Full opinion text
MEMORANDUM OF DECISION HANCOCK, District Judge. This action, filed by the United States of America under the False Claims Act (31 U.S.C. §§ 231-235) and for fraudulent breach of contract, is before the Court for decision on defendant’s motion for summary judgment. Those acting for plaintiff in the premises represent this action to be a completely justified effort (a) to recover damages allegedly sustained from a series of covert, surreptitious and fraudulent activities by the defendant over an extended period of time and (b) to impose upon defendant certain civil penalties provided by law for such activities. As viewed by defendant, the action is but another scene in a drama of planned harassment of defendant pursuant to which persons acting for the plaintiff in the premises, by repeatedly raising in litigation issues that are known to them to be baseless, have set about to break defendant financially so that defendant cannot pursue litigation whereby wrongdoing of persons for whose conduct plaintiff is responsible will be exposed and established. While it cannot be said that there are no facts in this record from which inferences supportive of defendant’s view can be drawn, or that, if confronted squarely with the question, the court would not so find, the court, in the present posture of the action, prefers to proceed on an assumption that the action is the result of an inability (or refusal) • of those acting for plaintiff to recognize that a contract can be subject to more than one reasonable construction and that a party to a contract by pursuing a course of action predicated upon his own reasonable construction of the contract does not thereby subject himself to liability for fraud. For the convenience of the parties, there is attached to this Memorandum of Decision (a) as Appendix A, a list of acronyms and similar abbreviated designations used herein, with a brief description of each, (b) as Appendix B, a list of names of persons who are referred to herein, with a short identifying statement about each such person, and (c) as Appendix C, a table reflecting the nature and location of exhibits which are referred to herein. Three contracts between defendant (whose name has been changed from Southern Airways Company [“Southern”] to Hangar One, Inc. since the execution of the contracts) and plaintiff, one dated October 3, 1966, one dated December 22, 1967, and one dated February 14, 1969, provide the background. In essence, insofar as this civil action is concerned, in these plaintiff-drawn contracts (herein sometimes collectively referred to as the “Supply Contracts” and individually referred to as the “1966 Supply Contract”, the “1967 Supply Contract” and the “1969 Supply Contract”), the parties agreed that, during calendar years 1967 to 1969, inclusive, defendant would tender for delivery to plaintiff, and that plaintiff would accept and pay defendant a fixed price for, more than 2,000,000 155 mm HE M107 Howitzer metal parts (“shell”) which, when subjected to inspections pursuant to specified inspection procedures, had properly passed such inspections. Defendant, before delivering any lot of shell, was required by such procedures to make two types — (a) a “one hundred percent [an every unit] inspection” for each of the characteristics that the Supply Contracts classified as a “critical” defect and (b) a “sampling plan inspection” (an inspection of sample units randomly drawn from the lot) for each of the characteristics that the Supply Contracts classified as “major” or “minor” defects. The gist of the action is plaintiff’s claim that, during the course of the performance of the 1967 and 1969 Supply Contracts, defendant produced and delivered a total of approximately 18,000 shell (about one-half of that number under each of those two contracts) that plaintiff claims defendant knew to be “defective” and that circumstances appertaining to the inspections made before delivery thereof necessarily amount to fraud on the part of defendant (i. e., as alleged in paragraph 8 of the original complaint, that defendant “returned, or caused to be returned, defective shells to the production line” and that defendant “failed to perform the required inspections for defects” [emphasis supplied]). The 18,000 “defective” shell were delivered in twenty-four of the 153 separate production lots (each of which contained approximately 16,000 shell) that were delivered throughout the said contract periods. Plaintiff charges that defendant’s invoices to plaintiff for the production lots, in which plaintiff claims these 18,000 “defective” shell were contained, constitute violations of the False Claims Act, 31 U.S.C. §§ 231-235. Plaintiff also charges defendant with breaches of contract, alleging that the breaches consisted of the same acts and omissions (which in this aspect are characterized as “fraud or such gross mistakes as amount to fraud”) upon which its False Claims Act charges are predicated. More particularly plaintiff’s charges, stripped of their formality, are that defendant (a) breached the 1967 and 1969 Supply Contracts because defendant employed or used the “sampling plan inspection” (rather than the “one hundred percent inspection” process) to inspect for the presence of two defects which plaintiff claims (and defendant denies) are classified by the Supply Contracts as “critical” defects and (b) violated the False Claims Act because defendant obtained payment for such shell by submitting invoices therefor which were supported, respectively, by a document containing a representation (by a government official) that the shell so invoiced had been subjected to and had passed the inspections that defendant was required to make by the particular Supply Contract under which they were delivered. As is hereinafter shown, there exist disputes as to the proper interpretation of contractual language (¿. e., as to whether two characteristics are classified by the contractual language as “critical” defects or as “minor” defects) between Frankford Arsenal (“FA, the agency by which plaintiff drafted the contractual language that gives rise to the part of the dispute here under discussion) and Ammunition Procurement Supply Agency (“APSA”, the agency by which plaintiff entered into the Supply Contracts containing that language), on the one hand, and defendant and Defense Contract Administration Services (“DCAS”, the agency by which plaintiff administered the Supply Contracts), on the other hand. DCAS, in administering the Supply Contracts for plaintiff, as aforesaid, (a) approved the inspection plans utilized by defendant in its performance of the Supply Contracts, (b) exercised continuing surveillance over defendant’s performance of the Supply Contracts by, inter alia, monitoring defendant’s inspection activities, (c) determined the acceptability of, and accepted or rejected, shell tendered by defendant for acceptance under the Supply Contracts, and (d) received, determined the propriety of, and paid, the invoices of which plaintiff here complains. No claim has been made herein at any time by plaintiff that any DCAS .personnel have been guilty of any failure to perform any duty, or of any collusion, or of any exercise of bad faith in or about the performance of any of that agency’s duties in the premises. At the respective times that each of the 153 lots produced by defendant under the Supply Contracts was tendered to, and accepted by, plaintiff (which acted in the