
USCA1 Opinion

	




          December 31, 1992 UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 92-1496                              UNITED STATES OF AMERICA,                                Plaintiff, Appellant,                                          v.                               DATA TRANSLATION, INC.,                                 Defendant, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Edward F. Harrington, U.S. District Judge]                                               ___________________                                 ____________________                                        Before                                 Breyer, Chief Judge,                                         ___________                         Torruella and Selya, Circuit Judges.                                              ______________                                 ____________________            Jonathan R.  Siegel, Attorney,  Department of  Justice, with  whom            ___________________        Stuart  M. Gerson,  Assistant  Attorney General,  A. John  Pappalardo,        _________________                                 ___________________        United States Attorney, and Douglas N. Letter, Attorney, Department of                                    _________________        Justice, were on brief for appellant.            Laurie R. Wallach  with whom Steven  A. Kaufman  and Ropes &  Gray            _________________            __________________      _____________        were on brief for appellee.                                  ____________________                                 ____________________                       BREYER,  Chief Judge.   In 1983  Data Translation,                                ___________             Inc. ("DTI")  agreed  to sell  its  computer boards  to  the             federal  government at  a  price negotiated  by the  federal             government's central civilian purchasing agency, the General             Services   Administration   ("GSA").       The    Government             subsequently brought  suit, claiming that, when  GSA and DTI             negotiated the contract, DTI failed properly to disclose the             prices  at  which  it  sold   its  boards  to  other,   non-             governmental customers.   That failure, the Government says,             violated  the  terms  of  the subsequent  contract  and  the             federal False Claims Act, 31 U.S.C.    3729 et seq.                                                         _______                       In  the  district  court,  both   judge  and  jury             disagreed  with the  Government.  The  judge found  that the             Government  had not  presented  enough evidence  to  warrant             submitting  its "breach of contract" claim to the jury.  The             jury  found that DTI did  not violate the  False Claims Act.             The  Government, in this  appeal, argues 1)  that, given the             evidence, the  court should not  have directed a  verdict on             the  "breach of contract" claim,  and 2) that  the court did             not  properly instruct  the jury  about  the meaning  of the             False Claims Act.                         After  reviewing the record, we conclude that both             lower court  determinations were  legally correct.   And, we             affirm the judgments.                                              I                            The "Breach of Contract" Claim                            ______________________________                       The Government's breach of contract issue  -- that             the  evidence was  strong enough  to warrant  submitting the             case  to the jury -- presents the more difficult question on             appeal.   We  note  that, had  the  district court  reserved             judgment  on the  defendant's motion  for directed  verdict,             while  submitting the  contract claim  along with  the False             Claims Act claim to the jury, the jury might well have found             in the defendant's favor.  (After all, the jury found in the             defendant's  favor on  factually  similar False  Claims  Act             matters).   In that event, the district court would not have             had to decide  the directed verdict question then and there,             and this court  (if the  jury had found  in the  defendant's             favor) would  have faced the easier task of deciding whether             the  evidence  was sufficient  to  support  a negative  jury             verdict;  and, only if the jury had found in the plaintiff's             favor  would  we  have  had to  decide  the  more  difficult             question (here  presented) of  whether the evidence  was, as             the  district   court  held,   insufficient  to  support   a                                         -3-                                          3             potentially  positive verdict.  Regardless, we have answered             this latter  question.   We  have  read the  record,  asking             ourselves whether  any reasonable juror could  have found in             the  Government's favor.  We conclude that the answer to the             question  is "no."   Because of the record's complexity, the             explanation  of how we have reached  this conclusion will be             lengthy.                                             A                                      Background                                      __________                       1.  The  Company.  DTI  makes an electronic  board                           ____________             which, when  inserted  in a  computer,  allows the  user  to             measure flows  and pressure  changes in gasses  and liquids.             This  computer  capability  is  useful  in  medicine  (e.g.,                                                                    ____             monitoring the  condition of artificial  hearts), in science             (e.g., detecting  abnormal genes),  and  in industry  (e.g.,              ____                                                  ____             detecting  flaws  in  large  quantities  of  rapidly  moving             paper).  Before  1983, DTI  sold its boards  to its  federal             government customers  (e.g., the Center for  Disease Control                                    ____             in  Atlanta)  primarily  through  a  government  procurement             process called  "sole  source" procurement,  a process  that             required each individual agency to fill out fairly elaborate             forms each time it wanted to buy even one or two boards from             DTI.  See   41  U.S.C.      254,  254(d)(1)(a)  (summarizing                   ___                                         -4-                                          4             disclosure requirements);  see also  Pub. L. No.  98-269, 98                                        ___ ____             Stat.   1184  (1984)  ("Competition   in  Contracting  Act")             (extending disclosure  requirements to civilian, as  well as             military, procurement).                         In  1983, at  the urging  of some  of its  federal             government customers, DTI decided to negotiate, through GSA,             a single  contract, called  an "MAS  contract,"  with  price             terms applicable to orders  placed by any federal government             agency  -- a  contract  that DTI  hoped  would simplify  the             selling process.                          2.     The   "Multiple  Award   Schedule"  ("MAS")                              ___________________________________________             Contract.  The GSA will normally negotiate MAS contracts for             ________             products   sold   by  firms   in   competitively  structured                                                _____________             industries.   