United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 8, 2002 Decided May 3, 2002
No. 01-5150
United States of America,
Appellee
v.
TDC Management Corporation, Inc. and
T. Conrad Monts,
Appellants
Appeal from the United States District Court
for the District of Columbia
(No. 89cv01533)
Stephen L. Braga argued the cause for appellants. With
him on the briefs was Mark A. Miller.
Michael D. Taxay, Attorney, U.S. Department of Justice,
argued the cause for appellee. With him on the brief were
Roscoe C. Howard, Jr., U.S. Attorney, Douglas N. Letter, and
Michael F. Hertz, Attorneys, U.S. Department of Justice.
Before: Ginsburg, Chief Judge, Rogers and Garland,
Circuit Judges.
Opinion for the Court filed by Circuit Judge Rogers.
Rogers, Circuit Judge: This case is before the court for a
second time. In the first appeal, the court reversed in part
the grant of summary judgment to TDC Management Corpo-
ration, Inc. and its president, Theodore Monts. The court
held that the decision of the Department of Transportation
Board of Contract Appeals ("the Board") on TDC's appeal
from cost disallowances collaterally estopped the government
from relitigating the accuracy of TDC's monthly progress and
expenditure reports, but did not estop the government from
bringing False Claims Act charges based on information that
was omitted from those reports. United States v. TDC
Mgmt. Corp., 24 F.3d 292 (D.C. Cir. 1994) ("TDC I"). In this
second appeal, from the grant of summary judgment to the
government, TDC contends correctly that the district court
erred by granting preclusive effect to factual findings by the
Board. This contention is waived, however, because TDC did
not raise it in the district court and no occasion is presented
for the exercise of our discretionary review in order to
prevent a manifest injustice. Accordingly, because TDC's
other challenges are unpersuasive, we affirm.
I.
The background to this appeal appears in TDC I. Suffice it
to say, the litigation arose in connection with a Demonstration
Bonding Program ("Program") of the Urban Mass Transit
Authority ("UMTA") of the Department of Transportation.
The Program was designed to assist minority enterprises in
securing bonding from sureties when bidding on large trans-
portation construction projects. TDC I, 24 F.3d at 294.
TDC agreed to identify private investors willing to provide
collateral and management assistance to the minority enter-
prises in return for a share of the profits; for its part, UMTA
agreed to match the collateral that investors provided. Id.
By the terms of the Program, TDC was to serve as ombuds-
man between the parties, with no financial interest in Pro-
gram operations. Id. On July 6, 1983, TDC and UMTA
entered into a cost-reimbursement contract in which TDC
was to use its "best efforts" to locate investors and sureties
and obtain their tentative agreement to participate in the
Program. Id. at 296.
When the Program failed to progress as expected, UMTA
terminated the contract for convenience and disallowed nearly
half of TDC's claimed contract-related expenses, which to-
taled $928,916. Id. at 296. TDC appealed to the Board.
Before the Board rendered its decision, the United States in
May 1989 sued TDC under the False Claims Act, 31 U.S.C.
s 3729 (1982), for misrepresenting its actual progress in its
monthly reports to UMTA and concealing deviations from the
Program terms. Id. The Board ruled in TDC's favor and
reversed the disallowances, finding that TDC had not breach-
ed the contract for nonperformance and that its monthly
reports had notified UMTA of the categories and types of
expenses that UMTA sought to disallow. Id. Viewing its
jurisdiction under the Contract Dispute Act, 41 U.S.C. s 605,
as limited to the costs that had been disallowed by the
contracting officer, the Board declined to consider UMTA's
claim that TDC was not entitled to any monies under the
contract due to fraudulent omissions. Id. at 295. The
Board's decision was affirmed by the United States Court of
Appeals for the Federal Circuit. Skinner v. TDC Mgmt.
Corp., 975 F.2d 869 (Fed. Cir. 1992) (unpublished order).
Based on the collateral estoppel effect of the Board's
findings, TDC moved on April 19, 1991, for summary judg-
ment on the False Claims Act charges. TDC I, 24 F.3d at
294. The district court granted the motion on August 17,
1992. Following a partial reversal by this court in TDC I on
June 3, 1994, the district court on remand granted the
government's motion for summary judgment on March 29,
2000, and on February 6, 2001, awarded the government
damages. On April 10, 2001, the district court denied TDC's
motion and granted the government's cross-motion, pursuant
to Fed. R. Civ. P. 60, to clarify or correct the judgment.
