Fourth Circuit Issues Important Decision in Murphy Anderson False Claims Act Case Strengthening the Law on Successor Corporation Liability
In the long-running case against European companies involved in a bid-rigging scheme for transport of military household goods, the Fourth Circuit just issued an important decision strengthening the law on successor corporation liability under the False Claims Act. In a decision issued November 15, 2016, U.S. ex rel. Bunk v. Government Logistics, N.V., a panel of the Fourth Circuit held that Relators Kurt Bunk and Ray Ammons adequately pled that Appellee Government Logistics, N.V. ("GovLog") was liable as a successor corporation for the $24 million judgment entered against the Gosselin Group for a bid-rigging scheme to defraud the government. The Complaint included allegations that the Gosselin Group transferred its Department of Defense contracts to GovLog as a sham to continue business with the government while avoiding its liabilities.
The Fourth Circuit held these allegations and other indicia of fraud sufficed to establish successor liability under a fraudulent transaction theory, even under heightened pleading standards. The Court vacated the District Court's grant of summary judgment in favor of GovLog and remanded to the District Court for further proceedings.
This decision puts companies on notice that they cannot avoid liability for False Claims Act violations by transferring assets to related entities with the intent to hinder the Government's ability to collect a judgment.
Lead counsel are Richard Greenberg and John Petite of the Greensfelder, Hemker & Gale, P.C. law firm of St. Louis. John Petite argued in the Fourth Circuit. Ann Lugbill, Michelle Banker and Mark Hanna of Murphy Anderson PLLC are also counsel along with attorney Tom Stanton. Reuben Guttman and Traci Buschner were previously counsel to Mr. Bunk. Michael Shih argued for the United States as amicus on behalf of Relators. Andrew Steinberg is the DOJ Civil Division Fraud Section Trial Attorney who was co-counsel with Relators at trial.