The district court generally denied the government’s motion for summary judgment in its FCA complaint alleging that Symantec failed to provide the General Services Administration with an honest accounting of its commercial sales practices prior to obtaining its Schedule contract and later failed to offered reduced pricing in accordance with the Price Reduction Clause. The court found that the many areas of factual dispute precluded summary judgment, generally concluding that information provided by Symantec during negotiations and definitions in the contract itself were not clear on Symantec’s practices and its obligations to the government. However, the court did find in favor of the government on several issues, first concluding that the parties had agreed to the contract’s terms. While the contents were defined across several documents, which the court thought less than ideal, the court found the parties did agree to which documents comprised the contract. The court also held that Symantec’s obligation to fully disclose its commercial sales practices was contractual, not a mere pre-award regulatory formality.
Relator Lori Morsell filed a qui tam action against her employer, Symantec Corporation, alleging that the company regarding its pricing obligations under its contracts with the General Services Administration’s Multiple Award Schedule program. The federal government and several states intervened. In these proceedings, the parties filed competing motions for summary judgment on various issues.
Under the MAS program, vendors are required to offer the federal government all discounts available to non-federal government or commercial customers. Generally, the contract’s price reduction clause ensures that federal agencies obtain a vendor’s lowest possible price. To facilitate this pricing, vendors must provide GSA with current pricing information and must disclose price changes and discounts. GSA and the vendor also must agree on a customer or category of customers that will serve as a baseline for the government’s discounts, and the vendor must apprise GSA of prices being offered to that customer or category of customer. If those customers receive pricing lower than what had been offered to the government, the vendor must reduce its pricing for MAS customers.
For its products and services, Symantec established a suggested retail price with tiered discounts available under five buying programs: Express, Government, Academic, Rewards, and Enterprise. For the Express, Government, and Academic programs, discounts were tied to minimum license quantities. However, for the Rewards program, customers were able to access steeper discounts over time as their purchases accumulated. The court found it undisputed that the pricing under the Rewards program was more advantageous than under other programs. Other discounts were available to resellers, distributors, and original equipment manufacturers, but the defendant noted these discounts were not automatic. Symantec also offered non-standard discounts that were generally unpublished and deal-specific, as well as a rebate program.
In 2005, Symantec merged with Veritas Software Company and decided to obtain its own GSA Schedule contract, through which it could vend products from both companies. According to the government, Symantec made numerous misrepresentations during negotiations, including providing incomplete, outdated, and misleading data and disclosures. The parties disputed what information Symantec provided to GSA and how it described its various buying programs. Notably, GSA ended negotiations with the understanding that it could not meet the requirements for the more advantageous Rewards program, but the government argued this was due to Symantec’s misrepresentations.
When Symantec submitted its final proposal revision, it represented that it had disclosed all its commercial business practices and that they were complete and accurate at the time negotiations concluded. Symantec also certified that its rates, pricing, and discounts for the government were equal to or better than any provided to commercial or other government customers under similar terms and conditions. GSA accepted the offer.
During the life of the contract, Symantec repeatedly sent GSA letters of authorization allowing that information Symantec had provided to GSA in support of its contract could be used by GSA and resellers of Symantec products when those resellers were negotiating their own contracts with GSA. Symantec also periodically represented to GSA, when making modifications to its contract, that its commercial sales practices had not changed.
The relator was hired by Symantec in 2011 to administer the company’s GSA Schedule contract, and filed her initial complaint about one year later, alleging that the company had provided false, incomplete, and inaccurate information to GSA about its commercial pricing practices. The relator also alleged that Symantec breached its contractual obligation to communicate and offer discounts to the government that were being offered to other customers. The government and several states intervened.
As amended, the Omnibus Complaint outlined nine counts brought by the federal government, two each from California and Florida, and three from Morsell on behalf of New York state. The federal government’s first five claims were brought under the FCA. The remaining four arose under common law. California and Florida each brought two claims under their respective state law–equivalents to the FCA. Morsell did the same for New York and added an additional claim based on state contracts. In these proceedings, the parties cross-filed for summary judgment on various claims and matters of interest before the court.
First, the court considered the United States’ request for summary judgment on Symantec’s liability for breach of contract. The government alleged that Symantec breached the agreement between the parties in three ways: by violating disclosure obligations regarding its commercial sales practices; by violating the Price Reduction Clause; and by violating the Modifications clause. To establish liability, the government sought summary judgment on whether there existed a valid contract between the parties, whether an obligation or duty arose out of the contract, and whether there had been a breach.
