Gosselin wins second favorable post-trial judgment
Clients Gosselin Worldwide Moving, N.V.; Gosselin Group N.V.; and Marc Smet
On December 24, 2014, the Eastern District of Virginia issued a favorable judgment to Jones Day clients Gosselin Worldwide Moving N.V. and its CEO, Marc Smet, overturning a jury verdict against them under the False Claims Act (FCA).
This ruling is the latest development in a lengthy dispute over allegations by the U.S. Department of Justice (DOJ) and qui tam Relators that Gosselin submitted false claims for the transportation of goods between the United States and Europe. DOJ's assertions initially went to trial in 2011, but were dismissed at the close of DOJ's case in chief on grounds of an antitrust immunity applicable to Gosselin. DOJ appealed the decision and the Fourth Circuit reversed, remanding the case for a new trial on these dismissed claims.
In the summer of 2014, the retrial began. Through the course of the trial, DOJ and Relators eventually conceded that although Gosselin had a pricing agreement with other European companies, Gosselin did not violate any statute, rule or regulation, did not make any false statements or misrepresentations, did not fail to disclose something the company was obligated to disclose, and, nevertheless, DOJ contended that Gosselin's agreement constituted fraud under the FCA because it violated the government's expectations.
Presented with this liability theory, the jury found Gosselin and Mr. Smet liable and awarded approximately $33.6 million in single damages, which would have been trebled to $100.8 million under the FCA. The jury also found that 58,000 claims were submitted under the multi-year contracts, each of which would be deemed a technical "false claim" under the FCA despite the lack of actual falsity in the invoices. This would have subjected Gosselin and Mr. Smet to a mandatory minimum of $324.5 million in civil penalties under Fourth Circuit precedent.
Post-trial, the Court revisited several dispositive motions on which it had reserved judgment, including motions for judgment as a matter of law and a motion to exclude DOJ's damages expert. Following multiple rounds of briefing and a lengthy oral argument, the Court granted Gosselin and Mr. Smet's motion for judgment as a matter of law as to liability, the number of false claims, and damages, and entered judgment in favor of Gosselin and Mr. Smet.
The Court determined that DOJ's liability theory was "both unprecedented and untenable," explaining: "[t]his case 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; (7) [sic] engage in anticompetitive conduct that violates any statutory or other prohibitions; or (6) [sic] collude or conspire with anyone who does any of the foregoing." The Court noted that "there was no evidence . . . and the government does not contend" that Gosselin engaged in any of these actions or that its conduct contained any element of falsehood.
The Court further held that "the evidence is far from sufficient" to sustain the jury's determination that false claims were submitted to the government. After reviewing the deficiencies in the evidence, the court noted that there is an "equally strong inference . . . that none of the rates were inflated," as DOJ argued they were.
In addition to setting aside the damages award because it set aside the jury's liability verdict, the Court also granted Gosselin and Mr. Smet's motion to exclude DOJ's damages expert, thus vacating the jury's damages award for this reason, as well. The Court found that numerous "aspects of the [plaintiffs' expert's'] damages model also raise substantial doubts as to its reliability." The Court noted that the model "did not adequately account for certain major factors affecting [the relevant] rates," and that "it is not at all clear whether [the expert] used the most appropriate data" to predict what rates would have been absent Gosselin's agreement. The Court concluded that "[o]verall, the Court is left with a firm conviction that the model is not reliably predictive of rates within the alleged conspiracy period and should have been excluded by the Court under Daubert."
Finally, the Court conditionally granted Gosselin and Mr. Smet a new trial if the Court's judgment is vacated or reversed on appeal.
United States ex rel. Bunk v. Birkart Globistics GmbH, et al., Case Nos. 1:02-cv-1168 (AJT/TRJ) & 1:07-cv-1198 (AJT/TRJ) (E.D. Va.)