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United States, ex rel Miller v. Bill Harbert International Construction

August 10, 2007

UNITED STATES OF AMERICA, EX REL. RICHARD F. MILLER, PLAINTIFFS,
v.
BILL HARBERT INTERNATIONAL CONSTRUCTION, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Royce C. Lamberth, United States District Judge

MEMORANDUM OPINION

This matter comes before the Court for ruling after a jury trial. The jury found single damages in the amount of $34,346,029.22 and 111 false claims, arising out of False Claims Act ("FCA") violations on three contracts: 20A, 07 and 29. Of this single damages amount, the jury apportioned damages for each contract in the following manner: Contract 20A: $29,920,000.00; Contract 29: $3,400,000.00; Contract 07: $1,026,029.22.

Plaintiffs filed a motion [863] with this Court seeking entry of judgment against all of the defendants: Bill Harbert International Construction, Inc. ("BHIC"), Harbert Corporation ("HC"), Harbert International, Inc. ("HII"), Bilhar International Establishment ("Bilhar") f/k/a Harbert International Establishment ("HIE"), Harbert Construction Services (U.K.), Ltd. ("Harbert UK), and E. Roy Anderson ("Anderson"). In this motion, the plaintiffs posit that the compensatory damages amount should be trebled, pursuant to the FCA. See 31 U.S.C. § 3729(a). Additionally, plaintiffs requested this Court impose statutory civil penalties of $10,000 per false claim.*fn1

In response, defendants raise a number of issues. First, defendant Harbert UK argues that it is not liable for any damages arising out of contracts 07 and 29 because claims under those contracts against Harbert UK were dismissed by this Court due to lack of personal jurisdiction. Second, each of the defendants contend that plaintiffs failed to properly offset amounts received by the Government from the other settling defendants in this case. Third, defendants HII and HC argue that the settlement amounts to be offset by the Court should include those amounts from the settlements by defendants Holzmann A.G. ("Holzmann") and J.A. Jones ("Jones"). Fourth, defendant Anderson argues that, once credited, the settlement amounts completely offset the damages owed by defendant Anderson, and that he is therefore relieved of his obligation to pay any damages.*fn2 Finally, each of the defendants asserts that a $10,000 civil penalty for each false claim is excessive. Rather, the defendants assert that the Court need only impose a $5000 penalty for each claim.

Plaintiffs have conceded to the first two arguments raised by defendants, recognizing that this Court has personal jurisdiction over Harbert UK solely for claims arising out of contract 20A,*fn3 and acknowledging that the Court should deduct from the trebled amount of damages any compensatory payments previously received by the Government from settling co-defendants in this case. Accordingly, the Court need only address the remaining three arguments relating to the offset of settlement payments as they relate to defendant Anderson's damages obligation, and the amount of civil penalties imposed by this Court. The Court will address each of these arguments in turn.

A. Analysis of Amount of Compensatory Payments "Previously Received"

All of the defendants and plaintiffs are in agreement that the total amount of money "previously received" by the government from the other settling defendants in this case amounts to a minimum of $13.7 million. This total consists of a $3.2 million payment from the Bilfinger & Berger settlement, a $500,000 payment from the AICI settlement, and a $10 million payment from the ABB SUSA settlement. Still, defendants HII and HC argue that the payment amounts arising from the settlements with defendants Holzmann and Jones must be added to this amount.

Though the defendants are correct that any settlement amount received from these two companies must be deducted from the overall amount of compensatory damages levied against the non-settling defendants, the offset is limited to those payments "previously received by the government . . . ." United States v. Bornstein, 423 U.S. 303, 316-17 (1976). To date, though the United States has entered into settlement agreements with Holzmann and Jones, it has not received any monetary payment from these settlement agreements, due in large part to the fact that the receipt of these payments is contingent upon the resolution of the defendants' respective bankruptcy proceedings outside of this Court. Accordingly, no amount relating to either of these settlements may yet be deducted from the overall trebled compensatory damage total.

