[00:00:00] Speaker 01: Case number 21-BQ179, United States of America versus Fonnywell International, Inc. [00:00:07] Speaker 01: Mr. Primus for the appellant, Mr. Janda for the appellate. [00:00:14] Speaker 03: Good morning. [00:00:16] Speaker 03: Good morning. [00:00:17] Speaker 03: May it please the court. [00:00:18] Speaker 03: When Congress enacted the False Plains Act in 1863, the prevailing common law at the time recognized joint and several liability for joint tour visas with no right of contribution. [00:00:28] Speaker 03: And that has been the unbroken rule courts have applied ever since. [00:00:32] Speaker 03: As a result, when multiple parties are jointly liable for the same false claim, any one of them can be held responsible for 100% of the damages, while others may be responsible for nothing at all. [00:00:43] Speaker 03: And that is the very nature of a joint and several regime with no right of contribution. [00:00:48] Speaker 03: It is focused on full compensation for the plaintiff and not on an equitable apportionment of fault among the defendant. [00:00:55] Speaker 03: The question in this case is, what is the appropriate measure [00:00:58] Speaker 03: of the offset for damages already recovered by the government from other defendants for the same false claims. [00:01:05] Speaker 03: The answer under the common law and common sense is a pro tanto set off for all money received by the government. [00:01:12] Speaker 05: In response, you keep, uh, you keep talking about the common law and the background rule when the act was passed, but what about the statute itself? [00:01:21] Speaker 05: It says that any person, it says any person who defrauds the government, [00:01:27] Speaker 05: is liable for three times the amount the government sustains because of the act of that person. [00:01:33] Speaker 05: And under your theory, quote, any person who defrauds the United States government, namely Honeywell, will not have to pay a cent, right? [00:01:44] Speaker 03: Well, not exactly on the last point, Your Honor, because it would still be liable for civil penalties. [00:01:48] Speaker 05: I'm talking about treble damages. [00:01:49] Speaker 03: Sure, on the treble damages part. [00:01:51] Speaker 05: But doesn't the statute require any person who defrauds the United States to pay treble damages? [00:01:56] Speaker 03: No, Your Honor, not in the multiple tort fees or context. [00:01:59] Speaker 05: Wait, wait, just stick with the statute. [00:02:01] Speaker 05: Suppose we weren't talking about multiple tort fees or common law or anything. [00:02:06] Speaker 05: Just look at the statute. [00:02:08] Speaker 05: You're suggesting a rule, the Protanto rule, that would result in [00:02:14] Speaker 05: a person who defrauds the government, namely Honeywell, in not being liable for treble damages. [00:02:19] Speaker 05: That seems inconsistent with the statute. [00:02:22] Speaker 03: No, Your Honor. [00:02:22] Speaker 03: If there were only one defendant, only one tortfeasor, that party would pay treble damages. [00:02:27] Speaker 05: I'm talking about this case. [00:02:29] Speaker 03: Correct. [00:02:29] Speaker 03: And in this case, the way Your Honor is positing the statute be read would indicate... No, I'm not positing it be read anywhere. [00:02:36] Speaker 05: I was reading you the statute. [00:02:38] Speaker 03: I understand. [00:02:39] Speaker 03: And my response is that [00:02:42] Speaker 03: If it is read that way and every person who is a party to a jointly committed tort is liable for three times the damages, then in theory, you could have 15, 21, 30 times damages, and no court has ever applied it that way. [00:03:00] Speaker 03: Well, what's the matter with that? [00:03:02] Speaker 05: I mean, even I think it was McDermott that said, it wasn't a statutory case, [00:03:11] Speaker 05: But McDermott says, quote, making tort feesers pay for the damages they cause can be more important than preventing overcompensation. [00:03:21] Speaker 05: So the point is that as far as Congress is concerned and the taxpayers are concerned, it's definitely more consistent with the purpose of the statute than to have overpayment than to have, quote, any person who defrauds the government to go off and not pay travel damage. [00:03:38] Speaker 03: No? [00:03:38] Speaker 03: Your Honor, if I may respond to that. [00:03:39] Speaker 03: Of course. [00:03:40] Speaker 03: McDermott, in our view, is completely inapposite. [00:03:43] Speaker 03: And McDermott itself says that. [00:03:44] Speaker 05: I wasn't suggesting that McDermott was binding. [00:03:47] Speaker 05: I was just suggesting that here's the Supreme Court telling us that overpayment is less important than requiring that tortfeasers pay. [00:04:02] Speaker 05: In fact, we've said that too. [00:04:05] Speaker 05: Judge Leventhal said the same thing years ago in that, what is it, Rose? [00:04:09] Speaker 05: He said exactly the same thing wasn't a false claims that case. [00:04:14] Speaker 03: Your honor, the difference with McDermott McDermott is it was a case first where the Supreme Court recognized it was Admiralty in an area of Judge made law. [00:04:23] Speaker 03: And second, there was a proportionate fault. [00:04:25] Speaker 03: There is no regime of which we are aware, and the government has cited none, where there is joint and several liability and no right of contribution, yet a proportionate share approach to an offset. [00:04:36] Speaker 05: Just out of curiosity, where does the joint and several liability come from? [00:04:42] Speaker 05: Have courts said that there's joint and several liability under the False Claims Act? [00:04:48] Speaker 03: Yes, the courts have consistently said that, and the Department of Justice has consistently said that. [00:04:53] Speaker 05: It's a question I'm not challenging you. [00:04:55] Speaker 05: What's your best case for that? [00:04:58] Speaker 03: Your Honor, we've cited numerous cases in our brief where the courts have consistently held its joint in several. [00:05:07] Speaker 04: And how about no right of contribution? [00:05:08] Speaker 04: Where does that come from? [00:05:10] Speaker 03: The no right of contribution has, again, been consistently held [00:05:14] Speaker 03: by the courts. [00:05:15] Speaker 04: Was it actually contested or just stated? [00:05:19] Speaker 03: No, in most cases it's been