Long Island Sav. Bank v. United States - Opposition

No. 07-1234

In the Supreme Court of the United States

THE LONG ISLAND SAVINGS BANK, FSB, ET AL., PETITIONERS

v.

UNITED STATES OF AMERICA

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

BRIEF FOR THE UNITED STATES IN OPPOSITION

GREGORY G. GARRE
Acting Solicitor General
Counsel of Record
GREGORY G. KATSAS
Acting Assistant Attorney
General
JEANNE E. DAVIDSON
KENNETH M. DINTZER
JOHN H. ROBERSON
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

QUESTIONS PRESENTED

1. Whether the court of appeals correctly held that petitioners' fraud rendered their contract with the Uni ted States unenforceable.

2. Whether the court of appeals correctly held that petitioners' prior material breach of the contract pre cluded their claims.

No. 07-1234

THE LONG ISLAND SAVINGS BANK, FSB, ET AL.,

PETITIONERS

v.

UNITED STATES OF AMERICA

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

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinions of the court of appeals (Pet. App. 1a- 37a, 38a-68a) are reported at 503 F.3d 1234, and 476 F.3d 917, respectively. The opinions of the Court of Federal Claims (Pet. App. 69a-169a, 170a-198a) are re ported at 67 Fed. Cl. 616, and 54 Fed. Cl. 607, respec tively.

JURISDICTION

The judgment of the court of appeals was entered on September 13, 2007. The petitions for rehearing were denied on December 28, 2007 (Pet. App. 199a-200a, 201a-202a). The petition for a writ of certiorari was filed on March 27, 2008. The jurisdiction of this Court is in voked under 28 U.S.C. 1254(1).

STATEMENT

This is one of the breach-of-contract cases that were filed after the enactment of the Financial Institu tions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub. L. No. 101-73, 103 Stat. 183. See Uni ted States v. Winstar Corp., 518 U.S. 839 (1996) (Win star). Of the approximately 122 Winstar-related cases that were originally filed, only approximately 17 remain pending, and most of those cases, like this one, have nearly completed the litigation process.

1. a. Petitioners are the Long Island Savings Bank, FSB (LISB) and the Long Island Savings Bank of Centereach FSB (Centereach). This case arises from LISB's acquisition of Centereach, a federally insured thrift that had been created by the government's merger of two troubled thrifts by the Federal Savings and Loan Insurance Corporation (FSLIC). Pet. App. 2a, 72a-73a.

In connection with the acquisition, LISB, Center each, and FSLIC entered into an Assistance Agreement in 1983. Pursuant to the Assistance Agreement, LISB acquired Centereach as a wholly-owned subsidiary by purchasing 100% of Centereach's stock for $100,000. The Assistance Agreement required FSLIC to make infusion of cash to Centereach that totaled $122 million. Pet. App. 3a, 76a-77a, 172a. The Assistance Agreement also permitted Centereach to account for $625.4 million of goodwill to be amortized over 40 years. Id. at 3a, 76a. LISB thereafter was able to dramatically expand its asset size, "increas[ing] its branch network fourfold, from twelve to forty-eight branches, and * * * its as sets more than threefold, from approximately $1.2 bil lion to $4.1 billion." Id. at 80a.

The soundness and integrity of LISB's management were critical to the government's decision to enter into the Assistance Agreement. Pet. App. 3a. The Assis tance Agreement thus provided, as a condition prece dent to FSLIC's entering into the transaction, that the Chairman of the Board of LISB certify that it was being operated in a safe and sound manner with no violations of federal statutes or regulations that could materially and adversely affect the operations or condition of the bank. Specifically, Section 2(c)(7) of the Agreement re quired a certification that LISB's "representations and warranties * * * set forth in § 11(b) are true and sub stantially correct as of the Purchase Date [August 17, 1983]" and that "[n]o event has occurred and is continu ing on the Purchase Date which would constitute * * * a Breach." Id. at 3a-4a. Section 11(b)(5) of the Agree ment in turn provided that:

LISB is not in violation of any applicable statutes, regulations or orders of, or any restrictions imposed by, the United States of America * * * regarding the conduct of its business * * * , including, without limitation, all applicable statutes, regulations, orders and restrictions relating to savings and loan associa tions * * * where such violation would materially and adversely affect LISB's business, operations or condition, financial or otherwise.

