The opinion of the court was delivered by: ARTHUR D. SPATT
After a jury trial, the defendant Zan Machine Company, Inc. ("Zan") was found to have committed eight violations of the False Claims Act ("the Act"), codified at 31 U.S.C. §§ 3729-33. The jury also determined that, as a result of these False Claims Act violations, the Government sustained actual compensatory damages in the sum of $ 26,363.63.
The main issue before the Court is whether to setoff the sum of $ 30,000 paid in settlement by the former defendant Bourdon Forge Company, Inc., which was a subcontractor involved in the assembly of the same safety belts involved in this case.
In their post-trial memoranda, the parties raise the following issues: (1) how large a civil penalty should be imposed against Zan?; and (2) should the jury's award of compensatory damages to the Government be offset by the amount it received from the co-defendant which settled prior to trial, and, if so, in what manner should the $ 30,000 be setoff?
On October 18, 1984, Zan was awarded a contract with the Department of the Air Force for the production of safety belts for military aircraft. This contract required that these safety belts meet certain specifications. Included in these requirements were that the belts be composed of specific types of metal, be of a certain strength and hardness, contain a certain amount of carbon, and that the metal parts be heat-treated.
In furtherance of its performance of the contract, Zan ordered safety-belt parts from Bourdon Forge Company, Inc. ("BFI"). These parts were not heat-treated and did not meet the strength, hardness and carbon requirements contained in the contract. Despite these shortcomings, Zan incorporated these parts into the seat belts it manufactured for the Air Force. Similarly, Zan acquired other component parts from a firm called Die-Matic Products, Inc. ("Die-Matic") which parts did not satisfy the contract's specifications. Zan also incorporated these parts into the military aircraft safety belts.
With regard to their shipments of the non-complying component parts to Zan, BFI and Die-Matic provided Zan with certificates of compliance which falsely certified that the shipments BFI and Die-Matic sent to Zan complied with the contract's specifications. As the jury determined, Zan presented eight of these false certificates to an agent of the Government in order to receive payment under the contract, knowing that the certificates were, in fact, false.
This case was originally brought by the Government against both Zan and BFI. However, just prior to the trial the Government settled its claims against BFI for the sum of $ 30,000.
At the time this case went to trial, the United States pursued five causes of action against Zan: namely, breach of contract, breach of warranty, payment by mistake or erroneous belief, and two causes of action alleging violations of the False Claims Act. With regard to the False Claims Act causes of action, the Government maintained that Zan violated 31 U.S.C. § 3729(a)(1) in that Zan allegedly presented false or fraudulent claims to the Government for payment, knowing that such claims were false or fraudulent. In this case the "claims" were actually deliveries of the safety belts. The Government also contended that Zan violated § 3729(a)(2) in that Zan allegedly made, used, or caused to be made or used a false record or statement to obtain payment for or approval of a false or fraudulent claim, knowing that such statement or record was false or fraudulent, within the purview of the statute.
The trial of this case commenced before a jury on September 2, 1992. By its verdict returned on September 9, 1992 the jury determined that Zan had breached the warranty of fitness for a particular purpose, that Zan had breached its contract with the Government, and that the Government had made payments to Zan based upon the erroneous belief that the safety belts conformed to the contract's specifications.
With regard to the Government's causes of action under the False Claims Act, the jury determined that Zan had not violated § 3729(a)(1), finding that Zan did not know that the claims or deliveries it made to the Government were false or fraudulent. The jury did find, however, that Zan violated § 3729 (a)(2) in that it knowingly made, used, or caused to be made or used false records or statements in order to obtain payments for a false or fraudulent claim. With regard to the § 3729(a)(2) cause of action, the jury determined that on eight occasions Zan used a false record or statement to obtain payment of a false or fraudulent claim.
Finally, the jury determined that the Government sustained actual compensatory damages in the sum of $ 26,363.63. These compensatory damages were the same for the other causes of action sounding in breach of ...