PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA ex rel.
Thornton G. Sanders,
Plaintiff-Appellant,
v.
NORTH AMERICAN BUS INDUSTRIES,
INCORPORATED; DELOITTE
& TOUCHE USA, LLP; NORTH
AMERICAN BUS INDUSTRIES KFT.,
Defendants-Appellees,
and No. 07-1773
NORTH AMERICAN BUS INDUSTRIES,
RT.; AMERICAN IKARUS; PETER Z.
RONA; THE FIRST HUNGARY FUND,
Defendants.
TAXPAYERS AGAINST FRAUD
EDUCATION FUND,
Amicus Supporting Appellant.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
J. Frederick Motz, District Judge.
(1:02-cv-03084-JFM)
Argued: September 24, 2008
Decided: November 5, 2008
2 UNITED STATES v. NORTH AMERICAN BUS
Before WILKINSON, Circuit Judge, HAMILTON, Senior
Circuit Judge, and James C. CACHERIS, Senior United
States District Judge for the Eastern District of Virginia,
sitting by designation.
Affirmed by published opinion. Judge Wilkinson wrote the
opinion, in which Senior Judge Hamilton and Senior Judge
Cacheris joined.
COUNSEL
ARGUED: Joseph A. Black, CULLEN LAW FIRM,
P.L.L.C., Washington, D.C., for Appellant. James Patrick
Ulwick, KRAMON & GRAHAM, Baltimore, Maryland;
Amelia Toy Rudolph, SUTHERLAND, ASBILL & BREN-
NAN, Atlanta, Georgia, for Appellees. ON BRIEF: Daniel E.
Cohen, CULLEN LAW FIRM, P.L.L.C., Washington, D.C.,
for Appellant. Melissa H. Maxman, BAKER &
HOSTETLER, L.L.P., Washington, D.C., for Appellees North
American Bus Industries, Incorporated and North American
Bus Industries, Kft. Mike Bothwell, Sara Vann, BOTHWELL
& HARRIS, P.C., Roswell, Georgia; James W. Moorman,
Joseph E. B. White, TAXPAYERS AGAINST FRAUD EDU-
CATION FUND, Washington, D.C., for Amicus Supporting
Appellant.
OPINION
WILKINSON, Circuit Judge:
This appeal arises from a qui tam action under the False
Claims Act brought by Thornton G. Sanders against his for-
mer employer, North American Bus Industries, Inc.
UNITED STATES v. NORTH AMERICAN BUS 3
("NABI"). Sanders alleges that NABI defrauded the United
States by underpaying duties on bus frames that NABI
imported from Hungary and by falsely certifying that the
buses that NABI manufactured using those frames were eligi-
ble for federal "Buy America" subsidies. Sanders also alleges
that Deloitte & Touche USA, LLP, participated in NABI’s
fraud.
The district court rejected all of Sanders’s claims on vari-
ous grounds. Sanders now challenges each of those dismiss-
als, asserting myriad defects of both fact and law. We agree,
however, with the district court that plaintiff has failed to
establish the necessary elements of an FCA claim. We thus
affirm the judgment.
I.
A.
NABI is an Alabama corporation that manufactures and
sells transit buses. The manufacturing process occurs in
stages. First, the bus frames, or "shells," are constructed by
NABI’s corporate parent, North American Bus Industries,
Kft. ("NABI Hungary"). NABI Hungary then ships the shells
to NABI’s headquarters in Alabama. The shipments include
a number of components, like the wheels, some of which are
fixed permanently to the shells prior to shipment. NABI then
completes the assembly, using both the shipped components
and additional American-made parts.
NABI distributes the completed buses to municipalities and
transit authorities throughout the United States. The federal
government subsidizes these local entities for purchases of
buses that meet federal "Buy America" requirements. See 49
U.S.C. § 5323(j); 49 C.F.R. §§ 661.1-.21. Local entities
receiving subsidies require NABI to certify that its buses sat-
isfy the Buy America provisions. In particular, NABI must
4 UNITED STATES v. NORTH AMERICAN BUS
certify that more than sixty percent of the components in its
completed buses (by cost) are produced in the United States.
The bus shells and components that NABI imports from its
Hungarian parent are taxed according to the Harmonized Tar-
iff Schedule of the United States ("HTSUS"), which provides
the various classifications and corresponding rates of duty for
imported merchandise. See 19 U.S.C. § 1202. Prior to June
1998, NABI’s bus shells were classified under the HTSUS
subheading for "Bodies (including cabs), for . . . motor vehi-
cles." HTSUS subheading 8707.90.50. That classification car-
ried a duty of four percent of the value of the imported bus
shells and components.