premises by and through DCAS), the QARIC, a DCAS employee, or his authorized representative, signed and delivered to defendant a certificate in the form of that set forth in Form DD 250 (the hereinafter discussed government form that was used to evidence the government’s acceptance of purchased material) reading: ACCEPTANCE of the listed items [the shell in lot in question] has been made by me or under my supervision and they conform to contract . . - About once each two weeks during all times that it was engaged in performing the Supply Contracts, defendant, in accord with the Supply Contracts, applied for and was paid a “progress payment”. In connection with each application by defendant for such a payment, the QARIC, or his authorized representative, also signed a certificate thereon reading: The contractor’s Quality System is acceptable and in accordance with contract requirements. The quality of the items produced is acceptable. Roland Smith was QARIC at defendant’s Sylacauga facility until mid-August 1969 when he was succeeded as such by W. E. Snider. Snider was QARIC until defendant completed its performance of the Supply Contracts. F. B. Mayes was Assistant QARIC at that facility throughout the entire time that defendant was engaged in its performance of the Supply Contracts. With respect to the two kinds of certificates mentioned next above, an affidavit by each of these officials reads, in substance: In my judgment each of the two kinds of certificates . . . that were signed during my tenure . [as such officer] are true and correct. Nothing has come to my attention at any time that has causéd me to suspect that anyone of them is or may be erroneous in any respect. I now affirm that it is now my judgment that said lots which were accepted for the Government . . . [during my tenure] met all of the quality requirements of the . . . [Supply] contracts as I understood and applied those requirements while I was . [QARIC or Assistant QARIC as the case may be] at said facility. The authority by which DCAS administered the Supply Contracts for plaintiff is derived from the Armed Services Procurement Regulations (“AS PR”), 32 CFR 1.100, et seq. These regulations have the force and effect of federal law. Paul v. United States, 371 U.S. 245, 255, 83 S.Ct. 426, 9 L.Ed.2d 292 (1963). The court, therefore, takes judicial notice of them. Tucker v. Texas, 326 U.S. 517, 519, 66 S.Ct. 274, 90 L.Ed. 274, 276 (1946); Carter v. American Tel. & Tel Co., 365 F.2d 486, 491 (5th Cir. 1966), cert. denied, 385 U.S. 1008, 87 S.Ct. 714, 17 L.Ed.2d 546 (1967). ASPR Section XIV deals with “Procurement Quality Assurance” (“PQA”). A review of some of the pertinent parts of that section of ASPR reveals just how significant is the fact that DCAS agrees with defendant, as aforesaid. ASPR Section 14-203 (a) provides in pertinent part: . . . [T]he contract administration office cognizant at a plant is responsible for the performance of Government procurement quality assurance. actions. The contract administration office shall verify that the contractor has fulfilled contract quality requirements. It is the contract administration office responsibility to develop and apply effective and effici-. ent procedures for Government procurement quality assurance. [Emphasis supplied.] “Acceptance” is defined in ASPR Section 14-001-6: Acceptance means the act of an authorized representative of the Government whereby the Government assumes for itself . . . ownership of existing and identified supplies tendered . as . partial or complete performance of the contract on the part of the contractor. ASPR Section 14-305.1 provides in pertinent part: Each contract shall designate the place or places where the Government reserves the right to perform those procurement quality assurance actions that it considers necessary to determine that supplies and services conform to contract requirements. Each of the Supply Contracts here contained provisions to the effect that the procurement quality assurance actions would be “at source.” See, e. g., the last paragraph of Article XIV of the 1969 Supply Contract: The Government Procurement Quality Assurance Actions . . . will be conducted at: The manufacturer’s plant . ASPR Section 14-305.2 (c) provides in pertinent part: Where the contract provides for the performance of Government quality assurance actions at source, these actions shall be taken at such times and places (including any stage in the manufacturing process . . .) as may be necessary to determine conformance to contract requirements. ASPR Section 14-403(a) provides as follows: Determination of conformance to contract quality requirements shall be made on the basis of objective evidence of quality. In determining the acceptability of supplies or services, the contract administration office shall make optimum use of quality data generated by contractors. To the extent that contractor quality data are available and reliable, as determined by the contract administration office, such data shall be used to adjust the amount of Government procurement quality assurance to a minimum consistent with proper assurance that the supplies or services accepted conform to contract quality requirements. [Emphasis supplied.] ASPR Section 14-403(c) lists the specific actions DCAS will take to determine conformance to contract: The following basic actions shall be taken to determine the contractor’s compliance with the contract quality requirements: (i) review and evaluation of the contractor’s inspection procedures; (ii) review and evaluation of the contractor’s selection, calibration, maintenance, and use of gauges and measuring and test equipment; (iii) review and evaluation of the contractor's quality records; and (iv) performance of product verification inspection by the Government. From the above, it is obvious that DCAS had the responsibility to administer defendant’s contracts and perform the procurement quality assurance functions necessary to assure contract conformance. The final act by DCAS was acceptance. Under these contracts acceptance was at defendant’s plant. See e. g., Article XVIII of the 1969 Supply Contract: Acceptance will be at Contractor’s Plant ASPR Section 14-306 (b) provides that acceptance is to be signified by the execution of a particular form: . Acceptance shall ordinarily be evidenced by execution of an acceptance certificate on the applicable inspection and receiving report form (DD Form 250 . . .). When acceptance is accomplished at a point other than destination, supplies cannot be reinspected at destination for acceptance purposes. ASPR Appendix I describes the DD Form 250 and its use. ASPR App. I-101(a) and (b) provide: (a) This appendix sets forth procedures and instructions for the use, preparation, and distribution of the Material Inspection and Receiving Report (MIRR) (DD Forms 250 Series) . used to evidence Government Procurement Quality Assurance (PQA). (b) MIRRs are used to document Procurement Quality Assurance, Acceptance of supplies and services, and shipments .... ASPR App. I-103(a)(i) sets forth the effect of the DD Form 250: The DD Form 250 is a multi-purpose report used for: PQA — to provide evidence of acceptance at origin or destination [Emphasis supplied.] Finally, ASPR Section 14-306 (b) provides for the situation where, as here, one agency (DCAS) is carrying out the procurement quality assurance functions for another agency (APSA): Acceptance of supplies and services is