UNITED STATES of America, EX REL. Robert R. PURCELL, Plaintiffs, v. MWI CORPORATION, Defendant.
Civil Action No. 98-2088 (GK)
United States District Court, District of Columbia.
Signed June 25, 2014
15 F. Supp. 3d 34
Gladys Kessler, United States District Judge
Alexina Guiomar Jackson, Brian T. McLaughlin, Charlotte E. Gillingham, Robert T. Rhoad, Jason C. Lynch, Crowell & Moring LLP, Washington, DC, for Defendant.
MEMORANDUM OPINION
Gladys Kessler, United States District Judge
On November 25, 2013, after a nine-day trial, a jury found Defendant MWI Corporation (“Defendant” or “MWI“) liable for violations of the False Claims Act (“FCA“),
I. BACKGROUND1
In 1992, MWI, a Florida corporation, arranged to sell irrigation pumps and other equipment to seven Nigerian states. The total sale price was $82.2 million.
To finance these sales, MWI and the Federal Republic of Nigeria (“Nigeria“) sought and received eight loans from the Export-Import Bank of the United States (“Ex-Im“), an agency of the United States that finances and facilitates transactions between U.S. exporters and international buyers. Ex-Im agreed to finance the deal and loan Nigeria $74.3 million. Nigeria agreed to pay back the $74.3 million, as well as interest and fees, and the individual Nigerian states agreed to pay the remainder of the $82.2 million price.
Before Ex-Im would approve the loans to Nigeria, it required MWI to submit a “Letter of Credit Supplier‘s Certificate” for each of the eight loans. On each of those eight Letter of Credit Supplier‘s Certificates, MWI attested that it had paid only “regular commissions” in connection with the pump sales. See Pls.’ Ex. 283.
After Ex-Im approved the loans, but before it disbursed any funds, it required MWI to submit a “Disbursement Supplier‘s Certificate.” MWI attested on 50 Disbursement Supplier‘s Certificates that it had paid only “regular commissions” in connection with the pump sales. See Pls.’ Ex. 284. Thus, MWI submitted eight Letter of Credit Supplier‘s Certificates and 50
In 1998, Relator Robert Purcell, a former employee of MWI, filed this action under the FCA. Complaint [Dkt. No. 1]. He alleged that MWI paid commissions in excess of 30 percent to its long-time Nigerian sales agent, Alhaji Mohammed Indimi (“Indimi“). Id. ¶¶ 35-37. Purcell alleged that those commission payments were not “regular” and should have been disclosed on all of the Supplier‘s Certificates that MWI submitted to Ex-Im. Id.
In April of 2002, the United States decided to intervene, and filed a complaint which then governed the proceedings (“Complaint“) [Dkt. No. 18]. Based in part on the amount of commissions paid to Indimi, which at the time was estimated to be approximately $28 million dollars,3 the Complaint alleged two violations of the FCA (Counts I and II) and two common law claims for unjust enrichment and payment by mistake (Counts III and IV).
The case was litigated for several years before Judge Ricardo M. Urbina. Judge Urbina made several findings and conclusions that bind this Court, including two opinions granting in part and denying in part various Motions for Summary Judgment. See United States ex rel. Purcell v. MWI Corp., et al., 520 F.Supp.2d 158 (D.D.C. 2007) (“First MSJ Opinion“); United States ex rel. Purcell v. MWI Corp., 824 F.Supp.2d 12 (D.D.C. 2011) (“Second MSJ Opinion“).
After Judge Urbina‘s retirement, the case was reassigned to Judge Colleen Kollar-Kotelly, and then to this Court. After resolving many pre-trial motions, the case went to trial on November 6, 2013.
