by Ben Vernia | January 8th, 2014
On December 19, the Court of Appeals for the Fourth Circuit, in U.S. ex rel. Bunk v. Gosselin World Wide Moving, N.V., reversed an Eastern District of Virginia judge’s decisions denying penalties on one set of claims, pursued by a relator, and holding the defendant shipping companies and their executive immune on another set, pursued by the government.
The case involved a scheme to fix prices on contracts for shipping the household goods of military service members both between the United States and Germany, and within Europe. The defendants had already been convicted under the antitrust laws for the conduct, and the civil case was tried to a jury. At the civil trial, the relators (there were originally two cases) agreed to forego damages and seek only penalties. After the jury found for the relator on over nine thousand claims, the relator offered to accept a remittitur of the penalties from over $50 million down to $24 million. The trial judge agreed with the defendants that this amount was an excessive fine under the Eighth Amendment, and awarded the relators nothing for their claims.
Although the District Court found the defendants liable for false claims on the portion of the scheme advanced by the government, it refused to award any damages, reasoning that the nearly $2.6 million in trebled damages had already been more than paid by settling codefendants; instead, the court imposed a single $5500 penalty. The trial judge also held that the company was immune for price-fixing under a Shipping Act’s provision regarding transportation solely within a foreign country.
The Court of Appeals rejected all of the District Court’s principal conclusions. But first it concluded that the relator had standing to sue, even though he had agreed to seek only penalties. That decision, the Court reasoned, “altered in no material way the fundamental legal relationship among him as plaintiff and assignee,” which the Supreme Court had found in the Vermont Agency case. The Court likewise rejected the defendants’ challenge to the relator’s standing on Appointments and Take Care Clause grounds, reasoning that the defendants had waived those arguments by failing to raise them before the trial court.
With respect to the size of the penalty, the Court first accepted the relator’s position that the remittitur value ($24 million) and not the statutory floor (approximately $50 million) was the relevant amount; the relator was the “master of his complaint,” the Court wrote, and offering the remittitur “was just the sort of arrow that a plaintiff is presumed to possess within his quiver.” The Court then criticized the District Court’s award of nothing at all, noting that doing so merely because of the large number of claims could perversely incentivize wrongdoers to submit numerous claims. Using the remitted amount was not excessive, the Court concluded, in light of the facts that the defendants were within the core class of malefactors the False Claims Act was intended to address (wartime profiteers), and the damages to the government were significant, possibly exceeding $2 million.
Finally, the Court rejected the defendants’ argument that the Shipping Act immunized them from liability. The intranational immunity provision in the Act, the Court reasoned, did not apply because the defendants’ conduct affected international shipping rates, too.
