[00:00:01] Speaker 02:
Case 14-5210, et al., United States of America, X-Rail, Robert R. Purcell, Appellant, Robert R. Purcell v. MWI Corporation.

[00:00:13] Speaker 02:
For Case 14-52, Ms.

[00:00:15] Speaker 02:
Patterson for the Appellant, Mr. McLaughlin for the Appellee MWI Corporation.

[00:00:21] Speaker 02:
And for Case 14-5218, Mr. Rode for the Appellant MWI Corporation.

[00:00:26] Speaker 02:
Ms.

[00:00:26] Speaker 02:
Patterson for the appellee, United States of America, and Mr. Aronica for the cross-appellee.

[00:00:36] Speaker 00:
Thank you.

[00:00:36] Speaker 00:
May it please the Court, Melissa Patterson on behalf of the United States.

[00:00:40] Speaker 04:
Oh, just half a second, if you will.

[00:00:43] Speaker 00:
Of course.

[00:00:56] Speaker 06:
Good morning.

[00:00:57] Speaker 00:
Good morning, Your Honor.

[00:00:59] Speaker 00:
The government has appealed on the way that the District Court offset the Trebled Damages Award here.

[00:01:06] Speaker 00:
We think the jury properly reached a single damages amount of 7.5, that the District Court properly, under the False Claims Act, trebled that to 22.5, and where our dispute comes in is in the way that the District Court then applied an offset to that amount.

[00:01:25] Speaker 00:
What we think the district court did is improperly take payments that in no sense were repayments or reimbursements for the fraud here and apply them as if they were.

[00:01:38] Speaker 00:
And I think it's helpful to run through the numbers here.

[00:01:40] Speaker 00:
The United States paid about $75 million to the defendants so that they would export goods to Nigeria.

[00:01:51] Speaker 00:
This was through an Ex-Im Bank loan.

[00:01:55] Speaker 00:
The jury found that 7.5 of that loan was due to MWI's fraud.

[00:02:02] Speaker 00:
That essentially 7.5 of that was fraud tainted.

[00:02:08] Speaker 00:
Now, ultimately, Nigeria ended up repaying those loans that MWI had gotten the United States to pay to MWI.

[00:02:16] Speaker 00:
So we got repaid one time for the 7.5 fraud tainted portion.

[00:02:22] Speaker 00:
But of course, in a false claims act case, you don't get repaid on the fraudulent amount once.

[00:02:29] Speaker 00:
The government is supposed to get repaid three times for travel damages.

[00:02:35] Speaker 00:
And the delta there between 22.5 and 7.5, that 15 million, is what no one has ever compensated the government for.

[00:02:45] Speaker 00:
And that's where we think the district court went wrong in wiping out that 15 million.

[00:02:51] Speaker 04:
Let me ask you, turning to the government's motion seeking reconsideration, are you familiar with that?

[00:02:57] Speaker 00:
Yes, Your Honor.

[00:02:59] Speaker 04:
The government states, and this is in the joint appendix at 401,

[00:03:10] Speaker 04:
This is Ian Lemonet motion saying that the district court had erred in allowing the defendants to argue that Nigeria's eventual repayment of the loan can reduce the government's damage.

[00:03:23] Speaker 00:
Yes, Your Honor.

[00:03:24] Speaker 04:
And the government states, the United States agrees that MWI is entitled to a credit for this payment, but only after the jury determines the government's damages and the court multiplies the damages.

[00:03:36] Speaker 04:
And you cite Bornstein.

[00:03:39] Speaker 04:
The court agreed with you, or agreed with the government.

[00:03:44] Speaker 00:
Yes, Your Honor.

[00:03:46] Speaker 04:
Haven't you conceded that very point?

[00:03:48] Speaker 00:
No, Your Honor.

[00:03:48] Speaker 00:
And in the course of the litigation, it was very clear that what we were not saying that the entire repayment would necessarily be considered.

[00:03:56] Speaker 04:
Did you agree with the sentence?

[00:03:57] Speaker 00:
I just... I did, Your Honor.

[00:03:59] Speaker 00:
And if you go to the next page... The next page of what?

[00:04:03] Speaker 00:
JA 402, the next page of our motion.

[00:04:05] Speaker 00:
Yes.

[00:04:07] Speaker 00:
It says, and we're referring back to an earlier ruling in the case, Judge Urbina found that any payments from Nigeria were compensatory payments that would be addressed by the court.

[00:04:18] Speaker 00:
Now, this is important.

[00:04:18] Speaker 00:
If you go to JA388... Hold on.

[00:04:23] Speaker 04:
Tell me what you're quoting on 402.

[00:04:25] Speaker 00:
It's at the bottom of the page.

[00:04:29] Speaker 04:
And what we're making clear... This is just recounting what the judge had previously decided.

[00:04:36] Speaker 00:
Yes, Your Honor.

[00:04:36] Speaker 00:
And what the judge had previously decided and what we were trying to get now Judge Kessler to reinstate is that the issue of whether and how any compensatory payments would be applied would be applied after the jury had arrived at the actual damages.

[00:04:53] Speaker 04:
So I thought the motion was to exclude this evidence.

[00:04:57] Speaker 04:
Yes it was.

[00:04:58] Speaker 04:
So that the jury could not hear it.

[00:05:00] Speaker 00:
Absolutely.

[00:05:01] Speaker 04:
Because as the government tells the district court, the United States agrees that MWI is entitled to credit for this payment.

[00:05:11] Speaker 00:
But Your Honor, we never agreed to any particular amount.

[00:05:14] Speaker 00:
So at JA388, we say the whole issue, whether and how any, I'll get the exact quote here, Nigeria's repayment may entitle MWI to a credit.

[00:05:28] Speaker 04:
Where are you now?

[00:05:29] Speaker 04:
388, where?

[00:05:31] Speaker 04:
Let me find me.

[00:05:36] Speaker 00:
I'm about halfway down the page.

[00:05:40] Speaker 00:
Nigeria's repayment may entitle MWI to a credit, but the court has expressly determined that it will assess whether and how such a credit is to be applied after the jury damages, awards damages a trial.

[00:05:56] Speaker 00:
And then that's exactly the ruling we got.

[00:05:58] Speaker 00:
If you look at JA 415,

[00:06:07] Speaker 00:
It says, this is in the first paragraph, not the first full paragraph, if the jury in this case, applying the formula set forth in science applications, determines that the government suffered damages, the court will then decide whether MDBUI is entitled to a reduction in the final tremendous damage amount based on the amount of Nigeria's repayments.

[00:06:31] Speaker 04:
Now, I agree that the district court's opinion and the later opinion

[00:06:35] Speaker 04:
I'll call the third published opinion.

[00:06:38] Speaker 04:
They're not entirely clear, but look at 414.

[00:06:48] Speaker 04:
And the court is reciting the theory of the case presented by the government, citing science applications.

[00:06:59] Speaker 04:
And then it says accordingly on reconsideration in light of Ornstein, the court now holds that the repayment is not relevant.

[00:07:11] Speaker 00:
Is not relevant?

[00:07:12] Speaker 04:
The district court in excluding the evidence on the ground that she was agreeing with the government that MWI was entitled to

[00:07:25] Speaker 04:
a credit for this payment necessarily deciding the Bornstein issue?

[00:07:33] Speaker 00:
If you're asking whether she decided that every dollar in repayments from Nigeria was going to be applied as an offset, the answer is no.

[00:07:41] Speaker 00:
And that's clear from the next page on 415, the final paragraph.

[00:07:46] Speaker 00:
Remember, as of this time, we were reserving the argument that while you're supposed to take it into account on the back end under Bornstein, you don't take it into account under the calculation of single damages.

[00:07:59] Speaker 00:
You only take it into account as an offset after the jury comes up with that number.

[00:08:04] Speaker 04:
And the judge agreed with you on that.

[00:08:05] Speaker 00:
Right, and then we presented evidence.

[00:08:08] Speaker 00:
We thought that there was a possibility MWI was not going to get any offset because they had orchestrated repayment on this loan at the expense of other loans.

[00:08:18] Speaker 04:
So let me be clear, under this position, then what was the basis for the judge excluding all the evidence?

[00:08:26] Speaker 04:
with regard to repayment.

[00:08:29] Speaker 00:
And this goes to the heart of our case, Your Honor, is that that's the proper way to think about a third party's reimbursement of fraud paid out monies.

[00:08:41] Speaker 00:
You think about it after you first calculate what the government has paid out.

[00:08:45] Speaker 04:
I'm the judge, the jury's about to hear the case, and the government files this motion for reconsideration saying exclude all evidence.

[00:08:56] Speaker 04:
regarding Nigeria's repayment of the loan.

[00:09:00] Speaker 04:
So if in fact some of the repayment was relevant, then was that ruling error?

[00:09:11] Speaker 00:
No, Your Honor.

[00:09:11] Speaker 00:
Remember, going into the trial, our argument, our theory was that every dollar the United States paid to MWI was damages.

[00:09:21] Speaker 00:
We wanted $75 million in damages.

[00:09:24] Speaker 00:
Now, if the jury had returned a verdict of $75 million in damages,

[00:09:29] Speaker 00:
Our theory would be identical, but under that theory, MWI would have gotten an offset of $75 million off a $225 million damages award.

[00:09:43] Speaker 00:
We paid out 75 million dollars.

[00:09:47] Speaker 00:
The jury said, okay, about 68 of that was legitimate.

[00:09:51] Speaker 00:
You would have paid it anyway, but about 7.5 of that was over and above what you would have paid but for the fraud.

[00:09:59] Speaker 00:
So we got repaid on the 68 million, which was essentially the legitimate part of the loan.

[00:10:05] Speaker 00:
We got repaid once for the fraudulent tainted portion, the 7.5, but we never got paid three times.

[00:10:14] Speaker 00:
So we are willing to give MWI a credit of the 7.5.

[00:10:18] Speaker 00:
We acknowledge somebody else reimbursed us that fraudulent amount, 7.5.

[00:10:24] Speaker 00:
But no one has reimbursed us for the full treble damages amount.

[00:10:28] Speaker 00:
And throughout the litigation we were clear that just the entire issue of how you take into account those third party repayments, you deal with that after the fact finder, after the jury.

[00:10:40] Speaker 09:
Why, if it's not compensatory payments and therefore as a matter of law put to the back end, why wouldn't that be relevant to damages, how much was repaid?

[00:10:52] Speaker 00:
because they don't have anything to do with the fraud, Your Honor.

[00:10:55] Speaker 00:
The jury said, and again, we didn't know what number the jury was going to come up with.

[00:10:59] Speaker 00:
So underborn students... What if they had paid nothing?

[00:11:04] Speaker 00:
MWI paid nothing?

[00:11:05] Speaker 09:
Not Nigeria.

[00:11:06] Speaker 00:
If my jury had paid nothing, that would also be irrelevant.

[00:11:09] Speaker 00:
We would still have litigated the case the same way.

[00:11:12] Speaker 00:
We're not trying to have it both ways.

[00:11:14] Speaker 00:
We're satisfied with the rule that whether the third party repays us or not, that's simply irrelevant to the jury's calculation of the damages of work.

[00:11:23] Speaker 00:
Now, of course, if we didn't get any repayments, there'd be no question of an offset on the back end.

[00:11:29] Speaker 00:
But our position is when you induce us, you, MWI, the defendant,

[00:11:35] Speaker 00:
induce us to pay you a bunch of money, whether or not somebody later comes along and reimburses us for those payouts is irrelevant to the calculation of single damages.

[00:11:47] Speaker 00:
And all of the reasons the court recited in Bornstein, we don't want the advantageous acts of a third party.

[00:11:53] Speaker 00:
We don't want the fact that a third party comes to the rescue, which may or may not happen, to fix the liability

[00:11:59] Speaker 00:
under the multiplier.

[00:12:01] Speaker 00:
We don't want that to be the driving factor.

[00:12:03] Speaker 00:
Now, of course, we're not trying to get a windfall here.

[00:12:05] Speaker 00:
If somebody else, the third party, comes along and gives us back some of the money we paid out due to fraud, or even if they wanted to, out of grace, if Nigeria had come to us and said,

[00:12:17] Speaker 00:
We understand that there is a $7.5 million damages award.

[00:12:21] Speaker 00:
We feel really bad.

[00:12:23] Speaker 00:
We understand we've only repaid it once.

[00:12:25] Speaker 00:
But here's a check for, you know, $10 million.

[00:12:28] Speaker 00:
We'd be arguing only for five.

[00:12:30] Speaker 00:
We're not trying to recover more than three times over.

[00:12:32] Speaker 00:
But we do get to account for at least that three times over.

[00:12:36] Speaker 00:
And I want to point out that the deterrence rationale that was so important to the court in Bornstein is even more important here because there, the fraudulent party, the subcontractor,

[00:12:47] Speaker 00:
It was going to be liable for the multiplied damages award in its entirety.

[00:12:52] Speaker 00:
The court noted that that fraudster, that subcontractor, is going to be liable to the contractor, the third party who made good to the United States in part.

[00:13:03] Speaker 00:
No one thinks that MWI needs to repay Nigeria that $7.5 million.

[00:13:10] Speaker 00:
Essentially, even under our theory of the case, MWI is only going to be on the hook for double damages, not the full traveled amount.

[00:13:19] Speaker 00:
But under Judge Kessler's theory, wrongdoers can evade the multiply damages liability entirely.

[00:13:28] Speaker 09:
I might be interrupting in a different thought, but why didn't you say this to the judge in these motions?

[00:13:36] Speaker 09:
In other words, the repayment is not relevant at the front end or the back end.

[00:13:42] Speaker 00:
Oh, Your Honor, we definitely said they're not relevant at the front end.

[00:13:45] Speaker 00:
That was the crux of our debate.

[00:13:47] Speaker 09:
Or the back end.

[00:13:48] Speaker 00:
Your Honor, we did say that there was, again, there was a dispute about whether or not MWI had orchestrated

[00:13:56] Speaker 00:
Nigeria's repayment on these loans, so we reserved the whole issue and the court at 415 makes clear that it was also just kicking that issue until after trial.

[00:14:06] Speaker 09:
We argued after trial that we thought... Judge Urbina's rulings, at least, I thought, correct me if I'm wrong, had indicated that those would be considered compensatory payments.

[00:14:19] Speaker 00:
I think that there was never any

[00:14:23] Speaker 09:
set amount that was going to be considered compensatory and and the court said whether and how much your motion said judge urbina found that any payments from nigeria war compensatory payments

[00:14:34] Speaker 00:
And in context, in the course of this litigation, we were not committing ourselves to saying all repayments are going to be repayments.

[00:14:42] Speaker 00:
We give a hypothetical in that motion.

[00:14:44] Speaker 00:
We say, if the jury returns about $75 million, then yes, they would get a $75 million credit.

[00:14:51] Speaker 00:
But again, at that point, if the jury had said, yes, all 75 paid out was due to fraud,

[00:14:56] Speaker 00:
We would have said, okay, we've gotten that $75 million back once, so we're going to give you a credit because the repayments for fraud, not repayments on a legitimate part of the loan, have been returned to the United States.

[00:15:12] Speaker 00:
But you have not returned the troubled figure, the remaining 150.

[00:15:17] Speaker 00:
And so that's what we think is the key error.

[00:15:20] Speaker 00:
Now, we could not have known before trial what the jury's verdict was going to be.

[00:15:25] Speaker 00:
So we never committed ourselves to any particular amount.

[00:15:29] Speaker 04:
Here's what the district court says in her third published opinion.

