United States ex rel Kurt Bunk v. Gosselin World Wide Moving

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-1369
UNITED STATES ex rel. KURT BUNK; UNITED STATES ex rel. RAY
AMMONS,
Plaintiffs – Appellants,
and
UNITED STATES OF AMERICA,
Intervenor/Plaintiff – Intervenor,
and
UNITED STATES ex rel. DANIEL HEUSER,
Plaintiff,
v.
GOSSELIN WORLD WIDE MOVING, N.V.; GOSSELIN GROUP N.V.; MARC
SMET,
Defendants – Appellees,
and
BIRKART GLOBISTICS GMBH & CO. LOGISTIK UND SERVICE KG; THE
PASHA GROUP; ITO MOBEL TRANSPORT GMBH; ANDREAS CHRIST
SPEDITION & MOBELTRANSPORT GMBH; JOHN DOES 1-100; AMERICAN
MOPAC INTERNATIONAL; DOE DEFENDANTS; GATEWAYS
INTERNATIONAL; ALLIED FREIGHT FORWARDERS; NORTH AMERICAN
VAN LINES, INCORPORATED; GLOBAL WORLDWIDE INCORPORATED; AIR
LAND FORWARDERS SUDDATH; COVAN INTERNATIONAL; JET
FORWARDING INCORPORATED; ARPIN INTERNATIONAL; BIRKART
GLOBISTICS AG; THIEL LOGISTIK AG, a/k/a Logwin AG; VIKTORIA
SCHAFER INTERNATIONALE SPEDITION GMBH; VIKTORIA SCHAFER
INTERNATIONAL SPEDITION GMBH; VIKTORIA-SKS KURT SCHAFER
INTERNATIONALE GMBH & CO., KG; GILLEN & GARCON GMBH & CO.
INTERNATIONALE SPEDITION KG; GILLEN & GARCON GMBH & CO. KG;
M.T.S. HOLDING & VERWALTUNGS GMBH, d/b/a M.T.S. Gruppe;
ANDREAS CHRIST GMBH; MICHAEL VILLINGER; ERWIN WEYAND;
NICODEMUS GOSSELIN; DIETER SCHMEKEL; HORST BAUR; KURT
SCHAFER; MARTINA SCHAFER; JOHN DOE DEFENDANTS; BIRKART
VERMOGENSVERWALTUNG GMBH; LOGWIN AIR + OCEAN DEUTSCHLAND
GMBH; LOGWIN HOLDING DEUTSCHLAND GMBH; JURGEN GRAF; MISSY
DONNELLY; GEORGE PASHA; AMERICAN MOPAC INTERNATIONAL,
INCORPORATED; AMERICAN SHIPPING INCORPORATED; CARTWRIGHT
INTERNATIONAL VAN LINES INCORPORATED; JIM HAHN;
INTERNATIONAL SHIPPERS ASSOCIATION INCORPORATED; GOSSELIN
WORLD WIDE MOVING GMBH;VIKTORIA INTERNATIONAL
SPEDITION;GOVERNMENT LOGISTICS N.V.; GATEWAYS INTERNATIONAL
INCORPORATED,
Defendants.
----------------------------------------------
CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA;
PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA,
Amici Supporting Appellees,
TAXPAYERS AGAINST FRAUD EDUCATION FUND,
Amicus Supporting Appellants.
No. 12-1417
UNITED STATES ex rel. KURT BUNK; UNITED STATES ex rel. RAY
AMMONS,
Plaintiffs – Appellees,
and
UNITED STATES OF AMERICA,
Intervenor/Plaintiff – Appellee,
and
2
UNITED STATES ex rel. DANIEL HEUSER,
Plaintiff,
v.
GOSSELIN WORLD WIDE MOVING, N.V.; GOSSELIN GROUP N.V.; MARC
SMET,
Defendants – Appellants,
and
VIKTORIA INTERNATIONAL SPEDITION; GOVERNMENT LOGISTICS
N.V.; BIRKART GLOBISTICS GMBH & CO. LOGISTIK UND SERVICE
KG; THE PASHA GROUP; ITO MOBEL TRANSPORT GMBH; ANDREAS
CHRIST SPEDITION & MOBELTRANSPORT GMBH; JOHN DOES 1-100;
AMERICAN MOPAC INTERNATIONAL; DOE DEFENDANTS; GATEWAYS
INTERNATIONAL; ALLIED FREIGHT FORWARDERS; NORTH AMERICAN
VAN LINES, INCORPORATED; GLOBAL WORLDWIDE INCORPORATED; AIR
LAND FORWARDERS SUDDATH; COVAN INTERNATIONAL; JET
FORWARDING INCORPORATED; ARPIN INTERNATIONAL; BIRKART
GLOBISTICS AG; THIEL LOGISTIK AG, a/k/a Logwin AG; VIKTORIA
SCHAFER INTERNATIONALE SPEDITION GMBH; VIKTORIA-SKS KURT
SCHAFER INTERNATIONALE GMBH & CO., KG; GILLEN & GARCON GMBH
& CO. INTERNATIONALE SPEDITION KG; M.T.S. HOLDING &
VERWALTUNGS GMBH, d/b/a M.T.S. Gruppe; ANDREAS CHRIST GMBH;
MICHAEL VILLINGER; ERWIN WEYAND; NICODEMUS GOSSELIN; DIETER
SCHMEKEL; JURGEN GRAF; HORST BAUR; KURT SCHAFER; MARTINA
SCHAFER; JOHN DOE DEFENDANTS; BIRKART VERMOGENSVERWALTUNG
GMBH; LOGWIN AIR + OCEAN DEUTSCHLAND GMBH; LOGWIN HOLDING
DEUTSCHLAND GMBH; MISSY DONNELLY; GEORGE PASHA; AMERICAN
MOPAC INTERNATIONAL, INCORPORATED; AMERICAN SHIPPING
INCORPORATED; CARTWRIGHT INTERNATIONAL VAN LINES
INCORPORATED; JIM HAHN; INTERNATIONAL SHIPPERS ASSOCIATION
INCORPORATED; GATEWAYS INTERNATIONAL INCORPORATED; GOSSELIN
WORLD WIDE MOVING GMBH,
Defendants.
---------------------------------------------
CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA;
PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA,
Amici Supporting Appellants,
3
TAXPAYERS AGAINST FRAUD EDUCATION FUND,
Amicus Supporting Appellees.
No. 12-1494
UNITED STATES OF AMERICA,
Intervenor/Plaintiff – Appellant,
and
UNITED STATES ex rel. DANIEL HEUSER; UNITED STATES ex rel.
KURT BUNK; UNITED STATES ex rel. RAY AMMONS,
Plaintiffs,
v.
GOSSELIN WORLD WIDE MOVING, N.V.; GOSSELIN GROUP N.V.; MARC
SMET,
Defendants – Appellees,
and
BIRKART GLOBISTICS GMBH & CO. LOGISTIK UND SERVICE KG; THE
PASHA GROUP; ITO MOBEL TRANSPORT GMBH; ANDREAS CHRIST
SPEDITION & MOBELTRANSPORT GMBH; JOHN DOES 1-100; AMERICAN
MOPAC INTERNATIONAL; DOE DEFENDANTS; GATEWAYS
INTERNATIONAL; ALLIED FREIGHT FORWARDERS; NORTH AMERICAN
VAN LINES, INCORPORATED; GLOBAL WORLDWIDE INCORPORATED; AIR
LAND FORWARDERS SUDDATH; COVAN INTERNATIONAL; JET
FORWARDING INCORPORATED; ARPIN INTERNATIONAL; BIRKART
GLOBISTICS AG; THIEL LOGISTIK AG, a/k/a Logwin AG; VIKTORIA
SCHAFER INTERNATIONALE SPEDITION GMBH; VIKTORIA-SKS KURT
SCHAFER INTERNATIONALE GMBH & CO., KG; GILLEN & GARCON GMBH
& CO. INTERNATIONALE SPEDITION KG; M.T.S. HOLDING &
VERWALTUNGS GMBH, d/b/a M.T.S. Gruppe; ANDREAS CHRIST GMBH;
MICHAEL VILLINGER; ERWIN WEYAND; NICODEMUS GOSSELIN; DIETER
SCHMEKEL; JURGEN GRAF; HORST BAUR; KURT SCHAFER; MARTINA
SCHAFER; JOHN DOE DEFENDANTS; BIRKART VERMOGENSVERWALTUNG
GMBH; LOGWIN AIR + OCEAN DEUTSCHLAND GMBH; LOGWIN HOLDING
4
DEUTSCHLAND GMBH; MISSY DONNELLY; GEORGE PASHA; AMERICAN
MOPAC INTERNATIONAL, INCORPORATED; AMERICAN SHIPPING
INCORPORATED; CARTWRIGHT INTERNATIONAL VAN LINES
INCORPORATED; JIM HAHN; INTERNATIONAL SHIPPERS ASSOCIATION
INCORPORATED; GATEWAYS INTERNATIONAL INCORPORATED; GOSSELIN
WORLD WIDE MOVING GMBH; GOVERNMENT LOGISTICS N.V.; VIKTORIA
INTERNATIONAL SPEDITION,
Defendants.
