Lithium Power Techs., Inc. v. United States - Opposition

No. 09-666

In the Supreme Court of the United States

LITHIUM POWER TECHNOLOGIES, INC.

ET AL., PETITIONERS

v.

UNITED STATES OF AMERICA EX REL.
ALFRED J. LONGHI, JR., ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

ELENA KAGAN
Solicitor General
Counsel of Record
TONY WEST
Assistant Attorney General
MICHAEL S. RAAB
NICHOLAS BAGLEY
Attorneys
Department of Justice
Washington, D.C. 20530-0001
SupremeCtBriefs@usdoj.gov
(202) 514-2217

QUESTIONS PRESENTED

Petitioners were held liable under the False Claims Act (FCA), 31 U.S.C. 3729 et seq., for falsifying informa tion in several applications for federal research funding. The court of appeals held that the false statements in question were relevant to the government's decision to fund petitioners' research; that the evidence demon strated that petitioners had acted with the requisite scienter; and that the government was entitled to a dam ages award in the amount of the funding that petitioners had secured under false pretenses. The questions pre sented are as follows:

1. Whether the court of appeals correctly concluded that petitioners' false statements were material to the government's funding decisions.

2. Whether the court of appeals correctly found that petitioners had acted with reckless disregard for the truth or falsity of their statements.

3. Whether the court of appeals correctly deter mined that the proper measure of damages to the Uni ted States was the amount of money that the govern ment had disbursed as a result of petitioners' false state ments.

4. Whether the court of appeals correctly held that it would violate public policy to dismiss the relator's FCA suit against his former employer based on the rela tor's agreement to release the employer from legal claims.

In the Supreme Court of the United States

No. 09-666

LITHIUM POWER TECHNOLOGIES, INC.

ET AL., PETITIONERS

v.

UNITED STATES OF AMERICA EX REL.
ALFRED J. LONGHI, JR., ET AL.

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1-37) is reported at 575 F.3d 458. The opinions of the district court granting the government's motions for summary judgment (Pet. App. 39-68, 69-120) are reported at 530 F. Supp. 2d 888 and 513 F. Supp. 2d 866.

JURISDICTION

The judgment of the court of appeals was entered on July 9, 2009. A petition for rehearing was denied on September 8, 2009 (Pet. App. 140-141). The petition for a writ of certiorari was filed on December 7, 2009. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

1. The False Claims Act (FCA or Act), 31 U.S.C. 3729 et seq., is "the Government's primary litigative tool for combating fraud." S. Rep. No. 345, 99th Cong., 2d Sess. 2 (1986). Under the FCA as it existed at the time of the events at issue in this case, any person who "knowingly presents, or causes to be presented, to an officer or employee of the United States Government * * * a false or fraudulent claim for payment or ap proval," 31 U.S.C. 3729(a)(1), "is liable to the United States Government" for civil penalties "plus 3 times the amount of damages which the Government sustains be cause of the act[s] of that person," 31 U.S.C. 3729(a).1 Suits to collect damages and civil penalties under the Act may be brought either by the Attorney General, or by a private person (known as a relator) in the name of the United States, in an action commonly referred to as a qui tam action. See 31 U.S.C. 3730(a) and (b)(1). The FCA defines the terms "knowing" and "knowingly" to encompass situations in which a person "has actual knowledge of [particular] information," "acts in deliber ate ignorance of the truth or falsity of the information," or "acts in reckless disregard of the truth or falsity of the information." 31 U.S.C. 3729(b)(1)-(3). The Act fur ther provides that "no proof of specific intent to defraud is required." 31 U.S.C. 3729(b).

2. In 1982, Congress established the Small Business Innovation Research (SBIR) Program to provide re search assistance to small businesses "in order to main tain and strengthen the competitive free enterprise sys tem and the national economy." 15 U.S.C. 638(a). To achieve that objective, Congress directed each federal agency with a research and development budget exceed ing $100 million to establish an SBIR program and to provide specified portions of that budget to small busi nesses. See 15 U.S.C. 638(f). Each agency with an SBIR program is responsible for "select[ing] awardees for its SBIR funding." 15 U.S.C. 638(g)(5).

