USCA1 Opinion

December 31, 1992 UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________
No. 92-1496
UNITED STATES OF AMERICA,
Plaintiff, Appellant,
v.
DATA TRANSLATION, INC.,
Defendant, Appellee.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Edward F. Harrington, U.S. District Judge]
___________________
____________________
Before
Breyer, Chief Judge,
___________
Torruella and Selya, Circuit Judges.
______________
____________________

Jonathan R. Siegel, Attorney, Department of Justice, with w

___________________
Stuart M. Gerson, Assistant Attorney General, A. John Pappalar
_________________
_________________
United States Attorney, and Douglas N. Letter, Attorney, Department

_________________
Justice, were on brief for appellant.
Laurie R. Wallach with whom Steven A. Kaufman
_________________
__________________
were on brief for appellee.

and Ropes & G

__________

____________________
____________________

BREYER,
Inc. ("DTI")
federal

Chief Judge.
___________

agreed

to sell

government at

In 1983
its

Data Translation,

computer boards

price negotiated

by the

to

the

federal

government's central civilian purchasing agency, the General

Services

Administration

subsequently brought

("GSA").

The

suit, claiming that, when

Government
GSA and DTI

negotiated the contract, DTI failed properly to disclose the

prices

at

which

it

governmental customers.

sold

its

boards

to

other,

non-

That failure, the Government says,

violated

the

terms

of

the subsequent

federal False Claims Act, 31 U.S.C.

In

the

district

court,

Government.

contract

and

3729 et seq.
_______
both

and

Government

had not

submitting

its "breach of contract" claim to the jury.

found that DTI did

The

Government, in this

evidence, the

judge found

jury

with the

jury

The

judge

disagreed

presented

enough evidence

not violate the

to

warrant
The

that, given the

have directed a

the

"breach of contract" claim,

and 2) that

not

properly instruct

about

the jury

that the

False Claims Act.

appeal, argues 1)

court should not

the

verdict on

the court did

the meaning

of the

False Claims Act.

After
lower court

reviewing the record, we conclude that both

determinations were

legally correct.

And, we

affirm the judgments.

I
The "Breach of Contract" Claim
______________________________
The Government's breach of contract issue
the
case

evidence was

to warrant

submitting the

to the jury -- presents the more difficult question on

appeal.

We

judgment

on the

while

strong enough

-- that

note

that, had

the

district court

reserved

for directed

verdict,

along with

the False

defendant's motion

submitting the

contract claim

Claims Act claim to the jury, the jury might well have found
in the defendant's favor.
defendant's
matters).

favor on

favor) would

favor

similar False

Claims

Act

the directed verdict question then and there,

and this court

evidence

verdict;

factually

In that event, the district court would not have

had to decide

the

(After all, the jury found in the

(if the

jury had found

in the

defendant's

have faced the easier task of deciding whether

was sufficient

to

support

a negative

jury

and, only if the jury had found in the plaintiff's

would

we

have

had to

decide

the

more

difficult

question (here

presented) of

whether the evidence

the

court

insufficient

district

held,
-33

to

was, as

support

potentially

positive verdict.

this latter

question.

ourselves whether
the

We

is "no."

explanation

have

read the

record,

any reasonable juror could

Government's favor.

question

Regardless, we have answered

asking

have found in

We conclude that the answer to the

Because of the record's complexity, the

of how we have reached

this conclusion will be

lengthy.
A
Background
__________
1.
which, when

The Company.
____________
inserted

measure flows
This

in a

and pressure

computer

monitoring the

capability

DTI

makes an electronic

computer,

changes in gasses
is

useful

condition of artificial

(e.g., detecting
____

abnormal genes),

detecting

in

paper).

flaws
Before

large

1983, DTI

government customers

allows the

and

quantities

in

board

user

to

and liquids.

medicine

(e.g.,
____

hearts), in science
in industry

(e.g.,
____

of

rapidly

moving

to its

federal

sold its boards

(e.g., the Center for

____

Disease Control

in

Atlanta)

primarily

process called

"sole

through

government

source" procurement,

procurement

a process

that

required each individual agency to fill out fairly elaborate

forms each time it wanted to buy even one or two boards from
DTI.

See
___

41

U.S.C.

254,

254(d)(1)(a)

(summarizing

-44

disclosure requirements);
Stat.

1184

(1984)

see also
___ ____

("Competition

(extending disclosure

Pub. L. No.
in

98-269, 98

Contracting

requirements to civilian, as

Act")
well as

military, procurement).
In

1983, at

the urging

of some

of its

federal

government customers, DTI decided to negotiate, through GSA,

a single

contract, called

terms applicable to orders

agency

-- a

contract

selling process.

an "MAS

contract,"

with

price

placed by any federal government

that DTI

hoped

would simplify

the

2.

The
"Multiple Award
Schedule" ("MAS")
___________________________________________

Contract.
________

The GSA will normally negotiate MAS contracts for

products

sold

industries.

by

firms

in

At the beginning

competitively
_____________

structured

of the negotiation

GSA will

obtain detailed information about, e.g., product quality and

____
prices at which the firm sells the product to other, private
customers.

It

government.