-------------------------------------------
CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA;
PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA,
Amici Supporting Appellees,
TAXPAYERS AGAINST FRAUD EDUCATION FUND,
Amicus Supporting Appellant.
Appeals from the United States District Court for the Eastern
District of Virginia, at Alexandria. Anthony J. Trenga,
District Judge. (1:02-cv-01168-AJT-TRJ)
Argued: May 14, 2013 Decided: December 19, 2013
Before KING, SHEDD, and THACKER, Circuit Judges.
No. 12-1417 affirmed; No. 12-1369 affirmed in part, reversed in
part, and remanded with instructions; and No. 12-1494 vacated
and remanded by published opinion. Judge King wrote the
opinion, in which Judge Thacker joined. Judge Shedd wrote a
separate opinion concurring in part and dissenting in part.
ARGUED: Michael T. Anderson, MURPHY ANDERSON PLLC, for United
States ex rel. Kurt Bunk, United States ex rel. Ray Ammons, and
United States ex rel. Daniel Heuser. Kerri L. Ruttenberg, JONES
DAY, Washington, D.C., for Gosselin World Wide Moving, N.V.,
Gosselin Group N.V., and Marc Smet. Jeffrey Clair, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Intervenor.
5
ON BRIEF: Richard E. Greenberg, John E. Petite, GREENSFELDER,
HEMKER & GALE, P.C., St. Louis, Missouri; Ann Lugbill, Mark
Hanna, Michael L. Woolley, MURPHY ANDERSON PLLC, Washington,
D.C., for United States ex rel. Kurt Bunk, United States ex rel.
Ray Ammons, and United States ex rel. Daniel Heuser. Shay
Dvoretzky, JONES DAY, Washington, D.C., for Gosselin World Wide
Moving, N.V., Gosselin Group N.V., and Marc Smet. James M.
Spears, Melissa B. Kimmel, PHRMA, Washington, D.C.; David W.
Ogden, Jonathan G. Cedarbaum, Nicole Ries Fox, WILMER CUTLER
PICKERING HALE AND DORR LLP, Washington, D.C., for
Pharmaceutical Research and Manufacturers of America. Robin S.
Conrad, Rachel Brand, NATIONAL CHAMBER LITIGATION CENTER, INC.,
Washington, D.C.; M. Miller Baker, McDERMOTT WILL & EMERY LLP,
Washington, D.C.; Joshua Buchman, Peter Schutzel, McDERMOTT WILL
& EMERY LLP, Chicago, Illinois, for Chamber of Commerce of the
United States of America. Kristin L. Amerling, Cleveland
Lawrence III, TAXPAYERS AGAINST FRAUD EDUCATION FUND,
Washington, D.C.; Colette G. Matzzie, Claire M. Sylvia, PHILLIPS
& COHEN, LLP, Washington, D.C., for Taxpayers Against Fraud
Education Fund. Neil H. MacBride, United States Attorney,
Alexandria, Virginia, Stuart F. Delery, Acting Assistant
Attorney General, Michael S. Raab, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Intervenor.
6
KING, Circuit Judge:
These appeals and cross-appeal are taken from final
judgments, entered in accordance with Federal Rule of Civil
Procedure 54(b), in a pair of qui tam actions consolidated for
litigation in the Eastern District of Virginia. By its Order of
February 14, 2012, the district court: (1) assessed a single
civil penalty in the sum of $5,500 in favor of the United
States, intervening in substitution of relator Ray Ammons, as to
a single portion of its claim pursuant to the False Claims Act
(the “FCA”), which it alleged against defendants Gosselin
Worldwide Moving, N.V., Gosselin Group N.V., and the latter’s
CEO, Marc Smet (collectively, “Gosselin” or the “company”); (2)
decreed judgment for Gosselin on the remainder of the FCA claim,
as well as common law claims asserted by the government in the
same action; (3) granted judgment as to liability with respect
to a single FCA claim alleged by relator Kurt Bunk and against
Gosselin in the second action; but (4) denied Bunk recovery of
civil penalties on that claim.
The primary issue before us is whether the district court
erred in determining that, concerning 9,136 false invoices at
the heart of Bunk’s claim, any award under the FCA must
necessarily exceed more than $50 million. The court ruled that
such an assessment would contravene the Excessive Fines Clause
of the Eighth Amendment, and it thus awarded nothing. We must
7
also decide whether, as to the larger portion of the
government’s FCA claim on which Gosselin prevailed, the court
properly declared the company immune under the Shipping Act.
Gosselin, for its part, urges on cross-appeal that Bunk’s
election to seek civil penalties to the exclusion of actual
damages deprives him of standing to maintain any recovery — even
one consistent with the Eighth Amendment.
We conclude that Bunk possessed standing to sue for civil
penalties while bypassing the prospect of a damages award, and
we thus affirm the district court’s judgment in his favor. To
the extent, however, that the court denied Bunk recovery of any
penalties, we reverse and remand for entry of his requested
award of $24 million, an amount that we deem to be consistent
with the Constitution. Finally, we are of the opinion that the
Shipping Act confers no immunity upon Gosselin for any part of
the government’s FCA claim; we therefore vacate the contrary
ruling in favor of Gosselin and remand the misadjudicated
portion of the claim for further proceedings.
I.
A.
1.
An army may march on its stomach, but when a fighting force
is deployed to a foreign front, familiar furnishings also serve
8
to fuel the foray. The Department of Defense (the “DOD”) seeks
to provide its armed military forces and civilian personnel with
the orderly and efficient transport of their goods and effects
across the Atlantic, point to point within Europe, and back home
again. The DOD thus instituted the International Through
Government Bill of Lading program (the “ITGBL program”) to
govern transoceanic moves, while relying on the Direct
Procurement Method (the “DPM”) to contract for transport
strictly on the European continent. Both methodologies were
administered by the DOD’s Military Traffic Management Command
(the “MTMC”). 1
In the ITGBL program, the MTMC solicited domestic vendors —
often referred to as “freight forwarders” — to bid on one or
more “through rates,” i.e., unitary prices for moving household
goods along shipping channels established between the several
states and the particular European countries in which American
personnel were encamped. Channels were further distinguished
based on which of the respective termini was the origin of the
goods. For example, the Virginia-to-Germany channel was bid
apart from the Germany-to-Virginia channel.
1
The MTMC is now called the Surface Deployment and
Distribution Command, or the SDDC.
9
The successful bidders contracted with the MTMC to supply
door-to-door service, typically consisting of discrete segments:
packing the goods at the origin; land carriage to the ocean
port; origin port services; ocean transport; destination port
services; and carriage overland to the destination, where the
goods were unpacked. Subcontractors, including Gosselin,
provided services in connection with the European segments, and
the prices quoted by those subcontractors were taken into
account by the freight forwarders. The MTMC dealt on an
individual basis with some of these same subcontractors when it
availed itself of the DPM to obtain packing, loading, and
transportation services exclusively within Europe.
