No. 99-213
In the Supreme Court of the United States
UNITED STATES OF AMERICA, PETITIONER
v.
SCS BUSINESS & TECHNICAL INSTITUTE, INC., ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
SETH P. WAXMAN
Solicitor General
Counsel of Record
DAVID W. OGDEN
Acting Assistant Attorney General
BARBARA D. UNDERWOOD
Deputy Solicitor General
MALCOLM L. STEWART
Assistant to the Solicitor General
MICHAEL F. HERTZ
DOUGLAS N. LETTER
JOAN E. HARTMAN
T. REED STEPHENS
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
PARTIES TO THE PROCEEDINGS
The United States of America, represented by the Attorney General of the
United States, was an intervenor in the court of appeals and is the petitioner
in this Court. The State of New York was an appellant/cross-appellee in
the court of appeals. The United States of America ex rel. Ronald E. Long
was an appellee/cross-appellant in the court of appeals. Joseph P. Frey
was an appellant in the court of appeals. The following parties were defendants
in the district court and were treated as appellees by the court of appeals:
SCS Business & Technical Institute, Inc.; Kamal Alsultany; Mohammed
("Michael") Alharmoosh; Sylvana Alharmoosh; Marguerite Alsultany;
Casablanca Resorts Development of Anguilla, Ltd.; Casablanca Resorts, Ltd.;
Intervest International Holding Corp.; and Intervest Holding Corp.
QUESTION PRESENTED
Whether a State or state agency is a "person" subject to suit
under the False Claims Act, 31 U.S.C. 3729 et seq.
In the Supreme Court of the United States
No. 99-213
UNITED STATES OF AMERICA, PETITIONER
v.
SCS BUSINESS & TECHNICAL INSTITUTE, INC., ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
The Solicitor General, on behalf of the United States of America, petitions
for a writ of certiorari to review the judgment of the United States Court
of Appeals for the District of Columbia Circuit in this case.
OPINION BELOW
The opinion of the court of appeals (App., infra, 1a-42a) is reported at
173 F.3d 870. A supplemental opinion of the court of appeals (App., infra,
43a-60a) is reported at 173 F.3d 890. The opinion of the district court
(App., infra, 61a-103a) is reported at 999 F. Supp. 78.
JURISDICTION
The judgment of the court of appeals was entered on April 2, 1999. On June
17, 1999, the Chief Justice extended the time for filing a petition for
a writ of certiorari to and including August 2, 1999. The jurisdiction of
this Court is invoked under 28 U.S.C. 1254(1).
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
1. The Eleventh Amendment to the United States Constitution provides:
The Judicial power of the United States shall not be construed to extend
to any suit in law or equity, commenced or prosecuted against one of the
United States by Citizens of another State, or by Citizens or Subjects of
any Foreign State.
2. Section 3729(a) of Title 31, United States Code, provides in pertinent
part:
False claims
(a) LIABILITY FOR CERTAIN ACTS. -Any person who-
(1) knowingly presents, or causes to be presented, to an officer or employee
of the United States Government or a member of the Armed Forces of the United
States a false or fraudulent claim for payment or approval;
* * * * *
is liable to the United States Government for a civil penalty of not less
than $5,000 and not more than $10,000, plus 3 times the amount of damages
which the Government sustains because of the act of that person.
STATEMENT
1. The False Claims Act (FCA), 31 U.S.C. 3729 et seq., prohibits any "person"
from "knowingly present[ing], or caus[ing] to be presented, to an officer
or employee of the United States Government or a member of the Armed Forces
of the United States a false or fraudulent claim for payment or approval."
31 U.S.C. 3729(a)(1). The FCA also prohibits a variety of related deceptive
practices involving government funds and property. 31 U.S.C. 3729(a)(2)-(7).
A "person" who violates the FCA "is liable to the United
States Government for a civil penalty of not less than $5,000 and not more
than $10,000, plus 3 times the amount of damages which the Government sustains."
31 U.S.C. 3729(a).
Suits to collect the statutory penalties may be brought either by the Attorney
General, or by a private person (known as a relator) in the name of the
United States, in an action commonly referred to as a qui tam action. See
31 U.S.C. 3730(a) and (b)(1). When a qui tam action is brought, the government
is given an opportunity to intervene to take over the suit. 31 U.S.C. 3730(b)(2)
and (c)(3). If the government declines to intervene, the relator conducts
the litigation. 31 U.S.C. 3730(c)(3). If a qui tam action results in the
recovery of civil penalties, those penalties are divided between the government
and the relator. 31 U.S.C. 3730(d).
2. The instant case involves a qui tam action filed by Ronald E. Long, a
former employee of the State of New York. The defendants (respondents in
this Court) included, inter alia, the State of New York and a state official.
The state defendants moved to dismiss the claims against them on various
grounds.
The district court denied the state defendants' motion to dismiss the qui
tam claims against them. App., infra, 61a-103a. The district court "reject[ed]
New York's argument that the Eleventh Amendment bars an FCA action against
a state." Id. at 68a. The court explained that "[t]he Eleventh
Amendment is not a bar to an FCA action because the United States is always
the plaintiff in a qui tam action and the Eleventh Amendment does not prohibit
suits by the United States against States in federal court." Ibid.
The court also held that a State is a "person" subject to potential
FCA liability under 31 U.S.C. 3729. App., infra, 69a-73a.
3. The State of New York filed an interlocutory appeal, contending that
it is not a "person" subject to liability under the FCA, and that
a qui tam suit against it is barred by the Eleventh Amendment. The United
States government, represented by the Attorney General, intervened pursuant
to 28 U.S.C. 2403(a) to defend the constitutionality of the FCA's qui tam
provisions. See App., infra, 5a. The court of appeals reversed the decision
of the district court, holding that a State is not a "person"
within the meaning of Section 3729(a). Id. at 1a-42a. Although the court
did not squarely decide whether qui tam suits against state defendants would
violate the Eleventh Amendment, its interpretation of Section 3729(a) was
based in part on the principle that ambiguous statutory provisions should
be construed in a manner that avoids substantial constitutional questions.
Id. at 34a-42a.1
ARGUMENT
On June 24, 1999, this Court granted the petition for a writ of certiorari
in Vermont Agency of Natural Resources v. United States ex rel. Stevens,
No. 98-1828. The first question presented in that case is "[w]hether
a State is a 'person' subject to liability under 31 U.S.C. 3729(a) of the
False Claims Act." 98-1828 Pet. at i.2 The petition explains that the
Second Circuit's resolution of that interpretive question in Vermont Agency
of Natural Resources conflicts directly with the D.C. Circuit's decision
in the instant case. See 98-1828 Pet. at 7-12.
As our response to the certiorari petition in Vermont Agency of Natural
Resources explains (98-1828 U.S. Br. at 11-13), the position of the United
States is that a State or state agency is a "person" subject to
potential FCA liability under 31 U.S.C. 3729(a). The Court's decision in
Vermont Agency of Natural Resources will very likely affect the proper disposition
of the instant case. The petition for a writ of certiorari should therefore
be held pending this Court's decision in Vermont Agency of Natural Resources
and then disposed of as appropriate.
CONCLUSION
The petition for a writ of certiorari should be held pending this Court's
decision in Vermont Agency of Natural Resources v. United States ex rel.
Stevens, No. 98-1828, and disposed of as appropriate in light of the resolution
of that case.
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
DAVID W. OGDEN
Acting Assistant Attorney General
BARBARA D. UNDERWOOD
Deputy Solicitor General
MALCOLM L. STEWART
Assistant to the Solicitor General
MICHAEL F. HERTZ
DOUGLAS N. LETTER
JOAN E. HARTMAN
T. REED STEPHENS
Attorneys
AUGUST 1999
1 The court of appeals subsequently issued a supplemental opinion explaining
the court's determination that it was not required to resolve the Eleventh
Amendment question before addressing the issue of statutory construction.
See App., infra, 43a-60a.
2 Vermont Agency of Natural Resources also presents the question "[w]hether
the Eleventh Amendment precludes a private relator from commencing and prosecuting
a False Claims Act suit against an unconsenting State." 98-1828 Pet.
at i.
APPENDIX A
UNITED STATES COURT OF APPEALS
DISTRICT OF COLUMBIA CIRCUIT
Nos. 98-5133, 98-5149 AND 98-5150
UNITED STATES OF AMERICA, EX REL.
RONALD E. LONG, APPELLEE/CROSS-APPELLANT
v.
SCS BUSINESS & TECHNICAL
INSTITUTE, INC., ET AL., APPELLEES
STATE OF NEW YORK, APPELLANT/CROSS-APPELLEE
v.
ATTORNEY GENERAL OF THE UNITED STATES, INTERVENOR
[Argued Jan. 14, 1999
Decided April 2, 1999]
OPINION
Before: WALD, SILBERMAN, and SENTELLE, Circuit Judges.
Opinion for the Court filed by Circuit Judge SILBERMAN.
SILBERMAN, Circuit Judge:
The question presented in this appeal is whether states are defendant persons
under the False Claims Act. Contrary to the decisions of the Second and
Eighth Circuits, see United States ex rel. Stevens v. Vermont Agency of
Natural Resources, 162 F.3d 195 (2d Cir. 1998); United States ex rel. Zissler
v. Regents of the Univ. of Minn., 154 F.3d 870 (8th Cir.1998), we hold that
they are not.
I.
Ronald Long was the Coordinator of Investigations and Audit for the Bureau
of Proprietary School Supervision of the New York State Department of Education,
the state agency that regulates proprietary schools. In 1989, he conducted
an investigation of SCS Business and Technical Institute, which operates
five business and technical schools in New York City, and discovered that
SCS allegedly had made false and fraudulent claims to the federal government
in return for federal funding for students attending SCS schools under tuition
assistance programs. He also determined, according to his complaint subsequently
filed in district court, that Joseph P. Frey, his supervisor at the Bureau,
and other officials in the State Department of Education, knew about SCS'
fraudulent claims and conspired with SCS to conceal the fraud in order to
secure further federal funding for SCS. They did so because, after a 1990
change in New York State law, the Bureau's funding depended in substantial
part on tuition assessments and fines that SCS paid to the Bureau. Long's
theory was that since the Bureau received a share of the federal funds that
SCS fraudulently obtained from the United States, the Bureau had
every incentive to see that fraud continue. He claims that after he reported
the results of his investigation to state and federal authorities, Frey
and other state officials took actions to limit and subvert his investigation.