The government argued there was no dispute over the existence of a valid contract, as Symantec submitted an offer, GSA accepted the offer, and the GSA contracting officer had the authority to bind the government to the contract. Symantec argued only that the government had not proven the existence of a valid and enforceable contract. However, the court found that the defendant’s own deposition witnesses established that a contract had been executed and that the contract was comprised of the RFP and Symantec’s commercial sales practices.
The question of contract formation thus turned on whether the parties agree on what set of documents constitute the CSPs disclosures. The court found that the testimony of Symantec’s witness also settled this question. During the witness’ deposition, the government’s attorney walked through the documentation produced by Symantec to GSA over the course of their negotiations. While some of the documents were not produced or had been only vaguely identified—such as various price lists—the court found the parties had agreed on a universe of documents that constituted the contract. While a contract with terms spread over several documents is not ideal, the court noted it was plausible as a form of contract and consistent with other MAS contracts that had been the subject of dispute before the court.
While Symantec argued GSA lost part of its contract file, the court found this no obstacle to concluding a contact had been formed. Rather, the necessary proof had been made using materials produced by Symantec and the government. The government bears the burden of establishing a contract, but is not required to carry that burden exclusively by relying on its own production, especially after discovery has been conducted. While the missing documents may prevent the government from proving the existence of a specific contract term, the court found the government had proven the existence of the contract itself.
The government also argued there was no dispute about three breaches of the contract: (1) breach of CSP disclosure obligations; (2) breach of PRC obligations; and (3) breach of Modifications clause obligations. Symantec argued there were genuine facts in dispute as to its obligations and whether it had breached them.
In the first dispute, the government argued that Symantec failed to disclose its accurate, complete, and current commercial sales practices, while Symantec argued it had no such duty. Symantec argued that the obligation to disclose CSP information was a pre-award regulatory requirement that did not arise from the GSA Schedule contract itself.
The court found this incorrect, as an offeror’s disclosure obligations are incorporated into every GSA MAS contract. Further, through the deposition testimony of its own employee, Symantec agreed that the documents containing these obligations were part of the contract. The court found no dispute that these obligations were incorporated in the contract. Because Symantec did not challenge other aspects of this obligation—such as the specific reporting requirement—the court held the government was entitled to summary judgment on the duty element of the first breach.
The court then considered each of the specific ways in which the government alleged the CSP disclosure obligations were breached. Those fall into four categories: challenges relating to (a) the Frequency Chart; (b) Buying Program disclosures; (c) non-standard discount disclosures; and (d) rebating policies and practices.
The Frequency Chart was presented as Symantec’s summary of non-published discounts for sales in 2006, and reported that 88 percent of the company’s discounts ranged from 31-40 percent. The government argued this information was false, because the chart included standard discounts, omitted sales for which non-standard discounts could have been calculated, and failed to contain sales of Symantec’s availability line of products. However, the court found that while the government provided evidence showing the chart erroneously treated many discounts as if they were non-published discounts, it did not show that the discounts that should have been excluded were large enough that they would have made a difference in the chart data. The court found enough of a genuine dispute to preclude summary judgment.
Next, the government argued the chart was incomplete because the individual who prepared it did not have access to all of Symantec’s price lists and therefore excluded many items for which he could not determine a discount. The government put forth an expert witness who purportedly corrected for these errors, but the court found no evidence of how greatly the original analyst erred or how the government’s witness corrected the alleged errors. Without this information, the court declined to grant summary judgment on this issue.
The government also argued the chart was false because it did not include products by Veritas, the firm that merged with Symantec prior to the company’s pursuit of a GSA Schedule contract. The court found no disputed that the Veritas line was not included in the chart, but Symantec argued that it provided the Veritas discount frequency data to GSA. However, the court found no evidence of this submission, other than the testimony of a Symantec witness. In fact, the court noted that discovery evidence included an email that suggested the Veritas chart was still being compiled at a date after Symantec asserted it had been provided to GSA.
However, while the court found no dispute that Symantec was obligated to provide the Veritas data and that it had not done so, it also found Symantec had other opportunities to submit the information after its initial disclosures. Notably, the court pointed out that Symantec identified several price list submissions the government was unable to locate but which Symantec understood to be part of the contract. Because the government acknowledge that some information about CSPs had gone missing from the contract file, the court could not conclude it had never been submitted.