On November 14, 2000, Gosselin met in Sonthofen, Germany,
with a number of its industry peers, some that provided services
in multiple European segments and others that were more locally
focused. Together, these entities controlled the lion’s share
of packing and transportation services within Germany. The
meeting participants agreed to charge a non-negotiable minimum
price for these local services, which would also be incorporated
into the fixed “landed rate” quoted to the freight forwarders
for servicing multiple segments. Apart from its intended effect
upon the ITGBL program, the Sonthofen meeting and resultant
agreement arguably served as a catalyst with respect to an
ongoing DPM scheme. Pursuant to that scheme, Gosselin was
10
awarded a contract, effective May 1, 2001, after colluding with
its fellow bidders to artificially inflate the packing and
loading component of the submitted bids. Thereafter, Gosselin
subcontracted much of the work, in predetermined allocations, to
its supposed competitors.
Despite the efforts of Gosselin and its Sonthofen cohorts,
freight forwarder Covan International, Inc., was able to submit,
at initial filing for the ITGBL International Summer 2001
(“IS01”) rate cycle, the low bid on fourteen channels between
Germany and the United States (the “Covan Channels”). In order
to increase the likelihood of obtaining business in those
channels, other freight forwarders such as the Pasha Group, with
which Gosselin had a continuing relationship, would have been
compelled to match Covan’s prime through rate. Instead,
Gosselin threatened to withdraw financing from Covan for the
latter’s purchase of thousands of lift vans required to fulfill
its contractual obligations with the MTMC. Consequently, Covan
cancelled its bid, and Gosselin spread the word among the
freight forwarders that each should, during the second (“me-
too”) phase of the bidding, match only the second-lowest bid on
the Covan Channels.
2.
The foregoing scenario was virtually duplicated one year
later, during bidding for the IS02 cycle. On that occasion,
11
Cartwright International Van Lines, Inc., successfully bypassed
the established landed rates to submit the low bid on twelve
Germany-U.S. channels (the “Cartwright Channels”). Gosselin and
Pasha, however, convinced Cartwright to withdraw its bid, and,
after ensuring that local agents would refuse services to anyone
who failed to cooperate, they secured agreements from Pasha’s
fellow freight forwarders to echo the second-lowest bid. For
their actions in connection with the Cartwright Channels, the
Gosselin and Pasha corporate entities were each convicted of
federal criminal offenses in the Eastern District of Virginia.
See United States v. Gosselin World Wide Moving, N.V., 411 F.3d
502 (4th Cir. 2005).
B.
The above-described acts gave rise to the underlying civil
actions premised on the FCA, 31 U.S.C. §§ 3729-3733, which,
during the events in question, provided in pertinent part:
(a) Any person who —
(1) knowingly presents, or causes to be
presented, to an officer or employee of the United
States Government . . . a false or fraudulent claim
for payment or approval;
(2) knowingly makes, uses, or causes to be made
or used, a false record or statement to get a false
or fraudulent claims paid or approved by the
Government; [or]
(3) conspires to defraud the Government by
getting a false or fraudulent claim allowed or
paid[,]
12
is liable to the United States Government for a civil
penalty of not less than $5,000 and not more than $10,000,
plus 3 times the amount of damages which the Government
sustains because of the act of that person[.]
Id. § 3729(a). 2 The FCA confers on private persons, such as Bunk
and Ammons, the authority to “bring a civil action for a
violation of section 3729 for the person and for the United
States Government” in the government’s name. Id. § 3730(b)(1). 3
Bunk sued in the Eastern District of Virginia on August 2,
2002, asserting claims arising from the DPM scheme. Ammons’s
lawsuit, stemming from the machinations relating to the ITGBL
program, was initiated on September 17, 2002, in the Eastern
District of Missouri. The two actions were commenced under seal
against Gosselin and a long list of other defendants, all but
one of which have since been dismissed via settlement and
otherwise. Advancement of both lawsuits was deferred pending
the final outcome of the criminal investigation and resultant
2
The FCA was revised in 2009 to clarify and flesh out many
of its provisions. The bases relied on in § 3729(a) to
establish Gosselin’s potential liability, however, remained
substantially the same.
3
The heading of § 3730(c) refers to a proceeding initiated
under the FCA as a “qui tam” action, which has been defined as
one “under a statute that allows a private person to sue for a
penalty, part of which the government or some specified public
institution will receive. They are usually reported as being in
the name of the government ex rel. ([i.e.,] on the relation of)
the private citizen.” Bryan A. Garner, A Dictionary of Modern
Legal Usage 728-29 (2d ed. 1995).
13
proceedings. See § 3730(b)(2), (3) (prescribing that relator’s
complaint “shall be filed in camera, shall remain under seal for
at least 60 days, and shall not be served on the defendant until
the court so orders”). On November 9, 2007, the Ammons matter
was transferred to the Eastern District of Virginia, where it
was consolidated with the Bunk proceeding.
Bunk accused Gosselin of participating in an unlawful
conspiracy to defraud the MTMC. His operative Third Amended
Complaint (the “Bunk Complaint”), filed December 8, 2009,
alleged that the conspirators saw their illicit plans bear fruit
when they “falsely represented, directly or indirectly, in
submitting claims for payments that they had not engaged in
common discussions or agreements regarding prices to be offered
and terms and conditions of service,” such terms and conditions
including “allocation of territories or market share . . . for
work performed under . . . [DPM] Government contracts . . . for
transportation of military personal property.” Bunk Complaint
¶ 136. 4
In a similar fashion, the Complaint filed by Ammons (the
“Ammons Complaint”) asserted, inter alia, that Gosselin
facilitated “a bid rigging scheme,” in furtherance of which it
4
The Bunk Complaint is found at J.A. 294-340. (Citations
herein to “J.A. ___” refer to the contents of the Joint Appendix
filed by the parties to this appeal.)
14
and Pasha illegally “control[led] the access to German freight
agents for [ITGBL] origin and destination services[.]” Ammons
Complaint ¶¶ 50, 61. 5 This monopoly of access, according to
Ammons, enabled the conspirators to “raise and control the
prices for a critical feature of the services necessary to
service the traffic channel between Germany and the United
States.” Id. ¶ 61.
The Ammons Complaint was superseded on July 18, 2008, by
the United States’ Complaint in Intervention (the “Government
Complaint”). See 31 U.S.C. § 3730(b)(2) (“The Government may
elect to intervene and proceed with the action.”). 6 The material
allegations of the Government Complaint echoed those of its
Ammons predecessor, in particular the asserted purpose of the
conspiracy, which “was to obtain collusive, artificially
inflated, and noncompetitive prices for transportation services
performed in connection with [ITGBL] international household
goods shipments.” Government Complaint ¶ 6. To advance the
illicit aims of the conspiracy, according to the government,
Gosselin knowingly “submitted or caused to be submitted false
and inflated claims for payment to the United States . . . and
5
The Ammons Complaint is found at J.A. 243-58.
6
The Government Complaint is found at J.A. 263-93.
15
made, used or caused to be made or used false records or
statements to get those claims paid or approved.” Id. 7
The government thus maintained that Gosselin was liable
under the FCA for treble damages and civil penalties, see
Government Complaint ¶¶ 87-93 (First Cause of Action), or, in
the alternative, for common law fraud, for conspiracy to defraud
the United States, and for unjust enrichment, see id. ¶¶ 94-108
(Second through Fourth Causes of Action). Bunk, for his part,
pleaded various FCA theories of liability against Gosselin and
others. See Bunk Complaint ¶¶ 145-59 (Counts I through V).
Suing in his individual capacity, Bunk joined several additional
claims, including a 42 U.S.C. § 1985 claim for conspiracy to
7
Though subordinated as a result of the government’s
intervention, Ammons remained in the suit, maintaining his
status as a party-plaintiff. See 31 U.S.C. § 3730(c)(1) (“[T]he
person bringing the action . . . shall have the right to
continue as a party to the action.”). Bunk’s role was
unchanged, as the government declined to intervene in his
proceeding. See id. § 3730(c)(3) (“If the government elects not
to proceed with the action, the person who initiated the action
shall have the right to conduct the action.”). The government’s
decisions as to intervention bear not only on who conducts the
litigation in the respective matters, but also the eventual
award, if any, to the relator. Compare id. § 3730(d)(1)
(providing that where “the Government proceeds with an action
brought by a person under subsection (b), such person shall
. . . receive at least 15 percent but not more than 25 percent
of the proceeds of the action or settlement of the claim”), with
id. § 3730(d)(2) (“If the Government does not proceed with an
action under this section, the person bringing the action or
settling the claim shall receive an amount . . . not less than
25 percent and not more than 30 percent of the proceeds.”).