In June 1998, NABI hired Damon Pike, a director at
Deloitte, to file a protest on NABI’s behalf with the U.S. Cus-
toms Service (currently U.S. Customs and Border Protection).
See 19 U.S.C. § 1514 (Customs protests); 19 C.F.R. pt. 174.
NABI sought to have its previous imports reclassified under
the HTSUS subheading for "Motor vehicles [with a diesel
engine] . . . [d]esigned for the transport of 16 or more persons,
including the driver." HTSUS subheading 8702.10.30. In
other words, NABI sought to have the imports that previously
had been classified as mere bodies of buses reclassified under
the subheading for completed motor vehicles. Under the latter
classification, NABI’s imports would have been eligible for
duty-free treatment under the Generalized System of Prefer-
ences because the imports were from Hungary. See 19 U.S.C.
§§ 2461-2467.
NABI’s protest relied primarily on General Rule of Inter-
pretation 2(a) of the HTSUS. Rule 2(a) provides that "[a]ny
reference in a heading to an article shall be taken to include
a reference to that article incomplete or unfinished, provided
that, as entered, the incomplete or unfinished article has the
essential character of the complete or finished article."
Based on that rule, NABI argued that its bus shells should
be reclassified because they had the "essential character" of
UNITED STATES v. NORTH AMERICAN BUS 5
finished motor vehicles. NABI supported that argument by
listing twenty components that it asserted were "permanently
installed" on the bus shells at the time of importation. NABI’s
protest did concede that, when compared with the imports in
a prior Customs ruling on trolley bus shells, NABI’s imported
components were somewhat fewer and had a somewhat lesser
value. NABI’s protest further expressly listed twelve compo-
nents that NABI acknowledged were installed only after
importation. But NABI argued that those differences and
missing parts did not alter the "essential character" of NABI’s
imports.
In November 1998, Customs issued a decision granting
NABI’s protest and holding that NABI’s imports should have
been classified under subheading 8702.10.30 as "motor vehi-
cles" eligible for duty-free treatment. The decision cited the
components listed in NABI’s protest and noted that the
remaining components were installed after importation. Cus-
toms then stated its finding that "[t]he bus shells when
imported contain a substantial amount of equipment and num-
ber of components necessary for a completed transit bus."
Customs concluded that NABI’s imports, even in their "unfin-
ished state," had the "essential character" of motor vehicles.
Based on the successful protest decision, NABI received
refunds of duties that it had paid on bus shells imported
between April and August 1997; statutory deadlines pre-
vented NABI from seeking refunds for earlier imports. Appar-
ently based in part on the advice of Damon Pike of Deloitte,
NABI also began classifying its subsequent imports under the
duty-free subheading for motor vehicles.
B.
Thornton G. Sanders, the qui tam relator in this action, is
a former executive of NABI. NABI hired Sanders as Vice
6 UNITED STATES v. NORTH AMERICAN BUS
President and Chief Financial Officer in 1993. In 1994, Sand-
ers became President and Director of NABI.1
During his employment at NABI, Sanders raised questions
within the company about certain contracts between NABI
and NABI Hungary. NABI and its parent company entered
into two separate contracts for each set of bus shells that
NABI imported in the years from 1993 to 1997. Under the
first contract, NABI paid NABI Hungary for the bus shells
and their components. Under the second contract, NABI paid
NABI Hungary for engineering and technology services.
NABI characterized those services as consisting of both tangi-
ble designs and intangible technical information that assisted
NABI in assembling the imported shells and parts. Because
NABI did not consider the engineering and technology ser-
vices to be part of the value of the imported bus shells, NABI
did not include the cost of those services when declaring the
value of the shells to Customs, or when calculating the eligi-
bility of its buses for Buy America subsidies.
In 1996, Sanders sent memoranda to others at NABI rec-
ommending that NABI discontinue its separate payments for
engineering and technology services. Sanders asserted that the
company’s payments did not accurately reflect the technical
assistance that NABI was receiving from NABI Hungary.
Apparently acting on Sanders’s recommendation, NABI dis-
continued its separate contracts for engineering and technol-
ogy services in 1997.
NABI also terminated Sanders’s employment in 1997,
shortly after Sanders proposed that the company be sold to a
group of investors that included himself and NABI’s other
senior managers. Sanders subsequently wrote a letter to
another NABI employee stating that he had been fired
1
At that time, NABI was known as American Ikarus, Inc. Any distinc-
tions between NABI and its predecessor corporation are immaterial to this
case.