At the close of the Government‘s case, MWI moved for judgment as a matter of law under Rule 50(a). Trial Tr. Nov. 19, 2013, P.M. Session at 79:8-80:7. “Consistent with the best practices governing pre-verdict motions, the Court reserved ruling” on MWI‘s motion. See Hancock v. Washington Hosp. Ctr., 13 F.Supp.3d 1, 3, 2014 WL 60288, at *1 (D.D.C. 2014) (quoting Moore‘s Federal Practice Civil § 50.33). The Court ordered Defendant to file a written brief in support of its motion. Trial Tr. Nov. 19, 2013, P.M. Session at 80:7-8.
On November 22, 2013, the case went to the jury on Counts I and II of the Complaint. On November 25, 2013, the jury returned a verdict for Plaintiffs on both Counts I and II [Dkt. No. 453]. The Government then dismissed Counts III and IV of the Complaint, its common law claims, with prejudice. Trial Tr. Nov. 25, 2013, A.M. Session at 22:18-20.
On December 9, 2013, Plaintiffs filed an Opposition to Defendant‘s Motion for Judgment as a Matter of Law [Dkt. No. 460], and on December 19, 2013, Defendant filed a Reply [Dkt. No. 466].
II. STANDARD OF REVIEW
Under
“If the court does not grant a motion for judgment as a matter of law made under
“The legal standard for granting a motion for judgment as a matter of law is the same whether it is rendered during the trial under
Although the court should examine all evidence in the record, “the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence.” Id. at 150. Moreover, courts “do not ... lightly disturb a jury verdict. Judgment as a matter of law is appropriate only if the evidence and all reasonable inferences that can be drawn therefrom are so one-sided that reasonable men and women could not have reached a verdict in plaintiff‘s favor.” Nelson v. Dist. of Columbia, 953 F.Supp.2d 128, 130 (D.D.C. 2013).
As a post-trial
III. ANALYSIS
The Government alleged two violations of the FCA. First, the Government alleged that MWI knowingly presented false or fraudulent claims for payment to the United States Government. Complaint ¶¶ 46-48 (citing
MWI raises several arguments that the Court will address in turn. However, many of MWI‘s arguments ask the Court to “make credibility determinations or weigh the evidence,” which it is not permitted to do. Reeves, 530 U.S. at 149; Estate of Mark Parsons v. Palestinian Auth., 651 F.3d 118, 124 (D.C. Cir. 2011) (“Sorting out ... contradictions [and] deciding how much weight to give evidence that supports or undermines [a party]‘s case ... are prototypical jury functions that courts may not commandeer.“). Likewise, the Court will not revisit its prior legal conclusions, which were unaffected by the evidence introduced at trial. Cf. Feld v. Feld, 688 F.3d 779, 782-83 (D.C. Cir. 2012) (holding that
A. There Was Sufficient Evidence to Support the Jury‘s Finding that the 58 Supplier‘s Certificates Were “Claims”
MWI argues that Plaintiffs failed to introduce any evidence that the Supplier‘s Certificates were “claims for payment” as defined by the FCA. Renewed Mot. at 45. The FCA defines “claim” to include “any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.”
Earlier in this litigation, MWI argued that, as a matter of law, “submissions made in connection with efforts to obtain Government loans cannot be treated as false claims under the FCA.” Def. MWI Corp.‘s Mot. for Clarification at 6 [Dkt. No. 230]. Judge Urbina rejected that argument, and granted the Government‘s Motion for Summary Judgment on the issue of the existence of claim and the issue of presentment. First MSJ Opinion, 520 F.Supp.2d at 174 n. 6; see also Order of March 20, 2008 (granting Plaintiff‘s Motion for Partial Summary Judgment on the FCA elements of “the existence of a claim” and “presentment of a claim to the government“) [Dkt. No. 233].
B. There Was Evidence Sufficient to Support the Jury‘s Finding that MWI‘s Claims Were False
Plaintiffs’ theory of falsity was that MWI‘s certifications on its Supplier‘s Certificates were false because it attested that it paid only “regular commissions.” Complaint ¶ 15; Trial Tr. Nov. 21, 2013, A.M. Session at 36:10-17. Consequently, in order to ascertain whether the claims were false, the jury had to evaluate whether the commissions MWI paid to Indimi were “regular.”
