The U.S. Constitution prohibits the imposition of excessive civil fines and penalties. In general, the civil side of the law is concerned with making plaintiffs “whole” again and restoring the (financially) damaged party to the place it would have been in but for the defendant’s action or inaction. Civil verdicts are generally meant to correct the wrong, not punish the wrongdoer. In some situations, a judge or jury may impose additional damages beyond those actually suffered, known as punitive damages, for the purpose of punishing the defendant for its actions in the case. Punitive damages are reserved for cases involving intentional, malicious conduct or extreme gross negligence. Mere negligence (including accident, oversight, or a deviation from reasonable conduct) does not generally merit an imposition of punitive damages.
In the case of U.S. ex rel. Bunk v. Gosselin World Wide Moving, N.V., the District Court struggled to configure a proper damages amount against the defendant and concluded that the plaintiff did not meet its burden in proving actual damages at trial. On appeal however, a very different result emerged, culminating in a puzzling conclusion highlighting the difficult balance between the FCA’s policy to punish and deter fraud and the Constitution’s guarantee of freedom from excessive penalties.
U.S. ex rel. Bunk v. Gosselin World Wide Moving: The Trial Phase
The Bunk case began in the Eastern District of Virginia after several qui tam actions were consolidated to form one whistleblower case against defendant Gosselin World Wide Moving, et al. In sum, plaintiffs alleged that the defendant had engaged in unlawful bid-rigging schemes in violation of its contract with the Department of Defense for the transport of military household goods between the U.S. and Europe. The case took a curious turn at trial when the plaintiffs decided to only pursue FCA penalties as opposed to monetary damages. Even though there was evidence to suggest the defendant submitted over 9,000 invoices for shipping payments, totaling potential damages and penalties in excess of $50,000,000, the trial court held that plaintiffs had failed to set forth evidence as to the financial amount it should receive. The trial court refused to enter an order for that amount and cited the Eighth Amendment’s prohibition against Excessive Fines. It also refused to enter plaintiffs’ requests for a reduced verdict of $24,000,000. As such, the District Court found Gosselin liable for its actions, but did not require it to pay a single fine under the FCA. In other words, the whistleblowers were unable to receive their award for coming forward.
U.S. ex rel. Bunk v. Gosselin World Wide Moving: The Appeal
The Court of Appeals for the Fourth Circuit saw the case in an entirely different way. First, it concluded that the $24 million compromise would have been appropriate and within the trial court’s discretion. It further addressed the intersection of the FCA, which allows for triple damages, and the Eighth Amendment’s prohibition against excessive fines. Referring to the conundrum as a “monster of our own creation,” the Fourth Circuit nonetheless determined the $24 million damages amount to be appropriate despite lack of evidence presented to the trial court of actual financial damages.
The Court concluded the matter by holding the trial court in error for awarding nothing at all, stating:
“An award of nothing at all because the claims were so voluminous provides a perverse incentive for dishonest contractors to generate as many false claims as possible, siphoning even more resources from the government… [The penalty] appropriately reflects the gravity of [defendant’s] offenses and provides the necessary and appropriate deterrent effect going forward.” See, United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., No. 12-1369 (4th Cir. Dec. 19, 2013).
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