Id. at 4a-5a. LISB also represented and warranted in Section 11(b)(9) that it would not make "any untrue statement of a material fact or omit to state a material fact necessary to be stated in order to make the state ments contained therein not misleading," and that the Assistance Agreement contained every fact materially adversely affecting LISB. Id. at 5a.

When LISB acquired Centereach, regulations re quired LISB to maintain safe and sound management, including by complying with the Real Estate Settlement Procedures Act of 1974, (RESPA), 12 U.S.C. 2601 et seq. 12 C.F.R. 563.17, 571.7 (1983). Regulations of the Fed eral Home Loan Bank Board also prohibited directors and officers of insured institutions from receiving fees, kickbacks, or anything of value, directly or indirectly, in connection with any institution loan for real property. 12 C.F.R. 563.40 (1983).

At the time of contract formation, LISB's Chairman of the Board and Chief Executive Officer (CEO), James Conway (Conway), signed the required certification of the Assistance Agreement. Pet. App. 5a. That certifica tion was false, as Conway at the time was involved in an illegal kickback scheme related to fees associated with LISB's real-estate loan closings. Id. at 12a-14a, 22a-26a, 187a-188a. Pursuant to that scheme, all of LISB's loan closings were directed to a law firm controlled by Con way. Although he did not practice law, the firm kicked back millions of dollars to Conway, either directly or through family members who Conway placed at the firm. Id. at 6a-7a, 12a-14a, 22a-26a. Conway also repeatedly misrepresented his relationship with the law firm in a series of questionnaires the banks submitted to regula tors during the 1980s. Id. at 7a-9a, 173a-174a.

b. In August 1989, Congress enacted FIRREA to address widespread problems in the savings and loan industry. FIRREA created the Office of Thrift Supervi sion (OTS) and charged it with examining, supervising, and regulating federally insured thrifts. 12 U.S.C. 1462a, 1463. FIRREA also imposed new capital require ments on thrifts and restricted their ability to count goodwill toward those capital requirements. Pet. App. 10a. FIRREA thus restricted Centereach's ability to count its $625 million in goodwill toward regulatory cap ital requirements and altered the period over which LISB could amortize its goodwill.

c. After the enactment of FIRREA, Conway hired an outside law firm to advise the banks. In the course of that representation, the law firm discovered Conway's compensation arrangement with his former firm. Peti tioners thereafter disclosed Conway's arrangement to OTS, which in turn banned Conway from holding any position in an insured financial institution. Pet. App. 10a-12a. In February 1998, Conway pleaded guilty to a criminal violation of 18 U.S.C. 215, admitting that he "knowingly, intentionally and corruptly solicit[ed], de manded, accepted and agreed to accept . . . funds from the law firm paid directly to him, . . . intending to be influenced and rewarded in connection with . . . the assignment of the LISB residential mortgage closing work to the law firm." Pet. App. 13a (brackets in origi nal). Conway was also disbarred by the New York Su preme Court, which found that he "engaged in a scheme of illegal kickbacks, using his daughter and daughter-in- law as conduits to circumvent Federal law prohibiting him from receiving compensation from his former law firm." Id. at 13a-14a (quoting In re Conway, 712 N.Y.S.2d 610, 611 (App. Div. 2000)).

2. Meanwhile, in August 1992, petitioners filed this suit in the Court of Federal Claims, alleging that, by enacting FIRREA, the government breached the Assis tance Agreement's provision stating that LISB could count the goodwill created by its acquisition of Cen tereach toward its regulatory capital computations. Pet. App. 12a. In February 2001, the government filed its answer, including its counterclaims and defenses, based upon petitioners' fraud and prior material breach of the contract. Id. at 14a. Defendant's answer was filed pur suant to the schedule agreed upon by the parties and set forth in the case management order governing this and other Winstar-related actions, which expressly stated that "no defenses or arguments of any kind should be deemed waived" because the answer had not been filed previously. Ibid.