UNITED STATES v. NORTH AMERICAN BUS 7
because executives at NABI Hungary viewed Sanders’s pro-
posed purchase of the company as an act of disloyalty.
C.
Sanders subsequently filed suit against NABI in 2002 under
the qui tam provisions of the False Claims Act ("FCA"). 31
U.S.C. §§ 3729-3733. Section 3729 of the FCA creates liabil-
ity in the form of treble damages and civil penalties of up to
$10,000 for persons who make false or fraudulent claims for
payment to the United States. Id. § 3729(a). And Section 3730
provides that civil actions under the FCA may be brought
either by the Attorney General, id. § 3730(a), or by private
persons, known as relators, who sue on the federal govern-
ment’s behalf, id. § 3730(b). A relator may recover up to
thirty percent of the proceeds of a successful action, plus
attorney’s fees and costs. Id. § 3730(d). The relator must file
his complaint under seal and notify the government of his
action, and the government may then elect either to intervene
in the suit or to allow the relator to continue the suit alone. Id.
§ 3730(b). The United States has consistently declined to
intervene in Sanders’s action.
Sanders stated five causes of action under the FCA. In
Count I, Sanders claimed that NABI had falsely certified that
its buses were eligible for Buy America subsidies. The district
court granted summary judgment to NABI on Count I because
Sanders’s claims were barred by the FCA’s six-year statute of
limitations in 31 U.S.C. § 3731(b)(1) and because the United
States had not suffered actual damages.
In Counts II and III, Sanders claimed that the protest sub-
mitted to Customs by NABI and Deloitte in 1998 contained
a false description of NABI’s imported bus shells. The district
court granted Deloitte’s motion to dismiss both counts as
time-barred. The district court also granted summary judg-
ment to NABI on Counts II and III. The court held that any
8 UNITED STATES v. NORTH AMERICAN BUS
alleged false statements in NABI’s protest were immaterial to
Customs’ decision to reclassify NABI’s imports.
In Count IV, Sanders claimed that NABI had also under-
paid its duties by failing to declare to Customs the value of
the separate payments that NABI made for engineering and
technology services. The district court granted summary judg-
ment to NABI, holding that the successful Customs decision
made clear that NABI never owed any duties on its imports.
Thus, even if NABI had failed to declare the imports’ full
value, the court held that NABI had not violated the FCA
because NABI had not deprived the government of any
money that it was actually due.
Finally, Sanders claimed in Count V that he had been
wrongfully discharged in violation of the FCA’s anti-
retaliation provision. 31 U.S.C. § 3730(h). The district court
dismissed Sanders’s claim as time-barred under the Supreme
Court’s decision in Graham County Soil & Water Conserva-
tion District v. United States ex rel. Wilson, 545 U.S. 409
(2005). Sanders did not oppose that dismissal.
Sanders now appeals the district court’s disposition of each
of his claims. We discuss those claims in turn.
II.
Sanders first contends that the district court misconstrued
the FCA’s statute of limitations, 31 U.S.C. § 3731(b), which
provides the following:
A civil action under section 3730 may not be
brought—
(1) more than 6 years after the date on which the vio-
lation of section 3729 is committed, or
(2) more than 3 years after the date when facts mate-
rial to the right of action are known or reasonably
UNITED STATES v. NORTH AMERICAN BUS 9
should have been known by the official of the United
States charged with responsibility to act in the cir-
cumstances, but in no event more than 10 years after
the date on which the violation is committed,
whichever occurs last.
The district court held that the six-year limitations period
in Section 3731(b)(1) barred Sanders’s claims against NABI
in Count I and against Deloitte in Counts II and III. Sanders
argues that the district court should have applied Section
3731(b)(2) to extend the limitations period for those claims.
Sanders interprets Section 3731(b)(2) to allow a relator to
bring a cause of action within ten years of an FCA violation,
as long as the relevant government official has not had actual
or constructive knowledge of the violation for more than three
years. We hold that Section 3731(b)(2) extends the FCA’s
statute of limitations beyond six years only in cases in which
the United States is a party.
It would be problematic to read the text of the statute any
other way. Section 3731(b)(2) refers only to the United States
—and not to relators. Thus, Congress intended Section
3731(b)(2) to extend the FCA’s default six-year period only
in cases in which the government is a party, rather than to
produce the bizarre scenario in which the limitations period in
a relator’s action depends on the knowledge of a nonparty to
the action.
