United States: Case Study: Bunk v. Birkart

Last Updated: March 5 2012
Article by Craig D. Margolis, Tirzah S. Lollar and Randall Warden

First published in Law360, February 2012

In a landmark decision on Feb. 14, the United States District Court for the Eastern District of Virginia declined to impose per-claim statutory penalties of more than $50 million in a False Claims Act case with more than 9,000 "false" claims but no damages. The court held that imposing such a disproportionate penalty would violate the Eighth Amendment's excessive fines clause, and that it lacked discretion unilaterally to reduce the penalty under the statute.

As a result, after years of pretrial procedural wrangling and following a jury verdict, the relators (and the United States) recovered neither damages nor penalties. See United States ex rel. Bunk v. Birkart Globistics GmbH & Co., et al., No. 1:02-cv-1168 (E.D. Va. Feb. 14, 2012). This case demonstrates the pitfalls for relators and for the government itself in actively pursuing FCA claims in the absence of provable damages.

This case involved a U.S. Department of Defense contract for the transportation of military household goods between U.S. military installations in Europe. The allegation was that bidders colluded on pricing after meeting with procurement personnel in 2001. Although an FCA qui tam complaint was filed under seal in 2002, the government did not intervene until 2008 (and then only partially) and the relators went to trial on the remaining claims in 2011.

At trial, the jury found that the winning contractor falsely certified in its bid that there was no collusive activity, and that, as a result, each of its 9,100-plus invoices was deemed "false." The question for the court was whether to impose any penalties under the FCA in the absence of evidence that the collusion resulted in increased prices or any other actual loss.

Penalty of $50 Million Is Excessive Absent Proof of Actual Damages

FCA penalties of between $5,500 and $11,000 must be imposed per false claim. 31 U.S.C. § 3729; 28 U.S.C. § 2461. With over 9,100 false invoices submitted, the court calculated the statutory FCA civil penalties to be not less than $50.2 million and not more than $100.4 million. The defendants argued that such a civil penalty would violate the Eighth Amendment, which provides: "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted."

First, concluding that FCA penalties are "essentially punitive in nature," Vermont Agency of Natural v. United States ex rel. Stevens, 529 U.S. 765, 784 (2000), the court analyzed whether the potential fine "is grossly disproportional to the gravity of a defendant's offense." United States v. Bajakajian, 524 U.S. 321, 334 (1998). There was a lack of "the type of evidence needed to calculate and establish damages under the FCA: the amount the government paid over and above what the government would have paid if not for the fraudulent activity." Bunk, No. 102-cv-1168, Mem. Op. at 13.

Indeed, the relators did not even attempt to prove damages at trial. There also was no evidence that the contractor's services were deficient in any way. Id. at 17. Importantly, the government itself had concluded that the contractor's price was fair and reasonable, and had exercised option periods after receiving relators' allegations about collusion. The contractor's liability resulted from a single false certification in its bid, leading the court to conclude that the number of invoices "is not reflective of Defendants' level of culpability." Id. at 19.

Finally, the court found that the total value of the services provided in connection with the misconduct was approximately $3.3 million, for which the defendants earned profit of approximately $150,000. Id. at 22. Under these circumstances, the court held that a minimum civil penalty of $50.2 million would be "grossly disproportionate to the harm caused," in violation of the Eighth Amendment. Id. at 23.

The Court Lacked Discretion to Reduce the Penalty

The court then considered whether it could reduce the penalty to come within constitutional bounds. Noting other courts had done just this, id. at 25, the court found no legal basis in the statute or in these cases for this exercise of discretion. Pointing to FCA language requiring imposition of a penalty of "no less than" $5,500 per claim, the court concluded that imposing less than $5,500 would require it "to rewrite the FCA ... in order to fashion a constitutional civil penalty under the facts of this case." Id. at 26-27.

Ironically, the relators and the government sought a penalty of $24 million, which the court rejected both because the calculation was not derived "from any principled application of the FCA" and also because it would not have solved the constitutional problem. Id. at 32-33 n.19. The court speculated that it might find other lesser penalties constitutional (e.g., one based on trebling the profit) but that these options were unavailable under the FCA. Id. at 28.


This case highlights the dilemma of relators, or even the government itself, in pursuing FCA cases in the absence of proof of actual damages. In recent cases, the government has pursued aggressive theories, including assertions that the payment of kickbacks or gratuities in connection with a contract render the resulting contract fraudulent (and any associated claim false) without proof of economic harm or tangible impact on the contract.

This is a cautionary tale that, even were the government to prevail on such a theory, it may be left with a "take nothing" judgment without damages or penalties, particularly if this case marks the start of a jurisprudential trend. The U.S. Constitution proscribes imposing millions of penalties for purportedly "false" claims that result in no actual loss to the government.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.