Long was taken off the investigation and then fired in 1992, shortly after
SCS settled administrative charges brought against one of SCS' schools by
the state education department. According to him, the settlement agreement,
which did not benefit the United States in any way and grossly understated
the extent of SCS' fraudulent practices, was a sweetheart deal that was
but another instance of the state's conspiracy with SCS to conceal and perpetuate
SCS' fraud-a conspiracy that he alleges continued until SCS filed for bankruptcy
in 1995. He alleges that after the settlement, New York ignored evidence
of SCS' continuing fraud and falsely represented to the United States that
SCS' fraud had ceased and that it was actively monitoring SCS.
Long filed a complaint in the district court against Frey, other state officials,
the State of New York, SCS, and various SCS officials. He brought his case
as a qui tam relator under the False Claims Act, 31 U.S.C. §§
3729 et seq. (1994), suing in the name of the United States for the benefit
of the United States and himself. He contended that the state defendants
violated the Act by conspiring with SCS to have false claims submitted to
the United States and by causing false claims to be submitted. The state
defendants were also alleged to have violated the whistle-blower provision
of the Act by harassing and wrongfully discharging Long, and to have been
unjustly enriched under state common
law. The United States (the government) subsequently intervened in the case
against the SCS defendants, but declined to intervene against the state
defendants. The state defendants moved to dismiss the complaint on the grounds
that states are not defendant persons under the Act and that, even if they
were, the Eleventh Amendment to the United States Constitution would bar
the suit. It was also asserted that Long's suit against the state defendants
was barred by the Act because the allegations of fraud had been publicly
disclosed and because Long was not an "original source" of the
information.
The district court denied in part the state defendants' motion to dismiss,
concluding that states are defendant persons under the Act and that the
Eleventh Amendment does not bar the suit. See United States ex rel. Long
v. SCS Bus. & Technical Inst., 999 F. Supp. 78 (D.D.C. 1998).1 The state
defendants filed an interlocutory appeal challenging the district court's
rejection of their Eleventh Amendment defense, over which we have jurisdiction
under 28 U.S.C. § 1291 (1994) and the collateral order doctrine. See
Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506
U.S. 139, 144-45, 113 S. Ct. 684, 121 L.Ed.2d 605 (1993). We exercise pendent
appellate jurisdiction over the "inextricably intertwined" statutory
question, Gilda Marx, Inc. v. Wildwood Exercise, Inc., 85 F.3d 675, 679
(D.C. Cir. 1996) (quoting Swint v. Chambers County Comm'n, 514 U.S. 35,
51, 115 S. Ct. 1203, 131 L.Ed.2d 60 (1995)), of whether states are defendant
persons under the Act.2 Thirty-six states join as amici curiae in support
of appellant New York's statutory and Eleventh Amendment arguments, and
appellee Long, the relator, is joined by the government as intervenor defending
the constitutionality of the Act.
II.
To persuade us to uphold the decision below, appellees Long and the government
must demonstrate that the district court correctly interpreted the term
"person" (liable for making a false claim) in § 3729(a) of
the False Claims Act to include states.3 In that respect, they have no little
burden because the statute does not define the term "person" and,
as the Supreme Court has remarked before, "in common usage, the term
'person' does not include the sovereign, [and] statutes employing the [word]
are ordinarily construed to exclude it." Will v. Michigan Dep't of
State Police, 491 U.S. 58, 64, 109 S. Ct. 2304, 105 L.Ed.2d 45 (1989) (quoting
Wilson v. Omaha Indian Tribe, 442 U.S. 653, 667, 99 S. Ct. 2529, 61 L.Ed.2d
153 (1979) (quoting United States v. Cooper Corp., 312 U.S. 600, 604, 61
S. Ct. 742, 85 L.Ed. 1071 (1941))) (alteration in original); see also, e.g.,
Georgia v. Evans, 316 U.S. 159, 161-62, 62 S. Ct. 972, 86 L.Ed. 1346 (1942).4
This "often-expressed understanding," Will, 491 U.S. at 64, 109
S. Ct. 2304, is not a "hard and fast rule of exclusion," Wilson,
442 U.S. at 667, 99 S. Ct. 2529 (quoting Cooper, 312 U.S. at 604-05, 61
S. Ct. 742), and depends in important part on the "context, the subject
matter, legislative history, and executive interpretation," id.-which
sounds like rather garden variety statutory interpretation. But if the Will-Wilson
rule has any meaning at all, it must create at minimum a default rule; states
are excluded from the term person absent an affirmative contrary showing.
See International Primate Protection League v. Administrators of Tulane
Educ. Fund, 500 U.S. 72, 83, 111 S. Ct. 1700, 114 L.Ed.2d 134 (1991) (noting
that the "conventional reading" of person to exclude states may
be "disregarded" if there is an affirmative showing of Congress'
intent to include them). This interpretive principle, the Supreme Court
tells us, is "particularly applicable" where, as here, "it
is claimed that Congress has subjected the states to liability to which
they had not been subject before." Will, 491 U.S. at 64, 109 S. Ct.
2304; see also Wilson, 442 U.S. at 667, 99 S. Ct. 2529. We think, therefore,
that the district court had it backwards when it concluded that it found
"no indication that Congress sought to create an exception for state
actors to perpetrate fraud upon the federal government Long, 999 F.Supp.
at 85.5
Our review of the "legislative environment," Evans, 316 U.S. at
161, 62 S. Ct. 972, leads us to doubt appellees have met their burden. As
we noted, neither the Act as currently written nor as originally passed
in 1863 defines the term person. Indeed, the original Act distinguished
for punishment purposes between fraudulent acts committed by "any person
in the land or naval forces of the United States," Act of March 2,
1863, 37th Cong., 3d Sess., ch. 67, § 1, 12 Stat. 696, and "any
person not in the military or naval forces of the United States," id.
at § 3, 12 Stat. 698. Since states would not have been thought to fall
within either classification, that Act can hardly be said to supply facially
the requisite affirmative showing that the Will-Wilson default rule requires.6
Appellees nevertheless invoke the broad purposes and legislative history
of the Civil War statute. We think that is not helpful because, as the Supreme
Court has said, Congress' primary concern at the time- admittedly not its
exclusive one-was to put an end to "frauds perpetrated by large [military]
contractors during the Civil War." United States v. Bornstein, 423
U.S. 303, 309, 96 S. Ct. 523, 46 L.Ed.2d 514 (1976); see United States ex
rel. Graber v. City of New York, 8 F. Supp.2d 343, 352 (S.D. N.Y. 1998).7
Appellees point to the Supreme Court's statement that Congress sought to
"reach all types of fraud, without qualification, that might result
in financial loss to the Government." United States v. Neifert-White
Co., 390 U.S. 228, 232, 88 S. Ct. 959, 19 L.Ed.2d 1061 (1968) (holding that
the term "claim" was not limited to claims submitted for payments
due and owing from the government, but included claims for favorable action
by the government upon applications for loans). But we think that description
is too general-it was also made in an entirely different context-to answer
the serious question whether states were made potential defendants under
the Act. (According to appellees' reasoning, foreign governments that entered
into commercial dealings with the United States would also be potential
defendants.) Similarly unpersuasive is the policy proposition put forward
by the Eighth Circuit, see Zissler, 154 F.3d at 874, that a truly effective
anti-fraud statute would subject states to liability since states receive
substantial amounts of money from the federal government. See also JOHN
T. BOESE, CIVIL FALSE CLAIMS AND QUI TAM ACTIONS, at 2-91 (1993) (stating
that states can be defendant persons because they are "major recipients
of federal funds"). A court looks to legislative purpose under the
default rule in order to locate a congressional intent "to bring state
or nation within the scope of the law," Cooper, 312 U.S. at 605, 61
S. Ct. 742, not to "engraft on a statute additions which [the court]
think[s] the legislature logically might or should have made," id.
Even if one assumes that states commit a good deal of fraud against the
federal government, it cannot seriously be argued that the very purpose
of the Act would be thwarted if states were not liable under the Act. Compare
California v. United States, 320 U.S. 577, 585, 64 S. Ct. 352, 88 L.Ed.
322 (1944).8
That takes us to the legislative history. Appellees point us first to an
1862 House Committee Report that, in discussing various frauds committed
during the Civil War, referred to certain state officials that had used
war contracts for personal profit. See H.R. REP. NO. 2, 37th Cong., 2d Sess.,
at xxxviiixxxix (1862). But the report specifically stated that these examples
of fraud were not committed against the United States government. See id.
at xxxviii. So the prior report is a rather
tenuous link to the Act Congress passed one year later. But see Stevens,
162 F.3d at 206 (concluding that "it is difficult to suppose"
that Congress "had forgotten the results of this extensive investigation"
when it passed the False Claims Act) (emphasis added). Even if there were
a stronger tie, the Supreme Court has held that legislative history indicating
an intent to impose liability on state officials is not evidence of an intent
to subject the states themselves to liability. See Will, 491 U.S. at 68-69,
109 S. Ct. 2304. The bottom line is that appellees have not pointed to anything
in the legislative history of the 1863 Act, or in the events leading up
to it, indicating that Congress actually contemplated imposing liability
on the states.
Because the enacting Congress' intent is, to be charitable, rather opaque,
appellees turn our attention to the 1986 amendments to the False Claims
Act and to a related statute also passed in 1986. The provision of the 1986
amendments that changed 31 U.S.C. § 3729(a) from imposing liability
on "[a] person not a member of an armed force of the United States"
to "[a]ny person" did not, however, substantively expand the meaning
of defendant persons under the Act. See Stevens, 162 F.3d at 206-07 (holding
that states are persons but conceding that this change was not "envisioned
as broadening the class of persons who could be held liable under the Act");
Graber, 8 F. Supp.2d at 354-55. It is true that the amendment expanded the
types of individuals subject to the Act to include those in the military.
Still, that change tells one nothing about the basic meaning of the term
person, or more specifically, whether Congress intended to include states
within that term. The legislative history accompanying the amendment reveals
Congress' extremely limited objective. See S. REP. NO. 345, 99th Cong.,
2d Sess., at 17-18 (1986), reprinted in U.S.C.C.A.N. 5266, 5282-83 (explaining
that the alteration of § 3729(a) was intended to provide for monetary
recovery against persons in the military and that, prior to 1986, a court
martial was the only available remedy).9 It is understandable, therefore,
why appellees do not actually claim that states were made defendant persons
by virtue of the 1986 amendment to § 3729(a). Instead, their argument
is that states have been defendant persons all along; various provisions
added by the 1986 Congress-which we discuss below-simply make that clear.