The specific language in the statute bears this out. The limi-
tations period in Section 3731(b)(2) starts when the govern-
ment knows or should know of "facts material to the right of
action." This language makes perfect sense when referring to
an action brought by the government: the limitations period is
based on the government’s knowledge of "facts material to
the right of action" because that particular knowledge notifies
the government that it has an actionable FCA claim. But
applying the statute’s language to a relator’s action makes no
10 UNITED STATES v. NORTH AMERICAN BUS
sense whatsoever. The government’s knowledge of "facts
material to the right of action" does not notify the relator of
anything, so that knowledge cannot reasonably begin the limi-
tations period for a relator’s claims. Furthermore, once the
material facts supporting a right of action are known to the
United States, it is doubtful that the government official
"charged with responsibility to act in the circumstances"
could be charged with any responsibility other than to see that
the government brings or joins an FCA action within the limi-
tations period. After all, government officials are certainly not
"charged with responsibility" to ensure that a relator brings a
timely FCA action. All of these textual elements demonstrate
that Section 3731(b)(2) makes sense only when read to extend
the FCA’s limitations period in actions brought or joined by
the United States.
Our reading of the statute’s text finds support in the fact
that Section 3731(b)(2) is almost identical to another federal
statute, 28 U.S.C. § 2416(c). Section 2416(c) tolls the gener-
ally applicable statute of limitations in actions brought by the
United States—and only by the United States—until "facts
material to the right of action" are actually or constructively
known by an "official of the United States charged with the
responsibility to act in the circumstances." Section 2416 was
enacted in 1966. See Pub. L. No. 89-505, § 1, 80 Stat. 304,
305 (1966). Congress added Section 3731(b)(2) to the FCA in
1986 (the FCA previously had a uniform six-year limitations
period). See Pub. L. No. 99-562, § 5, 100 Stat. 3153, 3158
(1986). Thus, it appears that when enacting Section
3731(b)(2), Congress adopted the language from Section
2416(c) that applies only to actions brought by the govern-
ment. This apparent transcription of statutory language sup-
ports the conclusion that the text of Section 3731(b)(2)
lengthens the FCA’s limitations period only when the govern-
ment is a party. See United States ex rel. Sikkenga v. Regence
BlueCross BlueShield of Utah, 472 F.3d 702, 724-25 (10th
Cir. 2006).
UNITED STATES v. NORTH AMERICAN BUS 11
Sanders proffers a contrary reading of the statute’s text.
Sanders argues that Section 3731(b)(2)’s failure to mention
relators actually supports the application of that section to qui
tam actions. He contends that the phrase "[a] civil action
under section 3730" in the preface to Section 3731(b) includes
all civil actions under the FCA; he then argues that Section
3731(b)(2) does not contain any language expressly excluding
relator actions; and he therefore concludes that relator actions
fall within the scope of Section 3731(b)(2).
Sanders’s argument fails for two reasons. First, Section
3731(b)(2) does contain language excluding actions by rela-
tors because the statutory language makes no sense when
applied to an action in which the government is not a party.
Second, we also disagree with Sanders’s other premise, that
"[a] civil action" must be read indiscriminately to encompass
all FCA claims in all contexts. In fact, the Supreme Court
recently rejected almost exactly the same argument in Gra-
ham County Soil & Water Conservation District v. United
States ex rel. Wilson, 545 U.S. 409 (2005). In Wilson, the
Supreme Court held that Section 3731(b)’s reference to civil
actions under Section 3730 did not include anti-retaliation
claims, even though FCA anti-retaliation claims are brought
under Section 3730(h). 545 U.S. at 411. The Court recognized
that "Congress used the term ‘action under section 3730’
imprecisely in § 3731 and, in particular, that Congress some-
times used the term to refer only to a subset of § 3730
actions." Id. at 418. And the Court reasoned that when "a civil
action" was read in context, Section 3731(b)(1)’s reference to
a "violation of section 3729" suggested that the statute did not
include anti-retaliation claims because a violation of Section
3729 was not an element of those claims. See 545 U.S. at 415-
16. The same reasoning applies here. When the phrase "a civil
action" is read in context, Section 3731(b)(2)’s restrictive lan-
guage referring to the United States—and not to relators—
makes clear that only a subset of civil actions may benefit
from the extended limitations period in Section 3731(b)(2)—
those in which the government is a party.
12 UNITED STATES v. NORTH AMERICAN BUS
Sanders’s proposed construction of the statute also gener-
ates numerous practical difficulties. Under Sanders’s reading,
the statute of limitations in qui tam actions would depend on
the knowledge of a nonparty government official. Not only is
that result counterintuitive, but it would also cause innumera-
ble headaches for both defendants and the government during
discovery. To advance a statute of limitations defense, defen-
dants would be forced to seek out and litigate the identity and
knowledge of a government official not a party to the action.