[00:15:36] Speaker 04:
In footnote nine.

[00:15:38] Speaker 00:
I'm sorry.

[00:15:38] Speaker 00:
Do you have a JA citation?

[00:15:39] Speaker 00:
I'll follow up.

[00:15:41] Speaker 04:
It's page 60 of the published opinions

[00:15:48] Speaker 04:
brochure.

[00:15:50] Speaker 00:
I'm afraid I only have the original record citations, but I'll try to follow along.

[00:15:55] Speaker 04:
I thought it was very convenient.

[00:16:00] Speaker 04:
All the published opinions were put in one place.

[00:16:04] Speaker 04:
So this is the third one, part C. This is footnote.

[00:16:08] Speaker 04:
Footnote nine.

[00:16:10] Speaker 04:
All right, page 60 of this brochure.

[00:16:13] Speaker 04:
And if you can find footnote nine of the decision

[00:16:23] Speaker 04:
February 10, 2014.

[00:16:33] Speaker 04:
Can counsel assist counsel here?

[00:16:38] Speaker 00:
No, Your Honor, I think I can find it.

[00:16:39] Speaker 00:
I'm using the original record versions, but I think I'll be able to find it just fine here.

[00:16:43] Speaker 00:
It's footnote nine.

[00:16:47] Speaker 04:
Here's what the judge says.

[00:16:50] Speaker 04:
in rejecting MWI's claims that the government's judiciary stopped.

[00:16:57] Speaker 04:
The judge says, quote, this court did not adopt the government's position that the Nigerian repayments were, quote, compensatory payments, close quote, that would necessarily offset any damages.

[00:17:14] Speaker 00:
Yes, Your Honor, and we think that that was a mischaracterization of our position, and we think...

[00:17:18] Speaker 04:
All I'm getting at is what we have is the government's written motion and we have the district court's statement as to how it understood that motion and what the government was arguing.

[00:17:35] Speaker 04:
That's the only point I'm getting at.

[00:17:38] Speaker 04:
And so it was a surprise to read in the government's brief, although the government may be right about this, that your position was only some of the repayments may be compensatory.

[00:17:53] Speaker 00:
Your Honor, I think if you go back to our actual motions.

[00:17:55] Speaker 00:
I did.

[00:17:57] Speaker 00:
And Judge Kessler's decision.

[00:17:59] Speaker 04:
But do you see this footnote 9?

[00:18:02] Speaker 00:
I do, Your Honor.

[00:18:02] Speaker 00:
And in our briefs we noted that that characterization of our position we thought was inconsistent with both our filings and we think it's inconsistent with the court's prior determination at JA 415 that

[00:18:17] Speaker 00:
whether and how MWI is entitled to a reduction, that will all be sorted out later.

[00:18:25] Speaker 04:
The judge actually says this twice in the sentence I read and then there's another sentence.

[00:18:30] Speaker 04:
So the district court, you're suggesting, completely misunderstood the government's position.

[00:18:36] Speaker 00:
I think at that point the way she described it was not a fair characterization and I don't think there's any legal theory.

[00:18:43] Speaker 04:
And what would have put the district court on notice that the government was arguing only part of the repayments may be compensatory?

[00:18:57] Speaker 04:
Well, you're following up on Judge Kavanaugh's question.

[00:19:00] Speaker 00:
Well, Your Honor, we, again, we were at that time reserving the argument that none of them were, that to the extent they're considered at all, you consider them after the jury calculates damages.

[00:19:10] Speaker 00:
But our theory was maybe none of these are compensatory.

[00:19:14] Speaker 04:
But in your written motion, you say that payment

[00:19:18] Speaker 04:
that MWI is entitled to your credit.

[00:19:22] Speaker 00:
We also refer to any compensatory payments.

[00:19:26] Speaker 00:
We never said any loan payments.

[00:19:28] Speaker 00:
We never said all loan repayments.

[00:19:31] Speaker 00:
We're talking about compensatory.

[00:19:32] Speaker 00:
Remember, that's what you're getting at under Bornstein.

[00:19:35] Speaker 09:
But let's just go back.

[00:19:36] Speaker 09:
So MWI is selling pumps, right?

[00:19:39] Speaker 00:
Correct.

[00:19:40] Speaker 09:
To Nigeria.

[00:19:42] Speaker 09:
under your theory fraudulently convince the government to give loans to Nigeria?

[00:19:49] Speaker 00:
Correct.

[00:19:50] Speaker 09:
And Nigeria repays the loans?

[00:19:53] Speaker 00:
Yes.

[00:19:56] Speaker 09:
What's the damage other than, what's the damage?

[00:20:00] Speaker 00:
Your Honor, remember there are sort of two separate agreements the government has going here.

[00:20:05] Speaker 00:
The government has an agreement with MWI about what kind of commissions they're going to pay and what they're going to use our $75 million for.

[00:20:13] Speaker 00:
And so we pay the money to MWI based on those representations.

[00:20:18] Speaker 00:
At that point, MWI is out.

[00:20:21] Speaker 00:
They have no further legal obligations.

[00:20:23] Speaker 00:
Once they file their last certificate and get the last drawdown,

[00:20:26] Speaker 00:
They're done, as far as the legal matter is concerned.

[00:20:29] Speaker 00:
Now, we still have a separate contract with Nigeria that says, you need to repay us the money that we paid to MWI on your behalf.

[00:20:38] Speaker 00:
But this really is a third-party payment.

[00:20:44] Speaker 00:
And cases talking about the benefit of the bargain, like this court science application cases,

[00:20:49] Speaker 00:
That case is not going to how you account for third-party reimbursements to the government due to fraud.

[00:20:56] Speaker 00:
And so we think the benefit of the bargain, the way you look at that is with NWI.

[00:20:59] Speaker 09:
But it's all these disparate transactions when it seems to me, and maybe I'm misunderstanding, but it seems to me they're all linked up.

[00:21:07] Speaker 09:
And when Nigeria repays the loan,

[00:21:10] Speaker 09:
I'm having trouble seeing what's left of the damage.

[00:21:15] Speaker 09:
Maybe you can restate what you said before when I asked that.

[00:21:18] Speaker 00:
Well, Your Honor, of course, there's some suggestion in the briefing that Ex-Im Bank somehow works like a Wells Fargo, that all we're after is just the interest.

[00:21:28] Speaker 00:
That is emphatically not the case.

[00:21:30] Speaker 00:
This is a government entity that's fulfilling a larger programmatic purpose for the benefit of a third party.

[00:21:36] Speaker 09:
Without the fraud, you wouldn't have given the loan, potentially.

[00:21:38] Speaker 00:
Absolutely not.

[00:21:39] Speaker 00:
And there is testimony to that effect.

[00:21:41] Speaker 09:
Okay.

[00:21:42] Speaker 09:
But you gave the loan and were repaid.

[00:21:45] Speaker 00:
Correct.

[00:21:45] Speaker 09:
But our larger purpose is... So the damage, therefore, is that you gave the loan and you didn't want to give the loan, but you were repaid on a loan.

[00:21:55] Speaker 00:
But that repayment, that third-party revenue stream, that's a third-party payment in newborn state.

[00:22:02] Speaker 09:
The legal terms of art we can get to, but I'm just trying to understand

[00:22:07] Speaker 09:
We didn't want to give the loan, or we wouldn't have given the loan, but for the fraud.

[00:22:11] Speaker 09:
We gave the loan, and we got repaid fully on the loan.

[00:22:15] Speaker 00:
No.

[00:22:15] Speaker 00:
Your Honor, again, looking at the benefit of the bargain that way, we think improperly conflates MWI and Nigeria, and that there's a real difference when the party that you're working directly with repays you versus when a third party makes good on something the first party sent you.

[00:22:33] Speaker 09:
If you're going to put it in plain English, that real difference is

[00:22:37] Speaker 00:
I don't know if this qualifies as real in English, but Bornstein.

[00:22:40] Speaker 00:
This is the setup the court was worried about in Bornstein.

[00:22:45] Speaker 00:
Party 1 defrauds you.

[00:22:47] Speaker 00:
Party 2 comes in and in some way makes good on that, makes good on the fraud.

[00:22:51] Speaker 09:
You still calculate... Yeah, there's still liability.

[00:22:54] Speaker 09:
I'm asking about damage.

[00:22:56] Speaker 00:
yet you still calculate the damages just based on what party one did to you.

[00:23:00] Speaker 00:
You don't take into account what party three did.

[00:23:03] Speaker 09:
But normally if you're fraudulently induced to give a loan, you're mad about it because the person you gave the loan to didn't repay you or didn't repay you fully.

[00:23:11] Speaker 00:
But in this case, what we're mad about is that somebody lied to us about what they're doing with our money.

[00:23:16] Speaker 00:
And that party has MWI.

[00:23:18] Speaker 00:
Now, I want to know, even on the theory, there seems to be some suggestion that the jury should have considered this in the first instance in calculating the damages.

[00:23:29] Speaker 00:
This court's decision in science applications makes very clear we get to argue to a jury that our larger programmatic interests were not fulfilled here.

[00:23:40] Speaker 00:
So even if the jury had been allowed to consider this information and calculating the actual damages, the single damages,

[00:23:47] Speaker 00:
We could still argue, listen, you took about $28 million of our dollars and you used it to fund a Nigerian agent, not to support American jobs.

[00:23:55] Speaker 00:
That's not what our program is for.

[00:23:57] Speaker 00:
Part of the reason that's not what our program is for is because we are not interested in using our money to support Nigerian agents, especially because it raises the specter of corruption and we want nothing to do with that.

[00:24:09] Speaker 09:
And that's a good argument for a criminal sanction or for liability of some kind.

[00:24:14] Speaker 09:
But when we're talking about damages,

[00:24:17] Speaker 00:
But I think our programmatic interests here really were damaged.

[00:24:20] Speaker 00:
And this brings up the issue of a remand, which of course is not something they've ever asked for here.

[00:24:27] Speaker 09:
I guess I don't understand.

[00:24:29] Speaker 09:
I don't want to prolong this, but I'm going to ask one more question.

[00:24:32] Speaker 09:
I don't understand why you say your damage would be the same if Nigeria repaid the loan or if they didn't repaid the loan.

[00:24:38] Speaker 00:
And that's because when you're looking at damages, you just look at what the fraudster did to us.

[00:24:45] Speaker 00:
Now we're not saying we get the same amount later.

[00:24:47] Speaker 00:
If we got repaid, you get a credit for it.

[00:24:51] Speaker 00:
But you calculate that on the back end.

[00:24:53] Speaker 09:
And I understand that's born seeing kind of bumping that to the back end.

[00:24:56] Speaker 09:
And you're saying not all of that gets bumped to the back end.

[00:24:59] Speaker 09:
Some of it doesn't matter at all.

[00:25:00] Speaker 00:
Well, under the jury's view of the case, some of it had nothing to do with the fraud.

[00:25:06] Speaker 00:
Remember, what we're talking about is compensation for the fraud, repayment for the fraud.

[00:25:12] Speaker 04:
And the jury said... Are the statutory provisions relevant to that?

[00:25:18] Speaker 00:
The statute simply says damage to the United States.

[00:25:21] Speaker 00:
The Supreme Court and Bornstein did.

[00:25:23] Speaker 04:
And why then isn't that relevant?

[00:25:26] Speaker 00:
Well, Your Honor, because it doesn't tell us how to calculate those damages.

[00:25:29] Speaker 04:
No, but I'm following up on Judge Kavanaugh's line of questioning.

[00:25:34] Speaker 04:
If you're totally repaid, and you're talking about this programmatic damage, and Congress has said, we're programmatic damages, here's what the damage is.

[00:25:46] Speaker 04:
I mean, that's one argument.

[00:25:47] Speaker 04:
And I'm asking you, how do you fit that in to your argument that even though the statutory damages are recovered, there is additional damage, notwithstanding the full repayment of the loan?

[00:26:02] Speaker 00:
By statutory damages, you mean the penalty provisions, right, Your Honor, just so I understand your question?

[00:26:08] Speaker 00:
That was very much the case in Bornstein.

[00:26:11] Speaker 00:
There were penalties in that case, too, and the court still said we have to make sure that the person who does the fraud, that the damage they inflict is doubled.

[00:26:20] Speaker 00:
We need that multiplier.

[00:26:22] Speaker 00:
That's a key part of the deterrence scheme here.

[00:26:24] Speaker 00:
So penalties alone, the Supreme Court has indicated, are not sufficient to take care of this third-party problem.

[00:26:31] Speaker 09:
This is an unusual case, correct?

[00:26:33] Speaker 00:
I believe so, Your Honor.

[00:26:34] Speaker 09:
Because the offset

[00:26:36] Speaker 09:
was more than the troubled damages, which is not usually going to be the case, correct?

[00:26:42] Speaker 00:
It will not usually be the case.

[00:26:43] Speaker 00:
Right.

[00:26:44] Speaker 00:
But that is because I think people will usually recognize that when you've gotten to that position that the offset is somehow more than the troubled damages, you may be taking into account as an offset something that didn't have anything to do with the fraud.

[00:26:59] Speaker 00:
The repayment on the first $68 million under the jury's view of the case, that was a legitimate payout.

[00:27:05] Speaker 00:
So when we got our money back, that was not reimbursement for the fraud.

[00:27:09] Speaker 04:
So what is your strongest case supporting the district court's decision to exclude all the evidence relating to the repayment?

[00:27:20] Speaker 00:
We think that's a clear application of Bornstein, Your Honor.

[00:27:23] Speaker 04:
That's what I thought you were going to say.

[00:27:24] Speaker 04:
That's what your motion said.

[00:27:26] Speaker 04:
And one other question just factually.

[00:27:30] Speaker 04:
When the Export-Import Bank received the application for the loan, from whom, whose application was it?

[00:27:43] Speaker 00:
I believe there's paperwork you need from both Nigeria and Ex-Im, but the form that says we only pay regular commission is only done by MWI.

[00:27:53] Speaker 04:
So you think, can we find in the record that you said there were two separate contracts?

[00:27:59] Speaker 04:
I just want to be clear about this.

[00:28:01] Speaker 00:
Yeah, I'll have to pull the record sites maybe when I'm back at council table, but there's a separate loan contract that's just Nigeria and the United States, and then both the supplier certificates and the original loan applications are just between MWI and the government.

[00:28:16] Speaker 00:
That's my understanding of how this transaction is structured.

[00:28:19] Speaker 04:
All right.

[00:28:20] Speaker 00:
I'm seeing well over time.

[00:28:21] Speaker 04:
Yeah, we'll give you a few minutes for rebuttal.

[00:28:24] Speaker 04:
Thank you, Your Honor.

[00:28:37] Speaker 04:
Good morning.

[00:28:46] Speaker 01:
Morning, Your Honors.

[00:28:47] Speaker 01:
May it please the Court.

[00:28:48] Speaker 01:
My name is Brian Tully McLaughlin and I represent MWI in this matter.

[00:28:53] Speaker 01:
Government, in its appeal, conflates the injury from the submission of false claims with the suffering of actual damages.

[00:29:04] Speaker 01:
As this court is recognized in both the Davis case and SAIC, the False Claims Act composes two types of liability.

[00:29:11] Speaker 01:
The first is that a defendant who submits a false claim is liable for civil penalties, irrespective of whether the government shows any actual damages.

[00:29:21] Speaker 01:
Secondly, the defendant is liable for three times the amount of damages that the government sustains because of the act of the defendant, if any.

[00:29:30] Speaker 01:
As the Davis case recognized, there are some instances of fraud that did not result in actual damages to the government.