In other words, appellees, by relying on these recent amendments, seek to
illuminate the 1863 Congress' "original intent." We are rather
dubious about such an approach. As the Supreme Court has observed, such
subsequent provisions are really "beside the point" because they
do not "reflect any direct focus by Congress upon the meaning of the
earlier enacted provisions." Almendarez-Torres v. United States, 523
U.S. 224, 118 S. Ct. 1219, 1227, 140 L.Ed.2d 350 (1998); Atkinson v. Inter-American
Dev. Bank, 156 F.3d 1335, 1342 (D.C.Cir.1998).
Be that as it may, we are not persuaded that these added provisions can
bear the weight appellees would place on them. Appellees argue that Congress'
decision to define "person" to include states in the Civil Investigative
Demand section of the Act, see 31 U.S.C. § 3733(l)(4) (1994), indicates
(some) Congress' intent to include states as persons throughout the whole
Act,10 even though this provision applies only to the Civil Investigative
Demand section. See 31 U.S.C. § 3733(l) (For purposes of this section
. . .) (emphasis added). Appellees question why Congress would create a
discovery tool to be used to gain information possessed by states if the
Act did not already authorize false claims actions against them. See also
Stevens, 162 F.3d at 207. It seems rather obvious, however, that states
could provide useful evidence to establish that private contractors, for
example, made false claims. Nor do appellees gain very much by pointing
to the Program Fraud Civil Remedies Act, 31 U.S.C. § 3801 et seq. (1994),
which Congress also passed in 1986 to create an alternative administrative
remedy to lawsuits under the False Claims Act. Unlike the False Claims Act,
this Act expressly defined the persons subjected to administrative liability
yet omitted states from the definition. See id. at § 3801(a)(6). Appellees
suggest that the exclusion of states from § 3801(a)(6) compels an inference
that § 3729(a) includes states. We do not agree because the two provisions
are not part of the same legislative enactment (not even the same century).
See Halverson v. Slater, 129 F.3d 180, 186 (D.C. Cir. 1997) (citing Russello
v. United States, 464 U.S. 16, 23, 104 S. Ct. 296, 78 L.Ed.2d 17 (1983)).
We share appellant's view, moreover, that, since both acts proscribe essentially
the same conduct, compare 31 U.S.C. § 3802(a)(1)-(2) with 31 U.S.C.
§ 3729(a), it would have been quite bizarre for Congress to exempt
states from administrative liability if it had thought that states already
were subject to the more onerous False Claims Act liability of treble damages
and penalties. In sum, we are inclined to view the omission of states from
the definition of person in the administrative act, to the extent it is
relevant at all, as more supportive of New York's argument.
Indeed, appellant and its amici, turning the blade, point out that the 1986
amendments, which increased liability from double to treble damages and
increased the civil penalty, see 31 U.S.C. § 3729(a), created a form
of punitive damages that would be palpably inconsistent with state liability.
Congress is not thought to impose punitive damages on public entities lightly.
Imposition of such a penalty has been held to be inconsistent with public
policy since it gives the plaintiff a windfall at the expense of the blameless
or unknowing taxpayers who must foot the bill for the government's transgressions.
See City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 258-71, 101 S.
Ct. 2748, 69 L.Ed.2d 616 (1981). It is true that the Supreme Court has already
analyzed the Act in a related context and concluded that the statute is
remedial in nature, see, e.g., Bornstein, 423 U.S. at 314-15, 96 S. Ct.
523, but as appellant rightly points out, it did so when the statute provided
for double damages of which the government received a one-half share, so
that the statute at that time truly did no more than make the government
whole, see Graber, 8 F. Supp.2d at 349 n. 3. Even assuming that it is possible
to characterize the increased liability imposed by the 1986 amendments as
remedial, that would only indicate at best that in this respect the 1986
Congress legislated in such a way that would have been consistent with state
liability. The 1863 Congress, by contrast, made clear as day that it intended
criminal, and a fortiori punitive, sanctions: the original statute provided
for criminal penalties, including imprisonment for one to five years, for
non-military persons (the class of persons said to include states) convicted
under the Act, as well as fines. See § 3, 12 Stat. at 698. Those provisions
are surely inconsistent with the concept of state liability.
Appellees' last sortie into the background of the 1986 amendments uncovered
a piece of legislative history that they regard as the "smoking gun."
They point to a Senate Report issued at the time Congress amended certain
provisions of the Act that includes a section entitled "History of
the False Claims Act and Court Interpretations." See S. REP. NO. 345,
99th Cong., 2d Sess., at 8 (1986), reprinted in U.S.C.C.A.N. 5266, 5273.
As part of what purported to be purely descriptive history, see id. ("In
its present form, the False Claims Act. . . . "), the Report states:
The False Claims Act reaches all parties who may submit false claims. The
term "person" is used in its broad sense to include partnerships,
associations, and corporations . . . as well as States and political subdivisions
thereof. Cf. Ohio v. Helvering, 292 U.S. 360, 370, 54 S. Ct. 725, 78 L.Ed.
1307 (1934); Georgia v. Evans, 316 U.S. 159, 161, 62 S. Ct. 972, 86 L.Ed.
1346 (1942); Monell v. Department of Social Services of the City of New
York, 436 U.S. 658, 98 S. Ct. 2018, 56 L.Ed.2d 611 (1978).
Id. (emphasis added) (footnote omitted).
According to appellees, the Report confirms that the Congress of 1863, over
a hundred years before, intended to include states as defendant persons-an
argument that two of our sister circuits and the district court below accepted.
See Stevens, 162 F.3d at 206-07; Zissler, 154 F.3d at 874-75; Long, 999
F. Supp. at 84-85. This portion of the Report, it should be understood,
is not linked with any of the substantive amendments made by the 1986 Congress.
It is instead a legislative observation about what § 3729(a), enacted
by an earlier Congress, means. Courts sensibly accord such "postenactment
legislative history," arguably an outright "contradiction in terms,"
Sullivan v. Finkelstein, 496 U.S. 617, 631, 110 S. Ct. 2658, 110 L.Ed.2d
563 (1990) (Scalia, J., concurring), only marginal, if any, value, see Wright
v. West, 505 U.S. 277, 295 n. 9, 112 S. Ct. 2482, 120 L.Ed.2d 225 (1992)
("[T]he views of a subsequent Congress form a hazardous basis for inferring
the intent of an earlier one.") (quoting Consumer Product Safety Comm'n
v, GTE Sylvania, Inc., 447 U.S. 102, 117, 100 S. Ct. 2051, 64 L.Ed.2d 766
(1980) (quoting United States v. Price, 361 U.S. 304, 313, 80 S. Ct. 326,
4 L.Ed.2d 334 (1960))).11 Post-enactment legislative history-perhaps better
referred to as "legislative future"-becomes of absolutely no significance
when the subsequent Congress (or more precisely, a committee of one House)
takes on the role of a court and in its reports asserts the meaning of a
prior statute. See Pierce v. Underwood, 487 U.S. 552, 566, 108 S. Ct. 2541,
101 L.Ed.2d 490 (1988); In re North, 50 F.3d 42, 45-46 (D.C. Cir. 1995).
The Senate Report actually was more modest; it appeared only to describe
the way in which the Supreme Court had interpreted the Act. Still, its author
either did not read the cited cases very carefully, or perhaps more likely,
made an unforgivably misleading use of the "cf." signal. None
of the cases interpreted the term "person" under the False Claims
Act, and all three stand for the unremarkable proposition that governmental
entities can be included in the term person when Congress so intends.12
In short, the Report is of no legal significance. Accord United States ex
rel Graber, 8 F. Supp.2d at 354-55.13
Nevertheless, appellees contend that we have asked the wrong question in
searching the legislative materials for affirmative indications that Congress
intended to include states as defendant persons in § 3729(a). Instead,
they would have us start with the presumption that states are defendant
persons and look only for some indication that Congress intended to exclude
states. They justify this approach by arguing that states can be plaintiffs
under § 3730(b)(1) (providing that "[a] person may bring a civil
action for a violation of section 3729 for the person and for the United
States Government"), and that the same statutory term, person, is used
to describe the eligible class of plaintiffs.14 The word person is presumed
to have the same meaning in different sections of the same statute. See,
e.g., Commissioner v. Lundy, 516 U.S. 235, 250, 116 S. Ct. 647, 133 L.Ed.2d
611 (1996). Appellees, then, would use the canon of consistent meaning (following
the Second and Eighth Circuits) to trump the Will-Wilson default rule. See
Stevens, 162 F.3d at 205; Zissler, 154 F.3d at 875; see also BOESE, supra,
at 2-92 (reasoning that states are defendant persons under the Act because
they are proper qui tam plaintiffs).
The consistent meaning canon is brandished as if the question whether states
could be qui tam relators were a statutory given. But it is not. We recognize
that other courts have assumed that states can be qui tam relators, see,
e.g., United States ex rel. Woodard v. Country View Care Ctr., Inc., 797
F.2d 888 (10th Cir.1986); United States ex rel. Wisconsin v. Dean, 729 F.2d
1100 (7th Cir. 1984), even though the term person under § 3730(b)(1)
is no more clearly defined than it is under § 3729(a). The argument
that states are plaintiffs is based on a provision passed in 1986 conferring
jurisdiction on the district courts "over any action brought under
the laws of any State for the recovery of funds paid by a State or local
government if the action arises from the same transaction or occurrences
as [a qui tam suit] brought under Section 3730." 31 U.S.C. § 3732(b).
If states are the only parties who could bring a state law suit to recover
state funds, the argument goes, and if a state is forbidden by § 3730(b)(5)
from intervening in another party's qui tam suit, see id. at § 3730(b)(5)
(providing that "[w]hen a person brings an action under this subsection
no person other than the Government may intervene or bring a related action
based on the facts underlying the pending action"), it seems to follow
that the Congress which enacted § 3732(b) intended states to be qui
tam relators under the Act. Otherwise, it is argued, the provision conferring
jurisdiction over the state's claim under state law has little meaning.
The legislative history lends some support to this reasoning. See S. REP.
NO. 345, 99th Cong., 2d Sess., at 16 (1986), reprinted in 1986 U.S.C.C.A.N.
5266, 5281 (explaining that the provision was enacted in response to comments
from the National Association of Attorneys General and was intended to allow
"State and local governments to join State law actions with False Claims
Act actions brought in Federal district court if such actions grow out of
the same transaction or occurrence"); see also id. at 12-13, reprinted
in 1986 U.S.C.C.A.N. at 5277-78 (disapproving of Dean decision on unrelated
jurisdictional grounds but not questioning the State of Wisconsin's ability
to be a qui tam plaintiff); Stevens, 162 F.3d at 204-05 (discussing Senate
Report).