And government agencies would be subjected to disruption
and expense in responding to discovery requests in actions in
which the government affirmatively chose to avoid those con-
cerns by declining to intervene. We are reluctant to place
these burdens on FCA defendants and the government absent
a clear textual basis for doing so.
Sanders’s reading of Section 3731(b)(2) also would allow
relators to sit on their claims for up to ten years before filing
an action and informing the government of the material facts.
Indeed, relators would have a strong financial incentive to
allow false claims to build up over time before they filed,
thereby increasing their own potential recovery. By empower-
ing relators to extend the limitations period at will, Sanders’s
reading would render the six-year limitations period in Sec-
tion 3731(b)(1) superfluous in nearly all FCA cases, thereby
contradicting "our duty to give effect, if possible, to every
clause and word of a statute." Duncan v. Walker, 533 U.S.
167, 174 (2001) (internal quotations omitted); see Sikkenga,
472 F.3d at 725-26 (agreeing that the approach advocated by
Sanders would render Section 3731(b)(1) superfluous).
Moreover, allowing relators to sit on their claims would
undermine the purpose of the qui tam provisions of the FCA:
to combat fraud quickly and efficiently by encouraging rela-
tors to bring actions that the government cannot or will not—
"to stimulate actions by private parties should the prosecuting
officers be tardy in bringing the suits." United States ex rel.
Marcus v. Hess, 317 U.S. 537, 547 (1943); Sikkenga, 472
UNITED STATES v. NORTH AMERICAN BUS 13
F.3d at 725. Sanders’s interpretation would instead allow
fraud to continue unabated for up to ten years. And a relator’s
failure to notify the government promptly of FCA violations
might also cause the government to lose out on its ability to
bring a criminal fraud prosecution, which must be filed within
five years of the violation. See 18 U.S.C. §§ 287, 3282;
United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211,
1218 (9th Cir. 1996).
This issue has admittedly given rise to different approaches
in the federal courts. Our interpretation of Section 3731(b) is
decidedly the majority approach in the federal courts of
appeals, where no circuit court has accepted Sanders’s view
that Section 3731(b)(2) extends the limitations period in qui
tam actions regardless of how long the relator has known of
the material facts. The Tenth Circuit has expressly held that
Section 3731(b)(2) does not apply to qui tam suits in which
the government has not intervened. Sikkenga, 472 F.3d at 725;
see also United States ex rel. Erskine v. Baker, No. 99-50034,
2000 WL 554644, at *1 (5th Cir. Apr. 13, 2000) (same);
United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501
F.3d 493, 515, 519-20 (6th Cir. 2007) (applying six-year limi-
tations period to a relator’s claims); Foster v. Savannah
Commc’n, No. 04-10876, 140 Fed. Appx. 905, 907-08 (11th
Cir. July 25, 2005) (same). But see Hyatt, 91 F.3d 1211,
1214-18 (9th Cir. 1996) (holding that Section 3731(b)(2)
applies when the government is not a party but that the relator
is the "official of the United States" on whose knowledge the
limitations period depends); United States ex rel. Malloy v.
Telephonics Corp., No. 01-3916, 68 Fed. Appx. 270, 272-73
(3d Cir. Apr. 16, 2003) (also interpreting Section 3731(b)(2)
to depend on the relator’s knowledge).2
2
Because we hold that Sanders cannot seek the benefit of Section
3731(b)(2), we need not and do not decide which specific government
official is "charged with responsibility to act in the circumstances"—a
question that has perplexed some courts. Compare United States v.
Macomb Contracting Corp., 763 F. Supp. 272, 274 (M.D. Tenn. 1990)
(relevant official must be within the Department of Justice) with United
States v. Tech Refrigeration, 143 F. Supp. 2d 1006, 1009-10 (N.D. Ill.
2001) (knowledge of other government officials may be imputed to DOJ).
14 UNITED STATES v. NORTH AMERICAN BUS
The majority of district courts in circuits other than these
are also in accord with our interpretation. See United States
ex rel. Fisher v. Network Software Assocs., Inc., 180 F. Supp.
2d 192, 194 (D.D.C. 2002); United States ex rel. El Amin v.
George Washington Univ., 26 F. Supp. 2d 162, 172-73
(D.D.C. 1998); United States ex rel. Finney v. Nextwave Tele-
com, Inc., 337 B.R. 479, 486 (S.D.N.Y. 2006); United States
ex rel. Thistlethwaite v. Dowty Woodville Polymer, Ltd., 6 F.