The Department of Defense (DoD) administers an SBIR program in which 12 military components partici pate. Pet. App. 3. Small businesses seeking to secure an SBIR grant generally submit proposals in response to specific research topics identified in "program solicita tions." See ibid. Proposals are evaluated "on a compet itive basis," 67 Fed. Reg. 60,084 (2002), and DoD selects those proposals that it "perceive[s] offer the best value to the government and nation," Pet. App. 3. The pro gram is highly selective. Id. at 70. Among other factors, "DoD specifically considers the: (1) key personnel avail able to perform the research, (2) facilities and equip ment available to the applicant, and (3) scope of any pre viously funded work performed by the applicant that may be similar to that proposed." Id. at 3.

Two types of SBIR grants are available under DoD's SBIR program. The first is a small trial grant for Phase I research. "A Phase I research grant is intended for the recipient to determine the scientific, technical, and commercial merit and feasibility of ideas submitted un der the SBIR program." Pet. App. 4. Phase I grant awards range from $60,000 to $100,000 and cover up to a nine-month period. Ibid.

If DoD determines that the recipient of a Phase I grant has demonstrated that future research "may po tentially yield a product or process of continuing impor tance to the DoD and the private sector, it can award a Phase II grant." Pet. App. 4. Only those applicants who have received a Phase I award can submit a Phase II proposal. Ibid. "A Phase II grant is expected to pro duce a well-defined, deliverable prototype and typically ranges from $500,000 to $750,000 over a two-year pe riod." Ibid.

"During Phase III of a research and development project, an applicant is expected to obtain funding from the private sector or non-SBIR government sources to develop the prototype into a viable product." Pet. App. 4. The Phase I and Phase II grants thus are intended to aid in the development of a product that, during Phase III, the small business can market on its own.

3. Petitioner Lithium Power Technologies, Inc. (Lithium Power), is in the business of designing and manufacturing specialized lithium-based batteries. Pet. App. 4. Petitioner M. Zafar Munshi is Lithium Power's majority shareholder, president, chief executive officer, and chairman of the board. Ibid. To date, Lithium Power has derived most of its funding from government sources. Id. at 73.

Petitioners first applied for SBIR funds in 1998. Pet. App. 72. They submitted proposals and won Phase I and Phase II grant awards from both the Air Force and the Ballistic Missile Defense Office (BMDO). See id. at 71- 73. Those grants were for "research that could lead to the development of very thin rechargeable batteries," id. at 5, and "study [of] the feasibility of microelectrical mechanical systems * * * batteries using solid elec trolytes for micro-satellites" id. at 73. Petitioners re ceived a total of more than $1.6 million under the four SBIR grants. Id. at 5.

In 2000, relator Alfred J. Longhi, Jr., joined Lithium Power as Vice President for Sales and Marketing. Pet. App. 5. Over the next two years, "Longhi began to sus pect that [petitioners] were defrauding the federal gov ernment" by, inter alia, making false statements in SBIR applications. Ibid. Longhi was laid off in 2002. Id. at 6.

4. Shortly before he was laid off, Longhi filed a qui tam action against petitioners under the FCA. Pet. App. 6. In 2005, after investigating Longhi's claims, the Uni ted States intervened in the suit. Id. at 6-7. The follow ing year, the United States moved for partial summary judgment as to liability. Id. at 7. In that motion, the government "argued that the undisputed record evi dence demonstrated that [petitioners] had, at a mini mum, shown a reckless disregard for the truth regard ing many of the representations in their four SBIR grant proposals." Ibid.

The district court entered summary judgment for the government as to liability. Pet. App. 69-120; see id. at 7- 8. The court concluded that petitioners' "BMDO Phase II proposal falsely stated that Lithium Power was incor porated in 1992" when the company was not actually incorporated until 1998; that Lithium Power had "know ingly falsified statements regarding its facilities and equipment"; that petitioners had "acted with reckless disregard to the falsity of statements by representing that Lithium Power had cooperative arrangements with the University of Houston and Polyhedron Laborato ries"; and that petitioners had "failed to disclose in [their] Air Force SBIR grant proposals that Lithium Power had previously undertaken related work in con nection with a BMDO SBIR grant." Ibid.; see id. at 88- 113. The court further found that petitioners' misstate ments were "material" to the government's payment decisions because they had a natural tendency to influ ence, and had in fact influenced, the government's award of SBIR grants. See id. at 113-118.