the responsibility of the activity to which the function is assigned by the purchasing office. When a Government activity uses services of another Government activity or department for the purposes of acceptance, acceptance by the other activity or department is binding upon the activity for which the services are performed. Unless there are valid reasons to the contrary, acceptance shall be at origin .... [Emphasis supplied.] From the foregoing review of pertinent ASPR sections and contract language, the court holds that DCAS, not FA and not APSA, had the authority to determine for plaintiff whether defendant was performing its contractual obligations and producing a product that conformed to contract requirements. It is undisputed, and the court so holds, that plaintiff, acting by and through DCAS (a) approved the inspection plans utilized by defendant in its performance of the Supply Contracts; (b) exercised continuing surveillance over defendant’s performance of the Supply Contracts by, inter alia, continually taking action to “verify” defendant’s inspection activities; (c) determined the acceptability of, and accepted or rejected, shell tendered by defendant for acceptance under the Supply Contracts; and (d) received, determined the propriety of, and paid, the invoices of which plaintiff here complains. In addition to such knowledge as plaintiff already had, or with which it is chargeable, by reason of the actual knowledge thereof that DCAS has continuously had from the inception of defendant’s shellmaking venture, plaintiff, by reason of investigations conducted in 1968 by APSA and FA, was, or should have been, then alerted to the fact that defendant was openly pursuing the course of conduct that plaintiff now contends was fraudulent. As is hereinafter shown, any problems that occasioned such 1968 investigations by APSA and FA, as well as those which subsequently arose, if not caused by, in all probability were magnified by,- a group of dissatisfied individuals who were then employees and former employees of defendant. Extensive investigations by the Army (the “other Army investigations”) and the Federal Bureau of Investigation (the “FBI”) were initiated from time to time. Plaintiff claims that these investigations disclosed the existence in said twenty-four lots of the “18,000 defective shells, more or less.” After the mentioned investigations had been underway a number of months, the Secretary of the Army conducted his own investigation (the “Fox and Krohn investigation”) which was participated in by John Krohn, Procuring Contracting Officer, APS A. While the position taken by the plaintiff in this action in large measure is dependent upon the results of the other Army investigations, it is significant to point out that the position plaintiff is asserting in this action is not only completely at odds with the results of the Fox and Krohn investigation, as hereinafter stated, but also is at odds with the views of DCAS, the agency by which plaintiff administered the Supply Contracts, as aforesaid. For example, on March 31, 1970, Assistant Secretary of the Army, J. Ronald Fox, stated in a letter (the “Fox-Chesarek letter,” Exhibit 219 to the deposition of John W. Krohn [the “Krohn Deposition” ]) to General F. J. Chesarek, Commanding Officer, Army Materiel Command (“AMC”), that it had been determined by the Fox and Krohn investigation that the shell classified as containing “critical” defects in the inspections that were made in the other Army investigations had been so classified by the application of criteria which were not a part of the Supply Contracts and that, if the correct criteria had been applied, in at least the majority of the cases, the defects in question would properly have been classified as “minor”. Moreover, it was also determined in that investigation that, when tested by the same criteria which were used in the other Army investigations, the quality of shell made by the other four suppliers of such shell was no better than (and, in some cases, including Sperry Rand Corporation [“Sperry Rand”], not as good as) that of the lots about which complaint is here made. Further in this connection, Exhibit 226 to the Krohn deposition shows that Richard Porter, then an attorney in the office of the General Counsel for the Department of Defense, which office investigated- the matter for Secretary Fox, also mentioned in a report to Fox that the FBI reports of its investigative interviews with government personnel who made the “critical” classification on which plaintiff now relies, state that, when they were asked by the interviewing FBI agents to define the nature of the critical defects they reportedly had observed, such government personnel usually described one or more of the “surface finish improper” characteristics that are expressly classified in the Supply Contracts as “minor” defects. Also W. C. McCain, who, at all material times, was Chief, Quality Assurance Division, DCAS Birmingham District (“DCAS-B’ham”, in which district the shell in question were made) had his staff investigate the charges that large numbers of “criticáis” had been delivered and, on the basis of that investigation (which was conducted in 1969 after defendant had made its lást delivery of shell), found that the shell theretofore reported as “criticáis” on the basis of inspections made in the other Army investigations had been classified as such by the use of criteria other than that specified in the Supply Contracts, as that criteria were uniformly understood and applied by him, his staff, the QARIC and defendant. The absence of an unambigous and monolithic interpretation of the governing documents is an important substantive deficiency in plaintiff’s case. That deficiency is discussed hereinbelow. Neither party will dispute the fact that representatives of both parties to this action have continually made oral and written references, including oral references by counsel in colloquies with the court, to the previously terminated criminal action in this same court that is hereinafter discussed. On the basis thereof and from its own notice and consideration of this Court’s own record of the proceedings in said criminal action, the court is satisfied (in this instance, as it is in the case of the other factual matters respecting that criminal action that are stated elsewhere in this decision) that, in 1970, substantially the same version which plaintiff here asserts to be the factual background of the fraud charged in this action, was presented to a grand jury empanelled by this Court. During the April, August and November 1970 sessions of that grand jury, attorneys from the Washington office of the Department of Justice (“WDJ attorney [s] ”) and the office of the local United States Attorney (the “United States Attorney”) caused evidence to be presented to that grand jury, inter alia, as to the said results of the other Army investigations without directing to the witnesses who testified about such results questions which would have caused that grand jury to know, or certainly to suspect, that the credibility of the testimony of those witnesses as to the quality of the shell in question might be, or was, questionable by reason of the investigations that are the subjects, respectively, of the Fox-Chesarek letter and of the FBI investigative reports that were mentioned, as aforesaid, by Porter; and, on November 24, 1970, that grand jury, on the basis, inter alia, of such