The more obvious reading of § 3732(b), however, is that it authorizes
permissive intervention by states for recovery of state funds (creating
what is in effect an exception to § 3730(b)(5)'s apparent general bar
on intervention by all other parties except for the United States). See
BOESE, supra, at 4-13 (explaining that § 3732(b) "does not require
the state to be a relator for jurisdiction to exist," noting the possibility
that it permits intervention by states, but making no reference to §
3730(b)(5)). Or Congress might even have meant § 3732(b) to provide
supplemental jurisdiction for a non-state relator to join a federal false
claim action with an action to recover state funds under a state qui tam
statute, which several states have enacted. See, e.g., Cal. Gov't Code §
12650 et seq. (West 1998); Fla. Stat Ann. § 68.081-092 (West 1998).
In any event, the argument that states are relators under § 3730(b)(1)
is rather strained. To the extent it relies on the Senate Report author's
knowledge of one suit by a state relator, it is no more persuasive than
the analogous argument based on the Report's "recognition" of
prior suits against state defendants. The argument, moreover, depends on
the proposition that § 3730(b)(5) prevents all parties, except for
the United States, from intervening in another relator's qui tam action.
Yet it is not at all clear that this provision precludes all forms of party
joinder, which would effectively limit qui tam actions to single relators.
See United States ex rel. Precision Co. v. Koch Indus., Inc., 31 F.3d 1015,
1017 (10th Cir. 1994) (holding that § 3730(b)(5) does not prohibit
all forms of joinder but only prevents permissive intervention in a relator's
suit by unrelated parties under Fed. R. Civ. P. 24(b)(2)). If states could
join as co-plaintiffs with private relators or the federal government, then
§ 3732(b) could be given full meaning without reading § 3730(b)(1)
to include states as relators.
It should be apparent, then, that whether states can be qui tam relators
presents an extraordinarily difficult question of statutory interpretation
in its own right. Although appellees do not acknowledge it, their argument
would require us to puzzle through that question-not squarely presented
to us-in order to resolve the actual question before us (itself no easy
one) in their favor. The consistent meaning canon does not have much usefulness
if in order to apply it a court has to struggle that hard to determine the
second meaning, against which the first is to be compared. Given the uncertainty
governing the question whether states can be relators, we think the proper
course is to decide only the issue before us.15
III.
Appellees have not persuasively demonstrated a congressional intent to include
states as defendant persons under the False Claims Act. That being so, the
default rule would seem to dictate that they are not. We hesitate in resting
solely on this ground, however, since the Supreme Court has never explained
just how much of a showing suffices to overcome the presumption against
interpreting persons to include states, and indeed on occasion has employed
the rule in a somewhat diluted fashion. See, e.g., Sims v. United States,
359 U.S. 108, 111-12, 79 S. Ct. 641, 3 L.Ed.2d 667 (1959); United States
v. California, 297 U.S. 175, 186, 56 S. Ct. 421, 80 L.Ed. 567 (1936); Ohio
v. Helvering, 292 U.S. at 370-71, 54 S. Ct. 725. We think there are additional
considerations, however, that resolve all doubts in New York's favor.
A.
Were we to agree with appellees that states can be defendants under the
False Claims Act, we would be obliged to decide whether, as appellant New
York contends, the Eleventh Amendment bars a qui tam suit by a private relator
against a state in federal court. The Amendment states that "[t]he
Judicial Power of the United States shall not be construed to extend to
any suit in law or equity, commenced or prosecuted against one of the United
States by Citizens of another State, or by Citizens or Subjects of any Foreign
State." U.S. Const. amend. XI. Although it has been read to bar suits
by plaintiffs not identified in the text of the amendment itself, such as
citizens of the state being sued, see Hans v. Louisiana, 134 U.S. 1, 10-11,
10 S. Ct. 504, 33 L.Ed. 842 (1890), and foreign sovereigns, see Principality
of Monaco v. Mississippi, 292 U.S. 313, 330-32, 54 S. Ct. 745, 78 L.Ed.
1282 (1934), it is well settled that it poses no bar to a suit by the United
States against a state in federal court. The states' consent to such suits
is thought to be inherent in the constitutional plan and necessary to the
very permanence of the Union. See, e.g., West Virginia v. United States,
479 U.S. 305, 311, 107 S. Ct. 702, 93 L.Ed.2d 639 (1987); Monaco, 292 U.S.
at 329, 54 S. Ct. 745; United States v. Texas, 143 U.S. 621, 641-46, 12
S. Ct. 488, 36 L.Ed. 285 (1892). Reasoning from this unobjectionable proposition,
three of our sister circuits have held that, since a qui tam suit against
a state is essentially a suit by and for the United States, the Eleventh
Amendment does not preclude a qui tam suit in federal court. See Stevens,
162 F.3d at 201-03; United States ex rel. Rodgers v. Arkansas, 154 F.3d
865, 868 (8th Cir. 1998); United States ex rel. Milam v. University of Texas
M.D. Anderson Cancer Ctr., 961 F.2d 46, 50 (4th Cir. 1992); see also United
States ex rel. Fine v. Chevron, U.S.A., Inc., 39 F.3d 957, 962-63 (9th Cir.
1994), vacated on other grounds, 72 F.3d 740 (9th Cir. 1995) (en banc).
We think our sister circuits have paid insufficient attention to the Supreme
Court's decision in Blatchford v. Native Village of Noatak, 501 U.S. 775,
111 S. Ct. 2578, 115 L.Ed.2d 686 (1991). In Blatchford, the Court held that
a statute giving federal district courts original jurisdiction of suits
brought by an Indian tribe involving federal law did not constitute a delegation
to the tribes of the United States' ability, free from the Eleventh Amendment
bar, to sue the states as the tribes' trustee. See id. at 785-86. Although
the Court held that Congress intended no delegation in the jurisdictional
statute, the Court was dubious that such a delegation would have been constitutionally
permissible:
We doubt . . . that that sovereign exemption can be delegated-even if one
limits the permissibility of delegation ... to persons on whose behalf the
United States itself might sue. The consent, "inherent in the convention,"
to suit by the United States-at the instance and under the control of responsible
federal officers-is not consent to suit by anyone whom the United States
might select; and even consent to suit by the United States for a particular
persons's benefit is not consent to suit by that person himself.
Id. at 785 (emphasis added).
It seems to us that permitting a qui tam relator to sue a state in federal
court based on the government's exemption from the Eleventh Amendment bar
involves just the kind of delegation that Blatchford so plainly questioned.
See Rodgers, 154 F.3d at 869 (Panner, J., dissenting). Nor are we persuaded
by the argument that the Court in Blatchford was concerned about a possible
delegation of the United States' Eleventh Amendment exemption just because
the injury to be remedied was the tribe's and not the United States'. See
Stevens, 162 F.3d at 203. The problems inherent in expanding the states'
consent to suit by the United States to suits "by anyone whom the United
States might select," Blatchford, 501 U.S. at 785, 111 S. Ct. 2578,
are no less troublesome where, as here, the injury on which the suit is
premised is a pecuniary injury to the United States. One should bear in
mind that the United States' ability to sue is broad; it is not limited
to suits to protect the federal fisc. See, e.g., In re Debs, 158 U.S. 564,
584, 15 S. Ct. 900, 39 L.Ed. 1092 (1895), disapproved of on other grounds
Bloom v. Illinois, 391 U.S. 194, 208, 88 S. Ct. 1477, 20 L.Ed.2d 522 (1968).
Indeed, the United States' very ability to sue as the tribes' trustee, which
was unquestioned in Blatchford, depended on an injury to the United States
as sovereign when injury was inflicted on the tribes. See United States
v. Minnesota, 270 U.S. 181, 194, 46 S. Ct. 298, 70 L.Ed. 539 (1926). It
does not seem reasonable, therefore, to distinguish Blatchford as an anti-delegation
principle applicable only where the "injury" is an injury to someone
other than the United States. The problem in either case is whether, consistent
with the constitutional plan, the United States can delegate its own exemption
from the Eleventh Amendment bar to another party.
Whatever the ultimate resolution of the question, we think it presents a
serious constitutional issue. It is quite a stretch to claim that such a
delegation was part of the inherent constitutional design, or that the permanence
of the union somehow depends on giving the United States broad latitude
to permit private parties to sue the states in the federal courts on the
United States' behalf. Compare United States v. Texas, 143 U.S. at 644-45,
12 S. Ct. 488. To assume that the United States possesses plenary power
to do what it will with its Eleventh Amendment exemption is to acknowledge
that Congress can make an end-run around the limits that that Amendment
imposes on its legislative choices. Imagine that Congress is contemplating
a new statute, to be enacted pursuant to its Article I powers, which would
create a private cause of action against the states in federal court. Since
the Court's decision in Seminole Tribe of Florida v. Florida, 517 U.S. 44,
116 S. Ct. 1114, 134 L.Ed.2d 252 (1996), Congress would not be able to enact
such a statute, irrespective of its clarity in imposing liability against
the states, because Congress is without constitutional power to abrogate
the states' Eleventh Amendment immunity under its Article I powers. See
id. at 57-73, 116 S. Ct. 1114. Yet if Congress is permitted to use the qui
tam device to create a private cause of action against the states brought
on behalf and in the name of the United States, it can reach precisely the
same end without constitutional impediment. See Jonathan R. Siegel, The
Hidden Source of Congress's Power to Abrogate State Sovereign Immunity,
73 TEX. L. REV. 539, 556-64 (1995) (approving of this outcome); see also
Blatchford, 501 U.S. at 785-86, 111 S. Ct. 2578 (noting that the tribe's
"delegation theory" was designed to avoid the constraints on congressional
abrogation of the states' Eleventh Amendment immunity). Admittedly, Congress
could have imposed liability against the states if it chose to put enforcement
of the statute "at the instance and under the control of responsible
federal officers." Blatchford, 501 U.S. at 785, 111 S. Ct. 2578; see
also Seminole Tribe, 517 U.S. at 71 n. 14, 116 S. Ct. 1114. But the quite
different legislative choice of authorizing private parties to haul sovereign
states into federal court against their will, ordinarily foreclosed unless
Congress successfully abrogates the states' immunity, suddenly becomes an
all too easy legislative option.
Long and the government would avoid the Blatchford delegation difficulty
by asserting that in qui tam suits the United States is the real party in
interest; a qui tam suit is therefore essentially a suit by and for the
United States. See, e.g., Stevens, 162 F.3d at 202; Milam, 961 F.2d at 49
(concluding that the United States is the real party in interest because
of "the structure of the qui tam procedure, the extensive benefit flowing
to the government from any recovery, and the extensive power the government
has to control the litigation"). This argument appears to us merely
to sidestep the core problem because it ignores the relator's undisputed
role as a party with a cause of action under the Act. The "real party
in interest" rule ordinarily requires that the suit be brought by the
"person who, according to the governing substantive law, is entitled
to enforce the right." 6A CHARLES ALAN WRIGHT, ARTHUR R. MILLER &
MARY KAY KANE, FEDERAL PRACTICE & PROCEDURE § 1543, at 334 (2d
ed.1990); see Fed R. Civ. P. 17(a) (stating that "every action shall
be prosecuted in the name of the real party in interest"). There is
no question that the False Claims Act gives such a right to the relator,
see 31 U.S.C. § 3730(b) ("A person may bring a civil action for
a violation of section 3729 for the person and for the United States Government.")