II.
On appeal, TDC challenges the grant of summary judg-
ment on several grounds, only one of which requires extended
discussion. That contention is that the district court relied on
an erroneous application of the doctrine of collateral estoppel.
A.
On remand, the district court ruled that collateral estoppel
prevented TDC from relitigating factual issues decided by the
Board with regard to omissions in TDC's monthly reports
because "the issue of omissions was squarely addressed by
the Board in its prior review of the contract termination."
Remand Opinion at 7. Relying on the Board's findings, the
district court concluded there were no genuine issues of fact
with regard to the alleged omissions. Id. at 14. The district
court recited at length the Board's findings that TDC had
departed from the terms of the Program by, inter alia: (1)
planning to use interest generated by short-term investment
of the UMTA contribution to underwrite the costs of provid-
ing services to disadvantaged business enterprises; (2) pro-
posing to investors that such businesses be charged a 3% fee
for management services; and (3) intentionally failing to
disclose to UMTA its plans to hold a financial stake in
Program operations in order to keep UMTA from learning of
activities that it would insist be terminated; and that with
such investment TDC could no longer act objectively as
ombudsman for the Program. On the basis of the Board's
findings, the district court concluded that the omissions were
either intentional or resulted from reckless disregard of the
Program terms, causing the monthly reports submitted by
TDC in support of its invoices for payment to be false. In
granting summary judgment to the government on liability,
the district court also relied on the unrebutted declarations of
UMTA officials, including that of UMTA Administrator Ralph
L. Stanley stating that had he known that TDC or Monts
tried to obtain an equity stake or other financial interest in
the Program, he would have directed that the contract be
immediately terminated for cause. The district court thus
found that the omissions were material because had UMTA
known of the omitted information, it would have either re-
quired TDC to cease those activities or terminated the con-
tract for cause. Id. at 15.
In TDC I, this court explained that a party is not collateral-
ly estopped from relitigating a disputed issue of fact unless
that issue "was actually litigated and necessarily decided by a
final disposition on the merits." 24 F.3d at 295; see also
Nasem v. Brown, 595 F.2d 801, 805 (D.C. Cir. 1979); 18
Charles Alan Wright & Arthur R. Miller, Federal Practice
and Procedure s 4421 (1981); id. s 4475 at 764-70. Or, as
stated in the Restatement (Second) of Judgments s 27 (1982),
a prior determination can only preclude relitigation of the
same issue if it was "essential to the [prior] judgment." TDC
prevailed before the Board and was awarded $778,613 for
expenses incurred under the contract. TDC I, 24 F.3d at 294.
The Board found that "[t]here [was] no evidence in the record
that the Program failed for any reason other than [UMTA]
electing not to fund the balance of the contract, but to
terminate TDC's performance." Board Opinion at 133.
Thus, TDC maintains, the Board's findings regarding the
omissions in TDC's progress reports were not necessary to
the result that the Board ultimately reached, and a factual
finding by the Board that is adverse to the prevailing party
cannot be "essential to the judgment" because by definition it
could not have affected the outcome of the case. TDC
contends, therefore, that in considering TDC to be bound by
the Board's findings regarding the omissions, the district
court plainly erred.
In TDC I, this court stated that the Board "expressly
reserved for the district court the legal determination of
whether TDC's failure to report its financial stake in Program
operations constituted fraud," and that "[i]n disposing of
TDC's contract claim, the Board made no necessary findings
about UMTA's reliance on TDC's reports." TDC I, 24 F.3d
at 296. Notwithstanding the instruction in TDC I and what
TDC now correctly contends is clear error by the district
court, TDC did not alert the district court to its error. On
remand, TDC never argued that it should not be precluded
from relitigating UMTA's reliance on the omissions because
those findings were not necessary to the Board's decision.
