Full opinion text
AMENDED MEMORANDUM OPINION AND ORDER ROSENTHAL, District Judge. On June 13, 2000, this court issued a memorandum opinion and amended order in this case. See 101 F.Supp.2d 500 (S.D.Tex.2000). This court withdraws that memorandum opinion to clarify the basis for the discussion on materiality in a civil False Claims Act suit. This amended memorandum opinion is substituted in its place. The parts of the opinion that do not discuss materiality, and the outcome, remain the same. In 1995, relator Patrick Wilkins, a former chief operating officer of a subcontractor to a drilling contract with the Army Corps of Engineers, filed this suit under the qui tam provisions of the False Claims Act, 31 U.S.C. §§ 3729-3730 (Supp. 2001) (“FCA”). Wilkins filed suit under seal so that the United States government could investigate his allegations and determine whether to exercise its statutory right to intervene and prosecute this lawsuit. 31 U.S.C. § 3730(b)(3) (Supp.2001). Three years later, the government completed its review and filed its complaint upon intervention. In that complaint, the government adopted most, but not all, of the relator’s claims and added claims the relator had not raised. Defendants, the general contractor and two subcontractors, subsequently moved to dismiss both complaints for failure to plead with sufficient particularity under Federal Rule of Civil Procedure 9(b) and failure to state a claim under Federal. Rule of Civil Procedure 12(b)(6). In response to defendants’ motions and this court’s orders, the United States filed two amended complaints and the relator filed an amended complaint. Defendants then moved to dismiss the government’s second amended complaint and the relator’s first amended complaint, urging that no further opportunities to amend should be allowed. The complaints include three sets of allegations. The first centers on the government’s contention that the two subcontractor defendants submitted “hidden” or “padded” waste costs in an October 1992 proposal to the Army Corps of Engineers for drilling, and that all three defendants later included these hidden costs in requests for progress payments, in violation of the False Claims Act, 31 U.S.C. § 3729(a)(1) and (a)(2). (Counts IV and V, Government’s Second Amended Complaint, Docket Entry No. 95, at 44-46). Defendants move to dismiss the claims based on the hidden waste costs. (Docket Entry Nos. 107 and 111). The second set of allegations is based upon a Request for Equitable Adjustment defendants submitted to the Army Corps of Engineers in May 1994. The government and the relator both allege that for the purpose of obtaining an equitable adjustment, defendants falsely claimed that the government was liable for costs related to differing site conditions and that the government had superior knowledge about these site conditions. Based on these claims, the government asserts causes of action against the general contractor under the Contract Disputes Act, 41 U.S.C. § 604 (Count I, Second Amended Complaint, Docket Entry No. 95, at 42) and against all defendants for violations of the False Claims Act, 31 U.S.C. § 3729(a)(1) and (a)(2) (Counts II and III, id., at 43-44); conspiracy to have the government pay false claims under 31 U.S.C. § 3729(a)(3) (Count VI, id., at 46-47); and common law fraud (Count VII, id., at 47-48). The relator asserts causes of action under 31 U.S.C. § 3729(a)(1), (2) and (3). Each defendant has moved to dismiss all the REA-based claims against it. (Docket Entry Nos. 105, 107, 109, 110, 111, and 113). The third set of allegations involves the relator’s claim that the parent company of one of the subcontractors is liable, both under an alter ego theory and independently. The parent company defendant has moved to dismiss this claim. (Docket Entry No. 105). In their motions to dismiss the government’s second amended complaint, the two subcontractor defendants assert that as a matter of law, the government has not sufficiently pleaded that the subcontractor defendants made false statements about waste removal costs in the bid proposal and contract. All defendants assert that the government has not sufficiently pleaded that they made false statements in connection with the Request for Equitable Adjustment (“REA”). All defendants assert that the relator’s complaint should be dismissed on the same grounds as the government’s second amended complaint. One of the defendants also asserts that the relator’s complaint should be dismissed as superseded to the extent the government adopted it and as deficiently pleaded to the extent it asserts claims the government did not adopt. This court entered a preliminary order dated March 31, 2000, on these claims. (Docket Entry No. 143). On June 13, 2000, this court issued a Memorandum Opinion and Amended Order. See 101 F.Supp.2d 500 (S.D.Tex.2000). This court now issues this Amended Memorandum Opinion and Order, setting out in greater detail the reasons for those rulings. This Amended Memorandum Opinion and Order differs from the earlier memorandum opinion only in that it further clarifies its holding that materiality is an element of a civil False Claims Act action. This is an alternative basis for dismissing plaintiffs padded waste cost claims. For the reasons stated in detail below, this court GRANTS the defendants’ motions to dismiss the government’s padded waste cost claims without leave to amend; DENIES the defendants’ motions to dismiss the government’s claims arising from the REA; DENIES the motion to dismiss the complaint of the relator as superseded; GRANTS the motion to dismiss the claims the relator has asserted against the parent company of one of the subcontractors; and GRANTS in part the defendants’ motions to dismiss the relator’s claims relating to the REA, with leave to amend. I. Factual and Procedural Background A. The Parties and the Contracts: The Facts Relating to the Padded Waste Claim On September 16, 1991, the Army Corps of Engineers (the “Corps”) awarded North American Construction Corporation (“NACC”), a Texas corporation based in San Antonio, Texas, contract Number DACA56-91-C-0110. The contract required NACC to construct a Groundwater Treatment Facility at Tinker Air Force Base in Oklahoma. The Corps contract required NACC to construct a treatment plant to remove contaminants from groundwater underneath an aircraft maintenance facility located on the base. The contract was a competitively bid fixed-price contract. Defendant CH & A Corporation, a Texas corporation and a subsidiary of GAB Business Services, Inc. (“GAB”), became a subcontractor to NACC for certain of NACC’s contractual obligations to the Corps when CH & A acquired the personnel, assets, and the obligations to NACC under the contract of U.S. Testing, Testing Engineers Division. Relator Patrick Wilkins is a former Chief Operating Officer of CH & A. The contract originally called for five vertical wells to be drilled inside the aircraft maintenance facility. On September 24, 1992, the Corps issued unilateral contract modification 9, substituting five horizontal wells for the vertical wells. The modification fell within the scope of CH & A’s subcontract with NACC. CH & A sought competitive bids for contract modification 9. In a letter dated October 16, 1992, defendant EVI Cherrington Environmental (“ECE”), a Texas