(emphasis added), and the statutory right to bring suit is sufficient to
satisfy the real party in interest requirement, even if the suit is brought
for the benefit of some other party, see Fed. R. Civ. P. 17(a) (second sentence);
6A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice
& Procedure § 1550, at 384. In any event, contrary to the suggestion
of the district court, see Long, 999 F. Supp. at 83-84, a qui tam action
is brought for the benefit of both the relator and the United States, not
for the benefit of the United States alone. See 31 U.S.C. § 3730(b)
(authorizing qui tam suit "for the person and for the United States
Government"). Nor does it make any difference that the False Claims
Act requires the relator to sue "in the name of the Government,"
31 U.S.C. § 3730(b), because the procedural question of in whose name
the suit must be brought is distinct from the substantive legal question
whether the plaintiff has a cause of action. See 6A Charles Alan Wright,
Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure §
1544, at 340.16
Accordingly, we do not think the relator's technical status as a "real
party in interest" is inconsistent with the conclusion of our sister
circuits that the United States is a "real party in interest"
as well. See, e.g., Stevens, 162 F.3d at 202; Rodgers, 154 F.3d at 868;
United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1217 n. 8 (9th
Cir. 1996); Milam, 961 F.2d at 49. It is, after all, not unheard of for
there to be two real parties in interest to a cause of action. See 6A CHARLES
ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE &
PROCEDURE § 1545, at 351-53 (in cases of partial assignments, the assignor
and assignee are both real parties in interest); id. § 1546, at 360
(same for partial subrogation). More important, although we are aware of
a variant of the doctrine used in a related Eleventh Amendment context,
see, e.g., Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 464,
65 S. Ct. 347, 89 L.Ed. 389 (1945) (analyzing whether a state defendant
is the "real party in interest" such that a suit against a state
entity, though not nominally against the state, would be barred by the Eleventh
Amendment), we do not see how the doctrine can be used to convert a party
with a statutory cause of action into a "nonparty-party."17 In
short, we think the real party in interest doctrine is plainly irrelevant
to the Eleventh Amendment question presented in this case. See Rodgers,
154 F.3d at 869 (Panner, J., dissenting).
Nor do we think, as appellees suggest, that the government's control over
a relator's suit alters the result. We acknowledge that the government takes
the greater share of any recovery, see 31 U.S.C. § 3730(d)(1),(2),
and that the statute gives the United States considerable control over the
relator's suit, see, e.g., id. at § 3730(b)(2)(providing that the government
can intervene in the suit as of right within sixty days after receiving
the relator's complaint, evidence, and information); id. at § 3730(b)(1)
(relator cannot dismiss his own suit without written consent of the court
and the Attorney General); id. at § 3730(c)(3)-(4) (even if the government
does not intervene, it may monitor the proceedings and stay discovery in
certain situations); id. at 3730(c)(3) (government can intervene at any
time upon a showing of good cause); id. § at 3730(c)(2)(A) (government
may dismiss the suit after notice to the relator and a hearing); id. at
§ 3730(c)(2)(B) (government may settle the suit with the defendant
over the relator's objection if the court approves after a hearing).18 Still,
we simply do not see how the government's potential exercise of its power
renders the relator any less a party. Whatever the degree of control the
United States exercises, we think it is telling that, although there are
some intimations to that effect, no court has actually held that the relator
is not a party to the qui tam suit merely because of the United States'
potential ability to control the prosecution of the suit.
The relator appears to remain a party whether or not the United States intervenes.
In either situation, the relator's rights must be protected under the statute.
See 31 U.S.C. § 3730(c)(3) (providing that the court may permit the
United States to intervene for good cause but must not "limit[ ] the
status and rights of the person initiating the action"); id. at §
3730(c)(1) (providing that the relator "shall have the right to continue
as a party to the action," subject to certain limitations, even after
the United States intervenes). This is important because the Eleventh Amendment
must be satisfied for every claim in the suit, see Pennhurst State Sch.
& Hosp. v. Halderman, 465 U.S. 89, 121, 104 S. Ct. 900, 79 L.Ed.2d 67
(1984), and the presence of the United States as a co-plaintiff does not
ordinarily remove the Eleventh Amendment bar for claims by other plaintiffs,
see id. at 103 n. 12, 104 S. Ct. 900; but see Rodgers, 154 F.3d at 870 (Panner,
J., dissenting) (distinguishing for Eleventh Amendment purposes between
cases in which the United States intervenes from those in which it does
not). But assuming arguendo that the Eleventh Amendment would not pose a
problem in cases in which the United States actually intervenes in a suit
against a state, the government did not do so in the present case. That
fact, coupled with the government's intervention limited to the claim against
the private defendants, suggests that the government does not lightly take
on the task of probing into the internal operations of the sovereign states,
and may well think it better to leave such politically unpalatable tasks
for the qui tam relators of the world. Yet, the government wishes the option
to sit back while the relator brings an action against a state, thus removing
itself from direct accountability and from the subtle political pressures
that might have precluded the lawsuit in the first place had the United
States been more actively involved from the start. See Stevens, 162 F.3d
at 225-29 (Weinstein, J., dissenting). That seems quite at odds with the
obvious purpose of the Eleventh Amendment since such a suit is emphatically
not one brought "at the instance and under the control of responsible
federal officers." Blatchford, 501 U.S. at 785, 111 S. Ct. 2578. We
seriously doubt that the government, under the Eleventh Amendment, is entitled
to transfer all of the benefits that accrue to it as a plaintiff in the
federal courts when it chooses to watch from the sidelines. That could be
described as allowing the government to have its constitutional cake and
eat it too.
It has also been contended that, despite the clear statutory language giving
relators a cause of action and treating them as parties vested with rights
and protections, relators should be seen instead as self-appointed government
counsel. See Stevens, 162 F.3d at 202; Milam, 961 F.2d at 49 ("Congress
has let loose a posse of ad hoc deputies to uncover and prosecute frauds
against the government."); Siegel, supra, 73 TEX. L. REV. at 556-57;
Evan Caminker, The Constitutionality of Qui Tam Actions, 99 YALE L. J. 341,
353 (1989). It has even been suggested that the relator's economic interest
in the lawsuit makes him more like a contingency fee lawyer than a party.
See Stevens, 162 F.3d at 202 (acknowledging that the qui tam plaintiff has
an interest in the action's outcome, but stating that "his interest
is less like that of a party than that of an attorney working for a contingent
fee" and citing cases noting that relators' primary motivation is a
monetary reward and not the public good). We simply do not understand the
analogy; typically both the client and the attorney have an economic interest
in litigation. In this sense, a relator looks no different to us than, let
us say, an applicant for a broadcast license. It is therefore not possible
to contend that the False Claims Act is an open-ended letter of engagement
from the government as client to a posse of prospective attorneys. See United
States ex rel. Farrell v. SKF, USA, Inc., 32 F. Supp.2d 617, 617-18 (W.D.N.Y.
1999) (rejecting contention by qui tam defendant that, since the relator
is only the United States' lawyer and the United States always remains a
party litigant, the defendant was entitled to discovery from the United
States even though the United States had not intervened in the suit). To
accept the "private Attorneys General" characterization as anything
more than an inapt convention would run headlong into the problems of how
a party with a statutory right to sue on his own behalf can be thought to
be acting in a representational capacity, see 31 U.S.C. § 3730(b),
why the client would need the court's permission to intervene in his own
suit, see id. at § 3730(c)(3), or to dismiss the lawyer's "suit,"
see id. at § 3730(c)(2)(A), and why the lawyer's "status and rights"
would be worthy of statutory protection in the event the client chooses
to intervene in the lawyer's action, see id. at § 3730(c)(3).19
B.
Although, as we have indicated, we have profound doubts that the Eleventh
Amendment permits this lawsuit against New York even if Congress implicitly
authorized relators to bring suits against the states, we do not rest our
decision on an interpretation of the Constitution. Instead, bearing in mind
that we must decide this difficult constitutional issue only if the term
person in the Act is interpreted as including states, and that it seems
quite dubious that Congress intended that result, the appropriate course
seems to us to interpret "person" as not including states.
The venerable doctrine of construing statutes in such a way as to avoid
serious constitutional questions has two important prerequisites. First,
the "statute must be genuinely susceptible to two constructions,"
and this determination must be made "after, and not before, [the
statute's] complexities are unraveled." Almendarez-Torres, 118 S. Ct.
at 1228; see also United States v. Espy, 145 F.3d 1369, 1372 (D.C. Cir.
1998); Association of Am. Physicians & Surgeons, Inc. v. Clinton, 997
F.2d 898, 906, 910-11 (D.C. Cir. 1993). Furthermore, the constitutional
question must be one that presents a "serious likelihood that the statute
will be held unconstitutional." Almendarez-Torres, 118 S. Ct. at 1228;
see also Association of Am. Physicians & Surgeons, 997 F.2d at 906 (constitutional
question must be a "grave" one); Espy, 145 F.3d at 1372.
It is obvious from what we have said already that these requirements are
satisfied in this case. As we have just explained at length, the Eleventh
Amendment question is, at bare minimum, a serious one. It could not be suggested,
moreover, that we are distorting the language of the statute in order to
avoid a constitutional question. The more obvious reading is to exclude
states from "person." The more difficult task is to demonstrate
that the inclusion of states as defendant persons is a fair reading of the
statute. There can be no objection to avoiding a constitutional question
that is implicated only by a rather strained reading of the statute.
We think it relevant-if not decisive-to observe that the avoidance canon
coincides in this case with two additional related canons of construction
that impose upon Congress an obligation of specificity. When "Congress
intends to alter the 'usual constitutional balance between the States and
the Federal Government,' "federal courts insist that Congress "make
its intention to do so 'unmistakably clear in the language of the statute.'"
Will, 491 U.S. at 65, 109 S. Ct. 2304 (quoting Atascadero State Hosp. v.
Scanlon, 473 U.S. 234, 242, 105 S. Ct. 3142, 87 L.Ed.2d 171 (1985)); see
also Gregory v. Ashcroft, 501 U.S. 452, 464, 111 S. Ct. 2395, 115 L.Ed.2d
410 (1991) (linking clear statement rule with constitutional avoidance canon).
