U.S. v. Murphy

• Decision Date: 19 June 1991
• Docket Number: No. 90-5648,90-5648
• Citation: 937 F.2d 1032
• Parties: , 1991-1 Trade Cases 69,482, 37 Cont.Cas.Fed. (CCH) 76,123 UNITED STATES of America, Plaintiff-Appellee, v. Paul B. MURPHY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1032

937 F.2d 1032

60 USLW 2048, 1991-1 Trade Cases 69,482,

37 Cont.Cas.Fed. (CCH) 76,123

UNITED STATES of America, Plaintiff-Appellee, v. Paul B. MURPHY, Defendant-Appellant.

No. 90-5648.

United States Court of Appeals Sixth Circuit.

Argued March 15, 1991.

Decided June 19, 1991.

William Sonnenberg, Gary Humble, Asst. U.S. Attys., Chattanooga, Tenn., John W. Gill, Jr., U.S. Atty., Knoxville, Tenn., Carolyn Mark, Staff Atty. Argued, U.S. Dept. of Justice, Civ. Div., Washington, D.C., for U.S.

John R. Bode, Edward N. Boehm, Miller & Martin, Chattanooga, Tenn., Timothy M. Broas Argued, Richard A. Hibey, Steven M. Alderton, Anderson, Hibey, Nauheim & Blair, Washington, D.C., for defendant-appellant.

Before MARTIN and MILBURN, Circuit Judges, and ENGEL, Senior Circuit Judge.

MILBURN, Circuit Judge.

Defendant-appellant Paul B. Murphy appeals the summary judgment granted in favor of plaintiff-appellee the United States of America in this civil action filed under the False Claims Act, 31 U.S.C. Secs. 3729-3733, to recover for the rigging of bids submitted by electrical contractors on the Moccasin Bend Wastewater Treatment project in Chattanooga, Tennessee. For the reasons that follow, we reverse.

I.

After one attempt to appeal was dismissed by this court on November 3, 1989, Murphy perfected a timely appeal following the denial of a timely motion for reconsideration by the district court. The proceedings below included Murphy's employer, Fischbach and Moore, Incorporated ("Fischbach"). Murphy was Fischbach's southern division president at all times relevant to this appeal.

In granting summary judgment on May 31, 1989, the district court held Murphy and Fischbach jointly and severally liable. Fischbach originally appealed along with Murphy but dismissed its appeal prior to oral argument.

Fischbach was convicted by a jury on an indictment charging a conspiracy to restrain trade in violation of the Sherman Antitrust Act, 15 U.S.C. Sec. 1, arising out of a meeting by representatives of Fischbach and Commonwealth Electric at the Read House Hotel in Chattanooga, Tennessee, on June 5, 1980. The indictment charged that representatives of the two companies reached an agreement whereby Commonwealth was to submit the low bid to the prime contractor on the Moccasin Bend project in Chattanooga and Fischbach was to submit a slightly higher bid. The indictment charged that both bids were to be artificially inflated and Fischbach was to be compensated, either by monetary payoff or by cooperation from Commonwealth on future bids. Commonwealth secured a contract with the winning prime contractor, Blount Brothers, Inc.

At the criminal trial, particularly damaging evidence against Fischbach came from Bernard Trepte, Fischbach's Atlanta district manager. Trepte testified that acting for the benefit of Fischbach, he met with his counterpart from Commonwealth and entered into the agreement charged in the indictment. Trepte also testified that the meeting took place with the knowledge and encouragement of his supervisor, defendant Murphy.

Murphy also testified in the earlier proceedings and acknowledged that Fischbach had participated in bid rigging in the past and that he had been personally involved in some of those schemes. Murphy also acknowledged that he had talked with Trepte about the Moccasin Bend project. Murphy admitted that he talked to Phillip Mahoney, Murphy's counterpart at Commonwealth, prior to the Read House meeting; however, Murphy claimed that he was only interested in determining whether Commonwealth was genuinely interested in bidding the Moccasin Bend project. When challenged on cross-examination, Murphy admitted that he recalled Mahoney stating, "Yes, why don't you stay out of that and let those guys at the job site handle any arrangement they are going to have." J.A. 717.

Murphy's testimony also indicated that he told Trepte "something ... like whatever you are going to do up there you are doing it on your own, I'm not involved in it." When asked what this statement meant, Murphy responded, "Well, we obviously were facing a situation where there were only going to be two or three bidders, so if there was any thought of bid rigging going on, then he has a good chance to do it, I suppose." J.A. 715. Murphy admitted that he saw Trepte at a convention in Hawaii approximately one week after the bids were opened. Murphy then learned that Trepte had "reached some sort of an accommodation with Commonwealth." J.A. 721.