corporation and a wholly-owned subsidiary of defendant Weatherford International, Inc. during the relevant period, wrote “to confirm our price with regard to drilling five approximately 1000 feet wellbores.... ” In this letter, ECE proposed a fixed price of $1,295,000 for “Total Project Excluding Waste Disposal.” ECE proposed a flat price of $215,000 to “store, haul and dispose of the drilling wastes” up to 40 cubic yards of solid waste and 120,000 gallons of liquid waste. In the letter, ECE stated that if the quantity of waste exceeded either of these amounts, ECE and CH & A would negotiate a unit rate for the disposal of the additional waste at the then-prevailing market rate. ECE also proposed that additional demurrage charges should be levied for wastes the Corps did not allow ECE to remove within thirty days after their production. CH & A forwarded the bid proposals it received to the Corps administrative contracting officer, Dan Johnson. The Corps concluded that ECE had submitted the lowest responsive bid. On October 30, 1992, CH & A and ECE executed a Subcontract Agreement for part of the work called for in unilateral contract modification 9. The Subcontract Agreement identified the “Contract Amount” of $1,295,000 as covering the following tasks: “Drill, Install, and Develop Five Horizontal Extraction Wells; Install Pump Systems; Manage Wastes. Actual disposal of wastes is to be paid per the unit prices shown in item 36.C.” (Docket Entry No. 58, Ex. A, at 19). Section 36.C of the Subcontract Agreement set out unit rate prices for the disposal of solid and liquid industrial wastes, at rates of $1.50 per gallon of liquid hazardous waste and $175.00 per cubic yard of solid hazardous waste. (Id., at 18). The Subcontract Agreement broke down the fixed contract amount into broad categories of prices: Total Well Materials; Mobilization & Demobilization; and Drill, Complete and Develop Wells. This third category was broken down only by a total price for each of the five wells. The contract set a fixed price that ECE would receive for the drilling and waste management work, but did not specify any cost component of the work. The price of the waste disposal work was not included in the fixed price of $1,295,000 and was to be paid according to the unit rate prices listed in section 36.C of the contract. During the contract work, ECE submitted progress payment requests under the Subcontract Agreement. The payment requests included amounts for drilling work and for the waste disposal work performed. Some of the payment, requests broke out and separately identified cost amounts for waste management and storage. The government does not allege that these charges are incorrect or inflated. Rather, the government contends that the payment requests, based on the percentage of work completed for each well until the total price of $1,295,000 was reached, were false because they included $280,000 in costs for waste removal work. (Second Amended Complaint, Docket Entry No. 95, ¶¶ 33-36). The government contends that if it had known that the total contract price of $1,295,000 for drilling and waste management included $280,000 that in fact represented costs for waste removal, it would not have agreed to pay ECE that total price. B. The Facts Relating to the Request for Equitable Adjustment Claims It is undisputed that ECE encountered problems in the horizontal well drilling that delayed the completion of the work under the Subcontract Agreement and resulted in cost overruns. It is also undisputed that the government approved the work. The quality of the work is not an issue. During the contract work, and after its conclusion, ECE, CH & A, and NACC had a number of discussions and meetings about the problems and delays encountered. ECE asserted that it had based its bid to CH & A on verbal representations from CH & A and on drilling logs CH & A provided that described the subsurface soil as “predominately silty glaze with some soft fractured sandstone.” Within a few days of beginning to drill, ECE realized that the subsurface soil was significantly harder and more heavily cemented than CH & A had described, making drilling slower and more costly. CH & A had given ECE “soil boring logs” that CH & A, rather than the Corps, had prepared. Both NACC and CH & A had other vertical well logs that the Corps had prepared and included in the bid package for the project. However, neither NACC nor CH & A gave ECE these Corps bid package logs. ECE employees became aware of the existence of the Corps bid package contract boring logs for vertical wells at a November 6, 1992 meeting between representatives of ECE, NACC, the Corps, and CH & A. On November 10, 1992, ECE employee David May wrote to CH & A employees Bayani Abueg and David Ren-dini, stating that the logs CH & A had given to ECE did not accurately represent the subsurface soil conditions at the site. Rendini prepared a Project Summary Report dated February 24, 1993 for Patrick Wilkins, CH & A’s COO. In this report, Rendini stated that the logs CH & A gave to ECE did not materially differ from the Corps bid package contract logs that CH & A had failed to provide to ECE. Rendini also noted that ECE had been given an opportunity to obtain copies of other, horizontal Corps drilling logs produced from two previous horizontal well bores drilled in the area, although not at the same site. The Corps had not attached these horizontal well logs to any of the bid or contract documents. CH & A blamed the delays on ECE’s own “incompetence,” rather than on the inaccuracy of the logs CH & A did give to ECE or on CH & A’s failure to give ECE the Corps vertical well logs. ECE commissioned a study by American Environmental Consultants, Inc. (“the AMENCO report”) that compared the Corps contract vertical well logs CH & A did not give to ECE before it tendered its bid, the CH & A logs that ECE did receive, and the actual subsurface soil conditions. Wilkins wrote a memorandum dated June 28, 1993, to John Darden, a senior vice president of GAB, the parent company of CH & A, in which he discussed the possibility that ECE might sue CH & A over the logs. On August 25, 1993, Alton Watson and Dan Eaton of ECE met with Roger Crad-dock, Patrick Wilkins, Ed Bove, and David Rendini of CH & A to discuss ECE’s claim that it had incurred extra costs of $547,635.66 because the logs CH & A had prepared and given to ECE did not accurately represent the subsurface soil conditions encountered. At the meeting, ECE presented a cost overrun report it had prepared. In February 1994, ECE prepared a draft of a Request for Equitable Adjustment (REA). In this draft REA, ECE asserted that it had incurred $547,635.66 in cost overruns because the CH & A well logs CH & A gave to ECE before ECE submitted its bid did not accurately describe the soil conditions. ECE attached a copy of the AMENCO Report to the REA and forwarded the REA to CH & A on February 25,1994. On March 4, 1994, a NACC employee telephoned Wilkins to express NACC’s concern that the draft REA included references to the dispute between ECE and CH & A over the different sets of drilling logs. On March 8, 1994, Doug Reitmeyer and Dan Sparkman of NACC, David Rendini and Patrick Wilkins of CH & A, and Dan Eaton of ECE met to discuss the concerns. Reitmeyer told Eaton that ECE should remove critical references