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RDB In The News
RDB and Its Co-Counsel Obtain Settlements Totaling $76.25 Million in False Claims Action
5/28/2008
Washington, DC – May 28, 2008 On May 19, 2008, the U.S. District Court for the Central District of California approved the final settlement of United States ex rel. Beck v. Hexcel Corp. In the Beck case, RDB and its co-counsel Spiegel & McDiarmid, LLP represented four private citizens Randall Beck, Gary Beck, Tod Boretto, and Kevin McLean, as Relators under the Federal False Claims Act seeking to collect for losses incurred by the Federal Government as a result of what the Relators alleged was a price-fixing conspiracy for carbon fiber. This settlement, totaling $25 million in proceeds, fees and expenses, from the final defendant in the case (Toray Industries Inc.), brought the total settlement to the case to $76.25 million, making it one of the largest recoveries in litigation brought and pursued by private citizens under the False Claims Act without the intervention of the United States.
At the time they filed this lawsuit, the Relators were officers and the outside general counsel of Horizon Sports Technologies, Inc. (HST), a company that used carbon fiber in sporting equipment for which it was once world famous. Carbon fiber also is used in aircraft, ammunition, and satellites purchased by the U.S. government. In the late 1990s, the Relators began to suspect from the sales people with whom they interacted that suppliers of carbon fiber were engaging in price-fixing. They alerted the FBI and wore wires for 18 months while in meetings with the carbon fiber sellers. In January 1999, based on information gleaned from those meetings, the FBI and authorities in Europe and Japan raided the offices of carbon fiber manufacturers, and in turn touched off both civil antitrust actions and a separate False Claims Action pursued on the novel theory that the United States Government was the largest ultimate victim of a price fixing conspiracy for a material that it purchased indirectly.
The Relators filed the False Claims Action under the Act’s qui tam provision, which permits private citizens – or “relators” – to sue on behalf of the government to recover federal funds obtained by false or fraudulent claims, and to receive a share of any settlement or judgment. The United States did not intervene in the case; as a result, the Relators bore the main responsibility of representing the Government’s interest in Court throughout nine years of litigation. Opting out of the class action representing direct purchasers of these materials, HST then filed a separate antitrust action against the manufacturers.
The manufacturers were represented by an array of large, well-respected law firms including, Skadden, Kirkland & Ellis, Pillsbury Winthrop, DLA Piper, Cleary Gottlieb, KL Gates, Dewey & LeBoeuf LLP, Weil, Gotshal & Manges, LLP, and Sheppard Mullin, LLP. In 2004, after five years of tremendous hardship and dedication, the Relators brought in RDB to act as lead counsel for discovery and trial. By the end of 2005, RDB and Spiegel & McDiarmid had settled the HST antitrust action with all of the defendants and the False Claims Action with all defendants but one – Toray Industries Inc., the largest seller in the industry.
The RDB and Spiegel & McDiarmid team, then, undertook over three more years of intense litigation including, among other things, what is believed to be responses to the largest number of requests for admission ever permitted (21,007). The firms also compiled over 10,000 data points of information, subpoenaed nearly 150 contractors, developed a core list of 5,000 specific documents culled out of some roughly 6 million pages of production (1.5 million of which were in Japanese), detailed more than 150 different meetings and conversations that formed the basis of the allegations, identified scores of witnesses with knowledge of the conspiracy, identified over 200 government programs and over 1,000 contracts through which the Government purchased carbon fiber, and deposed witnesses in the United States, Hong Kong and the United States Consulate in Japan. The case also involved the development and crafting of a number of novel legal arguments and an approach to case management never before used in an FCA case.
Following extensive negotiations throughout 2007, Toray agreed to settle for $25 million on the False Claims Act, bringing the total settlements from all defendants in the False Claims Action to $76.25 million. Toray’s settlement is the sixth and final settlement in the False Claims Action.
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