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United States v. Science Applications International Corp.

United States District Court, District of Columbia

July 22, 2013

UNITED STATES OF AMERICA, Plaintiff,
v.
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, Defendant

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[Copyrighted Material Omitted]

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For UNITED STATES OF AMERICA, Plaintiff: Daniel Hugo Fruchter, Dodge Wells, Donald J. Williamson, Michael J. Friedman, LEAD ATTORNEYS, J. Chris Larson, U.S. DEPARTMENT OF JUSTICE, Washington, DC; Michael F. Hertz, LEAD ATTORNEY, Department of Justice, Washington, DC; Brian R. Young, U.S. DEPARTMENT OF JUSTICE, Criminal Division, Washington, DC.

For SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, Defendant: Alan I. Baron, LEAD ATTORNEY, SEYFARTH SHAW, LLP, Washington, DC; Andrew Santo Tulumello, LEAD ATTORNEY, Amir C. Tayrani, GIBSON, DUNN & CRUTCHER, L.L.P., Washington, DC; David Penn Burns, LEAD ATTORNEY, GIBSON DUNN & CRUTCHER, Washington, DC; John P. Rowley, III, LEAD ATTORNEY, BAKER & McKENZIE LLP, Washington, DC; John S. Irving, IV, HOLLAND & KNIGHT, LLP, Washington, DC.

OPINION

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RICHARD W. ROBERTS, Chief United States District Judge.

MEMORANDUM OPINION AND ORDER

The United States brought this suit against Science Applications International Corporation (" SAIC" ) under the False Claims Act (" FCA" ), 31 U.S.C. § 3729, and District of Columbia common law, alleging that SAIC failed to make disclosures of organizational conflicts of interest (" OCIs" ) as was required under two contracts that SAIC entered into with the Nuclear Regulatory Commission (" NRC" ) in 1992 and 1999. After a jury found SAIC liable on the FCA and breach of contract claims and SAIC's motion for judgment as a matter of law or, alternatively, for a new trial was denied, SAIC appealed. The D.C. Circuit affirmed the denial of SAIC's motion for judgment as a matter of law and the denial of SAIC's motion for a new trial on the breach of contract claim. However, the D.C. Circuit vacated the judgment on FCA liability and damages and remanded the case for further proceedings. SAIC now moves for summary judgment regarding the FCA knowledge element and damages and the government moves for partial summary judgment regarding the FCA falsity element. Because there are genuine disputes of material fact regarding the FCA scienter and falsity elements and damages, the parties' motions will be denied.

BACKGROUND

The relevant facts were set out in United States v. Science Applications International Corp. (SAIC II), 653 F.Supp.2d 87, (D.D.C. 2009) as follows:

The NRC is an independent federal agency established to regulate the civil use of nuclear materials. The NRC creates scientific standards for allowing radioactive materials with low levels of contamination to be released to the private sector for recycling and reuse. In 1992 and 1999, the NRC contracted with SAIC to provide technical assistance related to this effort. Under the 1992 contract, SAIC was to provide the NRC with technical assistance related to the recycling and reuse of radioactive material and was to present an options paper outlining the possible approaches to rulemaking for the release of these materials. The goal of the 1999 contract was to assess regulatory alternatives regarding the release of reusable materials. SAIC's neutrality was critical under both contracts.
SAIC promised in both contracts to forego entering into any consulting or other contractual arrangements with any organization that could create a conflict of interest. The purpose of this clause was to avoid OCIs that were, among others, financial, organizational, or contractual. SAIC warranted upon entering both contracts that it had no OCIs as that term is defined in 41 C.F.R. § 20-1.5402(a).

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The regulation defined an OCI as " a relationship . . . whereby a contractor or prospective contractor has present or planned interests related to the work to be performed under an NRC contract which: (1) may diminish its capacity to give impartial, technically sound, objective assistance and advice or may otherwise result in a biased work product, or (2) may result in its being given an unfair competitive advantage." 41 C.F.R. § 20-1.5402(a) (1979). [1] SAIC further promised in both contracts to disclose any OCIs it discovered after entering the contract. SAIC repeatedly certified throughout the periods its contracts were in force that it had no OCIs and would notify the NRC of any changes resulting in an OCI.

SAIC II, 653 F.Supp.2d at 92-93.

The government contends " that SAIC breached its OCI obligations under the 1992 and 1999 contracts by engaging in relationships with organizations that created an appearance of bias in the technical assistance and support it provided the NRC." Id. at 93. Specifically, the government alleges that SAIC had five actual or potential OCIs that SAIC did not disclose to the NRC as required under the 1992 and 1999 contracts. First, the government argues that SAIC's relationship with British Nuclear Fuels, Ltd. (" BNFL" ) created an OCI. The Department of Energy (" DOE" ) contracted with BNFL in 1997 to " decommission and decontaminate buildings at a [DOE] site in Oak Ridge, Tennessee." United States v. Sci. Applications Int'l Corp. (SAIC III), 626 F.3d 1257, 1263, 393 U.S. App. D.C. 223, (D.C. Cir. 2010). BNFL " engaged SAIC to serve as a subcontractor" on the project. Id. " [T]he government argued that SAIC's relationship with British Nuclear created a potential conflict because the project involved the recycling and release of radioactive materials that would become subject

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to NRC regulation after leaving the DOE facility and entering into interstate commerce." Id.

Second, in 1999, SAIC performed consulting work for Bechtel Jacobs Corporation (" BJC" ).

SAIC helped Bechtel Jacobs with a dose assessment and performed a cost-benefit analysis regarding the recycling of radioactively contaminated materials from the site. The government contended that SAIC's work for Bechtel Jacobs closely overlapped with the company's work for the NRC, as illustrated most starkly by the allegation that a company employee copied material from a report prepared for the NRC and pasted it into one for Bechtel Jacobs.

Id.

Third, " SAIC pursued potential radioactive metal recycling opportunities" with Alaron Corporation. SAIC II, 653 F.Supp.2d at 100. The government alleges that Alaron was " both licensed and regulated by the NRC" and that SAIC's proposed work with Alaron was " in technical areas that were very similar if not identical to the advice that SAIC gave to the NRC." United States v. Sci. Applications Int'l Corp. (SAIC I), 555 F.Supp.2d 40, 54, (D.D.C. 2008) (internal quotation marks omitted).

Fourth, SAIC's Vice President Gerald Motl served " as an officer and board member of the Association of Radioactive Metal Recyclers (ARMR), a trade association that advocated for national regulatory standards governing the reuse and recycling of radioactive materials." SAIC III, 626 F.3d at 1264. Motl also worked on the 1999 NRC contract. The government alleges that Motl's work with the ARMR created an OCI with SAIC's work for the NRC.

Fifth, in 1990, SAIC began developing the Plasma Hearth Process (" PHP" ), " an experimental plasma treatment technology for high-temperature treatment of radioactive waste." Pl. U.S.'s Mot. for Partial Summ. J. (" U.S. Mot. (Falsity)" ), Pl. U.S.'s Stmt. of Undisputed Material Facts in Supp. of U.S.'s Mot. for Partial Summ. J. (" U.S. Stmt. (Falsity)" ) ¶ 78. The government alleges that " [t]he goal for the technology was to treat radioactive waste in such a way that a large portion of it could be released or recycled into general commerce." Id. It further alleges that, if used, the PHP would be regulated by the NRC and thus created an OCI with SAIC's work for the NRC. See ...


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