Bunk, et al v. Birkart Globistics, et al, No. 1:2002cv01168 - Document 1435 (E.D. Va. 2017)
Court Description: MEMORANDUM OPINION and ORDER. ORDERED that Bunk's jury demand with respect to his claim for successor liability against GovLog be, and the same hereby is, STRICKEN, and the case will be tried without a jury. Signed by District Judge Anthony J Trenga on 4/7/2017. (rban, )
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Bunk, et al v. Birkart Globistics, et al Doc. 1435 IN THE NITED STATES DISTRICT COURT FOR THE EASTEN DISTRICT OF VIRGINIA Alexndria Division NITED STATES OF AERICA ex rel. Kurt Bunk nd Daniel Heuser, PlaintifsRelators, v. ) ) ) ) ) ) Nos. 1 :02-cv-1168 (AJTMSN) ) 1:07-cv-1198 (AJTMSN) GOSSELIN WORLDWIDE MOVNG, N.V., ) GOSSELN GROUP, N.V., MARC SMET, et al., ) Defendants. ) ) MEMORANDUM OPION AND ORDER In this False Claims Act case, a $24 million judgment hs been entered against Defendnts Gosselins Group, Gosselin Worldwide Moving, N.V. ("Gosselin"), nd Mrc Smet ("Smet") (collectively, the "Gosselin Defendants"). Realtor Kurt Buk ("Buk") now seeks to impose liabiliy or that judment on Deendnt Govement Logistics, N.V. ("GovLog") under a theory of successor liabiliy. 1 The Fourth Circuit has remnded this case or tril ollowing its revesal of the Court's ranting summary judment in GovLog's avor with respect to Bunk's successor liability claim. Upon consideation of the parties' memonda nd the rgument of counsel at the hering nd sats conference held on Februy 10, 2017, the Cout concludes that the paticulr rounds or the successor liability claim asserted in this cas-that a nsaction between Gosselin and GovLog was raudulent-is by its nature an equitable claim or which a juy rial was not reconized at the time the Seventh Amendment ws adopted. It is thereore a claim that is to be tried without a juy at the ial scheduled to begin on Wednesday, May 17, 2017. 1 The United States did not intevene with respect to the claim that esulted in the judment, nd the successor liabiliy claim is theeore eing pursued solely by Bunk on behalf of the United Sates. Dockets.Justia.com BACKGROUND The factl background is more thoroughly laid out in the previous opinions of the Fouth Circuit nd the Cout. Briely sumarized, these cosolidated actions were originally iled in 2002 by Relators Bunk and Ray Ammons but remained under seal until May 19, 2008, ollowing the conclusion of ciminal proceedings against the Gosselin Deendnts nd nother compny involved in the "ITGBL proram," described below. In May nd Sept 2006, the United States advised Gosselin that wo lawsuits with False Claims Act ("FCA") claims had been iled against it nder seal. Those claims were bsed on Gosselin's involvement in the movement of household goods or Americn military personnel in Erope, primarily Gemny, under two sepate govement programs. The irst FCA claim ws based on Gosselin's paticipation in the Intenational Through Govement Bill of Lading proram, in which Gosselin, located in Europe, was a subconractor to Americn "reight owarders," also knon as Tnsporaion Service Provides ("TSPs"), located in the United Sates, that had received prime conracts rom the Deparment of Defense to move household goods of military personnel to Gemny (the "ITGBL claim"). The second FCA claim was bsed on Gosselin's paticipation in the Direct Procurement Method progrm, in which Gosselin was the prime conractor directly with the Depament of Deense or the ransporation of household goods of military personnel in Europe back to the United States (the "DPM claim"). The United States intevened in the ITGBL claim, but not the DPM claim. The ITGBL clam against Gosselin ws eventually resolved without any outstanding judment in avor of the United States. 2 he DPM claim against Gosselin ultimately resulted in the $24 millionjudment,2 which 3 remains unsatisied. On October 2, 2008, in Count II of his Second Amended Complaint, Bunk sued GovLog as a deendnt on the theory that GovLog had successor liability or Gosselin's FCA violations because in June 2007, Gosselin nd GovLog had entered into a "shm ransaction or inadequate consideration through which Gosselin Group ... and/or its operaing subsidiaries still proit through their business interests in shipping related to the U.S. Govement mrkets nd that action is desined to hinder, delay nd /or deraud Relators as a potenialjudment ceditor." United States ex rel. Bunk v. Gov't Logistics N. ., 842 F.3d 261, 270 (4th Cir.2016) (quoting Bunk Third Am.Compl. [Doc.No.448] I 30) (omission in original). On May 11, 2011, the Court biurcated the rial of the underlying DPM claim against Gosselin nd the successor liability claim against GovLog, inding that bircation would "facilitate the orderly resolution of the remaining issues, paticulrly given the derivative nd equitable nature of the govement's claims against GovLog, wich re to be detemined by the Cout, s opposed tojuy." [Doc.No.816. 