Rather, as the district court noted, in opposing the govern-
ment's motion for summary judgment TDC "fail[ed] to ad-
dress, let alone dispute, the collateral estoppel effect of the
[Board's] opinion with regards to omissions from its monthly
reports to UMTA. Instead, TDC suggest[ed] that the False
Claims Act claim based on omissions [wa]s a new claim which
require[d] further discovery." Remand Opinion at 6. Nor
in its motion for clarification under Rule 60 did TDC argue
that the district court's collateral estoppel ruling as to the
omissions was erroneous. On appeal, TDC points to nothing
that would indicate that it presented an appropriate objection
in the district court. TDC suggests, for example, that in
opposing the government's motion for summary judgment,
TDC identified several factual issues relating to the omissions
that would be inconsistent with the application of collateral
estoppel; again, however, the record shows that TDC was
addressing the issue of whether TDC's omissions were mate-
rial, i.e., whether UMTA relied on TDC's monthly reports,
and not whether it was appropriate to afford collateral estop-
pel effect to the Board's findings. To the extent that TDC
now focuses on the salient error, it argues that the issue of
collateral estoppel vel non was placed squarely before the
district court in the government's motion for summary judg-
ment. But as the district court's opinion makes clear, this is
hardly the same as joining the government's argument on
collateral estoppel. TDC itself moved for summary judgment
on the basis of the collateral estoppel effect of the Board's
findings; further, it argued in opposing the government's
calculation of damages that collateral estoppel operated in
TDC's favor, on the ground that the Board had already
determined the government could not prove that TDC's ac-
tions were the proximate cause of the Program's demise.
Thus, far from challenging the district court's application of
collateral estoppel in its liability determination, TDC's argu-
ment reinforced the notion that the district court's invocation
of the doctrine was appropriate. TDC's reliance on Butera v.
District of Columbia, 235 F.3d 637, 645 n.6 (D.C. Cir. 2001),
and AFGE v. FLRA, 841 F.2d 1165, 1168 (D.C. Cir. 1988), is
misplaced; in Butera, the court addressed only those issues
raised in the district court, and in AFGE the court bound the
FLRA to the implicit premise of its argument in the district
court. Here, by contrast, TDC neither explicitly nor implicit-
ly raised a "necessity" argument in the district court. We
hold that TDC, therefore, has waived the contention that the
district court erred in ruling that TDC was precluded from
relitigating UMTA's reliance on the omissions in TDC's
monthly reports.
B.
The question remains whether this court should exercise its
discretion to consider TDC's contention notwithstanding its
waiver. In District of Columbia v. Air Florida, 750 F.2d
1077 (D.C. Cir. 1984), the court stated the general rule: "It is
well settled that issues and legal theories not asserted at the
District Court level ordinarily will not be heard on appeal."
Id. at 1084-85. The Supreme Court has long instructed,
however, that appellate courts must "not lose sight of the fact
that such appellate practice should not be applied where the
obvious result would be a plain miscarriage of justice." Hor-
mel v. Helvering, 312 U.S. 552, 558 (1941). In United States
v. Atkinson, 297 U.S. 157 (1936), the Supreme Court de-
scribed "exceptional circumstances" when appellate courts on
their own motion may, in the public interest, "notice errors to
which no exception has been taken, if the errors are obvious,
or if they otherwise seriously affect the fairness, integrity, or
public reputation of judicial proceedings." Id. at 160.
This court thus acknowledged in Air Florida that in "ex-
ceptional circumstances, where injustice might otherwise re-
sult, we have the discretion to consider questions of law that
were neither raised below nor passed upon by the District
Court." 750 F.2d at 1085. In that case, reviewing dismissal
of a complaint for failure to state a cause of action, the court
declined to exercise its discretion because to do so would have
engaged the court in deciding whether to create new federal
common law where the United States was not a party to the
case and Congress may have preempted some or all of the
field. Id. at 1085-86. On the other hand, in Mulligan v.
Andrews, 211 F.2d 28 (D.C. Cir. 1954), the court exercised its
discretion to depart from the general rule; in that case the
loss of the plaintiff's livelihood was at issue due to what he
claimed was his unlawful removal from the classified Civil
Service, and the court deemed that an "injustice might other-
wise result" if the court did not consider whether his employ-
er had failed to comply with the statutory requirement that
written reasons be given for his removal. Id. at 29.
