District Court Holds Mandatory $50 Million False Claims Act Civil Penalty Unconstitutionally Excessive; Finds Itself Powerless To Impose Lesser Penalty

Article by Jonathan G. Cedarbaum , Jennifer M. O'Connor , David W. Ogden , Carl J. Nichols , Todd R. Steggerda and Matthew D. Benedetto In the latest turn in the developing caselaw on application of the Excessive Fines Clause to False Claims Act remedies, a judge on the U.S. District Court for the Eastern District of Virginia handed down a decision last week concluding that he could not impose any civil penalty in a False Claims Act ("FCA") case despite a jury finding that the defendant was liable for submitting 9,136 false claims. See United States ex rel. Bunk v. Birkart Globistics GmbH & Co., Nos. 1:02cv1168 and 1:07cv1198 (AJT/TRJ), 2012 WL 488256 (E.D. Va. Feb. 14, 2012). The qui tam relators had not attempted to prove actual damages to the Government at trial, and the court concluded that the Government had in fact suffered no economic harm. But the FCA would have required a civil penalty of at least $50 million. The court held that this would be unconstitutionally excessive under the Eighth Amendment—as would an alternative $24 million fine proposed by the relators and the Government. The court went on to determine that, in the face of the FCA's specification of a particular range of penalty amounts, it lacked discretion or authority to impose a lesser penalty that would fall within constitutional limits. Accordingly the court concluded that it could impose no penalty at all. Thus, the defendant was found liable but was not required to pay any damages or civil penalties.

The Decision

The relators alleged, in part, that the defendants, Gosselin Worldwide Moving N.V., its successor, and a Gosselin official (collectively "Gosselin"), had violated the FCA by filing a false Certificate of Independent Pricing ("CIPD") when Gosselin bid for a contract to transport military household goods between U.S. military installations in different countries. The relators contended the CIPD was false because Gosselin and other potential bidders had entered into a subcontract price-fixing agreement prior to bidding on the contract. Id. at *3. Although the relators initially alleged damages, they did not seek to prove damages at trial. Id. The parties stipulated that Gosselin had filed 9,136 invoices under the contract. The jury found Gosselin liable for the alleged bid-rigging. Id. The FCA provides that a violator "is liable to the United States Government for a civil penalty of not less than" $5,500 and not more than $11,000, as adjusted for inflation...