4 On August 4, 2011, thejuy ened a verdict on ] the DPM claim that ultimately resulted in the $24 millionjudm ent. On December 2 3, 2014, the Court entered summayjudment on Bunk's successor liability claim against GovLog. On November 15, 2016, the Fourth Circuit reversed that order, 2 The $24 mil1ion judment was bsed exclusively on statutoy penalties under the FCA, with no compensatoy damages sought by or awarded to the RelatorsUnited States. 3 All of these proceeding played out against the backdrop of the concluded criminal proceeding against Gosselin, in which Gosselin ultimately pied guilty to criminal antirust violations in connection with its ITGBL subconacts nd paid a $6 million ine and restitution Gointly and severally with its codeendant) in the amount of $865,000. The United States' Complaint in Intevention also included a successor liability claim against GovLog with respect to the ITGBL claim. The Cout's biurcation order applied to both the United States' and Bunk's successor liabiliy claims against GovLog. Bunk did not appeal this biurcation uling either in his appeal rom he out's inal judment in favor of Gosselin on Bunk's DPM claim that eventually resulted in the $24 million judment against the Gosselin Defendants, see Brief or Relatos-Appellants, United States x rel. Bunk v. Birkarl Globsties, 741 F.3d 390 (4th Cir. 2013), or in his appeal rom the Cout's inal summay judgment in favor of GovLog on his successor liability claim, see Relators-Appellants' Brief on Appeal, United Stats x rel. Bunk v. Govenment Logstis N. ., 842 F.3d 261(4th Cir. 2016). 3 inding that here were genuine issues of material fact to e decided by a acinder. See Bunk, 842 F.3d at 279. NALYSI S Fderal Rule of Civil Procede 39(a) provides that "(w]hen a juy rial has been demnded under Rule 38, the action must be designated on the docket as a jury action." The prties aree that a poper juy demnd ws made under Rule 38 with resect to Bunk's successor liability claim. Accordingly,he rial on that claim "must be by jy unless ...(2) the court,on moion or on its on,inds that on some or all of those issues there is no federal right to a juy ial." Fed.R.Civ.P. 39(a). The ederal right to a jury is determined by the scope of the Seventh Amendment. The Seventh Amendment provides in relevnt part: "In Suits at common law ...the right of rial by jury shall be preseved ...." U.S. Const.amend.VII. The Amendment ntees that a party in a civil se hs a right to a juy trial if its cause of acion is one hat was conizable in the courts of law in 1791 or is a moden-day nalog to such a cause of action. See Graninanciera, S.A. v. Nordberg, 492 U.S. 3 3,40-41 (1989). To make this deteminaion, the Court must ( 1) compre the cause of action ''to 18th-century actions brouht in the courts of Englnd prior to the merger of the cots of law and equity," but more imporantly, (2) examine the remedy sought to "detemine whether it is legal or equitable in nature." Id. at 42 (intel quotation mrks omitted). In claiming a right to a juy,Bunk irst contends that his successor liability claim is a statutoy claim "embedded " in the FCA because the FCA imposes liability on ny "person," which,under the Dictionary Act,is deined to include a corpoation nd its successos. Based on this theoy,Bunk contends that ifGovLog is ound to have liability as a successor under the 4 audulent ansaction theoy, it is jointly nd severally liable with Gosselin or the "$24 million in civil penalties as a matter of statutoy consuction, not pursuant to a stand-alone equitable remedy." he Court rejects this position. As Bunk notes, the FCA "imposes liability on 'ny person' that violates its provisions." Relator's Response to Govement Logistics N.V.'s Brief Pusunt to the Cout's Order of Febry IO, 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 nd acts that have nothing to do with the conduct that resulted in the $24 million judment against Gosselin or ny other alleged FCA violaion. As the Foth Circuit explained, a successor's liability in this context is imposed by the ederal common law, not the FCA. Bunk, 842 F.3d at 272-74 & n.15 ("As the Supreme Court insucted in United States v. Besfoos, however, the failure of a statute to speak to a matter s undmental as the liability implications of coporate onership demands application of the rule that in order to abrogate a common-law principle, the statute must speak diectly to the question addressed by the common law. Put simply, the FCA does not speak to successor copoation liability nd thus has no impact on he radiional common law principles goveng successor coporation