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United States ex rel Yannacopoulos v. General Dynamics

February 13, 2007

UNITED STATES OF AMERICA, EX REL. DIMITRI YANNACOPOULOS, RELATOR-PLAINTIFF,
v.
GENERAL DYNAMICS AND LOCKHEED MARTIN CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Judge Robert W. Gettleman

MEMORANDUM OPINION AND ORDER

Relator Dimitri Yannacopoulos has brought a seven count second amended qui tam complaint against defendants General Dynamics and Lockheed Martin Corporation alleging violations of the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., in connection with defendants' sale of F-16 aircraft to the government of Greece. Defendants have moved for partial summary judgment on certain claims raised in relator's complaint but not set out as separate counts. Specifically, defendants seek summary judgment on, (1) all claims attempting to hold them liable for violations of the FCA based on the theory that defendants' impliedly certified compliance with certain Defense Security Assistance Agency (the "DSAA") guidelines not specifically referenced in the actual contract or invoices ("the implied certification claim"), and (2) plaintiff's claim that defendants eliminated an Economic Price Adjustment Clause ("EP Clause") from the final contract without informing DSAA in violation of defendants' express certification that it would inform DSAA of any contract changes "upon effect" (the "express certification claim"). For the reasons set forth below, defendants' motion for partial summary judgment is granted.

BACKGROUND*fn1

This case involves a contract executed in January 1987 between Greece and General Dynamics for the sale of 40 F-16 aircraft ("Contract 5/86").*fn2 Defendant Lockheed Martin acquired General Dynamics' Fort Worth division and assumed all of General Dynamics' rights and obligations under Contract 5/86 in March 1993. Contract 5/86 was a direct commercial contract, meaning that Greece contracted directly with General Dynamics, and the United States was not a party. Greece, however, used foreign military financing ("FMF") loans provided by the United States government, to finance its purchase, which required DSAA to review the contract and approve the use of FMF funds.

In March 1985, General Dynamics and Greece executed a letter of intent ("LOI") setting forth the basic terms of their agreement as of that date. The effective date of that LOI was October, 1985. Attached to the LOI was a "draft contract" reflecting the status of the negotiations on various contract articles and annexes.

DSAA required General Dynamics to submit a "Contractor Certification and Agreement with the Defense Security Assistance Agency" ("Certification") which set forth General Dynamics' agreement with DSAA as to conditions of payment. General Dynamics submitted its first such Certification in February 1986 when General Dynamics and Greece sent DSAA the LOI that ultimately resulted in Contract 5/86. A largely identical Certification was submitted by General Dynamics in February 1987 when Contract 5/86 was finalized and signed. Each Certification was drafted by DSAA and contained thirteen enumerated paragraphs setting forth the terms of the agreement with DSAA. Paragraph 10 of the Certification provided that General Dynamics:

Certifies that the entire agreement which effects the contractual relationship between the contractor and the purchasing government relating to this Purchase Agreement consists of: Letter of Intent, dated 6 March 1985, including Annexes and documents listed therein and that there are no other amendments, modifications, side letters, or supplementary agreements relating to this Purchase Agreement. Agrees that any future changes with the terms of the Purchase Agreement will be reported to the DSAA upon effect.

Under the initial contract documents Greece agreed to make a $24 million down payment followed by quarterly milestone payments pursuant to a fixed schedule set forth in Annex A6 to Contract 5/86. The quarterly payments were due on the scheduled date provided defendants had completed the prescribed milestone events associated with each such payment. Defendants' right to receive the milestone payments was not limited by their actual cost of performance, nor were defendants required to substantiate their incurred costs, or provide any cost information at all. Rather, they submitted a "Certificate of Work-In-Progress" representing that had completed the necessary milestone events.

Defendants submitted each invoice or payment to the government of Greece. On each invoice defendants represented that the invoice was in accordance with Contract 5/86 (or the LOI) and defendants' Certification with DSAA. The invoices did not incorporate or adopt any DSAA guidelines either expressly or by reference. Greek authorities reviewed each invoice to confirm that payment was proper. Greek representatives approved the invoices for payment, signed the Certificate of Work-in-Progress and sent the invoices on to the U.S. government with requests that they be paid. It is undisputed that defendants completed each of the requisite milestone events associated with each quarterly payment at issue, and that the Greek government approved each invoice submitted by defendants.

The parties performed under the LOI and draft contract while they negotiated the terms of the final contract. Because General Dynamics was receiving milestone payments that were not based on or limited by its costs incurred, the draft contract contained a clause that would require that the final contract price would be reduced by the value of the imputed interest General Dynamics obtained by receiving so much of the price up front before incurring costs equal to the payments received. That clause was contained in Article 11 of the draft contract and was titled "Economic Price Adjustment for Advanced Payment" (the "EPA Clause"). Negotiation of the final terms of the contract continued for 22 months. Among many provisions continually discussed were the delivery dates and the EPA Clause. In particular, General Dynamics wanted elimination of the EPA Clause as a quid pro quo for an accelerated delivery schedule requested by Greece.

The parties executed the final version of Contract 5/86 on January 12, 1987. The contract was submitted to DSAA (by Greece) in February 1987 along with General Dynamics' Certification. The final version of Contract 5/86 did not contain the EPA Clause, but did include the accelerated delivery schedule. The instant motion for partial summary judgment on the express certification claim requires the court to decide, (a) when the parties actually reached an agreement as to the elimination of the EPA Clause, and (b), if or when DSAA was notified of that modification of the contract. It is undisputed, however, that DSAA received and reviewed the final version of Contract 5/86 prior to approving Greece's request to use FMF funds to finance the entire purchase price.

DISCUSSION

Implied Certification with DSSA Guidelines

Although not entirely clear from his complaint or brief, relator appears to be alleging that defendants violated the FCA by falsely certifying with each invoice and request for payment that they were in compliance with all DSAA guidelines. In particular, relator alleges that defendants failed to comply with paragraphs 4 and 18 of the October 1985 version of the DSAA guidelines. Because neither the invoices nor the Certification contains any reference to those particular guidelines, ...


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