In FCA Case, Court Finds Civil Penalties Would be Unconstitutional


Recently, a federal district court issued a ruling that could have a substantial impact on future qui tam claims brought under the False Claims Act ("FCA"). In United States of America ex rel. Bunk v. Birkart Globistics GmbH & Co., et al., No. 1:02-cv-1168, 2012 WL 488256, (E.D.Va. Feb. 14, 2012) (Trenga, J.), the Court refused to impose civil penalties where the Relator in an FCA case had failed to prove any actual damage to the government. The Court found that imposing a statutory penalty of between $50-$100 million under such circumstances would be unconstitutional under the Eighth Amendment's Excessive Fines Clause.

The case involved a 2001 solicitation by the Department of Defense Contracting Office for the transportation of military household goods between U.S. bases in Germany, Italy, Belgium, and the Netherlands. The solicitation required that the contractor demonstrate an ability to transport goods between any of these countries, and to indicate which subcontractors it would utilize. After an information session held by the government regarding the solicitation process, at least four potential contractors reached an agreement on a price that each would charge as subcontractors to the company that won the main contract with the Department of Defense. Notwithstanding this agreement, the winning bid, by Gosselin Worldwide Moving, included a certification that it had arrived at the prices in its offer "independently" andwithout any communications with any other offeror relating to price "for the purposes of restricting competition."

In 2002, a Relator, Kurt Bunk, filed an action under seal, alleging, among other things, that the Gosselin defendants had violated the FCA by falsely certifying that they had arrived at the prices in their offer "independently," when those prices actually resulted from collusion and price-fixing among potential bidders.

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