to CH & A from the REA, because if CH & A and ECE blamed each other for the differing site conditions, the government would be less likely to approve the claim. ECE drafted a revised REA dated March 15, 1994. In the revised REA, ECE stated that it had expected, and based its bid on, different site conditions than it encountered. ECE referred to “government boring logs” as those on which it based its bid. In the second amended complaint, the government alleges that this deliberately ambiguous phrase in fact referred to the logs that CH & A had prepared and provided to ECE. The government alleges that ECE referred to these logs as “government boring logs,” although they were not the logs the Corps attached to the contract bid documents, on the theory that the government had paid CH & A to prepare the logs. ECE did state in the March 15, 1994 REA that when it submitted its bid, it had not received the Corps contract boring logs for vertical wells that the Corps had included in the bid package, because CH & A had failed to transmit them. ECE also stated that it had not known about either the existence or contents of the Corps logs of the experimental horizontal wells. ECE asserted that the Corps’ failure to disclose or include the logs of the horizontal wells in the bid package for the five new horizontal wells called for in unilateral contract modification 9 constituted a withholding of superior knowledge. On March 16, 1994, CH & A forwarded ECE’s March 15, 1994 draft claim as part of CH & A’s claim submission to NACC. On April 6, 1994, Wilkins, as CH & A’s COO, signed CH & A’s certification for the March 16,1994 claim. On May 10, 1994, Reitmeyer and Spark-man (of NACC), Watson and Eaton (of ECE), and Wilkins (of CH & A) participated in a telephone conference. In their amended complaints, the government and the relator allege that Reitmeyer urged CH & A not to include in the REA any assertions that blamed ECE for the delays and cost overruns. The government and the relator allege that Reitmeyer also urged ECE to revise the REA to blame the government, not CH & A or NACC, for any misinformation as to the site conditions. Reitmeyer of NACC and Dan Eaton of ECE discussed removing the AM-ENCO report from ECE’s draft REA. The AMENCO report stated that the contract logs the Corps had given to CH & A before ECE’s bid accurately represented the site conditions. Reitmeyer suggested replacing the AMENCO report with a newspaper article, to avoid creating a gap in the exhibit list. On April 4, 1994, ECE’s president certified the ECE pass-through claim. Although the April 4,1994 ECE claim bore a March 15, 1994 date, ECE had substituted the newspaper article for the AMENCO report and made changes to the REA text. In the April 4,1994 REA, ECE stated that it learned after it began drilling that the Corps had not included logs from the experimental horizontal wells in the bid package and had not previously disclosed the existence or contents of those logs. ECE asserted that these horizontal well logs gave the government superior knowledge of the subsurface conditions associated with drilling horizontal wells at the contract site. In this suit, the government alleges that ECE’s statement about the horizontal well logs in the April 1994 REA is inconsistent with other documents and false. The government points to the February 24, 1993 CH & A project summary, which states that after ECE submitted its bid, but before it began drilling, the government told both ECE and CH & A about the logs of the experimental horizontal wells and made those logs available to ECE in a meeting. The government also points to an October 21, 1992 ECE entry in a chronology of the project, stating that ECE had asked the Corps for logs of horizontal wells at the site, showing ECE’s knowledge of the existence of those logs. In the April 1994 REA, ECE stated that it had submitted its bid based on soil boring logs that did not match the actual site conditions. ECE stated that it had based its bid on the government bid package, CH & A’s representations, and the soil boring logs CH & A had provided. However, ECE deleted the statement, included in the earlier draft REA, that the bid package CH & A gave to ECE omitted the Corps vertical well boring logs. ECE also did not include the statement from the earlier draft REA that the soil boring logs CH & A did provide were, in ECE’s judgment, faulty. ECE did not include the AMENCO report, which criticized the soil boring logs CH & A gave to ECE and found that the government logs that CH & A failed to provide were consistent with the actual site conditions. Instead, ECE asserted that the government was liable for the cost overruns due to differing site conditions and superior knowledge. In the certification of the REA, Watson, ECE’s president, stated that the REA was made in good faith; that the supporting data was accurate and complete to the best of ECE’s knowledge and belief; and that the amount requested accurately reflected the contract adjustment for which ECE believed the government to be liable. On April 6, 1994, Wilkins signed the REA certification on behalf of CH & A, stating that the claims were made in good faith; that the supporting data was accurate and complete to the best of CH & A’s knowledge and belief, and that the amount requested accurately reflected the contract adjustment for which CH & A believed the government was liable. The government alleges that Wilkins certified the March 15, 1994 draft claim, which included the AM-ENCO report. However, the government alleges that CH & A withheld from the government its belief that ECE’s own performance caused the project delays or its belief that the logs CH & A gave to ECE accurately described the subsurface conditions. On May 11, 1994, Donald Sparkman, NACC’s senior project manager, signed the REA certification, stating that the claim was made in good 'faith; that the supporting data was accurate and complete to the best of NACC’s knowledge and belief; and that the amount requested accurately reflected the contract adjustment for which NACC believed the government to be liable. The government alleges that before ECE bid on the modification 9 work, neither NACC nor CH & A had given ECE the Corps contract logs for vertical wells; that ECE based its bid on the logs CH & A prepared; and that the Corps had made logs for the previously drilled experimental horizontal logs available to ECE before ECE had begun to drill, though not until after it had bid. The government also alleges that none of the defendants had examined the horizontal well logs before submitting the REA. Despite the lack of knowledge of what these logs contained, defendants certified the assertion in the REA that these logs contained “vital” information that should have been included in the bid package given to ECE. The government alleges that if defendants had examined the horizontal well logs, they would have learned that these were gamma logs, which measured radioactivity, rather than subsurface soil conditions. The government asserts that these logs contained neither “vital” nor even relevant information about subsurface soil conditions. The government concludes that defendants’ claim that the government had superior knowledge about subsurface conditions that it withheld was made either falsely or with reckless disregard for