Because the jury found that the 58 Supplier‘s Certificates were false claims, it necessarily found that the Indimi commissions were not “regular.” Sufficient evidence was introduced to support the jury‘s finding.
The strongest evidence that the commissions paid to Indimi were not regular was the sheer amount of money paid to Indimi. Between 1992 and 1994, the commissions paid to Indimi dwarfed those paid to other MWI agents. Def.‘s Ex. 500 ($26,070,181 was paid in 8 commissions to Indimi; $1,744,537 was paid in 48 commissions to all other agents). Between 1980 and 1995, MWI paid $51,986,394 in 23 commissions to Indimi. Id. The other 130 commissions to MWI‘s other sales agents add up to approximately $3.6 million dollars combined. Id.
Of the largest 21 commissions paid between 1980 and 1995, Indimi received 19 of them. Id. His largest commission, in April of 1985, was $12,750,149 (almost four times as much as MWI paid all other sales agents over 15 years). Id.
MWI argues that the total dollar amount of the commissions is misleading. Renewed Mot. at 21. However, in addition to the high dollar amount Indimi received, the percentage of the total sales that he received in commissions was far higher than the percentages given to other MWI sales agents. Eighteen of the 153 commissions MWI paid between 1980 and 1995 were above 30% of the sales price, and 15 of those went to Indimi. Def.‘s Ex. 500.
MWI emphasizes that three other commission percentages were higher than 30% of the sales price, Renewed Mot. at 11, but those commissions were comparatively small. Def.‘s Ex. 500 (commissions of $26,624 (Feb. 2, 1990), $23,387 (July 22, 1980), and $16,839 (August 13, 1982)). Importantly, as Rita Rodriguez testified, commission percentages often have to be high
In addition, the average percentage of sales price paid to MWI sales agents in commissions between 1992 and 1994 was approximately 10%, but Indimi‘s average percentage of sales price was 33.9%. Def.‘s Ex. 500. Similarly, the average percentage of sales price paid to MWI sales agents between 1980 and 1995 was 14.68%, but Indimi‘s average percentage of sales price was 33.71%. Id.
Thus, the evidence supports the jury‘s finding that the commissions were “irregular” because the Indimi commissions were generally much higher than the commissions paid to MWI‘s other agents, both in total amount and in percentage of sales price.
Moreover, the evidence that Indimi was paid commission percentages between 26% to 37% was particularly significant because multiple Ex-Im employees testified that they expected commissions to be “in the lower than 5 to around 10 percent area.” Hess Dep. 60:18-22, Sept. 22, 2004;6 see also Test. of Rita Rodriguez, Trial Tr. Nov. 14, 2013, A.M. Session at 75:15-16, 76:14-19 (testifying that 5% was standard, and that anything over 8% or 10% would be unlikely to be approved). This statement correlates with the testimony given by MWI employee Juan Ponce that Ex-Im expected its commissions to be no more than 5%. Test. of Juan Ponce, Trial Tr. Nov. 13, 2013, A.M. Session at 22:1-10.