liabiliy.") (intenal quotation marks, citation, and alteations omitted). For these resons, Bk has no tatutoy claim or successor liability against GovLog nder the FCA. The Court must thereore detemine wheher Bunk's successor liabiliy claim based on a raudulent ransaction theoy under federal comon law is one that was coniable in the courts of law in 1791 or is a moden ay nalog of such a cause of action. Neither party hs pointed to n 18th-century nalog of this particulr successor liabiliy claim. Rather, the parties have atempted to deine the natue of this successor liability claim in 5 a way tt alins with claims ound to be within or outside the scope of he Seventh Amendment. In that regard, Buk rgues that successor liability is akin to those raudulent conveynces or preferential ansfers by bankrupts that the Supreme Court in Graninanciera, 492 U.S. at 43, concluded were oten prsued historically through common law actions ofrover nd money had nd received. GovLog, or its part, rgues that a successor liability claim based on a audulent nsaction is most nalogous to copoate veil piercing, wich the majoiy of couts have ond to be equitable claims. As the parties corectly concede, however, Bunk's successor liability claim hs spects nalogous to both audulent conveynces nd copoate veil piecing but is the equivalent of neither; and the Court has ound no 18th-century action or claim at law nalogous to Bunk's successor liability claim. In Graninanciera, the United States Supreme Cout obseved hat a claim based on n allegedly raudulent ansfer of n intangible proery, such as a business unit, s opposed to tangible property such s a chattel or cash, would have been within the purview of the English couts of equity: If the subject matter is a chattel, nd is still in the rntee's possession, an action inrover or replevin would be the rustee's remedy; and if he raudulentrnser was of cash, the ustee's action would be or money had nd received. Such actions at law re s available to therustee to-day as they were in the English couts of long ago. If, on the other hnd, the subject matter is land or an intangible, or therustee needs equitable aid or an accounting or the like, he may invoke the equitable process, nd that also is beyond dispute. Grainanciera, 492 U.S. at 44 (quoting 1 G. Glen, Faudulent Conveyances nd Peferences§ 98, at 183-84 (rev. ed. 1940)) (emphasis added); The Court went on to explain why: To be sue, in Drae v. Rice, 130 Mass., at 412, Justice Gay says that, '[b]y he law of Englnd beore the Americn Revoluion, . . . raudulent conveynces of choses in action, thouh not speciied in the statute [of Elizabeth], were equally void, but rom he nature of the subject the remedy of the creditor must be sought in equity.' But the reson why suits to ecover raudulent nses of choses in acion had to be bought in equiy, Jusice Gay points out, is that they could not be attached or levied upon. Id, at 413. See 6 also 0. Bmp, supr,§ 531 ("[T]here is no remedy at law when the property cn not be taken on execution or by attachment''). Jice Gray's summy of 18thcentury English pactice does not extend to cses, such as those involving monetary ransfers, where n adequate remedy existed at law."). Id. at 47 n.6 (alterations and omissions in original). As relected in the discussion in Grainanciera, historically, in detemining the respecive jurisdictions of the equity nd law cots, there was a citical distinction between raudulent ransactions based on the rnsfer of intngible assets nd those bsed on the ransfer of only money or tangible personal property. hile he "modem law of audulent ransfers had its origin in the Statute of 13 Eliabeth," BFP v. Resolution Trst Corp., 511 U.S. 531, 540 (1994), that statute did not chnge a paty's remedies; and thus only the courts of equity were available to remedy a audulent ansaction involving "a voluntary settlement of stock, or of choses in acion, or of copyholds, or of ny other propery, not liable to execution." 2 J. Story, Commentries on Equity Jurispudence,§§ 367-68 (10th ed. 1870). Here, Bunk's successor liabiliy claim is based on the allegedly raudulent anser of mostly intangible property. The nature of the remedy that would be available to Bunk, were liability established on his successor liability claim, also places his claim wihin what would have been the jisdiction of the 18th-century equiy couts. As explaind by the Foth Circuit, a corpoation that acquires the ssets of nother coporaion does not also acquire its liabilities, subject to our reconized exceptions: (1) ''the successor expressly or impliedly arees to assume the liabilities of the predecessor''; (2) "the ransaction may be considered a de facto merger"; (3) ''the successor may e considered a 'mee connuation' of the predecessor"; or (4) ''the