Supp. 2d 263, 265 (S.D.N.Y. 1998); United States ex rel.
Vosika v. Starkey Labs., Inc., No. Civ. 01-709, 2004 WL
2065127, at *2-3 (D. Minn. Sept. 8, 2004). A minority, how-
ever, has adopted Sanders’s view. See United States ex rel.
Pogue v. Diabetes Treatment Ctrs. of America, 474 F. Supp.
2d 75, 81-89 (D.D.C. 2007); United States ex rel. Salmeron
v. Enterprise Recovery Sys., Inc., 464 F. Supp. 2d 766, 769-70
(N.D. Ill. 2006); United States ex rel. Kreindler & Kreindler
v. United Techs. Corp., 777 F. Supp. 195, 204-05 (N.D.N.Y.
1991).
Based on our interpretation of Section 3731(b), we affirm
the district court’s grant of summary judgment on Count I to
NABI. Before the district court, Sanders limited the scope of
Count I solely to claims that arose outside of the six-year lim-
itations period. We therefore need not reach the question of
whether the government suffered actual damages from the
Buy America fraud that Sanders alleged in Count I. We also
affirm the district court’s dismissal of Counts II and III
against Deloitte as time-barred.3
3
Sanders tries to circumvent the district court’s holding that his claims
against Deloitte under Count III were untimely. Even though all of Deloit-
te’s alleged misconduct occurred outside of six years, Sanders contends
that Deloitte caused subsequent violations by NABI within the limitations
period. But that was not the theory of liability expressed in Count III of
Sanders’s complaint, which did not allege any independent FCA violations
other than the supposedly false Customs protest. See Second Amended
Complaint ¶ 40. Count III as pleaded against Deloitte was therefore time-
barred. And even if we were to construe Count III to contemplate addi-
tional, independent FCA violations, Sanders’s complaint warranted dis-
UNITED STATES v. NORTH AMERICAN BUS 15
III.
Sanders contends that the district court erred when it
granted summary judgment to NABI on Counts II and III of
Sanders’s complaint. In those counts, Sanders claimed that
NABI violated the FCA because the protest that NABI sub-
mitted to Customs in 1998 misrepresented the condition of the
company’s bus shells when they were imported, thereby
improperly allowing NABI to obtain duty-free treatment for
its imports. The district court held that Sanders failed to estab-
lish that the alleged false statements made by NABI in its pro-
test were material to Customs’ decision to reclassify NABI’s
imports.
The elements of an FCA claim are straightforward. "[T]he
plaintiff must prove: (1) that the defendant made a false state-
ment or engaged in a fraudulent course of conduct; (2) such
statement or conduct was made or carried out with the requi-
site scienter; (3) the statement or conduct was material; and
(4) the statement or conduct caused the government to pay out
money or to forfeit money due." Harrison v. Westinghouse
Savannah River Co., 352 F.3d 908, 913 (4th Cir. 2003). The
standard for materiality in the Fourth Circuit is also settled.
"Under the FCA, a statement or course of conduct is material
if it ‘has a natural tendency to influence agency action or is
capable of influencing agency action.’" United States ex rel.
Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 378 (4th
Cir. 2008) (quoting United States ex rel. Berge v. Bd. of Trs.
of the Univ. of Ala., 104 F.3d 1453, 1460 (4th Cir. 1997)).
Sanders did not allege under Counts II and III that NABI
made any false statement outside of the protest that it submit-
missal for other reasons. For one, Sanders failed to adequately plead the
element of causation because Deloitte’s alleged advice to NABI to enter
its bus shells duty-free was superfluous to the Customs decision itself.
Furthermore, Sanders failed to allege any FCA violations within the statu-
tory period with the particularity required by Federal Rule of Civil Proce-
dure 9(b).
16 UNITED STATES v. NORTH AMERICAN BUS
ted to Customs. Second Amended Complaint ¶¶ 37-41. We
therefore analyze only the materiality of the protest’s alleged
misstatements. NABI argued that its bus shells should be
reclassified because they had the "essential character" of fin-
ished motor vehicles. And to support that argument, the pro-
test listed twenty components and stated that those
components were "permanently installed" when the shells
were imported.
Before the district court, Sanders claimed initially that the
protest was materially false because some of the named com-
ponents were not "permanently installed." Second Amended
Complaint ¶ 24; Opposition to Deloitte’s Motion to Dismiss
at 18 ("The Amended Complaint also sets forth the factual
basis for the falsity of the protest, i.e., that at least seven spe-
cific components were not permanently installed."). For
example, Sanders contended that the protest was false because
the axles imported with the bus shells had to be removed and
subsequently reattached after importation. Second Amended
Complaint ¶ 26.