If the negotiation succeeds, GSA will list the

firm's

product,

competing

firms

will

along
(with

then

negotiate

with
MAS

similar
contracts),

price

for

products
in

sold

the

by

catalogue.

Individual government agencies may place orders for any item

listed in the catalogue (at the price there listed)
the

elaborate paperwork

that other
-55

without

government procurement

programs

require.

See
___

(disclosure requirements
finds

contract price

market

prices

quantities

of

to the

41

U.S.C.

need not

is based

254(d)(5)(A)(ii)

be applied where

on "established

commercial

items

sold

general public.");

agency

catalog or

in

substantial

47 Fed.

Reg. 50,252

(November 5, 1982) (GSA policy statement on pricing of items

sold

under MAS contracts). The

commit the government to

______________________

GSA's MAS contract does not

________

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.

3.
employee, Dewey

The Negotiations.
_________________
Carr, and a DTI

negotiated the terms

to

fill

out

questionnaire,

In

entitled

1983

GSA

employee, Elizabeth Bruce,

of an MAS contract.
detailed,

April

complex

"Solicitation,

The GSA asked DTI

seventy-eight
Offer and

page

Award."

With Mr. Carr's assistance, Ms. Bruce (who, at the time, was
nineteen
eight

years old)

prepared the

page questionnaire.

These

answers to

the seventy-

answers, along

with the

statements in the document, constituted the "Offer." The GSA

accepted the "Offer."
DTI

to

sell

its

The resulting MAS contract permitted

boards

(and

certain

other

items)

to

government agencies at DTI's ordinary list prices less a ten

-66

percent discount, provided

orders for

that the ordering

no more than ten

agency placed

items at any one

proviso reflected Mr. Carr's

time.

(This

recommendation that any agency

placing a larger single order should negotiate with DTI

for

a larger discount.)
4.

The Claimed Contract Violation.

_________________________________

Omitting

unnecessary

factual complexities and qualifications, we can

characterize

the Government's "breach of contract" claim as

resting

essentially on

submitted
board

its "Offer,"

price

customers.

discounts

did not
it

To understand

could constitute
several

the proposition

contract

disclose all

gave

to

how this

its

which

when it

the computer

non-governmental

alleged nondisclosure

contract violation,
provisions,

that DTI,

one

must

examine

cross-reference

each

other.
a.

The "Defective Pricing Clause".

_______________________________

The contract

clause that

the Government claims DTI

called the "Defective Pricing Clause."

directly violated is
It says:

If, subsequent to the award of any

__
contract
resulting
from
this
solicitation, it is found that any price
_________
negotiated . . . was increased by any
________________________________________
significant amount because the prices,
________________________________________
data, and facts were not as stated in
________________________________________
the
offeror's
"Certificate
of
________________________________________
Established Catalog or Market Price,"
________________________________________
then the contract price(s) shall be
________________________________________
reduced by such amount and the contract
_______
-77

shall be modified in writing to reflect

such adjustment.
(Emphasis added.)
b.

The "Certificate of Established Catalog or

___________________________________________

Market Price."
_______________
"prices,

data,

The "Defective
and

facts"

Pricing Clause"

that

DTI

"Certificate of Established Catalog

Certificate,

contained

questionnaire/"Offer,"

in

forth

in

its

or Market Price."

This

seventy-eight

page

the

says that

set

refers to

DTI

certifies

that

all

"data submitted" are "accurate, complete and current."

c.
as part of
of

The Relevant "Data Submitted."

______________________________
its questionnaire/"Offer," a

DTI included,

three-page summary

discounts from its list prices that it made available to

nongovernmental
purported

customers.

to respond

This

to the

the GSA negotiator

relevant
employees

at DTI.

to

In addition, Ms. Bruce,

described DTI pricing practices to

Dewey Carr, and

DTI documents

summary

questionnaire's direction

provide price discount information.

the DTI employee, orally

three-page

which she

In the

she provided Carr

with

had received

from other

Government's view,

this "data

submitted" was not "complete," for it did not fully describe

two

further

sets of

discounts

that

DTI offered

certain

customers, namely 1) discounts to "Special Price Customers,"

and 2)

"Volume Purchase

Agreement" discounts.
-88

The former

(as

the

name

suggests)

consists of

certain individual customers; the

discounts

based on

large

discounts

latter consists of

total quantity

ordered during

to

large
a given

time period (say, a year).

d.
amount

to

The Upshot.
__________
a

The

contractual

cross-referenced provisions
promise

by

DTI

that

its

questionnaire price discount responses are not significantly

_____________
inaccurate or incomplete.
________________________
this promise.
that neither
any

other

The Government says that it broke

The Government's
the three-page
information

described the "Special

case rests upon

summary of DTI

DTI

provided,

its claim

discounts, nor

listed

or

Price Customer" and "VPA"

fully

discounts

that DTI offered other, private customers.

As we have said, the district court, after hearing
the

evidence, granted a directed verdict for DTI.