evidence, returned an indictment (Exhibit 62 in the Addendum) against defendant and twelve individuals for alleged violations of 18 U.S.C. § 371 and 18 U.S.C. § 1001. Pretrial issues were strongly contested, and much pretrial discovery (some of which is hereinafter discussed) was undertaken by defendant in the criminal action. Because of delays incident to resolution of such matters (occasioned primarily by extensive remodeling of the federal building in which those matters were resolved), it was not until January 23, 1973, that the criminal trial began; and, on March 6, 1973, after over six weeks of trial, jury verdicts of not guilty were returned as to defendant and six of such individuals. During the trial, motions for judgments of acquittal were granted as to three other of said individuals and shortly afterwards, on motion of the United States, the indictment was dismissed as to the remaining individuals indicted. On February 27, 1974, approximately a year after the conclusion of the criminal action, and (aside from such earlier knowledge as it had or with which it was chargeable, by reason of said actual knowledge of DCAS) at least four or five years after the said factual background of defendant’s alleged illegal conduct was known to plaintiff by reason of the other Army investigations, but in only a matter of days after service on Sperry Rand of the complaint in the antitrust action that is a subject of note 14, supra, this civil action was initiated in the United States District Court for the Northern District of Georgia which, on motion of defendant, transferred it to this Court in June of 1974. For plaintiff to be entitled to a recovery under the False Claims Act aspect of this action, it must allege and prove that, in seeking or obtaining payment for the “defective” shell allegedly delivered, defendant intentionally defrauded the government. Proof of a specific intent to defraud is essential to a recovery under the False Claims Act. United States v. Aerodex, 469 F.2d 1003, 1007 (5th Cir. 1972); United States v. Priola, 272 F.2d 589, 594 (5th Cir. 1959). The essential elements of an intentional fraud are: that (a) a stated false representation was made (b) regarding a material fact (c) by one who did not believe it to be true (d) with the intent that it should be acted on (e) by one who believed it to be true and (f) was misled by it (g) to his (or his principal’s) injury. Southern Development Co. of Nevada v. Silva, 125 U.S. 247, 8 S.Ct. 881, 31 L.Ed 678 (1888); Socony Vacuum Oil Co., Inc. v. Allied Oil Corp., 178 F.2d 239 (7th Cir. 1949). Each of these elements must be averred to state a cause of action for intentional fraud. Socony Vacuum Oil Co. v. Allied Oil Corp., supra; CIT Financial Corp. v. Sachs, 10 F.R.D. 397 (S.D.N.Y.1950); Curacao Trading Co. v. William Stoke & Co., 2 F.R.D. 308 (S.D.N.Y.1941). The theory under which plaintiff seeks recovery for breach of contract is that its acceptance of the “defective” shell so delivered was obtained “by fraud or such gross mistakes as amount to fraud”, and, that, therefore, plaintiff can avoid (what otherwise would have been, Gordon H. Ball, Inc., ASBCA No. 8316, 1963 BCA 3925) the conelusiveness of its admitted acceptance under paragraph 5(d) of the General Provisions of each of the Supply Contracts, reading: . . . [Acceptance shall be conclusive except as regards latent defects, fraud, or such gross mistakes as amount to fraud. In each of the Supply Contracts, defendant agreed that, for the fixed prices (about $20 to $23) stated therein, it would produce, inspect and deliver to the government, in accordance with the drawings, designs and “applicable detail specifications” (all of which are sometimes collectively referred to hereinafter as the “tech data package”) stated (or incorporated.by reference) therein, the quantities of shell called for thereby. ' The somewhat detailed discussion next hereinbelow of the tech data package is included at this early stage of this decision because some knowledge thereof-— particularly respecting the interrelationship between the mentioned two types of inspection and the classification of defect charateristics — is essential not only to an understanding of the principal dispute between the parties but also of this court’s discussion of that dispute which follows thereafter. Excepting certain modifications not here material, the “applicable detail specifications” (pursuant to which the government required all such shell acquired by it to be produced, inspected and delivered) were set forth in the provisions of FA-PD-MI-2720, Rev. 0, 15 April 1966, (the “PD”) which provisions, as then so modified, were a part of each of the Supply Contracts. Part 4 of the PD (the language of which was drafted for plaintiff by FA, as aforesaid,) reads, in part: 4.3.2 Examination. One hundred percent examination shall be performed for all critical defects. Examination for major and minor defects shall be performed on a defect basis in accordance with the classification of defects contained herein, using the sampling plans contained in MIL-STD-105. Continuous sampling plans in accordance with MIL-STD-1235 may be used if approved by procuring activity. An AQL [Acceptable Quality Level] of 0.40 percent for each major defect of an AQL of 0.65 percent for each minor defect shall be used. All non-conforming material [disclosed by any of such methods of inspection] shall be rejected. [Emphasis supplied.] The only “classification of defects” expressly made in the Supply Contracts is made in Paragraphs 4.3.2.1, 4.3.2.2 and 4.3.2.3, respectively, of Part 4 supra. These paragraphs, respectively, list and expressly classify (as “critical”, “major” or “minor”) the sixty-seven characteristics for which defendant was required to make an inspection at one or more particular (stated) stages of the production process, (a) some before banding (b) others after banding but before paint and (c) still others after paint. And, according to “the classification of defects contained herein (i. e., part 4, supra)”, two characteristics are expressly classified as “critical” defects, thirty-two characteristics as “major” defects and thirty-three characteristics as “minor” defects. Those here pertinent (including the two characteristics “burr” and “surface finish defects” that are the subjects of said dispute) are so classified by said paragraphs, as follows: Paragraph Class Code Description 4.3.2.1 Critical 1 Metal defective Minor 202 Surface finish improper Minor 205 Burr 4.3.2.2 Major 116 Foreign matter in cavity Minor 214 Surface finish improper Minor 215 Burr 4.3.2.3 Critical 1 Pool of paint in cavity Minor 208 Burr Paragraphs 3.7.3, 3.7.4 and 3.7.7 of the PD read as follows: 3.7.3 Metal Defects. — All components shall be free from cracks, splits, cold shuts, pipe, porosity, inclusions or any other similar defect. 