At the beginning  of the negotiation  GSA will             obtain detailed information about, e.g., product quality and                                                ____             prices at which the firm sells the product to other, private             customers.    It  will  then  negotiate  a   price  for  the             government.   If the negotiation succeeds, GSA will list the             firm's  product,  along   with  similar  products  sold   by             competing  firms  (with  MAS  contracts),  in  a  catalogue.             Individual government agencies may place orders for any item             listed in the catalogue (at the price there listed)  without             the  elaborate paperwork  that other  government procurement                                         -5-                                          5             programs   require.     See  41   U.S.C.    254(d)(5)(A)(ii)                                     ___             (disclosure requirements  need not  be applied where  agency             finds  contract price  is based  on "established  catalog or             market  prices  of  commercial  items  sold  in  substantial             quantities  to the  general public.");  47 Fed.  Reg. 50,252             (November 5, 1982) (GSA policy statement on pricing of items             sold  under MAS contracts). The  GSA's MAS contract does not                                                                 ________             commit  the government to  buying the  product.   Rather, it             ______________________             provides an option for federal government agencies to buy at                         ______             a particular price, an  option that individual agencies may,             or may not, exercise.                       3.    The  Negotiations.   In  April  1983  a  GSA                             _________________             employee, Dewey  Carr, and a DTI  employee, Elizabeth Bruce,             negotiated the terms  of an MAS contract.  The GSA asked DTI             to   fill  out   a  detailed,  complex   seventy-eight  page             questionnaire,  entitled  "Solicitation,  Offer and  Award."             With Mr. Carr's assistance, Ms. Bruce (who, at the time, was             nineteen  years old)  prepared the  answers to  the seventy-             eight  page questionnaire.   These  answers, along  with the             statements in the document, constituted the "Offer." The GSA             accepted the "Offer."   The resulting MAS contract permitted             DTI  to  sell  its  boards  (and  certain  other  items)  to             government agencies at DTI's ordinary list prices less a ten                                         -6-                                          6             percent discount, provided  that the ordering  agency placed             orders for  no more than ten  items at any one  time.  (This             proviso reflected Mr. Carr's  recommendation that any agency             placing a larger single order should negotiate with DTI  for             a larger discount.)                       4.  The  Claimed  Contract  Violation.    Omitting                           _________________________________             unnecessary  factual complexities and qualifications, we can             characterize  the Government's "breach of contract" claim as             resting  essentially on  the proposition  that DTI,  when it             submitted  its "Offer,"  did not  disclose all  the computer             board  price  discounts  it  gave  to  its  non-governmental             customers.    To understand  how this  alleged nondisclosure             could constitute  a  contract violation,  one  must  examine             several  contract  provisions,  which  cross-reference  each             other.                        a.  The "Defective Pricing Clause".   The contract                           _______________________________             clause that  the Government claims DTI  directly violated is             called the "Defective Pricing Clause."  It says:                       If,  subsequent  to  the  award  of  any                       __                       contract     resulting     from     this                       solicitation, it is found that any price                                                      _________                       negotiated .  . .  was increased  by any                       ________________________________________                       significant  amount because  the prices,                       ________________________________________                       data, and  facts were  not as  stated in                       ________________________________________                       the     offeror's     "Certificate    of                       ________________________________________                       Established  Catalog  or Market  Price,"                       ________________________________________                       then  the  contract  price(s)  shall  be                       ________________________________________                       reduced  by such amount and the contract                       _______                                         -7-                                          7                       shall  be modified in writing to reflect                       such adjustment.             (Emphasis added.)                       b.  The "Certificate of Established Catalog or                             ___________________________________________             Market  Price."   The "Defective  Pricing Clause"  refers to             _______________             "prices,  data,  and  facts"  that  DTI  set  forth  in  its             "Certificate of Established Catalog  or Market Price."  This             Certificate,   contained   in    the   seventy-eight    page             questionnaire/"Offer,"  says that  DTI  certifies  that  all             "data submitted" are "accurate, complete and current."                       c.  The Relevant "Data Submitted."   DTI included,                           ______________________________             as part of  its questionnaire/"Offer," a  three-page summary             of  discounts from its list prices that it made available to             nongovernmental   customers.      This  three-page   summary             purported  to respond  to the  questionnaire's direction  to             provide price discount information.  In addition, Ms. Bruce,             the DTI employee, orally  described DTI pricing practices to             the GSA negotiator  Dewey Carr, and  she provided Carr  with             relevant  DTI documents  which she  had received  from other             employees  at DTI.    In the  Government's view,  this "data             submitted" was not "complete," for it did not fully describe             two  further  sets of  discounts  that  DTI offered  certain             customers, namely 1) discounts to "Special Price Customers,"             and 2)  "Volume Purchase  Agreement" discounts.   The former                                         -8-                                          8             (as  the  name  suggests)  consists of  large  discounts  to             certain individual customers; the  latter consists of  large             discounts  based on  total quantity  ordered during  a given             time period (say, a year).                       d.  The Upshot.   The  cross-referenced provisions                           __________             amount   to  a   contractual   promise  by   DTI  that   its             questionnaire price discount responses are not significantly                                                            _____________             inaccurate or incomplete.  The Government says that it broke             ________________________             this promise.   