the truth. On May 16, 1994, the Corps received the REA. It included a $3.9 million claim for cost overruns and delays for differing site conditions. The government investigated the claim under the Contract Disputes Act, 41 U.S.C. §§ 601-13. As a result of the investigation, the Corps rejected the claim for cost adjustments based on differing site conditions and superior knowledge. The core of the government’s and the relator’s case is that the defendants coordinated their submissions to make it appear that the government had caused the delay and overruns, despite their belief that acts or omissions of the defendants had caused or contributed to cause the problems. II. The Issues Presented The government’s arguments as to the first set of issues, arising from the padded waste claim, require this court to focus on the extent to which a government subcontractor must either affirmatively disclose the costs of performing a government fixed price contract or risk liability under the False Claims Act. The government asserts that it reasonably assumed that the fixed price it agreed to pay for drilling the wells did not include any costs for waste removal because the price for waste removal was separately classified. Defendants ECE and CH & A respond that the government’s theory rests on a duty to disclose that has neither a contractual nor a statutory basis. Defendants assert that by bidding and approving a fixed price contract, the government chose not to impose an obligation to disclose the cost basis of the fixed price bid or contract. In the absence of such a duty to disclose, the failure to do so cannot, argue defendants, amount to a false or fraudulent claim as a matter of law. The government’s argument as to the REA rests on a very different analysis. The government asserts that in the REA, the defendants cooperated to shift the blame for increased costs and contract delays from each other to the government. The government alleges that the steps defendants took to build a case of the Corps’ superior knowledge of differing site conditions furnish the necessary elements to state a cause of action under the False Claims Act and for common law fraud. Defendants respond that the false statements the government describes are litigation arguments the contractor and subcontractors submitted to support their position under the Contract Disputes Act. Defendants assert that the government is converting litigation arguments into false claims. Defendants also assert that the document the government makes the basis of its case, the REA that each of the defendants certified, does not assert that the government was wholly responsible for the cost overruns and delays, but merely that the government contributed to cause the problems by not earlier providing the horizontal well logs. Each of these arguments is examined below. III. The Applicable Legal Standards A. The Rule 9(b) Standard Federal Rule of Civil Procedure 9(b) provides that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.” Id. “Although the particularity demanded by Rule 9(b) differs with the facts of each case, a plaintiff pleading fraud must set forth ‘the who, what, when, and where ... before access to the discovery process is granted.’ Anything less fails to provide defendants with adequate notice of the nature and grounds of the claim.” Hart v. Bayer Corp., 199 F.3d 239, 248 n. 6 (5th Cir.2000) (citing Guidry v. Bank of LaPlace, 954 F.2d 278, 288 (5th Cir.1992); Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1067 (5th Cir.1994); and quoting Williams v. WMX Techs., Inc., 112 F.3d 175, 178 (5th Cir.1997)) (alteration in original; internal citations omitted). The second sentence of Rule 9(b) allows a plaintiff to make conclusory allegations as to defendant’s knowledge of the true facts and of defendant’s intent to deceive. 5 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, Federal PractiCE and Prooedure § 1297. Athough a district court may dismiss a claim for failure to plead fraud with particularity, “it should not do so without granting leave to amend, unless the defect is simply incurable or the plaintiff has failed to plead with particularity after being afforded repeated opportunities to do so.” Id. (citing O’Brien v. National Property Analysts Partners, 936 F.2d 674, 675-76 (2d Cir.1991)). Despite the requirement that fraud be pleaded with particularity, “fraud may be pleaded without long or highly detailed particularity.” Guidry v. United States Tobacco Co., 188 F.3d 619, 632 (5th Cir.1999) (citing 12A Charles Alan Wright, Arthur R. Miller, Mary Kay Kane & Richard L. Marcus, Federal Practice and Procedure, App. D, Form 13 (1999)). Rule 9(b) must be read together with the Rule 8(a) requirement that pleadings be “ ‘simple, concise, and direct’ Rule 9(b) does “not reflect a subscription to fact pleading.” Williams, 112 F.3d at 178 (quoting Fed. R. Civ. P. 8(a)(2)). The Williams court also observed that “courts have emphasized that Rule 9(b)’s ultimate meaning is context-specific.” Id. Rule 9(b) has four purposes: to ensure that the defendant has sufficient information to formulate a defense by having notice of the conduct complained of; to protect defendants against frivolous suits; to eliminate fraud actions in which all the facts are learned after discovery; and to protect defendants from undeserved harm to their goodwill and reputation. See Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir.1999). Rule 9(b) must be interpreted and applied in light of these purposes. The Fifth Circuit has specifically held that “[t]he complaint in a False Claims Act suit must fulfill the requirements of Rule 9(b).” United States ex rel. Russell v. Epic Healthcare Management Group, 193 F.3d 304, 308 (5th Cir.1999) (citing United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir.1997)). The Fifth Circuit has added a fifth element to the “who, what, when and where” that Rule 9(b) clearly requires, but has described this fifth element in various ways. In Tuchman, the court held that “Rule 9(b) requires the plaintiff to allege ‘the particulars of time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what [that person] obtained thereby.’ ” Tuchman, 14 F.3d at 1068 (quoting Tel-Phonic Servs., Inc. v. TBS Int’l, Inc., 975 F.2d 1134, 1139 (5th Cir.1992)) (alteration in original; internal quotation marks omitted); see also Russell, 193 F.3d at 308. In Williams, the Fifth Circuit set out three different standards including the fifth element, and one that did not. The first standard the Williams court cites is the Tuchman “what the person obtained thereby” standard. See Williams, 112 F.3d at 177. The second is a “why” standard: “As the Second Circuit has noted, articulating the elements of fraud with particularity requires a plaintiff to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent. We agree with the Second Circuit’s approach.” Williams, 112 F.3d at 177-78 (citing Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir.1993)) (internal citation omitted) (emphasis added); see also id. at 179 (“plaintiffs must also set forth an explanation as to why the statement or omission complained of was false or misleading”). At another point in the opinion, the Fifth Circuit states a “how” standard: “ ‘who, what, when, where, and how’ [are] required by Rule 9(b).” Id. (citing Melder v. Morris, 27 