stated and applied, but not reached as a holding. [00:05:27] Speaker 03: But we do believe that it is strong evidence of what the common law was at the time the statute was enacted. [00:05:34] Speaker 03: And we know that from [00:05:36] Speaker 03: For example, the Lovejoy v. Murray case in 1865, which was just two years after the False Claims Act was enacted. [00:05:43] Speaker 03: And it recognized multiple common law decisions that said where there is full satisfaction of a judgment that the other defendants to a joint tort are not liable for it. [00:05:54] Speaker 03: And it recognized cases that were from multiple states that were decided before the False Claims Act was enacted. [00:05:59] Speaker 03: And as the Supreme Court has said multiple times, when Congress passes a statute like the False Claims Act, [00:06:05] Speaker 03: It does so against a backdrop of common law. [00:06:09] Speaker 05: But that's unless the statute itself provides otherwise, right? [00:06:15] Speaker 03: Well, if the statute itself is clear, then you would look at the language of the statute, certainly. [00:06:21] Speaker 03: But where the statute does not directly address the issue at hand here, the method for calculating offsets, the Supreme Court has said you look to the common law at the time. [00:06:30] Speaker 05: Is your primary... [00:06:32] Speaker 05: Is your primary argument about the theory I suggested that it results in overcompensation for the government? [00:06:40] Speaker 05: Is that your main argument as to why a literal reading of the statute doesn't work? [00:06:45] Speaker 03: Our main argument is that a literal reading of the statute does not answer the question at hand and does direct the court to incorporate the background common law. [00:06:55] Speaker 05: Where does it say that? [00:06:56] Speaker 03: Well, we believe the focus is on damages and the treble damages and how to interpret that term. [00:07:01] Speaker 03: And the statute does not address a joint tortfeasor situation. [00:07:05] Speaker 03: If it says any person, that's not addressed to the joint tortfeasor situation. [00:07:10] Speaker 03: But we know that the joint tortfeasors are commonly accused of committing the same false claim. [00:07:16] Speaker 03: And as I said, the Justice Department, in such cases when it goes to trial, asked for an instruction of the jury indicating that only one judgment and one amount of damages can be obtained. [00:07:26] Speaker 03: And it does not ask for three times damages against each defendant. [00:07:29] Speaker 03: The government's not even seeking that relief. [00:07:31] Speaker 03: And we're not aware of any court that has ever acknowledged that. [00:07:34] Speaker 03: Certainly in US versus Bornstein, the United States Supreme Court, while it wasn't presented, certainly had no issue with and directed the lower courts to deduct amounts already paid from a False Claims Act judgment. [00:07:46] Speaker 04: How do we know that the apportionment rule and reliance transfer should not apply to False Claims Act? [00:07:55] Speaker 03: Well, for two reasons. [00:07:57] Speaker 03: First, [00:07:59] Speaker 03: In the admiralty context, the Supreme Court has been careful to say that it is involved in judicial policy and judicial lawmaking. [00:08:07] Speaker 03: And then in the Edmonds case, the Supreme Court specifically distinguished the common law approach when you're dealing with a statute. [00:08:17] Speaker 03: And the court said specifically in Edmonds that once Congress has spoken, we are not as free as we are in the normal admiralty judicial lawmaking context. [00:08:27] Speaker 03: to create common law, federal common law. [00:08:30] Speaker 03: And the Supreme Court more recently has been very clear that courts should use all the tools, all the interpretive tools in the toolbox before resorting to federal common law. [00:08:41] Speaker 03: And that has been consistent across many cases, including most recently the Comcast decision. [00:08:46] Speaker 05: You know, I'm glad you mentioned Borstein, because Borstein is a false claims act case, right? [00:08:52] Speaker 03: Yes. [00:08:52] Speaker 05: Yeah. [00:08:53] Speaker 05: Because your response to my reading McDermott is that that wasn't [00:08:57] Speaker 05: False claims that case, but bornstein. [00:08:59] Speaker 05: The case you rely on. [00:09:02] Speaker 05: As you point out. [00:09:06] Speaker 05: Question of whether the pro tanto. [00:09:08] Speaker 05: Roach was required or not wasn't before the court, but it picked the approach that the government suggested. [00:09:16] Speaker 05: Because I'm quoting here. [00:09:17] Speaker 05: The government's approach because it said. [00:09:24] Speaker 05: Because it, quote, fixes the liability of the defrauder without reference to the adventitious actions of the other person. [00:09:37] Speaker 05: And it actually said it twice. [00:09:39] Speaker 05: It said the prime contractor's fortuitous acts did not determine the liability of subcontractors. [00:09:44] Speaker 05: So it's saying the same thing that Dermot said in the context of the False Claims Act, namely that [00:09:53] Speaker 05: The liability of the person who defrauded the government shouldn't be for treble damages or in that case double damages shouldn't be affected by the actions of another. [00:10:05] Speaker 05: That's what's it. [00:10:07] Speaker 03: Yes, in the context in which it said that was in addressing whether damages should be doubled prior to or after the offset. [00:10:15] Speaker 03: And then it went ahead and directed the lower court to deduct deduct 100% of the [00:10:21] Speaker 03: other defendants payment in that case, which is consistent with what the Department of Justice usually seeks in these cases and what we're asking for. [00:10:28] Speaker 03: Are you familiar? [00:10:30] Speaker 04: Are you familiar with any other case in which application of the, uh, protons rule would mean a zero liability party? [00:10:47] Speaker 03: Well, in the 1865 case of [00:10:50] Speaker 03: Lovejoy versus Murray, that's what the Supreme Court said the rule was. [00:10:54] Speaker 04: And that's the last one? [00:10:57] Speaker 03: No. [00:10:58] Speaker 03: But I don't know that this situation arises that frequently, where the Justice Department is able to get all of its damages back from the other co-defendants before