TDC accordingly asserts in its brief that "[s]omething went
horribly wrong here to turn this case upside down from [the]
point" where TDC prevailed before the Board, and "it is up to
this Court to correct that wrong." Appellant's Br. at 16. In
support of its position, TDC makes two arguments why this
court should address its collateral estoppel contention: first,
the issue is purely a question of law subject to de novo
review; and second, "the district court's error was plain -- if
not egregious," as the overwhelming weight of authority
demonstrates that collateral estoppel operates in only one
direction. Reply Br. at 14. However, these reasons sweep
far too broadly and address only some of the relevant consid-
erations. Neither of TDC's arguments necessarily demon-
strates that a manifest injustice will occur unless this court
addresses the "necessity" of the Board's findings to its hold-
ing and remands the case for a trial. Although TDC's
counsel may have failed to alert the district court to an
obvious error, we decline to exercise our discretion for three
reasons.
First, culpability. The False Claims Act complaint alleged
that TDC's reports overstated its progress and failed to
disclose that, contrary to the Program terms, TDC sought to
obtain a financial interest in Program operations. See TDC I,
24 F.3d at 294. "The withholding of such information --
information critical to the decision to pay -- is the essence of
a false claim." Ab-Tech Constr., Inc. v. United States, 31
Fed. Cl. 429, 434 (1994). TDC does not contest that certain
information was not included in its progress reports and that
some of the omitted information would have revealed that
TDC was proposing to take an investor position in the
Program. TDC thus defrauded the government by present-
ing reports in support of payment that omitted information
indicating that it was acting in a manner that was contrary to
the core terms of the Program. Although TDC contends
there are material disputed issues regarding, for example,
UMTA's failure to make reasonable inquiries into TDC's
activities, changes that UMTA made to the Program mid-
stream, and the source of the proposals that TDC take equity
stakes in the joint ventures with private investors, the record
evidence remains dispositive. Likewise, TDC's contention
that it could not execute final agreements with investors or
sureties because only UMTA had that authority under the
terms of the Program is unavailing. TDC sought payment in
connection with its efforts to obtain agreements that were
contrary to Program terms. The undisputed evidence shows
there were omissions that UMTA officials deemed to be
material, and TDC presented no evidence to dispute UMTA
Administrator Stanley's declaration that he would have imme-
diately terminated the contract had he been aware of TDC's
unreported activities.
Second, prejudice to the government. The considerable
delay in this litigation creates problems with regard to wit-
nesses' memories and document retention regarding events
that occurred almost two decades ago. These problems
would presumably affect both parties at a trial. But they are
exacerbated for the government, for at oral argument the
parties informed the court of the death of Ralph L. Stanley.
Stanley's term as UMTA Administrator, from November 21,
1983 to May 31, 1987, spanned the period just after the
Program's inception in July 1983 until its termination in April
1985. He was directly in charge of what he described in his
April 1996 declaration as a "high priority project," and he
claimed in his declaration that he first learned at meetings
with Monts and TDC's legal consultant in December 1984 and
January 1985 that TDC was deviating from the Program in
significant ways. Although other UMTA officials were in-
volved in the management of the Program, Stanley was the
person in charge and, due to his death, there would be
obvious prejudice to the government at a trial.
Third, TDC recovered its contract costs. Pursuant to the
Board's decision, TDC recovered $778,613 of the $928,916
that it claimed over the life of the contract as "allowable,
allocable, and reasonable" costs associated with its work on
the Program. TDC I, 24 F.3d at 294; see Skinner, 975 F.2d
at 869. Our holding does not disturb this result. Rather,
any False Claims Act damages awarded to the government
"would merely offset the payments to which the Board ...
has already determined TDC is entitled under the terms of
its UMTA contract." TDC I, 24 F.3d at 298. Under the
version of the False Claims Act then in effect, the govern-
ment recovered as damages a civil penalty of $2,000 for each
false claim plus twice the amount of damages sustained as a
result of the false claim and costs. 31 U.S.C. s 3729 (1982);
see also TDC I, 24 F.3d at 298. The district court found that
TDC filed 18 false payment vouchers due to material omis-
sions from January 4, 1984, until the Program's termination,
and entered judgment against TDC in the amount of
$1,285,198.31: doubling the $621,466.11 in vouchers paid by
the government plus $36,000 in penalties and $6,266.09 in
costs. Hence, although TDC will owe money to the govern-
ment, it does not face an exacerbated "triple" penalty, i.e., the
loss of its contract costs over and above what it owes as
damages under the False Claims Act.