The Government's  case rests upon  its claim             that neither  the three-page  summary of DTI  discounts, nor             any  other   information  DTI  provided,  listed   or  fully             described the "Special  Price Customer" and "VPA"  discounts             that DTI offered other, private customers.                       As we have said, the district court, after hearing             the  evidence, granted a directed verdict for DTI.  And, the             Government appeals.                                          B                                The Evidentiary Issue                                _____________________                       The  district  court, when  granting  its directed             verdict, commented cryptically,                       I don't believe that there was a meeting                       of the minds, and, therefore,  there was                       no contract.                                         -9-                                          9             The Government  correctly points out that  this remark, read             literally, cannot  provide a ground for  directing a verdict             in  DTI's favor.  The  parties agreed there  was a contract;             they  disagreed  only  about  whether or  not  DTI's  "price             discount" questionnaire responses amounted to a violation.                       Nonetheless, the district court had a point.  When             a single  portion of  a lengthy contract  is unintelligible,             but  yet severable from  the remainder,  a court  may strike             that portion  itself without affecting the enforceability of             the remainder.  See,  e.g., Eckles v. Sharman, 548  F.2d 905                             ___   ____  ______    _______             (10th Cir. 1977) (vague contract provision unenforceable and             severable  if  not  essential  to   contract);  McArthur  v.                                                             ________             Rosenbaum  Co.,   180  F.2d  617,  619-20   (3d  Cir.  1950)             ______________             (radically   ambiguous    option   contract   unenforceable,             especially since option contract construed in favor of party             granting  option).   Thus,  we  still  must  ask  whether  a             reasonable  juror could  find the  price-discount disclosure             provisions sufficiently comprehensible  to enforce.  Compare                                                                  _______             C.H.I., Inc. v. Marcus Bros. Textile Inc., 930 F.2d 762, 764             ____________    _________________________             (9th  Cir.  1991) (question  of  whether  clause is  fatally             ambiguous and  therefore unenforceable is matter  of law for             judge  to decide) and Fashion  House, Inc. v.  K Mart Corp.,                               ___ ____________________     ____________             892 F.2d 1076, 1083 (1st Cir. 1989) (same) with Gel Systems,                                                        ____ ____________                                         -10-                                          10             Inc. v. Hyundai Engineering  and Construction Co., Inc., 902             ____    _______________________________________________             F.2d  1024, 1027 (1st Cir. 1990) (construction of clause for             finder).   If not, the judge should direct a verdict against             which two  permissible meanings exist is  question for fact-             the party  demanding enforcement  of the  clause.   (This is                                          11                                         -11-                       And,     in     deciding    the     question    of             the perspective  of a  reasonable person in  DTI's position.                                    _________________             not necessarily  as the GSA  intended them, but  rather from             See Restatement  (Second) of  Contracts    200,  203 (1981).             ___ ___________________________________             comprehensibility, one must examine the relevant provisions,             provisions  virtually  unintelligible  if   read  literally.                                                    ____________________             From this perspective, we find  the language of the discount             what we believe the district court intended.)             Unlike the district court, however,  we also believe one may             them intelligible.  Nonetheless, that fact does not help the                                The "Literal" Language                                ______________________                                          C             complied with its obligations.              Government,  for,  on  this  practical  interpretation,  DTI                       The Government  has asked the  district court  and             this  court  to read  the  contract's "discount  disclosure"             language literally,  as requiring DTI to  reveal every price                                                              ___________             give the  language a  practical  interpretation which  makes                                   _________             discount  it  provided  any  of  its  customers  ever  --  a             ________                ___                      ____             revelation  that  DTI must  concede  it  did  not make.  The             Government points  to language  that does  seem to  call for             such complete  disclosure.  The seventy-eight  page form, at             the top of the first"price discount" information page, says:                       List  below  the  best  discount  and/or                       concessions resulting in the  lowest net                       price (regardless of quantity  and terms                       and conditions) to other than authorized                       GSA  contract  users from  pricelist for                       the same or similar products or services                       offered  to  the  Government under  this                       solicitation.             (Emphasis omitted.)  The page lists a host of possible kinds             of discount, including:                       regular   discounts   .  .   .  quantity                       discounts     .     .    .     aggregate                       discounts . . .    commissions  .   .  .                       prompt  payment . . .  FOB  point .  . .                       [and] other . . . .             It then asks:                       Do you have in  effect, for any customer                       of  any  class   within  the  MOL   [the                       "Maximum  Order  Limitation,"  which  in                       DTI's  case  was  the  ten  item maximum                       that,  under the MAS contract, an agency                       could order  at any one time] or outside                       of  the  MOL,  other   discounts  and/or                       concessions including but not limited to                       the following,  regardless of pricelist,                       which  result in  lower net  prices than                       those offered the Government                       in this offer?                                         -12-                                          12             And,   it  lists   further  possible  kinds   of  discounts,             including:                       rebates  of  any  kind  .  . .  multiple                       quantity  unit   pricing  plan  .   .  .                       cumulative discounts . . . products that                       may be combined . . . [and] others.             