Updated Feb. 29
Weighing the constitutionality of civil penalties under the False Claims Act, a federal judge in Alexandria has refused to impose a minimum $50.2 million fine against an international moving and shipping company for its fraudulent conduct.
The judge, Anthony Trenga of U.S. District Court for the Eastern District of Virginia, called the statutorily required fine “grossly disproportional” to allegations Gosselin Worldwide Moving N.V. bilked the federal government.
In a decision (PDF) published this week, Trenga further said he doesn’t have the power to fashion a penalty other than the one the statute required him to impose. The U.S. Supreme Court and the U.S. Court of Appeals for the Fourth Circuit have not specifically addressed the issue.
“The court is driven to its conclusion that it must simply refuse to enforce the mandated penalty after finding it unconstitutional under the facts of this case, and not substitute its own fashioned penalty, in large part due to the structure and language of the FCA itself,” Trenga wrote.
Trenga said he is unwilling “to rewrite the FCA, as given to this court, in order to fashion a constitutional civil penalty under the facts of this case.”
Mark Hanna of the whistleblower firm Murphy Anderson in Washington said the whistleblowers are planning to appeal Trenga’s decision. The Justice Department, which intervened in the suit, did not immediately provide comment.
Jones Day partner Kerri Ruttenberg, who represented Gosselin, heralded the trial judge’s decision.
Ruttenberg called Trenga’s ruling significant because “there really hasn’t been a lot of analysis about, when in the context of False Claims Act case, a civil penalty is unconstitutionally excessive.”
A jury this summer in Alexandria ruled in large part for Gosselin, Ruttenberg said. The panel found the company liable on two claims, including a DOJ claim in which the company had already paid hundreds of thousands of dollars in an earlier antitrust case in 2003. Trenga's decision addressed a claim from the whistleblower themselves.
Justice Department lawyers and the whistleblowers had asked Trenga to impose a $24 million civil penalty. A DOJ Civil Division lawyer, Meredith Toole, said in court papers that the government and whistleblowers were “exercising their prosecutorial discretion” in asking for a lesser amount than the $50.2 million.
The government said $24 million “is unquestionably within the constitutional limit of the Excessive Fines Clause of the Eighth Amendment.” Trenga, according to the government, had no authority to reduce the number civil penalties below the amount the statute required.
A whistleblower alleged Gosselin filed a false “certificate of independent pricing” in connection with its bid in 2001 for the transportation of goods for military personnel between and among stations in Europe.
The certificate affirmed that the prices quoted in the offer were arrived at independently and without any agreement with a competitor. The suit alleged Gosselin and other potential bidders entered into a subcontract price-fixing agreement.
Trenga said he weighed, among other things, the extent of the harm and the seriousness of the offense relative to the fine. The False Claims Act must be assessed for each false claim and that each claim under a “fraudulently induced” contract is a separate false claim.
The judge could have punished Gosselin for each of the 9,136 invoices it submitted under the three-year 2001 military transportation contract. The math: the civil penalty range would have been between about $50.2 million and $100.5 million.
The conduct at issue, Trenga determined, did not cause the government any economic harm. The judge said there was no evidence that the United States could have received a lower cost for the transportation contract.
Gosselin’s 9,136 invoices did not contain false information, the judge said. “Rather, they are deemed false as a matter of law based on judicial constructions of the FCA,” Trenga wrote.
DOJ and the whistleblowers’ attorneys, the judge said, failed to support the proposed $24 million civil fine.
That amount, the judge said, “appears to be based on nothing more than what the plaintiffs think is an appropriate number under the circumstances of the case.”