Exhibit 10.1

 

SETTLEMENT AGREEMENT

 

This Settlement Agreement (“Agreement”) is entered into among the United States
of America, acting through the United States Department of Justice and on behalf
of the United States Surface Deployment and Distribution Command (“SDDC”),
Matson Navigation Company, Inc. (together, along with its parent corporation,
Matson, Inc., and all affiliated entities, “Matson”), and Mario Rizzo
(“Relator”) (hereafter collectively referred to as “the Parties”), through their
authorized representatives.

 

RECITALS

 

A.                                    Matson is engaged in the business of ocean
transportation and logistics services. Matson, Inc. is a publicly traded
company, incorporated under the laws of the State of Hawaii with its principal
place of business in Honolulu, Hawaii. Matson Navigation Company, Inc. is a
wholly-owned subsidiary of Matson, Inc., incorporated under the laws of the
State of Hawaii with its principal place of business in Honolulu, Hawaii.

 

B.                                    On October 10, 2010 Relator filed a qui
tam action in the United States District Court for the Central District of
California captioned United States ex rel. Rizzo v. Horizon Lines, LLC, et al.
Case No: 2:10-cv-07409-PA-AJW, pursuant to the qui tam provisions of the False
Claims Act, 31 U.S.C. § 3730(b) (the “Civil Action”). On June 13, 2012, Relator
filed a First Amended Complaint: On August 23, 2013, Relator filed a Second
Amended Complaint. Matson Navigation Company, Inc. was named as a defendant in
each of the foregoing complaints. The gravamen of the Relator’s allegations is
the improper reimbursement of certain fuel surcharges levied in connection with
the

 

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shipment of household goods. On May 10, 2013, the United States declined to
intervene in the Civil Action.

 

C.                                    The Relator contends the United States has
certain civil claims against Matson arising from fuel surcharges levied by
Matson on Transportation Service Providers (“TSPs”) for the shipment of military
household goods between Hawaii or Guam and any point within the continental
United States between October 4, 2000 and June 3, 2014 that occurred under “Code
4 - International Door-to-Door” of the “International Property Rate
Solicitations” programs or contracts (or any predecessor code(s) or program(s))
administered by the SDDC or any predecessor entity. Specifically, the Relator
contends Matson failed to itemize its fuel surcharges and included in those
surcharges amounts not properly related to fuel use by ocean vessels. Relator
further contends these fuel surcharges were paid by the TSPs who were then
improperly reimbursed for those surcharges by the SDDC. The conduct in this
Paragraph C is referred to below as the Covered Conduct. The fuel charges
themselves as described in the Covered Conduct are not Unallowable Costs as set
forth in Paragraph 12 below.

 

D.                                    This Agreement is neither an admission of
liability by Matson nor a concession by the United States or the Relator that
their claims are not well founded.

 

E.                                     Relator claims entitlement under 31
U.S.C. § 3730(d) to a share of the proceeds of this Agreement and to Relator’s
reasonable expenses, attorney’s fees and costs.

 

To avoid the delay, uncertainty, inconvenience, and expense of protracted
litigation of the above claims, and in consideration of the mutual promises and
obligations of this Agreement, the Parties agree and covenant as follows:

 

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TERMS AND CONDITIONS

 

1.                                      Matson shall pay to the United States $9
million (“Settlement Amount”) by electronic funds transfer pursuant to written
instructions to be provided by Civil Division of the United States Department of
Justice no later than 7 days after the Effective Date of this Agreement.

 

2.                                      Conditioned upon the United States
receiving the Settlement Amount from Matson and as soon as feasible after
receipt, the United States shall pay $2.565 million to Relator by electronic
funds transfer, pursuant to written instructions to be provided by Relator’s
counsel.

 

3.                                      Concurrent with Matson’s payment of the
Settlement Amount, Matson will pay $950,000 to Relator for expenses and
attorney’s fees and costs by electronic funds transfer pursuant to written
instructions to be provided by Relator’s counsel.

 

4.                                      Subject to the exceptions in Paragraph 7
(concerning excluded claims) below, and conditioned upon Matson’s full payment
of the Settlement Amount, the United States releases Matson, its officers,
directors, agents, employees, successors, and assigns from any civil or
administrative monetary claim the United States has or may have related to the
Covered Conduct including claims under the False Claims Act, 31 U.S.C. §§ 3729
et seq.; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; or the
common law theories of fraud, payment by mistake, unjust enrichment,
disgorgement of illegal profits, or breach of contract.

