United States ex rel. Bunk v. Birkart Globistics GmbH & Co.

• Decision Date: 24 December 2014
• Docket Number: Nos. 1:02–cv–1168 AJT/TRJ,1:07–cv–1198 AJT/TRJ.,s. 1:02–cv–1168 AJT/TRJ
• Citation: 89 F.Supp.3d 778
• Court: U.S. District Court — Eastern District of Virginia
• Parties: UNITED STATES of America ex rel. Kurt BUNK and Daniel Heuser, Plaintiffs/Relators, v. BIRKART GLOBISTICS GmbH & CO., et al, Defendants. United States of America ex rel Ray Ammons, Plaintiff/Relator, v. The Pasha Group, et al., Defendants.

89 F.Supp.3d 778

UNITED STATES of America ex rel. Kurt BUNK and Daniel Heuser, Plaintiffs/Relators

v.BIRKART GLOBISTICS GmbH & CO., et al, Defendants.

United States of America ex rel Ray Ammons, Plaintiff/Relator

v.The Pasha Group, et al., Defendants.

Nos. 1:02–cv–1168 AJT/TRJ

1:07–cv–1198 AJT/TRJ.

United States District Court, E.D. Virginia, Alexandria Division.

Signed Dec. 24, 2014.

Mark Hanna, Renee Marie Gerni, Murphy Anderson PLLC, Washington, DC, for Plaintiffs/Relators.

Kerri Lynn Ruttenberg, Jones Day, William Francis Coffield, IV, Berliner Corcoran & Rowe LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

ANTHONY J. TRENGA, District Judge.

Following remand from the Fourth Circuit, this case was tried before a jury beginning on July 21, 2014. On August 1, 2014, the jury returned a verdict against Defendants Gosselin World Wide Moving, N.V. and Marc Smet with respect to two provisions of the False Claims Act, 31 U.S.C. §§ 3729(a)(1) and (a)(3).¹ Presently before the Court is Defendants Gosselin World Wide Moving N.V. and Marc Smet's Renewed Motion for Judgment as a Matter of Law and Alternative Motion for New Trial [Doc. Nos. 1321 and 1322] (“the Motion”), on which the Court held a hearing on September 4, 2014.

Gosselin, located in Europe, provided services to American carriers who contracted with the United States to move the household goods of military personnel to and from Germany, known as the ITGBL program. The United States claims that Gosselin engaged in a fraudulent course of conduct that inflated rates the United States paid to American carriers under every ITGBL program contract it awarded during the 2001–2002 period, even those to carriers that did not use Gosselin's services. That fraudulent conduct, as described by the government, consists of “a scheme to eliminate competition from the ITGBL bidding process with the intent and effect of inflating prices that DOD paid for moves.” See United States and Relators' Memorandum in Opposition to Defendants' Renewed Motion for Judgment as a Matter of Law and Alternative Motion for New Trial (hereinafter “Government's Brief”), Doc. No. 1325, at 4. See also Doc. No. 1298 at 15 (“[A]ll claims submitted during these rate cycles were false or fraudulent, because all moves for which the Department of Defense paid were the subject of an anticompetitive agreement that eliminated competition and inflated rates in what was an explicitly competitive program.”). There was no evidence, however, and the government does not contend, that Gosselin made any false statements or certifications, express or implied, or that it failed to comply with any contract provisions, statutes, or regulations that were a term or condition for payment under or Gosselin's participation in the ITGBL program. Rather, the government contends that Gosselin's anticompetitive conduct alone is sufficient to impose False Claims Act liability, even if it does not constitute an anti-trust violation. See Doc. No. 1304, Tr. at 1169:6–16; 1191:2–5, 1200:25–1201:1–25 (arguing that any type of collusion that affects the ITGBL program constitutes fraud). This case therefore involves whether and to what extent the False Claims Act liability may be imposed on companies and individuals who do not (1) enter into any contracts with the federal government; (2) submit any claims to the federal government; (3) receive any funds directly from the federal government; (4) make any misrepresentations or fraudulent non-disclosures, express or implied, to the federal government or anyone who contracts with the federal government; (5) violate any contractual provisions, laws, regulations or statutes that constitute terms or conditions of payment to those who contract with or provide services to the federal government; (6) engage in anticompetitive conduct that violates any statutory or other prohibitions; or (7) collude or conspire with anyone who does any of the foregoing.

