Fourth Circuit Oral Argument Considers Questions Concerning Constitutionally Problematic FCA Fines

The Fourth Circuit recently heard oral argument in United States ex rel. Bunk v. Gosselin World Wide Moving (12-1369).1 During oral argument, the panel explored, among other issues, how to calculate fines under the FCA when the minimum fine called for by the statute violates the Eighth Amendment of the Constitution. While the panel in Bunk did not address the Eighth Amendment issues directly, it is poised to answer a series of questions that will have considerable practical significance for FCA defendants. Indeed, as much as $50 million rests on the court's decision, and the Fourth Circuit's ruling has the potential to be an important guidepost as courts around the country grapple with potential constitutional limits to FCA fines.

District Court's Decision in Bunk

In Bunk, relators brought a complaint alleging that several defendants violated the FCA by participating in bid rigging and price fixing in obtaining contracts for transporting household goods for U.S. military and civilian personnel stationed overseas. The allegations involved multiple different claims, some of which the government intervened with respect to, and one which the relators were left to pursue. With respect to the claim for which the relators were responsible, a jury found that certain defendants, including Gosselin Worldwide Moving, N.V. and Gosselin Group, N.V (collectively "Defendants"), knowingly submitted a false Certificate of Independent Bid Pricing to the government. The district court found that there was adequate evidence to support this finding and that each of the 9,136 invoices submitted to the government pursuant to the Defendants' contract with the government amounted to a violation of the FCA. Multiplying the number of false invoices by the minimum fine of $5,500 per violation under the FCA, the district court later determined that the minimum fine it could impose was approximately $50 million. The district court held that this fine was excessively high because there were a number of mitigating factors and no proven economic harm to the government. Although the government contended that it was only seeking sanctions for about half of the proven false claims, for a total fine of $24 million, the district court held that it had no authority to impose a fine below the FCA's statutory minimum, so it severed the penalty provision as applied, which resulted in no fine.2 The court entered judgment accordingly pursuant to Fed. R. Civ. P. 54(b). Both relators...