a case settles. [00:11:09] Speaker 03: And I would just indicate in terms of likelihood of settlement, the threat to each defendant of having 100% exposure on liability here, apparently, [00:11:19] Speaker 03: cause the other defendants to settle early. [00:11:21] Speaker 04: And indeed, their settlements amount were very modest, except for one. [00:11:25] Speaker 03: There were two in the tens of millions. [00:11:28] Speaker 03: One was 11, I think. [00:11:30] Speaker 03: There's one 30 approximately, one approximately 70 million. [00:11:33] Speaker 03: They were substantial for armor holdings and for Toyobo. [00:11:38] Speaker 03: And I would just note, if the government had decided not to settle with those parties and the three companies that made these vests together went to trial, the government would seek one amount of damage. [00:11:48] Speaker 03: And then they would be troubled, and it would decide which of the three defendants would pay that. [00:11:52] Speaker 03: They would never get more than three times. [00:11:54] Speaker 03: And that's what the government seeks when it goes to court. [00:11:56] Speaker 03: and offers jury instructions to the judges. [00:11:58] Speaker 03: That's all we're asking for in this case. [00:11:59] Speaker 01: Mr. Primus, so I assume I agree with you that the FCA is silent on this question, but also that I'm not convinced that the common law in 1863 was settled. [00:12:10] Speaker 01: So if we were to set a common law rule now, I mean, the government suggests we should proceed on a case by case basis rather than set a particular liability rule. [00:12:20] Speaker 01: And I'm wondering, [00:12:21] Speaker 01: If the FCA doesn't set the rule and the common law doesn't set the rule, why should we set a rule as opposed to proceed on a case by case basis? [00:12:29] Speaker 03: Well, Judge Rowland, I would say that first, with regard to the rule where there's full satisfaction, that was settled. [00:12:36] Speaker 03: There was no debate in 1865 in the Supreme Court. [00:12:39] Speaker 03: And that's the exact situation we have here. [00:12:42] Speaker 03: So I don't think there's a reason to have to create a new common law rule. [00:12:47] Speaker 03: And regardless, the proportionate share rule wasn't even [00:12:50] Speaker 03: known thing until the 1960s and so it can't pop that can't possibly be in terms of going with an equitable case by case approach we were actually surprised to see the government argue for that i think i know why they are doing that because they want to be able to choose in every case how much damage is they [00:13:08] Speaker 03: That is a completely unworkable rule, and the authority the government cites for that is CERCLA, where Congress actually did speak, and I think actually proves our case, where Congress wants to allow courts equitable discretion to carve up damages among defendants. [00:13:23] Speaker 03: It knows how to do that, and it speaks. [00:13:25] Speaker 03: In this case, where it is silent on it, and I don't want to say they're silent, they just didn't directly address this issue, but they did create exposure for treble damages for joint torque freezers, and there's a [00:13:35] Speaker 03: a settled body of law, we believe, that answers how you deal with it in that situation. [00:13:41] Speaker 03: And Congress has never spoken to say that that should not be the rule. [00:13:44] Speaker 04: But if there isn't a bunch of cases like this, if this is one off since 1865, let's say, it seems that the position the government's taken is just chasing this case. [00:13:58] Speaker 03: It might well be. [00:13:59] Speaker 04: What else is at stake, really? [00:14:01] Speaker 04: Nothing but this case. [00:14:02] Speaker 03: Well, I think a question for the government, Your Honor, is why they're taking this equitable case-by-case approach and why they want that to be the rule, which I think I'm not aware of any other area of the law where that's the case, and certainly not where Congress has a statute in place. [00:14:17] Speaker 03: And yes, I think that they are trying in this case to get more than three times their messages. [00:14:22] Speaker 04: Let's just play it off for a second. [00:14:24] Speaker 04: If the government is correct about this and it's going to be case, then what does that do in terms of the effect on settlement? [00:14:38] Speaker 03: If the government is correct? [00:14:39] Speaker 04: Yeah. [00:14:41] Speaker 03: I think it will make for a very chaotic false claims act situation because, for instance, if everyone knew that the government's new proposed rule was the rule 13 years ago when this case was brought, I suspect [00:14:54] Speaker 03: We would have had a lot different litigation. [00:14:56] Speaker 03: The parties probably would have sought to have their cases consolidated so that proportionate narrative fault could have been determined in one case. [00:15:03] Speaker 03: But that's not what happened. [00:15:05] Speaker 03: And so these cases proceeded on separate tracks. [00:15:07] Speaker 03: There was no cross-discovery between the Toyobo case and the Honeywell case. [00:15:11] Speaker 04: Right, but looking to the future, when new cases come along and the government's going to, pardon me, the court's going to decide which rule is to be applied, how does that affect something? [00:15:23] Speaker 03: If the court adopts Honeywell's proposed rule, I don't think it will change things at all because if we adopt the government's rule, there will be intense cross litigation among co-defendants trying to blame one another for the same fault. [00:15:38] Speaker 03: And it will create many trials within trials. [00:15:40] Speaker 03: And we will have the situation that we would have in this case on remand where the whole trial will now become Honeywell versus Toyobo versus Armour Holdings. [00:15:49] Speaker 03: rather than the question presented, which is whether Honeywell submitted a false claim, which, incidentally, I'll just say Honeywell did not. [00:15:56] Speaker 03: But I understand that's not at issue here. [00:15:59] Speaker 03: But that is exactly what will happen. [00:16:01] Speaker 03: And this case would have been discovered and litigated very differently if we had known this was going to be the case. [00:16:08] Speaker 01: Mr. Firmus, if we're deciding between the pro tanto and the proportionate