Next, the government alleged that a presentation describing Symantec’s five buying programs was inaccurate in three respects, as it: (1) falsely identified four contract features—co-termination of maintenance contracts, auto-renewal, iClick, and subsidiaries’ usage of a parent company’s Symantec Agreement Number or “SAN” to track sales—as prerequisites for participation in the Rewards buying program when, in reality, they were not required; (2) incorrectly stated that pricing was dependent on band thresholds Symantec routinely ignored; and (3) failed to inform GSA that pricing was substantially better under the Rewards program.
The court agreed the presentation provided a less-than-comprehensive explanation of how the buying programs worked. For example, the presentation did not define how purchases translated into point totals for the Rewards program. Even if the GSA CO understood the jargon and acronyms used in the presentation, she would not have known which details were requirements and which were simply options or proposals. For example, an option for an auto-renewing purchase was proposed but never implemented, but GSA would have no way to know this.
The testimony of Symantec’s witness regarding communications about the Rewards program was inconsistent. At one point, the witness stated that she had assured GSA that if an agency wanted to participate in the Rewards program, it could qualify. However, later in the same deposition, the witness was not sure whether she had expressed skepticism that GSA could apply with the terms of the Rewards program. While it appeared Symantec provided some clarification on the Rewards program, the court found it reasonable that the GSA CO may have come away from the conversations with a different understanding. The parties provided competing evidence, and the court found a jury could reach different conclusions, in part because of the inconsistencies in the testimony of Symantec’s witness. Because the court could not tell what conversations took place regarding the buying disclosures, it could not grant summary judgment.
Next, the government argued Symantec falsely represented that non-standard discounts were: (1) limited to strategic accounts, (2) approved in its automated discounting tool, and (3) provided for competitive business reasons. Broadly, the government argued the disclosure did not represent Symantec’s discount policy because it did not have one. The government noted that the defendant’s response to GSA’s query was largely copied from Veritas’ MAS contract, dated prior to their merger, and provided the identical examples of nonstandard discount scenarios. The government also noted that an audit found the company lacked a defined discount strategy.
However, while these points weighed in the government’s favor, the court found them insufficient to warrant summary judgment, as there were genuine issues of material fact the court could not resolve. For example, the court found a poorly worded section on non-standard pricing available to strategic accounts could be read in either the government’s or Symantec’s favor. While the government’s reading seemed more plausible, the court found the construction so awkward that the clause was ambiguous.
Further, the court found the government’s evidence contradictory. On the one hand, the government noted that Symantec did not track which accounts were strategic or what discounts these accounts received, and did not have a policy instructing the sales team to only offer non-standard discounts to strategic accounts. According to the government, this showed that Symantec was not following its policy of giving non-standard discounts only to strategic accounts. However, Symantec argued that the lack of guidance and tracking showed that it never promised to restrict discounts to only strategic accounts. The parties also offered competing evidence about when and how discounts were approved.
Symantec also argued that it never claimed it would only offer non-standard discounts for competitive reasons, contrary to the government’s assertion. The court agreed, finding the defendant’s guidance listed other reasons a non-standard discount might be given. Because the contract could plausibly be read in two ways, the court found summary judgment was not warranted. The government raised several additional arguments, none of which the court found compelling. Generally, the court found the government only introduced more contradictory evidence, which could not be resolved at this stage.
Finally, the government targeted Symantec’s commercial sales practices as a whole, alleging they were incomplete because they did not disclose the company’s rebate practices. The government alleged Symantec failed to disclose multiple rebate programs and agreements, even though the employee responsible for obtaining the GSA Schedule contract for Symantec knew they existed. Symantec argued it did make this disclosure, but the court found no evidence in the documents provided. Based on these documents, the court could not conclude that GSA aware of any policy, much less its terms.
While the Symantec employee testified she had discussed the rebate program with GSA, the court found there were disputes of fact about the discussions at that meeting. Given how little evidence and clear testimony the court had regarding this meeting, it could not rule out the possibility that Symantec discussed the rebate program. While a jury might find the government’s account more credible, the court would not at this stage.
Next, the government argued that Symantec triggered the price reduction clause but failed to offer the required price reductions to the government. Symantec argued that its obligations under the PRC were unclear. Alternatively, the defendant argued that even if the government’s interpretation was correct, the PRC was not breached.