3. The Court of Federal Claims denied the govern ment's summary judgment motion with respect to the counterclaim for fraud and its defense of prior material breach. Pet. App. 170a-198a. The trial court recognized that Conway had engaged in an illegal scheme to receive kickbacks from his law firm with respect to LISB loan closings. Id. at 172a-175a. The court nonetheless re jected the fraud counterclaims based on its conclusions that LISB itself had not acted fraudulently and that Conway's conduct could not be imputed to LISB. Id. at 194a-198a. The trial court further found that LISB had not committed a prior material breach of the Assistance Agreement. Id. at 177a-184a. In reaching that conclu sion, the trial court held that LISB did not violate RESPA because it did not pay the kickback charges to Conway; rather, Conway's law firm paid the kickbacks. Id. at 183a. The trial court then reasoned that, because LISB was not violating RESPA, LISB was not operating in an unsafe and unsound manner, and therefore did not violate the Assistance Agreement's warranty and disclo sure provisions. Ibid.

The government subsequently moved for summary judgment seeking to dismiss petitioners' claims for $474 million in restitution damages. The trial court granted the government's motion, holding that petitioners' claim was "both speculative and indeterminate." 60 Fed. Cl. at 96 (quoting Glendale Fed. Bank FSB v. United States, 239 F.3d 1374, 1382 (Fed. Cir. 2001)).

Following a trial, the Court of Federal Claims issued its decision holding the government liable for breach of the Assistance Agreement. Pet. App. 107a-120a. The court awarded petitioners expectancy damages of more than $252 million, incidental damages of almost $18 mil lion, and a tax gross-up of more than $165 million, for a total of approximately $435 million. Id. at 168a-169a.

4. The court of appeals reversed, holding that peti tioners' claims were forfeited under the special plea in fraud statute, 28 U.S.C. 2514. Pet. App. 38a-68a. Fol lowing petitioners' petition for panel rehearing and re hearing en banc, the court of appeals, acting en banc, returned the case to the panel, which withdrew and va cated its original opinion. Id. at 2a. The court of ap peals then held that the trial court erred in denying the government's summary judgment based upon fraud and prior material breach. Id. at 1a-37a.

The court of appeals observed that, pursuant to the Restatement (Second) of Contracts § 163 (1981) (Re statement), a misrepresentation may prevent the forma tion of contract, thus making the contract void. Pet. App. 19a-20a. The court of appeals then recognized that "the general rule is that a Government contract tainted by fraud or wrongdoing is void ab initio." Id. at 20a (quoting Godley v. United States, 5 F.3d 1473, 1476 (Fed. Cir. 1993)). The court held that rule was satisfied here because LISB obtained the contract by knowingly making a false statement that LISB was operating in a safe and sound manner at the time of the Centereach acquisition. Id. at 21a-24a. The court of appeals further held that Conway's knowledge of the certification's fal sity should be imputed to LISB. Id. at 26a-29a. The court of appeals explained that Conway's arrangement to funnel LISB's mortgage closing transactions to his law firm benefitted LISB because it obtained the legal services required for the closings, id. at 28a-29a, and because "by signing the false certification under the As sistance Agreement, Conway enabled LISB to acquire Centereach," id. at 29a. The court of appeals further found that the government had "contracted for full dis closure of any conflicts-of-interest in order to assure the safe and sound management of LISB," and had justifi ably relied upon Conway's misrepresentations. Id. at 29a-30a. The court of appeals explained that "the only reasonable inference is that had [petitioners] stated the truth about Conway, they would not have received the contract." Id. at 31a.

The court of appeals further held that, "[e]ven if the contract were not void, the doctrine of prior material breach precludes [petitioners'] breach of contract claim for damages." Pet. App. 31a. The court of appeals con cluded that "because the Assistance Agreement explic itly conditioned the government's obligations" upon the "representations and warranties of LISB set forth in § 11(b)" of the Assistance Agreement, "the falsity of LISB's certification * * * represents a failure of per formance." Id. at 32a-33a. The court of appeals ex plained that petitioners' failure of performance was ma terial because, without the false certification, petitioners would not have received the contract. Id. at 33a. The court of appeals similarly determined that, because the government relied upon the certification, LISB's failure of performance preceded the government's breach and was never cured. Ibid. The court of appeals accordingly concluded that "LISB's false certification constitutes an uncured material failure of performance that provides an independent basis for precluding [petitioners'] claim for damages." Id. at 36a.1

ARGUMENT

The court of appeals correctly held that petitioners' knowingly made false material statements, both at the formation of the contract with the United States, and during the contract's performance, preclude petitioners' breach of contract claim. That fact-bound decision does not warrant further review by this Court.