share approach, [00:16:14] Speaker 01: How much weight should we put on the purpose of the False Claims Act? [00:16:18] Speaker 01: So the government argues that it's in part punitive and you argue that one of its main purposes compensatory. [00:16:25] Speaker 01: I mean, how do we think about that in terms of picking between the [00:16:28] Speaker 03: Your honor, I think this court said in Samino and has recognized elsewhere, as has the Supreme Court in recent statutory construction cases, that trying to define the purpose of a statute is very dangerous business. [00:16:39] Speaker 03: And as Judge Patz has said in the Allen case, it opens the door to, and as this court said in Samino, it opens the door to judicial policymaking. [00:16:47] Speaker 03: And so we don't resort to the common law at the time the statute was passed. [00:16:53] Speaker 03: just because the Supreme Court said to do that, there's a serious separation of powers reason for that, which is to guide judicial decision-making and interpretation of statutes. [00:17:03] Speaker 03: And so we would submit that the purpose case law on the False Claims Act is less than clear. [00:17:09] Speaker 03: The Supreme Court has said both that it is punitive and that's compensatory. [00:17:13] Speaker 03: In the antitrust cases, which also have trouble damages, the same thing occurs. [00:17:17] Speaker 03: And there's no judicial line between where it becomes [00:17:20] Speaker 03: and punitive in any given case. [00:17:23] Speaker 03: So we think it's very dangerous and we think the common law answers this question. [00:17:28] Speaker 05: So I have a just a question about the record. [00:17:31] Speaker 05: Do I understand the government? [00:17:32] Speaker 05: I think I saw this in the district court decision. [00:17:35] Speaker 05: The government is seeking. [00:17:36] Speaker 05: What $17 million from Honeywell? [00:17:42] Speaker 03: The government is seeking 11 and a half million on the False Claims Act count, and then it's traveled to about 34 and a half. [00:17:49] Speaker 03: Million. [00:17:52] Speaker 05: Well, what about from Honeywell specifically? [00:17:54] Speaker 03: That is the amount. [00:17:55] Speaker 03: Oh, just to be clear, the government is seeking 100% of the liability from Honeywell, which means if they prevent this, I'm talking about in the district court. [00:18:04] Speaker 05: Yes, that's where they get the 17 million figure, isn't it? [00:18:07] Speaker 05: What did the district court mean by that? [00:18:09] Speaker 03: I don't know. [00:18:10] Speaker 03: Oh, there are other counts that might be talking about, but on the False Claims Act, it's thirty four and a half million plus penalties. [00:18:20] Speaker 03: Thank you. [00:18:20] Speaker 05: Any other questions? [00:18:21] Speaker 05: Okay, thank you. [00:18:22] Speaker 05: We'll hear from you. [00:18:23] Speaker 05: Did you have a question? [00:18:24] Speaker 05: No, thank you. [00:18:25] Speaker 05: We'll hear from the government. [00:18:34] Speaker 02: Thank you, Your Honor, and may it please the court. [00:18:36] Speaker 02: Sean Janda for the United States. [00:18:38] Speaker 02: I'd like to start, if I can, exactly where the court started this morning, which is with the text of the statute. [00:18:44] Speaker 02: I think as Judge Taylor suggested, the statute makes any violator liable for three times as [00:18:50] Speaker 02: So the initial, I think, implicit premise of Honeywell's argument that it's entitled to a set off, it doesn't come from the statute. [00:18:56] Speaker 05: But what you just said isn't the position the government took in its brief. [00:19:00] Speaker 05: So you're saying in your brief, the statute doesn't answer this question, which sort of surprised me. [00:19:06] Speaker 02: I think that the starting point from the statute is that any person is liable for three times. [00:19:11] Speaker 02: Is what is liable for three times damages. [00:19:14] Speaker 02: That being said, the government recognizes that [00:19:16] Speaker 02: There is an equitable principle that entitles joint tort feesers to set-offs when other joint tort feesers settle. [00:19:22] Speaker 02: And the government hasn't contested the application of that equitable principle at a general level is appropriate in this case. [00:19:30] Speaker 02: But I think the important point here is that Honeywell's argument that it's entitled to a set-off, it isn't a statutory argument. [00:19:35] Speaker 02: That doesn't address that question. [00:19:36] Speaker 02: It's an argument that itself is grounded in equity. [00:19:39] Speaker 02: And so I'm not sure how Honeywell can come in and try and sort [00:19:43] Speaker 02: start with that label premise, and then run away from equity when it comes to figuring out, you know, not whether they're entitled to self, but rather whether you're how you calculate yourself. [00:19:53] Speaker 05: So is it your position that the proton to rule can never be used or just can't be used in a case where it results in a person who defrauded the government paying no treble damage? [00:20:05] Speaker 02: So this is an equitable question. [00:20:08] Speaker 02: We think the district court. [00:20:09] Speaker 05: Why is that equitable? [00:20:11] Speaker 05: But I just said, why isn't that statutory? [00:20:14] Speaker 02: So as I said, I think the sort of background equitable principle that's not found in the statute is a principle that. [00:20:21] Speaker 05: I thought you just said to me that the problem with Honeywell's position is that it would result in them not paying trouble damage. [00:20:28] Speaker 02: I think that the sort of specific problem with application of the Protontal Rule in this case is an equitable problem, which is that if Honeywell is not paying any statutory damages, that undermines [00:20:39] Speaker 02: One, it's inequitable with respect to the other defendants. [00:20:42] Speaker 02: But two, it undermines the punitive and deterrent purposes of the False Claims Act. [00:20:47] Speaker 02: And as a matter of equity, I think the district court correctly determined that the application of the pro-autonomous rule in this case does not satisfy the relevant equitable principles. [00:20:57] Speaker 01: What case can you point to that suggests the False Claims Act, these liability questions should be determined on equitable principles, as