The Court in Will derived this "clear statement" rule from the
Eleventh Amendment cases requiring an explicit textual intent to abrogate
a state's Eleventh Amendment immunity, but noted its applicability in a
range of contexts in which Congress alters the federal-state balance of
power. See Will, 491 U.S. at 65, 109 S.Ct. 2304.20 In Gregory, the Court
applied this "plain statement" principle where Congress' imposition
of liability under the Age Discrimination in Employment Act would "upset
the usual constitutional balance" by interfering with the states' fundamental
role in defining the qualifications of their state judges. Id. at 460-61,
111 S. Ct. 2395; see id. at 464-67, 111 S. Ct. 2395 (holding that Congress
did not make a sufficiently clear statement in the ADEA that state judges
are within the Act's coverage). It cannot seriously be disputed that if
Congress were required to make its intentions "clear and manifest,"
Will, 491 U.S. at 65, 109 S. Ct. 2304, in order to impose False Claims Act
liability on the states, it has failed to do so.
Appellees contend that there is no justification for applying this clear
statement rule of Will or Gregory because treating states as defendant persons
would not actually alter the constitutional balance of powers between the
federal and state governments. Such an alteration occurs, for example, when
Congress seeks to remove the states' sovereign immunity in their own courts,
as in Will, 491 U.S. at 67, 109 S. Ct. 2304, or when Congress attempts to
interfere with an essential governmental function, as in Gregory, 501 U.S.
at 460, 111 S. Ct. 2395. Since this case arose in federal court and because
the fraudulent conduct proscribed cannot be thought an essential governmental
function, appellees argue that neither Will nor Gregory apply.
We are unpersuaded by various crabbed analyses of the Court's "clear
statement" jurisprudence that we have seen. To characterize the relevant
state function at issue, as the Second Circuit did, as fraudulent conduct,
see, e.g., Stevens, 162 F.3d at 204 ("The States have no right or authority,
traditional or otherwise, to engage in [fraudulent] conduct."), is
to assume the conclusion that the function is not an essential one. Using
that logic, the Court in Gregory would have declined to apply a clear statement
rule because it is not essential for the state to discriminate against elderly
judges. Appellees, for their part, describe the governmental function at
issue in this case as the process by which a state receives federal funding-which
they argue cannot possibly be described as an essential state function.
The state, in other words, is simply a supplicant coming to the federal
sovereign. That characterization, in our view, is still too narrow because
the Act's imposition of liability necessarily interferes with a state's
sovereign performance of a range of indisputably essential functions, such
as the administration of a state education department involved in the present
case. See Ambach v. Norwick, 441 U.S. 68, 76, 99 S. Ct. 1589, 60 L.Ed.2d
49 (1979) ("Public education, like the police function, 'fulfills a
most fundamental obligation of government to its constituency.'") (quoting
Foley v. Connelie, 435 U.S. 291, 297, 98 S. Ct. 1067, 55 L.Ed.2d 287 (1978));
Brown v. Board of Educ., 347 U.S. 483, 493, 74 S. Ct. 686, 98 L.Ed. 873
(1954) ("[E]ducation is perhaps the most important function of state
and local governments."). That the federal government funds in part
that function does not destroy its essentiality to the state. To accept
that hypothesis, given present tax and spending mechanisms, would go a long
way toward burying federalism.
The Supreme Court has applied Gregory as we do, focusing on the state functions
necessarily affected by operation of the statute, and not exclusively on
the actual conduct proscribed by Congress. See Gregory, 501 U.S. at 463,
111 S. Ct. 2395 (essential state function with which ADEA liability would
interfere was the "authority of the people of the States to determine
the qualifications of their most important government officials" in
their state Constitutions); see also Pennsylvania Dep't of Corrections v.
Yeskey, 524 U.S. 206, 118 S. Ct. 1952, 1953-54, 141 L.Ed.2d 215 (1998) (assuming
that imposition of ADA liability against state prisons would interfere with
the essential state function of "exercising ultimate control over the
management of state prisons"); BFP v. Resolution Trust Corp., 511 U.S.
531, 544 & n. 8, 114 S. Ct. 1757, 128 L.Ed.2d 556 (1994) (applying Gregory
to Bankruptcy Code provisions governing constructively fraudulent transfers,
and explaining that the state function was not general authority over debtor-creditor
law, but the "essential sovereign interest in the security and stability
of title to land" necessarily affected by application of the Bankruptcy
Code to foreclosure sales). We thus do not think it is appropriate to look
myopically only to the state's formal submission of the claim to the government
and to ignore the underlying governmental functions to which the claim relates.21
Appellees similarly give an overly restrictive reading of Will. It is true
that the Court in Will pointed to the states' sovereign immunity in their
own courts as a supporting reason for concluding that Congress did not intend
to make states persons under 42 U.S.C. § 1983. See Will, 491 U.S. at
66-67, 109 S. Ct. 2304. But the Court nowhere even suggested that abrogation
of state sovereign immunity was the only alteration of the constitutional
balance that justified use of the clear statement rule, nor did it rely
on the idea of essential state functions implicit in the later decision
in Gregory. Will could be read to suggest-although we are uncertain of this-that
it was the very imposition of a new liability against the state that would
have altered the constitutional balance of powers.
Whether or not Will or Gregory can be taken as far as we have suggested,22
there is a second related clear statement canon that bears on our case.
In cases involving congressional abrogation of a state's Eleventh Amendment
immunity, the applicability of the clear statement rule is well-established
and the uncertainties in defining the scope of the Will and Gregory versions
of that rule disappear. See Dellmuth v. Muth, 491 U.S. 223, 230, 109 S.
Ct. 2397, 105 L.Ed.2d 181 (1989). Appellees contend that that rule does
not apply, however, because they conclude that the Eleventh Amendment is
not a bar to a qui tam suit (and thus that no abrogation is necessary).
But it seems highly artificial to conclude that Congress labors under an
obligation of utmost textual specificity when it seeks to abrogate the states'
Eleventh Amendment immunity when that immunity is otherwise certain, but
that liability against the states- potentially implicating the Eleventh
Amendment-can be imposed willy-nilly, using as imprecise a term as "person."
We think there is significant conceptual overlap-though admittedly not an
identity-between the abrogation inquiry and the statutory construction question
whether Congress intended to include states as defendant persons. The Supreme
Court's conclusion that Congress has failed to abrogate with the requisite
specificity is often based on Congress' failure explicitly to provide for
suits against the states in federal court-the precise failing of the False
Claims Act that raises the question in this appeal. See, e.g., Dellmuth,
491 U.S. at 231-32, 109 S. Ct. 2397; Atascadero State Hosp., 473 U.S. at
245-46, 105 S. Ct. 3142. So although we recognize that the Eleventh Amendment's
clear statement rule has always been applied to an abrogaion inquiry-rather
than to a threshold question as to whether the Eleventh Amendment applies-we
do not think it wholly irrelevant to the latter.
Appellees' argument against using the Eleventh Amendment's clear statement
rule follows from their prior conclusion that the Eleventh Amendment does
not apply to this case. Appellees therefore assume that states are persons
for the purpose of rejecting New York's Eleventh Amendment defense, and
then proceed to reject the Eleventh Amendment's clear statement rule when
actually interpreting the statute previously assumed to include states-sort
of a divide and conquer strategy. The statutory construction issue is, however,
inextricably linked with the jurisdictional one, which is precisely why
we decline to assume that states are persons in order to conduct an Eleventh
Amendment inquiry that could be avoided if the assumption were not made
in the first place. We think the correct resolution is to read the Act in
such a way that avoids the serious constitutional question whether the Eleventh
Amendment bars qui tam suits against the state in federal court. In so doing,
we rely on the constitutional avoidance canon buttressed by the family of
"clear statement" rules applicable when Congress attempts to legislate
in the way that appellees contend it has legislated.23
* * *
In the end it comes to this: if we must decide whether states constitutionally
can be defendants in federal court under the Act, Congress must make its
intent clear. The decision of the district court is therefore reversed.
So ordered.
1 The district court granted the motion to
dismiss Long's whistleblower and unjust enrichment claims, the former because
the Eleventh Amendment bars private suits brought against the state (although
it does not bar Long's claim for prospective relief against Frey, a state
official), and the latter because Long has no standing to assert the government's
claim of unjust enrichment under state common law. See Long, 999 F. Supp.
at 91-93.
2 The district court also concluded that Long's suit was not barred by the
public disclosure and original source provisions of the Act. See Long, 999
F. Supp. at 87-89. Although the parties challenge aspects of those rulings
on appeal, we need not address them further given our resolution of the
case in favor of New York. We also decline to exercise pendent appellate
jurisdiction over the statutory whistle-blower and constitutional claims
against appel-lant Frey in his individual capacity. Although these claims
are not foreclosed by anything in our opinion, they are not in any way related
to the Eleventh Amendment and statutory construction questions that we decide
today. And although an inextricable relation between claims is not a necessary
condition for pendent appellate jurisdiction, see Jungquist v. Sheikh Sultan
Bin Khalifa Al Nahyan, 115 F.3d 1020, 1027 (D.C. Cir. 1997), and efficiency
interests might counsel in favor of resolving these claims now, we could
not possibly terminate the entire case against Frey-even if we agreed with
him-because Long also asserted § 1983 claims against him that the district
court did not dismiss and from which Frey does not now seek to appeal. That,
coupled with the other-wise unappealable nature of the order as to Frey,
a separate appellant, see Gilda Marx, 85 F.3d at 678, and the presence of
factual disputes in the briefs on the "original source" and "public
disclosure" questions, see id. at 679, leads us to reject Frey's request
that we resolve these claims now.
3 The statute provides, in relevant part:
(a) Liability for certain acts. Any person who-
. . .
(2) knowingly makes, uses, or causes to be made or used, a false record
or statement to get a false or fraudulent claim paid or approved by the
Government;
(3) conspires to defraud the Government by getting a false claim allowed
or paid . . . is liable to the United States Government. . . .
31 U.S.C. § 3729 (1994).
4 As appellees observe, the Eighth Circuit rejected application of this
rule in interpreting the False Claims Act on the ground that the presumption
of sovereign exclusion applies only to the enacting sovereign. See Zissler,
154 F.3d at 874. However, the Court in Will applied this rule even though
the enacting sovereign (the United States) was different from the state
sovereigns excluded from the term person, see Will, 491 U.S. at 64, 109
S. Ct. 2304, implicitly rejecting the Eighth Circuit's position as it was
then articulated in Justice Brennan's dissent, see id. at 73, 109 S. Ct.
