United States of America v. Pacific Coast Maritime Agency et al

Filing 17

Opinion and Order - Plaintiff's motion for default judgment (ECF 15 ) is GRANTED IN PART. Defendant Paul Sogotis is ordered to pay Plaintiff damages of $170,769.51, plus civil penalties in the amount of $55,000, for a total award of $225,769.51. Signed on 9/29/2016 by Judge Michael H. Simon. (mja)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

UNITED STATES OF AMERICA,
Plaintiff,

Case No. 3:15-cv-02415-YY
OPINION AND ORDER

v.
PACIFIC COAST MARITIME AGENCY,
PAUL SOGOTIS, Individually,
Defendants.
Michael H. Simon, District Judge.
Plaintiff United States of America brings this civil action against Defendants under the
False Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733. On December 29, 2015, Plaintiff filed a
Complaint alleging that Defendants submitted false and fraudulent claims and statements to the
United States by knowingly engaging in systemic and fraudulent overstatement of services
rendered to the United States Transportation Maritime Administration (commonly known as
“MARAD”) in violation of 31 U.S.C. § 3729(a)(1)(A). Defendant Paul Sogotis (“Sogotis”) has
failed to appear in this action or answer the complaint served on him February 25, 2016. Before
the Court is Plaintiff’s Motion for Default Judgment against Defendant Sogotis under Federal
Rule of Civil Procedure 55(b)(2). ECF 15. For the following reasons, the Court grants in part
PAGE 1 – OPINION AND ORDER

Plaintiff’s motion, and will enter a default judgment against Defendant Sogotis in the amount
of $225,769.51.
STANDARDS
Under Federal Rule of Civil Procedure 55(a), the Clerk of the Court is required to enter
an order of default if a party against whom affirmative relief is sought fails timely to answer or
otherwise defend an action. Fed. R. Civ. P. 55(a) (“When a party against whom a judgment for
affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by
affidavit or otherwise, the clerk must enter the party’s default.”). Upon the entry of default, the
Court accepts “the well-pleaded factual allegations” of the complaint “as true.” DIRECTV, Inc. v.
Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (quoting Cripps v. Life Ins. Co. of N. Am., 980
F.2d 1261, 1267 (9th Cir. 1992)); see also Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th
Cir. 1977). The court, however, does not accept as admitted facts that are not well-pleaded,
conclusions of law, or facts relating to the amount of damages. DIRECTV, 503 F.3d at 854;
Geddes, 559 F.2d at 560; see also Derek Andrew, Inc. v. Poof Apparel Corp., 528 F.3d 696, 702
(9th Cir. 2008) (“‘The general rule of law is that upon default the factual allegations of the
complaint, except those relating to the amount of damages, will be taken as true.’” (quoting
TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987))).
After default has been entered against a defendant, a court may enter a default judgment
against that defendant. See Fed. R. Civ. P. 55(b). “The district court’s decision whether to enter a
default judgment is a discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980);
see also Dreith v. Nu Image, Inc., 648 F.3d 779, 786 (9th Cir. 2011) (noting that a district’s court
decision whether to enter a default judgment is reviewed for abuse of discretion). In Eitel v.
McCool, 782 F.2d 1470 (9th Cir. 1986), the Ninth Circuit set out factors to guide a district
court’s consideration of whether to enter a default judgment. See DIRECTV, 503 F.3d at 852
PAGE 2 – OPINION AND ORDER