[00:29:38] Speaker 01:
And here we have one of those instances.

[00:29:40] Speaker 01:
The district court properly concluded that ultimately there were no damages to the government

[00:29:46] Speaker 01:
because it had received the benefit of its bargain and been made whole by its receipt of full repayment of the loans it issued pursuant to the terms of those loans, as well as earnings of $34 million in interest and fees on top of it.

[00:30:02] Speaker 01:
Nevertheless, the district court recognized that false claims had been found, and so to compensate the government for any intangible or non-monetizable harm,

[00:30:14] Speaker 01:
it assessed the maximum amount of penalties available.

[00:30:18] Speaker 01:
And that was the proper result here.

[00:30:23] Speaker 04:
Well, you heard all my questions about judicial stoppage.

[00:30:26] Speaker 04:
Do you want to respond to the government's position?

[00:30:30] Speaker 04:
Basically is that we're talking about apples as to exclusion and oranges as to the calculation of damages.

[00:30:39] Speaker 01:
Certainly, Your Honor.

[00:30:41] Speaker 04:
And basically, I think the assumption of that argument is everybody understood that in the district court.

[00:30:49] Speaker 01:
And I would disagree with that.

[00:30:51] Speaker 01:
I think what was understood was that the government sought to exclude all payments towards the loan, and it didn't provide any qualifiers as to what would or would not be relevant as an offset.

[00:31:03] Speaker 04:
And beyond the documents I've cited in the record, do you have any other documents to support that position?

[00:31:09] Speaker 01:
One that I think is in the same document that you cited, Your Honor, but I think is important to point out, and it's at JA402.

[00:31:23] Speaker 01:
And this is, again, just going back to, I think it's the same paper submitted by the government that you were focused on earlier.

[00:31:29] Speaker 01:
And here, just as in other places, the government

[00:31:37] Speaker 01:
referring to Judge Urbina stated that Judge Urbina found that any payments, plural, from Nigeria were compensatory payments.

[00:31:48] Speaker 01:
So the reason I point that out is because they said any payments.

[00:31:53] Speaker 01:
There's no qualifier there.

[00:31:55] Speaker 01:
That means all of them, any and all.

[00:31:58] Speaker 01:
There's no other way to read that language.

[00:32:01] Speaker 04:
But what about the government's argument that the False Claims Act

[00:32:07] Speaker 04:
is trying to get at something else as well.

[00:32:11] Speaker 04:
And the Export-Import Bank is not simply Wells Fargo.

[00:32:16] Speaker 04:
It has another mission involved as well.

[00:32:20] Speaker 04:
And Nigeria got this, or you got the money through this loan, and had the government known that there were fraudulent claims and fraudulent statements, it would have

[00:32:38] Speaker 04:
denied this application and given the money to someone else.

[00:32:44] Speaker 04:
I mean, I don't know enough about the congressional appropriation process here as far as the Export-Import Bank is concerned, but I assume, you know, it's not a bottomless pit where it just has money that... So, you know, if we approved what turned out to be a fraudulent loan, it's no loss to anyone.

[00:33:09] Speaker 01:
I agree with you that the EXIM funds are not, they do have limitations and in terms of that, whether there was a programmatic harm of any sort, that was something that the government had every opportunity to prove and to quantify to the jury and it failed to do so.

[00:33:26] Speaker 04:
Well, I mean it did to the extent of 7.5 million, alright, and then the statutory provision kicks in.

[00:33:37] Speaker 01:
I disagree, Your Honor.

[00:33:40] Speaker 01:
What the government asked the jury to do was to find the amount, as it states in its appeal brief, over and above what it would have paid but for the false claims.

[00:33:51] Speaker 01:
That's what the jury was asked to do.

[00:33:53] Speaker 01:
And as SAIC dictates, that's only part of the damages calculation.

[00:34:00] Speaker 01:
So the first part is to calculate what's the amount over and above that the government wouldn't have paid but for the false claims.

[00:34:07] Speaker 01:
But the second part is to then consider what was the value received by the government in spite of the false claims.

[00:34:16] Speaker 01:
And that was not something that the jury was permitted to do.

[00:34:20] Speaker 01:
The court then did it post trial by applying the undisputed value, which is tangible money,

[00:34:28] Speaker 01:
that was received by the government in this transaction on these loans.

[00:34:32] Speaker 01:
That's the benefit of the bargain analysis and it matters not that MWI itself did not make the payments.

[00:34:39] Speaker 01:
What matters is that this transaction was for loans to be paid out and the value and the government here

[00:34:48] Speaker 01:
Unlike in some cases where you do have a pure third party beneficiary case in which the government pays money to a contractor to go provide services to a third party.

[00:35:01] Speaker 01:
Here, the government wanted something for itself.

[00:35:04] Speaker 01:
The bank said, you can benefit these third parties with your sales, but we want something back.

[00:35:10] Speaker 01:
We're giving you a loan.

[00:35:11] Speaker 01:
We're going to get it paid back, and we should earn interest and fees on top of it.

[00:35:16] Speaker 01:
That makes us a very different case.

[00:35:18] Speaker 09:
The government says, though, that the compensatory benefits or payments referred to in Bornstein are compensation for the fraud.

[00:35:27] Speaker 09:
Do you want to respond to that?

[00:35:29] Speaker 01:
Sure.

[00:35:31] Speaker 01:
I would say a few things in response to that, Your Honor.

[00:35:37] Speaker 01:
First of all,

[00:35:40] Speaker 01:
The payments are ones that were, as I think Judge Rogers has pointed out, were considered by the district court to be compensatory payments.

[00:35:51] Speaker 01:
And so in that sense, we can't turn around and now call them something else.

[00:35:55] Speaker 01:
They have to be applied.

[00:35:57] Speaker 09:
Well, okay, go to your next point then.

[00:36:00] Speaker 09:
We got that point, but what about the argument that that's still not, regardless of what was said to the district court, put that aside, this is not compensation for the fraud.

[00:36:11] Speaker 09:
This was compensation under the terms of the loan, but was not meant to compensate for the fraud.

[00:36:17] Speaker 01:
Well, the compensation.

[00:36:18] Speaker 01:
And therefore is not offset.

[00:36:20] Speaker 01:
The money here is compensating the government for what its damage could be in the loan context.

[00:36:30] Speaker 01:
And in that sense, where you have a loan, the most obvious form of damage would be by a default.

[00:36:37] Speaker 01:
Here, the payments that are made serve the purpose of precluding the government from having any damage from that.

[00:36:44] Speaker 01:
And that's why they are relevant in the sense that they compensate the government for any potential damage there.

[00:36:50] Speaker 01:
More importantly, the real point is that this is a case in which there was no damage.

[00:36:57] Speaker 01:
There was nothing to compensate the government for because it already received pursuant to the terms of the loans all of the money it had loaned out.

[00:37:06] Speaker 04:
What about the Supreme Court's concern about perverse incentives in Bornstein?

[00:37:14] Speaker 01:
The district court took that concern into account in a couple of ways.

[00:37:19] Speaker 01:
First of all, as I mentioned, the district court here specifically referenced in its damages opinion that civil penalties are available under the statute and that they must be applied.

[00:37:33] Speaker 01:
And the district court reasons that given the fact that there are potentially other costs to the government that may not be monetizable,

[00:37:42] Speaker 01:
that penalties were appropriate at the maximum amount and that those serve a deterrent effect.

[00:37:49] Speaker 01:
MWI here is not getting off, as the government argues, scot-free.

[00:37:54] Speaker 01:
MWI has been found liable under the statute.

[00:37:57] Speaker 01:
It has been suffering, I would say, for over a decade now from the ramifications of that.

[00:38:03] Speaker 01:
And it will continue to have that judgment against it, subject to the cross-appeal.

[00:38:08] Speaker 01:
It also has to pay penalties.

[00:38:09] Speaker 01:
And that's what the courts recognize is appropriate, even where there are no actual damages suffered.

[00:38:16] Speaker 01:
The other point I would make,

[00:38:18] Speaker 01:
excuse me, is that that's exactly what Bornstein and other Supreme Court cases have said, that it's not just about the travel damages, but the fixed sum of a civil penalty that compensates the government overall for any loss monetizable or not.

[00:38:44] Speaker 01:
I wanted to note, just to make sure I wrapped up on the judicial estoppel point, Your Honor, that a point was made about there's a disagreement from the government concerning whether there's a confusion between the parties and the district court about what was meant.

[00:39:02] Speaker 01:
But what's important here is that the court didn't just say that it agreed with the government

[00:39:12] Speaker 01:
It said expressly that Ornstein is directly applicable to this case and that was the basis of its entire ruling.

[00:39:20] Speaker 01:
The court said MWI does not cite any case to distinguish loan payments from compensatory payments.

[00:39:29] Speaker 01:
and also reason that there is no logical relevance between that.

[00:39:34] Speaker 01:
That was the holding of the district court.

[00:39:36] Speaker 01:
And that's why, because there is no other basis for the district court to exclude the payments other than holding that they were all compensatory, they must be considered so at this point.

[00:39:50] Speaker 03:
Bornstein is an interesting case because you both cite it.

[00:39:54] Speaker 03:
You both rely on it pretty heavily.

[00:39:57] Speaker 03:
My question is, if we follow what I think is your argument, then don't we end up with exactly the problem that Bornstein was concerned about, which is this

[00:40:11] Speaker 03:
advantageous action of third parties where you get different results from you know where exactly the same thing has occurred and what happens depends on whether some third party pays something back or not.

[00:40:27] Speaker 01:
I appreciate your question, Your Honor, and that's not a problem here.

[00:40:32] Speaker 01:
Here, what the Supreme Court recognized and was concerned with in Bornstein was that prior to any traveling or doubling at that time of damages, that a third party's payment could then wipe out everything.

[00:40:49] Speaker 01:
So the Bornstein rule and calculus was as follows.

[00:40:53] Speaker 01:
You assess the damages, you then treble them, again double them at that time, and then you would apply any payments from third parties that are relevant to that transaction.

[00:41:04] Speaker 01:
That's exactly what the district court did here.

[00:41:07] Speaker 01:
The Bornstein court didn't say that the payments after trebling when applied couldn't offset single, double, treble damages.

[00:41:16] Speaker 01:
It just said this is the calculus that has to be done.

[00:41:19] Speaker 01:
And the one important thing in that regard that Bornstein also said is that the purpose of all of this is to make sure that the government is made whole.

[00:41:27] Speaker 01:
But it's not to make sure that the government is made more than whole.

[00:41:31] Speaker 01:
And here, that's what happened.

[00:41:34] Speaker 01:
The government was made whole.

[00:41:36] Speaker 01:
It may not have wanted to make these loans, but as the Ninth Circuit recognized in U.S.

[00:41:41] Speaker 01:
v. Woodbury, even if it had wanted to hold up some payments or not make them, it ultimately did and it got the security that it bargained for.

[00:41:50] Speaker 01:
plain and simple.

[00:41:51] Speaker 01:
And that's why there is no damage here.

[00:41:53] Speaker 01:
And USB Woodbury is one of the cases we cited as a no damages case.

[00:41:57] Speaker 01:
Very similar in that regard.

[00:42:00] Speaker 01:
The other thing I would note, incidentally, in the Bornstein case is that that case was then to be remanded.

[00:42:07] Speaker 01:
And in footnote 13 in Bornstein, the Supreme Court

[00:42:13] Speaker 01:
made clear the benefit of the bargain analysis that we say governs here, which is that in that case, the government had retained the defective tubes that it had received.

[00:42:28] Speaker 01:
And in the damages calculation that went up to the Supreme Court, the value of those defective tubes retained had not been considered.

[00:42:38] Speaker 01:
In part, because the lower courts had been improperly applying the prime contractor's payments.

[00:42:46] Speaker 09:
I asked you a question, sorry to interrupt, but the damages here are separate and apart from what happened with the loan itself.

[00:42:57] Speaker 09:
And then the damages are trebled.

[00:43:01] Speaker 09:
As a matter of logic, why should

[00:43:05] Speaker 09:
what happens with the loan offset damages that were separate and apart from what happened with the loan?

[00:43:14] Speaker 01:
I think the problem with that is that I think the premise, which is that there's damages.

[00:43:20] Speaker 01:
The juries... Well, the jury found damage of 7.5.

[00:43:25] Speaker 01:
What was that for?

[00:43:26] Speaker 01:
What the verdict shows, in some sense, I'm not sure that I can really make sense of it.

[00:43:33] Speaker 09:
But it's got to be something other than the failure to repay the loan.

[00:43:40] Speaker 09:
Because that evidence was not part of the case, having been excluded, correct?

[00:43:44] Speaker 09:
I agree with that.

[00:43:46] Speaker 09:
OK, so then that damage has nothing to do with the loan repayment or not, and then it's

[00:43:54] Speaker 09:
Why would what happens with the loan offset damage that had nothing to do with the loan if the loan repayment is not part of the relevant evidence in the case?

[00:44:10] Speaker 01:
The verdict of 7.5 million does not represent actual damages to the government.

[00:44:17] Speaker 01:
The reason is because the only thing it represents

[00:44:20] Speaker 01:
is the amount over and above that the government wouldn't have paid but for the false claims.

[00:44:27] Speaker 01:
What the verdict does not represent is balancing that against the value that the government received from the transaction of making the loans.

[00:44:36] Speaker 01:
And therefore, the actual damages are putting those two things together, and that's why there's no damage here.

[00:44:48] Speaker 04:
Anything further?

[00:44:50] Speaker 01:
I just wanted to make a couple final points, Your Honors, just to talk about the kind of the public policy issues here.

[00:45:04] Speaker 01:
The difference from so many of these loan fraud cases is that the loans were repaid in full.

[00:45:10] Speaker 01:
And the government here is seeking to punish MWI in such a case where the loans were repaid by their terms.

[00:45:18] Speaker 01:
Now, I just think it's important to think about why the government sought to exclude those payments in the first place.

[00:45:26] Speaker 01:
And the reason is clear.

[00:45:28] Speaker 01:
Because the jury would have awarded zero.

[00:45:30] Speaker 01:
Exactly.

[00:45:31] Speaker 01:
Because the jury would have seen that there was no damage.

[00:45:35] Speaker 01:
Conversely, though, if the loans had not been repaid in full or in part, I defy the government to stand here again and say that they would not have pointed to the default on the loan as damage and quantified it based on the damage, based on the amounts it had not received on those loans.

[00:45:56] Speaker 01:
That is what happens in the typical loan fraud case.

[00:45:59] Speaker 01:
Again, this is a very different case.

[00:46:01] Speaker 01:
And I think all of this, one further point that shows that there can be no real dispute about that is that there were common law claims led by the government in this case.

[00:46:13] Speaker 01:
And upon learning that the court was going to permit repayment evidence to be given to the jury on those claims, the government made a decision to dismiss them with prejudice.

[00:46:28] Speaker 01:
That is a recognition that there would have been a very different finding were that evidence to be considered.

[00:46:36] Speaker 01:
And the government seems to have a position that because it's proceeded under the False Claims Act, that the damages should come out differently, and that's just incorrect.

[00:46:46] Speaker 01:
So the last point I would make is simply that the ultimate question in this case really is, does the government suffer any damages when it loans money that's fully repaid pursuant to the terms with earned interest and fees?

[00:47:01] Speaker 01:
The answer on this record is no, it does not.

[00:47:06] Speaker 04:
Thank you.

[00:47:14] Speaker 04:
All right, Council for the Government, you have a couple of minutes.

[00:47:18] Speaker 00:
Thank you, Your Honor.