The district court subsequently entered an award of treble damages and civil penalties totaling slightly more than $5 million. Pet. App. 39-68. In calculating that award, the court determined that the government's ac tual damages were equal to the full amount of the funds it had paid to Lithium Power under the SBIR program. Id. at 47-63. Petitioners argued that the damages should be reduced to reflect the benefits that the gov ernment had purportedly received from the research conducted by petitioners under the program. In reject ing that contention, the court explained that petitioners' activities had "produced no tangible benefit to the gov ernment" because "[t]he batteries developed through the SBIR funding belong to [Lithium Power]-not the government," and Lithium Power "had every intention of marketing those batteries to the government and pri vate industry." Id. at 53-54. The court further ex plained that any intangible benefit the United States might have received from the research was "clearly off set by the lost opportunity for innovation by the eligible deserving small businesses that did not receive the funds which [Lithium Power] fraudulently induced from the government." Id. at 61.

5. The court of appeals affirmed. Pet. App. 1-37.

a. The court of appeals explained that a false state ment made in connection with a request for federal funds provides a basis for FCA liability only if it is "ma terial" to the government's payment decision. Pet. App. 15. The court further explained that "a false statement is material if it has a natural tendency to influence, or [is] capable of influencing, the decision of the decision making body to which it was addressed." Id. at 18 (quo ting Neder v. United States, 527 U.S. 1, 16 (1999) (inter nal quotation marks in Neder omitted; bracket in origi nal)). The court noted that the "natural tendency" test does not require proof that the false statement actually affected the outcome of a governmental decision. Id. at 20. Rather, the court explained, that test requires "only that the false or fraudulent statements either (1) make the government prone to a particular impression, there by producing some sort of effect, or (2) have the ability to [a]ffect the government's actions." Id. at 21. In de clining to adopt an "outcome materiality" standard, un der which a defendant's misrepresentations or omissions must be shown to have actually affected the govern ment's payment decisions (see id. at 19), the court noted (id. at 22-23) that Congress had "embraced" the "natu ral tendency" test in enacting the Fraud Enforcement and Recovery Act of 2009 (FERA), Pub. L. No. 111-21, § 4, 123 Stat. 1621.

b. The court of appeals held that the government had met its burden of demonstrating that petitioners had "knowingly provided false or fraudulent statements in the SBIR grant proposals." Pet. App. 24. The court explained that petitioners had "lied in all four SBIR grant proposals regarding a cooperative arrangement with the University of Houston and Polyhedron Labora tories." Ibid. The court rejected as "patently absurd" petitioners' argument that, "because members of the public could use labs at the University of Houston and Polyhedron Laboratories for a fee, Lithium Power, as a member of the public, had an 'arrangement' with both institutions." Ibid. The court found that petitioners had misled the BMDO and the Air Force by making these statements "either purposefully, or with reckless disre gard to [their] truth or falsity." Ibid.

The court of appeals further explained that one of petitioners' grant proposals had claimed that the com pany was incorporated in 1992, when in fact it was incor porated in 1998. Pet. App. 25. "This was not a mere typographical error," the court observed, because "Lith ium Power was not incorporated until five months after it submitted" the application. Ibid. "In addition," the court noted, petitioners had "lied about the existence of Lithium Power's facilities." Ibid. Petitioners had claimed in one of their grant proposals that they had roughly 4000 square feet of new laboratory and office space, as well as a 500-square-foot dry-room. Id. at 96. In fact, these facilities "were under construction at the time the [proposal] was submitted." Id. at 25.

Finally, the court found "troubling" petitioners' fail ure to apprise the Air Force of its prior receipt of a grant for similar work from BMDO. Pet. App. 25. Al though the SBIR application required applicants to de scribe "significant activities directly related to the pro posed effort and previous work not directly related to the proposed effort but similar," ibid. (internal quota tion marks omitted), petitioners had not disclosed the work they had undertaken in connection with the previ ous grants from BMDO, see id. at 25-26. The court found that this "omission, again when coupled with the misrepresentations regarding Lithium Power's coopera tive agreements, establish that [petitioners] had no in tention to perform according to the terms of the SBIR." Id. at 26.

c. The court of appeals held that petitioners' false statements were material to the government's funding decisions because those statements "had the potential to influence the BMDO and Air Force's decisions to award Lithium Power the SBIR grants." Pet. App. 26. The court explained that petitioners had "painted a picture of an established company, that was so well-respected in the community that it had developed a strong relation ship with two notable research organizations. In reality, Lithium Power was a company that was in its prelimi nary stages of development that had yet to demonstrate any proven success." Ibid.