Later, in opposition to the government's motion for summary judgment, Murphy submitted his own affidavit asserting that (1) Trepte handled the entire bidding process on the Moccasin Bend project without approval, supervision, or direction from Murphy; (2) if the word arrangement was used in his conversation with Mahoney, Murphy did not understand it to refer to illegal bid rigging; (3) no agreement was reached in the telephone conversation between Mahoney and Murphy; and (4) Murphy told Trepte that he was "on his own," not out of bid rigging concerns, but as an implicit warning to submit an adequate bid. Murphy also submitted deposition testimony to the effect that (1) his knowledge of what went on regarding the Moccasin Bend project came mostly from reading the testimony of others rather than from specific recollection, (2) when he (Murphy) used the word "arrangement" in earlier proceedings he was groping for words, and (3) he believed upon reflection that his earlier testimony concerning a conversation in Hawaii was inaccurate in that Murphy and Trepte did not discuss Moccasin Bend.

In support of its motion for summary judgment, the government presented proof that Fischbach inflated its bid from a pre-conspiracy figure of $5,841,684 by $1,368,316 to arrive at a figure of (as adjusted by Blount for comparison sake) $7,160,000. Commonwealth's winning bid (as adjusted) was $6,879,000 and was inflated $551,780 by the conspiracy. According to the government's proof, the conspiracy inflated the cost a total of $1,037,316. The injury alleged by the government represents seventy-five percent of the latter figure, or $777,987 ¹.

Although the government's complaint was grounded in the common law theory of unjust enrichment in addition to violations of the False Claims Act, the government's summary judgment motion and the district court's judgment were based solely on violations of the False Claims Act, 31 U.S.C.A. Sec. 3729(a)(1) and (a)(3). As amended in 1986, those sections provide recovery to the government for submission of false claims and conspiracies to submit false claims as follows:

Any person who--

(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government ... a false or fraudulent claim for payment or approval; [or]

....

(3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid;

....

is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person....

31 U.S.C.A. Sec. 3729(a) (Supp.1990).

Prior to the 1986 amendments, the statute allowed only double, rather than treble damages and a civil forfeiture of only $2,000. The 1986 amendment also defined "knowingly" for purposes of the statute to include "deliberate ignorance of the truth." 31 U.S.C.A. Sec. 3729(b) (Supp.1990). Prior to the 1986 amendment, this circuit required a showing "actual knowledge" of the falsity of the claim by clear, unequivocal evidence. United States v. Ekelman & Assoc., 532 F.2d 545, 548 (6th Cir.1976). The district court determined that the 1986 amendments were to be applied retroactively to the acts committed between 1980 and 1985 since it would not work a manifest injustice in this particular case.

The district court was persuaded that the criminal conviction established a conspiracy to submit false claims. As to defendant Murphy, the district court viewed the dispositive questions as "whether Murphy himself knowingly caused the false or fraudulent claims to be presented and whether Murphy conspired to defraud the United States by having the false and fraudulent claims presented." To Murphy's arguments that the evidence showed, at most, conscious avoidance of the conspiracy rather than participation in the conspiracy, see United States v. Ciambrone, 787 F.2d 799, 810 (2d Cir.), cert. denied, 479 U.S. 1017, 107 S.Ct. 668, 93 L.Ed.2d 720 (1986), the district court responded that the evidence showed that Murphy merely avoided consciously knowing the details of the conspiracy rather than avoiding participation in the conspiracy.

The district court awarded actual damages of treble the difference in the final adjusted bid Fischbach would presumably have submitted absent the conspiracy and Commonwealth's winning final adjusted bid. The district court also awarded a $10,000 forfeiture for each of the thirty-nine claims submitted by Commonwealth under the false claims provision of the statute and one $10,000 forfeiture for the underlying conspiracy. Because of the defendants' prior involvement in bid rigging, the district court imposed the maximum forfeiture for each fraudulent claim.

The principal issues argued by Murphy are that the district court improperly applied the 1986 amendments to the False Claims Act retroactively and that there were genuine issues of material fact regarding Murphy's knowledge of and his participation in the conspiracy.

II.

A.

A district court's grant of summary judgment is reviewed de novo. McKee v. Cutter Laboratories, Inc., 866 F.2d 219, 220 (6th Cir.1989). In our review, this court must view all facts and the inferences drawn therefrom in the light most favorable to the nonmoving party. 60 Ivy Street Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir.1987). Summary judgment is appropriate only where the "moving party has [carried] the burden of...