And, the

Government appeals.
B
The Evidentiary Issue
_____________________
The

district

court, when

verdict, commented cryptically,

granting

its directed

I don't believe that there was a meeting

of the minds, and, therefore, there was
no contract.

-99

The Government

correctly points out that

literally, cannot
in
they

provide a ground for

DTI's favor.

The

disagreed

only

this remark, read

directing a verdict

parties agreed there

about

whether or

was a contract;

not

DTI's

"price

discount" questionnaire responses amounted to a violation.

Nonetheless, the district court had a point.
a single
but

portion of

a lengthy contract

yet severable from

that portion
the remainder.

the remainder,

When

is unintelligible,
a court

may strike

itself without affecting the enforceability of

See,
___

e.g., Eckles v. Sharman, 548

____ ______
_______

F.2d 905

(10th Cir. 1977) (vague contract provision unenforceable and

severable

if

not

essential

to

contract);

McArthur
________

v.

Rosenbaum Co.,
______________
(radically

180

F.2d

ambiguous

617,

option

619-20

(3d

contract

Cir.

1950)

unenforceable,

especially since option contract construed in favor of party

granting
reasonable

option).

Thus,

juror could

we

still

find the

must

ask

whether

price-discount disclosure

provisions sufficiently comprehensible

to enforce.

Compare
_______

C.H.I., Inc. v. Marcus Bros. Textile Inc., 930 F.2d 762, 764
____________
_________________________
(9th

Cir.

1991) (question

ambiguous and
judge

of

whether

clause is

therefore unenforceable is matter

to decide) and Fashion House, Inc. v.

___ ____________________

fatally

of law for

K Mart Corp.,
____________

892 F.2d 1076, 1083 (1st Cir. 1989) (same) with Gel Systems,
____ ____________
-1010

Inc. v. Hyundai Engineering and Construction Co., Inc., 902

____
_______________________________________________
F.2d

1024, 1027 (1st Cir. 1990) (construction of clause for

finder).
which two

If not, the judge should direct a verdict against

permissible meanings exist is question for fact-

the party

demanding enforcement

of the

clause.

(This is

And,

the perspective
not necessarily

in

11
-11deciding

the

question

of

of a

reasonable person in DTI's position.

_________________
as the GSA intended them, but rather from

See Restatement (Second) of Contracts

200, 203 (1981).
___ ___________________________________
comprehensibility, one must examine the relevant provisions,

provisions

virtually

unintelligible

if
read literally.
____________________
From this perspective, we find the language of the discount
what we believe the district court intended.)

Unlike the district court, however,

we also believe one may

them intelligible.

Nonetheless, that fact does not help the

The "Literal" Language

______________________
C
complied with its obligations.
Government, for, on this practical interpretation,

The Government
this

court

to read

language literally,

the

has asked the

DTI

district court

contract's "discount

and

disclosure"

give the

language a

reveal every price

___________
interpretation which makes

discount
________

it

its

revelation

as requiring DTI to

practical
_________
provided any of
___

that

DTI must

Government points
such complete

concede

to language

disclosure.

customers
it

that does

did

ever
____

not make.

seem to

The seventy-eight

--

a
The

call for

page form, at

the top of the first"price discount" information page, says:

List below the best discount and/or
concessions resulting in the lowest net
price (regardless of quantity and terms
and conditions) to other than authorized
GSA contract users from pricelist for
the same or similar products or services
offered to the Government under this
solicitation.
(Emphasis omitted.)

The page lists a host of possible kinds

of discount, including:

regular
discounts
. .
. quantity
discounts
.
.
.
aggregate
discounts . . .
commissions .
. .
prompt payment . . . FOB point . . .
[and] other . . . .
It then asks:
Do you have in effect, for any customer
of any class
within the MOL
[the
"Maximum Order Limitation," which in
DTI's case was the ten item maximum
that, under the MAS contract, an agency
could order at any one time] or outside
of the MOL, other
discounts and/or
concessions including but not limited to
the following, regardless of pricelist,
which result in lower net prices than
those offered the Government
in this offer?

-1212

And,
it lists
including:

further

possible

kinds

of

rebates of any kind . . . multiple

quantity unit
pricing plan .
. .
cumulative discounts . . . products that
may be combined . . . [and] others.

discounts,

Leaving no stone unturned, the form defines "discounts" as:

reductions to catalog or market prices
(published or unpublished) applicable to
any customer, including OEM's, dealers,
distributors, national accounts, states,
etc.; and any other form
of price
reductions such as concessions, rebates,
quantity
discounts,
allowances,
services, warranties, installation, free
parts, etc., which are granted to any
customer.
At
Edward

trial,

McAndrews,

procurement policy

the Government
the GSA

expert

called
who

as a

witness,

developed the

that this language summarizes.

GSA

He said

that the language means what it says: namely, that a company

wishing
parts,

to

sell, say,

pencils,

or computer

to the government, must list any lower price, or any

variation from its "standard

company

typewriters,

had

granted

to

terms and conditions" that the

anyone,
______

ever.
____

That

expert

testified:
Q:

[Y]ou're supposed to put in the top matrix

here how you do business in a standard way?

