false claims

were submitted to the government subsequent to the

1986 amendments.

3. 31 U.S.C.5 3729(a), as amended provides that:

Any person who-

(1) knowingly presents, or causes to be

presented, to an officer or employee of the United States

Government or a member of the Armed Forces of the

United States a false or fraudulent claim for payment or

approval:

(2) knowingly makes, uses, or causes to be made

APPENDIX B

B-20

or used, a false record or statement to get a false or

fraudulent claim paid or approved by the Government;

(3) conspires to defraud the Government by

getting a false or fraudulent claim allowed or paid;

(4) has possession, custody, or control of property

or money used, or to be used, by the Government and,

intending to defraud the Government or willfully to conceal

the property, delivers, or Causes to be delivered, less

property than the amount for which the person receives a

certificate or receipt;

(5) authorized to make or deliver a document

certifying receipt of property used, or to be used, by the

Government and, intending to defraud the Government,

makes or delivers the receipt without completely knowing

that the information on the receipt is true;

(6) knowingly buys, or receives as a pledge of an

obligation or debt, public property from an officer or

employee of the Government, or a member of the Armed

Forces, who lawfully may not sell or pledge the property;

or

(7) Knowingly makes, uses, or causes to be made

or used, a false record or statement to conceal, avoid, or

@ecrease an obligation to pay or transmit money or

prunerty to the Government,

is liable to the United States Government for a civil

penalty of not less than $5,000 and not more than

$10,000, plus 3 times the amount of damages which the

Government sustains because of the act of that person,

except that if the court finds that

(A) the person committing the violation of this subsection

furnished officials of the United States responsible for

investigating false claims violations with all information

known to such person about the violation within 30 days

after the date on which the defendant first obtained the

information;

(B) such person fully cooperated with any

APPENDIX B

B-21

Government investigation of such violation; and

(C) at the time such person furnished the United

States with the information about the violation, no criminal

prosecution, civil action, or administrative action had

commenced under this title with respect to such violation.

and the person did not have actual knowledge of the

existence of an investigation into such violation:

the court may assess not less than 2 times the

amount of damages which the Government sustains

because of the act of the person. A person violating the

subsection shall also be liable to the United States

Government for the costs of a civil action brought to

recover any such penalty or damages.

4. Under the 1986 False Claims Act amendments.

“knowingly,” as used in section 3729(a), subsections (1)

and (2), is defined as having actual knowledge of the

falsity of information, acting in deliberate ignorance of the

truth or falsity of the information, or acting in reckless

disregard of the truth or falsity of the information. 31

U.S.C. 3729(b).

5. Under the amended False Claims Act, which

defines “knowingly” to include “deliberate ignorance” or

“reckless disregard” of the truth or falsity of the

information, ‘“[t]he requisite intent is the knowing

submission of what is known to be false.” United States ex

fel_ Hagood v. Sonoma County Water Agency, 929 F.2d

1416, 1421 (9th Cir. 1991). “Innocent mistake is a

defense to the criminal charge or civil complaint. So is

mere negligence.” j _ FM

Corp., 975 F.2d 1412, 1420 (9th Cir. 1992).

6. “Deliberate ignorance” describes a state of mind

“when the defendant purposely contrives to avoid learning

all the facts . . . . [or] willful blindness, where a person

Suspects a fact, realizes its probability, but refrains from

obtaining final confirmation in order to able to deny

knowledge if apprehended.” United States v. Mapelli, 971

F.2d 284, 286 (9th Cir. 1992). Deliberate ignorance

APPENDIX B

B-22

“differs from positive knowledge only so far as necessary

to encompass a calculated effort to avoid the sanctions of

| the statute while violating its substance." United States v.

| Pacific Hide & Fur Depot, 768 F.2d 1096, 1098 (9th Cir.

1985), quoting Unit tes v. li, 532 F.2d 697, 704

(9th Cir. en banc), cert. denied, 96 S.Ct. 3173 (1976).

