On Remand, District Court Dramatically Reduces False Claims Act Damages

In April 2015, we wrote about the Sixth Circuit’s decision to reverse and remand a $664 million judgment in favor of the government against United Technologies Corp., relating in part to claims that United Technologies’ predecessor, Pratt & Whitney (“P&W”), violated the False Claims Act by falsely certifying that it had corrected misstated projected costs in a 1983 bid to supply engines for the Air Force’s F-15 and F-16 fighter jets.  See United States v. United Techs. Corp., No. 13-4057 (6th Cir. Apr. 6, 2015).  The $664 million award included $7 million in statutory penalties related to the False Claims Act violation, and $657 million in damages for common law claims of payment by mistake and unjust enrichment.

On remand to the Southern District of Ohio, United Technologies moved the court to enter a final judgment of $7 million on the FCA claims, reflecting just the statutory penalties.  In its cross motion for entry of final judgment, the government argued that the court should reopen the record and instead award damages comprised of disgorgement of unjust enrichment with prejudgment interest, plus the $7 million statutory penalties.  United Technologies argued, in part, that “disgorgement fails on the record” because retroactive price reductions in later years of P&W’s contract with the government offset damages suffered in earlier years.

In addressing United Technologies’ retroactive off-set argument, the court stated that, under the FCA —and pursuant to the Sixth Circuit’s instruction—“savings achieved in later years may not offset damages in other years.” However, the court further explained that the focus of damages for purposes of disgorgement is on the amount of profits actually, wrongfully received by United Technologies.  Because the government never paid the initial prices offered in the first year of the contract due to price reductions in following years, the court found that United Technologies was entitled to an offset related to any amounts it did not actually receive as a result of the price reductions.  Agreeing with United Technologies’ offset calculation, the court determined that United Technologies had wrongfully received not $23,762,721 (as argued by the government), but $1,176,619.  Thus, the court awarded damages based on disgorgement of $1,176,619 plus interest, in addition to the $7 million in statutory damages.

A copy of the court’s opinion can be found here.