A:

That's correct.

Q:

Based on a price list you're using as an

offer to GSA?
-1313

A:

Absolutely.

Q:

Below it says, 'If you've got other price

lists and other discounts, tell us what
they are,' right?

A:

Or any other concession.

Q:

Concession.
a discount?

A:

It could be terms and conditions.

Q:

Terms and conditions?

A:

That's correct.

Q:

So if there is ever a situation in which you

vary from your standard terms and conditions,
ever, ever, you're supposed to report that
____ ____
down there?

A:

Yes.

Q:

Ah.

A:

Yes, so we can evaluate that.

Q:

Every time, huh?

A:

Yes.

Q:

So if a company has a thousand customers and

it has a standard way of doing business which
it describes in the matrix, but for some 15,
20, 30 customers who are bigger than the
seller. . . .

A:

Mm-hmm.

Q:

What's a concession if it's not

And you're supposed to report every

_____
instance of it?
________

. the

company

agrees

to the

buyer's

standard T's and C's [Terms and Conditions],

which are going to differ buyer from buyer,
right?
-1414

A:

Sure.

Q:

Every time it does that, it's got to record

that down there?

A:

It's what it's supposed to do.

(Emphasis added.)
We

concede

the

circumstance

Government points with pride,

to

which

namely, the exhaustiveness of

the disclosure that the language literally demands.

is

that

very

circumstance

Exaggerating to explain our

the

that

creates

But, it
problem.

point, we find the Government's

interpretation a little like that of, say, a park keeper who

tells

people that the sign "No Animals in the Park" applies

literally and comprehensively, not only to pets, but also to

toy animals, insects, and

even chicken sandwiches.

If

one

met such a park keeper, one would find his interpretation so

surprisingly

broad that one

really meant

or what to

simply would not

do.

We

do not

mean to say

farfetched example directly applies here.

considered in light
reader

we

disclosure form creates

with

think a

we conclude that no

GSA

Government

may help the

literal reading

ambiguity and

this

But, the example,

of our explanation below,

understand why

and why

know what he

of the

incomprehensibility,

reasonable person, negotiating

negotiator Carr,

could

really wanted the

have

believed that

the

complete and total disclosure

-1515

for

which

conclusion

the
upon

language
the

seems

to

combined

ask.

force

of

We

rest

three

this

sets

of

considerations, which we shall now discuss in turn:

1. Business Context.
________________
would not seem likely to
read

literally, the

form

An ordinary business person

interpret the form literally, for,

asks a

business

to shoulder

compliance

burden

difficult

or

which

will

impossible

to

often

carry

seem

out.

inordinately
Consider,

for

example, an office supply firm, or a furniture company, or a

computer

parts manufacturer,

industry.

Such

thousands

of

a firm,

selling its

different

customers,

different sales personnel,

in response
to

time

competitive

products to
a

might vary prices

to time,

either through

in

through

to shifting competitive

market, from

another,

operating

report of

paperwork
track,

every

blizzard,

or

from one

customer

cuts or

variation

even assuming

of

pressures, from market

direct price

such

host

considerably,

is

that the

to

through the

creation of small "terms of trade" advantages.

paper

tens of

To require a
to

require

company keeps

on paper, of every variation, not only in the price,

but also in the price-related terms and conditions of sale.

The record
clear that

supports this

surmise,

government suppliers have not

___
-1616

for it

makes

read the language

literally.

GSA expert

McAndrews

conceded that,

despite

potential double damage penalties for failing to comply with

the form's instructions, see 31 U.S.C.
___
never

seen any

firm ever comply

taken

literally.

When asked

comprehensive listing

he said

with the

whether he

form's request,
had ever

of "price reductions" in

"concessions" through variations

of sale,

3729 (1982), he has

that

he had

in "terms and
not.

And, he

seen a

the form of
conditions"
went on

to

testify as follows:
Q:

Have you ever seen [a comprehensive listing

of variations from standard terms
and conditions] done?

A:

I have not personally seen one done.

Q:
response[s]

Have

you

looked

at

these

things

--

[by companies to the Government's

questionnaire]?
A:

Yes.

Q:

And have you ever seen anybody ever do that?

A:

Not frequently.

Q:

Have you ever seen anybody do it?

A:

I've seen people submit data on, in terms of

the conditions.

Q:

Have

you

ever

seen

anyone

describe

in

[Section]
3-B
questionnaire]
standard terms

[of
the
discount
disclosure
every time they vary from their
and conditions?
-1717

A:

No, I have not.

. . . .

This

Q:

So nobody ever answers these questions

truthfully?

A:

That's probably true.

testimony, by

questionnaire)
conclusion
language,

the

supports

that a

the

(and

common

reasonable supplier

in context,

disclosure, whatever
intended.

GSA expert

as

calling

the GSA

See Garbincius
___ __________

for

coauthor of

the

sense,

objective

would not

read the

complete,

author subjectively

literal
may have

v. Boston Edison Co., 621

__________________

F.2d

1171, 1177 (1st Cir. 1980) (contracts should be construed to

reach sensible

result

if possible);

Farnsworth on Contracts Vol. II,

_______________________
reasonableness
interpretation).

as

fundamental
See also
___ ____

id.,
___

E. Allan

Farnsworth,

7.10, at 255 (standard of

principle
7.11,

of
at

contract
265-66 (an

ambiguous form contract is construed against the drafter).