7. “Reckless disregard" means conduct that is

“highly unreasonable and represents an extreme

departure from the standards of ordinary care to the

extent that the defendant must have been aware of it.”

Hollinger v. Tital Capital Com., 914 F.2d 1564, 1570 (9th

Cir. 1990). Recklessness means “the kind of recklessness

that is equivalent to willful fraud and as such, should be

viewed as the functional equivalent of intent.” Sunstrand

Corp. v. Sun Chemical Com., 553 F.2d 1033, 1045 (7th

Cir.) cert, denied, 439 U.S. 875 (1977).

8. Allegations or evidence which amount merely to

a condemnation of a government contractor's

performance of its contracts, including engineering efforts

performed under those contracts, does not rise to the

level of fraud or liability under the False Claims Act. Wana

ex rel. United States v. FMC Corp., 975 F.2d 1412, 1420

(9th Cir. 1992).

9. "[KJnowledge possessed by Officials of the

United States may ... show that the defendant did not

submit its claim in deliberate ignorance or reckless

disregard of the truth." United States ex rel. Hagood v.

Sonoma County Water Agency, 929 F.2d 1416, 1421 (9th

Cir. 1991).

10. The contract must be interpreted consistently

with the parties’ shared intent. See Management Systems

Assoc., Inc. v. McDonnell Douglas Corp., 762 F.2d 1161,

1172 (4th Cir. 1985); United States v. Data Translation.

Inc., 1992 U.S. App. Lexis 33894 (1st Cir. Dec. 31, 1992)

(where government and contractor disputed the meaning

of a contract requirement, the court applied a “practical”

interpretation rather than one which would turn “nearly

APPENDIX B

B-23

everyone into a rule violator... .").

11. Under the contract interpretation shared by

General Dynamics and the Air Force, there was no

expectation that General Dynamics’ drawings would be

error-free. The Air Force and General Dynamics

recognized this impossibility and applied practical

solutions aimed at driving out major or significant errors

from the drawings.

12. Under the contract interpretation shared by

General Dynamics and the Air Force, decisions about

whether General Dynamics’ drawings were sufficiently

complete and contained information in the proper format

were left to be negotiated between General Dynamics and

the Air Force program officials during the course of the

various drawing reviews that were called out in the

contracts.

13. General Dynamics did not deliver drawings to

the Air Force or submit any claims for payment with the

intent of defrauding the Government. General Dynamics’

drawings were not submitted with actual knowledge,

“deliberate ignorance” or “reckless disregard” for the

completeness or level of accuracy of the drawings. ~

14. The False Claims Act defines a "claim" as: "any

request or demand, whether under a contract or

otherwise, for money or property which is made to a

contractor, grantee, or other recipient if the United States

Government provides any portion of the money or

property which is requested or demanded, or if the

Government will reimburse such contractor, grantee, or

other recipient for any portion of the money or property

which is requested or demanded.”

15. None of the DD 250 forms, invoices, or

progress payment requests submitted by General

Dynamics under the MUTES contracts contained any

false claim for payment or fraudulent statement, nor were

they used to get a false or fraudulent claim paid, nor were

they used to avoid or decrease an obligation to transmit

APPENDIX B

Cn

B-24

property to the government.

16. General Dynamics’ Quality Assurance Reports,

Program Status Reports, and General Dynamics’

unsuccessful proposal and best and final offer for the

follow-on contract that was awarded to Aydin did not

contain any false claims, records or statements, nor were

they used to obtain of a false or fraudulent claim paid, nor

were they used to avoid or decrease an obligation to

transmit property to the Government.

17. General Dynamics did not have actual

knowledge of any alleged false information contained in its

Quality Assurance Reports, Program Status Reports or in

its unsuccessful proposal for the follow-on contract.