The court of appeals further explained that the re cord contained evidence that petitioners' "false state ments actually influenced the decision to award" the grants to petitioners. Pet. App. 26-27. One of the BMDO evaluators had "recommended approving [peti tioners'] proposal because Lithium Power had adequate facilities to conduct the project-in actuality Lithium Power had no such facilities." Id. at 27. Another BMDO evaluator stated that his recommendation to fund peti tioners' proposal "was greatly influenced by the false statements," and an Air Force evaluator "stated that he would not have approved funding the Air Force propos als if [petitioners] had included information regarding" the previous grants secured from BMDO. Ibid. The court concluded that, "even if [it] were to apply the 'out come' materiality standard, [it] would still conclude that Lithium Power's false statements were material." Id. at 27 n.8.

d. The court of appeals also upheld the district court's damages award. Pet. App. 28-30. The court held that, "[i]n a case such as this, where there is no tangible benefit to the government and the intangible benefit is impossible to calculate, it is appropriate to value dam ages in the amount the government actually paid to [pe titioners]." Id. at 30. The court rejected petitioners' contention that the damages should be reduced because the government had received the tangible benefit of Lithium Power's research. The court explained that the relevant contracts "did not produce a tangible benefit to the" government because "[t]he end product" of petition ers' research "did not belong to the BMDO or the Air Force." Id. at 29. Rather, the court concluded, "[t]he Government's benefit of the bargain was to award money to eligible deserving small businesses," and that benefit "was lost as a result of [petitioners'] fraud." Id. at 30.

ARGUMENT

With respect to the first three questions presented in the petition for a writ of certiorari, the court of appeals' decision is correct and does not conflict with any deci sion of this Court or of any court of appeals. Further review of those issues therefore is not warranted.2

1. a. The FCA provision under which petitioners were held liable prohibits the knowing submission to a federal officer or employee of "a false or fraudulent claim for payment or approval." 31 U.S.C. 3729(a)(1). A false statement submitted in connection with a re quest for payment will render the claim "false or fraudu lent" if the false statement is material to the govern ment's funding decision. As the court of appeals held (Pet. App. 18), and as petitioners acknowledge (Pet. 7-8), the appropriate standard for gauging whether a false statement is "material" for purposes of the FCA is whether that statement "has a natural tendency to influ ence, or is capable of influencing, the decision of the decisionmaking body to which it is addressed." Neder v. United States, 527 U.S. 1, 16 (1999) (internal quotation marks and bracket omitted).

Under that standard, the false statements that peti tioners submitted to secure research grants from the federal government were material to the government's funding decisions. Petitioners averred in their proposals that Lithium Power had "cooperative arrangements" with a university and a private facility for use of labora tory space, when in fact the company had no such ar rangements, informal or otherwise. Pet. App. 98-99. Petitioners claimed that Lithium Power had been incor porated since 1992, when the company was not actually incorporated until May 1998-five months after petition ers submitted their first SBIR proposal. Id. at 88-89. Before their facilities were built, petitioners falsely as serted that Lithium Power had thousands of square feet of laboratory and office space and a large "dry room" for developing battery technology. Id. at 96. And when asked to disclose their related work, petitioners failed to inform the Air Force that they had undertaken related work financed by grants from its sister agency. Id. at 25.

As the court of appeals correctly concluded (Pet. App. 25), petitioners' misrepresentation of their busi ness credentials and research capacity gave the impres sion that Lithium Power was an established and experi enced business with ties to the research community rather than a fledgling start-up company with no proven history of research. The false impression that petition ers gave the government enhanced the likelihood that their proposals would be chosen in a highly competitive application process. The false statements therefore had a "natural tendency" to influence the government's funding decisions.

Petitioners contend (Pet. 11-12) that the court of ap peals' description of the materiality standard conflicts with the context-sensitive approach taken by this Court in Kungys v. United States, 485 U.S. 759, 770 (1988).3 That argument lacks merit. In explaining that a false statement has a "natural tendency to influence" a gov ernment decision when it "either (1) make[s] the govern ment prone to a particular impression, thereby produc ing some sort of effect, or (2) ha[s] the ability to [a]ffect the government's actions," the court of appeals adopted precisely the sort of context-driven inquiry that petition ers claim it eschewed. Pet. 12 (quoting Pet. App. 21). Rather than "analyz[ing] materiality in the abstract" (Pet. 9), the court of appeals examined whether petition ers' specific false statements would have had a tendency to affect the decision to distribute SBIR grant money. Because those statements falsely inflated petitioners' credentials and enhanced the likelihood that petitioners' grant proposals would be selected in a competitive appli cation process, the court held that they were material. Pet. App. 26.