2.

The Statutory Context.

______________________

A literal reading

is

also unnatural because it seems to undermine, or at least to

implement inappropriately,
program

of which the GSA

authorized,

and

the GSA

the

purposes of

form is an
designed,

the

statutory

instrument.
the MAS

Congress

program

simplified alternative for government procurement

__________

as a

of common

-1818

items sold competitively in the commercial marketplace.

H.R.

Rep. 1157, 98th Cong., 2d Sess. 18 (1984) (legislative

history of the Competition in

L.

See
___

No. 98-369,

competition

98 Stat.

may

not

officials, it is the
the best

products

be

Contracting Act of 1984, Pub.

1175 (1984))
considered

("While the
worthwhile

only way for the government

for the

best prices.

. .

use of
by

some

to obtain
Clearly,

economy

and

efficiency

must

be the

Federal procurement system and

to accomplish this goal.")
the

prices of

permits

office, to

commonly

cornerstone

of

the

H.R. 5184 provides the means

Where

competition helps to keep

purchased items

government agency,

say,

buy, say, a lamp, without

low, the

program

local Park

Service

asking lamp suppliers

to undergo the rigorous government "bid-procurement" process

or

the

highly

detailed,

audits that accompany

See
___

47

Fed.

pricing

of MAS

existence
itself

Reg.

of

50,252 (description

competition

helps to

inspections

(non-bid) "sole source"

contracts).

Under
in

the

provide assurance

government as well.
lamp

time-consuming

The

the

of

procurement.
GSA

policy on

MAS program,

commercial
of

and

the

marketplace

low prices

for the

listing of several competing, say,

manufacturers in the government MAS catalogue provides

added assurance of low prices.

-1919

The MAS negotiating process,

with its

questionnaire answers (and later

compliance) offers
To the

a third

extent, however,

audits to ensure

way to guarantee

"low prices."

that the questionnaire

and audits

become as burdensome as the "sole source" selection process,

the

MAS

program

rationale.
Kelly,

abandons

its

basic

See id. at 50,243; Robert

___ ___

"simplification"

S. Brams & Daniel J.

Multiple Award Schedule Contracting: A Practical

____________________________________________________

Guide
to Surviving Its
Shortcomings, Ambiguities and
____________________________________________________________
Pitfalls,
________

19 Pub.

Cont. L.J.

441, 453-60,

Indeed, if the MAS properly selects

sold

in

truly

competitive

paperwork, audits,
increasing

its products from those

commercial

markets, elaborate

and inspections, then,

competitive

firms'

467-72 (1990).

cost

by significantly

of

doing

federal

government business, could result in the government's

being

charged higher, not lower, prices.

Of
will

incur

compliance

course, neither
significant
if

the

the government

additional

government

does

questionnaire's disclosure requirements

or

costs
not

nor suppliers
of

literal

enforce

the

as literally

read,

if it enforces the requirements only sporadically.

But,

a system that lays down a literal rule with which compliance

is
rule

inordinately difficult,
violator, and

then

turning nearly everyone

permits the

agency

into a

to pick

and

-2020

choose

when

and where

undesirable.
rationally

It

to enforce

destroys in

cabining agency

the rule,

practice

is obviously

the very

discretion that

the GSA form

All

this is

is unlawful, but, rather,

provide an additional reason why we doubt that

potential supplier

would believe

that it

of

the rulemaking

process promises in principle.

not to say that

hope

to

a reasonable

was to be

taken

literally.
3.
Dewey Carr,

The Negotiating Context.

________________________
gave the

The GSA negotiator,

DTI negotiator, Elizabeth

Bruce, the

distinct impression that she did not have to comply with the
questionnaire as read literally.
of discount
some

information that she provided.

of the

offered
her these

He reviewed various pieces

discount

information, for

He crossed out

example, discounts

for sales of more than ten items per order, telling

discounts were not relevant

for the government's

purposes.
supplied,

He

accepted other

DTI

that they did

not contain various

normally offered

(but

relevant to the negotiation).

that a large discount
Equipment

material that

she

although he knew (and he knew that Ms. Bruce knew

that he knew)
that

pages of

which

he considered

not

Carr told Bruce specifically

that DTI gave a large

Corporation,

discounts

which purchased

buyer, Digital

particularly large

-2121

quantities

of

Government

equipment,

could not

equivalent size.

was

irrelevant

commit itself

to

because

place an

the

offer of

He also gave Ms. Bruce the impression that

the words "other discount" on the form referred to discounts

applying

to

the

same kind of purchase

________________________

intended

to make.

