CIVIL FALSE CLAIMS ACT: Fourth Circuit Holds That A $24 Million FCA Penalty Is Not An 'Excessive Fine' Even Where The Relator Fails To Prove That The United States Suffered Any Economic Harm

Sometimes, an opinion has an "Alice in Wonderland" quality to it, where a court seems to come up with a theory out of thin air. That quality certainly seems to permeate an important aspect of the recent decision by the U.S. Court of Appeals for the Fourth Circuit in United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., No. 12-1369 (4th Cir. Dec. 19, 2013). Dispensing with decades of Supreme Court jurisprudence—including one case argued by Chief Justice Roberts before he took the federal bench—the Fourth Circuit ordered the trial court to impose $24 million in FCA penalties against the defendants following a trial at which the relator pointedly sought no FCA damages and no proof of economic harm to the United States was ever established. This result is squarely at odds with a number of constitutional protections, particularly the Eighth Amendment‟s Excessive Fines Clause, as well as a number of decisions applying that constitutional provision to FCA penalty awards. The Fourth Circuit‟s sole reliance on intangible and non-economic factors such as "deterrent effects" and public policy considerations to override the traditional excessive fines analysis lacks precedent and should result in en banc, and, if necessary, Supreme Court review.

Background in the Bunk Case

The penalties at issue in Bunk arose in a consolidated case that began as separate qui tam suits brought by two relators who alleged that the defendants engaged in bid-rigging schemes designed to inflate the rates charged to the Defense Department for the movement of U.S. military household goods between the United States and Europe and within Europe. The government intervened with respect to the cross-ocean moves, but did not intervene with respect to the intra-Europe moves—the so-called Direct Procurement Method or "DPM" claims—which were the focus of the Fourth Circuit‟s penalty analysis. By the time of trial in the Eastern District of Virginia, Gosselin and its executive were the only remaining defendants.1

As to the DPM claims, one of the relatorsMr. Bunkclaimed that the defendants violated the FCA by falsely certifying that their prices were independently determined. However, Mr. Bunk decided to pursue only FCA penalties, not damages. Following lengthy trial proceedings, the jury held that Gosselin was liable under the FCA for its role in the DPM scheme. Subsequently, the trial judge determined that each of the 9,136 invoices that had been submitted under the DPM...