The court of appeals' application of the "natural ten dency" test is fully consistent with this Court's decision in Kungys. The Court in that case held that several triv ial misrepresentations that an alien had made in his nat uralization proceedings (including misrepresentations as to his precise age and city of birth) were not material because they had no bearing on the government's deci sion to grant him citizenship. 485 U.S. at 774-776. In contrast to the irrelevant biographical details in Kun gys, this case involves misrepresentations about a busi ness's credentials made to government officials who dis tributed federal funds based in part on the relevant fed eral agencies' assessment of those credentials.

b. The court of appeals concluded not only that peti tioners' false statements could have affected the govern ment's decisionmaking processes, but also that those statements had an actual effect on the government's funding decisions. See Pet. App. 26-27 & n.8. Petition ers' fact-bound challenge to that holding (Pet. 12-15) lacks merit and does not warrant this Court's review. As the court of appeals explained, several SBIR evalua tors stated without contradiction in the record that their recommendations to fund petitioners' proposals were greatly influenced by the false statements. Pet. App. 27. Petitioners assert (Pet. 13) that testimony of a former administrator of BMDO's SBIR program called the eval uators' statements into question. That individual testi fied, however, that primary responsibility for evaluating grant proposals fell to a pool of about 300 evaluators, and that he "relied strictly on his evaluators with re spect to funding" Lithium Power's proposal. Pet. App. 116. Thus, even if some of the false statements would not have mattered to the administrator had he been the primary evaluator, his testimony leaves undisturbed the conclusion that the false statements actually affected "the decision of the decisionmaking body to which [they were] addressed." Kungys, 485 U.S. at 770 (emphasis added; internal quotation marks omitted).

2. The court of appeals concluded (Pet. App. 24-26) that a pattern of false statements contained in four sepa rate SBIR proposals demonstrated, at a minimum, that petitioners had acted with "reckless disregard of the truth or falsity" of the information contained in their proposals. 31 U.S.C. 3729(b)(3). Petitioners contend (Pet. 16-21) that the question of scienter is a factual mat ter that the lower courts could not properly resolve on summary judgment.

Petitioners are mistaken. The FCA defines the terms "knowing" and "knowingly" to include "actual knowledge of [particular] information," "deliberate igno rance of the truth or falsity of the information," and "reckless disregard of the truth or falsity of the informa tion." 31 U.S.C. 3729(b)(1)-(3). The determination whether a defendant possessed "actual knowledge" or acted with "deliberate ignorance" requires an inquiry into the defendant's subjective state of mind. The civil standard for recklessness, by contrast, includes an ob jective test that is met when the actor "does not realize or appreciate the high degree of risk involved, although a reasonable man in his position would do so." Restate ment (Second) of Torts § 500 cmt. a (1965); see Farmer v. Brennan, 511 U.S. 825, 836 (1994) ("The civil law gen erally calls a person reckless who acts * * * in the face of an unjustifiably high risk of harm that is either known or so obvious that it should be known."). Consistent with that understanding, the FCA states that "no proof of specific intent to defraud is required" in order to estab lish liability under the Act. 31 U.S.C. 3729(b). Although ascertaining whether a party acted with an "improper motive" can raise questions of fact for a jury to resolve, Crawford-El v. Britton, 523 U.S. 574, 589 (1998), no such inquiry was needed for the courts below to determine that petitioners were at least reckless with regard to the truth or falsity of their statements.

Petitioners also suggest (Pet. 18-19) that their false statements were the result of mere inadvertence. When they submitted their proposals, petitioners surely knew that Lithium Power was not yet incorporated, that its facilities had not been built, that it had no "cooperative arrangements" with research facilities in place, and that it had previously undertaken related work with a BMDO grant. Yet petitioners' applications made false state ments about their qualifications with respect to each of these known facts-indeed, petitioners repeated most of these false statements several times over. The court of appeals therefore correctly concluded that petitioners were at least reckless in failing to verify the information they submitted to the federal government. Petitioners' fact-bound challenge to that conclusion does not warrant this Court's review.