3.7.4 Surface finish. — The requirements for surface finish are as detailed in the applicable drawing. The body cavity shall be free of scale, fins, deep seams, die scratches, pits or other surface discontinuities, the radii of which shall be . less than .030 inch. The characteristics (cracks, splits, cold shuts, pipe, porosity and inclusions) which are specifically enumerated in paragraph 3.7.3, supra, as “Metal Defects” and which are classified as “Metal defective” critical defects (Code 1) by paragraph 4.3.2.1, supra, are the kinds of defects that the processes used in making steel (a raw material from which shell are made) can cause in the cavity (or elsewhere for that matter) of shell. On his deposition, Hinzman testified, in substance, (p. 45 of April 28, 1975 deposition) that the term “defective metal”, as it is used in paragraph 4.3.2.1, supra, “is poor steel or dirty steel” and that these shell defects “are present in the steel from the [steel] mill.” How “surface finish improper” and “burr” characteristics (which, respectively, are depressions in, or protrusions from, the metal surface) are caused to be in the cavity of a shell (in the process utilized by defendant to make shell) is described by the Armed Services Board of Contract Appeals in United States Hoffman Machinery Corporation, ASB CA No. 10906, 68-1 BCA [[7027 (1968), as follows: [A shell is] formed out of billet steel by means of a technique known as the hot forging process. In that process a metal punch, called a forging tip, [is] rammed into a piece of red hot steel thereby forming a cavity. The hot steel [is] then forced through a series of draw rings which [causes] the walls of the cavity to be elongated to their final size. As might be suspected, the hot forging technique [does] not produce smooth, machine finished surfaces in the cavity The quality of a projectile’s cavity finish [is] directly related to the condition of the forging tip used in shaping the cavity. A forging tip [produces] fewer surface imperfections when it [is] new than it [does] when it [is] ready for replacement. Under the authority of Paragraph 4.3.2 of Part 4 of the PD, plaintiff’s “procuring activity” (APSA) authorized defendant to use the “continuous sampling plans” in accordance with the plan set forth in MIL-1235. On his deposition, Hinzman, testified, in substance, (pp. 77-78 of March 20, 1975 deposition) that continuous sampling plans are designed for use in inspecting for defects that are caused by machinery during the course of a manufacturing process. Using the example alluded to during his deposition, if you are inspecting for a particular defect at a particular point on a production line that is stamping out nickels, you can assume that your manufacturing process is stabilized insofar as that particular defect is concerned when you “clear your ‘i’ factor” (e. g., find “i” number, say 230, consecutive nickels that reach that point on the line that are free of that particular defect) and, thereafter, sample inspect “at frequency f” , say 1 out of 25, of the nickels that reach that point on the line until such time as you find that particular defect in one of the samples you pull for inspection; then you begin all over by screening until you can assume, by again clearing your “i” factor, that your manufacturing process is stabilized (e. g., that the machine that caused the defect you found in the sample has been adjusted). The particular “frequency f” and “i factor” that MIL-1235 requires to be used depend upon the volume of units being produced (say 1 to 1200, 1200-3200, etc., per 8 hour shift, per day, etc.) and are ascertainable from tables that are contained in MIL-1235. From the sheer number of shell required to be manufactured under each of the Supply Contracts, it would seem that an objective third party observer, even without having knowledge of the contract provisions above quoted, would intuitively expect that some of the units delivered would not in fact meet all of the requirements of the drawings, etc., no matter how faithfully the producer has made any required inspection; further, that the number of such units which would not meet a particular requirement would vary, depending upon the severity of the inspection required to be made to ascertain whether the units meet that particular requirement; and further, that the more objectionable a purchaser deems a failure to meet a particular requirement, the more severe the inspection he would require his own, or his supplier’s, inspection personnel to make for the purpose of detecting and rejecting units in which such a failure occurs. This view, which it seems one would expect to feel intuitively, finds elaborate explicit support in the Supply Contracts. For example, MIL-1235, which was designed to provide inspections for use in gov-eminent acquisitions of all kinds of mass-produced manufactured items that might be needed by the Army (shell being just one of an almost unlimited number of such items), provides, in parts here pertinent: 3.9 Defect. — ,. . . . Defects are normally classified according to severity (see 3.12). 3.12 Classification of defects . — A classification of defects is an enumeration of pertinent defects classified acccording to their importance. 3.12.2 Critical Defects. — A critical defect is a defect that judgment and experience indicate could result in hazardous or Unsafe conditions for individuals using or maintaining the product .... 3.12.3 Major Defects. — A major defect, other than critical, that could result in failure or materially reduce the usability of the unit or product for its intended purpose. 3.12.4 Minor Defects. — A minor defect is one that does not materially reduce the usability of the unit of product for its intended purpose, or is a departure from established standards having no significant bearing on the effective use or operation of the unit of product. [Emphasis supplied.] Provisions that are comparable to the five paragraphs from MIL-1235 quoted next above are also contained in paragraphs 2.1, 2.1.1, 2.1.2 and 2.1.3 of MIL-105. The fact that the Supply Contracts required that a “one hundred percent” (commonly called “screening”) type inspection be made for “critical” defects, but only required that a “sampling plan” type inspection be made for “major” and “minor” defects, and the distinctions in the respective procedures that are built upon and around those two types of inspections, must be clearly understood because the very fact that the two types of inspection exist, to say nothing of their application, is central tó understanding the error in plaintiff’s view that the tender to plaintiff by defendant of any shell not meeting a particular drawing, etc., requirement, is a breach of the manufacturing requirements, or of the inspection requirements, either or both, under the Supply Contracts. The court expects that there can be no quarrel with the proposition that, if the government specifies in the contract that only “frequency f” of shell (say one in each group of 25 of the shell that reaches a particular point on the production line) will be required to be inspected for adherence to a particular drawing requirement and that, if that one is faithfully inspected and no defect is found in it, then that group of 25 will be deemed, for purposes of that contract, to meet that said drawing requirement, there is a mathematical probability that some number of shell out of the other 24 shell not inspected (and not required to be inspected for that same particular requirement at that same point on the production line) will not meet that requirement and will move on up the production line for further manufacturing processing. Stated differently, and in its most succinct form, if the government by contract has specified that only one shell in 25, etc., is to be examined for adherence to a particular requirement, the government has automatically thereby created a manifold probability that some, shell (“non-specification shell”) that do not meet that requirement will ultimately be delivered to the government, and that this could happen without the contract being ignored or breached and without the government being defrauded. Inasmuch, as is hereinafter shown, the governing documents, all drawn by the government, not only expressly state that the receipt of some nonspecification shell is “expected”, but also go on, as is next hereinafter shown, to evaluate that expectation quantitatively, it appears that the mere delivery by the defendant to the government of some number (and especially some number not exceeding that expectation) of non-specification shell cannot, standing alone, constitute either a breach of the governing contract or a fraudulent act. By means of another table contained in MIL-1235, each of the AQLs that is specified in paragraph 4.3.2, supra (i. e., “the 0.40 percent” and “0.65 percent” AQLs), for each “major” and each “minor” defect, respectively, can be converted into an equivalent AOQL which paragraph 3.18 of MIL-1235 defines, as follows: 3.18 AOQL.