COFC Applies Government Knowledge Defense In Case Where Government Does Not Direct Or Approve Submitter's Actions

In the recent case of Ulysses, Inc. v. United States, Case No. 06-436C, --- Fed.Cl. --- (2013), the Court of Federal Claims (COFC) applied the so-called government knowledge defense to reject fraud-based counterclaims brought by the government in response to a contractor's claim for improper cancellation of two orders. While the COFC's appellate court, the Federal Circuit, has not spoken on the government knowledge defense, the COFC in Ulysses applied a version of the defense that focuses not on a quasi-estoppel theory of government waiver by consent, but rather on the critical issue of scienter under the relevant fraud statutes - i.e., can a contractor ever be said to "knowingly" deceive its government counterpart when the contractor knows the government is aware of the relevant facts? This distinction is important, because under the COFC's approach, a contractor can succeed in a government knowledge defense without showing that the government approved or acquiesced in the contractor's assertion of the facts. Indeed, it is clear in Ulysses that the government did not agree with the contractor on the underlying facts.