(noting that Eitel “set[] out factors to guide district court’s determination regarding the
appropriateness of granting a default judgment”).
The Ninth Circuit in Eitel held:
Factors which may be considered by courts in exercising discretion
as to the entry of a default judgment include: (1) the possibility of
prejudice to the plaintiff, (2) the merits of plaintiff's substantive
claim, (3) the sufficiency of the complaint, (4) the sum of money at
stake in the action, (5) the possibility of a dispute concerning
material facts, (6) whether the default was due to excusable
neglect, and (7) the strong policy underlying the Federal Rules of
Civil Procedure favoring decisions on the merits.
Eitel, 782 F.2d at 1471-72. The “starting point” of the court’s analysis, however, “is the general
rule that default judgments are ordinarily disfavored.” Id. at 1472.
BACKGROUND
Because a default has been entered against Sogotis, the facts as alleged by Plaintiff,
except those relating to damages, are taken as true and are summarized herein. Defendant Pacific
Coast Maritime Agency (“PCMA”) is a corporation with its principal place of business in
California. It is a shipping agent and conducts business along the sea ports of the Pacific Coast,
including Portland. Sogotis was at all relevant times President of PCMA.
From 2009 to 2011, Interocean American Shipping (“IAS”) contracted with PCMA to
serve as a ship agent to obtain tug services for the vessels in the District of Oregon. IAS was
serving as a general agent for MARAD, to manage MARAD’s Pacific vessels. MARAD is an
agency of the United States Department of Transportation.
Under its contract with IAS, PCMA retained Shaver Transportation Company (“Shaver”)
to provide services to the vessels in the District of Oregon. Shaver performed all services as
requested and fully performed all of its obligations to Defendants. Shaver submitted invoices to
PCMA for those services. PCMA and Sogotis knowingly participated in a fraudulent scheme to
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falsely claim and receive payment from the United States by knowingly altering the Shaver
invoices before submitting them for payment. Under the scheme, PCMA increased certain
charges and deleted discounts provided by Shaver. On 11 separate occasions, PCMA submitted
altered invoices to IAS and MARAD for payment. MARAD paid the altered invoices, resulting
in an overpayment of $56,923.17 to PCMA. Defendants knew of these fraudulent practices and
false statements. Defendants accepted, condoned, and used those fraudulent practices and false
statements to increase their own earnings and profits, resulting in a loss of money to the United
States.
On December 29, 2015, Plaintiff filed its complaint in this case, asserting that Defendants
violated the FCA by knowingly presenting or causing to be presented to MARAD false or
fraudulent claims for payment and by knowingly making or using a false record or statement
material to a false or fraudulent claim. The Complaint includes the following chart that identifies
the false invoices submitted to the United States:
Invoice
Number
216326
216460
217757
217929
219441
219586
219587
219605
219606
219826
220215

Invoice Date
09/02/2009
10/19/2009
04/30/2010
05/28/2010
01/24/2011
02/18/2011
02/18/2011
02/22/2011
02/22/2011
04/04/2011
05/31/2011

Final
Payment
Date
12/30/2009
12/30/2009
09/26/2010
10/28/2010
03/30/2011
05/05/2011
05/05/2011
05/05/2011
05/05/2011
08/31/2011
08/31/2011

Total

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Genuine
Invoice
Amt
$5,076.00
$5,076.00
$5,741.84
$5,276.00
$5,690.08
$6,568.75
$35,672.09
$9,156.25
$9,801.08
$6,840.00
$6,947.09

Altered
Invoice
Amt
$7,153.00
$7,153.00
$7,217.00
$7,217.00
$7,217.00
$14,687.00
$55,198.75
$20,345.00
$10,812.60
$10,125.00
$11,643.75

Difference

$101,845.09

$158,769.10

$56,923.17

$2,077.00
$2,077.00
$1,475.16
$1,941.00
$1,526.92
$8,118.25
$19,526.66
$11,188.75
$1,011.25
$3,285.00
$4,695.91

Sogotis properly was served with a copy of the summons and complaint on February 25,
2016. ECF 10. Sogotis has not answered or otherwise appeared in this action. The Court entered
an order of default against Sogotis on May 31, 2016. ECF 13. On August 11, 2016, Plaintiff filed
a motion for default judgment against Sogotis seeking $113,846.34 (double the amount of the
alleged overcharge of $56,923.17),1 plus civil penalties in the amount of $55,000 ($5,000 for
each of the 11 false claims Defendant presented), for a total requested judgment of $168,846.34.
ECF 15.
DISCUSSION
A. Standards
Under 31 U.S.C. § 3729(a)(1), any person who “knowingly presents, or causes to be
presented, a false or fraudulent claim for payment or approval,” or who “knowingly makes, uses,
or causes to be made or used, a false record or statement material to a false or fraudulent claim,”
is liable under the FCA. See 31 U.S.C. § 3729(a)(1)(A), (B). The factual assertions in Plaintiff’s
Complaint, summarized above, establish those elements. Accordingly, a judgment of default is
appropriate in this case. The Court now turns to the proper amount of that default.
Generally, any person who violates 31 U.S.C. § 3729(a)(1) “is liable to the United States
Government for . . . 3 times the amount of damages which the Government sustains because of
the act of that person,” as well as “a civil penalty of not less than $5,000 and not more
than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990.” 31
U.S.C. § 3729(a)(1). The civil penalty as relevant to Plaintiff’s claims is $5,500 to $11,000.
1