 

5.                                      Subject to the exceptions in Paragraph 7
below, and conditioned upon Matson’s full payment of the Settlement Amount,
Relator, for himself and for anyone that may claim through him (including his
heirs, successors, attorneys, agents, and

 

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assigns), releases Matson and its officers, directors, agents, employees,
successors, and assigns from any civil monetary claim that Relator has or may
have on behalf of the United States related to the Covered Conduct or the
allegations in any of Relator’s complaints (either filed or proposed to be
filed), or the investigation and prosecution thereof, including claims under the
False Claims Act, 31 U.S.C. §§ 3729 et seq.; the Program Fraud Civil Remedies
Act, 31 U.S.C. §§ 3801-3812; any statutory provision creating a cause of action
for civil damages or civil penalties for which the Civil Division of the United
States Department of Justice has actual and present authority to assert and
compromise pursuant to 28 C.F.R. Part O, Subpart I, Section 0.45(d); or common
law theories of fraud, payment by mistake, unjust enrichment, disgorgement of
illegal profits, or breach of contract.

 

6.                                      Conditioned upon dismissal with
prejudice of the Civil Action as set forth in Paragraph 14 below, Matson fully
and finally releases Relator and his heirs, successors, attorneys, and agents,
from any claims (including attorney’s fees, costs, and expenses of every kind
and however denominated) that Matson has asserted, could have asserted, or may
assert in the future against Relator and his heirs, successors, attorneys, and
agents, related to the Covered Conduct, the investigation and prosecution
thereof, and Relator’s filing of the Civil Action. This release does not affect
any claims arising under this Agreement.

 

7.                                      Notwithstanding the releases given in
paragraph 4 and 5 of this Agreement, or any other term of this Agreement, the
following claims of the United States are specifically reserved and are not
released:

 

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a.                                      Any liability arising under Title 26,
U.S. Code (Internal Revenue Code);

 

b.                                      Any criminal liability;

 

c.                                       Except as explicitly stated in the
Agreement, any administrative liability, including the suspension and debarment
rights of any federal agency;

 

d.                                      Any liability to the United States (or
its agencies) for any conduct other than the Covered Conduct;

 

e.                                       Any liability based upon obligations
created by this Agreement; or

 

f.                                        Any liability of individuals.

 

8.                                      Relator and his heirs, successors,
attorneys, agents, and assigns shall not object to this Agreement but agree and
confirm that this Agreement is fair, adequate, and reasonable under all the
circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B). Conditioned upon Relator’s
receipt of the payment described in Paragraph 2, Relator and his heirs,
successors, attorneys, agents, and assigns fully and finally release, waive, and
forever discharge the United States, its agencies, officers, agents, employees,
and servants, from any claims arising from the filing of the Civil Action or
under 31 U.S.C. § 3730, and from any claims to a share of the proceeds of this
Agreement and/or the Civil Action.

 

9.                                      Conditioned upon receipt of the payments
described in Paragraphs 1 and 3 above, Relator, for himself, and for his heirs,
successors, attorneys, agents, and assigns, releases Matson, and its officers,
agents, and employees, from any liability to Relator

 

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arising from the filing of the Civil Action, or under 31 U.S.C. § 3730(d), for
expenses or attorney’s fees and costs.

 

10.                               Matson waives and shall not assert any
defenses Matson may have to any criminal prosecution or administrative action
relating to the Covered Conduct that may be based in whole or in part on a
contention that, under the Double Jeopardy Clause in the Fifth Amendment of the
Constitution, or under the Excessive Fines Clause in the Eighth Amendment of the
Constitution, this Agreement bars a remedy sought in such criminal prosecution
or administrative action. Nothing in this paragraph or any other provision of
this Agreement constitutes an agreement by the United States concerning the
characterization of the Settlement Amount for purposes of the Internal Revenue
laws, Title 26 of the United States Code.

 

11.                               Matson fully and finally releases the United
States, its agencies, officers, agents, employees, and servants, from any claims
(including attorney’s fees, costs, and expenses of every kind and however
denominated) that Matson has asserted, could have asserted, or may assert in the
future against the United States, its agencies, officers, agents, employees, and
servants, related to the Covered Conduct and the United States’ investigation
and prosecution thereof.

 

12.                               a.                                     
Unallowable Costs Defined: All costs (as defined in the Federal Acquisition
Regulation, 48 C.F.R. § 31.205-47) incurred by or on behalf of Matson, and its
present or former officers, directors, employees, shareholders, and agents in
connection with:

 

(1)                                 the matters covered by this Agreement;

 

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(2)                                 the United States’ audit(s) and civil
investigation(s) of the matters covered by this Agreement;

 

(3)                                 Matson’s investigation, defense, and
corrective actions undertaken in response to the United States’ audit(s) and
civil investigation(s) in connection with the matters covered by this Agreement
(including attorney’s fees);

 

(4)                                 the negotiation and performance of this
Agreement;

 

(5)                                 the payment Matson makes to the United
States pursuant to this Agreement and any payments that Matson may make to
Relator, including costs and attorney’s fees, are unallowable costs for
government contracting purposes (hereinafter referred to as Unallowable Costs).

 

b.                                      Future Treatment of Unallowable Costs:
Unallowable Costs will be separately determined and accounted for by Matson, and
Matson shall not charge such Unallowable Costs directly or indirectly to any
contract with the United States.

