When the Supreme Court convenes its “long conference” on Monday to consider pending petitions for certiorari, much of the public focus will be on the various cases about same-sex marriage.   Government contractors, however, should pay closer attention to Gosselin World Wide Moving, N.V. v. United States ex rel. Bunk et al., a case involving the propriety of per-invoice penalties under the False Claims Act, especially given no evidence of damages suffered by the Government.

The defendant contractors in Gosselin provided household goods shipping services to the United States military.  A qui tam relator alleged that the company conspired with other firms to fix prices and then submitted a false certification stating that it had independently developed its prices.

Although the relator’s original complaint alleged damages, he did not attempt to prove any damages at trial.  Instead, he sought only the statutory civil penalty of $5,500 to $11,000 for each false claim submitted to the Government.  According to the relator, the single false certification as to independent price determination tainted each of the invoices the company submitted to the Government, rendering each one a separate false claim for purposes of calculating civil penalties under the False Claims Act.  The 9,136 invoices at issue meant that the statutory penalties – at a minimum – would exceed $50 million (9,136 X $5,500 = $50,248,000), although the relator proposed a voluntary remittitur that reduced his claim to “only” $24 million.  The district court held that the minimum statutory penalty under that formulation – $50 million – was unconstitutionally disproportionate to the offense, noting that none of the invoices referenced the false certification that appeared in the contractor’s proposal.

The Fourth Circuit disagreed.  Although it described its per-invoice rule as a “monster of our own creation,” it ordered penalties of $24 million, the amount of the settlement offer the relator and the Government had proposed.  In so holding, the Fourth Circuit reaffirmed its commitment to a rigid per-invoice method of calculating civil penalties.

The defendants petitioned the Supreme Court for review, urging the Court to consider the question whether such a mechanical approach to penalties is consistent with the False Claims Act or the Eighth Amendment of the Constitution.  Covington & Burling submitted a supporting brief on behalf of the National Defense Industrial Association, arguing that False Claims Act penalties should be based on actual culpability, not on the simple number of invoices that happen to be involved in a contract.

The issues of damages calculation presented in Gosselin are not unusual.  Many government contracts, especially those involving GSA Multiple Award Schedule contracts, can generate thousands of invoices.  If the Fourth Circuit’s ruling stands, it could give relators substantial – and unjustified – leverage to demand high settlements, even in meritless cases.  If the Court does agree to hear the case, it will offer the Court the opportunity to provide guidance on a more nuanced approach to calculating False Claims Act penalties.