1. Petitioners contend (Pet. 16-24) that the court of appeals erred by failing to hold that petitioners' fraud in inducing the Assistance Agreement merely rendered that contract voidable, and not, as the court of appeals held, void ab initio. Petitioners thus argue that the court of appeals' decision conflicts with precedents of this Court recognizing the distinction between the two concepts and that the court "did not attempt to reconcile its holding with generally applicable principles of con tract law, and did not rely for its rule on the Restate ment or the decisions of any other court." Pet. 19; see Pet. 23-24. That contention is incorrect and would not warrant this Court's review in any event.

a. Contrary to petitioners' statement (Pet. 16-17) the court of appeals cited the Restatement §§ 163-164, and expressly recognized that "a misrepresentation may prevent the formation of a contract or may make a con tract voidable." Pet. App. 19a. Section 163 states that, if a misrepresentation concerns an essential term of the contract, so that the opposing party does not have a rea sonable opportunity to know of the character or the es sential terms of the contract, "there is no effective mani festation of assent and no contract at all." Restatement § 163 cmt. a.

The court of appeals correctly determined in this case that LISB's representations that it was operating in a safe and sound manner and that it had not failed to disclose material information were essential terms of the contract. Pet. App. 30a-33a. The fraud here thus "re lates to the very nature of the proposed contract itself." Restatement § 163 cmt. a.

Through the Assistance Agreement, the government contracted primarily for LISB's safe and sound manage ment, an essential concern of the government, given that Centereach's financial condition was deteriorating and its acquisition was funded from the outset by $75 million of government-infused cash, with the govern ment's assistance totally $122 million. The govern ment's concern for safe and sound management was fur ther based upon its desire to maintain the public's trust in the banking system, a trust that depends to a large degree on the integrity of bank management. A meeting of the minds as to the integrity and truthfulness of LISB's representations was therefore essential-and a condition precedent-to any agreement by the govern ment with the petitioners. Pet. App. 3a-4a.

The evidence was uncontested that there would have been no contract if the government had known that the certification-a central tenet of the contract itself-was false and if petitioners instead had truthfully set forth the facts concerning the safety and soundness of LISB's management. Pet. App. 9a-10a, 30a-31a. Accordingly, there was no effective manifestation of assent by the government to the essential terms of the contract con cerning safety and soundness of LISB's management. In other words, petitioners understood that the contract itself actually did not set forth true and accurate repre sentations concerning safety and soundness and full dis closure of material facts, while the government under stood the contract's essential terms as setting forth truthful representations concerning these matters.

b. Petitioners also contend (Pet. 19-23) that the court of appeals' finding that the Assistance Agreement was void ab initio conflicts with United States ex rel. Siewick v. Jamieson Science & Engineering, Inc., 214 F.3d 1372, 1377 (D.C. Cir. 2000) (Jamieson), and Hayes International Corp. v. McLucas, 509 F.2d 247, 263 n.26 (5th Cir.), cert. denied, 423 U.S. 864 (1975). That is not correct, as those decisions are clearly distinguishable from the court of appeals' decision in this case. Jamie son was a qui tam action in which the United States was not a party, and the court addressed the distinction be tween void and voidable contracts only in what is essen tial dictum, as the court of appeals concluded that the relator had not shown that the government was de frauded. 214 F.3d at 1376-1378. Moreover, Jamieson acknowledged that "contracts that are seen as being in fundamental violation of public policy" are void (rather than merely voidable). Id. at 1377. Jamieson did not involve conduct remotely resembling that at issue here, where petitioners made an express certification in the contract that was both essential to contract formation and false.

Hayes is even further removed from this case. That case did not even discuss the difference between con tracts that are void and those that are voidable. The court, in a concluding footnote, merely declined to invali date a government contract based on an asserted "gen eral public policy against conflicts of interest," unan chored to specific penal prohibitions. 509 F.2d at 263 n.26. Here, by contrast, petitioners made false repre sentations in the contract itself, and Conway was con victed of a criminal offense for conduct underlying the false representations.