2304 (Brennan, J., dissenting).
5 In reaching this conclusion, the district court was guided by its assumption
that the "clear statement" rule of Will, 491 U.S. at 65, 109 S.
Ct. 2304, did not apply-an issue which we take up below. But the district
court incorrectly equated Will's "clear statement" rule with the
traditional rule presuming that the term person does not include states.
Compare Will, 491 U.S. at 65 (clear statement rule), with id. at 64, 109
S. Ct. 2304 (default rule that person does not include states). Even if
the former rule were not implicated here, the latter rule-which all parties
concede applies-dictates a presumption opposite to the one the district
court applied.
6 The Second Circuit explained this problem away by reasoning that the Congress'
undeniable intent to include military contractors in the Act refuted any
attempt to read "persons not in the military" as impliedly referring
only to natural, as opposed to corporate, persons. See Stevens, 162 F.3d
at 205-06. The default rule of statutory construction governing corporations
as "persons," however, is precisely the opposite of the default
rule that we must apply in this case. See Wilson, 442 U.S. at 666, 99 S.
Ct. 2529 (stating that the "word 'person' for purposes of statutory
construction, unless the context indicates to the contrary, is normally
construed to include" corporations). Since we must look for an affirmative
intent to include states, that contractors, under the default rule for corporations,
could have been thought to be "person[s] not in the military"
is hardly supportive of appellees' case.
7 Of course, Stevens, not Graber, is Second Circuit law.
8 In Zissler, 154 F.3d at 874, the Eighth Circuit relied on United States
v. California, 297 U.S. 175, 186, 56 S. Ct. 421, 80 L.Ed. 567 (1936), for
the proposition that it would be a mistake to exclude the states from an
"act of Congress, all-embracing in scope and national in its purpose,
which is as capable of being obstructed by state as by individual action,"
id. But the Supreme Court made that statement only after it had "fairly
. . . inferred" that the purpose of the Federal Safety Appliance Act,
albeit implicit, was to subject state-run railroads to liability. See id.
If the mere use of the term person in a broad statute with national purposes,
which states were equally capable of violating, were sufficient to bring
the states within the statute's scope, the interpretive rule presuming the
opposite would be largely ineffectual, if not wholly eviscerated.
9 The Eighth Circuit thought that this amendment more broadly "evidenced
consideration of whom to hold liable" under the amended Act. Zissler,
154 F.3d at 874. But there is nothing in the text of the statute or in any
of the legislative history indicating that Congress' consideration of "whom
to hold liable" extended beyond its intent, expressed in the statute,
to bring military persons within the scope of the Act.
10 The CID section permits the government to conduct discovery of persons
who "may be in possession, custody, or control of any documentary material
or information relevant to a false claims investigation." 31 U.S.C.
§ 3733(a)(1).
11 It is unclear what appellees think they add by pointing to a 1981 General
Accounting Office Report that documented recent instances of state officials
defrauding the United States government-of which the Senate apparently was
aware when amending the statute in 1986. See S. REP. NO. 345, 99th Cong.,
2d Sess., at 2 & n.1 (1986), reprinted in U.S.C.C.A.N. at 5266, 5267
(citing GAO Report to Congress, FRAUD IN GOVERNMENT PROGRAMS: HOW EXTENSIVE
IS IT? HOW CAN IT BE CONTROLLED ? (1981)). Not only is evidence of an intent
to impose liability on state officials (which itself would be a tenuous
inference from this report) distinct from an intent to impose liability
on the states themselves, see Will, 491 U.S. at 68-69, 109 S. Ct. 2304,
but a report documenting contemporary instances of state fraud could hardly
be thought to illuminate the intent of the enacting Congress in 1863.
12 The Report's resort to these inapposite cases is unsurprising since,
at the time of the 1986 amendments, only one decision involved a qui tam
suit against the state, and that decision held that states were not persons
under the Act. See United States ex rel. Weinberger v. Florida, 615 F.2d
1370, 1371 (5th Cir. 1980) (describing district court's decision to that
effect and vacating on the ground that, under an older and since modified
version of the present 31 U.S.C. § 3730, the district court lacked
subject matter jurisdiction because the federal government had knowledge
of the facts underlying the relator's suit).
13 The Eighth Circuit thought that 1986 amendments to § 3729(a) warranted
giving the 1986 Report greater interpretive weight, even on the assumption
that the Report's understanding of the pre-1986 caselaw was incorrect. See
Zissler, 154 F.3d at 874. Again, the change to § 3729(a) had nothing
to do with the meaning of the term person. The portion of the Report in
question, moreover, makes no reference whatsoever to the slight alteration
actually made to § 3729(a). It is merely a commentary on the past.
14 Although New York seemed insistent that it can have it both ways-that
it can be a plaintiff but not a defendant-the states, appearing as amici,
seemed quite prepared to abandon any claim that they could sue as plaintiffs;
the threat of being a qui tam defendant apparently "concentrated their
minds."
15 Even assuming arguendo that states can be relators, we doubt that the
consistent meaning canon is appropriately applied in this case. The canon
itself has an important exception "[w]here the subject-matter to which
the words refer is not the same in the several places where they are used."
Atlantic Cleaners & Dyers, Inc. v. United States, 286 U.S. 427, 433,
52 S .Ct. 607, 76 L.Ed. 1204 (1932). Imposing liability is quite different
from conferring a right to sue, and as we noted above, the Will-Wilson default
rule has added force when the question is whether states are subject to
liability as persons. See Will, 491 U.S. at 64, 109 S. Ct. 2304. The canon
also encounters potentially insurmountable difficulties when the "meanings"
are enacted by two different Congresses-which is an obvious flaw in appellees'
effort to use the 1986 amendments' effect on the term person in § 3730(b)(1)
to give consistent meaning to the term person in § 3729(a), which was
enacted by the 1863 Congress.
It might be argued that the 1986 amendments merely clarified that Congress
has intended states to be relators since 1863, and that the consistent meaning
canon really applies to the 1863 Congress alone. But this theory would require
us, quite illogically, to interpret the 1986 legislative action as a declaration
of what a Congress over a century earlier intended. The action of the 1986
Congress tells us, at most, what the 1986 Congress thought about states
as qui tam relators (and as we noted above, it does not tell us very much);
it does not purport to tell us, nor could it, what the 1863 Congress intended.
See Rainwater v. United States, 356 U.S. 590, 593, 78 S. Ct. 946, 2 L.Ed.2d
996 (1958) (stating that 1918 amendment to the criminal provisions of the
False Claims Act was at most "merely an expression of how the 1918
Congress interpreted a statute passed by another Congress more than a half
century before" and had "very little, if any, significance"
in interpreting the original Act's civil provisions). Although the Supreme
Court occasionally says that "[s]ubsequent legislation which declares
the intent of an earlier law is entitled to great weight in statutory construction,"
Loving v. United States, 517 U.S. 748, 770, 116 S. Ct. 1737, 135 L.Ed.2d
36 (1996) (quoting Consumer Product Safety Comm'n v. GTE Sylvania, Inc.,
447 U.S. 102, 118 n. 3, 100 S. Ct. 2051, 64 L.Ed.2d 766 (1980) (quoting
Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 380-81, 89 S. Ct. 1794,
23 L.Ed.2d 371 (1969))), the Supreme Court's application of that principle
has been rather inconsistent, see Paramount Health Sys., Inc. v. Wright,
138 F.3d 706, 709-11 (7th Cir. 1998) (comparing this rule with the competing
rule that the views of a subsequent Congress in legislative history form
a hazardous basis for inferring the intent of an earlier one). And we are
unaware of any Supreme Court holding in which a subsequent declaration has
been used, not to discern the current meaning of a statute post-declaration,
see, e.g., Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 595-96,
100 S. Ct. 800, 63 L.Ed.2d 36 (1980); Red Lion Broadcasting, 395 U.S. at
380-81, 89 S. Ct. 1794, but instead to interpret the meaning of a statute
prior to the declaration. Appellees' attempt to apply the consistent meaning
canon to the 1863 Congress depends on precisely such a "retroactive
clarification."
16 The district court concluded that Long's claim under the whistle-blower
provision of the False Claims Act, 31 U.S.C. § 3730(h), was barred
by the Eleventh Amendment because, unlike a qui tam suit under § 3730(b)
brought in the name of the United States, a claim under § 3730(h) is
a true "private right of action." Long, 999 F. Supp. at 92. We
disagree; a qui tam suit under § 3730(b) is no less a cause of action,
and the relator is no less a party prosecuting that action, because the
action is brought in the name of the United States.
17 One of the principal concerns motivating the Eleventh Amendment inquiry
into whether the state is the "real party in interest" defendant
(or in other words that the actual defendant is an "arm of the state")
is that an individual plaintiff's recovery will be paid out of the state
treasury. See Regents of the University of California v. Doe, 519 U.S. 425,
117 S. Ct. 900, 904, 137 L.Ed.2d 55 (1997). That is the precise concern
presented by a private relator recovering against a state defendant in a
qui tam suit.
18 There are, however, substantial restrictions on the United States' power
incorporated within these provisions. See Stevens, 162 F.3d at 223-24 (Weinstein,
J., dissenting).
19 Of course, if the government actually hired a lawyer to bring its own
cause of action, the Blatchford delegation problem would not arise. But
as we have explained at length, that is not what the False Claims Act does.
20 Indeed, in Will itself the Eleventh Amendment was not a concern because
the question whether states were persons under § 1983 arose in the
context of a state court case, and the Eleventh Amendment does not apply
in state courts. See Will, 491 U.S. at 63-64, 109 S. Ct. 2304.
21 It could be argued, we suppose, that because False Claims Act liability
is only triggered when the state requests money from the federal government,
it brings any interference with its essential functions on itself. But we
do not see any basis in Gregory for eliminating the need for a clear statement
simply because the liability imposed is conditioned on a voluntary act by
the state. The clear statement rule of Pennhurst State School and Hospital
v. Halderman, 451 U.S. 1, 17, 101 S. Ct. 1531, 67 L.Ed.2d 694 (1981)-which
requires a clear statement when Congress imposes conditions on grants of
federal money-seems flatly inconsistent with such an argument.
22 The government would have us instead limit the Court's clear statement
rules because of the significant reliance interests created by Congress'
and the federal agencies' assumption that states, to whom they entrusted
large sums of money, are covered by the Act. For the proposition that reliance
interests can trump clear statement rules, the government relies on Hilton
v. South Carolina Public Railways Comm'n, 502 U.S. 197, 205-07, 112 S. Ct.
