U.S. Ex Rel. Thomas M. Ubl v. Solutions

• Decision Date: 19 April 2011
• Docket Number: No. 09–2280.,09–2280.
• Citation: 161 Lab.Cas. P 10367,650 F.3d 445
• Parties: UNITED STATES of America ex rel. Thomas M. UBL, Plaintiff–Appellant,v.IIF DATA SOLUTIONS; Charles Patten, Sr., Defendants–Appellees,andUnited States General Services Administration, Party–in–Interest.Project on Government Oversight, Amicus Supporting Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

650 F.3d 445

161 Lab.Cas. P 10,367

UNITED STATES of America ex rel. Thomas M. UBL, Plaintiff–Appellant,

v.IIF DATA SOLUTIONS; Charles Patten, Sr., Defendants–Appellees,andUnited States General Services Administration, Party–in–Interest.Project on Government Oversight, Amicus Supporting Appellant.

No. 09–2280.

United States Court of Appeals, Fourth Circuit.

Argued: Jan. 25, 2011.Decided: April 19, 2011.

ARGUED: Victor Aronoff Kubli, Kubli & Associates, PC, Vienna, Virginia, for Appellant. James Joseph Duane, Regent University School of Law, Virginia Beach, Virginia, for Appellees. ON BRIEF: Michael S. Lieberman, Stephen Stine, Dimuroginsberg, PC, Alexandria, Virginia, for Appellant. Christopher I. Kachouroff, Dominion Law Center, PC, Lake Ridge, Virginia; Jason N. Workmaster, McKenna, Long & Aldridge, LLP, Washington, D.C.; Robert J. Cynkar, Cuneo, Gilbert & Laduca, LLP, Alexandria, Virginia, for Appellees. Richard R. Renner, Kohn, Kohn & Colapinto, LLP, Washington, D.C., for Amicus Supporting Appellant.Before TRAXLER, Chief Judge, and WILKINSON and GREGORY, Circuit Judges.Affirmed in part; reversed in part by published opinion. Chief Judge TRAXLER wrote the opinion, in which Judge WILKINSON and Judge GREGORY joined.

OPINION

TRAXLER, Chief Judge:

Thomas Ubl brought an action under the False Claims Act (“FCA”) against his former employer, IIF Data Solutions, Inc., and Charles Patten, Sr., IIF's vice-president (referred to together as “IIF”). Ubl and IIF reached an agreement to settle the action for almost nine million dollars, contingent on approval by the government. The government did not approve the agreement, the case eventually proceeded to trial, and the jury found in favor of IIF on all counts. The district court thereafter determined that the action was “clearly frivolous” and ordered Ubl to pay IIF approximately $500,000 in attorney's fees. See 31 U.S.C.A. § 3730(d)(4) (West 2003). Ubl appeals, arguing that the district court erred by not enforcing the settlement agreement, that the district court made various errors during trial entitling him to a new trial, and that the district court erred by awarding attorney's fees to IIF. We conclude that the district court properly refused to enforce the settlement agreement and committed no reversible error during the course of trial. However, we agree with Ubl that his action was not clearly frivolous and we therefore reverse the award of attorney's fees.

I.

IIF, a small company located in Falls Church, Virginia, was founded by Charles Patten, Sr., who had served in the Army National Guard for twenty-eight years before starting the company. IIF initially worked as a subcontractor for a prime contractor that was providing information-technology services to the National Guard Bureau. IIF later sought out and was awarded its own government contracts, and those contracts are at the center of this case.

The government contracts awarded to IIF were “multiple award schedule” (“MAS”) contracts. The MAS program provides a simplified process through which government agencies can obtain commercial supplies and services at prices associated with volume buying. MAS contracts are solicited, negotiated, and awarded by the General Service Administration (“GSA”). Prospective vendors must provide GSA with information about their sales practices and their pricing and discount information. GSA uses this information to negotiate prices for MAS contracts, seeking to obtain for the government the best price offered to the vendor's most favored commercial customer. See 48 C.F.R. § 538.270(c). The accuracy of the pricing information provided to GSA by the prospective vendors is thus critical to the MAS process.

If the negotiations between GSA and the prospective vendor are successful,

GSA will list the firm's product, along with similar products sold by competing firms (with MAS contracts), in a catalogue. Individual government agencies may place orders for any item listed in the catalogue (at the price there listed) without the elaborate paperwork that other government procurement programs require. The GSA's MAS contract does not commit the government to buying the product. Rather, it provides an option for federal government agencies to buy at a particular price, an option that individual agencies may, or may not, exercise.