opposed to, say, common law principles or a particular common law rule? [00:21:08] Speaker 02: So I think the whole inquiry is a remedial, equitable inquiry. [00:21:13] Speaker 02: And we cite a number of cases in our brief. [00:21:15] Speaker 02: So we cite some cases from the False Claims Act context, not to address this particular question, but that gaps fill in other ways in sort of a common law equity-focused basis. [00:21:26] Speaker 01: Well, common law and equity are not the same thing, right? [00:21:29] Speaker 01: I mean, the fact that there's a gap and the gap may have to be filled by a judge-made rule is not the same thing as it [00:21:36] Speaker 01: as the inquiry being a case-by-case equitable type of inquiry. [00:21:40] Speaker 01: And those are distinct concepts. [00:21:43] Speaker 02: Yes, that's correct. [00:21:45] Speaker 02: However, I think when the court is developing a federal common law rule to apply, it's perfectly appropriate for the court in determining what rule is appropriate to fill the gap in any given context to take account of those equitable principles. [00:21:56] Speaker 02: And to the extent that those equitable principles might be circumstance dependent or might point in different directions in different cases. [00:22:04] Speaker 01: Can you point to any case in which [00:22:06] Speaker 01: there has been a decision a court had to make about setting a liability rule, which it has then proceeded case by case, as opposed to picking one rule or another. [00:22:16] Speaker 01: So there isn't a ton of case law that specifically, because we couldn't find really, and I don't think any of the cases you cite, I mean, where the court has recognized there's a gap, it always picks a rule. [00:22:29] Speaker 02: So historically that has been correct, Your Honor. [00:22:32] Speaker 02: I mean, I think the [00:22:32] Speaker 02: One difference is in the CERCLA context, where Congress- But the statute there is distinct. [00:22:37] Speaker 02: Right. [00:22:37] Speaker 02: And most of these cases, the statute doesn't address it. [00:22:41] Speaker 02: Courts have historically picked one rule or the other. [00:22:43] Speaker 02: But the courts haven't really looked at the question whether they should pick one rule to apply in all cases, or whether it would be better to proceed- But they do pick a rule, though. [00:22:51] Speaker 01: That's sort of our practice, is to pick a rule. [00:22:54] Speaker 02: That is reflected in the bulk of the case. [00:22:58] Speaker 02: I think I said CERCLA is [00:22:59] Speaker 02: sort of the one place that I know of where Congress has addressed the question and Mayor of Congress said, at least in certain circumstances, court should proceed according to the principles of equity. [00:23:10] Speaker 01: So I guess I have a question for the government, which is if we were to pick a rule, which rule should we pick? [00:23:16] Speaker 02: We just we don't think that's the appropriate question. [00:23:18] Speaker 01: But if we think that that's what we need to do in this context, which rule would the government prefer? [00:23:27] Speaker 01: Because the government sometimes, you know, has argued for the pro tanto approach. [00:23:32] Speaker 01: So if there's going to be one rule, which rule does the government? [00:23:35] Speaker 02: So the government hasn't taken a position on that question, Your Honor. [00:23:38] Speaker 02: And I think it's sort of helpful to take a step back to try to understand why. [00:23:41] Speaker 02: And I think in this case, it is a particularly stark example of a context where the protocol rule really leads to an inequitable result and doesn't result in furthering the statutory scheme and the purposes of the false claims that there are other cases where the proportionate share approach. [00:23:59] Speaker 02: in those cases might, or similarly, not further the appropriate purposes of the False Claims Act, might lead to undercompensation. [00:24:07] Speaker 02: And there's still other cases where, you know, maybe both rules sort of further the purposes of the False Claims Act and the statutory scheme similarly, but there are equity reasons or judicial economy reasons that one approach or the other. [00:24:19] Speaker 01: It's going to be a complete mess if there's no rule. [00:24:22] Speaker 01: I mean, how will settling parties have any idea how to proceed in terms of [00:24:29] Speaker 01: working with the government to settle if they don't know when they settle, whether they'll have to play a proportionate share or whether their settlement will be final. [00:24:36] Speaker 01: I mean, how, how is it going to work with when you have so many of these cases where there are many different, um, tort feasers? [00:24:45] Speaker 02: As a general rule settlement is always, uh, receiving in the face of uncertainty, legal uncertainty about what might happen to trial, um, uncertainty about [00:24:55] Speaker 02: what a jury might end up doing if the case gets to trial. [00:24:59] Speaker 02: And I can see that there might be a little bit more uncertainty if the court adopts the government's approach than if the court adopts... A little more uncertainty? [00:25:05] Speaker 01: You think it'll just be a little bit? [00:25:08] Speaker 02: Yeah, Your Honor, I don't think it's that much more uncertainty. [00:25:11] Speaker 02: I mean, I think in a lot of cases, to the extent that a settlement generally reflects the proportionate share of a particular sailing defendant's liability, then the two approaches sort of come out into a pretty similar [00:25:25] Speaker 02: a pretty similar result. [00:25:26] Speaker 02: And of course, I mean, Honeywell's approach, one input of that approach is what every other defendant settles for. [00:25:32] Speaker 02: And so at the outside of the case, each defendant has no idea what other defendants might settle for. [00:25:37] Speaker 02: And so I'm not sure that adopting that approach really reduces uncertainty on the front end. [00:25:42] Speaker 02: It might reduce uncertainty once you have a bunch of defendants who have settled and there's one defendant left. [00:25:48] Speaker 02: But that's a pretty rare circumstance where you have one lone hold out there. [00:25:52] Speaker 04: What does Supreme Court do in McDermott? [00:25:56] Speaker 04: Pick your choice. [00:25:57] Speaker 04: Pick your rule as