Leaving no stone unturned, the form defines "discounts" as:                       reductions to catalog  or market  prices                       (published or unpublished) applicable to                       any customer,  including OEM's, dealers,                       distributors, national accounts, states,                       etc.;  and  any  other  form   of  price                       reductions such as concessions, rebates,                       quantity      discounts,     allowances,                       services, warranties, installation, free                       parts,  etc., which  are granted  to any                       customer.                       At  trial,  the Government  called  as a  witness,             Edward  McAndrews,  the GSA  expert  who  developed the  GSA             procurement policy  that this language summarizes.   He said             that the language means what it says: namely, that a company             wishing  to  sell, say,  pencils,  typewriters,  or computer             parts,  to the government, must list any lower price, or any             variation from its "standard  terms and conditions" that the             company  had  granted  to  anyone,   ever.      That  expert                                        ______    ____             testified:                       Q:   [Y]ou're supposed to put in the top matrix                            here how you do business in a standard way?                       A:   That's correct.                       Q:   Based on a price list you're using as an                            offer to GSA?                                         -13-                                          13                       A:   Absolutely.                       Q:   Below it says, 'If you've got other price                            lists and other discounts, tell us what                            they are,' right?                       A:   Or any other concession.                       Q:   Concession.  What's a concession if it's not                            a discount?                       A:   It could be terms and conditions.                       Q:   Terms and conditions?                       A:   That's correct.                       Q:   So if there is ever a  situation in which you                            vary from your standard terms and conditions,                            ever, ever, you're supposed to report that                            ____  ____                            down there?                       A:   Yes.                       Q:   Ah.  And you're supposed to report every                                                               _____                            instance of it?                            ________                       A:   Yes, so we can evaluate that.                       Q:   Every time, huh?                       A:   Yes.                       Q:   So if a company has a thousand customers and                            it has a standard way of doing business which                            it describes in the  matrix, but for some 15,                            20,  30  customers  who are  bigger  than the                            seller. . . .                       A:   Mm-hmm.                       Q:   .  .  . the  company  agrees  to the  buyer's                            standard T's and  C's [Terms and Conditions],                            which are going to differ  buyer from  buyer,                            right?                                          -14-                                          14                       A:   Sure.                       Q:   Every time it does that, it's got to record                            that down there?                       A:   It's what it's supposed to do.              (Emphasis added.)                       We   concede   the  circumstance   to   which  the             Government points with pride,  namely, the exhaustiveness of             the disclosure that the language literally demands.  But, it             is   that   very  circumstance   that  creates   a  problem.             Exaggerating to explain our  point, we find the Government's             interpretation a little like that of, say, a park keeper who             tells  people that the sign "No Animals in the Park" applies             literally and comprehensively, not only to pets, but also to             toy animals, insects, and  even chicken sandwiches.  If  one             met such a park keeper, one would find his interpretation so             surprisingly  broad that one  simply would not  know what he             really meant  or what to  do.  We  do not  mean to say  this             farfetched example directly applies here.  But, the example,             considered in light  of our explanation below,  may help the             reader  understand why  we  think a  literal reading  of the             disclosure form creates  ambiguity and  incomprehensibility,             and why  we conclude that no  reasonable person, negotiating             with  GSA  negotiator Carr,  could  have  believed that  the             Government  really wanted the  complete and total disclosure                                         -15-                                          15             for  which  the  language  seems  to  ask.    We  rest  this             conclusion  upon  the  combined   force  of  three  sets  of             considerations, which we shall now discuss in turn:                       1. Business Context.   An ordinary business person                          ________________             would not seem likely to  interpret the form literally, for,             read  literally, the  form  asks a  business  to shoulder  a             compliance  burden  which   will  often  seem   inordinately             difficult  or  impossible  to  carry  out.    Consider,  for             example, an office supply firm, or a furniture company, or a             computer  parts manufacturer,  operating  in  a  competitive             industry.   Such  a firm,  selling its  products to  tens of             thousands  of  different   customers,  through  a  host   of             different sales personnel,  might vary prices  considerably,             in response  to shifting competitive  pressures, from market             to  market, from  time  to time,  or  from one  customer  to             another,  either through  direct price  cuts or  through the             creation of small "terms of trade" advantages.  To require a             paper  report of  every  such  variation  is  to  require  a             paperwork  blizzard,  even assuming  that the  company keeps             track,  on paper, of every variation, not only in the price,             but also in the price-related terms and conditions of sale.                        The record  supports this  surmise,  for it  makes             clear that  government suppliers have not  read the language                                                   ___                                         -16-                                          16             literally.    GSA expert  McAndrews  conceded that,  despite             potential double damage penalties for failing to comply with             the form's instructions, see 31 U.S.C.   3729 (1982), he has                                      ___             never  seen any  firm ever comply  with the  form's request,             taken  literally.   When asked  whether he  had ever  seen a             comprehensive listing  of "price reductions" in  the form of             "concessions" through variations  in "terms and  conditions"             of sale,  he said  that  he had  not.   And, he  went on  to             testify as follows:                        Q:   Have you ever seen [a comprehensive listing                            of variations from standard terms                            and conditions] done?                       A:   I have not personally seen one done.                       