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33 Procurement Law. 1 (1997-1998)

handle is hein.journals/procurlw33 and id is 1 raw text is: False Claims Act: Supreme Court Decision Leaves Qui Tam Questions Unanswered MARK R. TROY AND MARYANNE R. LAVAN The United States Supreme Court recently unanimously held in Hughes Aircraft Co. v. United States ex rel. Schurer' that the 1986 amendments to the civil False Claims Act (FCA) eliminating the government knowl- edge defense to qui tam actions cannot be applied retroactively. The decision will result in the dismissal of a few other qui tam cases that alleged preamendment con- duct.2 Although the Schurner case was clear on the retroactivity issue, it did not address a number of out- standing issues associated with qui tam cases. This article will describe the facts underlying the Schumer case and the Ninth Circuit's decision upon which the Supreme Court granted certiorari. The article will further analyze the Supreme Court's holding in Scluoner and explore the Luestions left unanswered by the case. Description of Schumer Case In the early 1980s, Hughes Aircraft Company performed two subcontracts for the design and development of air- craft radar systems. One was a cost-reimbursement sub- contract with Northrop Corporation for the B-2 bomber; Mark R. Troy is a partner in the Los Angeles office of McKenna & Cuneo, L.L.P. Maryanne R. Lat'an is Vice President and General Counsel, Electronics Sector, Lockheed Martin COnrporation in Bethesda, Mar'land. The views expressed in this article are solely those of the auahors. the other was a fixed-price subcontract with McDonnell- Douglas Corporation for an upgraded F- 15 fighter. As work progressed, it became apparent to the Air Force and Hughes that some of the development effort overlapped, i.e., that certain components undergoing development could be utilized in both programs. In December 1982, Hughes established internal commonality agreements between its two program offices to specify the allocation of costs for the development of components that were common to the two programs.' In January 1984, long before any significant costs were allocated via the agree- ments, Hughes amended its Cost Accounting Standards (CAS) disclosure statement to describe the accounting methods implemented by the commonality agreements. When the B-2 program began to experience signifi- cant cost growth, officials at Northrop asked the Govern- ment to review the commonality accounting practices used by Hughes to determine whether the B-2 was incur- ring costs that should have been borne by the F- 15. The Government started an investigation in 1985. Between 1985 and 1988, the Defense Contract Audit Agency (DCAA) disclosed to Hughes a series of audit reports, ( continued on page 21) News from the Chair 2 Design Delegation & New AIA Conditions 3 Materiality & the False Claims Act 6, Acquisition Reform's Unfinished Agenda 9 Spearin Doctrine: How Far Does It Go? 11 Bid Protests & the U.S. Court 16 of Federal Claims News from the Committees 27 News from the Regions 32