For the reasons discussed below, the Court concludes that the government's theory of liability is both unprecedented and untenable. There was no evidence that Gosselin engaged in any deceptions or misrepresentations and the evidence was therefore insufficient, as a matter of law, to support the jury's finding of liability under instructions that required the jury to find, in order to impose liability, that Gosselin engaged in conduct that “knowingly deceived” the United States and “knowingly caused” the government to enter into an ITGBL contract. For similar reasons, discussed below, the Court finds, in its capacity as fact finder on the issue of materiality, that Gosselin did not engage in conduct that was “material” to the government's awarding ITGBL contracts or making payments thereunder since Gosselin did not engage in any conduct that pertained to any term or condition of payment to the American carriers that submitted claims to the United States for payment. The Court also concludes that the evidence was insufficient for the jury to find that Gosselin caused a specific, identifiable false claim to be presented to the government for payment, or the total numbers of such claims, or to award damages. Finally, the Court concludes that if the Court's decision to enter judgment in favor of the Gosselin defendants is vacated or reversed on appeal, a new trial is warranted on all issues. For these reasons, the Court GRANTS the defendants' motion for judgment as a matter of law and also CONDITIONALLY GRANTS defendants' motion for a new trial pursuant to Fed. R. Civ. Pro. 50(c)(1).

I. BACKGROUND

The lengthy procedural history and facts of this case are set forth in detail in this Court's previous orders and memorandum opinions.² Briefly summarized, these consolidated actions were originally filed in 2002 by Relators Kurt Bunk and Ray Amnions but remained under seal until May 19, 2008. See Doc. No. 97. On July 18, 2008, the United States intervened as to all claims relating to the ITGBL program, but not as to certain other claims relating to a contract awarded to Gosselin in 2001 under the Direct Procurement Method (DPM) program. The case was tried beginning on July 18, 2011, and on July 28, 2011, following the close of the United States' case in chief, the Court dismissed the ITGBL claims other than those that related to two sets of transportation channels, referred to in this litigation as the Cartwright and Covan Channels, based on the antitrust immunity provision of the Shipping Act of 1984, 46 U.S.C. §§ 40301 –40307. See Doc. No. 1032, Trial Tr. at 1031–64; Doc. No. 1072 (Memorandum Opinion). On December 19, 2013, the Fourth Circuit reversed this Court's ruling on immunity under the Shipping Act, vacated this Court's order based on its contrary ruling, and remanded the case for further proceedings. See Doc. No. 1167.

The retrial began on July 21, 2014.³ On July 28, 2014, following the close of the United States' case in chief, the defendants moved for judgment as a matter of law. The Court reserved on the motion. The defendants then renewed their motion at the close of the evidence. At that time the Court granted, without opposition⁴ , the motion as to the United States' common law claims and 31 U.S.C. § 3729(a)(2) claim and did not grant the motion as to claims under 31 U.S.C. § 3729(a)(1) and (3), submitting those claims to the jury. On August 1, 2014, the jury returned its verdict in favor of the United States and against Defendants Gosselin World Wide Moving, N.V. and Marc Smet on both claims.⁵ It also found that those defendants knowingly caused to be submitted 58,950 false claims and awarded a total of $33.6 million in damages. Defendants Gosselin World Wide Moving, N.V. (“Gosselin”) and Marc Smet now move for judgment as a matter of law or a new trial.

II. STATEMENT OF FACTS

The evidence at trial was in most material respects undisputed and essentially consisted of the same evidence presented at the first trial and discussed in this Court's Memorandum Opinion dated August 26, 2011.See Doc. No. 1072. Briefly summarized, that evidence, with disputed factual issues viewed most favorably to the government, established the following:

For decades the United States has transported the household goods of military personnel posted in Germany through the International Transportation Government Bill of Lading program, or ITGBL program. As the ITGBL program operated during the relevant time period, the Department of Defense (“DOD”), acting through the Surface Deployment and Distribution Command (“SDDC”), on a biannual basis, solicited bids for moves from American owned freight forwarding companies, also called carriers or Transportation Service Providers (“TSPs”). There were therefore two cycles per year, summer and winter, designated, for example, as IS01 for International Summer 2001 and IW01 for International Winter 2001. The claims in this case involve the bids that were submitted by American carriers during the four cycles that occurred in 2001 and 2002: IS01, IW01, IS02, and IW02.

Overall, there were one hundred and four channels between the United States and Germany, corresponding to different transportation routes: fifty-two westbound and fifty-two eastbound. The carriers submitted a separate bid, in the form of a dollar price per hundred weight, for each of the fifty-two channels, for as many or as few channels as they chose. During the relevant years, carriers filed their initial bids in November for the IS cycle, which started on April 1 in the following calendar year, and in May for the IW cycle, which started on October 1 of that same calendar year. The bidding took place pursuant to a two-step process. After carriers submitted their initial round of bids, the DOD published the five lowest rates. The lowest bid for a particular channel was known as the “prime rate,” and the carrier that submitted the lowest bid was guaranteed at least 10% of the total volume for that channel. After the publication of the five lowest rates, other carriers who had...