[00:47:20] Speaker 00:
Following up on our earlier discussion, you had asked for record citations about the separate agreements here.

[00:47:25] Speaker 00:
So starting at JA750.

[00:47:29] Speaker 00:
is the loan agreement signed only by Nigeria.

[00:47:32] Speaker 00:
The signature page is at JA 783, just the government and Nigeria.

[00:47:37] Speaker 00:
And then at JA 784 is an example of one of the fraudulent certificates.

[00:47:42] Speaker 00:
I think they were 58 at 784 and it's signed only by MWI and the government.

[00:47:49] Speaker 00:
I want to note that the last words by MWI's counsel were that the government suffered no damages.

[00:47:59] Speaker 00:
Now, of course, the jury said we suffered $7.5 million in damages, and if you wanted to overturn that jury verdict,

[00:48:08] Speaker 00:
on the theory that they should have thought about this loan repayment evidence, that it's really part of the benefit of the bargain and that they should have been able to have it before them and thought about it in calculating those actual damages.

[00:48:22] Speaker 00:
What you ask for is a remand, which defendants here have never asked for.

[00:48:27] Speaker 00:
Remember, they put their complaints about the benefit of the bargain in this part of the case, in the appeal.

[00:48:33] Speaker 00:
Of course, if they wanted to expand their relief,

[00:48:38] Speaker 00:
they needed to cross-appeal on that issue.

[00:48:41] Speaker 09:
So why any offset at all from the government's point of view?

[00:48:47] Speaker 00:
We do think that on this record, the way that this case was litigated... What's your theory for why an offset is allowed?

[00:48:55] Speaker 00:
At all is because we...

[00:48:58] Speaker 00:
If we paid out $7.5 million due to fraud, which is what the jury said, $7.5 million over and above, and we got it back once, we're willing to say that can plausibly be described as compensation, as reimbursement.

[00:49:12] Speaker 00:
One time over, not three times.

[00:49:13] Speaker 09:
Where you got it back once, how did you get it back once?

[00:49:16] Speaker 00:
When Nigeria repaid it.

[00:49:19] Speaker 00:
So then they repaid it once, and we are conceding that they get a credit of $7.5 million.

[00:49:26] Speaker 09:
as part of the repayment alone.

[00:49:28] Speaker 00:
Yes.

[00:49:29] Speaker 09:
But your theory of the case, I thought, was that the loan is distinct from the damages that the government may or may not have suffered.

[00:49:38] Speaker 00:
Your Honor, we agree that loan repayments can be compensatory, just not that they're always compensatory.

[00:49:45] Speaker 09:
You have to look at... Well, that's where I'm struggling with your argument.

[00:49:48] Speaker 09:
It seems like the pure argument, which also I realize why you might not make this, but the pure argument would be there should be no offset at all because the repayment of the loan is irrelevant to the damages that the jury found that the government suffered here and therefore you should trouble those and just ignore the repayment of the loan.

[00:50:08] Speaker 00:
You know, I think if we said that you don't take into loan repayment into account on either end, either the front end or the back end, we really would be seeking a windfall and we've never sought to do that.

[00:50:18] Speaker 00:
We think you have to take it into account once.

[00:50:19] Speaker 00:
We think the right way is on the back end, but a lot of what opposing counsel was up here saying suggests that there shouldn't have been any single damages at all.

[00:50:28] Speaker 09:
But then doesn't the traveling become a penalty rather than damages?

[00:50:33] Speaker 00:
No, Your Honor, the Supreme Court's explained that the reason we multiply, Congress multiplied, is to compensate the government for the more incoherent harms of frauds in its programs, as well as to deter people from doing it.

[00:50:45] Speaker 00:
If you just wait until you get caught and you pay it back, there's no deterrence.

[00:50:48] Speaker 09:
Right, but then why not offset it all?

[00:50:52] Speaker 00:
Because, Your Honor, all we're talking about, it's not all due to the fraud.

[00:50:57] Speaker 00:
Only the 7.5 was repayment for the fraud.

[00:51:00] Speaker 00:
That's the amount the jury, and again, we respect the jury verdict here.

[00:51:03] Speaker 00:
The jury said only 7.5 of this was tainted by fraud.

[00:51:08] Speaker 00:
And so on that view, based using what the jury told us, that's how we get to the theory that, all right, fine, you get 7.5 credit.

[00:51:17] Speaker 00:
But you don't get the extra 15 million.

[00:51:20] Speaker 09:
So the 108, if I have that figure right, that Nigeria repays does compensate for the 7.5, but doesn't compensate for the 15.

[00:51:30] Speaker 00:
I think that's right, Your Honor.

[00:51:31] Speaker 00:
Remember the 108 gets to the interest on this loan?

[00:51:35] Speaker 09:
Yes, okay.

[00:51:35] Speaker 09:
Well, whatever amount is repaid, which is more than 22, it properly offsets the 7.5 but doesn't properly offset the troubling amount, which is the extra 15.

[00:51:48] Speaker 00:
Because you have to look at what part of that 108 can in any sense be described as reimbursing the government.

[00:51:54] Speaker 00:
for the fraud.

[00:51:56] Speaker 00:
We know how much the government was out due to fraud.

[00:51:59] Speaker 09:
But the 15 is for the fraud, too.

[00:52:01] Speaker 09:
As you said, it's the Incoet harms and extra harms and hard to calculate harms that Congress wanted to put in there.

[00:52:10] Speaker 00:
It is, and it's very clear that we get those.

[00:52:13] Speaker 00:
I do want to note that this idea that loan repayments count as offsets

[00:52:19] Speaker 00:
not as part of the benefit of the bargain is not new.

[00:52:22] Speaker 00:
The Supreme Court itself cited two district court cases, Globemodeling and Klein.

[00:52:27] Speaker 00:
They were both loan cases where the government had later gotten some payments from the innocent third parties.

[00:52:33] Speaker 00:
And the Supreme Court described those as offsetting credits.

[00:52:37] Speaker 00:
But of course, a credit actually has to be compensation.

[00:52:40] Speaker 00:
It can't just be something you did that was not related to the fraud there.

[00:52:45] Speaker 09:
Yes, so that's why... I understand why you argued it the way you did, but the concession...

[00:52:53] Speaker 09:
If I can use that word that you've made, it's a bit inconsistent with your theory, I think.

[00:52:58] Speaker 03:
Well, maybe, let me see if I can say this in a different way.

[00:53:05] Speaker 03:
Would it be correct to say that the government's position is their argument was perhaps the entire fraud, the entire loan was fraudulently induced?

[00:53:17] Speaker 03:
Right.

[00:53:18] Speaker 03:
But for those false certifications, you might not have made any loan.

[00:53:23] Speaker 03:
But the jury found that they decided you probably would have made it, just perhaps not as much.

[00:53:31] Speaker 00:
I think that's entirely right, Your Honor.

[00:53:33] Speaker 00:
I see I'm way over time.

[00:53:36] Speaker 00:
I do just want to note if what we're talking about is saying the jury got it wrong in the 7.5 and actually they should have reached, they should have heard about this loan repayment,

[00:53:50] Speaker 00:
you would have to remand, which is something they've never asked for here.

[00:53:53] Speaker 00:
You don't just get to assume.

[00:53:54] Speaker 00:
We get that point.

[00:53:55] Speaker 04:
We want to be clear, I think.

[00:53:58] Speaker 04:
Our questions are going to try to understand the government's theory of the case.

[00:54:01] Speaker 00:
Yes, Your Honor.

[00:54:02] Speaker 04:
In the way it litigated it in the district court.

[00:54:05] Speaker 04:
And I thought that's what Judge Brown's question was trying to be helpful in explaining.

[00:54:12] Speaker 04:
And you said yes.

[00:54:15] Speaker 04:
So you just adopt it.

[00:54:17] Speaker 04:
Period.

[00:54:18] Speaker 04:
I just want to be clear.

[00:54:18] Speaker 00:
I do.

[00:54:19] Speaker 00:
And I think that the way Judge Brown articulated it is correct.

[00:54:23] Speaker 00:
Our theory of the case was that all of the loan was fraudulent.

[00:54:27] Speaker 00:
Every dollar we paid out was fraudulent.

[00:54:29] Speaker 04:
So this was argued to the district court.

[00:54:32] Speaker 04:
I just want to be clear about this.

[00:54:33] Speaker 04:
I'm trying to find this argument.

[00:54:37] Speaker 04:
Because when I read the district court's opinion on this issue,

[00:54:41] Speaker 04:
She doesn't, the district court doesn't avert to any of this.

[00:54:44] Speaker 04:
Now maybe it decided it just wasn't, but that's not the way the opinion reads.

[00:54:52] Speaker 04:
And the district court says she looked at authorities and all of the cases are treating and interpreting Bornstein the way the district court did here.

[00:55:09] Speaker 04:
And I understand you're saying the district court was wrong, but I'm trying to understand where this argument is set out for the district court.

[00:55:21] Speaker 04:
Judge Brown offered one suggestion, and where is that?

[00:55:30] Speaker 04:
Is that even in the government's brief?

[00:55:33] Speaker 00:
Your Honor, yes, if you look at page JA402, the government sets out a hypothetical.

[00:55:40] Speaker 00:
Remember, this is before trial, and we set out a hypothetical very much in line with what Judge Brown was saying.

[00:55:46] Speaker 00:
Our theory

[00:55:48] Speaker 00:
Going to trial, where I'm in the first full paragraph was, we said consistent with Bornstein and Glober modeling, if the jury finds, for example, this is a hypothetical, that the United States paid out $74.3 million because of their false statements, i.e.

[00:56:03] Speaker 00:
if everything we paid out, single damages would be the $74.3 million.

[00:56:08] Speaker 00:
After the court troubles, get to 229, then the court would apply any potential offsets or payments Nigeria made towards the $70.43 million loan.

[00:56:19] Speaker 00:
So if we paid out, if all 75 we paid out was fraudulent, then when you pay us back that 75, you can fairly say that's reimbursing us for the fraud.

[00:56:29] Speaker 00:
But that was a hypothetical.

[00:56:31] Speaker 00:
We were never saying that no matter what the jury came back and said was due to fraud.

[00:56:38] Speaker 00:
that we would somehow consider repayments that were for loans not fraudulently obtained, compensation for payments that were?

[00:56:47] Speaker 00:
The court has no further questions.

[00:56:49] Speaker 00:
Any appeal?

[00:56:50] Speaker 00:
Thank you.

[00:57:14] Speaker 04:
All right, turning to the cross-appeal.

[00:57:16] Speaker 07:
Yes, Your Honor.

[00:57:17] Speaker 07:
May it please the Court?

[00:57:18] Speaker 07:
My name is Robert Rode, and I represent the Appellee and Cross-Appellant, NWI Corporation.

[00:57:25] Speaker 07:
And I will be presenting this morning on our cross-appeal issues.

[00:57:34] Speaker 07:
I'd like to begin by saying that at its core, this is a case that really involves fundamental notions of due process.

[00:57:42] Speaker 07:
and whether my client, NWI, should be held liable under the draconian sanctions regime of the False Claims Act for simply interpreting a term on a form from the Export-Import Bank

[00:57:58] Speaker 07:
where the Export-Import Bank, or XM as we refer to it frequently, never provided any definition, statute, by law, by regulation, by any written guidance, or by any convention at the time.

[00:58:14] Speaker 07:
What NWI did was they were asked to report

[00:58:19] Speaker 07:
any commissions other than, quote, regular commissions or fees paid or to be paid in the ordinary course of business to our regular sales agents or sales representatives and readily identifiable on our books and records.

[00:58:35] Speaker 09:
Your hurdle, initial hurdle here, which is not instrumentable, but your initial hurdle is that these arguments could have been and were presented to the jury and the jury

[00:58:46] Speaker 09:
found otherwise.

[00:58:47] Speaker 09:
So how are we supposed to deal with that, in your view?

[00:58:50] Speaker 07:
Yes, Your Honor.

[00:58:51] Speaker 07:
There's multiple levels.

[00:58:53] Speaker 07:
And by the way, I did reserve five minutes for rebuttal, and I just wanted to make that clear on the record.

[00:58:58] Speaker 07:
But there are multiple levels to that analysis, the first of which is that the case never should have proceeded to trial in the first place.

[00:59:06] Speaker 07:
Judge Urbina should have granted summary judgment.

[00:59:08] Speaker 07:
This was a clear question of law as to whether, under due process requirements, for example,

[00:59:15] Speaker 07:
the agency had set a clear standard for which MWI could comply or not comply.

[00:59:23] Speaker 09:
I think the question for us now, though, is whether a reasonable jury could conclude that your interpretation of the term regular commissions was not reasonable.

[00:59:32] Speaker 07:
Yes, Your Honor.

[00:59:33] Speaker 09:
I think.

[00:59:35] Speaker 09:
Correct me if you think that phrasing of the question is wrong.

[00:59:37] Speaker 09:
Well, I won't correct you on your phrasing of any question, but... No, but the issue before us, is that the right way to look at the issue?

[00:59:46] Speaker 09:
Could a reasonable jury conclude that your interpretation of regular commission was not reasonable?

[00:59:53] Speaker 07:
So I don't believe so, Your Honor, respectfully, because the case of Feld v. Feld

[00:59:59] Speaker 07:
which this court issued, made very clear that if there is a pure question of law at the summary judgment stage, it is reviewable on appeal, regardless of what happens after, and there is no need for a litigant to put forward a Rule 50 motion at trial to preserve that issue.

[01:00:20] Speaker 09:
But isn't that the question at summary judgment too?

[01:00:23] Speaker 07:
Yes, Your Honor.

[01:00:24] Speaker 07:
And in our view, the issue.

[01:00:26] Speaker 09:
The question that I asked, isn't that the question, in essence, of summary judgment?

[01:00:30] Speaker 07:
It is, Your Honor.

[01:00:31] Speaker 07:
Except in here, what we have, though, is a clear question of law.

[01:00:34] Speaker 07:
That is, whether or not there was a fair notice to MWI as to what this standard was, this previously undefined standard,

[01:00:46] Speaker 04:
What do you do with our decision in K&R where the question there arose in the context where there was nothing more than the statement and here the argument is, well there was evidence presented arguably from which a reasonable jury could find that there was sufficient warning to your client.

[01:01:16] Speaker 07:
So Your Honor, you raise a good point.

[01:01:19] Speaker 07:
And we actually rely heavily, as you know, from our briefs on the K&R partnership decision, which is memorable, at least which is for Judge Brown's opening statement, quoting Jimi Hendrix.

[01:01:31] Speaker 07:
But the issue there was, if there is more than one reasonable interpretation of a regulatory requirement, it cannot, as a matter of law,

[01:01:43] Speaker 07:
invoke FCA liability for purposes of the CNTER requirement.

[01:01:50] Speaker 07:
There is an issue and the Supreme Court in Safeco, which is the decision really that KNR adopted and applied to the FCA context, explains that it really doesn't matter

[01:02:04] Speaker 07:
you what the motive or the intent was.

[01:02:07] Speaker 07:
As long as there are one or more reasonable interpretations of a regulatory provision and the defendant adopts one of those provisions,

[01:02:17] Speaker 07:
There can be no CNTA.

[01:02:19] Speaker 07:
There can be no FCA liability.

[01:02:22] Speaker 07:
And I would note that in Safeco, it's interesting because that was a case where there was actually evidence where the defendant may have been warned away from its interpretation of an ambiguous regulatory term.