-The average Outgoing Quality Limit (AOQL) (stated as a percentage) is the largest fraction of defective material, which is expected on the average to pass inspection when the associated sampling plan is followed faithfully. [Emphasis supplied.] Other parts of MIL-1235 here pertinent are: 3.15 Continuous Sampling Inspection. -Continuous sampling inspection is the examination and/or testing of units of product as they move past an inspection station. Only those units of product found by the inspector or screening crew to be nonconforming are rejected; the rest of the production, uninspected units as well as units found to be conforming, is allowed to continue down the production line as conforming material. 5.2 Order of Production.-All inspection must be performed in the order produced. Moreover, all units must pass each inspection station [at which acceptance inspections are made for any defect]. This does not prevent process inspection by the supplier prior to submittal to the [acceptance] inspection station nor does it prohibit the supplier from removing [from the production line], or correcting units containing defects prior to submittal. 6.1 Determination of Acceptability.The acceptability of product submitted shall be determined by use of a specified sampling plan. 6.2 Acceptance.-Durmg 100% inspection periods, the inspection is a sorting process during which good product is allowed to pass the inspection station, while the defective units are withdrawn from the product and returned to the contractor. During periods of sampling inspection, the product is allowed to pass the inspection so long as the provisions of the plan selected are satisfied. Product which is allowed to pass the inspection station is considered acceptable for the defect (s) concerned, and is not subject to recall for further inspection for those defects except . [that upon] discovery of a critical defect during sampling inspection, the required screening will begin with the unit of product just after the last defect-free sample unit. [Emphasis supplied.] Contra to the situation with respect to units containing “critical” defects, which defendant was required by the “one hundred percent” inspection procedures to reject (irrespective of how, where or when found before delivery) and which defendant, if it had any knowledge that such unit contained such a defect, could not return it to the production line (for any purpose other than using the production line merely as a conveyor system by which to move such eighty pound units from one place in the plant to another), the said “sampling” plan procedures, with exceptions not here significant, provided, as shown, inter alia, (a) that a required sampling plan inspection be made for each of certain (specified) “major” and “minor” defects at a (stated) particular stage of the production process (i. e., paragraphs 4.3.2.1, 4.3.2.2 and 4.3.2.3, respectively, required that certain of such defects be so inspected for before banding, others after banding but before painting, and still others after painting), (b) that only “nonconforming” units found in any of such required sampling inspections be rejected and (c) that a unit that had been properly passed on a required sampling inspection for a particular “major” or “minor”' defect (in this example called a “first defect”), even though defective by reason of that defect (for example, one of the say 24 in 25 that, not having been selected for inspection in the sampling process, was not required to be actually inspected for the first defect), was “considered acceptable for the defect concerned [i. e., the first defect in this example]” and was “not subject to recall for further inspection” for that defect, with the consequence that, if a unit had properly passed sampling inspection for the first defect and was thereafter set off the production line for a proper purpose (such as, for example, so that it could be repaired for a subsequently discovered “major” or “minor” defect of another kind [the “second defect”]), defendant was authorized, insofar as the first defect was concerned, to return the unit to the production line at any time after the purpose for which the unit had been so set off had been accomplished (such as, for example, after the second defect had been repaired and the unit had been properly subjected to and had passed any after-repair inspections specified for a unit that had undergone repair for that kind of defect), and to do so with the intention that that unit (containing the undetected first defect) would “continue down the production line” and, still containing the first defect, be delivered to the government “as conforming material” that the government was due to accept and for which the government was due to pay. Although, as stated above, one or more of paragraphs 4.3.2.1, 4.3.2.2 and 4.3.3.3, supra, expressly list “burr” and “surface finish improper” characteristics as “minor” defects, and although it is nowhere expressly stated in the PD that such defects are “critical” defects, plaintiff insists herein that, depending on the degree of severity, some “burr” and “surface finish defects” are classified as “critical” defects by the PD. Such insistence by plaintiff is a principal basis for its contention herein that defendant is guilty of breach of contract and fraud. This insistence by plaintiff arises from the fact that defendant admittedly did not, with respect to those two named defects, follow the procedures “required” by the Supply Contracts for “critical” defects (i. e., plaintiff claims that defendant did not make “one hundred percent inspections” for those two defects, and that defendant [under circumstances when such action would have been proper only in the case of units containing “major” or “minor” defects] “returned to the production line” units knowing that they contained one or more of such two named defects, etc.). The premise for said insistence by plaintiff is bottomed on its contentions herein (a) that MIL-1235 and MIL-105 are each referenced in the PD, (b) that paragraph 3.12.2, supra, of MIL-1235 states that a “critical” defect is “a defect that judgment and experience indicate could result in hazardous or unsafe conditions for individuals using or maintaining the product”, and (e) that the judgment and experience of government ammunition specialists indicate that some “burr” and “surface finish improper” defects have .been demonstrated to be so severe as to be as, or more, “hazardous,” etc., “for