He

said that

the

Government

the question

she should

answer was (in the words of his testimony):

[F]or

the same

types of

dollar volume

that they expect the government to buy

in, are there any
other commercial
customers
which have
a discounting
policy, or do they receive discounts for
buying in the same volumes that the
government is going to buy in?
Although Mr.
testimony,

that

everything [DTI]

he

Carr did
asked

did at

Ms.

say, at
Bruce

the time," he

one point
for

"a

in his

picture of

simultaneously made

clear that Ms. Bruce did not understand his requests to mean
that

he

wanted

comprehensive

disclosure

of

the

sort

Mr. McAndrews described in his testimony.

From

these three

sets of

considerations --

the

business context, the statutory context, and the negotiating

context --

we draw

one conclusion, namely,

that, whatever

the GSA questionnaire writer's subjective intent, its

and

requests,

supplier

in the

considered

objectively

circumstances,
-2222

did not

by

words

reasonable

call for

literal

compliance.

And, we believe that

have reached

no reasonable juror could

contrary conclusion

on

the basis

of

the

evidence presented at trial.

D
A Practical Reading
___________________
If

the

literally, what
directing

questionnaire's
does

offers support

But, we need
in reading

The

no

is

not

district

stopping

meant

court,

point between

in
a

the questionnaire and unintelligibility.

conflicting testimony

witnesses

an

mean?

verdict, found

literal reading of
The

it

language

of several
for

the

not go as far as the

of the

Government's

district court's
district court.

the record favorably to the

alternative, intelligible reading

view.
Rather,

Government, we find
of the questionnaire.

Such a reading would call for a "practical" effort to supply

_________
relevant price discount
________
958

F.2d

494,

interpreted as

497

data.

(1st Cir.

end).

disclose significantly relevant

_______________________
normally provided
________
to

Cofman v. Acton Corp.,

______
____________

1992)

(contract

a business transaction by

towards a straightforward

comparable
__________

See
___

It would

the

agency

contemplated would occur under

-23-

practical parties
require DTI

price discounts

other customers making

purchases

should be

that

to
DTI

purchases roughly
_______
the

the MAS program.

Government
We

do not

23

believe that the record

supports an interpretation any more

favorable

to the Government

than this one.

this kind

of interpretation

does not help

The trial

record makes clear that no

have

found

a violation

of

the

And, adopting
the Government.

jury could reasonably

disclosure obligation

as

practically interpreted.
1.
customers

Special Price Customers.

_________________________

whom it

called "Special

DTI had

several

Price Customers."

DTI

told GSA that it gave a 30% discount to its largest "Special

Price

Customer,"

discount,

GSA

Digital

told

negotiations).

But,

other

Price

"Special

DTI,

Equipment
was

not

Corporation
relevant

DTI did not tell

_____________
Customers,"

offered large price discounts.

to

to

the GSA
whom

it

(which
the

MAS

about its
regularly

The Government says that DTI

should have disclosed this list.

The record

makes clear, however, that DTI's sales

to these

"Special Price

the MAS sales DTI

The President
unlike

of DTI, Mr. Alfred

government

agency

a special service

"middleman"

agencies.

Molinari, testified that,

customers,

it "earned" the discount.

"middleman."

comparable to

proposed to make to government

Customer" provided
which

Customers" were not

each

"Special Price

for DTI in

Each such
computer

virtue of

customer was a

manufacturer,

for

-2424

example, would install DTI's board in

sell

that

computer,

thereby

its computer and then

reselling DTI's

board.

"middleman" software developer, for example, would buy DTI's

boards, develop
them.
help

new uses for those boards,

A "middleman"
DTI

reselling

with

venturers" with

engineering firm, for

quality

boards.

and then resell

control problems

Insofar

as these

DTI (helping to develop

example, would
in

firms

addition
were

to

"joint

a better product),

they provided
not provide.
(unlike
buying

DTI with

services that the

Government would

Insofar as the firms resold DTI's boards, they

the Government)

had to

"live[] on

the discount,"

at a price low enough to permit a profitable resale.

In the words of DTI Vice-President Ellen Wirka Harpin,

the special price customers, they were
offering us something that another, that
a regular everyday customer wasn't going
to offer us,
like advertising,
or
writing software for our products so the
customer could use it, reselling the
board . . . .
The record

contains virtually

nothing to

contradict these

accounts.
We

must

say

"virtually

nothing"

"absolutely nothing"

because on redirect

President

one

said that

of its

instead

of

examination DTI's

special price

customers,

Sandia Laboratories, in New Mexico, was partly funded by the

-2525

Government.

But, the record tells

us nothing further about

this

example.

It

whether Sandia

earned its

or simply

that

undisputed
said,

that DTI

received the

contradicts

testimony of the DTI executive.

that testimony

customer"

virtue of

makes clear

discounts involved

The single
not amount to

the

otherwise

And, as we have

that the

sales so

those

single order

our view, does

significantly
_____________

a jury,

or "joint venturer,"

fully disclosed.

to Sandia Labs, in

evidence

court, nor

12% discount in

because it

"quantity discount"
reference

the

Labs was a "middleman"

or whether it
functions

tells neither

"special price

different from

MAS

sales that DTI need not have disclosed them.

2.

The Volume Purchase Agreements.