nsacion is raudulent." Bunk, 842 F.3d at 273. Here, Bunk's only remaining rounds or successor liabiliy is the audulent ansacion exception, which, at its core, is bsed on audulent conveynces, the generally recozed remedy or which is either n nwining of the rnsaction or holding the 7 successor entiy liable to the extent of the value of the assets raudulently nsered. No doubt or this eson, courts have concluded that ceditos' rights in cases where the audulent ransaction exception applies re limited to the ssets of the predecessor acquired by the successor coporation. See, e.g., Stanley v. Miss. State Pilots of Guport, Inc., 951 So.2d 535, 539 (Miss. 2007). In act, Bnk has acknowledged nd relied on authoriy in the Fourth Circuit or the proposition that the remedy or successor liability based on a raudulent nsaction is limited to the value of the raudulently sfered assets. See Memondum in Suppot of Relators' Motion or Summay Judment as to Successor Liability of Defendant Govement Loistics N.V. [Doc. No. 1337-1], at 15 ("Moeover, the Fourth Circuit has reconized nd relied on W. Fletcher, Cyclopedia of the Law of Copoations ('Fletcher'), in deining the successor liability exceptions. See Carolina Trasformer, 978 F.2d at 838. That authoritative soCe provides that, 'if the ransfer consitutes, either in fact or s a matter of law, a raud upon the creditors of the other copoation, the creditors derauded by the ransfer may, in equiy, follow the propery into the hans of the new corporation and subject ii to the satifaction of their claims, or hold the new corporation liable to the xtent of its value.' Fletcher§ 7125.") (emphsis added).5 Nevertheless, Bunk is seeking a much diferent remedy-upon a inding of liability, the automatic imposition on GovLog of the entire $24 millionjudment,jointly nd severally with Gosselin, without regrd to the actual value of the assets ransered. Bunk hs not cited nd the Court hs not ound ny case where the emedy or successor liabiliy based only on a audulent nsaction is the automatic imposition of n already deteined money judment, paticulrly where the predecessor copoation remains a viable entity. In any event, 5 See also Fletcher § 7403 ("If a coporation conveys or ransfers its propery, with intent to hinder, delay or deaud creditos, or without consideaion, exising creditos may sue to set the conveyance or nsfer side, to subject the propery to the satisaction of their claims, or to hold the rantee or nsferee liable/or is value....) (emphsis added). 8 should Bunk establish successor liabiliy, the Court will have to decide what particular remedy is appropriate since the rnsaction at issue was not simply "money payments of ascerined nd deinite mounts," and Bunk's claim would likely "call or n accounting or oher equitable relief."6 Graninanciera, 492 U.S. at 49 (quoting Schoenthal v. Iving Trust Co., 287 U.S. 92, 95 (1932)). In sum, Bnk necessarily seeks n equitable remedy or a claim that I 8th-century courts of law would not have had jurisdiction to her. As such, no jy right attaches to his claim. Compare Ed Peters Jewely Co. v. C & J Jewely Co., 215 F.3d 182, 186 (1st Cir. 2000) (holding there is no riht to juy rial on successor liability claim based on mere continuation or actual raud theories), with In re G-I Holdings, Inc., 380 F. Supp. 2d 469,474 (D.N.J. 2005) (holding there is a juy rial right in successor liability claim based on mere continuation theoy). For these resons, the May 17, 2017 rial will be ried by the Court without a juy. Whereore, it is hereby ORDERED that Bunk's jy demnd with respect to his claim or successor liability against GovLog be, and the same hereby is, SIC.EN, nd the case will be ied without a juy. Alexndria, Virginia April 7, 2017 6 In this rspct, the emedy available or a successul successor liability claim based on de facto merger, areement, or mere continuation appes to difer undamenally rom that available bsed solely on a raudulent ansaction. See, e.g., Stnly, 95 l So. 2d at 53941 (.. [he ansferee copoation] is unmistakably liable or [the plainti's] judment against [the ansferor copoation] up to the amount raudulently ansfered. he amount ansfered includes all of the accouns eceivable rom [the ansferor cooation], ather thn one week's woth as the chancellor ound. Bcause it is unclear rom the ecord whether the value of the ansfeed ssets would qual the amount of the judment, it is necessy to discuss the altenative docrine of 'continuiy of enteprise.' ...Under [precedent], the new copoation is a mere continuation of [the nsferor cooation] nd the new corporation is liable or al of [the nsfeor corpoation's] debts.) (emphasis in original); Colanrea v. Colanrea, 401 A.2d 480, 489-91 (Md.App.1979). 9
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