Q:   Have   you  looked   at   these   things   --             response[s]                            [by companies to the Government's                            questionnaire]?                       A:   Yes.                       Q:   And have you ever seen anybody ever do that?                       A:   Not frequently.                       Q:   Have you ever seen anybody do it?                       A:    I've seen people submit data on, in terms of                            the conditions.                       Q:   Have  you   ever  seen  anyone   describe  in             [Section]                            3-B        [of   the    discount   disclosure             questionnaire]           every  time  they  vary from  their             standard terms           and conditions?                                         -17-                                          17                       A:   No, I have not.                        . . . .                        Q:   So nobody ever answers these questions                            truthfully?                       A:   That's probably true.             This  testimony, by  the  GSA expert  (and  coauthor of  the             questionnaire)   supports   the   common  sense,   objective             conclusion  that a  reasonable supplier  would not  read the             language,  in context,  as  calling  for  complete,  literal             disclosure, whatever  the GSA  author subjectively  may have             intended.   See Garbincius  v. Boston Edison  Co., 621  F.2d                         ___ __________     __________________             1171, 1177 (1st Cir. 1980) (contracts should be construed to             reach sensible  result  if possible);  E. Allan  Farnsworth,             Farnsworth on Contracts Vol. II,   7.10, at 255 (standard of             _______________________             reasonableness   as   fundamental   principle  of   contract             interpretation).    See also  id.,     7.11,  at  265-66 (an                                 ___ ____  ___             ambiguous form contract is construed against the drafter).                       2.  The Statutory  Context.  A literal reading  is                           ______________________             also unnatural because it seems to undermine, or at least to             implement inappropriately,  the  purposes of  the  statutory             program  of which the GSA  form is an  instrument.  Congress             authorized,  and  the GSA  designed,  the MAS  program  as a             simplified alternative for government procurement  of common             __________                                         -18-                                          18             items sold competitively in the commercial marketplace.  See                                                                      ___             H.R.  Rep. 1157, 98th Cong., 2d Sess. 18 (1984) (legislative             history of the Competition in  Contracting Act of 1984, Pub.             L.  No. 98-369,  98 Stat.  1175 (1984))  ("While the  use of             competition  may  not  be  considered   worthwhile  by  some             officials, it is the  only way for the government  to obtain             the best  products  for the  best prices.  . .  .   Clearly,             economy  and  efficiency  must  be the  cornerstone  of  the             Federal procurement system and  H.R. 5184 provides the means             to accomplish this goal.")  Where  competition helps to keep             the  prices of  commonly  purchased items  low, the  program             permits  a  government agency,  say,  a  local Park  Service             office, to  buy, say, a lamp, without  asking lamp suppliers             to undergo the rigorous government "bid-procurement" process             or  the  highly  detailed,  time-consuming  inspections  and             audits that accompany  (non-bid) "sole source"  procurement.             See  47  Fed.  Reg.  50,252 (description  of  GSA  policy on             ___             pricing  of MAS  contracts).   Under  the  MAS program,  the             existence  of  competition  in  the  commercial  marketplace             itself  helps to  provide assurance  of  low prices  for the             government as well.  The  listing of several competing, say,             lamp  manufacturers in the government MAS catalogue provides             added assurance of low prices.  The MAS negotiating process,                                         -19-                                          19             with its  questionnaire answers (and later  audits to ensure             compliance) offers  a third  way to guarantee  "low prices."             To the  extent, however,  that the questionnaire  and audits             become as burdensome as the "sole source" selection process,             the   MAS  program   abandons  its   basic  "simplification"             rationale.   See id. at 50,243; Robert  S. Brams & Daniel J.                          ___ ___             Kelly,  Multiple Award  Schedule  Contracting:  A  Practical                     ____________________________________________________             Guide   to  Surviving  Its   Shortcomings,  Ambiguities  and             ____________________________________________________________             Pitfalls,  19 Pub.  Cont. L.J.  441, 453-60,  467-72 (1990).             ________             Indeed, if the MAS properly selects  its products from those             sold  in  truly  competitive  commercial  markets, elaborate             paperwork, audits,  and inspections, then,  by significantly             increasing   competitive  firms'   cost  of   doing  federal             government business, could result in the government's  being             charged higher, not lower, prices.                       Of  course, neither  the government  nor suppliers             will  incur   significant   additional  costs   of   literal             compliance   if  the   government  does   not  enforce   the             questionnaire's disclosure requirements  as literally  read,             or  if it enforces the requirements only sporadically.  But,             a system that lays down a literal rule with which compliance             is  inordinately difficult,  turning nearly everyone  into a             rule  violator, and  then  permits the  agency  to pick  and                                         -20-                                          20             choose  when  and where  to enforce  the rule,  is obviously             undesirable.   It  destroys in  practice  the very  hope  of             rationally  cabining agency  discretion that  the rulemaking             process promises in principle.                  All  this is             not to say that  the GSA form  is unlawful, but, rather,  to             provide an additional reason why we doubt that  a reasonable             potential supplier  would believe  that it  was to be  taken             literally.                        3.  The Negotiating  Context.  The GSA negotiator,                           ________________________             Dewey Carr,  gave the  DTI negotiator, Elizabeth  Bruce, the             distinct impression that she did not have to comply with the             questionnaire as read literally.  He reviewed various pieces             of discount  information that she provided.   He crossed out             some  of the  discount  information, for  example, discounts             offered  for sales of more than ten items per order, telling             her these  discounts were not relevant  for the government's             purposes.   He  accepted other  pages of  material that  she             supplied,  although he knew (and he knew that Ms. Bruce knew             that he knew)  that they did  not contain various  discounts             that  DTI  normally offered  (but  which  he considered  not             relevant to the negotiation).   