_______________________________

special discount to customers

a

series
and

a signer

who bought

A VPA, in essence,

DTI boards

to

aggregate a

of small purchases made during the course of a year,

thereby to qualify for

a volume discount

total amount of boards purchased.

are,

who bought boards pursuant to

"Volume Purchase Agreement" ("VPA").

permitted

DTI gave

in

essence,

two

separate

based on the

The Government makes what

claims

related

to

VPA

discounts.
a.
copy of

a VPA.

Incomplete Disclosure.
_____________________
That copy

DTI gave

makes clear 1)
-2626

GSA a blank

that the

buyer

signing the VPA

must commit to buy a total

number of items

during the year; 2) that the buyer must send purchase orders
for that amount
must

"accept

to DTI "within one year;" 3) that the buyer

delivery

of

the

products

ordered

within

fourteen months;" and, 4) that if the year's purchase orders

exceed,

or

commitment,

fall

short

DTI will

of,

the

adjust the

government auditor testified

amount

of

the

initial

discount accordingly.

that GSA considered

this type

of VPA (with its discount "bill back" provision for purchase

shortfalls) "as being identical to MAS-type contracts."

For

that

DTI

reason,

should also

the

Government apparently

have given it a

claims

list of its VPA

that

customers and

copies of the actual contracts with these customers as

as

the

blank

form.

That

added

information,

Government's view, presumably

would have permitted

negotiator

more

recognize

feature

the

of

easily
VPA

to

agreement,

and,

the

in

well
the

the GSA

"aggregation"

perhaps,

to

have

negotiated a similar discount for government agencies.

The

record

makes

clear,

however,

that

the

questionnaire

(as interpreted

DTI to provide this additional

said, DTI gave the GSA
being so,

practically) did

not oblige

information, for, as we just

a blank VPA form contract

an additional

filled out

and, that

form would

have added

-2727

nothing of significance.

For one thing, the

VPA agreement

is not, and could not reasonably seem "identical to MAS-type

contracts."

In fact, it is different enough that DTI could

reasonably have thought that Mr. Carr did not need every VPA
detail.

GSA's negotiator, Mr.

Carr, testified that he told

the DTI negotiator, Ms. Bruce, that the VPA discount was not
___
relevant
cannot
The VPA

to the

MAS

negotiation because

the

"government

commit to buy any amount during any period of time."

form itself makes

clear that

a buyer must

contrary, that is, the buyer must say that it

wishes

to

purchase the

quantities set

do the

forth in Exhibit A hereto (the 'Quantity

Levels') of the products described in
Exhibit A (the 'Products').
This

would seem to be

the kind of

promise (whether or not

the VPA assessed penalties for its breach) that Mr. Carr had
in mind

when he testified

that GSA "cannot

sign up

to an

agreement like this."

For
(without

another

thing,

contradiction) that

involved billing

DTI's

President

VPA sales, unlike

and servicing a single

testified
MAS sales,

VPA buying source.

In contrast, MAS sales, he said,

meant
separate
invoices for
every
facility. It meant separately answering
questions from every researcher as to
how
to use our
product, and then
separate manuals going out with each
-2828

product.
It was indeed like selling to
hundreds of different customers. In no
way did it have any amalgamation of
saving money or
making it a
more
efficient sale.

This point,

that MAS purchases would

not involve economies

of
scale enabling DTI to charge a lower price, is particularly
significant because
agency

DTI's MAS sales

purchases of no more

DTI.

would involve

than ten units

federal

at a time from

GSA told all agencies intending to buy larger amounts

not
___

to buy through the MAS program, but rather to negotiate

directly with DTI for a better discount.

We do
could

not see

conclude that

instead

of

a blank

how anyone, in

providing
form

GSA with

would

the circumstances,
filled out

have added

forms

something

of

significance to the disclosure.

b.

Inaccurate Disclosure.
_____________________

The Government points

out that Mr. Carr testified at trial that Ms. Bruce told him
that a VPA buyer qualified for a discount
bought

only if the buyer

all the VPA items using a single purchase order at a

___
____

single time.
____________

Ms.

Bruce

strongly

denied

saying

this;

Mr. Carr's contemporaneous notes of the negotiations reflect

no
when

such statement;
he

gave a

Mr. Carr did

deposition;

and

-2929

not recall
the record

the statement
contains

no

corroborating

evidence.

reasonable jury
And, in that
Carr

Nonetheless,

might believe

we

concede that

Mr. Carr's trial

testimony.

case, it could believe that Ms. Bruce told Mr.

something

that was

not

true, for

the

VPA contract

permitted VPA buyers

to aggregate different purchases

___________________

at

during

different times
________________

the

year

made

through different
__________________

purchase orders.
_______________
The

jury,

nonetheless,

liability on this belief,

Clause") the

conclude

Bruce's

could have "increased

Mr. Carr was fully
old,

not

for (to return to the

"Defective Pricing
that Ms.

could

jury could

contract's

not reasonably

alleged statement

to Mr.