c. This Court's review is also not warranted because even if the contract was not void ab inito, the Assistance Agreement was voidable at the government's election, and petitioners thus are not entitled to relief in any event. As petitioners acknowledge, as a result of peti tioners' fraud, the government is entitled to renounce the contract and be returned to its pre-contract position, as long as the government does not continue to keep the benefits of the contract. Pet. 18. Here, contrary to peti tioners' suggestion (Pet 29 n.10) the trial court properly denied petitioners' restitution claim for benefits alleg edly conferred on the government, 60 Fed. Cl. at 96, and petitioners did not appeal that holding. Indeed, far from retaining any benefit of the bargain, the government never received from petitioners the $122 million in cash that the government provided to petitioners, or the value of the Centereach franchise. Accordingly, any distinction between a contract being void and being void able is not critical to the outcome of this case.2

2. In all events, this Court's review of the court of appeals' holding that the contract was void ab initio is unwarranted because the court alternatively held that petitioners' prior material breach provided an independ ent basis for rejection of petitioners' damages claims. Pet. App. 2a, 31a, 36a, 37a. That fact-bound conclusion too does not warrant further review.

Petitioners contend (Pet. 24-27) that the court of ap peals erred in stating that "any degree of fraud is mate rial as a matter of law." Pet. App. 33a (quoting Christo pher Village, L.P. v. United States, 360 F.3d 1319, 1335 (Fed. Cir. 2004), cert. denied, 543 U.S. 1146 (2005)). Petitioners further argue (Pet. 27-29) that the court's statement in that respect conflicts with decisions of other courts of appeals that hold that materiality turns on the extent to which a contract breach deprives the non-breaching party of the benefit of the bargain. The court of appeals' actual holding, however, is entirely faithful to that principle. The court of appeals' passing statement that "any degree of fraud is material" was unnecessary to the court's disposition of the issue, as the court's specifically held that petitioners' breach was ma terial because the government did not receive the bene fits of its bargain under the contract, i.e., sound manage ment of the bank. Pet. App. 33a.

Specifically, the court of appeals thus held that pe- titioners' misrepresentations were material "based on [the court's] discussion of causation in supra Part III.A.3." Pet. App. 33a. Part III.A.3 of the court of ap peals' opinion in turn held that there was a direct and substantial causal link between petitioners' fraud and the government's decision to enter into the contract. Id. at 29a-31a. The court of appeals thus concluded that "the only reasonable inference is that had the plain tiffs stated the truth about Conway, they would not have received the contract. The plaintiffs have set forth no affirmative evidence such that a reasonable jury could conclude otherwise." Id. at 31a. Indeed, the govern ment's supervisory agent responsible for negotiat- ing and recommending the acquisition averred that, had LISB revealed the nature of the kickback scheme, the government would not have gone forward with the Agreement. Id. at 9a-10a. The trial court thus found that Conway's fraud was material and induced the agreement, explaining that the "Government contracted for full disclosure of any conflicts-of-interest in order to assure the safe and sound management of LISB, and it relied on Conway's statements. The Government thus justifiably relied on Conway's misrepresentation." Id. at 192a.3

Petitioners therefore err in arguing that the court of appeals held that a contracting party can be absolved of liability "if a contracting party made any misstatement at all that caused the other party to enter into the con tract, even if the misstatement was not 'wil[l]ful or even negligent.'" Pet. 25 (emphasis added) (brackets in origi nal). Nowhere did the court of appeals state that "any misstatement at all" that causes a party to enter into a contract can absolve a party of liability. The court of appeals merely noted in a footnote, that the knowledge element required for rendering a contract void based on fraud is not a requirement under the prior material breach doctrine. Pet. App. 33a n.4 (quoting Restate ment § 235 cmt. a). Petitioners' argument here, too, does not address the court of appeals stated bases for finding the false statements and omissions material: that the certification was an express condition precedent for the government's performance and that there would have been no contract but for the false certification.4

In short, petitioners deprived the government of the benefit of safe and sound management for which it had contracted as a fundamental purpose of the Assistance Agreement. LISB's fraud was neither minor nor insig nificant, but rather tainted the very essence of LISB's performance. The acquisition approved by the govern ment enabled LISB to obtain 36 branches and $122 mil lion in cash, the benefits of which LISB would not have received but for the fraud, Pet. App. 29a-30a, while "LISB paid nothing for the franchise," and contributed only $100,000 to Centereach. Id. at 172a. LISB was required in turn to supply (1) honest and full disclosure, and (2) safe and sound management. LISB breached those obligations at the contract's inception, depriving the government of the expected benefit of its bargain. The court of appeals' fact-bound conclusion in this re gard does not warrant plenary review by this Court.