16
interfere with his civil rights, see id. ¶¶ 160-62 (Count VI),
and state law claims for tortious interference with contractual
relations, for antitrust and related violations, and for
defamation, see id. ¶¶ 163-75 (Counts VII through IX). 8
C.
On the basis of the prior criminal proceedings against
Gosselin, the district court granted partial summary judgment on
liability to the government on its FCA claim insofar as it
pertained to the Cartwright Channels. The remaining issues in
the consolidated matters were tried in Alexandria before a jury,
beginning on July 18, 2011. The government explained in its
opening statement that Gosselin, pursuant to the conspiracy
engendered by the Sonthofen Agreement, engaged in two general
types of wrongful conduct: (1) unlawfully colluding with its
industry cohorts to inflate the landed rate component of ITGBL
bids involving all German channels, which caused those bids as a
whole — and the resultant DOD payments — to be higher than they
would have been absent such collusion (the “price-fixing”
conduct); and (2) in concert with Pasha and others, improperly
8
Although the government did not intervene in the Bunk
proceeding, the district court determined that all of Bunk’s
claims had nonetheless been effectively superseded by the
Government Complaint, except for Count II of the Bunk Complaint,
which sought recovery under the FCA for Gosselin’s actions in
connection with the DPM scheme. The court’s ruling in that
regard has not been appealed.
17
influencing Covan and Cartwright to withdraw their initial low
bids in the IS01 and IS02 cycles, respectively, and dissuading
its competitors from matching the Covan and Cartwright bids in
the affected channels (the “bid-rigging” conduct). See
Transcript of Trial, July 18, 2011, at 54-58. For these
asserted misdeeds, the government sought both categories of
redress permitted by § 3729(a), that is, a fixed civil penalty
for each false claim, plus three times the amount of actual
damages it had sustained. Bunk, by contrast, chose to forgo
proof of damages, suing only for civil penalties.
At the close of the government’s case-in-chief, on July 28,
2011, the district court granted in part Gosselin’s motion for
judgment as a matter of law, concluding that the company was
entitled to immunity under the Shipping Act, and it therefore
could not be held accountable under the FCA for its price-fixing
conduct. See Fed. R. Civ. P. 50(a). That conduct, the court
explained, was the only basis for imposing liability on Gosselin
for the inflated landed rate affecting all ITGBL channels
starting and ending in Germany, and not merely the Covan and
Cartwright Channels that were the sole bid-rigging targets. The
court likewise awarded judgment to Gosselin on the alternative,
common law claims, with the result that the only portion of the
government’s case permitted to proceed was its FCA claim, and
18
that only insofar as it related to Gosselin’s bid-rigging
conduct directed at Covan and Cartwright.
Conversely, the district court denied Gosselin’s motion for
judgment as a matter of law with respect to Bunk’s claim
premised on the DPM scheme. The court explained that the
conduct engendering FCA liability as to that claim was not
grounded in immunized price-fixing, but instead manifested in
the subsequent Certificate of Independent Price Determination
(the “CIPD”) filed by Gosselin. The CIPD was designed to
affirmatively assure the MTMC that the successful DPM contractor
had not discussed pricing or soliciting strategy with other
potential suppliers. Bunk had adduced evidence at trial, the
court recalled, that Gosselin had met with its competitors “and
agreed on prices that would be charged and who would service
territories regardless of who was awarded the contract.”
Transcript of Trial, July 28, 2011, at 1059. That evidence
created “a triable issue for the jury” as to whether Gosselin
“acted in a way inconsistent with its certification,” and,
assuming that the CIPD was false, “whether it was a material
misstatement and whether [it was made] knowingly.” Id. at 1059-
60.
Gosselin proceeded with its defense, followed by rebuttal
from Bunk and from the government. At the conclusion of all the
evidence, the jury was instructed by the district court, heard
19
the parties’ closing arguments, and retired to consider its
verdict. On August 4, 2011, after about nine hours of
deliberations over two days, the jury returned a verdict in
favor of Gosselin as to that portion of the government’s FCA
claim stemming from the Covan Channels. In regard to the
Cartwright portion of the FCA claim, for which the district
court had previously ruled Gosselin liable as a matter of law,
the jury found that the government had proved 4,351 instances of
false or fraudulent claims. Finally, the jury found Gosselin
culpable under the FCA for its role in the DPM scheme, as set
forth in Count II of the Bunk Complaint.
D.
1.
Through its memorandum opinion of October 19, 2011, the
district court disposed of various post-trial motions filed by
the parties. First, the court deemed the evidence insufficient
to support the jury’s finding of 4,351 false claims in
connection with the Cartwright Channels; it thus granted
Gosselin partial judgment as a matter of law, or, alternatively,
a new trial on the civil penalties remedy pertaining to the
government’s First Cause of Action. See Fed. R. Civ. P.
50(c)(1). We characterize the judgment as “partial” because the
district court declined to decree that the government recover
nothing. To the contrary, in line with its prior ruling
20
regarding the Cartwright Channels, the court entered judgment
for the United States in the sum of $5,500. The amount of the
judgment reflects the court’s conclusion that the whole of
Gosselin’s bid-rigging misconduct established nothing more than
a baseline false claim, for which the government — in the
absence of more sophisticated proof — was entitled to receive
only a single civil penalty. 9
Moving on to consider the damages remedy, the district
court observed that the government had collected approximately
$14 million from settling codefendants. That amount was far in
excess of the presumptive damages, i.e., the $865,000 that
Gosselin paid as restitution in the criminal proceedings, such
liability under the FCA being increased to $2,595,000 upon
application of the trebling modifier. The court thus decided
that Gosselin was entitled to a full offset, with no damages
remaining payable. Lastly, the court denied Gosselin’s motion
for judgment as a matter of law with respect to Count II of the
Bunk Complaint and held Gosselin liable for 9,136 false claims,
9
See United States ex rel. Harrison v. Westinghouse
Savannah River Co., 352 F.3d 908, 920 (4th Cir. 2003)
(ascertaining defendant liable for twenty-six false claims,
consisting of initial fraudulent certification plus twenty-five
resultant invoices). The government has not appealed the
district court’s Rule 50(c) determination as to the number of
Cartwright Channel claims.
21
corresponding to the number of invoices stipulated by the
parties to have been submitted under the DPM contract.
2.
It remained for the district court to calculate the
appropriate civil penalties for the Bunk false claims. Treating
each of the 9,136 claims as a discrete basis for liability under
§ 3729(a), imposition of no more than the statutory minimum of
$5,500 would have resulted in a cumulative penalty just in
excess of $50 million ($50,248,000). 10 Gosselin contended that a
multi-million-dollar award would be grossly out of proportion to
its misconduct, and thus in contravention of the constitutional
proscription against excessive fines. See U.S. Const. amend.
XIII (“Excessive bail shall not be required, nor excessive fines
imposed, nor cruel and unusual punishments inflicted.”).
The district court agreed, and by memorandum opinion of
February 14, 2012, expressed its view that the relatively
isolated harm caused by the DPM scheme, under which the
government paid a total of approximately $3.3 million for the
10
Pursuant to 28 C.F.R. § 85.3(a)(9), persons adjudged
liable under the FCA are, as of September 29, 1999, subject to
increased civil penalties amounting to a minimum of $5,500 and a
maximum of $11,000. See Federal Civil Penalties Inflation
Adjustment Act of 1990, Pub. L. No. 101-410, § 535, 104 Stat.
890 (1990), as amended by Pub. L. 104-134, 110 Stat. 131 (1996)
(directing that agency heads adjust and publish via regulation
certain civil penalties).