you go. [00:25:59] Speaker 02: No, you're right. [00:25:59] Speaker 02: The Supreme Court McDermott said that in the multi-context, the proportionate share rule wasn't appropriate. [00:26:05] Speaker 02: The court, though, didn't consider the question whether it should adopt one rule. [00:26:11] Speaker 04: It didn't consider that. [00:26:12] Speaker 04: It didn't occur to anybody. [00:26:14] Speaker 04: In fact, I've never heard a suggestion. [00:26:15] Speaker 04: I can't find any suggestion anywhere in the cases of the treatises that there's something other than a rule. [00:26:22] Speaker 02: So as we acknowledge that the cases have generally picked one rule or the other rule or a third rule or a fourth rule back in criminal days. [00:26:31] Speaker 02: But that being said, I don't think there's any particular reason for if you're compelled to adopt a single rule and for us accepting that the two. [00:26:41] Speaker 04: Well, I mean, you're just saying the government wants the right to be opportunistic, right? [00:26:46] Speaker 04: It's not just the government. [00:26:47] Speaker 04: Well, it's the government in this case, of course. [00:26:49] Speaker 04: But why would this not spill over into [00:26:51] Speaker 04: other contexts, courts, and so on. [00:26:54] Speaker 02: So I think there's sort of two parts to that question. [00:26:56] Speaker 02: So taking the second part first, we think that the determination of what the court ought to do should be guided in large part by the statutory scheme and purposes of the statute. [00:27:07] Speaker 02: And so I don't think if the court adopts this case-by-case approach that we've been advocating in this context that would necessarily spill over into other contexts or other statutory schemes. [00:27:16] Speaker 02: But that being said, I just don't think that [00:27:19] Speaker 02: It's entirely fair to characterize the governance approach as being the approach that seeks the most money in any given case. [00:27:26] Speaker 02: I think, as we said in our briefs, there are also concerns of equity among defendants. [00:27:30] Speaker 02: There are concerns of judicial economy. [00:27:32] Speaker 04: Those concerns might come up. [00:27:34] Speaker 04: It seems to me they're, even from your account, they are at war here. [00:27:39] Speaker 04: In other words, judicial economy would be set back with the uncertainty, et cetera, and having many trials about proportionality, [00:27:48] Speaker 04: And whereas on your account, fairness would be advanced. [00:27:52] Speaker 02: So I think it very much depends on the particular circumstances of any given case. [00:27:56] Speaker 02: And so this case I'm talking about, that's what you're talking about. [00:27:59] Speaker 02: So in this particular case, I mean, the district court, I think, considered the judicial economy question and found that in its experience, juries are perfectly capable of making these sorts of determinations. [00:28:10] Speaker 02: And I think a lot of the evidence that Honeywell points to about what other joint court users did in this case [00:28:15] Speaker 02: would likely be made anyway to provide context for the dispute, sort of inform the jury about what happened. [00:28:22] Speaker 04: How many defendants in this matter? [00:28:25] Speaker 02: So in this case, I believe Honeywell is the only defendant. [00:28:29] Speaker 04: I'm sorry. [00:28:31] Speaker 04: How many parties against such claims were made? [00:28:34] Speaker 02: I'm not sure the exact number, Your Honor. [00:28:37] Speaker 04: More than three? [00:28:37] Speaker 02: More than three, I would say. [00:28:38] Speaker 04: More than five? [00:28:40] Speaker 02: Perhaps more than five. [00:28:42] Speaker 02: Although not all of the defendants are directly linked [00:28:47] Speaker 04: So this is not your typical MedMail case. [00:28:51] Speaker 04: Two parties, maybe three at the most. [00:28:53] Speaker 02: So there are a relatively large number of potentially liable parties in this case, Your Honor, or this general fraud investigation. [00:29:00] Speaker 02: That being said, the district court looked at this particular question and just determined that given its experience litigating complex trials, this wasn't a particularly difficult problem to solve and didn't consider that to be [00:29:15] Speaker 02: Uh, you know, particularly on the reason to adopt the proton to approach in this case. [00:29:19] Speaker 01: I think the government agree that this FCA is a joint and several liability statute. [00:29:27] Speaker 02: We have not tested that in this case, your honor. [00:29:30] Speaker 02: My sense of the case law is the same as my friends on the other sides, which is that courts have applied joint several liability. [00:29:37] Speaker 02: Um, I'll be honest, I'm not sure if the government has taken an official position on that question. [00:29:42] Speaker 02: I wouldn't want to take one without being authorized to do so. [00:29:45] Speaker 02: But that has been the rule that courts have applied. [00:29:49] Speaker 01: The FCA nowhere requires the determination of proportionate fault, does it? [00:29:55] Speaker 02: Not as part of the statutory scheme. [00:29:59] Speaker 01: Right, so if we were to choose a rule, I mean, doesn't the pro tanto approach seem more consistent with the FCA than the proportionate share? [00:30:09] Speaker 02: I don't think so, Your Honor. [00:30:11] Speaker 01: I mean, do you think one of these approaches is more consistent with the statute? [00:30:14] Speaker 01: When you started, you said we should be focused on the statute. [00:30:17] Speaker 01: So does the statute suggest one approach is preferable or more consistent with one approach or another? [00:30:23] Speaker 02: But either approach may be more consistent with the statute in a particular case. [00:30:26] Speaker 02: And I think that just underscores why it can one approach to apply in all cases. [00:30:32] Speaker 02: It isn't the appropriate way to go about. [00:30:34] Speaker 02: And in this case, the portion of share approach is more consistent with the statute. [00:30:38] Speaker 02: It furthers the statutory goals of deterrence and punishing. [00:30:43] Speaker 01: So is that just the purpose of the statute that you're referring to, or is it some particular provision of the statute? [00:30:49] Speaker 02: I think it's the statutory