Ex-Im employees also testified that commissions of either the percentage of sales price or the total dollar amount paid to Indimi were unquestionably “irregular” and far outside the scope of anything they had ever seen. See, e.g., Test. of David Chavern, Trial Tr. Nov. 12, 2013, A.M. Session at 83:10-18, 88:24-89:9 (testifying that if a commission of either 24% or 35% had been disclosed, the bank would not have approved the disbursement); Test. of Leilani Lansing, Trial Tr. Nov. 12, 2013, P.M. Session at 48:2-3, 51:7-16, 51:20-21, 52:23-25, 84:13-23 (referring to the total amount paid to Indimi in commissions on all of the sales as “huge compared to the amount of the sale, and also the percentage,” “absurd,” an “outrageous amount,” and “far beyond the range of anything reasonable“); Test. of Rita Rodriguez, Trial Tr. Nov. 14, 2013, A.M. Session at 29:21-37:21 (testifying that even the lowest commission percentage, 24%, would be found irregular because she did not “know of any industry in any country that regularly pays that kind of commission legitimately” and noting that it would be “astounding” and “unbelievable” that anyone would suggest that the Government should finance such a transaction). In sum, the Government submitted ample evidence supporting the jury‘s finding that the commissions paid to Indimi were not “regular,” and, thus, MWI‘s certifications to the contrary were false.7
Despite being specifically foreclosed from pursuing this theory, MWI now raises the same argument, couched in the language of “objective standards.” Renewed Mot. at 4-10. However, the basis of its theory is the same—that the language of the Certificates provides so little guidance that no commission could be said to be “regular” or “irregular.” Id. at 4 (arguing that Government failed to show the commissions “could be objectively adjudged to be regular or irregular under the circumstances here“).8 This legal argument has been rejected repeatedly by this Court and MWI has failed to raise any “intervening change of controlling law[] or new evidence,” Alliance for Cannabis Therapeutics v. D.E.A., 15 F.3d 1131, 1134 (D.C. Cir. 1994), that would justify revisiting the Court‘s conclusion. Therefore, the Court will simply reiterate that the language of the Supplier‘s Certificate was not so ambiguous as to prevent a finding of falsity.
Second, MWI argues that the Government failed to introduce evidence of the relevant “industry standard.” Renewed Mot. at 14-17. In 2007, Judge Urbina found that “Ex-Im‘s interpretation of ‘regular commissions’ as referring to industry-wide benchmarks is not only ‘consistent’ with the underlying term but is finely tuned to its context and purpose.” First MSJ Opinion, 520 F.Supp.2d at 177. Thus, the Court instructed the jury that, “[t]he term ‘regular commissions’ refers to commissions normally and typically paid by the exporter and its competitors in the same industry.” Trial Tr. Nov. 21, 2013, A.M. Session at 36:20-22.
MWI now argues that because the instruction to the jury defined regular commissions as “commissions normally and typically paid by the exporter and its competitors in the same industry,” id. (emphasis added), the Government was required to introduce specific evidence of commissions paid both by MWI and by MWI‘s industry competitors to meet its burden on the element of falsity. Revised Mem. at 14-17.
The Court disagrees. The intent of this instruction was to provide some guidance to the jury as to the scope of the “regular commissions” inquiry, not to establish an
Moreover, the objection is unavailing because the Government submitted evidence to the jury to enable them to make reasonable inferences about the commissions normally and typically paid in the industry. See Beyene, 958 F.Supp.2d at 249 (noting that court must draw all reasonable inferences in favor of non-moving party). Namely, evidence was submitted that, in markets where there was competition, MWI‘s commissions were limited to “10 percent or less.” Test. of Juan Ponce, Trial Tr. Nov. 13, 2013, A.M. Session at 29:23-30:6; see also id. at 31:9-18 (in markets with competition, “[s]ometimes commissions cannot be any more than 5 percent“). This testimony corresponds with MWI‘s own commissions data. See, e.g., Def.‘s Ex. 500 (commissions percentages in Europe between 1980 and 1995 were 5%-10%; average commission in Central American between 1992 and 1994 was 8%). Evidence was presented that the pump industry-standard was to keep prices low by keeping commissions low.
Ponce‘s testimony also explained why the Government did not have specific evidence about commission payments paid by competitors selling irrigation pumps in Nigeria—there were no such competitors. Test. of Juan Ponce, Trial Tr. Nov. 13, 2013, A.M. Session at 30:11-17 (“The Hydraflo pump was a proprietary equipment, and even though we had some competition later on, but we were basically alone in the market with this particular product.“); see also id. at 29:23-30:6, 31:1-7. Because there were no direct competitors, it would have been impossible for the Government to submit specific evidence about what competitors paid in commissions for similar products.
In sum, the Government submitted sufficient evidence as to how the industry generally functioned to constitute a “legally sufficient evidentiary basis for a reasonable jury to find” that Indimi‘s commissions were irregular compared to those generally paid in the industry. Reeves, 530 U.S. at 149.