individuals using or maintaining the product”, than some of the “metal defective” characteristics that are expressly classified by paragraph 3.7.2.1 as “critical” defects. On the premise of these facts, plaintiff, by evidence and oral argument, claims that, under the rule of construction known as ejusdem generis, i. e., that where, as in paragraph 3.7.3, supra, general words (i. e., “other similar defects”) follow an enumeration of particular things (i. e., the characteristics “cracks, splits, cold shuts, pipe, porosity, inclusions”), such general words as a matter of law' must be held to include other characteristics of the same general kind or class as those specifically mentioned (i. e., all characteristics, including, but not limited to, those listed in paragraphs 3.7.4 and 3.7.7 if they are of such severity that the “judgment and experience” [of plaintiff’s ammunition experts] indicate that they too could result in “hazardous or unsafe conditions . . . .”). This position by plaintiff has been a, perhaps the, most bitterly fought legal issue — not only in this civil action but also in the criminal action. Defendant, in opposition, argues that only a moment’s contemplation is necessary for one to correctly conclude that the “judgment and experience” referred to in paragraphs 2.1.1, supra, of MIL-105 and 3.12.2, supra, of MIL-1235 must be such judgment and experience, if any, as may be exercised by the government before the time its procuring authority requests a bid or proposal for a shell supply contract; that, if it were otherwise and the “judgment and experience” in question were exercisable by those various persons, firms and corporations who might be selected (by means of competitive bid or otherwise) as shell suppliers on the basis of best (all factors considered) price, as the law contemplates that they be, then those suppliers who had had no experience (with the loading or use of ammunition, or otherwise) on which to base an informed judgment would have a decided advantage over those who might have had much such experience because the former might contractually be entitled to reject as “criticáis” no units containing any paragraphs 3.7.4 and 3.7.7, supra, characteristics while the latter would be required to reject, as “criticáis” (and to repair, scrap or replace) a substantial part of its production (to say nothing of the added consequence that, each time such a unit was rejected, the more experienced would have imposed on it the added consequence of an extra screen until 2500 consecutive units free of such characteristic had been found); and that plaintiff’s contention totally ignores paragraph 3.9, supra, which provides that defects will “normally” be classified according to “severity” — that no potentially interested supplier who is asked to respond to a request for a proposal of the price for which he will make shell could determine from the government’s formal requests for such proposal (which historically have purported to state what it is that the government wants the successful offeror to do) but that, under the government’s overall ammunition program, the government already had obtained (as it had with Sperry Rand when defendant entered into the Supply Contracts), or might then already be intending thereafter to obtain, other contracts whereby the government would pay a loading contractor to make some (and, if so what) other repairs, inspections or modifications of the shell that the government might from time to time desire to have made of the shell to be supplied before they were loaded. Defendant further contends, in this regard, that, assuming arguendo that there is an ambiguity in the PD which should be resolved by the ejusdem generis rule of construction, that what the “particularly enumerated” characteristics (“cracks, splits, cold shuts, pipe, porosity, inclusions”) enumerated in 3.7.3, supra, have in common one with the other is the fact that each of them is a metallurgically definable steel making process caused kind of cavity defect (a “steel mill caused cavity defect”) that has an adverse effect on the soundness and strength of the metal; that a construction such as that contended for by plaintiff would not only nullify, but also be directly contrary to, those respective parts of paragraphs 3.7.2.1, 3.7.2.2 and 3.7.2.3 that expressly classify the two defects in question as “minor” defects without any stated exception on account of severity or otherwise; further, that, only by construing the said phrase “other similar defects” so that its meaning is limited only to metallurgically definable steel mill caused cavity defects that have an adverse effect on the soundness and strength of the metal can all of the various parts of the Supply Contracts be made meaningful and be construed as a harmonious whole — e. g., the phrase “other surface discontinuities, the radii of which is less than 0.30 inch” in paragraph 3.7.4, similarly construed, would thus mean and be limited to shellmaking “process caused” (or “process induced”) defects, “the radii of which is . . . ”; and, finally, that, under the ever changing subjective standard suggested by plaintiff (i. e., the judgment and experience of those persons who might from time to time be plaintiff’s ammunition specialists), a shell supplier who rejected a shell for a paragraph 3.7.4 or 3.7.7 defect but thereafter cleared an “i” factor of only 230 shell (as required for a “minor” defect) instead of 2500 shell (as required for a “critical” defect), would not know until six or eight years later, after two petit juries, respectively, had returned verdicts in a criminal case and in a civil case, whether by so doing he had defrauded the government or had subjected himself to liability for a False Claims Act violation. Irrespective of whether either, both or neither of the parties is correct about how the phrase “other similar defect” should be construed, it appears that, because of the significant effect that the provisions quoted hereinabove from the PD and from MIL-1235 will have on what might reasonably be “expected” by the parties to a supply contract, the matter of whether a supply contract will require a particular defect characteristic to be inspected for on a “one hundred percent” or on a “sampling” basis should be considered by and known to the parties before contracting — by those charged with government procurement, in order to protect the interests of the government by agreeing to pay for enough but not too much or unnecessary inspection, and by the supplier, in determining the price he will quote or bid in order to determine the cost to him of the inspection system that he must provide as well as the cost to him of the repair, scrapping or replacing (and the handling incident thereto) of the defective units that might reasonably be “expected” to be detected by an inspection made at the required degree of severity — because, once such designation as to any particular defect characteristic is made in a supply contract, it is a material provision of the document to which both parties must look in order to determine their respective rights and liabilities, not only with respect to the severity of the required inspection for that particular defect characteristic but also their rights and liabilities with respect to the repair or replacement of any defective units that might or might not be disclosed by an inspection made for that defect at that degree of severity. Thus, if, on the one