scheme, and in particular the damages provision, which [00:30:54] Speaker 02: As a tribal damage division, the Supreme Court has characterized that as reflecting Congress's understanding that part of the statute's purpose is to deter fraud against the government, to punish past fraud against the government. [00:31:08] Speaker 02: And those are goals of the statute that would not be advanced. [00:31:11] Speaker 02: I think it would be utterly undermined in a world where Honeywell is allowed to escape with no statutory damages whatsoever. [00:31:17] Speaker 04: Simply because... Under your no-roll rule, [00:31:23] Speaker 04: I suppose a district judge could look at the, let's say, plethora of parties against some claims and say, this is just too inefficient. [00:31:39] Speaker 04: We're not going to go through determining proportionality for 13 different companies. [00:31:45] Speaker 04: So we're going to use the potential. [00:31:49] Speaker 04: And another district judge could look at that and say, [00:31:52] Speaker 04: I don't see a problem with that. [00:31:54] Speaker 04: I've had cases with 13 claimants, claimees, and yes. [00:31:59] Speaker 04: So I'll use the other one. [00:32:02] Speaker 02: So I think it's correct to run our initial matter that that sort of question to consider is one that we think is perfectly appropriate for district courts to consider in determining which rule to apply in any case. [00:32:14] Speaker 02: And it may be the case that different district judges or different district courts would balance the relevant considerations in different ways [00:32:22] Speaker 02: But I think that's just a common feature of sort of equitable discretionary inquiries. [00:32:27] Speaker 02: I don't think there's anything specific about this inquiry that is particularly problematic in that respect. [00:32:34] Speaker 05: How much is the government seeking from Honeywell? [00:32:38] Speaker 02: So the underlying damages from Honeywell would be somewhere in the neighborhood of $34 million. [00:32:44] Speaker 02: How many? [00:32:46] Speaker 05: I'm sorry. [00:32:47] Speaker 05: 34, you said? [00:32:48] Speaker 02: That's correct, Your Honor. [00:32:49] Speaker 05: Is that trebled? [00:32:50] Speaker 05: That's trebled. [00:32:52] Speaker 02: And then the government concedes that Honeywell is entitled to a credit for the proportionate share of other funds liability, which would reduce that $34 million by some amount. [00:33:04] Speaker 02: I don't know what the jury would say that the proportionate chair is. [00:33:07] Speaker 05: Wait, wait, wait. [00:33:10] Speaker 05: So the government agrees that the $34 million can be reduced. [00:33:14] Speaker 02: Correct, Your Honor. [00:33:15] Speaker 05: And is that the amount of reduction to be determined by the jury? [00:33:19] Speaker 02: Uh, yes. [00:33:20] Speaker 05: So under the proportion, why didn't the district court mentioned a credit of 18 million or something? [00:33:25] Speaker 02: So I think the portion of the opinion that you're referring to, your honor, is where the district court said, if I were to adopt the pro tanto approach here are sort of the government had an expert that said, this is how you would apply the potential approach. [00:33:39] Speaker 02: Honeywell had an expert that said, this is how you would apply the pro tanto approach. [00:33:42] Speaker 02: And that was the government's expert applying the pro tanto approach. [00:33:47] Speaker 05: All right, so if we agree with you, then we say, I'm not sure what the rationale would be yet, but we say the pro tanto approach is not appropriate in this case, correct? [00:34:01] Speaker 05: And then we send it back to the district court. [00:34:04] Speaker 05: We say nothing else. [00:34:05] Speaker 02: I think all you need to say is the district court did not abuse its discretion in determining that the appropriate approach in this case is the proportionate share approach. [00:34:12] Speaker 05: I see. [00:34:13] Speaker 05: And what's your response to Mr. Primus's argument that [00:34:17] Speaker 05: under the government's theory, it's going to receive more than treble damages of its loss, treble its loss. [00:34:27] Speaker 02: So I think that argument, Your Honor, was squarely rejected as particularly persuasive by the Supreme Court in McDermott. [00:34:32] Speaker 05: Well, McDermott wasn't a false claims act case. [00:34:35] Speaker 02: That's correct, but I think it's actually more persuasive, or I guess that argument is less persuasive in this context. [00:34:40] Speaker 02: I mean, McDermott was [00:34:41] Speaker 02: not a treble damages case. [00:34:43] Speaker 02: So the punitive and deterrent rationales of the statute or of the regime were even, I think, less evident. [00:34:50] Speaker 02: And there, the Supreme Court said, there's no rigid rule against overcompensation. [00:34:53] Speaker 02: And sometimes, it's more important to make a tortfeasor pay for the harm the tortfeasor has caused than to prevent over recovery. [00:35:01] Speaker 02: I think that's even more true in this context, where we're talking about a fraud on the government, on taxpayers. [00:35:06] Speaker 05: Well, what do you do with the fact that the statute says treble damage? [00:35:10] Speaker 05: of its losses, treble its losses. [00:35:13] Speaker 02: So the statute says, Your Honor, that each violator is liable for those treble damages. [00:35:18] Speaker 02: It doesn't say, number one, it doesn't say the government should not be permitted to recover more than treble damages in circumstances like this. [00:35:24] Speaker 05: Doesn't it say, doesn't it say, it says any person who defrauds the government is liable to three times the damages caused by the, quote, act of that person, [00:35:40] Speaker 05: And that person, not all the government's losses, just that person's loss. [00:35:47] Speaker 02: Correct. [00:35:48] Speaker 02: So the 34 million, the treble 34 million, which is kind of the bottom line or top line number, it is only connected to the false claims that relate to Honeywell's alleged misrepresentations. [00:36:02] Speaker 02: So that's how we sort of focus in on Honeywell's misconduct in this case. [00:36:08] Speaker 02: And that sort of provides a starting point [00:36:10] Speaker 02: and the application of either of them. [00:36:12] Speaker 05: If anything else. [00:36:15] Speaker 