22
packing and loading line item, could not justify a $50 million
penalty. Concluding that it was unauthorized by the FCA to
award less than the $5,500 minimum per claim, and, further, that
each of the 9,136 claims required an award, the court rejected
Bunk’s proposal, in consultation with the government, to accept
$24 million in settlement of the judgment. Indeed, the court
concluded in the alternative that, under the circumstances, any
penalty in excess of $1.5 million would be constitutionally
excessive, and in the event the statute permitted an assessment
of less than $50,248,000, it would award $500,000.
The district court directed the entry of final judgment as
to the claims set forth in the operative complaints against
Gosselin. 11 Encapsulating the various jury findings and legal
rulings set forth above, the court ordered:
(1) judgment in favor of the Plaintiff the United
States of America and against Defendants [Gosselin],
11
See Fed. R. Civ. P. 54(b) (instructing that “[w]hen an
action presents more than one claim . . . or when multiple
parties are involved, the court may direct entry of a final
judgment as to one or more, but fewer than all, claims or
parties . . . if the court expressly determines that there is no
just reason for delay”). The court deferred decision on the
relators’ claims for a percentage of the government’s recovery,
together with their requests for FCA attorney fees from
Gosselin, pending final disposition of this appeal. Also left
pending is the fate of the lone remaining defendant in the case,
Government Logistics, N.V., which was alleged liable as a
successor to Gosselin. The court denied the parties’ cross-
motions for summary judgment as to the successor liability
question, holding it over for eventual determination by trial.
23
jointly and severally, in the amount of Five Thousand,
Five Hundred Dollars ($5,500), on the First Cause of
Action in the [Government] Complaint . . . ; (2)
judgment in favor of Defendants [Gosselin] and against
the Plaintiff the United States of America on the
Second, Third, and Fourth Causes of Action in the
[Government] Complaint . . . ; (3) judgment in favor
of [Bunk] and against the Defendants [Gosselin] as to
liability on Count II of the [Bunk] Complaint; and (4)
judgment in favor of Defendants [Gosselin] and against
the United States of America and [Bunk] as to civil
penalties on Count II of the [Bunk] Complaint.
J.A. 1621.
By notice timely filed on March 13, 2012, Bunk and Ammons
jointly appealed the district court’s Rule 54(b) judgment (No.
12-1369). Thereafter, on March 27, 2012, Gosselin cross-
appealed (No. 12-1417). The government noticed its appeal (No.
12-1494) on April 13, 2012. 12 We possess jurisdiction pursuant
to 28 U.S.C. § 1291.
II.
Intricate issues of law underlie the judgment below and
permeate these several appeals. Most of the issues concern the
construction and application of federal statutes in a fashion
12
In the typical civil case, a party seeking to appeal must
file notice thereof in the district court “within 30 days after
entry of the judgment or order appealed from.” Fed. R. App. P.
4(a)(1)(A). If, however, “one of the parties is . . . the
United States,” or an agency or official representative thereof,
“any party” to the litigation may appeal within 60 days
following the entry of the judgment or order at issue. Id.
4(a)(1)(B).
24
consistent with the Constitution. These legal issues were, with
certain exceptions identified below, considered and decided in
the first instance by the district court, whose rulings thereon
we review de novo. See United States v. Under Seal, 709 F.3d
257, 261 (4th Cir. 2013) (deeming questions of statutory
interpretation and constitutional challenges subject to de novo
review).
III.
A.
1.
Gosselin suggests that Bunk lacks standing to sue, thereby
challenging the jurisdiction of the federal courts as to that
portion of the consolidated litigation in which the government
has not intervened. See U.S. Const. art. III, § 2 (limiting
judicial power of United States solely to adjudication of cases
and controversies). We thus turn our attention at the outset to
Gosselin’s cross-appeal. See United States v. Day, 700 F.3d
713, 721 (4th Cir. 2012) (“[C]ourts must resolve jurisdictional
Article III standing issues before proceeding to consider the
merits of a claim.”). According to Gosselin, Bunk’s decision to
bypass proof of actual damages and instead seek only civil
penalties demonstrates that he suffered no injury in fact caused
by Gosselin, such being an essential component of standing. See
25
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)
(observing that “irreducible constitutional minimum of standing
contains three elements,” i.e., injury in fact, traceability of
injury to defendant’s conduct, and redressability); accord Vt.
Agency of Natural Res. v. United States ex rel. Stevens, 529
U.S. 765, 771 (2000).
The Supreme Court’s decision in Vermont Agency is
dispositive of the question. Therein, Justice Scalia, writing
for the Court, reiterated that “[a]n interest unrelated to
injury in fact is insufficient to give a plaintiff standing.”
529 U.S. at 772. The Court nevertheless instructed “that
adequate basis for the relator’s suit . . . is to be found in
the doctrine that the assignee of a claim has standing to assert
the injury in fact suffered by the assignor.” Id. at 773. The
relator provisions of the FCA suffice in that regard, the Court
reasoned, insofar as they occasion a “partial assignment of the
Government’s damages claim.” Id. This assignment in part,
especially when viewed in the context of the long tradition of
qui tam actions — originating in England about 500 years before
the ratification of the Constitution — see id. at 774-75,
26
“leaves no room for doubt that a qui tam relator under the FCA
has Article III standing.” Id. at 778. 13
Gosselin, however, seizes upon the Supreme Court’s
characterization of an FCA action as alleging both an “injury to
[the government’s] sovereignty arising from violation of its
laws” and a “proprietary injury resulting from the alleged
fraud,” 529 U.S. at 771, asserting that the civil penalties
provision redresses strictly the former, with damages payable
dollar for dollar to remedy the latter. Gosselin suggests that
only the proprietary injury is an injury in fact for standing
purposes, and it relies for support on the Vermont Agency
language quoted in the preceding paragraph, pointing out that
Justice Scalia spoke only of the FCA assigning the “damages
claim” on behalf of the government. Thus, the argument goes,
Bunk’s election to forgo proof of damages and pursue penalties
solely for the government’s sovereignty injury — purportedly
non-assignable — strips him of standing to maintain suit and
thereby moots his portion of the case. See Arizonans for
Official English v. Arizona, 520 U.S. 43, 68 n.22 (1997)
13
The Supreme Court’s invocation of the principle of
assignment to establish relators’ standing under the FCA is
sufficient to distinguish Lujan and analogous authorities relied
on by Gosselin, in which plaintiffs suing to vindicate
exclusively their own rights were required to have themselves
sustained a palpable injury in fact.
27
(“Mootness has been described as the doctrine of standing set in
a time frame: The requisite personal interest that must
commence at the outset of the litigation . . . must continue
throughout its existence.” (citations and internal quotation
marks omitted)).
We are scarcely convinced that the Supreme Court in Vermont
Agency would have embarked by mere implication on the novel
dissection urged by Gosselin, without so much as a nod that it
was breaking new ground. The judgment entered below,
unchallenged on its merits, confirms that the government
sustained injury by virtue of Gosselin’s conduct, and it is “the
United States’ injury in fact,” without reference to the source
of that injury, that the Court has said “suffices to confer
standing” on FCA relators like Bunk, who is not otherwise
alleged unqualified. See Vermont Agency, 529 U.S. at 774. That
Bunk made a tactical decision during the course of litigation to
pursue only civil penalties altered in no material way the
fundamental legal relationship among him as plaintiff and
assignee, Gosselin as defendant and tortfeasor, and the
government as victim and assignor.
Moreover, in documenting the use of qui tam actions over
the centuries to buttress the concept of relator standing, the
Vermont Agency Court discussed so-called “informer” statutes
that had been enacted in England and, later, in the American
28
colonies. These statutes, designed to redress a host of wrongs
such as piracy, privateering, and horse thievery, “allowed
informers to obtain a portion of the penalty as a bounty for
their information, even if they had not suffered an injury
themselves.” See 529 U.S. at 775-77 & nn. 6-7. We think it
highly unlikely that the Court would have relied on the informer
statutes to reach the result it did in Vermont Agency had it
intended future relators, such as Bunk, seeking precisely the
same sorts of penalty bounties, to be without standing to sue.