In its Complaint, Plaintiff requested treble damages (plus civil penalties). See ECF 1. In
its Motion for Default Judgment, Plaintiff appears to explain the reduced damages request as
aimed at increasing the likelihood of default judgment against Sogotis. See ECF 15 at 5 (“The
sum of money at stake, considered in [Eitel] factor four, is large, but is not excessive in light of
the Defendant’s conduct. In addition, the United States is requesting the minimum amount of
damages provided for under the False Claims Act . . . . ”).
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See 28 CFR § 85.3(a)(9) (establishing that for FCA violations occurring after September 29,
1999 and before November 2, 2015, the penalty is a minimum of $5,500 and maximum
of $11,000); see also Horn & Associates, Inc. v. United States, 123 Fed. Cl. 728, 762 n.76 (2015)
(noting that “[t]he Department of Justice, by regulation, has increased the penalties for FCA
violations to a minimum of $5,500.00 and a maximum of $11,000.00”). The amount of damages
sustained by the United States is ordinarily “the amount that it paid out by reason of the false
statements over and above what it would have paid if the claims had been truthful.” United States
v. Mackby, 339 F.3d 1013, 1018 (9th Cir. 2003).
A court has discretion under certain circumstances to assess reduced damages in the
amount of double (versus treble) damages. 31 U.S.C. § 3729(a)(2). Reduced damages may only
be assessed if the court finds:
(A) the person committing the violation of this subsection
furnished officials of the United States responsible for
investigating false claims violations with all information known to
such person about the violation within 30 days after the date on
which the defendant first obtained the information;
(B) such person fully cooperated with any Government
investigation of such violation; and
(C) at the time such person furnished the United States with the
information about the violation, no criminal prosecution, civil
action, or administrative action had commenced under this title
with respect to such violation, and the person did not have actual
knowledge of the existence of an investigation into such
violation[.]
Id.
B. Analysis
Plaintiff provided to the Court copies of both the original invoices and the altered
invoices. ECF 15-2. Plaintiff also provided the sworn declaration of the investigator into the
allegations against Defendants. Id. This investigator reviewed the relevant documents, confirmed
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that the invoices submitted by Defendants had been altered, and verified the amount of the
overpayment. Id. Accordingly, the Court finds that Plaintiff has properly calculated the amount
of damages sustained in this case by the United States. See Mackby, 339 F.3d at 1018 (noting that
damages equal the amount overpaid by the government).
Regarding the requirement of treble or double damages, Plaintiff requests only double
damages. Plaintiff has failed, however, to assert any basis upon which the Court may award
reduced damages in this case. Plaintiff has not alleged or otherwise shown that Sogotis in any
way or at any time furnished officials of the United States with information relevant to the false
claims or cooperated with any Government investigation of those claims, let alone did so before
this case was filed or Sogotis was aware of the investigation into his actions. Absent such
assertions, the Court lacks the discretion to reduce damages below the otherwise statutorily
mandated treble amount. See Vermont Agency of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765,
785 n. 16 (2000) (concluding that the exception for reduced damages “applies only in some of
those (presumably few) cases involving defendants who provide information concerning the
violation before they have knowledge that an investigation is underway” (emphasis added)); see
also U.S. ex rel. Kozak v. Chabad-Lubavitch Inc., 2015 WL 2235389, at *12 (E.D. Cal. May 11,
2015) (noting that 31 U.S.C. § 3729(a)(1) “makes imposition of treble damages mandatory”)
(emphasis added). Plaintiff provides no contravening authority to support that the Court has the
ability to award reduced damages absent the requisite findings of 31 U.S.C. § 3729(a)(2). The
Court finds that it lacks the discretion to grant Plaintiff’s request for reduced damages in this
case. Instead, the Court awards the statutorily required amount of treble the damages of
$56,923.17, for a total damages award of $170,769.51. See 31 U.S.C. § 3729(a)(1).

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The Court also lacks the discretion to grant Plaintiff’s requested civil penalties of $55,000
($5,000 for each of Sogotis’s 11 false claims). As noted above, the current penalty range
is $5,500 to $11,000. “In addition to treble damages, the FCA requires a court to award” an
amount within the statutorily set range “for each false claim or statement submitted to the
government[.]” In re Schimmels, 85 F.3d 416, 419 n.1 (9th Cir. 1996) (emphasis added); accord
Horn, 123 Fed. Cl. at 762 n.76; see also U.S. ex rel. Kozak, 2015 WL 2235389, at *12 (stating
that when a court finds that a defendant submitted false claims to the government, the FCA
“mandates” a civil penalty of not less than $5,500 for each violation). The Court thus lacks the
discretion to grant Plaintiff’s request for a civil penalty of only $5,000 per violation. Instead, the
Court awards the statutorily required minimum penalty of $5,500 for each of Sogotis’s false
claims, for total penalties of $55,000.
CONCLUSION
Plaintiff’s motion for default judgment (ECF 15) is GRANTED IN PART. Defendant
Paul Sogotis is ordered to pay Plaintiff damages of $170,769.51, plus civil penalties in the
amount of $55,000, for a total award of $225,769.51.
IT IS SO ORDERED.
DATED this 29th day of September, 2016.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge

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