United States v. Natl Semiconductor ( 1997 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA ex rel. P.
WYMAN HARRISON; LAWRENCE T.
SHEPARD, Relators,
Plaintiffs-Appellants,
and
TAXPAYERS AGAINST FRAUD, No. 95-2993
Movant,
v.
NATIONAL SEMICONDUCTOR
CORPORATION,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
J. Frederick Motz, Chief District Judge.
(CA-91-3239-JFM)
Argued: December 4, 1996
Decided: January 7, 1997
Before WILKINSON, Chief Judge, and
NIEMEYER and WILLIAMS, Circuit Judges.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Frank Paul Bland, Jr., LAW OFFICE OF KIERON F.
QUINN, Towson, Maryland, for Appellants. Roger S. Goldman,
LATHAM & WATKINS, Washington, D.C., for Appellee. ON
BRIEF: Bradley S. Weiss, LAW OFFICE OF BRADLEY SCOTT
WEISS, Washington, D.C.; Sandra J. Strebel, David E. Pomper,
SPIEGEL & MCDIARMID, Washington, D.C., for Appellants.
Penelope A. Kilburn, LATHAM & WATKINS, Washington, D.C.,
for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
P. Wyman Harrison and Lawrence T. Shepard filed this qui tam
action on behalf of the United States against National Semiconductor
Corporation, alleging that National Semiconductor committed fraud
in performing its fixed-price contract to supply the National Security
Agency with a state-of-the-art facility for the manufacture of microe-
lectronic chips, in violation of the False Claims Act, 31 U.S.C. § 3729et seq. The United States elected not to intervene in the action, and
Harrison and Shepard, as relators, have pursued it. The district court
entered summary judgment in favor of National Semiconductor, and
we now affirm.
In 1988, the National Security Agency ("NSA") entered into a firm
fixed-price contract with National Semiconductor for the installation
of a semiconductor manufacturing facility at the NSA's Special Pro-
cess Laboratory at Fort Meade, Maryland. The contract used a perfor-
mance, as opposed to a design, criterion and required that National
Semiconductor provide its expertise in supplying a state-of-the-art
facility. Accordingly, the NSA made the contract deliberately "vague"
so as to afford the supplier the flexibility necessary to meet the gov-
ernment's performance specifications. As was expected by the parties,
during the contract's two-year performance period, National Semi-
conductor modified its initial proposal to upgrade the technology and
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substitute components to reflect the rapidly evolving state-of-the-art.
Performance of the contract was concluded in October 1990, and,
according to the NSA, "the facility has performed, and continues to
perform, much to the satisfaction of [the NSA]." Even now, more
than six years after completion of the contract, the NSA has expressed
no dissatisfaction with National Semiconductor's performance or its
contractual modifications.
Harrison and Shepard were two employees of Argonne National
Laboratories, a quality assurance subcontractor hired by the NSA to
review the performance of the National Semiconductor contract. As
qui tam relators, they filed suit alleging that National Semiconductor
had failed to provide numerous items allegedly required by the con-
tract and that National Semiconductor made numerous false state-
ments to the NSA regarding its cost of performance. Harrison and
Shepard allege that the NSA relied on National Semiconductor's false
statements in deciding to accept contract modifications in lieu of
items originally specified. After reviewing the relators' allegations,
the government declined to intervene, concluding that the information
that the relators "have presented was known by the Government and
determined to be acceptable back in 1990. No new information has
been presented that would warrant investigation and the continued
expenditure of government funds." The district court then unsealed
the complaints and, after disposing of several minor matters, granted
National Semiconductor's motion for summary judgment.
On appeal, the relators have focused their challenge on alleged
misstatements made in two letters submitted by National Semicon-
ductor to the NSA in the final weeks of the contract. They contend
that National Semiconductor misrepresented costs it incurred in pro-
viding certain upgraded equipment. According to the relators, the
NSA's decision to accept National Semiconductor's performance of
the contract was based on these false statements, and, but for the
statements, the NSA would have required National Semiconductor to
refund a portion of the contract price. Inherent in relators' argument
that costs for change were misrepresented is the notion that National
Semiconductor's original proposed costs constitute the benchmark
against which the costs of later changes are to be measured. National
Semiconductor, on the other hand, contends that the cost of any sub-
stituted performance must be measured against what the cost of actual
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performance would have been and not what was originally estimated.
Against this measure, National Semiconductor notes that the costs it
reported to the NSA were indisputably accurate. Given the rapid evo-
lution of the relevant technologies, the difference between the pro-
jected costs at the time of the proposal and the costs of actual
purchase at the time of performance was, in some cases, very substan-
tial.
The district court reviewed the record in detail and concluded that
the underlying facts were undisputed and that National Semiconduc-
tor's representations were in fact accurate. Moreover, the court con-
cluded that because the contract was performance-based, any
statements of National Semiconductor's costs were not material.
Finally, the court concluded that the case contains no fraud because
the NSA was happy with what it received despite knowledge of the
allegedly false claims at the time it accepted contract performance.
We have reviewed the record carefully, and having considered the
extensive arguments of counsel, we agree with the district court's
conclusions with respect to the issues before us. We also find it
important to note that the NSA, the customer in this case, fully
reviewed the relators' claims and concluded that it was satisfied with
National Semiconductor's performance.
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
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