United States ex rel. Wall v. Circle C Construction, LLC
813 F.3d 616
| 6th Cir. | 2016Background
- Circle C contracted to build 42 warehouses at Fort Campbell; contract required Davis-Bacon wages and weekly compliance statements.
- Phase Tec, Circle C’s electrical subcontractor, underpaid several electricians in Kentucky by $9,916 in total, making some compliance statements false.
- The government sued under the False Claims Act; liability based on false compliance statements is undisputed.
- The district court adopted the government’s "taint" theory, treating all Phase Tec electrical work in the Kentucky warehouses as valueless, and awarded treble damages based on the full amount paid for that electrical work (~$777,895 less a $15,000 offset).
- The Sixth Circuit reversed, holding actual damages equal the wage shortfall ($9,916), trebled, less the prior $15,000 settlement, resulting in $14,748 owed by Circle C.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper measure of "actual damages" under the False Claims Act when contract work was completed and used despite a statutory wage underpayment | Government: Entire value paid for all Phase Tec electrical work is lost because the underpayment "tainted" all that work, so actual damages equal full amount paid for that work | Circle C: Actual damages equal the real, provable shortfall — the unpaid wages ($9,916); the government received the buildings and almost all value bargained for | Court: Actual damages are the measurable wage shortfall ($9,916); full-value "taint" theory rejected because government used the buildings and money damages compensate the injury |
| Whether hypothetical withholding/suspension of payments (had government known) should determine actual damages | Government: Would have suspended or withheld payments, so damages equal amounts paid that would have been withheld | Circle C: Actual damages require a comparison of what was bargained for vs. what was received in fact, not a counterfactual withholding theory | Court: Rejected hypothetical-withholding measure; actual damages must be grounded in the value difference actually suffered (the wage shortfall) |
| Effect of trebling and prior settlement offset | Government: Treble the actual damages or treble full-taint measure, offset by Phase Tec settlement only after trebling | Circle C: Treble only the actual, provable damages; credit prior Phase Tec $15,000 settlement against treble amount | Court: Trebled $9,916 = $29,748, minus $15,000 settlement credit = $14,748 judgment against Circle C |
Key Cases Cited
- United Technologies Corp., 626 F.3d 313 (6th Cir. 2010) (False Claims Act damages framework)
- U.S. ex rel. Compton v. Midwest Specialties, Inc., 142 F.3d 296 (6th Cir. 1998) (defective goods that are dangerous can be valueless)
- U.S. ex rel. Roby v. Boeing Co., 302 F.3d 637 (6th Cir. 2002) (actual damages measure: difference between value bargained for and value received)
- United States v. Bornstein, 423 U.S. 303 (1976) (crediting prior payments/settlements against FCA recovery)
- Hance v. Norfolk S. Ry., 571 F.3d 511 (6th Cir. 2009) (standard of review: abuse of discretion)