[01:02:34] Speaker 07:
In that case, they had sought and received the advice of counsel at the agency

[01:02:40] Speaker 07:
who actually advised them that the position that they were taking would not be the most prudent position to take.

[01:02:47] Speaker 07:
Nonetheless, the court said that that's not authoritative guidance because it didn't commit the commission.

[01:02:54] Speaker 07:
In our case, there is none of that.

[01:02:58] Speaker 07:
What we have is we have MWI, which is a good company that had been in existence for nearly a century, four generations of a family,

[01:03:06] Speaker 07:
that had never been in trouble before, that had worked with the same agent in the same geographic region, selling the same sales, selling the same products, both through private deals, through governmental deals, and even a prior deal in which the loan was backed by the Export-Import Bank, where it was paying the same range of commissions.

[01:03:28] Speaker 07:
There's no dispute about that.

[01:03:29] Speaker 07:
Those facts are undisputed.

[01:03:32] Speaker 07:
MWI for 12 years prior to this deal

[01:03:35] Speaker 07:
was paying the same agent in the same country for the same products, the same commissions.

[01:03:41] Speaker 07:
And informed by that experience and looking through that lens, they of course deemed what they were paying the agent for these deals to be regular commissions as that term was laid out in the form.

[01:03:55] Speaker 04:
So your position is it wouldn't matter what evidence might be available absent a formal

[01:04:06] Speaker 04:
adoption by the agency of what it meant by a particular term.

[01:04:16] Speaker 07:
In essence, yes, Your Honor.

[01:04:17] Speaker 07:
What I would concede is that if there was information that would have clearly warned MWI away from its interpretation, that could have a bearing, at least as to the scienter element.

[01:04:30] Speaker 04:
Because that's what I was going to get at.

[01:04:31] Speaker 04:
The district court emphasized that, didn't it, that here

[01:04:36] Speaker 04:
We're talking about economic regulation.

[01:04:38] Speaker 04:
We're talking about the requirement that the action be done knowingly.

[01:04:45] Speaker 07:
Yes, Your Honor.

[01:04:46] Speaker 07:
That's what the

[01:04:48] Speaker 07:
They had a general understanding of that.

[01:04:52] Speaker 07:
But I think they ultimately failed, if we want to fast forward.

[01:04:56] Speaker 07:
And to the jury instruction on knowledge, for example, it said specifically it was an error in our position, and we preserved our objections.

[01:05:06] Speaker 07:
But it basically said that,

[01:05:13] Speaker 07:
It said, the fact that you may, this is as to knowledge, and I apologize because I don't have a JA sent to this, but it was the jury instruction provided.

[01:05:23] Speaker 07:
713.

[01:05:24] Speaker 07:
Thank you, Your Honor.

[01:05:25] Speaker 07:
The fact that you may conclude that MWI had a reasonable and or good faith interpretation does not require you to conclude that MWI did not act with actual knowledge, deliberate ignorance, or reckless disregard.

[01:05:40] Speaker 07:
And our view has been, and has always been, that that's clear error.

[01:05:44] Speaker 07:
That's in contravention of the law.

[01:05:47] Speaker 04:
And as two of Your Honor said- Have you challenged that jury instruction?

[01:05:51] Speaker 07:
We did, Your Honor, at multiple levels.

[01:05:52] Speaker 07:
So at first- In your brief.

[01:05:56] Speaker 04:
in your appeal?

[01:05:59] Speaker 07:
We challenged the issue of the finding of knowledge.

[01:06:01] Speaker 07:
I can't commit to whether we actually specifically challenged it in our brief, Your Honor, to be candid.

[01:06:10] Speaker 09:
You mentioned it, but you don't have a separate challenge.

[01:06:12] Speaker 09:
You're not asking for a new trial based on an improper jury instruction.

[01:06:17] Speaker 07:
No, no, no.

[01:06:17] Speaker 07:
What we're really saying is that

[01:06:20] Speaker 07:
We can talk about the trial a lot.

[01:06:22] Speaker 07:
And there's a natural tendency and, I think, desire to want to talk about it, because that's what a jury actually heard.

[01:06:29] Speaker 07:
That's what a jury actually found.

[01:06:31] Speaker 07:
I get that.

[01:06:32] Speaker 07:
What we're talking about, though, is the issues of due process, falsity, and c-enter are really involved pure legal questions of law for which the facts that are involved were never in dispute and should have been resolved in our favor at the summary judgment.

[01:06:50] Speaker 04:
Well, that's how I thought your argument was and that's why I asked you the question.

[01:06:55] Speaker 04:
So your position is that if an agency has a standard and the standard is ambiguous until the agency formally adopts a position as to the meaning of that standard, there can be no liability under the False Claims Act.

[01:07:16] Speaker 07:
Yes, I think that's right, in the sense that, first of all, we would say that they never had a standard.

[01:07:21] Speaker 07:
It wasn't like they had a standard and it was something big.

[01:07:23] Speaker 04:
Well, I'm saying regular commissions is their standard.

[01:07:28] Speaker 04:
Yes, but... Go ahead.

[01:07:31] Speaker 09:
But you would have to acknowledge, I think, that there may be interpretations even of an ambiguous provision that would be outside the range of reasonable interpretations and thus still proper for liability.

[01:07:46] Speaker 07:
Yes, Your Honor, I would.

[01:07:47] Speaker 09:
And that really is the question here, I think, which is I

[01:07:51] Speaker 09:
I take regular commissions to be ambiguous.

[01:07:53] Speaker 09:
My question first is whether your interpretation of it was outside the range of reasonable interpretations of it, and then second, how I factor in what the jury did here.

[01:08:03] Speaker 07:
Yes, Your Honor.

[01:08:03] Speaker 07:
So that's a very fair point.

[01:08:05] Speaker 09:
But just because it's ambiguous doesn't mean you win.

[01:08:08] Speaker 07:
Correct.

[01:08:09] Speaker 07:
So our first position, again, goes back to the due process and the Trinity broadcasting decision, which was that even, and we don't agree that the court should have, but even if the court did give deference to the Export-Import Bank of its post-hoc litigation fresh interpretation of this term regular commissions as being industry-wide

[01:08:31] Speaker 07:
an industry-wide standard, that's fine.

[01:08:34] Speaker 07:
That doesn't change the fact, as this Court found in Trinity Broadcasting, that there still has to be fair notice to the parties that are governed by that regulation.

[01:08:44] Speaker 07:
In this case, there's no dispute that there wasn't.

[01:08:46] Speaker 07:
There was never a definition in law, statute, regulation, agency, guidance, or convention.

[01:08:50] Speaker 04:
Okay.

[01:08:51] Speaker 04:
Let me understand what you mean when you say, that's fine.

[01:08:54] Speaker 04:
What do you mean?

[01:08:56] Speaker 07:
What I'm saying, Your Honor, is that we can concede that the Export-Import Agency should get this high level of deference that this Court acknowledged in Trinity Broadcasting to interpret its own regulations and to create a definition.

[01:09:13] Speaker 07:
That's one of the two steps.

[01:09:14] Speaker 07:
The second step... All right.

[01:09:16] Speaker 04:
That's why I asked you the question I asked you.

[01:09:19] Speaker 04:
I need to just be clear about this.

[01:09:22] Speaker 04:
I thought your first point was the agency never articulated any standard under this phrase regular commissions.

[01:09:34] Speaker 04:
That's number one.

[01:09:36] Speaker 04:
And just because some staff person mentioned it and said they had this understanding, that's insufficient under our

[01:09:46] Speaker 07:
That's actually not right.

[01:09:49] Speaker 07:
I thought that was your first argument.

[01:09:53] Speaker 04:
Then your second argument was even if this new litigation position is the interpretation that is due deference, your client still should prevail because there was insufficient evidence of... Fair

[01:10:16] Speaker 07:
Is that your argument or you say I'm wrong?

[01:10:19] Speaker 04:
And I need to be clear what your argument is.

[01:10:21] Speaker 07:
Yes, Your Honor.

[01:10:21] Speaker 07:
So our argument is there has never to this day been any definition articulated by the Export and Import Bank as to what regular commissions means or as to what the other terms on this certification mean.

[01:10:37] Speaker 07:
It was only during the course of this litigation, a decade

[01:10:41] Speaker 07:
after the events in question that the Department of Justice, not Exum, the Department of Justice came forward and had proffered the court with its new industry-wide standard as the definition of regular.

[01:10:53] Speaker 09:
But your argument needs more steps, which is, and then.

[01:10:57] Speaker 09:
Your interpretation at the time was reasonable under all the circumstances and history of commissions paid.

[01:11:05] Speaker 07:
That's exactly right, Your Honor.

[01:11:07] Speaker 07:
And our interpretation at the time, which was that MWI, informed by its experience, interpreted the term to mean commissions paid that were commensurate with what it had paid its regular agent in the same geographic area selling the same products

[01:11:25] Speaker 09:
Do you think a commission paid historically to one agent makes it a regular commission?

[01:11:30] Speaker 07:
It all depends.

[01:11:31] Speaker 07:
If that's the market.

[01:11:33] Speaker 07:
And the Kafkaesque element of this case is that the government, proper this industry-wide standard, never really told anyone what the industry was.

[01:11:44] Speaker 07:
Does that mean selling pump products in the United States, abroad, sub-Saharan Africa, Asia, Europe, just everywhere around the world?

[01:11:54] Speaker 07:
Does it mean patented pump technology, commodity pump technology?

[01:11:58] Speaker 07:
They never articulated that.

[01:12:00] Speaker 07:
And we made the argument, as Judge Kessler acknowledged in the Rule 50 proceedings, that the government went out of its way to create this standard, but then never presented a scintilla of evidence as to what the industry standard is.

[01:12:17] Speaker 09:
You know, this line in the jury instruction that you quoted killed you.

[01:12:22] Speaker 09:
Don't you think?

[01:12:23] Speaker 09:
What line is it?

[01:12:24] Speaker 09:
The line in the jury instruction that the fact that you may conclude that MWI had a reasonable or good faith interpretation does not require you to conclude that MWI did not act with actual knowledge, deliberate ignorance, or recklessness.

[01:12:38] Speaker 07:
Yes, it did kill us in the sense that there is ample evidence.

[01:12:42] Speaker 09:
Because if I'm a juror, and I hear that, I think, well, they might have a reasonable interpretation.

[01:12:49] Speaker 09:
And the judge told me not to worry about that.

[01:12:50] Speaker 09:
That's exactly right, Your Honor.

[01:12:53] Speaker 07:
And again, this is really, in our view, an issue about what happened at summary judgment and clear error in conclusions of law that were reached based on undisputed facts.

[01:13:06] Speaker 07:
But yes, when it did get to the jury, that didn't help.

[01:13:10] Speaker 07:
We had ample evidence, and the record is undisputed, that MWI has been a family-owned company that has been in poor generations for over a century and has never been in trouble.

[01:13:19] Speaker 07:
They do good.

[01:13:21] Speaker 07:
They do well by doing good.

[01:13:22] Speaker 07:
That doesn't help.

[01:13:23] Speaker 07:
That's the first time for everything.

[01:13:25] Speaker 07:
Yes.

[01:13:25] Speaker 07:
I agree.

[01:13:27] Speaker 07:
But I would note.

[01:13:28] Speaker 07:
To your honor's questions, though, these are just a few of the things that Judge Arvina had to say about this issue.

[01:13:35] Speaker 07:
Because it goes back to your question, Judge Kavanaugh, which is we can all agree that there can be some interpretation of a regulation that is so outside the balance that it's unreasonable and therefore doesn't deserve the due process protections or the

[01:13:53] Speaker 07:
proper analysis under falsity.

[01:13:55] Speaker 09:
Suppose they had paid him three times his commission historically paid in this case.

[01:13:59] Speaker 09:
Would that be a regular commission?

[01:14:01] Speaker 07:
I don't believe so, no.

[01:14:03] Speaker 09:
How about two times?

[01:14:06] Speaker 07:
Look, they paid him within 1% or 2% below or above what they had paid him in the 12 years prior.

[01:14:13] Speaker 07:
And again, this was on private deals, governmental deals, and even one large deal that was also backed by Exxon.

[01:14:20] Speaker 07:
Can you explain?

[01:14:21] Speaker 09:
I understand your historical argument.

[01:14:22] Speaker 09:
You also have another argument about the formula.

[01:14:24] Speaker 09:
Can you spell that out a bit?

[01:14:26] Speaker 07:
Sure, so there was basically one of the things that Judge Urbina said is that there are, he said things like, oh, there are plethora of...

[01:14:38] Speaker 07:
of explanations or definitions, and he specifically looked at three potential, what he viewed, I think, to be reasonable interpretations, which was that the standard could be industry-wide, intra-firm, or individual agent.

[01:14:53] Speaker 07:
And I think MWI's interpretation would be a combined version of both the individual agent and the intra-firm.

[01:15:01] Speaker 04:
I thought he said the word regular wasn't

[01:15:04] Speaker 04:
inconsistent with historical.

[01:15:06] Speaker 07:
He did.

[01:15:07] Speaker 04:
And you were relying on historical, I thought.

[01:15:10] Speaker 07:
We were.

[01:15:12] Speaker 07:
But we find that baffling.

[01:15:15] Speaker 07:
I mean, if you look at the definition of regular, how can it not be historical?

[01:15:20] Speaker 07:
If one is looking through the lens of what is regular.

[01:15:24] Speaker 09:
And that's one argument you have, the historical paid to this person.

[01:15:28] Speaker 09:
But you have another argument, I think, which is the same formula was used here that the firm

[01:15:34] Speaker 07:
And that was also undisputed.

[01:15:36] Speaker 07:
At trial, we made clear that what we paid Mr. Ndimi for these commissions in Nigeria was no different than what we paid every other agent across the company, across the world, who was doing similar projects.

[01:15:51] Speaker 07:
I am not a mathematician, but I can tell you, roughly speaking,

[01:15:55] Speaker 07:
there was a calculus whereby the formula was that an agent would get a certain percent based on the book price, if you will.

[01:16:04] Speaker 07:
And then for every dollar they sold it above that book price, they would get 50% of that.

[01:16:10] Speaker 07:
And so that's why the percentage that Mr. Indini got may have been higher than some other agents at the company.

[01:16:19] Speaker 07:
But no one ever disputed that it wasn't in line or consistent with what the formula was that the company used for every sales agent across the world.

[01:16:31] Speaker 04:
So the district court rejected your due process argument?

[01:16:37] Speaker 07:
Yes, Your Honor.

[01:16:39] Speaker 04:
Saying this is economic regulation, you're an exporter, there was enough here to

[01:16:47] Speaker 04:
If I may, Your Honor.

[01:16:48] Speaker 04:
Inquiry notice, it says.

[01:16:51] Speaker 07:
Well, if I may, Your Honor, I think what the district court did, I think under Trinity broadcasting, there's really two steps.

[01:16:57] Speaker 07:
The one is, is the agency's interpretation plainly wrong?

[01:17:01] Speaker 07:
If it's not, we're going to give the high level of deference the agency deserves and accept its interpretation.

[01:17:07] Speaker 07:
But the second step, which is very important here and was very important to this court in Trinity, which is whether or not fair, even if we accept that definition or that interpretation,

[01:17:17] Speaker 07:
whether or not fair notice was given to the affected party.

[01:17:21] Speaker 07:
And in that case, they ruled that there hadn't been any definition or notice.

[01:17:27] Speaker 04:
So that's why I went back to K&R, all right?

[01:17:30] Speaker 07:
Yes, Your Honor.

[01:17:32] Speaker 04:
To try to just be clear what your position is.