hand, the government determines that it desires that the lots and sub-lots of the units it purposes to acquire by a supply contract be free of a particular defect characteristic (excepting the relatively few such units that might reasonably be expected to escape detection as the result of human fallibility), then, by agreeing with its supplier in the supply contract that such characteristic will be inspected for on a “one hundred percent” basis, the government, because of its supplier’s contractual obligation in that regard, could reasonably expect to realize its quality expectation with regard to that defect characteristic. On the other hand, however, if the government, for economy or other reason, determines that it is willing to tolerate a particular defect characteristic in up to a certain percentage of the units it proposes to acquire, then, by consulting said table in MIL-1235, it can find the AQL for the degree of the severity (whether 1 in say 10, 25, 50, etc.,) of the “sampling” inspection that it should by contract require to be made for that particular defect in order to achieve its quality expectation; and then, by agreeing with its supplier in the supply contract, that that characteristic, for the purposes of the supply contract, will be deemed to be a “major” or “minor” defect (with that particular AQL) and that it will be inspected for as such on the “sampling” basis at the degree of severity required by MIL-1235 for defect characteristics having that AQL, the government could (at least the statistical probabilities would be such that it could) reasonably expect to realize its quality expectation with regard to that defect characteristic. Therefore, it follows that, if the government drawn PD is interpreted literally, by agreeing to said provisions in paragraph 4.3.2, swpra (i. e., that defendant would only be required to inspect for those thirty-two particular characteristics classified by the Supply Contracts as “major” defects on a sampling basis, as provided in MIL-1235, for defects having an AQL of 0.40 percent and that defendant would only be required to inspect for those thirty-three particular characteristics classified by the Supply Contracts as “minor” defects on a sampling basis, as provided in MIL-1235, for defects having an AQL of 0.65 percent), the parties to the Supply Contracts, in effect, acknowledged (a) that it was “expected” by each party thereto that (paraphrasing paragraph 3.16, supra), if the continuous sampling plans under MIL-1235 were “followed faithfully”, the deliveries made under the respective contracts, “on the average”, would contain “up to” certain percentages (computable by what amounts to a fixed formula in MIL-1235) of units that would be non-specification shell by reason of each one of the thirty-three characteristics that were classified under such contracts as “major” defects and “up to” certain percentages (likewise computable) of units that would be non-specification shell by reason of each one of the thirty-three characteristics that were classified under such contracts as “minor” defects; and (b) that, if such sampling plan were “followed faithfully” and “on the average” it turned out that way, the government could not rightly complain about the non-specification (i. e., “defective”) units so delivered as it would have obtained exactly what it had bargained to receive. There is, therefore, a vital distinction that must be made in this action between a “defective” shell and a “nonconforming” shell, and this distinction will be discussed hereinafter. But it should be emphasized here that one does not breach a contract simply by delivering, or violate the False Claims Act simply by submitting invoices by which he seeks payment for, “defective” material that the government ordered, “expected” to receive, and agreed to pay for. Alleging that this distinction had been ignored by plaintiff in making its said allegation that defendant had delivered “18,000 defective shell, more or less” and that such deficiency was in no way cured by plaintiff’s conclusory allegations that the delivery of such shell had been made “fraudulently” and “knowingly” , defendant filed herein its Motion to Dismiss or, in the Alternative, for a More Definite Statement (“motion to dismiss”). The motion to dismiss also claimed that plaintiff’s allegation that defendant “failed to perform required inspections” did not take account of the distinction between “process” and “acceptance” inspections. The importance in this civil action of the mentioned distinction between “defective” shell and “nonconforming” shell is pointed up by plaintiff’s answers to defendant’s Interrogatories 43, 50 and 57 which interrogatories, inter alia, were obviously designed to demonstrate that plaintiff’s claims herein exceeded what it reasonably could have “expected” of defendant under the Supply Contracts. Interrogatory 50 reads, in part, here pertinent-: 50. State the total number of each kind of “major” defect that could reasonably be “expected” to be delivered to the United States by a supplier of shell who in inspecting same “followed faithfully” the plan of inspection specified in MIL-STD-1235, if the AQL specified for each such major defect was 0.40% [the AQL specified by paragraph 4.3.2, swpra, for each of said thirty-two major defects] and the total number of shell delivered were . . .(b) 1,003,000 [the number delivered under the 1967 supply contract] (c) 660,000 [the number delivered under the 1969 supply contract]. Plaintiff’s answer to parts (b) and (c) -of that interrogatory, in substance, is that, under the hypothetical contracts posed (which, respectively, in this aspect are identical in all respects material to this discussion with the 1967 and 1969 Supply Contracts), the government could reasonably expect that the respective numbers of each of the thirty-two kinds of “major” defects that would be present in the shell delivered to it by a supplier would vary from minimum numbers to (depending upon certain assumptions not necessary to discuss here) maximum numbers, as follows: (b) under the first contract posed (comparable to the 1967 Supply Contract) from a minimum of 17,653 to a maximum of 23,777 and (c) under the second contract posed (comparable to the 1969 Supply Contract) from a minimum of 11,616 to a maximum of 15,599. The results of simple addition show that comparable minimum and maximum numbers for each of the thirty-two kinds of “major” defects under both contracts would be 29,269 and 39,376, respectively. Because the AQL specified by paragraph 4.3.2, supra, for each of the thirty-three kinds of “minor” defects is “0.65 percent” (instead of the “0.40 percent” that is so specified for each of said thirty-two “major” defects), it is obvious that the respective minimum and maximum numbers of each of such thirty-three kinds of “minor” defects that could have reasonably been “expected” by the government to be present in the shell delivered to it by a supplier under the posed contracts (which, insofar as here material are not unlike the 1967 and 1969 Supply Contracts) would certainly be no less than the comparable maximum and minimum numbers, respectively, that are stated for “major” defects in the next preceding paragraph. Interrogatory 43 requested, in substance, that plaintiff break down the claimed defects in the 18,000 shell “by lot” and “by class and sub-class”. Plaintiff made its first answer to this interrogatory on July 12, 1974, and the