3. Petitioners also challenge the damages award. See Pet. 21-30. The court of appeals held that, "[i]n a case such as this, where there is no tangible benefit to the government and the intangible benefit is impossible to calculate, it is appropriate to value damages in the amount the government actually paid to [petitioners]." Pet. App. 30. The court rested its conclusion in part on the fact that the government administers the SBIR pro gram not to secure for itself a tangible good, such as the batteries that Lithium Power developed, but to provide benefits to "deserving small businesses." Ibid.; see 15 U.S.C. 638(a) (SBIR program serves "to maintain and strengthen the competitive free enterprise system and the national economy"); 15 U.S.C. 631(a); 67 Fed. Reg. at 60,072 ("The statutory purpose of the SBIR Pro gram is to strengthen the role of innovative small busi ness concerns (SBCs) in Federally-funded research and research and development."). As the court ex plained, "[t]he BMDO and the Air Force's intangible benefit of providing an 'eligible deserving' business with the [SBIR] grants was lost as a result of [petitioners'] fraud." Pet. App. 30. Cf. United States v. TDC Mgmt. Corp., 288 F.3d 421, 428 (D.C. Cir.) (holding that it would be reasonable to conclude that, when a middleman fraudulently concealed a financial interest in a transac tion, a government program to pay middlemen for their services "no longer had any value to the government"), cert. denied, 537 U.S. 1048 (2002).

Petitioners contend (Pet. 24-27) that the decision be low conflicts with the Fourth Circuit's ruling in United States ex rel. Harrison v. Westinghouse Savannah River Co., 352 F.3d 908 (2003). Harrison, however, is distinguishable on its facts. That case involved a con ventional service contract-specifically, to design and implement a training program. Id. at 911. Because the government in fact received the services for which it had contracted, the Fourth Circuit held that, "under the par ticular facts of this case, the district court properly re quired the plaintiff to prove damages by showing how much more the government paid [the defendant] to per form the subcontract than it would have paid another firm absent the false * * * certification." Id. at 923.

By contrast, the principal purpose of the SBIR pro gram is not to secure services or procure a deliverable product. See Pet. App. 54 (district court explains that "[t]he batteries developed through the SBIR funding belong to [Lithium Power]-not the government," and that Lithium Power "had every intention of marketing those batteries to the government and private indus try"); id. at 29. It is instead to give deserving small businesses a realistic chance to compete against their larger, more established competitors. See 15 U.S.C. 638(a); Pet. App. 29-30. That purpose was entirely thwarted when a company with dubious qualifications received SBIR funding that should have gone to a more deserving candidate. Neither Harrison nor any other case cited by petitioners casts doubt on the court of ap peals' damages analysis under the program at issue here. And, for the same reasons, this case would provide an unsuitable vehicle for determining the proper method of calculating damages in situations where the govern ment receives significant benefits under a procurement contract despite the defendant's false statements.

Petitioners also contend (Pet. 27) that Lithium Power provided "a tangible benefit" to the government by "perform[ing] research and development services." As explained above, however, the government's benefit of the bargain was not the research services that peti tioners claim they undertook. It was instead the oppor tunity to support deserving small businesses, and peti tioners thwarted the purpose of the SBIR program by taking money that should have gone to a different candi date. The court of appeals correctly concluded that the government was damaged in the amount that, but for petitioners' false statements, could have been directed to a more deserving applicant.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

ELENA KAGAN
Solicitor General
TONY WEST
Assistant Attorney General
MICHAEL S. RAAB
NICHOLAS BAGLEY
Attorneys

MARCH 2010

1 In 2009, while this case was pending, Congress amended the FCA. See Fraud Enforcement and Recovery Act of 2009 (FERA), Pub. L. No. 111-21, § 4, 123 Stat. 1621. All citations to the FCA in this brief are to the Act as it existed prior to those amendments.

2 In addition to the holdings described above, the district court also determined that a release clause in a contract that relator Longhi had entered into shortly after filing his qui tam suit was unenforceable on grounds of public policy. Pet. App. 125-139. The court of appeals af firmed that determination. Id. at 30-33. The government did not ad dress that issue in the court of appeals and takes no position on it here. As petitioner recognizes (Pet. 30-31), the resolution of that issue "do[es] not affect any of the claims by the government" but rather bears only on the potential liability to each other of petitioners and the relator.

3 Petitioners also suggest that variations among the courts of ap peals' understanding and application of the materiality standard consti tute a circuit split that warrants this Court's review. Pet. 8. Any such divergence is minor and undeserving of this Court's attention. More over, Congress eliminated any confusion that previously may have exis ted when it enacted FERA § 4(a)(2), 123 Stat. 1623. The Act clarified that the "natural tendency" test from Neder supplies the appropriate governing standard. In any event, this case would be an unsuitable vehicle for deciding whether the "natural tendency" or the "'outcome' materiality" standard governed under prior law, since the record indi cates (and the courts below found) that petitioners' misrepresentations had an actual effect on the government's funding decisions. See Pet. App. 26-27 & n.8, 114-118; pp. 13-14, infra.