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United States ex rel. Kurt Bunk v. Gosselin Worldwide Moving, N.V.

United States District Court, E.D. Virginia, Alexandria Division

April 7, 2017

UNITED STATES OF AMERICA ex rel. Kurt Bunk and Daniel Heuser, Plaintiffs/Relators,


          Anthony J. Trenga, Judge

         In this False Claims Act case, a $24 million judgment has been entered against Defendants Gosselins Group, Gosselin Worldwide Moving, N.V. ("Gosselin"), and Marc Smet ("Smet") (collectively, the "Gosselin Defendants"). Realtor Kurt Bunk ("Bunk") now seeks to impose liability for that judgment on Defendant Government Logistics, N.V. ("GovLog") under a theory of successor liability.[1]

         The Fourth Circuit has remanded this case for trial following its reversal of the Court's granting summary judgment in GovLog's favor with respect to Bunk's successor liability claim. Upon consideration of the parties' memoranda and the argument of counsel at the hearing and status conference held on February 10, 2017, the Court concludes that the particular grounds for the successor liability claim asserted in this case-that a transaction between Gosselin and GovLog was fraudulent-is by its nature an equitable claim for which a jury trial was not recognized at the time the Seventh Amendment was adopted. It is therefore a claim that is to be tried without a jury at the trial scheduled to begin on Wednesday, May 17, 2017.


         The factual background is more thoroughly laid out in the previous opinions of the Fourth Circuit and the Court. Briefly summarized, these consolidated actions were originally filed in 2002 by Relators Bunk and Ray Amnions but remained under seal until May 19, 2008, following the conclusion of criminal proceedings against the Gosselin Defendants and another company involved in the "ITGBL program, " described below. In May and Sept 2006, the United States advised Gosselin that two lawsuits with False Claims Act ("FCA") claims had been filed against it under seal. Those claims were based on Gosselin's involvement in the movement of household goods for American military personnel in Europe, primarily Germany, under two separate government programs. The first FCA claim was based on Gosselin's participation in the International Through Government Bill of Lading program, in which Gosselin, located in Europe, was a subcontractor to American "freight forwarders, " also known as Transportation Service Providers ("TSPs"), located in the United States, that had received prime contracts from the Department of Defense to move household goods of military personnel to Germany (the "ITGBL claim"). The second FCA claim was based on Gosselin's participation in the Direct Procurement Method program, in which Gosselin was the prime contractor directly with the Department of Defense for the transportation of household goods of military personnel in Europe back to the United States (the "DPM claim"). The United States intervened in the ITGBL claim, but not the DPM claim. The ITGBL claim against Gosselin was eventually resolved without any outstanding judgment in favor of the United States.

         The DPM claim against Gosselin ultimately resulted in the $24 million judgment, [2] which remains unsatisfied.[3] On October 2, 2008, in Count II of his Second Amended Complaint, Bunk sued GovLog as a defendant on the theory that GovLog had successor liability for Gosselin's FCA violations because in June 2007, Gosselin and GovLog had entered into a "sham transaction for inadequate consideration through which Gosselin Group... and/or its operating subsidiaries still profit through their business interests in shipping related to the U.S. Government markets and that transaction is designed to hinder, delay and /or defraud Relators as a potential judgment creditor." United States ex re I. Bunk v. Gov't Logistics N.V., 842 F.3d261, 270 (4th Cir. 2016) (quoting Bunk Third Am. Compl. [Doc. No. 448] ¶ 30) (omission in original). On May 11, 2011, the Court bifurcated the trial of the underlying DPM claim against Gosselin and the successor liability claim against GovLog, finding that bifurcation would "facilitate the orderly resolution of the remaining issues, particularly given the derivative and equitable nature of the government's claims against GovLog, which are to be determined by the Court, as opposed to jury." [Doc. No. 816.][4] On August 4, 2011, the jury returned a verdict on the DPM claim that ultimately resulted in the $24 million judgment.