Carr told Bruce specifically             that a large discount  that DTI gave a large  buyer, Digital             Equipment  Corporation,  which purchased  particularly large                                         -21-                                          21             quantities   of  equipment,   was  irrelevant   because  the             Government  could not  commit itself  to  place an  offer of             equivalent size.  He also gave Ms. Bruce the impression that             the words "other discount" on the form referred to discounts             applying  to  the  same  kind  of  purchase  the  Government                                ________________________             intended  to make.   He  said that  the question  she should             answer was (in the words of his testimony):                        [F]or  the same  types of  dollar volume                       that they expect  the government to  buy                       in,  are  there  any   other  commercial                       customers   which  have   a  discounting                       policy, or do they receive discounts for                       buying  in  the  same volumes  that  the                       government is going to buy in?                        Although Mr.  Carr did  say, at  one point  in his             testimony,  that  he  asked  Ms.  Bruce  for  "a  picture of             everything [DTI]  did at  the time," he  simultaneously made             clear that Ms. Bruce did not understand his requests to mean             that  he  wanted  comprehensive   disclosure  of  the   sort             Mr. McAndrews described in his testimony.                         From  these three  sets of  considerations --  the             business context, the statutory context, and the negotiating             context --  we draw  one conclusion, namely,  that, whatever             the GSA questionnaire writer's subjective intent, its  words             and  requests,  considered   objectively  by  a   reasonable             supplier  in the  circumstances,  did not  call for  literal                                         -22-                                          22             compliance.  And, we believe that  no reasonable juror could             have reached  a  contrary conclusion  on  the basis  of  the             evidence presented at trial.                                                 D                                 A Practical Reading                                 ___________________                       If  the  questionnaire's  language  is  not  meant             literally, what  does  it  mean?   The  district  court,  in             directing  a  verdict, found  no  stopping  point between  a             literal reading of  the questionnaire and unintelligibility.             The  conflicting testimony  of several  of the  Government's             witnesses  offers support  for  the  district court's  view.             But, we need  not go as far as the  district court.  Rather,             in reading  the record favorably to the  Government, we find             an  alternative, intelligible reading  of the questionnaire.             Such a reading would call for a "practical" effort to supply                                              _________             relevant price discount  data.  See  Cofman v. Acton  Corp.,             ________                        ___  ______    ____________             958  F.2d  494,  497  (1st Cir.  1992)  (contract  should be             interpreted as  a business transaction by  practical parties             towards a straightforward  end).   It would  require DTI  to             disclose significantly  relevant  price discounts  that  DTI                      _______________________             normally provided  other customers making  purchases roughly             ________                                             _______             comparable   to  the   agency   purchases   the   Government             __________             contemplated would occur under  the MAS program.  We  do not                                         -23-                                          23             believe that the record  supports an interpretation any more             favorable  to the Government  than this one.   And, adopting             this kind  of interpretation  does not help  the Government.             The trial  record makes clear that no  jury could reasonably             have  found  a violation  of  the  disclosure obligation  as             practically interpreted.                       1.   Special  Price  Customers.   DTI had  several                            _________________________             customers  whom it  called "Special  Price Customers."   DTI             told GSA that it gave a 30% discount to its largest "Special             Price  Customer,"  Digital   Equipment  Corporation   (which             discount,  GSA  told  DTI,  was  not  relevant  to  the  MAS             negotiations).   But,  DTI did  not tell  the GSA  about its                                        _____________             other  "Special  Price  Customers,"  to  whom  it  regularly             offered large price discounts.  The Government says that DTI             should have disclosed this list.                        The record  makes clear, however, that DTI's sales             to these  "Special Price  Customers" were not  comparable to             the MAS sales DTI  proposed to make to government  agencies.             The President  of DTI, Mr. Alfred  Molinari, testified that,             unlike  government  agency  customers,  each  "Special Price             Customer" provided  a special service  for DTI in  virtue of             which  it "earned" the discount.   Each such  customer was a             "middleman."    A  "middleman"  computer  manufacturer,  for                                         -24-                                          24             example, would install DTI's board in  its computer and then             sell  that  computer,  thereby  reselling DTI's  board.    A             "middleman" software developer, for example, would buy DTI's             boards, develop  new uses for those boards,  and then resell             them.   A "middleman"  engineering firm, for  example, would             help  DTI  with  quality  control problems  in  addition  to             reselling  boards.    Insofar  as these  firms  were  "joint             venturers" with  DTI (helping to develop  a better product),             they provided  DTI with  services that the  Government would             not provide.  Insofar as the firms resold DTI's boards, they             (unlike  the Government)  had to  "live[] on  the discount,"             buying  at a price low enough to permit a profitable resale.             In the words of DTI Vice-President Ellen Wirka Harpin,                       the special price  customers, they  were                       offering us something that another, that                       a regular everyday customer wasn't going                       to  offer  us,   like  advertising,   or                       writing software for our products so the                       customer  could  use  it, reselling  the                       board . . . .             The record  contains virtually  nothing to  contradict these             accounts.                       We   must  say  "virtually   nothing"  instead  of             "absolutely nothing"  because on redirect  examination DTI's             President  said that  one  of its  special price  customers,             Sandia Laboratories, in New Mexico, was partly funded by the                                         -25-                                          25             Government.  But, the record tells  us nothing further about             this  example.   