General Dynamics did not submit those documents to the

Air Force with the intent to defraud the government. Nor

did General Dynamics submit those documents with

deliberate ignorance or in reckless disregard of the truth

or falsity of the information contained therein.

18. Plaintiffs are entitled to recover nothing by their

complaint.

19. Because the court does not find that plaintiffs’

Claim was Clearly frivolous, clearly vexatious, or brought

primarily for purposes of harassment, defendant is not

entitled to recover attomeys' fees or expenses under 31

U.S.C.S 3730(d)(4).

The Clerk is directed to enter Judgment in favor of

General Dynamics Corporation, defendant, and against

United States of America, ex rel. Murray W. Lindenthal

and Donald B. Willis, plaintiffs, in accordance with these

Findings of Fact and Conclusions of Law.

DATED: August 5,1993 s/ WILLIAM B. SHUBB

UNITED STATES DISTRICT JUDGE

APPENDIX B

C-1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

JUDGMENT IN A CIVIL CASE

USA, ex rel Murray W Lindenthal, et al

V. CASE NUMBER: CIV S-891411 WBS

General Dynamics Corporation

XX -- Decision by the Court. This action came to trial or

hearing before the Court. The issues have been tried or

heard and a decision has been rendered.

IT IS ORDERED AND ADJUDGED

THAT JUDGMENT IS HEREBY ENTERED IN"

ACCORDANCE WITH THE COURT'S ORDER OF

August 5, 1993.

Jack L. Wagner,

Clerk of the Court

by: S/

G Miyasato, Deputy Clerk

ENTERED

August 5, 1993

APPENDIX C

FILED

DEC 8, 1993

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

——00000—_—-

UNITED STATES OF AMERICA

ex rel., MURRAY W. LINDENTHAL

and DONALD B. WILLIS,

NO. CIV. S-89-1411WBS/JFM

Plaintiffs,

V. Bee

GENERAL DYNAMICS CORPORATION,

Defendant.

——00000——_

Defendant moves for review of the clerk's

September 16, 1993, denial of costs pursuant to Fed. R.

Civ. P. 54(d) on the ground that plaintiffs have not

satisfied their burden of overcoming the presumption

entitling the prevailing party to costs under Fed. R. Civ. P.

54(d). Plaintiffs oppose this motion on several grounds,

including: (1) the court's previous denial of expenses

under § 3730(d)(4) of the False Claims Act necessarily

included a denial of costs; (2) the court should deny costs

based upon such factors as the length and difficulty of the

case, the misconduct of the defendant, and the inequity

that would result from an award of costs; and (3) the bill of

costs filed by defendant is excessive and insufficiently

documented.

APPENDIX D

eee

D-2

BACKGROUND

After several years of litigation beginning in 1989,

and culminating in a trial between September 15, 1992

and April 30, 1993, this court filed its findings of fact and

conclusions of law on August 5, 1993, ordering judgment

in favor of the defendant. Defendant lodged its Bill of

Costs pursuant to Local Rule 292 on August 23, 1993.

For reasons which are unclear, apparently because

plaintiff filed objections requiring the determination of legal

issues, on September 16, 1993 the clerk taxed the costs

in the amount of 0. Defendant has timely moved for

review of the clerk's action.

DI ION

Defendant seeks to recover its costs as the

prevailing party pursuant to Fed. R. Civ. P. 54(d), which

provides:

"Except when express provision therefor is made

either in a statute of the United States or in these

rules, costs shall be allowed as of course to the

prevailing party uniess the court otherwise

directs..."

Fed. R. Civ. p. 54(d).1 Whether costs are awarded is a

' Plaintiffs argument that Rule 54(d) does not apply

because the court's previous denial of expenses under 31

U.S.C. § 3730(d)(4) necessarily included a denial of costs

is without merit. Costs and expenses are not

synonymous, as costs generally include only those

amounts paid for items specified in 28 U.S.C. § 1920.