Sanders’s initial argument failed because the issue of per-
manent installation was clearly immaterial to Customs’ classi-
fication of NABI’s bus shells. Customs’ decision in favor of
NABI did not rely on a finding that any components were
installed permanently. Instead, it relied solely on a finding
that the bus shells "contain[ed] a substantial amount of equip-
ment and number of components necessary for a completed
transit bus." A previous Customs ruling (cited by NABI in its
protest) also looked only to the presence of components, not
to whether they were permanently installed. Sanders therefore
eventually acknowledged in his summary judgment motion
that permanent installation was immaterial: "For classification
purposes, it does not matter if any of the components were
permanently installed." Sanders’s Motion for Summary Judg-
ment at 14.
After conceding on the issue of permanent installation,
Sanders nonetheless argues that NABI’s protest was materi-
UNITED STATES v. NORTH AMERICAN BUS 17
ally false because a few of the components listed in the pro-
test were either themselves partially incomplete or were not
actually imported with the bus shells. But even when the evi-
dence in the record is viewed generously in Sanders’s favor,
it is clear that the protest at most contained minor deficien-
cies. The evidence shows that no more than one or two sub-
components of the suspension and power steering systems
were not imported with the bus shells. Most, but not all, of the
buses’ wheels and tires were included. And some of NABI’s
bus shells (apparently beginning with the ones imported in the
spring of 1998) did not include brake chambers and were
imported with axles that were removed and sent back to Hun-
gary. Sanders does not allege that any other components listed
in NABI’s protest were missing or incomplete, nor does the
evidence in the record suggest that to be the case.
When the record evidence is properly characterized, the
flaw in Sanders’s claim is obvious. Assuming for purposes of
argument that NABI’s statements were false, Sanders has
given us no reason to believe that when Customs considered
a protest that listed twenty imported components,4 those false
statements regarding one or two missing components—much
less subcomponents—were material to Customs’ decision.5
Sanders has focused most of his energy on alleging falsity
in the protest by diving into the minute details of the subcom-
ponents of the bus shells. But as Sanders’s claims of falsity
4
Those components were: the base structure; body; axles; front suspen-
sion; rear suspension; rims; wheels; power steering; brake chamber; fuel
tank; engine cradle; flooring; partial door system including the door pan-
els; windshield; outside body trim; corrosion protection paint; steering
wheel; tracking for interior lights; air duct system; and destination sign
door and enclosure.
5
The protest also acknowledged that twelve components were not
installed: the propulsion system; traction system; cooling system; heating
and air conditioning; electrical system; bumpers; seats and stanchions;
side windows; interior lighting; exterior lamps; passenger signals; and
non-standard customer options.
18 UNITED STATES v. NORTH AMERICAN BUS
become narrower, the alleged falsehoods become less likely
to be material. That is particularly so where the question for
Customs was not whether every component and subcompo-
nent in the protest was present, but whether the bus shells had
the "essential character" of buses. When it answered that
question in the affirmative, Customs did not rely on the pres-
ence of any specific component. Instead, its decision found in
broad terms that the bus shells "contain[ed] a substantial
amount of equipment and number of components necessary
for a completed transit bus." Thus, we find no reason to
believe that the particulars proffered by Sanders had any bear-
ing on Customs’ holistic analysis.
Sanders, however, takes vigorous exception to the actions
of both Customs and the district court. First, Sanders attempts
to find fault with the district court’s precise expression of the
materiality standard. He argues that the district court applied
the incorrect test by analyzing whether the missing compo-
nents or subcomponents in the protest "would have," rather
than "could have," affected Customs’ decision. But the district
court expressly found a lack of materiality under the "could
have" formulation pressed by Sanders. JA 1430. And regard-
less, the materiality inquiry does not turn on questions of
"would have" versus "could have." The standard is whether
NABI’s alleged false statements had "a natural tendency to
influence agency action or [were] capable of influencing
agency action." Berge, 104 F.3d at 1460. Under that standard,
the false statements alleged by Sanders were immaterial to
Customs’ decision.