05: Okay, thank you. [00:36:17] Speaker 05: Mr. Primus, you are out of town, out of time, excuse me, but you can take two minutes. [00:36:22] Speaker 00: Yeah. [00:36:30] Speaker 03: The position the government is looking here is really extraordinary and they haven't taken a quote. [00:36:35] Speaker 03: I haven't taken a position on which rules should apply. [00:36:38] Speaker 03: The government conceives Protanto does apply. [00:36:40] Speaker 03: And I suspect in most cases, that's the rule they would want to adopt. [00:36:44] Speaker 03: And so they're asking this court to really upset and create a lot of chaos in False Claims Act law to obtain a judgment against one party. [00:36:55] Speaker 03: And it is not consistent with the statute and will cause great havoc. [00:37:00] Speaker 03: I also just want to be clear in response to Judge Ginsburg. [00:37:03] Speaker 03: The government is seeking 100% liability from Honeywell. [00:37:07] Speaker 03: So they've already recovered full [00:37:09] Speaker 03: amounts for the vests at issue, and they're going for 100%. [00:37:12] Speaker 04: What are the dollar amounts? [00:37:15] Speaker 04: Excuse me? [00:37:15] Speaker 04: What are the dollar amounts? [00:37:16] Speaker 04: What have they recovered? [00:37:17] Speaker 03: They've recovered, for purposes of vests that contain Honeywell's product, $35 million or $36 million, and they hold us where they say we're liable for $34.5 million. [00:37:28] Speaker 03: So at the end, they'll have $70 million if they're successful. [00:37:33] Speaker 05: So you think we should then ignore the statutory requirement that [00:37:39] Speaker 05: that any person who defrauds a government is liable to three times its damage. [00:37:45] Speaker 05: We're going to ignore that. [00:37:46] Speaker 03: Your Honor, I do want to address the textual argument, too. [00:37:50] Speaker 03: The statute says, and I think, Your Honor, skipped the part about civil penalties. [00:37:55] Speaker 03: No, I didn't. [00:37:56] Speaker 05: I didn't. [00:37:57] Speaker 05: I know it says civil penalty. [00:37:58] Speaker 05: But so far, the government isn't seeking civil penalties, as far as I know. [00:38:03] Speaker 05: Maybe they will. [00:38:04] Speaker 05: But it says, it says, it says, [00:38:08] Speaker 05: It says civil penalties plus, right? [00:38:11] Speaker 03: Correct. [00:38:12] Speaker 03: OK. [00:38:12] Speaker 03: So what I wanted to respond, Your Honor, was that under the plain language of the statute, Honeywell can be liable, if it is found to have committed this false claim, liable to the United States government for a civil penalty of not less than $5,000 and not more than $10,000. [00:38:28] Speaker 03: And we have not disputed that. [00:38:30] Speaker 03: So that part of the statute can certainly still be enforced as written. [00:38:34] Speaker 05: But suppose the damages instead of being $34 million are, say we had the exact same case, except the damages were $100 million. [00:38:49] Speaker 05: Certainly a fine of $5,000 to $10,000 is going to compensate the government. [00:38:54] Speaker 03: It depends on the number of claims. [00:38:57] Speaker 05: Wait a minute. [00:38:57] Speaker 05: OK. [00:38:58] Speaker 05: Let's say there's just one or two parties. [00:39:00] Speaker 05: That's all. [00:39:01] Speaker 05: $100 million. [00:39:04] Speaker 05: And it says plus. [00:39:06] Speaker 05: What do you do about the word plus? [00:39:07] Speaker 03: Well, that's textually. [00:39:10] Speaker 03: You have the liability for the civil penalties, which still exists. [00:39:13] Speaker 03: And then for the three times the amount of damages portion, [00:39:18] Speaker 03: say that that can be interpreted as written, subject to the offsets that both parties agree exist in this case. [00:39:24] Speaker 05: I was just responding to your, I understand that's your argument. [00:39:27] Speaker 05: You seem to be suggesting that maybe the five to $10,000 civil penalty is somehow compensatory to the government. [00:39:36] Speaker 03: No, the point there is just textually the statute still has financial exposure for a defendant who is liable, even with the offset approach to the [00:39:46] Speaker 03: three times damages. [00:39:47] Speaker 03: Okay. [00:39:48] Speaker 03: And in addition, that is the penalty. [00:39:50] Speaker 03: It's a civil penalty. [00:39:51] Speaker 03: That is the punitive portion. [00:39:53] Speaker 01: Ms. [00:39:53] Speaker 01: Chris, is it the question, what does it mean to be liable? [00:39:57] Speaker 01: I mean, the statute doesn't say that a person will pay three times trouble damages. [00:40:04] Speaker 01: They're liable for trouble damages and being liable doesn't always mean that. [00:40:10] Speaker 03: Your honor, that was the point I was trying to make, which is that money well, [00:40:14] Speaker 03: under the reading that we're proposing can still be held liable or a false claim, still be subject to the civil penalties, still potentially be subject to the three times the damages, unless they're offset by other people who have already paid. [00:40:26] Speaker 03: That isn't actually. [00:40:27] Speaker 04: Is there a collateral consequence to being liable under the false claims act? [00:40:32] Speaker 04: Are you forbidden from bidding for a while or things like that? [00:40:35] Speaker 03: Yes, Your Honor, that's if we're talking in the world of purpose again, which we don't advocate, but certainly [00:40:40] Speaker 03: There are other consequences to Honeywell if it is found liable. [00:40:44] Speaker 03: There's the penalty provision. [00:40:46] Speaker 03: There are reporting obligations and federal government contracting. [00:40:49] Speaker 03: There are discretionary determinations that can be made by government agencies with a party that's found liable for a false claim. [00:40:55] Speaker 03: So it's a serious business. [00:40:57] Speaker 03: There is potential debarment, although I want to say for the record that I don't believe that would be appropriate in this case. [00:41:03] Speaker 03: But yes, those are all serious risks that any False Claims Act defendant faces [00:41:08] Speaker 03: regardless of whether they pay three times damages or not. [00:41:11] Speaker 05: All right, anything else? [00:41:13] Speaker 05: Okay, thank you. [00:41:14] Speaker 05: The case is submitted.