This Court notes, however, that any payment received by the plaintiffs from either the Jones or Holzmann settlement prior to the collection of the full amount of the judgment in this case shall be subtracted from the full trebled amount that plaintiffs may collect under the judgment. Along those lines, any payment by the plaintiffs from either the Jones or Holzmann settlement received after the plaintiffs have collected the entire judgment must be paid by the plaintiffs to the defendants in proportion to the amount of the full judgment paid by each defendant.

B. Defendant Anderson Not Entitled to Complete Offset of Settlement Amounts Already Received

Defendant Anderson argues that he is entitled to a complete credit or offset of the settlement amounts that the plaintiffs have already received from those defendants who have previously settled with plaintiffs. Citing the Supreme Court's decision in Bornstein, defendant Anderson points out that subtractions from the government's doubled damages needed to be made for compensatory payments received previously by the government from other settling defendants. See also 31 U.S.C. 3729(a). In light of this holding, defendant Anderson argues that a non-settling defendant should be entitled to a full credit of the settlement amount against the amount owed by the non-settling defendant. Under this rationale, defendant Anderson contends that the amount he would be required to pay would be reduced to zero because the amount already recovered by the government from the settling defendants ($13.7 million) completely offsets the trebled verdict amount against defendant Anderson ($139,615.20). Defendant Anderson's argument is misplaced.

Pursuant to the False Claims Act ("FCA"), any party who is found to have committed violations of the FCA "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. § 3729(a) (2007). With respect to damages under the FCA, the U.S. Supreme Court has found that the actual damages must first be multiplied pursuant to the statute, and then be reduced by any compensatory payments previously received by the Government from other co-defendants who have settled. Bornstein, 423 U.S. at 316-17. ("[I]n computing the double damages authorized by the [False Claims] Act, the Government's actual damages are to be doubled before any subtractions are made for compensatory payments previously received by the Government from any source.").*fn4 Once this number is calculated, the Court must then add the total amount in statutory penalties.

And yet, as the Supreme Court has pointed out, in cases where there is a settlement between the plaintiff and one defendant, the liability of the remaining non-settling defendants must be "calculated with reference to the jury's allocation of the non-settling defendant's responsibility." McDermott v. AmCLYDE, 511 U.S. 202, 204 (1994). This approach--based on the jury's determination of each defendant's proportionate share of liability--makes a non-settling defendant's liability completely untethered to the amount of settlement negotiated by the plaintiff with other defendants. Id. at 220. To that end, "[a] plaintiff's good fortune in striking a favorable bargain with one defendant gives other defendants no claim to pay less than their proportionate share of the total loss." Id. Accordingly, other non-settling defendants "are not entitled to a reduction in liability when the plaintiff negotiates a generous settlement . . . ." Id. at 221.

The D.C. Circuit reached a similar conclusion in another case involving the issue of how much of a non-settling defendant's damages liability was a non-settling defendant entitled to have offset by a co-defendant's settlement amount with the plaintiff. See Rose v. Associated Anesthesiologists, 501 F.2d 806 (D.C. Cir. 1974). In Rose, the D.C. Circuit was presented with a medical malpractice action brought by an infant--upon whom the medical malpractice occurred--and the infant's father against three defendants: the operating surgeon, the partnership of anesthesiologists, and the hospital. Id. at 807. Both the surgeon and anesthesiologists partnership settled with the plaintiffs in the amounts of $95,000 and $175,000, respectively, for a total settlement amount of $270,000. Id. The case proceeded against the hospital, with the jury awarding total damages in the amount of $294,777.25 (awarding the infant $265,000 and the father $29,777.25). Id. The district court ultimately found that, under the D.C. Circuit's holding in Snowden v. D.C. Transit System, 454 F.2d 1047 (D.C. Cir. 1971), the court was required to offset the entire settlement amount, which resulted in canceling out the hospital's liability to the father altogether, and diminishing the hospital's liability to the infant to $25,000. Id. at 807-08 & 808 n.4. On appeal, however, the D.C. Circuit found that the hospital was not entitled to a credit that exceeded its proportionate share of liability. Id. at 809-10. Credits and offsets of settlement amounts, the Circuit Court held, are subject to "a limitation of amount so as to assure that the defendant held liable in the litigation does not pay less than his equitable share." Id. at 810 (emphasis added). To hold otherwise would create a "needless irony that a rule grounded in avoidance of unjust ...


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