[prices] by" a "significant

aware that Ms. Bruce was

was not an expert

predicate

on company pricing

amount."

nineteen years
policy, and did

not fully understand the complex forms or documents.

same

Carr

At the

time, he had before him the VPA contract itself, which

quite clearly
over the

provides for

period of a year.

which distinguishes between

aggregation of
He had read

purchase orders
the DTI catalogue

"quantity discounts"

available

"when placed in a single order,"

_________________________________
available

on a "contract basis."

that Ms. Bruce's (alleged)

and "other"
_____
And, he

discounts

must have known

statement made little sense, for

it would have meant that VPA customers had to sign contracts

-3030

to obtain the same

obtain

discounts that any other

just by placing a

large single order.

circumstances, Mr. Carr's negligence

statement,

not the

customer could

in relying upon such a

statement itself,

predominant cause of any resulting

Given these

would have

higher price.

been the
See Atari
___ _____

Corp. v. Ernst & Whinney, 1992 U.S. App. LEXIS 32,243 at *16
_____
_______________
(9th

Cir. 1992)

representations
precludes
injury); cf.
___

(where
to

be

plaintiff possesses
false,

determination
United States
_____________

that

reliance

facts showing

unreasonable

misrepresentations

and

caused

v. Lumbermen's Mutual Casualty

____________________________

Co., 917
___

F.2d

654, 660-61

(1st

statements unreasonable when

Cir. 1990)

party should

(reliance

have known

on
they

were incorrect); Paper Express, Ltd. v.

___________________

Pfankuch Maschinen,
___________________

G.M.B.H.,
________

Cir.

972

sophisticated

F.2d

753,

757-58 (7th

1992)

(where

party could read document itself, reliance on

other party's representations concerning

unreasonable).

document's content

That being so, the jury could not have found

a violation of the "defective pricing" clause, for we do not

read that

clause to

predicate liability where

GSA, rather

than the supplier, is primarily at fault.

For

these

legally entitled

reasons,

we

conclude

to a directed verdict

that

DTI

was

on the Government's

-3131

"defective pricing" clause contract claim.

We add that the

district court
various

also directed

other

enrichment"

contract-related

and

"payment

verdicts on those
claim

a verdict in

by

claims

DTI's favor
--

mistake."

We

counts, for our analysis

precludes a jury verdict for

for

on

"unjust

affirm

the

of the contract

the Government on these

claims as well.

II
The False Claims Act Jury Instruction
_____________________________________
The
violated
person

the False
from

fraudulent

claim

for

charged

Act, an

present[ing]
payment

view,

. .

DTI's

DTI

act

replaced by 31 U.S.C.
___________

Government's

accurately to

also

Claims

"knowingly

3729(1)(1982),
the

Government

with

having

that prohibits

.
.

"

false or
31 U.S.C.

3729(a) (1986).

failure

completely

disclose price discount information

In
and

made all

of its subsequent payment requests "false" and "fraudulent,"

for

these

requests

relevant underlying

rested
data were

jury found in DTI's favor.

The Government
improperly

upon

instructed

an

assertion

that

accurate and complete.

the
The

The Government appeals.

argues at

the jury
-3232

length

about

the

that the
state of

court
mind

necessary to support a

False Claims Act violation.

In the

Government's view, the requisite state of mind includes, not

only

1)

specific

"deliberate

ignorance

intent
of

disregard of the truth."

two last

1986.
was

the

when Congress

See 31 U.S.C.
___
as the

district

truth,"

and

mind made

amended the

3729(b).
court

but
3)

also

2)

"reckless

to actions

their first
False Claims

Before

stated

Government, Congress intended its

apply retroactively,

deceive,

The Government concedes that these

mentioned states of

appearance

to

legal
Act in

that time, the law

it.

Yet,

says

the

new statutory standard to

that, as here,

took place

long before 1986.

The Sixth
length.

It has

retroactive.

apply

has considered

concluded that

See United States

___ _____________

1038 (6th Cir.

not

Circuit

the

this issue

new standard

v. Murphy, 937
______

at

is not

F.2d 1032,

1991) (False Claims Act intent standard does

retroactively

since

it

substantive liability under the Act).

enlarges

scope

of

We find its reasoning

convincing.

And, we would follow its holding.

We need not decide the matter definitely, however,

for, given our decision thus far, it is clear that any error
was "harmless."

For

the reasons set out above,

the record

would not support a verdict for the Government, irrespective

-3333

of the

instruction on state of

reasonably be
disclosure

of

mind.

The GSA

form cannot

interpreted to require, in the circumstances,

the

"Special

Price

Customer"

or

information beyond the disclosure DTI actually made.

DTI's alleged nondisclosure could
the price
230

negotiated.

F.Supp.

426, 432

misrepresentation of
Johnson,
_______

809

See,
___

F.2d

1964)

95 (1st

Cir.

v. Klein,
_____

(fraud implies

a material fact); Turner

______
90,

Hence,

not have been material to

e.g., United States

____ _____________

(W.D.Pa.

"VPA"

1986)

the

v. Johnson &
_________
(materiality

established as an element of common law fraud).

For these

reasons, the

judgment of

court is
Affirmed.
________

NOTE:

See Slip Opinion for Appendix.

-3434

the district