3. Petitioners finally contend that the court of ap peals' decision will discourage citizens from entering into commercial contracts with the government, Pet. 31- 32, and "greatly unsettle the government contracting process." Pet. 15. That contention, too, is incorrect. For over half a century, the law has been settled-in a decision by the Federal Circuit's predecessor, the Court of Claims-that, if a plaintiff commits material fraud "in regard to the very contract upon which the suit is brought," all claims under the contract will be for feited. Little v. United States, 152 F. Supp. 84, 87 (Ct. Cl. 1957). The contracting process has fared well be cause, contrary to petitioners' contention, it is not, in fact, unduly burdensome to require contractors to re frain from fraud in the inducement of government con tracts.

Furthermore, as the Federal Circuit has correctly observed, Winstar claims frequently turn on their par ticular facts and circumstances, and each case must be considered on its individual merits. See, e.g., Califor nia Fed. Bank, FSB v. United States, 245 F.3d 1342, 1347 (Fed. Cir. 2001), cert. denied, 534 U.S. 1113 (2002). In this case, petitioners were unable to make out their claim for breach of contract because of the material fraud they perpetrated in connection with the formation and performance of the contract, and because of their prior material breach of the contract.

The petitioners' hypothetical, where the government confiscates a $436 million airplane without paying for it (see Pet. 30-31), is not remotely analogous to the facts here.5 This is not a case in which a contractor supplied goods or services and the expected payments from the government were forfeited. As discussed above, peti tioners have failed to return more than $100 million in government funds they procured by fraud, and they are hardly well-positioned to complain that the court of ap peals' decision undermines public confidence in govern ment contracts. Contrary to the petitioners' apparent belief (Pet. 34), the court of appeals' decision thus re spects this Court's admonition that ordinary principles of contract construction and breach should be applied to government contracts. United States v. Winstar Corp., 518 U.S. 839, 870-871, 895 (1996). Moreover, as the Court explained in United States v. Mississippi Valley Generating Co., 364 U.S. 520, 565 (1961), non-enforce ment of government contracts tainted by fraud is meant to "guarantee the integrity of the federal contracting process and to protect the public from the corruption which might lie undetectable beneath the surface of a contract conceived in a tainted transaction."

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

GREGORY G. GARRE
Acting Solicitor General
Counsel of Record
GREGORY G. KATSAS
Acting Assistant Attorney
General
JEANNE E. DAVIDSON
KENNETH M. DINTZER
JOHN H. ROBERSON
Attorneys

JUNE 2008

1 The court of appeals did not address the government's challenges to the trial court's award of damages. The government argued that any costs resulting from the merger were not caused by the breach; that the merger entailed no new capital costs; that the trial court erred in im puting costs to LISB's contributed capital; that the trial court used an improper methodology for calculating any imputed costs of LISB's re tained earnings; and that the trial court erred by awarding tax gross-up damages. Gov't C.A. Br. 36-62.

2 The government's election to regard the contract as void was time ly. By the time the government discovered LISB's fraud, at the earliest in 1992 (Pet. App. 12a), "all of the government's obligations under the Assistance Agreement were completed." Pet. App. 35a. As the court of appeals correctly concluded, moreover, the government did not con tinue to accept performance under the Assistance Agreement after dis covery of the fraud. Id. at 35a-36a. Finally, pursuant to the case man agement order governing this case, petitioners agreed that the gov ernment waived no counterclaim or defense by following the procedural order whereby the government was not obligated to file an answer to petitioners' 1993 complaint until 2001. Id. at 14a, 34a-36a.

3 The trial court concluded that Conway's fraud could not be imputed to LISB, Pet. App. 194a-198a, but the court of appeals reversed that conclusion, id. at 26a-29a, and petitioners do not seek review of that issue in this Court.

4 For the same reasons, the court of appeals did not, as petitioners argue, establish a "per se test[] of materiality that completely disre gard[s] the effect of the breach on the performance promised by the breaching party." Pet. 25-26. Again, the court of appeals specifically concluded that petitioners' certification was an express condition prec edent for the government's performance and that, but for the misstate ments and omissions, petitioners would not have received the contract. Pet. App. 29a-31a.

5 Moreover, as noted, the plaintiff's claimed damages, at a minimum, were significantly inflated. See supra, n