Hairline Creations. Inc. v. Kefalas, 664 F.2d 652, 655-56

(7th Cir. 1981). Furthermore, expenses and costs are

distinguished elsewhere in the False Claims Act. See 31

U.S.C. § 3730(d)(2). Expenses not X properly taxable as

"costs" are considered “expenses”. Dickerson v.

APPENDIX D

D-3

decision within the discretion of the district court. K-2 Ski

Company v. Head Ski Co.. Inc., 506 F.2d 471, 476-77

(9th Cir. 1974).

Under Rule 54(d) there is a presumption that the

prevailing party should recover costs, Horning v. Washoe

ounty, 108 F.R.D. 364, 365 (D. Nev. 1985); True

Temper Corp. v. CF & | Steel Corp., 601 F.2d 495,

509-510 (10th Cir. 1979); Gardner v. Southern RY.

Systems, 675 F.2d 949,954 (7th Cir. 1982), and ordinarily

some reason must appear to penalize a party if costs are

denied. Homing, 108 F.R.D. at 365; see Subscription T.V.

v. Southern Cal. Theater Owners, 576 F.2d 230, 234 (9th

Cir. 1978) (district court must state reasons for denying

costs).

Although this court found that plaintiff's suit was not

frivolous, an award of costs is not limited to clearly

frivolous actions. See Nat. Organization for Women v.

Bank of California, 680 F.2d 1291, 1294 (9th Cir. 1982).

Furthermore, the presumption of awarding costs to the

prevailing party is not overcome solely because the other

party acted in good faith. Schaulis v. CTB/McGraw-Hill

Inc., 496 F. Supp. 666, 680 (N.D.Ca. 1980) (citing Popeil

Brothers. Inc. v. Schick Electric. Inc., 516 F.2d 772, 776

(7th Cir. 1975); Maldonado v. Parasole. 66 F.R.D. 388,

390 (S.D.N.Y. 1975)).

Plaintiffs argue that the court should consider such

factors as the length and difficulty of the case and the

inequitable result of piecing the burden of costs on the

Pritchard, 551 F. Supp. 306, 312 (W.D. Ark. 1982) (cited

by plaintiff). Therefore, a court may deny certain expenses

while S granting others as costs. A motion for costs under

28 U.S.C. § 1920 is governed by Rule 54(d). Crawford

Fittina Co. v. J.T. i Gibbons. Inc., 482 U.S. 437, 441-42

(1987).

APPENDIX D

D-4

plaintiffs.* A court may consider the fact that a case was

| “well founded and its resolution a close question” in

denying costs, Agarwal v. Arthur G. McKee and Co., 644

F.2d 803, 807 (9th Cir. 1981) (affirming district court's

denial of costs on these grounds); see White & White. Inc.

v. American Hosp. Supply Co,, 786 F.2d 728, 732 (6th

Cir. 1986) (considering length and difficulty of case as

factor in denying costs), as well as the inequity that may

occur as a result of plaintiffs limited budget. Nat.

Organization for Women v. Bank of California, 680 F.2d

1291, 1294 (9th Cir. 1982) (district court did not abuse its

discretion in considering plaintiffs’ budgets); Schaulis, 496

F. Supp. at 680 (award of costs would be undue burden to

individual litigant when case was closely litigated);

compare Hudson v. Nabisco Brands. Inc., 758 F.2d 1237,

1244 (7th Cir. 1985) ("a general rule that disparate

wherewithal alone would defeat a claim for costs would

upset the dictates of rule 54(d7...").

Although this case was closely litigated and an

award of costs would be a burden to the qui tam plaintiffs,

the court has considered these factors and finds that they

are insufficient reasons to overcome the presumption in

favor of awarding costs to defendant as the prevailing

party. However, before the court determines the amount

of costs, plaintiffs will be given time to file detailed

objections to defendant's proposed costs.

IT IS THEREFORE ORDERED that defendant

recover its costs of suit pursuant to Fed. R. Civ. P. 54(d).