Successful FCA relators can and do recover both damages and
civil penalties. See 31 U.S.C. § 3729(a) (specifying
defendant’s liability “for a civil penalty . . . plus 3 times
the amount of damages” sustained by the government (emphasis
added)). The two remedies were thus designed to be unitary, or
at least complementary. See United States ex rel. Marcus v.
Hess, 317 U.S. 537, 551-52 (1943) (ascertaining that dual remedy
provisions facilitate the “chief purpose” of the FCA to ensure
“that the government would be made completely whole,” and
acknowledging the problem Congress confronted in “choosing a
proper specific sum which would give full restitution”).
Exemplifying the intended synergy, the penalty provision
fulfills a function similar to that of the damages multiplier.
Cf. United States v. Bornstein, 423 U.S. 303, 315 (1976)
(touting usefulness of multiplier “to compensate the Government
29
completely for the costs, delays, and inconvenience occasioned
by fraudulent claims”). As the court of appeals emphasized in
United States ex rel. Main v. Oakland City University, 426 F.3d
914, 917 (7th Cir. 2005), the FCA “provides for penalties even
if (indeed, especially if) actual loss is hard to quantify.”
The practical integration of the remedial provisions
strongly suggests that they should not be evaluated in isolation
for standing purposes. This seems all the more so when one also
considers the similar integration between FCA relators and the
government; the statute provides that both share in the ultimate
recovery regardless of which directs the litigation. To deny a
relator its bounty on the ground that it cannot pursue penalties
alone would be to deny the United States due recompense, or, in
the alternative, to deprive the government of its choice to
forgo intervention. We decline Gosselin’s invitation to
interpret the FCA in a manner that disrupts the statute’s
careful design. In holding that relators seeking solely civil
penalties enjoy standing to sue, we find ourselves in agreement
with the two other circuits that have decided the issue. See
United States ex rel. Stone v. Rockwell Int’l Corp., 282 F.3d
787, 804 (10th Cir. 2002), rev’d on other grounds, 549 U.S. 457,
479 (2007); Riley v. St. Luke’s Episcopal Hosp., 252 F.3d 749,
752 n.3 (5th Cir. 2001) (en banc).
30
2.
Gosselin presses on, insisting that if Bunk’s standing
depends on Congress having assigned him the right under the FCA
to seek redress for the government’s sovereign injury, such an
action by the legislative branch contravenes Article II of the
Constitution, specifically the Appointments Clause and the Take
Care Clause. The former confers on the President the exclusive
authority to appoint all “Officers of the United States,” except
those who require “the Advice and Consent of the Senate” or
whose appointment Congress otherwise vests “in the Courts of
Law, or in the Heads of Departments.” U.S. Const. art. II, § 2,
cl. 2. The latter mandates that the President “take Care that
the Laws be faithfully executed.” Id. art. II, § 3. Gosselin
contends that Congress, through the FCA, has effectively
appointed Bunk an officer of the United States. This alleged
usurpation of the President’s constitutional role, the argument
goes, has further resulted in Bunk impermissibly wielding the
power reserved to the executive to penalize Gosselin’s violation
of federal law.
Being derivative of the failed threshold assault on relator
standing pursuant to Article III of the Constitution, the more
nuanced Article II attacks on the FCA were purposely and
pointedly left unresolved by the Supreme Court in Vermont
Agency. Justice Scalia was careful to note that the Court
31
“express[ed] no view” on the constitutionality of the FCA under
the Appointments and Take Care Clauses, because the statute was
not contested on either of those bases. See 529 U.S. at 778
n.8. Importantly for our purposes, however, the Court
recognized that “the validity of qui tam suits under those
provisions,” in contrast to the standing afforded the relator to
bring suit, was not “a jurisdictional issue” requiring analysis
and decision. Id.
The same is true here. Gosselin’s constitutional
challenges to the FCA are newly raised in its cross-appeal,
having never been presented to the district court for
consideration in the first instance. Although the question of
Bunk’s standing strikes at the heart of federal jurisdiction
limited under Article III to cases and controversies, whether
the FCA contravenes Article II does not.
As one of our esteemed colleagues has aptly observed, “it
remains the law of this circuit that when a party to a civil
action fails to raise a point at trial, that party waives review
of the issue unless there are exceptional or extraordinary
circumstances justifying review.” Corti v. Storage Tech. Corp.,
304 F.3d 336, 343 (4th Cir. 2002) (Niemeyer, J., concurring)
(collecting cases). We discern no compelling reason to depart
from the usual rule in this case. See Singleton v. Wulff, 428
U.S. 106, 121 (1976) (“The matter of what questions may be taken
32
up and resolved for the first time on appeal is one left
primarily to the discretion of the courts of appeals.”). The
Vermont Agency Court exercised its discretion to withhold ruling
on the Article II challenges not properly before it, and, under
similar circumstances, we do the same.
B.
1.
We move on to address Bunk’s appeal of the district court’s
ruling that it lacked authorization to enter judgment against
Gosselin on the 9,136 false claims for civil penalties amounting
to less than $50 million and change (insofar as $248,000 can be
considered “change”), notwithstanding that Bunk was willing to
accept a remittitur to $24 million. Bunk suggests that, to the
extent the district court correctly concluded that the Eighth
Amendment is contravened if the full force of the FCA is brought
to bear on Gosselin, the statute can nonetheless be reformed
within constitutional tolerances by imposing a civil penalty on
fewer claims than proved or stipulated; the same result could be
obtained by disregarding the $5,500 floor per claim. In support
of the reformation approach, Bunk points to Ayotte v. Planned
Parenthood of Northern New England, in which the Supreme Court
explained that “when confronting a flaw in a statute, we try to
limit the solution to the problem. We prefer, for example, to
enjoin only the unconstitutional applications of a statute while
33
leaving other applications in force.” 546 U.S. 320, 328-29
(2006). We are content to leave the FCA as it is, however, by
reaching the same result another way.
We begin with the proposition that litigation usually
commences to redress a perceived wrong against one or more
private persons or entities, or the public at large. As a
society, we seek to encourage this structured, civilized form of
dispute resolution, so it makes sense that parties availing
themselves of the courts to sue possess considerable latitude —
so far as may be fair to the defendant — over how the suit
progresses and ultimately culminates. In the normal course, the
plaintiff or prosecutor determines the claims or charges to
bring, how much discovery or investigation is reasonable to
undertake, the evidence and testimony introduced to sustain the
burden of proof, and whether to initiate or accept an offer of
compromise.
The primacy of the complaining party is reflected in the
legal vernacular. We often speak of the civil plaintiff being
the “master of his complaint.” See, e.g., Lincoln Prop. Co. v.
Roche, 546 U.S. 81, 91 (2005) (“In general, the plaintiff is the
master of the complaint and has the option of naming only those
parties the plaintiff chooses to sue.” (citation and internal
quotation marks omitted)); Johnson v. Advance Am., 549 F.3d 932,
937 (4th Cir. 2008) (acknowledging that “plaintiffs, as masters
34
of their complaint, can choose to circumscribe their class
definition” to escape federal jurisdiction under Class Action
Fairness Act); Pueschel v. United States, 369 F.3d 345, 356 (4th
Cir. 2004) (explaining that claim raised in prior proceedings
but not adjudicated was subsequently precluded because plaintiff
was responsible “as the master of her complaint, to make sure
that the district court identified all of her claims”).
Similarly, in the criminal context, it is taken for granted that
prosecutors enjoy substantial discretion with regard to the
persons and offenses they elect to charge. See Bordenkircher v.
Hayes 434 U.S. 357, 364 (1978) (“In our system, so long as the
prosecutor has probable cause to believe that the accused
committed an offense defined by statute, the decision whether or
not to prosecute, and what charge to file or bring before a
grand jury, generally rests entirely in his discretion.”).
It is hardly surprising, then, that the FCA was crafted in
acknowledgment of the flexibility typically afforded the
government to right a public wrong. At the threshold, the
United States is vested with the discretion to file or forgo
suit. See 31 U.S.C. § 3730(a) (providing that, after diligent
investigation, “[i]f the Attorney General finds that a person
has violated or is violating section 3729, the Attorney General
may bring a civil action under this section against the person
(emphasis added)). If a relator initiates suit, then the
35
government “may elect to intervene and proceed with the action.”
