## Facts

- The U.S. Army Corps of Engineers solicited bids for a federal construction project at Saylorville Reservoir under a small-business set-aside requiring average annual receipts (including affiliates) not exceeding $7.5 million.
- Jensen submitted the low bid and Iconco the second-low bid; both certified small-business eligibility.
- In an unrelated procurement, a protest challenged Jensen’s small-business status, prompting SBA review.
- SBA informed Jensen that subsidiary receipts must be included; with subsidiaries, Jensen exceeded the size limit and would be ineligible.
- Before the Corps’ Saylorville contracting officials learned of SBA’s determination, the Corps awarded Jensen the Saylorville contract, and Jensen began performance.
- Iconco later learned SBA had found Jensen not a qualifying small business and protested; the Corps declined to terminate Jensen’s contract.
- Iconco filed a diversity action asserting Iowa common-law fraud and unjust enrichment, alleging Jensen’s incorrect small-business certification caused Iconco to lose the award.
- At trial, the contracting officer testified (in response to a detailed hypothetical) that Iconco would have received the contract if it had not been awarded to Jensen.

## Issues

1. Whether Iowa common law, in a diversity case, may use standards from the federal Small Business Act and SBA regulations to assess liability for unjust enrichment and fraud.
2. Whether the evidence supported an Iowa unjust-enrichment award to a disappointed second-low bidder based on Jensen’s receipt of a set-aside contract it was not entitled to under SBA size rules.
3. Whether the contracting officer’s hypothetical-based causation testimony and related instructions/evidentiary rulings were sufficient to sustain the unjust-enrichment verdict.
4. Whether the evidence satisfied Iowa’s elements of fraud (including scienter and reliance) such that the jury’s fraud verdict and actual/punitive damages should be reinstated.

## Decision

- The court affirmed the judgment awarding Iconco $61,503 on unjust enrichment.
- The court held Iowa could use the Small Business Act and SBA regulations as the standard of conduct in applying Iowa unjust-enrichment and fraud doctrines.
- The court found sufficient evidence of causation and entitlement for unjust enrichment, including the contracting officer’s testimony.
- The court affirmed the district court’s decision setting aside the jury’s fraud verdict and associated actual and punitive damages as unsupported by the evidence.

## Legal Principles

- A state may apply federal statutory and regulatory standards as benchmarks within state common-law claims where Congress has not clearly forbidden such use and state enforcement does not conflict with federal objectives.
- Under Iowa unjust-enrichment principles, restitution may be available when a defendant retains a benefit it was not rightfully entitled to receive under the applicable standards, and retention would be inequitable as against the plaintiff.
- Unjust enrichment is distinct from fraud; equitable restitution may be awarded even when the stricter elements of tort fraud are not proven.
- Trial courts have discretion over the use of hypothetical questions to elicit expert or specialized testimony; such testimony can support causation if grounded in record evidence.

## Conclusion

The Eighth Circuit upheld a restitutionary recovery for a second-low bidder on a federal small-business set-aside contract by permitting Iowa unjust-enrichment law to incorporate SBA size standards, while affirming the setting aside of a jury fraud verdict because the record did not establish the required fraudulent intent and reliance under Iowa law.


Iconco v. Jensen Construction Co., 622 F.2d 1291 (8th Cir. 1980)