United States v. Data Translation, Inc., 984 F.2d 1256, 1258 (1st Cir.1992) (citations omitted).

GSA first awarded IIF an MAS contract authorizing IIF to provide personnel to perform information technology (“IT”) services. The contract included six labor categories ( e.g., analyst I, analyst II, programmer, senior programmer, etc.) and the rates at which employees assigned to each category would be billed. The labor categories (or position descriptions, as one witness called them) listed the education, experience, and skill requirements necessary for the IIF employee to be assigned to each category. IIF later received MAS contracts authorizing it to provide certain environmental and business improvement services.

IIF subsequently received millions of dollars worth of task orders under the MAS contracts, with the majority of task orders coming from the National Guard Bureau (the “Bureau”). The Bureau, part of the Department of Defense, is “the channel of communications on all matters pertaining to the National Guard, the Army National Guard of the United States, and the Air National Guard of the United States between (1) the Department of the Army and Department of the Air Force, and (2) the several States.” 10 U.S.C.A. § 10501 (West 2010).

According to Ubl, IIF when applying for the MAS contracts made various material false representations about its prior pricing and discounting practices. For example, Ubl alleged that IIF fabricated and back-dated a commercial price list, listed as “market-tested” hourly rates that it had never charged in any of its contracts with non-governmental customers, and misrepresented the nature of discounts it had given non-governmental customers. Ubl also alleged that IIF made false claims when submitting invoices under the individual task orders placed with IIF by the Bureau after IIF obtained the MAS contracts. According to Ubl, IIF misclassified some of its employees and billed them to the government at rates higher than warranted by the employees' education and experience, billed the government for hours not worked, and billed the government for administrative activities performed by its employees that should have been absorbed by IIF as overhead.

The allegations described above formed the core of Ubl's FCA action against IIF. We will provide more details as needed within the discussions of the issues raised by Ubl.

II.

We first consider Ubl's claim that the district court erred by refusing to enforce the settlement agreement.

Ubl commenced this action in June 2006. After almost two years of discovery and typical pre-trial wrangling, the case was scheduled for trial on May 6, 2008. On the day trial was to begin, Ubl and IIF agreed to settle the case, and they executed a document (the “May 6 Agreement”) setting out the terms of the settlement. Under the May 6 Agreement, IIF was to pay $8.9 million in settlement of all claims, to be allocated between Ubl and the government according to a schedule set out in the agreement; IIF was to make an initial payment of $1.2 million, with the balance to be paid monthly over the course of ten years. The May 6 Agreement stated that “[t]his agreement is void without Government approval. If the Government does not approve this agreement, the parties shall cooperate in good faith to effectuate changes to this Agreement that will be satisfactory to the Government.” J.A. 436. The requirement that the May 6 Agreement be approved by the government tracks the requirements of the FCA itself, which provides that the government must consent to a dismissal of an FCA claim brought by a private party. See 31 U.S.C.A. § 3730(b)(1) (West 2003); United States v. Purdue Pharma L.P., 600 F.3d 319, 328 (4th Cir.2010) (“Section 3130(b)(1) manifests Congress' express intent to prohibit a relator's unilateral settlement of FCA claims, absent the government's consent, once a suit has been filed.”).

On June 3, 2008, the government notified the parties that it had several objections to the proposed settlement. Although the May 6 Agreement called for Ubl to receive his share of the settlement proceeds first, the government contended that 31 U.S.C.A. § 3713 required the government to be paid before Ubl. The government stated that since the case had not (at that point) proceeded to trial, it would not consent to awarding Ubl 30% of the settlement proceeds, as proposed in the agreement. Noting that Ubl's complaint did not assert a retaliation claim under 31 U.S.C.A. § 3730(h) (West Supp.2010), the government also objected to the allocation of a portion of the settlement proceeds to the settlement of what the agreement characterized as Ubl's “personal claim.” Finally, the government expressed doubt that IIF could fund the $8.9 million settlement and stated its belief that “the settlement is designed to provide [Ubl] with $1.2 million and to provide the United States with an uncollectable debt.” Defendant's Opposition to Relator's Motion to Enforce Settlement, Exhibit 3.

Negotiations among the parties continued after the government's letter, but with little success. In an email on July 8, 2008, the government stated that “[t]here is at this point no settlement because the United States has not consented to the current arrangement between [Ubl] and defendant and as set forth in our prior communications, we would never consent to the arrangement as it stands now.” Defendant's Opposition, Exhibit 4. In an email two days later, the government reiterated its position that it “d[id] not consent to the current proposed settlement.” Defendant's Opposition, Exhibit 5. Quoting from an earlier email sent by counsel...