Id. § 3730(b)(2) (emphasis added). Upon intervention and
notwithstanding the objection of the relator, the government
may, after a hearing before the court, dismiss or settle the
suit, see id. § 3730(c)(2)(A)-(B), prerogatives that, absent
intervention, inhere in either the government or a relator suing
as the government’s assignee.
By requesting the district court to enter judgment for a
reduced amount of $24 million on the claims he brought, Bunk, as
the government’s assignee, was merely exercising his discretion
to attempt to bring the case to a suitable conclusion following
the jury’s verdict in his favor. A dispute can be settled, of
course, at any time before litigation has commenced, during its
pendency, or after it has finished. And settlements often take
the form of a consent judgment. Bunk’s proposal, being
unilateral, was not a settlement. It was, however, doubtlessly
intended to make the prospect of settlement more palatable for
Gosselin, or — failing that immediate resolution — to smooth
Bunk’s path before the district court and on appeal against the
looming Eighth Amendment challenge.
In short, Bunk’s effort at a voluntary remittitur was just
the sort of arrow that a plaintiff is presumed to possess within
his quiver. It must be the rare case indeed where the plaintiff
prevails before a jury, then, under no overt influence from the
36
court or the defendant, elects to take a lesser judgment before
the ink has dried on the verdict form. Nevertheless, we imagine
that the plaintiff’s discretion to willingly do so is virtually
unbounded. In United States v. Mackby, 339 F.3d 1013 (9th Cir.
2003), the district court entered judgment against the defendant
under the FCA for treble damages in excess of $174,000 stemming
from 1459 false claims. Although the defendant was also liable
for civil penalties on each claim, the court, at the
government’s request, assessed the $5,000 minimum on only 111 of
the claims to add $555,000 to the judgment. Neither the court
nor the defendant questioned the government’s discretion to
proceed in such a manner. Accord Peterson v. Weinberger, 508
F.2d 45, 55 (5th Cir. 1975) (approving entry of judgment on
civil penalties for only 50 of 120 false claims “where the
imposition of forfeitures might prove excessive and out of
proportion to the damages sustained by the Government”).
By our observations, we do not mean to imply that a
district court is at the mercy of either the government or a
relator in an FCA proceeding. Quite the opposite is true: the
court remains in firm control of those aspects of the litigation
over which it has always had domain, including without
limitation scheduling and discovery, the admission and exclusion
of evidence, and the conduct of trial. But the court must
permit the government or its assignee the freedom to navigate
37
its FCA claims through the uncertain waters of the Eighth
Amendment.
We reluctantly acknowledge that the perceived tension
between the FCA and the Excessive Fines Clause of the Eighth
Amendment, which so understandably concerned the district court,
is a monster of our own creation. The FCA as enacted could
arguably have been construed as authorizing a total civil
penalty not to exceed $11,000 (in addition to treble damages)
against anyone planning or executing a scheme to defraud the
government. See 31 U.S.C. § 3729(a) (providing that any person
presenting, facilitating through certain means, or conspiring to
present government with a false or fraudulent claim “is liable
to the United States Government for a civil penalty” now ranging
from $5,500 to $11,000 (emphasis added)).
We eschewed such a narrow interpretation, however, in
Harrison v. Westinghouse Savannah River Co., 176 F.3d 776 (4th
Cir. 1999) (“Harrison I”), a relator’s appeal from the district
court’s dismissal order, wherein the defendant was alleged to
have misrepresented costs and withheld disclosures to obtain
subcontracting approval from the government. With respect to
the defendant’s requests for reimbursement of its payments to
the subcontractor, we concluded that the FCA “attaches
liability, not to the underlying fraudulent activity . . . but
to the claim for payment.” Harrison I, 176 F.3d at 785
38
(citation and internal quotation marks omitted). Moreover,
“each [invoice] constitutes a claim under the False Claims Act,”
id. at 792, on the ground that these invoiced “claim[s] for
payment . . . [were] . . . submitted under a contract which was
fraudulently approved,” id. at 793-94. In so ruling, we took
note of substantial amendments to the FCA thirteen years
earlier, reflecting the determination of Congress to “‘enhance
the Government's ability to recover losses sustained as a result
of fraud.’” Id. at 784 (quoting S. Rep. No. 99-345, at 2
(1986), reprinted in 1986 U.S.C.C.A.N. 5266)).
That approach proved just the tonic in the Harrison cases,
where, it would turn out, the defendant was penalized nearly
$200,000 for submitting twenty-five false invoices. See United
States ex rel. Harrison v. Westinghouse Savannah River Co., 352
F.3d 908, 913, 920 (4th Cir. 2003) (“Harrison II”). It was
inevitable, we suppose, in view of the vast number of government
contracts — many of prodigious size and sophistication — that
we would confront FCA actions involving thousands of invoices,
thus exposing culpable defendants to millions of dollars of
liability for civil penalties. We are entirely comfortable with
that proposition. When an enormous public undertaking spawns a
fraud of comparable breadth, the rule set forth in Harrison I
helps to ensure what we reiterate is the primary purpose of the
39
FCA: making the government completely whole. See Harrison II,
352 F.3d at 923 (citing Hess, 317 U.S at 551-52).
The district court’s methodology cannot be said to have
furthered that statutory purpose. Indeed, an award of nothing
at all because the claims were so voluminous provides a perverse
incentive for dishonest contractors to generate as many false
claims as possible, siphoning ever more resources from the
government. Though we agree that the number of false invoices
presented is hardly a perfect indicator of the relative
liability that ought to attach to an FCA defendant, injustice is
avoided in the particular case by the discretion accorded the
government and a relator to accept reduced penalties within
constitutional limits, as ultimately adjudged by the courts.
2.
An important question remains as to whether $24 million is
an excessive fine as applied to Gosselin’s misconduct in
connection with the DPM scheme. According to the Supreme Court,
“[t]he touchstone of the constitutional inquiry under the
Excessive Fines Clause is the principle of proportionality: The
amount of the forfeiture must bear some relationship to the
gravity of the offense that it is designed to punish.” United
States v. Bajakajian, 524 U.S. 321, 334 (1998). The test is by
no means onerous. A cumulative monetary penalty such as that
imposed under the FCA will violate the Eighth Amendment
40
proscription against excessive fines in the infrequent instance
that it is “grossly disproportional to the gravity of a
defendant’s offense.” Id.
The defendant in Bajakajian, travelling with his family
from the United States to Cyprus, was detained by customs
officials in Los Angeles upon being discovered with cash in his
possession totalling $357,144. The defendant pleaded guilty to
attempting to leave the United States with more than $10,000
without reporting it, see 31 U.S.C. § 5316(a)(1)(A), and the
government sought forfeiture of the entire amount. In reviewing
the judgment of the Ninth Circuit that the government was
entitled to only $15,000, the Supreme Court assessed the gravity
of the defendant’s offense by its nature and the harm it caused.
In that regard, the Court explained that the defendant’s
“crime was solely a reporting offense. It was permissible to
transport the currency out of the country so long as he reported
it.” Bajakajian, 524 U.S. at 337. Moreover, the “violation was
unrelated to any other illegal activities. The money was the
proceeds of legal activity and was to be used to repay a lawful
debt.” Id. at 338. Further, the Court observed, the defendant
did “not fit into the class of persons for whom the statute was
principally designed: He is not a money launderer, a drug
trafficker, or a tax evader.” Id. Conviction of the failure-
to-report offense carried a term of imprisonment of no longer
41
than six months and a maximum fine of $5,000, “confirm[ing] a
minimal level of culpability.” See id. at 338-39. Finally, the
resultant harm from the defendant’s failure to report the cash
he was carrying was described as “minimal,” with “no fraud on
the United States, and . . . no loss to the public fisc.” Id.
at 339. The Court thus affirmed the judgment of the court of
appeals, recognizing that the amount sought was “larger than the
$5,000 fine imposed by the District Court by many orders of
magnitude, and it bears no articulable correlation to any injury
suffered by the Government.” Id. at 340.