[01:17:36] Speaker 04:
And I still need to be clear about this.

[01:17:38] Speaker 04:
Your first position is there cannot be any fair notice where the agency hasn't formally promulgated

[01:17:47] Speaker 04:
its interpretation.

[01:17:50] Speaker 04:
And B, there cannot be any fair notice where your client has a reasonable interpretation of an ambiguous term.

[01:18:10] Speaker 04:
And this is where KNR comes in.

[01:18:14] Speaker 04:
There's nothing that could have warned your client away from its interpretation.

[01:18:21] Speaker 04:
Yes, Your Honor, although I don't think... So that's an evidentiary question, isn't it?

[01:18:24] Speaker 04:
That's what I'm trying to understand.

[01:18:26] Speaker 07:
Well, it would normally be, but for the fact that those facts that support that proposition, in this case, are undisputed as they were at summary judgment.

[01:18:35] Speaker 04:
If I may... In other words, you say the facts are undisputed as to the firm's historical practice, A, generally, and B, with respect to this agent in particular.

[01:18:46] Speaker 07:
Yes.

[01:18:47] Speaker 04:
And the judge said, well, the term talks about regular, not historical.

[01:18:55] Speaker 04:
And the question, it seems to me, if under KNR the question is, was there anything to warn you away, your position is,

[01:19:08] Speaker 04:
There was nothing.

[01:19:10] Speaker 04:
The government's position is there was.

[01:19:13] Speaker 04:
And so isn't that a disputed issue of material fact?

[01:19:17] Speaker 07:
It's not.

[01:19:18] Speaker 07:
We can agree that there was a witness who testified that there was some discussions, his name was Juan Ponce, about

[01:19:26] Speaker 07:
what XM expected in terms of commissions.

[01:19:30] Speaker 07:
He then qualifies that by saying, gee, he doesn't really remember.

[01:19:33] Speaker 07:
And then he clarifies it by saying, gee, I thought all commissions had to be reported.

[01:19:39] Speaker 07:
Setting that aside, what Safeco and KNR partnership

[01:19:44] Speaker 07:
and its progeny teach us is that whatever the guidance is that warns you away has to be authoritative guidance.

[01:19:51] Speaker 07:
And again, in Safeco, the defendant actually received a written letter from a counsel at the agency

[01:19:59] Speaker 07:
literally warning them away from their position that they were taking.

[01:20:02] Speaker 07:
And even there, the court said that wasn't enough because it didn't find the commission.

[01:20:06] Speaker 07:
And lastly, I know that I'm out of time, but the court itself, and this is why it's a matter of law, said Hexan never defined the term regular commissions or issued any guidance.

[01:20:16] Speaker 07:
There was no definition of the term.

[01:20:18] Speaker 07:
The government can point to no regulation, no statute, or otherwise.

[01:20:22] Speaker 07:
No authoritative guidance as to the term's meaning had ever been issued.

[01:20:26] Speaker 07:
The language itself was insufficient, not susceptible to an exact meaning.

[01:20:31] Speaker 07:
It involved a plethora of interpretive possibilities.

[01:20:35] Speaker 07:
It may be conceded that the term regular commissions is not susceptible to an exact definition.

[01:20:40] Speaker 07:
EXIM officials relied on their implicit understanding of the term while refraining from helpfully issuing any guidance.

[01:20:46] Speaker 04:
What are you reading now?

[01:20:47] Speaker 07:
I'm reading, these are quotes from Judge Urbina.

[01:20:49] Speaker 04:
Right, from his first book.

[01:20:51] Speaker 07:
Yes, and it goes on for another page, I'll spare you that.

[01:20:55] Speaker 07:
But he clearly recognized that this was an ambiguous term, and he also recognized that the definition that MWI adopted was one of the three possibilities that he even identified.

[01:21:11] Speaker 07:
The term potentially includes all three, referencing the industry-wide, intra-firm, and individual agent thing.

[01:21:18] Speaker 07:
So the fact alone that we have a judicial determination that the term was ambiguous,

[01:21:25] Speaker 07:
And that MWI's interpretation, which is undisputed that it was their interpretation, was among those reasonable possibilities, should end the matter there, in terms of both on the due process side and in terms of the falsity side, before we even get to the Cianta side and the KNR partnership decision.

[01:21:49] Speaker 07:
And with that, Your Honor, I will, unless the court, unless to be honest with questions at this time, I'll just wait until later.

[01:21:55] Speaker 05:
Thank you.

[01:22:00] Speaker 04:
All right.

[01:22:07] Speaker 04:
Counsel for the government.

[01:22:09] Speaker 00:
Thank you, Your Honor.

[01:22:11] Speaker 00:
The standard, whether at summary judgment or after the verdict, is whether any reasonable jury could conclude on the record that we've made at our case

[01:22:22] Speaker 04:
What about the authority in this circuit, though, that talks about fair notice?

[01:22:29] Speaker 04:
That if the government is going to move against a party, the party has to have fair notice.

[01:22:38] Speaker 04:
And the government can't rely on an ambiguous term in proceeding.

[01:22:46] Speaker 00:
I think there are two parts there, Your Honor.

[01:22:48] Speaker 00:
The first really is evidentiary.

[01:22:51] Speaker 00:
We have to prove that they were on fair notice, that they could have been on fair notice, and we presented evidence to that effect.

[01:22:58] Speaker 00:
That's an evidentiary question.

[01:23:00] Speaker 04:
So if the law is that unless the agency has formally promulgated its interpretation of an ambiguous term, the government can't proceed against it.

[01:23:16] Speaker 00:
I do not think that's the law, Your Honor.

[01:23:18] Speaker 00:
We do have to show that you're acting outside any reasonable interpretation of that ambiguous term.

[01:23:24] Speaker 00:
But that's exactly what we showed to the jury.

[01:23:26] Speaker 00:
This is not kind of a in the margins of reasonableness case.

[01:23:31] Speaker 00:
We presented evidence.

[01:23:32] Speaker 09:
Well, if there are three possible interpretations of regular in this case, industry-wide, intra-firm, and historical with respect to this agent,

[01:23:44] Speaker 09:
Seems like they were within the bounds of two of those three.

[01:23:48] Speaker 00:
Your Honor, I don't think they're even within the bounds of two.

[01:23:51] Speaker 00:
Their average to all their other and their firms was about 10%.

[01:23:55] Speaker 00:
These were 33.

[01:23:55] Speaker 00:
But even so... They used the same formula, correct?

[01:23:59] Speaker 00:
I don't know that that's undisputed, Your Honor, but certainly they yielded wildly varying percentages and wildly varying amounts.

[01:24:07] Speaker 00:
The average to all their other agents was 31,000.

[01:24:09] Speaker 00:
This guy, the lowest he got on the...

[01:24:11] Speaker 09:
But you know how stats can be manipulated.

[01:24:14] Speaker 09:
And it depends on the percentages rather than the amounts.

[01:24:17] Speaker 09:
I know you're using the amounts.

[01:24:18] Speaker 00:
The percentages were way, triple what they paid their other people.

[01:24:22] Speaker 09:
I know.

[01:24:22] Speaker 09:
It depends on the foreman.

[01:24:23] Speaker 09:
But it is consistent, at least, undisputed, consistent with what they paid him before in other deals.

[01:24:28] Speaker 00:
They certainly have been paying him inflated commissions a long time.

[01:24:31] Speaker 00:
But the court found.

[01:24:33] Speaker 09:
The problem with the term regular is that it requires a baseline

[01:24:41] Speaker 09:
to compare to.

[01:24:42] Speaker 09:
Regular is compared to what?

[01:24:43] Speaker 09:
Did you spend your regular amount of time preparing for this argument?

[01:24:46] Speaker 09:
Regular is compared to other cases where I'm doing two sides of the argument or regular as to an ordinary case.

[01:24:53] Speaker 09:
You know, there's a baseline of comparison and it strikes me that when you're asked regular commission, it's not unreasonable

[01:25:03] Speaker 09:
Well, it's arguably not unreasonable for someone to say, well, this is what we've always paid him.

[01:25:07] Speaker 09:
That's our regular commission to him.

[01:25:09] Speaker 09:
Or this is the same formula we apply to others.

[01:25:11] Speaker 09:
Yes, it leads to higher commissions for him, but it's the same formula.

[01:25:14] Speaker 09:
It's a regular commission.

[01:25:16] Speaker 00:
That is contrary to what the district court said at page 233.

[01:25:20] Speaker 09:
I know, but why is it wrong?

[01:25:22] Speaker 00:
It's wrong because of the reasons that the former head of Ex-Im testified at trial.

[01:25:26] Speaker 00:
If I punch you in the nose seven times, it doesn't make it okay on the seventh time just because I've been doing it to you over and over again, as Judge Urbina explained.

[01:25:33] Speaker 09:
It doesn't make it okay, but it might make it regular.

[01:25:35] Speaker 00:
It does not make it regular.

[01:25:37] Speaker 00:
It does not make it in the regular that any reasonable person looking at this form would have known.

[01:25:43] Speaker 00:
We had testimony from multiple sources that anybody in this business

[01:25:48] Speaker 00:
would know why they wanted to know about regular commissions, and that they knew or should have known that this 33-ish percent was, quote, beyond the pale.

[01:26:00] Speaker 00:
And so I don't think Judge Urbino was incorrect to say that from an objective standpoint, a reasonable person considering the term regular commissions would recognize that it would imply an industry-wide standard rather than an intra-industry standard.

[01:26:13] Speaker 09:
I'm not sure, like, why is regular not historical?

[01:26:16] Speaker 00:
Your Honor, because of the, if you're looking at this form, you know that what they want, they don't want to just know that you're paying.

[01:26:23] Speaker 09:
Is this your regular way of preparing?

[01:26:24] Speaker 09:
Yes, this is the way I always prepare.

[01:26:26] Speaker 09:
That's historical.

[01:26:27] Speaker 09:
That's common language.

[01:26:29] Speaker 00:
Even by their own practices, this was not regular for their whole firm.

[01:26:33] Speaker 00:
And we had testimony that not only could they have known, not only was it possible for somebody acting in this industry, but we had testimony from a former exit employee that said,

[01:26:43] Speaker 00:
We had a meeting with XM.

[01:26:45] Speaker 00:
They let us know a reasonable commission would be two, three, maybe five percent.

[01:26:49] Speaker 00:
We all joked in the office about how none of us wanted to sign these things.

[01:26:52] Speaker 04:
No, but what I'm trying to focus on is the fact that somebody in an agency says five percent is the limit.

[01:27:06] Speaker 04:
That hasn't been enough in the past as to fair notice.

[01:27:11] Speaker 04:
And I'm trying to understand why this case gets around those cases.

[01:27:17] Speaker 04:
The fact that you can put testimony on from various people is not the same as the agency having formally announced what we have in mind is something 5%, 10%, nothing more.

[01:27:34] Speaker 00:
Your Honor, the cases that have said all we're arguing about is a reason, is like we're all arguing whether your interpretation of this ambiguous term was right or our interpret, the related interpretation.

[01:27:46] Speaker 04:
I know you want to make it evidentiary and I'm trying to stick with the legal argument that's been made.

[01:27:51] Speaker 04:
Was there fair notice of what the term regular commission, what it meant in the view of the Export-Import Bank?

[01:28:04] Speaker 00:
Yes, Your Honor, a reasonable person looking at this foreign operating news industry was on fair notice.

[01:28:10] Speaker 04:
What industry?

[01:28:12] Speaker 00:
The export and foreign industry, Your Honor.

[01:28:14] Speaker 00:
Generally throughout the world?

[01:28:16] Speaker 00:
We did have, again, testimony, and how you know what a normal person operating in this business is going to know, I think is evidentiary, that in any industry, the witness could not conceive of a legitimate reason for paying a 33% commission.

[01:28:34] Speaker 00:
That even 20 was beyond the payable.

[01:28:36] Speaker 00:
Well, it depends.

[01:28:37] Speaker 04:
It depends, doesn't it, on a lot of different circumstances.

[01:28:42] Speaker 04:
It may seem outrageous that we pay

[01:28:46] Speaker 04:
I don't know, sports figures, millions and millions of dollars, and we don't pay school teachers very much, or policemen or firemen.

[01:28:55] Speaker 04:
All right?

[01:28:55] Speaker 04:
It depends what you're talking about and why these decisions were made.

[01:29:00] Speaker 04:
And I'm just trying to understand your position, because Judge Arfina acknowledged that there was testimony.

[01:29:07] Speaker 04:
And I thought you were going to look at K&R, where we talked about

[01:29:15] Speaker 04:
you know, were there warnings, which to me implies that the warnings can be something less than officially promulgated interpretations.

[01:29:27] Speaker 00:
I think that's true in KNR, Your Honor, and of course, KNR said the only evidence there was merely the dispute about the better interpretation

[01:29:37] Speaker 00:
Here, where we have evidence that whatever a reasonable interpretation of this term would have been, we're way outside of it.

[01:29:45] Speaker 00:
This is not a case at the margins.

[01:29:47] Speaker 00:
We get a chance to make that case.

[01:29:48] Speaker 00:
It may be harder for the government to make its case

[01:29:52] Speaker 00:
where it hasn't put forth a nice, clean, bright line.

[01:29:55] Speaker 00:
We're going to have a harder time convincing a jury that these folks did not have a reasonable, good-faith interpretation and that they acted in accordance with it.

[01:30:04] Speaker 00:
But we get a chance to do it, and we did it here.

[01:30:06] Speaker 09:
What about the line in the jury instructions that basically said reasonable interpretation does not excuse it of liability?

[01:30:17] Speaker 00:
So a couple things.

[01:30:18] Speaker 00:
First, they did not object below to that line?

[01:30:21] Speaker 09:
Well, the district court cut off the objections after they had put off, as I understand it, different proposed instructions.

[01:30:30] Speaker 00:
It's true that the court said, I'm not going to hear argument.

[01:30:33] Speaker 00:
But nonetheless, that same day, MWI put on the docket a notice, just a brief letter, saying, hey, just to be clear, we're still objecting to the loan repayment evidence.

[01:30:41] Speaker 00:
They never objected to this language.

[01:30:44] Speaker 00:
Moreover, they never appealed on this language again.

[01:30:47] Speaker 00:
If you think the jury instruction's wrong, you ask for a remand.

[01:30:50] Speaker 09:
I understand that, but they do mention it as part of their overall argument here.

[01:30:53] Speaker 00:
In their reply brief, Your Honor, where we never had a chance to talk about it.

[01:30:56] Speaker 00:
But let's talk about it now.

[01:30:57] Speaker 00:
I don't think that it necessarily is saying what the other side is, the import it's subscribing.

[01:31:05] Speaker 00:
The instruction at JA 713 says,

[01:31:08] Speaker 00:
You may consider whether or not MWI had a reasonable and or good faith interpretation of the term regular commissions.

[01:31:16] Speaker 00:
And then it goes on to say that they may have had such an interpretation does not require you to conclude that they did not act with actual knowledge, deliberate ignorance, or reckless disregard.

[01:31:28] Speaker 00:
You can have a good faith interpretation, even one that we think is way outside the bounds.

[01:31:33] Speaker 00:
Say they thought this was 20%.

[01:31:35] Speaker 00:
But when they acted, when they turned in these certificates that they knew were not disclosing 33%, you can still act with the requisite sienter.

[01:31:45] Speaker 00:
And so I don't think that there's anything per se wrong about this jury instructions, but if there were, you needed to raise it to the district court

[01:31:53] Speaker 00:
You need to preserve that challenge.