In sum, in light of the undisputed record evidence of TDC's
culpability, the prejudice to the government, and TDC's re-
covery of its contract costs, remanding for a trial would
simply prolong the closure date of this litigation without, in
all likelihood, advancing the interests of either party. Ac-
cordingly, we decline to exercise our discretion to address the
collateral estoppel contention that TDC waived.
III.
We address briefly TDC's two other contentions, regarding
damages and Monts' liability.
A.
TDC contends that in light of the Board's ruling, the
government's net damages were zero because it "got what it
paid for" under the "best efforts" agreement. TDC further
contends that the government failed to prove that TDC
proximately caused its damages because it may have termi-
nated the contract for reasons unrelated to the omissions in
the progress reports, and that at the very least, an evidentia-
ry hearing into the causation issue was required. These
claims are meritless.
The Supreme Court pointed out long ago that "the chief
purpose of the statutes [which formed the basis for the False
Claims Act] ... was to provide for restitution to the govern-
ment of the money taken from it by fraud, and that the device
of double damages plus a specific sum was chosen to make
sure that the government would be made completely whole."
United States ex rel. Marcus v. Hess, 317 U.S. 537, 551-52
(1943). In United States ex rel. Schwedt v. Planning Re-
search Corp., 59 F.3d 196, 200 (D.C. Cir. 1995), this court
stated that if the government can show it relied on represen-
tations in a contractor's progress reports in deciding to make
payments, "those payments may constitute damages under
the Act." TDC relies on United States v. Bornstein, 423 U.S.
303, 317 n.13 (1976), holding that the government is entitled
to receive damages "equal to the difference between the
market value [of the item] it received and retained, and the
market value it would have received if they had been of the
specified quality." The Program at issue, however, did not
call for TDC to produce a tangible structure or asset of
ascertainable value, as occurred in Ab-Tech Construction, Inc.
v. United States, 31 Fed. Cl. 429 (1994), and United States v.
Woodbury, 359 F.2d 370, 379 (9th Cir. 1966). Rather, the
evidence allowed the district court to find that the value of
the "best efforts" provided by TDC was vitiated by TDC's
fraudulent concealment of its rent-seeking behavior. Once
TDC deviated from its contracted role as impartial ombuds-
man by seeking a financial stake in joint ventures with
private investors and by charging fees for the provision of
material assistance to minority entrepreneurs, the district
court then could properly find that the Program no longer
had any value to the government. Cf. United States ex rel.
Compton v. Midwest Specialties, Inc., 142 F.3d 296, 304 (6th
Cir. 1998).
TDC's contention that the government terminated the con-
tract for convenience and failed to prove that TDC's omis-
sions proximately caused its damages is also unavailing.
UMTA initially terminated the contract for convenience but
changed this to a termination for cause after learning about
the omissions in TDC's progress reports. No court has ever
found the termination for cause to be unwarranted. Further,
TDC failed to rebut the declarations of UMTA officials that
UMTA relied on TDC's monthly reports and would not have
continued to make payments on TDC's vouchers but for the
omissions. TDC's alternative contention that the district
court erroneously characterized the question of materiality by
failing to ask whether UMTA officials would have acted
differently if the omitted information had been included in the
reports, as opposed to whether they knew of such informa-
tion, was not raised in the district court and is not properly
before this court. See Air Florida, 750 F.2d at 1084-85.
Under the circumstances, there was no genuine issue of fact
regarding causation and reliance, nor any need for an eviden-
tiary hearing. Thus, TDC fails to show that the district court
erred in adopting a "but for" measure of damages, based on
what the government would have paid out had it known of the
information that TDC omitted from its monthly progress
reports.
B.
Finally, TDC's contention that the district court improperly
extended the judgment to include Monts as a defendant is
frivolous. The government sued both TDC and Monts as
named defendants. TDC I, 24 F.3d at 294. In granting the
government's motion for summary judgment as to liability,
the district court in its March 2000 memorandum opinion and
order referred only to TDC and neglected to mention Monts
by name. However, in its February 2001 memorandum
opinion awarding damages, the district court referenced its
March 2000 memorandum and order on liability as granting
summary judgment "against defendants TDC Management
Corporation ('TDC') and T. Conrad Monts." Further, in
granting the government's cross-motion in response to TDC's
Rule 60 motion, the district court stated that the final judg-
ment applied to both TDC and Monts, "each of whom shall be
jointly and severally liable to the United States."
Accordingly, we affirm the grant of summary judgment to
the government.