Third, MWI argues that the jury could not find that the Indimi commissions were irregular as compared to its other commissions because all of its commissions were calculated using the same formula. Renewed Mot. at 17-23; Renewed Reply at 7; Def.‘s Ex. 533. This formula set a commission of 10% of the base price. Def.‘s Ex. 533. The agent would then also receive half of any sales amount received over the base price. Id.; see also Test. of Cornelius Lang, Trial Tr. Nov. 14, 2013, P.M. Session at 47:20-48:12.
MWI insists that its “neutral” application of this formula to all sales is nonrebuttable evidence of regularity. Revised Mem. at 11-12. However, the Government submitted evidence that explained how the lack of competition in Nigeria affected the sales price and application of the commissions formula in important ways.
Because there were no competitors selling similar pumps in Nigeria, there were no market forces to ensure that MWI‘s prices or commissions were not inflated.
The evidence showed that Indimi sold his products to Nigeria at between 168% of the base price and 296% of the base price. See Def.‘s Ex. 533 (setting forth formula for calculation of commissions); Def.‘s Ex. 500 (listing commissions and sales prices). On average, Indimi‘s sales were close to 250% of the base price. Id. In comparison, sales of other salespeople between 1992 and 1994 were an average of 102% of the base price. Id.
Consequently, the fact that Indimi‘s high commissions were calculated according to a formula does not make the commissions “regular” because the formula was applied to irregular, inflated prices. Although companies are free to charge whatever prices they can get in the private market, the Ex-Im‘s purpose is to finance sales made on a commercially-based basis. Hess Dep. 100:2-10, Sept. 22, 2004. As the Ex-Im witnesses testified consistently, the purpose of requiring disclosures of high commissions is, at least in part, to assure that the Bank invests in projects where the “products are priced correctly.” Test. of David Chavern, Trial Tr. Nov. 12, 2013, A.M. Session at 109:5-14; see also id. at 66:1-6 (stating that Ex-Im would not want situation where “the amount of lending that the bank is doing is in excess of what‘s needed to actually buy the product“); Test. of Leilani Lansing, Trial Tr. Nov. 12, 2013, P.M. Session at 52:4-13 (noting that disclosure of high commission rate “would raise in my mind the question as to whether we approved the loan for the wrong amount“).
In sum, the jury had a sufficient evidentiary basis to reject MWI‘s argument that its application of a consistent formula to all its commissions made these irregular transactions, and the irregularly high commissions that accompanied them, “regular” for purposes of procuring Ex-Im financing.
Fourth, MWI argues that the Indimi commissions were “regular” because they were consistent with the commissions it had been paying to Indimi for years. Revised Mem. at 12. MWI argued this theory to the jury, and the jury rejected it. It was certainly not unreasonable for the jury to conclude that MWI‘s exorbitant commissions to Indimi were not “regular” simply because it had paid him similarly exorbitant commissions for years. There is simply no basis for the Court to overturn this finding. See Estate of Mark Parsons, 651 F.3d at 124.
Finally, MWI argues that the Government inappropriately argued that the many unconventional ways in which Indimi received his commissions was evidence of irregularity. Renewed Reply at 13.10 Contrary to MWI‘s insistence that the Government never raised this theory be
In sum, the Government presented a “legally sufficient evidentiary basis” for the jury to find that the commissions paid to Indimi were not regular, and, thus, that MWI‘s certifications were false.11 Reeves, 530 U.S. at 149.
C. There Was Sufficient Evidence to Support the Jury‘s Finding that MWI Acted With the Requisite Scienter
For both counts, the Government needed to prove that MWI acted “knowingly.” The Court instructed the jury: “Under the False Claims Act, knowingly means that, with respect to the allegedly false or fraudulent information, a defendant had actual knowledge of the information; ... or acted in deliberate ignorance of the truth or falsity of the information, or acted in reckless disregard of the truth or falsity of the information.” Trial Tr. Nov. 21, 2013, A.M. Session at 37:3-12.