The circumstances of this appeal could not be more readily
distinguishable from those evaluated by the Supreme Court in
Bajakajian. Signed into law by President Lincoln in the midst
of the Civil War, the FCA was enacted specifically “in response
to overcharges and other abuses by defense contractors.”
Harrison I, 176 F.3d at 784. As a defense contractor, Gosselin
is precisely within the class of wrongdoers contemplated by the
FCA. Gosselin did not commit some sort of technical offense;
its misdeeds were of substance. For analogous misconduct in
connection with the ITGBL program as it pertained to the
Cartwright Channels, Gosselin was convicted of conspiring to
defraud the United States, as proscribed by 18 U.S.C. § 371, and
of conspiring to restrain trade, in contravention of 15 U.S.C.
42
§ 1. Those offenses carry maximum prison terms under the
pertinent statutes of, respectively, five and ten years.
Though Bunk sought no damages, the question of economic
harm to the government arising from the DPM false statements was
fiercely contested before the district court. The court
ultimately concluded that there was insufficient evidence of any
harm, a notion seemingly inconsistent with Gosselin’s apparent
profit motive in making the statements at issue. The undisputed
evidence revealed a substantial short-term price increase under
the DPM contract for similar services previously provided,
perhaps in excess of $2 million, and there is no doubt that the
government has suffered significant opportunity costs from being
deprived of the use of those funds for more than a decade.
For purposes of our Eighth Amendment analysis, however, the
concept of harm need not be confined strictly to the economic
realm. The prevalence of defense contractor scams, as often
portrayed in the media, shakes the public’s faith in the
government’s competence and may encourage others similarly
situated to act in a like fashion. We made the proper point
more than fifty years ago in Toepleman v. United States:
[N]o proof is required to convince one that to the
Government a false claim, successful or not, is always
costly. Just as surely, against this loss the
Government may protect itself, though the damage be
not explicitly or nicely ascertainable. The [FCA]
seeks to reimburse the Government for just such
losses. For a single false claim[, the civil penalty]
43
would not seem exorbitant. Furthermore, even when
multiplied by a plurality of impostures, it still
would not appear unreasonable when balanced against
the expense of the constant Treasury vigil they
necessitate.
263 F.2d 697, 699 (4th Cir. 1959). Thus, to analyze whether a
particular award of civil penalties under the FCA is “grossly”
disproportionate such as to offend the Excessive Fines Clause,
we must consider the award’s deterrent effect on the defendant
and on others perhaps contemplating a related course of
fraudulent conduct.
Under the circumstances before us, we are satisfied that
the entry of judgment on behalf of Bunk for $24 million on the
DPM claim would not constitute an excessive fine under the
Eighth Amendment. That amount, we think, appropriately reflects
the gravity of Gosselin’s offenses and provides the necessary
and appropriate deterrent effect going forward. To the extent
that the district court was of the view that the constitutional
threshold could not exceed $1.5 million, we have reviewed its
decision de novo, see Bajakajian, 524 U.S. at 336 & n.10, and
have come to the different conclusion set forth above. 14
14
Gosselin interposes a number of arguments to the effect
that, for myriad reasons, Bunk and the government are estopped
from advocating for a substantial penalty. See Br. for
Defendants-Appellees/Cross Appellants at 36-39, 59-65. We have
carefully considered each of these arguments, and we reject
them.
44
C.
The government appeals the district court’s Rule 50(a)
determination as to the larger portion of its FCA claim, that
is, those aspects of the claim seeking to hold Gosselin liable
for its price-fixing conduct affecting all channels with a
German terminus. For purposes of this discussion, we exclude
the smaller portion of the FCA claim relating to the Cartwright
Channels, for which the government has received judgment and has
not appealed. See supra note 9. The linchpin of the court’s
decision was a provision of the Shipping Act of 1984, 46 U.S.C.
App. §§ 1701-1719, barring application of the antitrust laws to
“any agreement or activity concerning the foreign inland segment
of through transportation that is part of transportation
provided in a United States import or export trade.” Id.
§ 1706(a)(4). 15 The court concluded that the provision
accurately described Gosselin’s agreements and activity to
inflate the landed rate, reasoning further “that a false claim
under the FCA cannot be predicated on price fixing conduct that
15
The Shipping Act was amended and recodified in 2006, with
the result that substantially the same provision now appears at
46 U.S.C. § 40307(a)(5). The referenced exemption applies by
its literal terms merely to liability under the antitrust laws,
but, strictly for purposes of this decision, we assume that it
may also apply to exempt persons from FCA liability.
45
enjoys a statutory immunity from the antitrust laws.” J.A.
1137. 16
In the criminal proceedings pertaining to the Cartwright
Channels, during which Gosselin admitted to similar price
fixing, we rejected the same immunity argument. See United
States v. Gosselin World Wide Moving, N.V., 411 F.3d 502, 509-11
(4th Cir. 2005). Mindful of the canon that exemptions from
antitrust liability are to be narrowly construed, our friend
Judge Wilkinson reasoned that because Gosselin’s “collusive
effort was aimed at the entire through transportation market,
rather than just the foreign inland segment, we do not think
that they can claim exemption.” Id. at 510.
Put another way, Gosselin’s price-fixing scheme did not
inflate in isolation merely the landed rate quoted the freight
forwarders; it inflated the all-inclusive through rates that the
freight forwarders were induced to bid (and MTMC was compelled
to pay) on each of the channels between the United States and
Germany. The scheme thus concerned more than just the foreign
16
In deciding the immunity issue, the district court relied
in part on the Ninth Circuit’s opinion in United States v. Tucor
International, Inc., 189 F.3d 834, 836-38 (9th Cir. 1999),
wherein the court of appeals declared the defendants immune from
antitrust liability pursuant to § 1706(a)(4). The facts and
circumstances surrounding Gosselin’s case are dissimilar to
those in Tucor, which, in any event, is not the law of this
Circuit.
46
inland segments from which the landed rate was derived. That
the effect may have been more drastic in the Covan and
Cartwright Channels — burdened with the additional encumbrance
of Gosselin’s bid-rigging efforts — is insufficient reason to
segregate the other channels for purposes of the immunity
analysis.
Adhering to our decision in the criminal proceedings, the
district court correctly granted summary judgment against
Gosselin as to liability on that portion of the FCA claim
regarding the Cartwright Channels. The court, however,
incorrectly ruled as a matter of law in Gosselin’s favor on the
company’s price-fixing conduct affecting the remaining German
channels, including the Covan Channels. Gosselin could not have
successfully asserted Shipping Act immunity anew to defeat the
preclusive effect of our prior judgment, and it should not have
been suffered to prevail on the same argument with respect to
the nearly identical circumstances presented by the Covan
Channels, or to the materially similar circumstances common to
all the German channels. The jury should have been allowed to
consider the government’s entire case, but, inasmuch as it was
not so permitted, the verdict in favor of Gosselin must be
vacated as infirm. On remand, the district court shall conduct
further proceedings, not inconsistent with this opinion, as to
the remainder of the government’s FCA claim.
47
IV.
Pursuant to the foregoing, the judgment of the district
court is affirmed as to Gosselin’s cross appeal. We also affirm
the entry of judgment in favor of Bunk, but we reverse and
remand the court’s entry of no monetary award, instructing it to
amend the judgment to award $24 million. Lastly, we vacate the
court’s judgment in favor of the United States so that it may
conduct further proceedings on what remains of the government’s
FCA claim and reenter judgment as appropriate.
No. 12-1417 AFFIRMED
No. 12-1369 AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED WITH INSTRUCTIONS
No. 12-1494 VACATED AND REMANDED
48
SHEDD, Circuit Judge, concurring in part and dissenting in part:
I concur in all but Part III-C of the majority opinion. In
my view, the district court correctly determined that Gosselin’s
activity was immunized by the Shipping Act, 46 U.S.C. App.
§ 1706(a)(4), and I would affirm substantially for the reasons
given by the district court. See United States v. Birkart
Globistics GMBH & Co., No. 1:02cv1168 (E.D. Va. Aug. 26, 2011).
49