F.3d 1097, 1100 n. 5 (5th Cir.1994)). Finally, the court stated a narrower, yet logically consistent, version of the rule: “[djirectly put, the who, what, when, and where must be laid out before access to the discovery process is granted.” Id. at 178; see also Hart v. Bayer Corp., 199 F.3d at 248 n. 6. Eight courts of appeals have adopted standards that require the pleading of a fifth element of the fraud. Three other courts of appeals have announced different standards. The different formulations of this fifth element of the Rule 9(b) standard reflect the difficulty in articulating criteria that identify those allegations that describe a fraud, so as to permit discovery to proceed. Like the majority of courts of appeals, the Fifth Circuit has consistently applied the Rule 9(b) standard to require a fifth element. “[W]hat [that person] obtained thereby,” Tuchman, 14 F.3d at 1068, “why the statement or omission complained of was false or misleading,” Williams, 112 F.3d at 179, and the “how required by Rule 9(b),” id., are all variants of the same rule: in cases in which the mechanism or basis of the fraud is not otherwise apparent from the face of the complaint, the plaintiff must explain how the fraud worked. In cases in which a fifth element is not expressly included in the stated standard, that element was not relevant to the outcome of the appeal. See, e.g., Hart, 199 F.3d at 248 n. 6. The amended complaints must be measured against all five elements of the Rule 9(b) standard. B. The Rule 12(b)(6) Standard Defendants have also moved to dismiss under Rule 12(b)(6), seeking dismissal for failure to state a claim upon which relief can be granted. A claim may not be dismissed under Rule 12(b)(6) “unless it appears certain that the plaintiff cannot prove any set of facts in support of her claim which would entitle her to relief.” Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Piotrowski v. City of Houston, 51 F.3d 512, 514 (5th Cir.1995). In deciding a Rule 12(b)(6) motion, the factual allegations of the complaint must be accepted as true, see Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972), and the complaint construed favorably to the pleader. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). The court may consider the facts presented in exhibits to the complaint, as well as the factual allegations of the complaint itself. See Caine v. Hardy, 943 F.2d 1406, 1411 n. 5 (5th Cir.1991); Zinermon v. Burch, 494 U.S. 113, 118, 110 S.Ct. 975, 108 L.Ed.2d 100 (1990); see also Fed. R. Civ. Proc. 10(c) (“A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes.”). “The court will not accept as true allegations that are contradicted ... by other allegations or by exhibits attached to or incorporated in the pleading.” 5A CHARLES ALAN WRIGHT & ARTHUR R. MlLLER, Federal Praotioe and PROCEDURE § 1363. The Seventh Circuit has held that Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir.1993); see also Sheppard v. Texas Dep’t of Transp., 158 F.R.D. 592, 597 (E.D.Tex.1994) (“[A] court may rely upon a defendant’s exhibit when it is referred to in the plaintiffs complaint and is central to plaintiffs claim”); 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1327 (2d ed. 1990) (“[W]hen plaintiff fails to introduce a pertinent document as part of his pleading, defendant may introduce the exhibit as part of his motion attacking the pleading.”). [a] plaintiff is under no obligation to attach to her complaint documents upon which her action is based, but a defendant may introduce certain pertinent documents if the plaintiff failed to do so. Documents that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiffs complaint and are central to her claim. Although the court must accept as true “well-pleaded” factual allegations in the complaint, the court need not accept as true “conclusory” allegations or allegations of inferences that are contradicted by the facts pleaded or set out in the exhibits attached to or incorporated in the pleading. See, e.g., Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir.1995) (“ ‘conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss’ ”) (quoting Femandez-Montes v. Allied Pilots Ass’n, 987 F.2d 278, 284 (5th Cir.1993)). The government and the defendants refer to several documents as relevant to the court’s consideration of the motions to dismiss. The government has attached a “Progress Payment Request Chronology for Horizontal Well Drilling Work” to its second amended complaint. (Docket Entry No. 95, Att. A). In the second amended complaint, the government also cites or quotes excerpts from the contract between ECE and CH & A; a project summary report dated February 24, 1993 and written by David Rendini of CH & A; a letter dated July 20, 1993 from Rendini to Alton Watson, president of ECE; a letter dated June 16, 1993 from Watson to Rendini; a February 14, 1994 facsimile transmission from Pat Stout of NACC to Rendini; a February 14, 1994 facsimile transmission from Stout to Watson; the draft REA dated February 25, 1994; a cover letter to the February 25, 1994 draft REA from Watson to Rendini; a letter dated February 28, 1994 from Daniel Eaton of ECE to Rendini; the revised draft REA dated March 15, 1994; a letter dated March 17, 1994 from Watson to Wilkins, and copied to Don Sparkman of NACC and Rendini; CH & A’s March 16, 1994 claim including the REA submitted to NACC; the certification of the REA signed by Alton Watson, the president of ECE, and dated April 4, 1994; the certification of CH & A’s March 16, 1994 claim including the REA, signed by Wilkins and dated April 6, 1994; NACC’s certification of the REA, signed by Sparkman and dated May 11, 1994; and the REA received by the Corps on May 16,1994. (Docket Entry No. 95). CH & A has attached the contract between CH & A and ECE (Docket Entry No. 58, Ex. A), one set of excerpts from the draft REA dated February 25, 1994 (Docket Entry No. 106, Ex. 1); excerpts from the submitted REA dated March 15, 1994 {Id., Ex. 2; Docket Entry No. 108, Ex. C); CH & A’s requests for progress payments for the work performed by ECE (Docket Entry No. 108, Ex. A); and another set of excerpts from the draft REA dated February 25, 1994 (Id., Ex. B). Weatherford has attached a letter dated October 16, 1992 from David May of ECE to Bayani Abueg of NACC (Docket Entry No. 112, Ex. 13); the October 26, 1992 contract between CH & A and ECE (Id., Ex. 14); an invoice dated September 30, 1992 from ECE to NACC (Id., Ex. 15); and the certification of the REA signed by Alton Watson, the president of ECE, and dated April 4,1994 (Id., Ex. 16). C. The False Claims Act The test for FCA civil liability is (1) whether a “claim,” as defined by the statute, was presented for payment or approval to the United States; (2) whether that claim was false or fraudulent; (3) and whether the claim was made with the requisite scienter. See, e.g., United States v. Basin Elec. Power Coop., 248 F.3d 781, 803 (8th Cir.2001); United States ex rel. Harrison v. Westinghouse Savannah River Co., 176 F.3d at 788 (cited with approval in Russell, 193 F.3d at 308). The Supreme Court has defined a claim under the FCA as “ ‘a demand of some matter as of right’ ” asserted against the United States government. United States v. Cohn, 270 U.S. 339, 345, 46 S.Ct. 251, 70 L.Ed. 616 (1926) (quoting Prigg v. Pennsylvania, 41 