There was ample evidence to support a finding that MWI acted with, at a minimum, reckless disregard. See United States v. Sci. Appl. Int‘l Corp., 653 F.Supp.2d 87, 97 (D.D.C. 2009) (noting that jury had to find defendant acted “with actual knowledge, or at least reckless disregard or deliberate ignorance of the truth or falsity of its claims“) (emphasis added), reversed in part on other grounds, 626 F.3d 1257 (D.C. Cir. 2010).
For example, Ponce testified that MWI employees knew that the commissions MWI was paying to Indimi were much higher than those being paid to agents in other countries. Test. of Juan Ponce, Tri
In addition, MWI employees testified that Eller personally approved every commission MWI paid, including Indimi‘s commissions. Test. of Thomas Roegiers, Trial Tr. Nov. 19, 2013, A.M. Session at 20:9-23; Test. of Juan Ponce, Trial Tr. Nov. 13, 2013, A.M Session at 9:22-10:8, 14:14-21. Eller testified that he could not remember MWI ever paying any other agent a commission of more than $5 million, far less than the largest commission Indimi received, $12.75 million. Trial Tr. Nov. 8, 2013, A.M. Session at 120:11-22; Def.‘s Ex. 500. Eller signed the majority of the Supplier‘s Certificates declaring that no irregular commissions had been paid, even though he knew that Indimi‘s commissions were significantly higher than MWI‘s average commission rates. This evidence supports a finding of reckless disregard. See United States v. Krizek, 111 F.3d 934, 942 (D.C. Cir. 1997) (upholding district court‘s determination that failure to verify and review false submissions rose to level of reckless disregard).
Moreover, this Court has already noted that there was evidence that Eller had actual knowledge that the commissions should have been disclosed. Judgment Opinion, 15 F.Supp.3d at 31, 2014 WL 521524, at *11. Ponce testified that MWI employees were informed that the Ex-Im expected commissions to be no more than 5 percent. Test. of Juan Ponce, Trial Tr. Nov. 13, 2013, A.M. Session at 21:20-22:10. He testified that, “we knew that we were violating ... the rules. We just hoped that we would never get caught.” Id. at 35:3-4.12 Thus, the Government submitted sufficient evidence to the jury for it to find that MWI‘s certifications were made with actual knowledge of falsity.13
Thereafter, the jury weighed the evidence and found that MWI‘s evidence of good faith and reasonable interpretation was not as credible or persuasive as the Government‘s evidence to the contrary. As discussed above, the Government produced evidence that MWI employees knew that the Ex-Im expected commissions to be much lower than the commission being paid to Indimi,14 and knew that the commissions being paid to him were significantly higher than those being paid to any other MWI sales agents. Given that the Court must not make credibility findings or weigh the evidence, Reeves, 530 U.S. at 149, it is clear that MWI‘s argument about the “reasonableness” of their interpretation is without merit.
MWI‘s other arguments similarly reiterate the same arguments it made to the jury in its closing argument. In doing so, it misstates the role of this Court, which is only to decide whether sufficient evidence was presented to the jury on each element. The jury was presented with MWI‘s evidence and arguments at trial, and was not persuaded by them. Given the sufficiency of the Government‘s evidence to support the jury‘s finding of scienter, MWI‘s insistence that the jury should have interpreted the evidence differently cannot support a reversal of the verdict.
IV. CONCLUSION
After a careful review of the record, the Court concludes that there was a “legally sufficient evidentiary basis for a reasonable jury to find” for Plaintiffs. Reeves, 530 U.S. at 149. Consequently, Defendant has failed to establish that “reasonable men and women could not have reached a verdict in plaintiff‘s favor,” Nelson, 953 F.Supp.2d at 130, and its Motion for Judgment as a Matter of Law [Dkt. No. 443] and its Renewed Motion for
An Order shall accompany this Memorandum Opinion.
GLADYS KESSLER
United States District Judge