Plaintiffs are given thirty (30) days from the date of this

Order to file detailed, line-item objections to defendant's

cost bill. Any such objections shall be presented to the

2 The court will not consider plaintiffs argument that

defendant's misconduct during the litigation should be

considered because the court did not conclude that

defendant was guilty of misconduct.

APPENDIX D

be

D-5

magistrate judge for findings and recommendations.

DATED: December 7, 1993

s/

WILLIAM B. SHUBB

UNITED STATES DISTRICT JUDGE

APPENDIX D

E-1

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, ex fel. FILED

MURRAY W. LINDENTHAL; DONALD B. OCT 4, 1995

WILLIS,

Plaintiffs-Appellants,

Nos. 93-16690 & 94-16005

V. D.C. No. CV-89-01411-WBS

GENERAL DYNAMICS CORPORATION,

ORDER

Defendant-Appeliee.

Before: HALL, WIGGINS, and LEAVY, Circuit Judges

The panel has voted to deny appellant's petition for

rehearing and to reject the suggestion for rehearing en

banc.

The full court has been advised of the suggestion

for rehearing en bane and no active judge has requested

a vote on whether to rehear the matter en banc. Fed. R.

App. P. 35. .

The petition for rehearing is DENIED and the

suggestion for rehearing en banc is REJECTED.

APPENDIX E

JA

SAF/GCP (Mr. Vincent)

Washington, D.C.20330-1000

1. This letter follows up on several conversations between

your office and Mr. Hamilton of this office. We have

already forwarded supporting documentation as it was

received from Mr. Jacobs, the private attorney for Murray

Lindenthal and Donald Willis in the referenced case. You

have asked for our position on the question of whether the

United States should enter the Lindenthal case. We join

with legal counsel from Eglin AFB in recommending entry

into the case.

2. The initial decision not to enter the case was based on

an expedited investigation by our local OS! office. In that

investigation contact was made with the current project

manager for the MUTES program. He expressed his

opinion that the data purchased under the MUTES

contract with General Dynamics was solely for purchase

of spare parts, not competitive reprocurement of MUTES

systems. The contracting officer at the time of that initial

investigation had no opinion on that issue. Additionally, in

initial review of the case questions arose conceming

whether a false claim case could be made when the Air

Force had accepted the data from Generali Dynamics,

presumably after inspection. Further, even if such a case

were feasible, the amount of damages appeared to be

speculative since there was no Clear contractual provision

which specified the amount paid solely for the data.

3. This office aided Mr. Jacobs in obtaining further

contract review and witness interviews after the initial OS!

investigation. We personally interviewed the contracting

officer who actually procured the data in 1982. Further, we

examined the contract file to determine the Air Force's

EXHIIBIT G-111

APPENDIX F

F-2

involvement in inspection of the data. Based on our

interviews and examinations, we learned that there is

clear documentation and readily available testimony to

establish that the Air Force intended to purchase data to

subsequently reprocure MUTES systems on a competitive

basis. Further, ine data is so voluminous that it was not

inspected by the Air Force. Instead, it was simply

accepted. Errors in the data attributable to General

Dynamics account for at least 960 engineering change

orders by the successor contractor, Aydin, at a cost of

over $21 million. Testimony from an engineer who

formerly worked for General Dynamics and who has since

retired shows that General Dynamics’ management

directed its engineers to stop documenting errors to the

data being given to the Air Force. This lack of

documentation corresponds directly to the engineering

change orders now being paid for by the Air Force.

4. Based on the foregoing, we respectfully suggest that

the initial OSI investigation led to an incorrect decision.

Accordingly, we believe good cause exists to move for

permission of the court to enter the case.

5. Questions should be directe¢ to Mr. Hamilton at

extension 3-5123.

JAMES L. DONAT, Lt. Col. USAF

Acting Staff Judge Advocate

EXHIBIT G-111

APPENDIX F