U.S. (16 Pet.) 539, 615, 10 L.Ed. 1060 (1842) (Story, J.)). The 1986 amendments to the FCA put into place a statutory definition of claim that included claims made against government contractors, grantees, and other recipients of federal funding. The False Claims Act is a statutory cause of action intended from its inception to combat fraud against the government. Courts have consistently included materiality as an implied element of a civil False Claims Act cause of action. This court’s ruling dismissing the government’s padded waste cost claims stands regardless of whether materiality is an element of those claims. However, because it is an alternative ground for the dismissal, and because courts have raised the issue in light of United States v. Wells, 519 U.S. 482, 117 S.Ct. 921, 137 L.Ed.2d 107 (1997), and Neder v. United States, 527 U.S. 1, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999), this court addresses whether a false statement, alleged to result in a false or fraudulent claim for payment, must be material to be actionable. In Neder, the Supreme Court relied on the framework for materiality inquiries set out in Wells to hold that the wire, mail, and bank fraud statutes included an implied materiality requirement. Neder, 527 U.S. at 20-24, 119 S.Ct. 1827. Under the Wells framework, the Court “first look[s] to the text of the statutes at issue to discern whether they require a showing of materiality.” Neder, 527 U.S. at 20, 119 S.Ct. 1827. If there is no reference to materiality in the text of the statute, the Court then looks to the “established meaning” of the terms in the statute. “It is a well-established rule of construction that [w]here Congress uses terms that have accumulated settled meaning under ... the common law, a court must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning of these terms.” Id. at 21, 119 S.Ct. 1827 (quotation marks and citations omitted; alterations in original). The Neder Court went on to hold that the “scheme to defraud” language common to the wire, bank, and tax fraud statutes incorporated the meaning “defraud” had in the context of common-law fraud. Id. at 24, 119 S.Ct. 1827. The third step in the Wells framework, which the Neder Court did not reach, is to examine the statutory history. See Wells, 519 U.S. at 493, 117 S.Ct. 921. Application of the Neder/Wells framework to subsections 3729(a)(1), (2) and (3) is uncomplicated to the extent that the subsections deal with “fraud” or directly related terms. The Court found in Neder that “the well-settled meaning of ‘fraud’ [when the mail, bank, and wire fraud statutes were enacted] required a misrepresentation or concealment of material fact. Indeed, as the sources we are aware of demonstrate, the common law could not have conceived of ‘fraud’ without proof of materiality.” Neder, 527 U.S. at 22, 119 S.Ct. 1827 (citing BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 579, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996); Smith v. Richards, 38 U.S. (13 Pet.) 26, 39, 10 L.Ed. 42 (1839)). Congress enacted the mail, bank, and wire fraud statutes after the FCA; the established meaning of “fraudulent” at the time Congress enacted the FCA included a materiality requirement. Subsection 3729(a)(3), which includes the language “conspires to defraud,” also clearly includes a materiality requirement. The application of the Neder/Wells framework to subsections 3729(a)(1) and (2) is less straightforward. The problematic language is the disjunctive phrase “false or fraudulent claim” in both paragraphs. The analysis is complicated because although the phrase is disjunctive, requiring either a “false claim” or a “fraudulent claim,” the phrase “false or fraudulent claim” has itself become a term of art, see Harrison, 176 F.3d at 785, and the term “false claim” itself refers generally to all FCA causes of action, including fraudulent claims. In United States ex rel. Cantekin v. University of Pittsburgh, the court suggested that the Wells and Neder distinction between the term “false statement,” which does not include an implied materiality requirement, from the term “fraudulent statement,” which does imply a materiality requirement, casts doubt on finding a materiality requirement in the phrase “false claim.” 192 F.3d 402, 415 (3d Cir.1999) (citing Neder, 527 U.S. at 23 n. 7, 119 S.Ct. 1827). The Cantekin question may proceed from an incomplete premise. Subsection 3729(a)(1) of the False Claims Act does not contain the term “false state ment.” Rather, it requires a “false or fraudulent claim ” as the basis for liability. Subsection 3729(a)(2) similarly requires a “false record or statement to get a false or fraudulent claim paid or approved.” 31 U.S.C. § 3729(a)(2) (emphasis added). This distinction makes a difference, demonstrated by recent case law and the application of the NederfWells framework to subsections 3729(a)(1) and (2). 1. The Recent Case Law on Materiality Almost every court considering the issue holds that materiality is included in a FCA claim, but without distinguishing between false and fraudulent claims. Before Wells and Neder, the Fifth Circuit, with other courts, held that materiality is an element of a FCA cause of action. In United States ex rel. Weinberger v. Equifax, Inc., the court stated that the FCA “interdicts material misrepresentations made to qualify for government privileges or services.” 557 F.2d 456, 460-461 (5th Cir.1977). More recently, in United States ex rel Thompson v. Columbia/HCA Healthcare Corp., the Fifth Circuit quoted Equifax in holding that liability under the FCA required more than a claim for services rendered in violation of a statute. 125 F.3d 899, 902 (5th Cir.1997). Instead, a claim submitted with a false certification of compliance with a statute or regulation creates a cause of action under the FCA only when the certification is a prerequisite to obtaining payment. See id. at 902. A claim submitted with a false certification of compliance with a statute is “false or fraudulent” under the FCA only “where the government has conditioned payment of a claim upon a claimant’s certification of compliance with, for example, a statute or regulation, a claimant submits a false or fraudulent claim when he or she falsely certifies compliance with that statute or regulation.” Id. Although the Thompson court did not frame the issue in materiality terms, it is recognized that the “prerequisite standard in the false certification cases is essentially a heightened materiality requirement: the government must have conditioned payment of the claim upon certification of compliance with the provision of the statute, regulation, or contract at issue.” Harrison, 176 F.3d at 793. The earlier Equifax case involved allegations of fraud in the inducement to contract, another recurring category of False Claims Act cases. See 557 F.2d at 460-461. In such a case, False Claims Act liability is asserted as to each claim submitted to the government under a contract, if that contract was originally obtained through false statements or fraudulent conduct. The claims for payment may be accurate, but the antecedent- fraud in obtaining the contract makes each claim submitted a false or fraudulent claim. See, e.g., United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943). In Equifax, the relator alleged Equifax had misrepresented