 

c.                                       Treatment of Unallowable Costs
Previously Submitted for Payment: Within 90 days of the Effective Date of this
Agreement, Matson shall identify and repay by adjustment to future claims for
payment or otherwise any Unallowable Costs included in payments previously
sought by Matson or any of its subsidiaries or affiliates from the United
States. Matson agrees that the United States, at a minimum, shall be entitled to
recoup from Matson any overpayment plus applicable interest and penalties as a
result of the inclusion of such Unallowable Costs on previously-submitted
requests for payment. The United States, including the Department of Justice
and/or the

 

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affected agencies, reserves its rights to audit, examine, or re-examine Matson’s
books and records and to disagree with any calculations submitted by Matson or
any of its subsidiaries or affiliates regarding any Unallowable Costs included
in payments previously sought by Matson, or the effect of any such Unallowable
Costs on the amount of such payments.

 

13.                               This Agreement is intended to be for the
benefit of the Parties only.

 

14.                               Upon receipt of the payments described in
Paragraphs 1 and 3, above, the Parties shall promptly sign and file in the Civil
Action a Joint Stipulation of Dismissal of the Civil Action With Prejudice with
respect to Matson only pursuant to Rule 41(a)(1). If the Court issues an order
denying dismissal with prejudice or dismissing without prejudice, then this
Agreement shall immediately become null and void and all amounts paid by Matson
pursuant to this Agreement shall be returned to Matson within ten days of the
issuance of any such order.

 

15.                               Except as provided for in Paragraph 3, each
Party shall bear its own legal and other costs incurred in connection with this
matter, including the preparation and performance of this Agreement.

 

16.                               Each party and signatory to this Agreement
represents that it freely and voluntarily enters in to this Agreement without
any degree of duress or compulsion.

 

17.                               This Agreement is governed by the laws of the
United States. The exclusive jurisdiction and venue for any dispute relating to
this Agreement is the United States District Court for the Central District of
California. For purposes of construing this Agreement, this Agreement shall be
deemed to have been drafted by all Parties to

 

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this Agreement and shall not, therefore, be construed against any Party for that
reason in any subsequent dispute.

 

18.                               This Agreement constitutes the complete
agreement between the Parties. This Agreement may not be amended except by
written consent of the Parties.

 

19.                               The undersigned counsel represent and warrant
that they are fully authorized to execute this Agreement on behalf of the
persons and entities indicated below.

 

20.                               This Agreement may be executed in
counterparts, each of which constitutes an original and all of which constitute
one and the same Agreement.

 

21.                               This Agreement is binding on Matson’s
successors, transferees, heirs, and assigns.

 

22.                               This Agreement is binding on Relator’s
successors, transferees, heirs, and assigns.

 

23.                               All parties consent to the United States’
disclosure of this Agreement, and information about this Agreement, to the
public. All parties further agree that neither Matson nor Relator shall publicly
disclose this Agreement, the contents hereof, or any information about this
Agreement except as may be required to obtain the Court’s dismissal of the Civil
Action in accordance with Paragraph 14. Notwithstanding the preceding sentence,
Matson may disclose this Agreement, the contents hereof, or any information
about this Agreement as reasonably necessary to comply with NYSE listing
requirements, and the securities laws and regulations and other laws applicable
to it, and Relator may disclose this Agreement, the contents hereof, or any
information about this Agreement as necessary to prepare tax filings.

 

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24.                               This Agreement is effective on the date of
signature of the last signatory to the Agreement (the “Effective Date of this
Agreement”). Facsimiles of signatures shall constitute acceptable, binding
signatures for purposes of this Agreement.

 

[Signature Page Follows]

 

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THE UNITED STATES OF AMERICA

 

DATED:

6/17/2014

 

BY:

/s/ Benjamin Wei

 

 

Benjamin Wei

 

 

Trial Attorney

 

 

Commercial Litigation Branch

 

 

Civil Division

 

 

United States Department of Justice

 

 

 

MATSON NAVIGATION COMPANY, INC.

 

DATED:

July 15, 2014

 

BY:

/s/ Peter T. Heilmann

 

 

Matson Navigation Company, Inc.

 

 

DATED:

July 15, 2014

 

BY:

/s/ Joel Sanders

 

 

Joel Sanders

 

 

Gibson, Dunn & Crutcher LLP

 

 

Counsel for Matson Navigation Company, Inc.

 

 

 

RELATOR MARIO RIZZO

 

DATED:

July 16, 2014

 

BY:

/s/ Mario Rizzo

 

 

Mario Rizzo

 

 

 

 

 

DATED:

July 16, 2014

 

BY:

/s/ Wayne T. Lamprey

 

 

Wayne T. Lamprey

 

 

Goodin, MacBride, Squeri, Day & Lamprey, LLP

 

 

Counsel for Mario Rizzo

 

[Signature Page to Settlement Agreement]

 

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