[01:31:55] Speaker 00:
And then you need to appeal it in your opening brief so we have a chance to fight about it.

[01:31:59] Speaker 00:
And you need to ask for a remand.

[01:32:01] Speaker 00:
If you think the jury was improperly instructed, the remedy is not, therefore, throw out the whole case.

[01:32:08] Speaker 00:
The remedy is, we get to try again with a better jury instruction.

[01:32:12] Speaker 00:
And of course, that's precisely what they have not asked for here.

[01:32:15] Speaker 00:
And one possibility is that they may be willing to either pay the $15 million we're asking for in our appeal

[01:32:22] Speaker 00:
or get the whole case thrown out, but they don't want to risk us getting to go back and try again and get a much higher damages verdict.

[01:32:28] Speaker 04:
Remember, our position is that as the CNTER, there was sufficient evidence, given Mr. Ponce's testimony, the testimony of other MWI employees and employees of the XM Bank.

[01:32:47] Speaker 00:
Is that your position?

[01:32:48] Speaker 00:
Yes, Your Honor.

[01:32:51] Speaker 00:
We had Mr. Ponzi testifying.

[01:32:54] Speaker 00:
We had others testifying that the people in this industry knew or should have known.

[01:32:59] Speaker 00:
Now, of course, there was counter-testifying.

[01:33:00] Speaker 09:
Should have known is not good enough.

[01:33:02] Speaker 00:
But knew, or I think should have known is, Your Honor.

[01:33:04] Speaker 00:
Remember, the statute spells out.

[01:33:06] Speaker 00:
It doesn't have to be actual knowledge.

[01:33:07] Speaker 00:
It can be deliberate.

[01:33:09] Speaker ?:
Reckless.

[01:33:09] Speaker 00:
Yeah, reckless or deliberate ignorance.

[01:33:11] Speaker 00:
So if you should have known, but you're just closing your eyes and saying, how could we have known?

[01:33:16] Speaker 00:
Or as Judge Romina said, throwing up our hands in vacant bewilderment at what this could possibly mean, that's not good enough.

[01:33:23] Speaker 00:
And we have to think.

[01:33:25] Speaker 04:
So where a client went ahead and asked for an opinion of counsel, that was not enough.

[01:33:34] Speaker 04:
How do you distinguish that case?

[01:33:36] Speaker 00:
Again, I believe in Safeco, it was a debate about what's the better among objectively reasonable interpretations.

[01:33:46] Speaker 00:
We presented evidence and we get to present evidence that no matter where the lines are here, whatever the nimbus is, you're acting outside of it, and that's what we did.

[01:33:56] Speaker 04:
But I didn't read the testimony to be that, all right, because you say here today, well, what you meant was

[01:34:06] Speaker 04:
any international commerce in the world, there never would have been a 33% commission.

[01:34:13] Speaker 04:
There was no evidence to that effect.

[01:34:15] Speaker 00:
I believe Rita Rodriguez, one of the former board members, did say, and it's not in the Joint Appendix, but it is in her testimony.

[01:34:25] Speaker 00:
It's not in the Joint Appendix?

[01:34:26] Speaker 00:
Where is it?

[01:34:26] Speaker 00:
So we can find it.

[01:34:29] Speaker 00:
She testified on... Did anybody cite it to us?

[01:34:32] Speaker 00:
No, Your Honor, but if we want to get into it, we can.

[01:34:35] Speaker 00:
It's November 14, 2013.

[01:34:35] Speaker 04:
Well, if it's critical testimony.

[01:34:39] Speaker 04:
You're just saying, you know, to help the court here.

[01:34:41] Speaker 04:
What's the date of the testimony?

[01:34:43] Speaker 00:
November 14, 2013, at page 30.

[01:34:49] Speaker 04:
She says... Are you going to provide us with a copy of this?

[01:34:52] Speaker 04:
I certainly can, Your Honor.

[01:34:53] Speaker 04:
Thank you.

[01:34:53] Speaker 04:
Let me just make a note.

[01:34:57] Speaker 04:
So she says anywhere in the world, no one for any industry would have given a 33% commission.

[01:35:03] Speaker 00:
Page 37, she says, I don't know of any industry in any country that regularly pays that kind of commission legitimately.

[01:35:11] Speaker 00:
She said at page 30.

[01:35:12] Speaker 04:
That's a little different, isn't it?

[01:35:15] Speaker 00:
Well, Your Honor, again, what we're trying to show.

[01:35:18] Speaker 04:
I'm just trying to be clear here.

[01:35:20] Speaker 00:
Your Honor, let me continue.

[01:35:22] Speaker 00:
She testified for the jury that it would have been considered outrageous.

[01:35:27] Speaker 00:
She cannot conceive of any explanation that would satisfy that pavement as legitimate after her 45 years in international finance and that she has never seen it.

[01:35:35] Speaker 00:
It is astounding.

[01:35:36] Speaker 04:
It's astounding to me that if this is critical to the government's argument that we don't have a site to it.

[01:35:42] Speaker 04:
But I'm going to take your word for what it says.

[01:35:44] Speaker 04:
Anything further?

[01:35:46] Speaker 09:
I have another question, which is just the things that they cite are as showing that it was a regular commission, or at least a reasonable interpretation of the phrase regular commission.

[01:35:56] Speaker 09:
The commissions they are paying to the same sales agent for the prior sales for similar projects in Nigeria over the previous 10 years, the same internal formula that MDWI used for all its sales agents worldwide.

[01:36:13] Speaker 09:
formula based upon the price the agent made the sale at relative to MWI's internal base price.

[01:36:21] Speaker 09:
On that formula question, I asked you that before and you didn't really answer.

[01:36:25] Speaker 09:
Were they using the same formula?

[01:36:29] Speaker 00:
you know i i don't know the whether they were or not but that there was testimony that he i don't think so your honor their own numbers their own chart that they put in showed that they were regularly paying other agents much much lower commissions again nine point seven with the average for everybody else and they paid him thirty three percent and that's because of the way the formula kicked out the numbers at least that's what they're saying in the brief i believe that there was also testimony that that that that

[01:36:59] Speaker 00:
the base price for these things may be inflated due to non-market forces in these types of situations.

[01:37:10] Speaker 00:
So I don't have a clear answer on the formula.

[01:37:12] Speaker 00:
I can try to get one and provide it along with the citations to Dr. Rodriguez's testimony, but

[01:37:18] Speaker 00:
Whatever formula they were using, it led to this guy getting commissions over three times as high as they were paying their other folks, against the backdrop of testimony that they knew, that everybody knew they were violating the rules and just hoped they would never get caught.

[01:37:37] Speaker 04:
Well, that's Mr. Ponce's testimony, okay?

[01:37:40] Speaker 04:
And they cross-examine him, et cetera, and he says he thought all commissions needed to be reported.

[01:37:46] Speaker 04:
I guess Dr. Rodriguez's testimony is the key testimony on this.

[01:37:52] Speaker 00:
I think Mr. Ponce's as well as the district court explained in denying their Rule 50 motion, she said Mr. Ponce also testified that, quote, everybody

[01:38:02] Speaker 00:
knew they were violating the rules.

[01:38:04] Speaker 00:
So whether or not he himself had a misunderstanding about what commissions had to be disclosed, there was still evidence from which a reasonable jury, again, this court doesn't have to look at the record and think, if I were in that jury room, I would have come out the other way.

[01:38:17] Speaker 00:
The question is, is there sufficient evidence such that no reasonable jury could possibly find them liable under the False Claims Act?

[01:38:25] Speaker 09:
And you think this line in the jury instruction we just ignore in thinking about that?

[01:38:30] Speaker 00:
Now, I think, Your Honor, that it properly recognizes you can have a good faith interpretation, but it doesn't necessarily mean that you don't depart from it when you act.

[01:38:38] Speaker 00:
Again, you have to have acted with the requisite santa.

[01:38:42] Speaker 00:
But if you think that, again, 20 percent, again, we think that's wrong.

[01:38:46] Speaker 00:
We think that's outrageous.

[01:38:47] Speaker 00:
But if you had that good faith interpretation, and remember, a lot of the fight here, a lot of the conflicting testimony was what did they actually think a reasonable, a regular commission was.

[01:38:56] Speaker 00:
But then you depart from that when you act, when you hand in these certificates, of course you can still be liable.

[01:39:02] Speaker 00:
And again, if they had wanted to have this fight, the time to do it would have been to object to this below and to raise it in their opening brief so we could actually brief this question.

[01:39:11] Speaker 09:
And part of the problem here is we're not just apportioning liability for some set of damages in a typical civil tort case or something.

[01:39:19] Speaker 09:
This is a civil penalty provision, quasi criminal provision.

[01:39:23] Speaker 09:
So elements of fair notice really kick in, I think, with a false claims act in a way that they might not with a tort case or something.

[01:39:31] Speaker 09:
And that's why I think there's a concern about using the phrase like regular commission not defining it and coming in years later and defining it.

[01:39:41] Speaker 09:
in a way where I would have thought historical is fine, regular is historical.

[01:39:45] Speaker 09:
Yeah, maybe I've constantly been doing it in a way that I shouldn't be doing it, but you asked, is it my regular practice?

[01:39:52] Speaker 09:
Yes.

[01:39:53] Speaker 00:
Well, Your Honor, we got to have a fight about that in front of the jury.

[01:39:56] Speaker 00:
Again, the head of the company sat up there and testified, I had no idea.

[01:40:00] Speaker 00:
I had no idea.

[01:40:01] Speaker 00:
I thought this was regular.

[01:40:02] Speaker 00:
And we presented counter testimony that said, no, you didn't, that you had the same concern, that no one wanted to sign these because we're all worried about getting caught.

[01:40:10] Speaker 00:
And the jury went away.

[01:40:12] Speaker 09:
Are those things inconsistent to think that what you're doing is proper but also to be concerned?

[01:40:22] Speaker 00:
Your Honor, Mr. Ponce's testimony was we all knew we were violating the rules.

[01:40:29] Speaker 00:
So, yes.

[01:40:30] Speaker 09:
But Mr. Ponce had an incorrect understanding of the law.

[01:40:33] Speaker 00:
But he testified that everybody knew.

[01:40:36] Speaker 00:
And that's what Judge Kessler pointed to in denying her motion.

[01:40:38] Speaker 00:
Again, that was a fair grounds for them to try to impeach his testimony on.

[01:40:42] Speaker 00:
And the jury didn't buy it.

[01:40:43] Speaker 00:
And there's no reason that this court should come in and disregard Mr. Ponce's statements that everybody knew that we were violating the rules.

[01:40:51] Speaker 09:
But he didn't know the rules.

[01:40:52] Speaker 09:
but he said everybody else that i mean everyone knew we were violating the incorrect rules

[01:40:57] Speaker 00:
Everybody knew.

[01:40:59] Speaker 00:
I mean, he's talking about whether this is regular or not.

[01:41:02] Speaker 00:
And he said, we asked, did you have discussions with people about what would happen if Mr. Ndemi's commissions had been disclosed?

[01:41:10] Speaker 00:
And he said, yeah, we had those discussions.

[01:41:12] Speaker 00:
And he said, well, let me just say, everybody just hoped we wouldn't get caught.

[01:41:17] Speaker 00:
So he testified as to the actual knowledge.

[01:41:20] Speaker 09:
Because if it had been disclosed that they're paying these commissions, what happens then?

[01:41:24] Speaker 00:
How about a False Claims Act suit, Your Honor?

[01:41:28] Speaker 09:
False Claims Act.

[01:41:29] Speaker 00:
Because you have made a knowing misrepresentation that is material to the government's decision to pay you $75 million.

[01:41:41] Speaker 09:
If you're not paying a regular, you're saying they'd have to pay a lower commission, is the point.

[01:41:45] Speaker 00:
I think they probably would have just been, we had testimony, they would have been just denied outright.

[01:41:49] Speaker 00:
If they wanted to try to reformulate the deal, get Mr. Endini a commission much more in line with industry standards.

[01:41:55] Speaker 09:
Mr. Endini would say, why aren't you paying me my regular commission that I've been getting for the last 12 years.

[01:41:59] Speaker 00:
That's between MWI and Mr. Endini.

[01:42:02] Speaker 00:
There are no further questions.

[01:42:06] Speaker 04:
All right, counsel for the relator, Mr. Purcell.

[01:42:18] Speaker 08:
Good morning, Your Honors.

[01:42:18] Speaker 08:
Good morning.

[01:42:19] Speaker 08:
Joseph Veronica from Duane Morris on behalf of the relator, Robert Purcell.

[01:42:24] Speaker 08:
MWI did not argue today the reversal of Judge Urbina's denial of their motion to kick out the relator.

[01:42:35] Speaker 08:
But I'm here to address that.

[01:42:37] Speaker 08:
They filed that motion 10 years after the case was filed, after the government had intervened, and one year after the initial rulings on the motions for summary judgment.

[01:42:58] Speaker 08:
The motion that they filed was based primarily on a Miami Herald article in May of 1998.

[01:43:07] Speaker 08:
reporting on a lawsuit filed by Robert Purcell against MWI on some contract issues after his termination.

[01:43:16] Speaker 04:
So is this the one, the article that's at J271?

[01:43:19] Speaker 04:
This is May 25, 1998?

[01:43:23] Speaker 04:
Yes.

[01:43:24] Speaker 08:
That's the one.

[01:43:26] Speaker 08:
The district court, after analyzing the article and the related complaint, denied the motion.

[01:43:35] Speaker 08:
There's no reason to disturb Judge Urbina's well-reasoned opinion and his factual findings that Mr. Purcell's lawsuit was not based on that article or any other article.

[01:43:50] Speaker 04:
Well, that's not quite the test, is it?

[01:43:54] Speaker 04:
I mean, the question is, you know, were...

[01:44:00] Speaker 04:
the facts disclosed such that the government could proceed with an investigation, and even if they were, was Mr. Purcell nonetheless an original source?

[01:44:12] Speaker 08:
Well, I think there are two aspects of this thing.

[01:44:14] Speaker 08:
First, you determine whether or not the allegations and the transactions in the latest complaint are based upon any public disclosure.

[01:44:24] Speaker 08:
If the judge were to find that, then the judge addresses

[01:44:29] Speaker 08:
The second part of the test, and that is, is he the original source and when did he file?

[01:44:34] Speaker 08:
Judge Urbina decided there was no public disclosure upon which the allegations and the transactions in his complaint were based on.

[01:44:47] Speaker 08:
And he was absolutely correct.

[01:44:50] Speaker 08:
The article

[01:44:53] Speaker 08:
deals primarily with Jeb Bush's relationship with David Eller and Bushell and MWI.

[01:45:02] Speaker 08:
The article was published around the time that Jeb Bush was running for governor of Florida, so we've got a lot of play.

[01:45:14] Speaker 08:
MWI bases its argument in large part on one paragraph.

[01:45:19] Speaker 08:
And that paragraph is in statements linked to the lawsuit.

[01:45:24] Speaker 08:
That's the state lawsuit that Purcell filed.

[01:45:29] Speaker 08:
Purcell alleges a laundry list of possible quote fraudulent quote activities quote, including cash payments for influence and bid rigging.

[01:45:41] Speaker 08:
He also alleges that Ella reimbursed employees for making political contributions to unnamed candidates.

[01:45:48] Speaker 08:
The information, obviously, in that article came from Purcell.

[01:45:54] Speaker 08:
And the reporter says that.

[01:45:57] Speaker 08:
But those things were shot down by Bush, by Eller, and by Eller's lawyer.

[01:46:03] Speaker 04:
No, I guess that's not the question, though.