The PRC then identifies three events or “triggers” that would lead to a price reduction: (1), if the offeror revises the commercial catalog, pricelist, schedule or other document to reduce prices; (2) if the offeror grants more favorable discounts or terms and conditions to the baseline customer compared to those at contract formation; and (3) if the offeror grants special discounts and the change disturbs the price/discount relationship of the government to the customer that was the basis of the award. There are four exceptions: the PRC is not triggered if the sale in question (1) involved an order larger than the government’s maximum order limit; (2) was made to a federal agency; (3) was made to a state or local government under the MAS contract; or (4) can be shown to have been in error.
The court declined to grant summary judgment, first noting that the term “commercial class of customer” in the contract—upon which the PRC is based—was ambiguously defined. While the contract incorporated a clear baseline definition, it also incorporated Symantec’s FPR, which included a definition that was more ambiguous. Further, even if the government were correct, the court found more ambiguity in the discussion of the class of customer in relation to the discount relationship. The court found some of the documentary evidence leaned in the government’s favor but could not find that it was so precise that summary judgment was warranted. In addition, the court found some support for Symantec’s argument that the discount chart was meant to provide a summary and was not intended to be used to calculate prices and identify PRC triggers. Further, the court found the chart itself contained a significant amount of information that bore no relationship to the calculation of a discount relationship, like reseller terms and conditions, academic pricing, and warranty details.
Next, the government argued that by misrepresenting its CSPs in the first place, and by periodically certifying that its sales practices had not changed, Symantec repeatedly breached its obligation to provide its actual CSPs each time it was making a modification.
Symantec argued that its obligations under the Modifications Clause were unclear, but the court was not convinced. Symantec argued that GSA has not defined “commercial sales practices,” but the court found that this phrase is not used in the Modifications Clause. Instead, the clause references “Commercial Sales Practice Format,” which is unmistakably defined elsewhere.
Symantec also argued that it did not know what would count as a “change” to a commercial practice, but the court found this immaterial, because the government’s argument did not rely on Symantec’s failure to report changes, but on its repeated failure to disclose practices that it had concealed from the beginning. The court found the government entitled to summary judgment on the duty element of this allegation, but still concluded that it was unclear whether Symantec breached these duties because any alleged breach would depend on a violation of its alleged CSP disclosure obligations, each of which has been shown to be the subject of a genuine dispute of material fact.
The court then proceeded to consider the rest of the government claims, including claims of payment by mistake and unjust enrichment, as well as threshold elements (i.e. falsity and materiality) of the government’s FCA and negligent misrepresentation claims.
The court first addressed the count of false claims under the implied certification theory and fraudulent inducement sub-theory. The government argued that claims submitted by Symantec and by resellers operating under Symantec’s contract were literally false because of breaches of Symantec’s CSP, PRC, and Modifications Clause obligations. However, because the court ruled against summary judgment on those breaches, it found it could not grant summary judgment on the false claims themselves. The court also found the government had not shown there were no disputes about the materiality of the alleged false statements. Without knowing which, if any, of the many possible falsities the government will establish at trial, the court could not possibly judge the effect these would have had on the government’s decision to contract with Symantec.
The government also sought summary judgment on the falsity and materiality elements of its claims that Symantec is responsible for the government overpaying on sales of Symantec products submitted by resellers under separate contracts. However, the court again found to many alleged facts in dispute. The court declined to grant summary judgment on the count of reverse false claims for the same reason.
The court also denied summary judgment on the counts of negligent misrepresentation (Count VI), unjust enrichment (Count VIII), and payment by mistake (Count IX). First, the court found no genuine issue of material fact regarding the existence of a contract between the government and Symantec, and therefore held that the quasi-contract claims could not be pursued. The government’s unjust enrichment and payment by mistake claims also alleged that Symantec is liable under these theories for sales of its products made under resellers’ GSA contracts. While not precluded, the court could not grant summary judgment, based on the number of alleged facts in dispute.
Finally, the government sought summary judgment on certain elements of its negligent misrepresentation claim. The parties disagreed on the elements of negligent misrepresentation, citing to different state law and federal common law, but the court felt it need not rule on that matter at this juncture.
The government argued there was no genuine issue of material fact regarding (a) whether Symantec made misrepresentations, (b) whether Symantec had a duty, or (c) whether Symantec expected the United States would rely on its statements. However, the court found the first and third items clearly in dispute. The parties also disagreed over Symantec’s duty, with the government asserting the defendant had a duty to speak and Symantec arguing it had a duty to exercise reasonable care. The Court agreed that some duties under the contract had been established, but found that others were matters of dispute owing to ambiguity in the contract.
For the court’s ruling on Symantec’s motion for summary judgment, click here.