Sanders also disagrees with the determination by Customs
that NABI’s bus shells were properly classified as motor vehi-
cles. Sanders thinks that the shells were so incomplete that
they should have been classified under the alternative sub-
heading for "bodies," and he goes on at length about 39 com-
ponents that he asserts were missing from the shells. But of
those 39 supposedly missing components, Sanders points to
only 3 that were listed in NABI’s protest as being present in
UNITED STATES v. NORTH AMERICAN BUS 19
the bus shells. Brief of Appellant at 10-12. NABI also explic-
itly told Customs that many more of those 39 components
were not included with its shells. And Sanders conceded at
oral argument that NABI had made no misrepresentation to
Customs regarding most of these 39 components. Further-
more, the Customs decision reflected the agency’s knowledge
that NABI’s bus shells were far from complete. The decision
stated that the bus shells arrived in the United States in an
"unfinished state" and that only then were "the remaining nec-
essary parts . . . installed to complete the transit bus[es]." Yet
Customs still decided that NABI’s bus shells had the "essen-
tial character" of motor vehicles. When Sanders complains
that too many components were missing from NABI’s bus
shells for the shells to be classified as motor vehicles, he is
therefore complaining not about misconduct by NABI, but
about the Customs decision itself. Sanders may think that
Customs’ decision was wrong, but that does not make NABI’s
statements materially false.
IV.
Sanders next contends that the district court erred when it
granted summary judgment to NABI on Count IV of Sand-
ers’s complaint. Sanders claimed in Count IV that—prior to
its successful protest—NABI underpaid its duties to Customs
because the company failed to declare as part of the value of
its bus shells the payments that it made to NABI Hungary for
engineering and technology services.
We agree with the district court that Sanders failed to sat-
isfy the fourth element of a cause of action under the FCA:
that NABI’s allegedly false statement or conduct "caused the
government to pay out money or to forfeit money due." Har-
rison, 352 F.3d at 913. Because Customs determined that
NABI’s bus shells qualified for duty-free treatment under the
HTSUS subheading for motor vehicles, NABI owed no duties
on its imports, regardless of their declared value. Thus, even
if NABI declared less than the correct value, NABI did not
20 UNITED STATES v. NORTH AMERICAN BUS
avoid any obligation to pay money to the government, 31
U.S.C. § 3729(a)(7), and the government forfeited no money
that it was due.
Sanders responds with a creative—yet erroneous—
argument. Sanders points out that when NABI filed its protest
with Customs in 1998, statutory deadlines prevented the com-
pany from obtaining refunds of duties that it had paid before
April 1997. Had NABI declared a larger value for its imports
prior to April 1997, therefore, Sanders observes that NABI
could not have recovered any of the extra duties that it would
have paid. From this, Sanders concludes that the government
suffered a loss in the additional amount that it would have
received—and kept—had NABI declared the full value of its
imports prior to April 1997.
Sanders’s argument fails because the availability of a
refund is irrelevant to the issue of whether the government
forfeited money that it was due in the first place. Even if
NABI could not obtain a refund of past duties, the Customs
decision demonstrated that NABI should have been paying no
duties all along. Thus, NABI cannot be said to have cheated
the government out of anything that it was due. In fact, the
earlier misclassification of NABI’s imports worked in the
government’s favor by erroneously subjecting those imports
to taxation. And the only reason that the limitations period on
refunds bears any significance is that it saved the government
from making NABI whole on its overpayments. Sanders
essentially argues that NABI should be liable for failing to
provide the government an additional windfall. That argument
cannot sustain the fourth element of an FCA claim, so we
affirm the district court’s grant of summary judgment on
Count IV.6
6
Sanders also appeals the district court’s dismissal of his anti-retaliation
claim under Section 3730(h). Sanders concedes, and we agree, that the dis-
trict court correctly dismissed that claim as time-barred under the Supreme
Court’s decision in Graham County Soil & Water Conservation District
v. United States ex rel. Wilson, 545 U.S. 409 (2005). Sanders contends that
his claim should be reinstated if Congress enacts legislation to overrule the
result in Wilson. No such legislation has been enacted, so we affirm on
this claim also.
UNITED STATES v. NORTH AMERICAN BUS 21
V.
While this appeal was pending, Sanders submitted what he
styled as two pieces of supplemental authority regarding
developments within the past year: claims that Customs
reclassified certain bus shells that NABI imported in Decem-
ber 2007, and claims that the government is investigating
NABI for possible criminal violations relating to the classifi-
cation of its imports. Our decision expresses no view whatso-
ever on these contentions. They are not part of the record
before us, and we refuse to speculate as to the potential out-
come of any ongoing investigations. Our decision tenders no
general assessment on NABI’s past, current, or future con-
duct. We hold only that on the record in this case, the district
court properly granted the defendants’ motions to dismiss and
for summary judgment. The district court’s judgment is there-
fore
AFFIRMED.