[01:46:05] Speaker 04:
I mean, obviously, Mr. Bush is not at issue here in any way.

[01:46:11] Speaker 04:
But rather, it's a question of whether the article referring to the $74 million sale financed by the Export-Import Bank involving this water pump company, that profits were being diverted and that Mr. Inouye,

[01:46:33] Speaker 04:
was the recipient here.

[01:46:41] Speaker 08:
No, that's just not correct, Your Honor, with all due respect.

[01:46:44] Speaker 08:
The article does not say that.

[01:46:46] Speaker 04:
What does it say?

[01:46:46] Speaker 08:
The article speaks about a contract, the XM contract, with that money.

[01:46:53] Speaker 08:
The diversion related in Purcell's lawsuit is that he believed some of the monies that went to Bushell for commissions

[01:47:02] Speaker 08:
he was entitled to.

[01:47:03] Speaker 04:
No, I understand that.

[01:47:04] Speaker 04:
But all I'm saying, the question is, did it put the government on sufficient notice to pursue an investigation?

[01:47:12] Speaker 08:
Absolutely not.

[01:47:13] Speaker 04:
And because?

[01:47:14] Speaker 08:
Because that only related to after MWI received the money, how it distributed.

[01:47:23] Speaker 08:
It didn't deal with any fraud on XM or any government agency on how MWI derived and received that money.

[01:47:35] Speaker 08:
That's the distinction.

[01:47:37] Speaker 08:
And when you take a look at the complaint,

[01:47:40] Speaker 08:
Mr. Purcell's, the relator's, complaint.

[01:47:45] Speaker 08:
That deals and alleges that MWI perpetrated a fraud on XM.

[01:47:51] Speaker 08:
There is no mention in the article of Indini as MWI's agent.

[01:47:59] Speaker 08:
There is no information that Indymi received over $25 million and over 30% of the funds that MWI got from this XM loan.

[01:48:11] Speaker 08:
There is no mention of MWI filing full certifications with XM to cause the loans to be paid.

[01:48:19] Speaker 08:
There is no mention in the supplier that supplier certificates that were filed

[01:48:24] Speaker 08:
were false because MWI lied when it said it paid indemnity only regular commissions.

[01:48:33] Speaker 08:
That is, that the commissions he received were in line with the commissions that it paid to its, in the ordinary course of its business, to its regular agents plural.

[01:48:51] Speaker 08:
That's as an assign.

[01:48:54] Speaker 08:
That's what the supplier certificate says.

[01:48:57] Speaker 08:
The supplier certificate just doesn't amorphously speak of regular commissions.

[01:49:04] Speaker 08:
What it says is you've got to disclose commissions that are other than what you pay in the ordinary course of your business to your regular agents, plural.

[01:49:19] Speaker 08:
just because NWI might have gotten away earlier with fraud in the amount it was paying in DIMI years before, doesn't give them the right to claim that all of a sudden that's a regular commission when they got around on this contract.

[01:49:37] Speaker 08:
The newspaper article doesn't say anything about false certificates of value that were filed with XM, which claimed no commissions were paid.

[01:49:49] Speaker 08:
There's no mention of the false on-board shipping documents which claimed no commissions were paid.

[01:49:57] Speaker 08:
There's no mention that NWI knew the various certifications were false, that they intended XM to rely.

[01:50:05] Speaker 08:
And there's no mention of NWI's deceptive

[01:50:11] Speaker 08:
respective equipment descriptions to avoid price comparisons in order to conceal the gross overcharges for the between 200 and 500 percent of price gouging on the Nigerians.

[01:50:29] Speaker 04:
Any questions?

[01:50:30] Speaker 08:
And that was done in order to get this approved.

[01:50:33] Speaker 04:
All right.

[01:50:33] Speaker 04:
Thank you.

[01:50:34] Speaker 04:
I think we have your argument.

[01:50:45] Speaker 07:
Thank you, Your Honors.

[01:50:47] Speaker 04:
All right, counsel for MWI.

[01:50:50] Speaker 07:
Yes, Your Honors.

[01:50:51] Speaker 07:
First of all, as to the issue of the jury instruction and the objections, I think the record speaks for itself.

[01:50:56] Speaker 07:
I'll just note that in our pretrial statements, both sides proffered their proposed jury instructions, objections to the others.

[01:51:04] Speaker 07:
Judge Kessler then heard a series of motions in Lemonay, asked the parties to submit new objections, or new jury instructions, which we did, as well as objections to the government objections.

[01:51:15] Speaker 07:
Then during the course of trial, she had submitted her proposed instructions.

[01:51:22] Speaker 07:
We submitted some additional authority, and I think as the record makes clear, she made clear that she wasn't going to hear any more objections from that point further.

[01:51:31] Speaker 07:
We think that issue is preserved, but the point isn't important.

[01:51:34] Speaker 04:
Well, I think the issue is whether it's forfeited, because you didn't raise it in your opening brief.

[01:51:40] Speaker 07:
Yes, Your Honor.

[01:51:41] Speaker 07:
I mean, in our view, the issue doesn't even really relate to Rule 50.

[01:51:44] Speaker 04:
I understand that.

[01:51:45] Speaker 07:
You don't want a new trial.

[01:51:47] Speaker 04:
Yes.

[01:51:48] Speaker 07:
It's like Roberto Duran, right?

[01:51:50] Speaker 07:
No mas.

[01:51:52] Speaker 07:
And what I would also say is this industry standard thing,

[01:51:57] Speaker 07:
You know, it goes back, we did get into a Kafka-esque kind of circumstance where the government pushed it, never put on any evidence of what the industry was, and then the court said, in Rule 50, gee, of course they couldn't have put any evidence on of an industry standard, because in Nigeria it was an industry of one agent, Mr. Ndini.

[01:52:14] Speaker 07:
What about Ms.

[01:52:15] Speaker 09:
Patterson's point that there was

[01:52:19] Speaker 09:
common knowledge that this was pushing the envelope?

[01:52:22] Speaker 07:
There really wasn't, Your Honor.

[01:52:24] Speaker 07:
And the fact that the only evidence, really, as Judge Rogers pointed out, was the testimony of Mr. Concei, which I think... Well, we heard about Dr. Rodriguez this morning.

[01:52:34] Speaker 07:
Well, and that's a fair point.

[01:52:36] Speaker 07:
And what I would say is when you read the testimony of Dr. Rodriguez, she went on and on about how no one could imagine a commission above a certain percentage or certainly nothing in the 30s, blah, blah, blah.

[01:52:48] Speaker 07:
What Ms.

[01:52:49] Speaker 07:
Patterson failed to disclose, though, and what the testimony does is that on cross-examination, Ms.

[01:52:56] Speaker 07:
Rodriguez actually revealed or conceded that Export-Import Bank pays its own insurance brokers a 40% commission.

[01:53:04] Speaker 07:
So, you know, I think Ms.

[01:53:07] Speaker 07:
Rodriguez's testimony can be undercut in that regard.

[01:53:10] Speaker 07:
And we also submitted at J748... And what's your best answer to the Ponce testimony?

[01:53:16] Speaker 07:
is that Mr. Ponce's recollection was poor, and his understanding of the law was wrong.

[01:53:23] Speaker 07:
And as Your Honor pointed out, if he says, gee, everybody knew, it's kind of like him, based on that concession, saying everybody knew that

[01:53:31] Speaker 07:
we may have been doing something wrong against this misguided notion or misapprehension of what the law could be.

[01:53:36] Speaker 07:
And this was a chart that shows in its JA 748, which was the historical commissions of Mr. Endini relative to MWI.

[01:53:48] Speaker 07:
And I mean, graphically, I think it shows

[01:53:51] Speaker 07:
But they didn't change anything when we got to the blue part is the deals that are in question.

[01:53:57] Speaker 07:
I think Ms.

[01:53:57] Speaker 09:
Patterson would say that just because it had been done inappropriately before does not make it right now.

[01:54:03] Speaker 07:
Sure.

[01:54:04] Speaker 07:
The government's position is that, gee, if you historically bribe people or historically pay inflated commissions, then

[01:54:13] Speaker 07:
I don't know if she would concede that may be regular.

[01:54:15] Speaker 07:
We wouldn't.

[01:54:15] Speaker 09:
She would say it's not, I think.

[01:54:17] Speaker 09:
I think that's what she said.

[01:54:18] Speaker 09:
So how do you respond to that?

[01:54:19] Speaker 07:
Yeah, what we would say is that this was the market, as the Court recognized inferentially in the Rule 50 decision, that Nigeria, we had one agent.

[01:54:28] Speaker 07:
We had been doing these deals for a long, long time.

[01:54:31] Speaker 07:
Why would we pay him something different?

[01:54:33] Speaker 07:
And we didn't on this particular deal versus what we had paid him in the past.

[01:54:37] Speaker 07:
And the evidence is uncontroverted that we didn't.

[01:54:40] Speaker 07:
And I think that we can... Yes, Your Honor?

[01:54:43] Speaker 04:
Does the evidence show that that was also true with regard to XM bank loans?

[01:54:49] Speaker 07:
Yes, Your Honor.

[01:54:50] Speaker 07:
We had a significant deal with the River Basin Development Authority project back in the mid-1980s where we paid Mr. Ndimi the same if not a higher commission and we filled out the same types of supplier certificates certifying the same exact thing.

[01:55:05] Speaker 07:
That was 10 years earlier.

[01:55:06] Speaker 07:
We filled the form out the same way.

[01:55:11] Speaker 07:
And as to the point, if historical does not mean regular, I just don't know what could.

[01:55:17] Speaker 07:
And again, that goes back to the notion that Exum should have said so.

[01:55:20] Speaker 07:
And lastly, there's the issue of Mr. Glick, who is the general counsel for Exum, who actually wrote the language in the certificate.

[01:55:28] Speaker 07:
And he testified at trial.

[01:55:30] Speaker 07:
And he testified very clearly at 661 through 683 that he had been, first of all, at an exam from 1955 through 1984.

[01:55:47] Speaker 07:
He was the one that wrote the applicable language.

[01:55:50] Speaker 07:
So regarding commissions, as you drafted the commission certification in the supplier's kit, it was meant to apply to the exporter's commission for the exporter who was filling out the form.

[01:56:03] Speaker 07:
Correct.

[01:56:04] Speaker 07:
He also said,

[01:56:05] Speaker 07:
that if an exporter had a sales agent that it had used exclusively in a particular market for roughly 10 years and paid him or her a commission consistent with and in the range of what it had paid him or her on numerous transactions during that 10-year period, would it have been reasonable for the exporter to believe that those commissions were regular commissions?

[01:56:30] Speaker 07:
It would be reasonable, is his answer.

[01:56:33] Speaker 07:
And it goes on and on, and we wrote down the certificate phrase by phrase, and in essence whether MWI's interpretation was reasonable.

[01:56:41] Speaker 07:
He said it was at every turn.

[01:56:43] Speaker 07:
He also said that it was never intended to apply an industry-wide standard, that it was always intended to apply to the individual company.

[01:56:52] Speaker 07:
filling out the form.

[01:56:54] Speaker 07:
And again, he's the person who authored the actual certificate.

[01:56:57] Speaker 07:
And I understand that his view of the world may have been different than the litigation fresh post-hoc rationalization that the Department of Justice provided.

[01:57:06] Speaker 07:
But nonetheless, it all goes back to the point, at the end of the day, this was an aim.

[01:57:12] Speaker 07:
There was not fair notice of this standard in violation of due process as to falsity and c-enter.

[01:57:18] Speaker 07:
The term was clearly ambiguous.

[01:57:20] Speaker 07:
The district court recognized that.

[01:57:23] Speaker 07:
It also recognized that NWI's interpretation was among the reasonable interpretations a company could have.

[01:57:29] Speaker 07:
And there is nothing disputed about the circumstances that I've described for you.

[01:57:35] Speaker 07:
And that's why we needn't get to the rule 50 motion issue at all.

[01:57:41] Speaker 07:
This all goes back to summary judgment.

[01:57:43] Speaker 07:
These were pure legal conclusions that judge Urbina reached.

[01:57:47] Speaker 07:
The facts involved were undisputed.

[01:57:49] Speaker 07:
The case never should have gone to trial.

[01:57:51] Speaker 07:
There's nothing at trial that changed any of this.

[01:57:53] Speaker 07:
There was never authoritative guidance of any sort that warned MWI away.

[01:57:58] Speaker 07:
And just lastly, I would say on a policy level,

[01:58:01] Speaker 07:
And as you know, we have an amicus in this case, the National Association of Manufacturers.

[01:58:06] Speaker 07:
This case is the epitome of why we need right lines.

[01:58:12] Speaker 07:
It is fundamentally unfair to deprive an individual or party from property or liberty interests when you don't provide fair notice.

[01:58:22] Speaker 07:
There is no dispute, Your Honors, as to whether or not fair notice was provided, whether or not the provision was ambiguous, and whether or not MWI had a reasonable interpretation.

[01:58:34] Speaker 07:
As to the public disclosure issues, we'll rest on our written submissions.

[01:58:38] Speaker 07:
All right.

[01:58:39] Speaker 04:
One quick question about the record.

[01:58:42] Speaker 04:
This record, supplemental record filed under seal?

[01:58:45] Speaker 07:
Yes, Your Honor.

[01:58:46] Speaker 04:
That's accompanied by a filing of May 28 of this year?

[01:58:52] Speaker 04:
Is it my understanding, this is MWI's notice of sealed supplement, is it my understanding that the pages in this document are not sealed?

[01:59:02] Speaker 07:
May I confer momentarily?

[01:59:04] Speaker 04:
Maybe if you could just alert or advise the court.

[01:59:07] Speaker 04:
I wasn't clear whether these pages were sealed because they were subject to the protective order or these pages are not sealed because they were not subject to the protective order.

[01:59:18] Speaker 07:
If I may defer to my colleague.

[01:59:20] Speaker 04:
That's fine, yeah.

[01:59:20] Speaker 07:
Thank you.

[01:59:23] Speaker 01:
Thank you, Your Honor.

[01:59:23] Speaker 01:
Just to address that, there's no content in the pages that is, in our view, subject to the protective order.

[01:59:30] Speaker 01:
However, the entire filing from which those pages emanate was filed under seal.

[01:59:35] Speaker 04:
Well, what I'm trying to clarify in my own mind is this was submitted by all three parties, but the document labeled under seal, but only MWI filed this explanatory statement.

[01:59:53] Speaker 04:
And I read that to mean that these particular pages were not subject to the protective order.

[02:00:00] Speaker 04:
Am I correct in reading that that way?

[02:00:03] Speaker 04:
Or is it just your interpretation that the protective order didn't reach

[02:00:08] Speaker 04:
the facts or proceedings in these particular pages?

[02:00:12] Speaker 01:
Well, the protective order was entered at MWI's behest and on behalf of MWI, our position is that those particular pages do not contain any protected information and therefore not subject to it.

[02:00:26] Speaker 04:
All right, thank you.

[02:00:27] Speaker 04:
Mrs. Patterson, is that the government's position as well?

[02:00:34] Speaker 00:
We defer to MWI.

[02:00:35] Speaker 00:
It was a protective order for their benefit.

[02:00:37] Speaker 00:
So if they're comfortable with it, we're fine.

[02:00:39] Speaker 00:
Thank you.

[02:00:41] Speaker 00:
Any further questions?

[02:00:43] Speaker 04:
All right.

[02:00:45] Speaker 04:
We'll take the case under advisement.

[02:00:46] Speaker 04:
Case is under advisement.