It  tells neither  the  court, nor  a jury,             whether Sandia  Labs was a "middleman"  or "joint venturer,"             or whether it  earned its  12% discount in  virtue of  those             functions  or simply  because it  received the  single order             "quantity discount"  that DTI  fully disclosed.   The single             reference  to Sandia Labs, in  our view, does  not amount to             evidence  that  significantly   contradicts  the   otherwise                             _____________             undisputed  testimony of the DTI executive.  And, as we have             said,  that testimony  makes clear  that the  "special price             customer"  discounts involved  sales so  different from  MAS             sales that DTI need not have disclosed them.                        2.  The  Volume Purchase Agreements.   DTI gave  a                           _______________________________             special discount to customers  who bought boards pursuant to             a  "Volume Purchase Agreement" ("VPA").   A VPA, in essence,             permitted  a signer  who bought  DTI boards  to  aggregate a             series  of small purchases made during the course of a year,             and  thereby to qualify for  a volume discount  based on the             total amount of boards purchased.  The Government makes what             are,  in  essence,  two   separate  claims  related  to  VPA             discounts.                       a.   Incomplete Disclosure.  DTI gave  GSA a blank                            _____________________             copy of  a VPA.   That copy  makes clear 1)  that the  buyer                                         -26-                                          26             signing the VPA  must commit to buy a total  number of items             during the year; 2) that the buyer must send purchase orders             for that amount  to DTI "within one year;" 3) that the buyer             must  "accept  delivery  of   the  products  ordered  within             fourteen months;" and, 4) that if the year's purchase orders             exceed,  or  fall  short  of,  the  amount  of  the  initial             commitment,  DTI will  adjust the  discount accordingly.   A             government auditor testified  that GSA considered  this type             of VPA (with its discount "bill back" provision for purchase             shortfalls) "as being identical to MAS-type contracts."  For             that  reason,  the  Government apparently  claims  that  DTI             should also  have given it a  list of its VPA  customers and             copies of the actual contracts with these customers as  well             as  the  blank  form.     That  added  information,  in  the             Government's view, presumably  would have permitted  the GSA             negotiator   more  easily  to  recognize  the  "aggregation"             feature  of  the  VPA   agreement,  and,  perhaps,  to  have             negotiated a similar discount for government agencies.                       The   record  makes   clear,  however,   that  the             questionnaire  (as interpreted  practically) did  not oblige             DTI to provide this additional  information, for, as we just             said, DTI gave the GSA  a blank VPA form contract  and, that             being so,  an additional  filled out  form would  have added                                         -27-                                          27             nothing of significance.   For one thing, the  VPA agreement             is not, and could not reasonably seem "identical to MAS-type             contracts."   In fact, it is different enough that DTI could             reasonably have thought that Mr. Carr did not need every VPA             detail.  GSA's negotiator, Mr.  Carr, testified that he told             the DTI negotiator, Ms. Bruce, that the VPA discount was not                                                                      ___             relevant  to the  MAS  negotiation because  the  "government             cannot  commit to buy any amount during any period of time."             The VPA  form itself makes  clear that  a buyer must  do the             contrary, that is, the buyer must say that it                        wishes  to  purchase the  quantities set                       forth in Exhibit A hereto (the 'Quantity                       Levels')  of  the products  described in                       Exhibit A (the 'Products').             This  would seem to be  the kind of  promise (whether or not             the VPA assessed penalties for its breach) that Mr. Carr had             in mind  when he testified  that GSA "cannot  sign up  to an             agreement like this."                       For  another  thing,  DTI's   President  testified             (without  contradiction) that  VPA sales, unlike  MAS sales,             involved billing  and servicing a single  VPA buying source.             In contrast, MAS sales, he said,                        meant   separate   invoices  for   every                       facility.  It meant separately answering                       questions  from  every researcher  as to                       how   to  use  our   product,  and  then                       separate  manuals  going  out with  each                                         -28-                                          28                       product.   It was indeed like selling to                       hundreds of different  customers. In  no                       way  did  it  have  any  amalgamation of                       saving  money  or   making  it  a   more                       efficient sale.             This point,  that MAS purchases would  not involve economies             of              scale enabling DTI to charge a lower price, is particularly              significant because  DTI's MAS sales  would involve  federal             agency  purchases of no more  than ten units  at a time from             DTI.   GSA told all agencies intending to buy larger amounts             not  to buy through the MAS program, but rather to negotiate             ___             directly with DTI for a better discount.                       We do  not see  how anyone, in  the circumstances,             could  conclude that  providing  GSA with  filled out  forms             instead  of  a blank  form  would  have added  something  of             significance to the disclosure.                           b.   Inaccurate Disclosure.  The Government points                            _____________________             out that Mr. Carr testified at trial that Ms. Bruce told him             that a VPA buyer qualified for a discount  only if the buyer             bought  all the VPA items using a single purchase order at a                     ___                                             ____             single  time.    Ms.  Bruce  strongly  denied  saying  this;             ____________             Mr. Carr's contemporaneous notes of the negotiations reflect             no  such statement;  Mr. Carr did  not recall  the statement             when  he  gave a  deposition;  and  the record  contains  no                                         -29-                                          29             corroborating  evidence.   Nonetheless,  we  concede that  a             reasonable jury  might believe  Mr. Carr's trial  testimony.             And, in that  case, it could believe that Ms. Bruce told Mr.             Carr  something  that was  not  true, for  the  VPA contract             permitted VPA buyers  to aggregate different purchases  made                                                ___________________             at  different  times  during  the  year   through  different                 ________________                      __________________             purchase orders.               _______________                       The   jury,   nonetheless,  could   not  predicate             liability on this belief,  for (to return to the  contract's             "Defective Pricing  Clause") the  jury could  not reasonably             conclude  that Ms.  Bruce's  alleged statement  to Mr.  Carr             could have "increased  [prices] by" a "significant  amount."             Mr. Carr was fully  aware that Ms. Bruce was  nineteen years             old,  was not an expert  on company pricing  policy, and did             not fully understand the complex forms or documents.  At the             same  time, he had before him the VPA contract itself, which             quite clearly  provides for  aggregation of  purchase orders             over the  period of a year.   He had read  the DTI catalogue             which distinguishes between  "quantity discounts"  available             "when  placed  in a  single  order,"  and "other"  discounts              _________________________________         _____             available  on a "contract basis."   And, he  must have known             that Ms. Bruce's (alleged)  statement made little sense, for             it would have meant that VPA customers had to sign contracts                                         -30-                                          30             to obtain the same  discounts that any other  customer could             obtain  just by placing a  large single order.   Given these             circumstances, Mr. Carr's negligence  in relying upon such a             statement,  not the  statement itself,  would have  been the             predominant cause of any resulting  higher price.  See Atari                                                                ___ _____             Corp. v. Ernst & Whinney, 1992 U.S. App. LEXIS 32,243 at *16             _____    _______________             (9th  Cir. 1992)  (where  plaintiff possesses  facts showing             representations  to  be  false,  reliance  unreasonable  and             precludes   determination  that   misrepresentations  caused             injury); cf.  United States  v. Lumbermen's  Mutual Casualty                      ___  _____________     ____________________________             Co., 917  F.2d  654, 660-61  (1st  Cir. 1990)  (reliance  on             ___             statements unreasonable when  party should  have known  they             were incorrect); Paper Express, Ltd. v.  Pfankuch Maschinen,                              ___________________     ___________________             G.M.B.H.,  972  F.2d  753,  757-58 (7th  Cir.  1992)  (where             ________             sophisticated  party could read document itself, reliance on             other party's representations concerning  document's content             unreasonable).  That being so, the jury could not have found             a violation of the "defective pricing" clause, for we do not             read that  clause to  predicate liability where  GSA, rather             than the supplier, is primarily at fault.                         For  these  reasons,  we  conclude  that  DTI  was             legally entitled  to a directed verdict  on the Government's                                         -31-                                          31             "defective pricing" clause contract claim.   We add that the             district court  also directed  a verdict in  DTI's favor  on             various  other   contract-related  claims  --   for  "unjust             enrichment"  and  "payment  by  mistake."    We  affirm  the             verdicts on those  counts, for our analysis  of the contract             claim  precludes a jury verdict for  the Government on these             claims as well.                                          II                        The False Claims Act Jury Instruction                        _____________________________________                       The  Government  also  charged  DTI   with  having             violated  the False  Claims  Act, an  act  that prohibits  a             person  from  "knowingly  present[ing]  .  .  .  a  false or             fraudulent  claim  for  payment  .  . .  .  "      31 U.S.C.             3729(1)(1982),  replaced by 31 U.S.C.    3729(a) (1986).  In                             ___________             the   Government's  view,   DTI's  failure   completely  and             accurately to  disclose price discount information  made all             of its subsequent payment requests "false" and "fraudulent,"             for  these  requests  rested  upon  an  assertion  that  the             relevant underlying  data were  accurate and complete.   The             jury found in DTI's favor.  The Government appeals.                       The Government  argues at  length  that the  court             improperly  instructed  the jury  about  the  state of  mind                                         -32-                                          32             necessary to support a  False Claims Act violation.   In the             Government's view, the requisite state of mind includes, not             only  1)  a   specific  intent  to  deceive,   but  also  2)             "deliberate  ignorance  of  the  truth,"  and  3)  "reckless             disregard of the truth."  The Government concedes that these             two last  mentioned states of  mind made  their first  legal             appearance  when Congress  amended the  False Claims  Act in             1986.  See 31 U.S.C.    3729(b).  Before  that time, the law                    ___             was  as the  district  court  stated  it.    Yet,  says  the             Government, Congress intended its  new statutory standard to             apply retroactively,  to actions  that, as here,  took place             long before 1986.                       The Sixth  Circuit  has considered  this issue  at             length.    It has  concluded that  the  new standard  is not             retroactive.   See United States  v. Murphy, 937  F.2d 1032,                            ___ _____________     ______             1038 (6th Cir.  1991) (False Claims Act intent standard does             not  apply   retroactively  since   it  enlarges   scope  of             substantive liability under the Act).  We find its reasoning             convincing.  And, we would follow its holding.                       We need not decide the matter definitely, however,             for, given our decision thus far, it is clear that any error             was "harmless."  For  the reasons set out above,  the record             would not support a verdict for the Government, irrespective                                         -33-                                          33             of the  instruction on state of  mind.  The GSA  form cannot             reasonably be  interpreted to require, in the circumstances,             disclosure  of   the  "Special  Price  Customer"   or  "VPA"             information beyond the disclosure DTI actually made.  Hence,             DTI's alleged nondisclosure could  not have been material to             the price  negotiated.  See,  e.g., United States  v. Klein,                                     ___   ____  _____________     _____             230  F.Supp.  426, 432  (W.D.Pa.  1964)  (fraud implies  the             misrepresentation of  a material fact); Turner  v. Johnson &                                                     ______     _________             Johnson,  809  F.2d  90,  95 (1st  Cir.  1986)  (materiality             _______             established as an element of common law fraud).                        For these  reasons, the  judgment of  the district             court is                       Affirmed.                       ________                               NOTE:  See Slip Opinion for Appendix.                                         -34-                                          34