         On December 23, 2014, the Court entered summary judgment on Bunk's successor liability claim against GovLog. On November 15, 2016, the Fourth Circuit reversed that order, finding that there were genuine issues of material fact to be decided by a factfinder. See Bunk, 842 F.3d. at 279.


         Federal Rule of Civil Procedure 39(a) provides that "[w]hen a jury trial has been demanded under Rule 38, the action must be designated on the docket as a jury action." The parties agree that a proper jury demand was made under Rule 38 with respect to Bunk's successor liability claim. Accordingly, the trial on that claim "must be by jury unless ... (2) the court, on motion or on its own, finds that on some or all of those issues there is no federal right to a jury trial." Fed.R.Civ.P. 39(a). The federal right to a jury is determined by the scope of the Seventh Amendment.

         The Seventh Amendment provides in relevant part: "In Suits at common law... the right of trial by jury shall be preserved" U.S. Const, amend. VII. The Amendment guarantees that a party in a civil case has a right to a jury trial if its cause of action is one that was cognizable in the courts of law in 1791 or is a modern-day analog to such a cause of action. See Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 40-41 (1989). To make this determination, the Court must (1) compare the cause of action "to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity, " but more importantly, (2) examine the remedy sought to "determine whether it is legal or equitable in nature." Id. at 42 (internal quotation marks omitted).

         In claiming a right to a jury, Bunk first contends that his successor liability claim is a statutory claim "embedded" in the FC A because the FC A imposes liability on any "person, " which, under the Dictionary Act, is defined to include a corporation and its successors. Based on this theory, Bunk contends that if GovLog is found to have liability as a successor under the fraudulent transaction theory, it is jointly and severally liable with Gosselin for the "$24 million in civil penalties as a matter of statutory construction, not pursuant to a stand-alone equitable remedy." The Court rejects this position.

         As Bunk notes, the FCA "imposes liability on 'any person' that violates its provisions." Relator's Response to Government Logistics N.V.'s Brief Pursuant to the Court's Order of February 10, 2017 [Doc. No. 1432], at 5. But Bunk does not allege that GovLog, as the successor to Gosselin, violated the FCA. Rather, Bunk's claim against GovLog is based on events and facts that have nothing to do with the conduct that resulted in the $24 million judgment against Gosselin or any other alleged FCA violation. As the Fourth Circuit explained, a successor's liability in this context is imposed by the federal common law, not the FCA. Bunk, 842 F.3d at 272-74 & n.15 ("As the Supreme Court instructed in United States v. Bestfoods, however, the failure of a statute to speak to a matter as fundamental as the liability implications of corporate ownership demands application of the rule that in order to abrogate a common-law principle, the statute must speak directly to the question addressed by the common law. Put simply, the FCA does not speak to successor corporation liability and thus has no impact on the traditional common law principles governing successor corporation liability.") (internal quotation marks, citation, and alterations omitted). For these reasons, Bunk has no statutory claim for successor liability against GovLog under the FCA. The Court must therefore determine whether Bunk's successor liability claim based on a fraudulent transaction theory under federal common law is one that was cognizable in the courts of law in 1791 or is a modern day analog of such a cause of action.

         Neither party has pointed to an 18th-century analog of this particular successor liability claim. Rather, the parties have attempted to define the nature of this successor liability claim in a way that aligns with claims found to be within or outside the scope of the Seventh Amendment.

         In that regard, Bunk argues that successor liability is akin to those fraudulent conveyances or preferential transfers by bankrupts that the Supreme Court in Granjinanciera, 492 U.S. at 43, concluded were often pursued historically through common law actions of trover and money had and received. GovLog, for its part, argues that a successor liability claim based on a fraudulent transaction is most analogous to corporate veil piercing, which the majority of courts have found to be equitable claims. As the parties correctly concede, however, Bunk's successor liability claim has aspects analogous to both fraudulent conveyances and ...

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