its eligibility for government employment. However, Equifax had properly performed the work for which it claimed payment under its contract with the government. Noting that the False Claims Act “‘was not designed to reach every kind of fraud practiced on the Government,’ ” the court held that: [T]o establish that Equifax committed fraud in this manner, Weinberger first must demonstrate that the government was misled by Equifax’s application for the reporting business. Unless the government made it clear that it would not employ detective agencies when it contracted for the work, Equifax’s application did not make a material misrepresentation, did not mislead the government, and did not defraud the government within the meaning of the False Claims Act. Equifax, 557 F.2d at 460-461 (quoting United States v. McNinch, 356 U.S. 595, 599, 78 S.Ct. 950, 2 L.Ed.2d 1001 (1958)). The court rejected the argument “that Equifax misrepresented its qualification for government employment and thus made a false claim.” Id. at 460. In rejecting the argument, the Fifth Circuit appeared to equate a “false claim” with a “fraudulent claim” with respect to the requirement that the misrepresentation made had to bear on, or be material to, the entitlement to payment. Other circuits have reached similar conclusions, although framed differently depending on whether the case involved a false certification; fraud in the , inducement; or a false or fraudulent statement in a claim. In Harrison, a case that involved both fraud in the inducement and false certification allegations, the Fourth Circuit emphasized that materiality is a requirement for civil liability under the FCA. 176 F.3d at 785. “Materiality depends on ‘whether the false statement has a natural tendency to influence agency action or is capable of influencing agency action.’ ... Materiality is a mixed question of law and fact.’ ” Id. (internal citations omitted). The First Circuit, using the language of fraud, held that a false statement that is not material does not support liability under the post-1986 False Claims Act. See United States v. Data Translation, Inc., 984 F.2d 1256, 1267 (1st Cir.1992). The Court of Federal Claims has held that “the FCA covers only those false statements that are material.” Tyger Constr. Co. v. United States, 28 Fed.Cl. 35, 55 (Fed.Cl.1993). See also United States v. Intervest Corp., 67 F.Supp.2d 637, 646 (S.D.Miss.1999) (“the False Claims Act imposes a materiality requirement”); United States ex rel. Walle v. Martin Marietta Corp., 1997 WL 4566, at *2 (E.D.La. Jan.6, 1997) (unpublished decision) (“there is a requirement that the false claim be a material misrepresentation”); United States v. Job Resources for the Disabled, 2000 WL 562444, at *2 n. 9 (N.D.Ill. May 9, 2000) (materiality determination “particularly appropriate when considering a lie of omission”); United States ex rel. Lamers v. City of Green Bay, 998 F.Supp. 971, 991 (E.D.Wis.1998) (same), aff'd, 168 F.3d 1013 (7th Cir.1999); United States ex rel. Durcholz v. FKW Inc., 997 F.Supp. 1159, 1167 (S.D.Ind.1998), aff'd, 189 F.3d 542 (7th Cir.1999); Luckey v. Baxter Healthcare Corp., 2 F.Supp.2d 1034, 1046 (N.D.Ill.1998), aff;d, 183 F.3d 730 (7th Cir.1999). One court reached a different result, but without explanation. United States ex rel. Roby v. Boeing Co., 184 F.R.D. 107, 112 (S.D.Ohio 1998) (holding without explanation that under the Wells framework, there is no separate materiality requirement under the False Claims Act). In Cantekin, the Third Circuit, without deciding the issue, cast doubt on the Fourth Circuit’s holding in Harrison that the FCA includes a materiality requirement. 192 F.3d at 415. The Third Circuit cited a footnote in Neder for the proposition “that the term ‘false statement,’ unlike ‘fraudulent statement,’ does not imply a materiality requirement.” Id. (citing Neder, 527 U.S. at 23 n. 7, 119 S.Ct. 1827). The courts agree that if the defendant allegedly made a “fraudulent claim,” materiality is an implied element of FCA civil liability because materiality is implicit in fraud claims. See id.; Harrison, 176 F.3d at 785. The issue is whether a “false claim” violates the FCA without an implied materiality requirement. 2. The Neder/Wells Framework a. The Language of the Statute “It is a cardinal rule of statutory interpretation that we begin our analysis by examining the statute’s text. Mere quotation of the statute does not satisfy this requirement; instead, we must give studied consideration to Congress’s words.” In re Luongo, 259 F.3d 323 (5th Cir.2001). Neither of the subsections of the False Claims Act at issue contains an express materiality requirement. By its terms, the statute requires that a false or fraudulent claim be made to the United States. The statute does not provide, however, that a false statement made within a claim or in relation to a claim is sufficient for civil liability. A natural reading of the statute is that the claim itself must be made false or fraudulent. False claims, the Supreme Court has held, include “all fraudulent attempts to cause the Government to pay out sums of money.” United States v. Neifert-White, 390 U.S. 228, 233, 88 S.Ct. 959, 19 L.Ed.2d 1061 (1968). The statutory definition of “claim” in subsection 3729(c) is “any request or demand, whether under, a contract or otherwise, for money or property ... [where] the United States Government provides any portion of the money or property.” 31 U.S.C. § 3729(c). A false claim is a request or demand for money or property from the United States Government, made by a person not rightfully entitled to that money or property. A statement or action in or related to a claim makes the claim itself false only if it bears on, or is material to, the person’s entitlement to the money or property claimed. The distinction between a false statement and a false claim is clearly made in subsection 3729(a)(2). Under this subsection, a person who “knowingly makes, uses or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government” is liable under the statute. A canon of statutory construction requires a reading that gives meaning to each word. See Bailey v. United States, 516 U.S. 137, 145, 116 S.Ct. 501, 133 L.Ed.2d 472 (1995) (citing Platt v. Union Pacific R. Co., 99 U.S. (9 Otto) 48, 25 L.Ed. 424 (1879) (“a legislature is presumed to have used no superfluous words.”)). If the knowing submission of a false statement to the government sufficed for liability under the FCA, then the insertion of the word “false” to modify “claim” is superfluous. The statute would only require that “a false record or statement [be used] to get a claim paid or approved.” Instead, Congress required that a “false record or statement [be used] to get a false or fraudulent claim paid or approved.” The claim itself must be false, not merely contain a false statement. A false statement and a false claim are not identical. Studied consideration of the words leads to the conclusion that the defendant’s statements or conduct that form the basis of an FCA complaint must result in a claim that is false or fraudulent. Statements or conduct make a claim false only if they are material to the defendant’s entitlement to the money or property claimed. This natural reading of the terms is consistent with this court’s application of the terms. A claim may be “false” because it contains a false statement that bears on the claimant’s right to receive payment. A claim may be “false” because it contains a false certification of statutory compliance, but only when certification of compliance is a condition of payment. A claim may be “false” even if it is literally true, if the claimant previously made misrepresentations or omissions or committed misconduct in order to induce the government to enter into the contract in the first place. A natural reading of the term “false or fraudulent claim” is consistent with the implied materiality requirement that the courts have consistently recognized. By requiring a claim that is false or fraudulent, rather than a claim that contains false or fraudulent statements, the FCA implicitly requires statements or conduct that are material to the person’s entitlement to the money or property claimed before liability can arise. b. The Established Meaning at Common Law The second step of the Ned-er/Wells framework requires an examination of whether the phrase “false or fraudulent claim” had acquired an “established meaning” at common law that implies, or at least does not exclude, materiality. The value of this inquiry is somewhat limited by the fact that the phrase “false or fraudulent claim” was not in the original version of the False Claims Act, and by the fact that “false claim” has itself become a term of art. See Harrison, 176 F.3d at 785. This court inquires into the meaning, at common law, of the terms “false,” “fraudulent,” “claim,” and the phrase “false claim.” In addition, because the False Claims Amendments Act of 1986 added an new provision at subsection 3729(a)(7), providing for liability when a person “knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government,” this court will also inquire into whether any of the terms had a different established meaning in 1986. “False” and “fraudulent” are used in the statute to modify “claim.” “The ordinary signification of a claim, is that of a right or title, actual or supposed, to a debt, privilege or other thing in the possession of another.” Lawrence v. Miller, 2 N.Y. 245, 1849 WL 5321 (1849). The Oxford English Dictionary, citing sources beginning in 1300, defines a “claim” as “a demand for something as due; an assertion of a right to something.” IV Oxford English Dictionary 261 (2d ed.1989). The meaning of claim was established at the time the FCA was drafted. The 1986 amendments added a statutory definition of claim. This definition is consistent with the common law definition and clarified that the FCA was applicable to claims made against government contractors, grantees and other recipients of federal funding. See False Claims Amendments Act of 1986 § 2, codified at 31 U.S.C. § 3729(c) (Supp.2001). At common law, the definition of “false” included “erroneous, wrong,” as well as “mendacious, deceitful, treacherous ... purposely untrue” V Oxford English Dictionary 697-698 (2d ed.1989) (citing sources from 1175 to 1833). Fraudulent was defined as “guilty of or addicted to fraud; that wrongs another person by false representations; cheating, deceitful, dishonest.” VI Oxford English Dictionary 153 (2d ed.1989) (citing sources from 1430 to 1858). There is not a singular meaning of “false” identical to “fraudulent,” although the meanings overlap. See BRIAN A. Garner, A Dictionary Of Modern Legal Usage 348 (1st ed.1987) (“false, in a phrase such as false statement, is potentially ambiguous, since the word may mean either ‘erroneous, incorrect’ or ‘purposely deceptive’ ”); Black’s Law Dictionary 540 (5th ed.1979) (false may be alternatively defined as “not true,” “assumed or designed to deceive,” “deceitful; deliberately and knowingly false”). However, many of the common law definitions of the term “false” clearly connote fraud. The phrase “false claim” had a meaning at common law as well, defined as “where a man claimed more than his due.” See Law Dictionary 601 (Alexander Burrill ed., 1870). Additionally, under English common law, a plaintiff who brought a claim and then failed to prevail in that action was said to have brought a “false claim,” making him liable to the prevailing party for the costs of the action. See Masterson v. Brown, 72 F. 136, 137 (1896). This definition is not inconsistent with an implied materiality requirement. A plaintiffs claim was false not merely because it was erroneous or inaccurate, but because a court had determined that the plaintiff was not entitled to receive the money or relief claimed. The common law definitions of “false” and “false claim” do not require, but do not preclude, a materiality requirement. This court’s prior opinion contained a lengthy footnote analyzing the common law jurisprudence on “false claim.” That footnote discussed four cases and concluded that the phrase “false claim” had the common-law meaning of an attempt to obtain or retain title to property by fraudulent means. See 101 F.Supp.2d at 516 n. 8. The Amiable Isabella was a prize case in which a ship and cargo were captured by a privateer and forfeited as prizes of war. 19 U.S. (6 Wheat.) 1, 2-3, 5 L.Ed. 191 (1821). In the condemnation proceeding, the claimant argued that the vessel was properly passported as a Spanish vessel under a treaty between the United States and Spain and therefore was neutral property that should be acquitted and returned to him as the rightful owner. The Court explained that in a prize case the claimant must present evidence of the property’s neutral character: from the ship’s papers, and persons on board; and where these are not satisfactory, if the claimant has not violated good faith, he shall be admitted to maintain his claim by further proof. But if ... the claim is still left in uncertainty, and the neutrality of the property is not established beyond a reasonable doubt, it is the invariable rule of Prize Courts to reject the claim, and to decree condemnation of the property. There is another rule too, founded in the most salutary and benign principles of justice, that the assertion of a false claim, in whole, or in part, by an agent of, or in connivance with the real owners, is a substantive cause of forfeiture, leading to condemnation of the property. Id., 19 U.S. at 77-78 (emphasis added). The Court found numerous reasons why the owner and his agents were, not entitled to the property and why the claim was false. Those reasons included that the Spanish passport was procured “by an imposition practised upon the Spanish judicial authorities, by means of a pretended lien”; that “some papers were thrown over board, others were concealed, and others spoliated” by the claimant or his agents; and that there was an “imputation of designed suppression of facts and prevarication.” Id. at 78-80. The Court rejected the claim and forfeited the ship and cargo. Id. The Court held that any interest of an agent of the true owner who participated in the misconduct was forfeited, for “[i]f Ms claim be substantially false in the manner in which it is framed, having been adopted by him, he has justly incurred a forfeiture of any such interest, by attempting an imposition upon the Prize Court.” Id. (emphasis added). The agent’s claim was made substantially false by his participation in presenting a false claim to a court. The Court did not require proof of fraud to find the claim false.