560, 116 L.Ed.2d 560 (1991) (holding that Will is a rule of statutory construction,
not of constitutional law, and that the reliance interests created by the
Court's prior decision interpreting the Federal Employers' Liability Act
to include state-owned railroads warranted adherence to stare decisis rather
than to the clear statement rule). That the Court feels obliged to disregard
the clear statement rule because of reliance interests that it created through
its own precedent is of course quite different from the government's contention.
Any reliance interests in this case are not the judiciary's doing, but rather
stem from the legislature's and the federal agencies' assumption, based
on weak post-enactment legislative history, that states were, or ought to
be, covered by the Act. Since Congress easily could have included states
within the definition of person if it so intended, the government can hardly
be heard to complain now (on behalf of Congress) that Congress, in effect,
wrote the states a blank check.
23 New York would also have us apply the clear statement rule of Pennhurst,
451 U.S. at 17, 101 S. Ct. 1531, under which Congress must unambiguously
set forth conditions it imposes on the grant of federal money when it exercises
its spending power. Because we have enough-more than enough-clear statement
rules to resolve this case, we need not decide whether False Claims Act
liability can be seen as a condition imposed on a grant of federal money.
APPENDIX B
UNITED STATES COURT OF APPEALS DISTRICT OF COLUMBIA CIRCUIT
Nos. 98-5133, 98-5149 AND 98-5150
UNITED STATES OF AMERICA, EX REL. RONALD E. LONG, APPELLEE/CROSS-APPELLANT
v.
SCS BUSINESS & TECHNICAL INSTITUTE, INC., ET AL., APPELLEES
STATE OF NEW YORK, APPELLANT/CROSS-APPELLEE
v.
ATTORNEY GENERAL OF THE UNITED STATES, INTERVENOR
[April 30, 1999]
SUPPLEMENTAL OPINION
Before: WALD, SILBERMAN, and SENTELLE, Circuit Judges.
Opinion for the Court filed by Circuit Judge SILBERMAN.
SILBERMAN, Circuit Judge:
In the same week that our opinion issued, the Fifth Circuit held that the
Eleventh Amendment bars a False Claims Act qui tam suit against a state
in federal court. See United States ex rel. Foulds v. Texas Tech University,
171 F.3d 279 (5th Cir. 1999). The court thought it was obliged to decide
that issue before reaching the question we decided-whether the statute provides
for a qui tam action against a state-because the Eleventh Amendment issue
is jurisdictional. Although we certainly discussed the serious nature of
the Eleventh Amendment issue as it bore on our order of decision, we did
not consider whether, as a matter of judicial authority, we too were obliged
to decide that issue. Since our sister circuit implicitly challenged our
jurisdiction-even though no party before us did-and our mandate has not
issued, under these unusual circumstances, we think it appropriate to issue
this supplemental opinion to explain why we believe we should stick with
the order of decision we adopted.
The Fifth Circuit reasoned as follows: since the question whether a relator
can sue a state under the Act is a cause of action or merits question, and
since the question whether a federal court can hear such a suit under the
Eleventh Amendment is a jurisdictional one, the latter must be resolved
before the former. See id. at 286. The principal authority that the Fifth
Circuit relied on is Steel Co. v. Citizens for a Better Environment, 523
U.S. 83, 118 S. Ct. 1003, 140 L.Ed.2d 210 (1998), in which the Supreme Court
held that a question of Article III standing must be decided before the
statutory question whether a cause of action exists. See id. at ____ -____,
118 S. Ct. at 1012-16. In so holding, the Court rejected the doctrine of
"hypothetical jurisdiction," under which lower courts-including
this one, see, e.g., Cross-Sound Ferry Servs., Inc. v. ICC, 934 F.2d 327,
333 (D.C. Cir. 1991)-had assumed jurisdiction in order to reach the merits,
where the merits question was easier and the prevailing party on the merits
would be the same as the prevailing party were jurisdiction denied. See
Steel Co., 523 U.S. at ____, 118 S. Ct. at 1012 (disapproving of Cross-Sound
and other lower court decisions). The doctrine, the Court said, is flatly
inconsistent with core principles limiting the role of Article III courts:
"For a court to pronounce upon the meaning or the constitutionality
of a state or federal law when it has no jurisdiction to do so is, by very
definition, for a court to act ultra vires." Id. at ____, 118 S. Ct.
at 1016.
We did not address this Steel Co. question in our opinion, we confess, because
we did not focus on it. Indeed, New York-whose immunity from suit is at
stake-specifically urged us, apparently unlike Texas in Foulds, to decide
the statutory question first on the ground that nonconstitutional grounds
should be considered before constitutional ones. Admittedly, we ordinarily
are obliged to raise jurisdictional questions on our own, so the parties'
litigating tactics would not excuse our oversight. Still, the Eleventh Amendment
bar on suits against the states in federal court is not a garden variety
jurisdictional issue. Although the Amendment speaks in terms of the limits
of the judicial power, see U.S. Const. Amend. XI ("The Judicial power
of the United States shall not be construed to extend . . . ."), a
state can waive its Eleventh Amendment defense and consent to suit in federal
court, and the Supreme Court has held that there is no obligation for the
Court to raise the issue sua sponte. See Wisconsin Dep't of Corrections
v. Schacht, 524 U.S. 381, ____ - ____, 118 S. Ct. 2047, 2052-53, 141 L.Ed.2d
364 (1998) (citing Atascadero State Hsp. v. Scanlon, 473 U.S. 234, 241,
105 S. Ct. 3142, 87 L.Ed.2d 171 (1985) and Patsy v. Board of Regents of
Fla., 457 U.S. 496, 515 n. 19, 102 S. Ct. 2557, 73 L.Ed.2d 172 (1982)).
To be sure, the Court has also held that the "Eleventh Amendment defense
sufficiently partakes of the nature of a jurisdictional bar so that it need
not be raised in the trial court," Edelman v. Jordan, 415 U.S. 651,
678, 94 S. Ct. 1347, 39 L.Ed.2d 662 (1974); see Burkhart v. Washington Metropolitan
Area Transit Authority, 112 F.3d 1207, 1216 (D.C. Cir. 1997), and indeed
can be raised for the first time in the Supreme Court, see Ford Motor Co.
v. Department of Treasury, 323 U.S. 459, 467, 65 S. Ct. 347, 89 L.Ed. 389
(1945). Given these somewhat conflicting rules, see Schacht, 524 U.S. at
____, 118 S. Ct. at 2055 (Kennedy, J., concurring), the Court has frankly
recognized that the Eleventh Amendment is a rather peculiar kind of "jurisdictional"
issue. See Calderon v. Ashmus, 523 U.S. 740, ____ n. 2, 118 S. Ct. 1694,
1697 n. 2, 140 L.Ed.2d 970 (1998) ("While the Eleventh Amendment is
jurisdictional in the sense that it is a limitation on the federal court's
judicial power, and therefore can be raised at any stage of the proceedings,
we have recognized that it is not coextensive with the limitations on judicial
power in Article III."); Idaho v. Coeur d'Alene Tribe of Idaho, 521
U.S. 261, 267, 117 S. Ct. 2028, 138 L.Ed.2d 438 (1997) ("The Amendment,
in other words, enacts a sovereign immunity from suit, rather than a nonwaivable
limit on the federal judiciary's subject-matter jurisdiction."). The
Court's most recent opinion noted that the question whether Eleventh Amendment
immunity is a matter of subject matter jurisdiction is an open one. See
Schacht, 524 U.S. at ____, 118 S. Ct. at 2054.
New York's explicit request that we first decide the statutory question
could therefore be seen as a kind of agreement to assert its Eleventh Amendment
defense only if it loses on the statutory one (a "springing" defense,
as it were). As the Supreme Court has recently made clear, "[t]he Eleventh
Amendment . . . does not automatically destroy original jurisdiction,"
but instead "grants the State a legal power to assert a sovereign immunity
defense should it choose to do so." Schacht, 524 U.S. at ____, 118
S. Ct. at 2052 (emphasis added). A state can waive its immunity from suit
in the context of a litigation, see, e.g., Ford Motor Co., 323 U.S. at 467-69,
65 S. Ct. 347, as long as it does so unequivocally, see Atascadero, 473
U.S. at 246-47, 105 S. Ct. 3142. Although there are difficult questions
about whether the state's attorneys must be authorized by state law to waive
the state's immunity, and about whether such authorization, if needed, has
been granted, compare id. (suggesting that such authorization is necessary)
with Schacht, 524 U.S. at ____ - ____, 118 S. Ct. at 2055-56 (Kennedy, J.,
concurring) (questioning whether in the removal context specific authorization
is required), it may well be that New York's approach amounts to a partial
consent to suit on the statutory question- subject to a later Eleventh Amendment
defense. And if so, we might be obligated to decide the statutory question
first.
But even if we were not so obligated, we think that we are at least permitted
to do so. Had New York chosen not to assert its Eleventh Amendment defense
below, or even before us, it would not have been precluded from raising
it thereafter. See Calderon, 523 U.S. at ____ n. 2, 118 S. Ct. at 1697 n.
2 (Eleventh Amendment "can be raised at any stage of the proceedings");
but cf. Schacht, 524 U.S. at ____, 118 S. Ct. at 2055 (Kennedy, J., concurring)
(criticizing this rule because "permitting the belated assertion of
the Eleventh Amendment bar . . . allow[s] States to proceed to judgment
without facing any real risk of adverse consequences"). Unless that
defense is asserted by the state, a court is arguably not obliged to raise
the issue itself since the Supreme Court has made clear that the usual obligation
to raise jurisdictional issues sua sponte does not apply (at least to the
Court itself) in Eleventh Amendment cases. See Patsy, 457 U.S. at 515 n.
19, 102 S.Ct. 2557.1 Therefore New York's litigation strategy-an Eleventh
Amendment argument in the alternative-suggests that, at least, we are entitled
to reverse the Steel Co. order. After all, Steel Co.'s rule is premised
on a court's lack of power to reach the merits without establishing its
jurisdiction. In the Eleventh Amendment context, where a court lacks power
only if a state claims that it does, it is arguable that we have no obligation
to decide the Eleventh Amendment issue first if the state does not demand
that we do so.
Moreover, the quasi-jurisdictional or "hybrid" status of the Eleventh
Amendment, see Schacht, 524 U.S. at ____, 118 S. Ct. at 2055 (Kennedy, J.,
concurring), raises questions about Steel Co.'s applicability in this context,
quite apart from New York's request that we interpret the statute first.
Since the Eleventh Amendment at most "partakes of the nature of a jurisdictional
bar," Edelman, 415 U.S. at 678, 94 S. Ct. 1347, it seems fair to ask
whether the Eleventh Amendment is sufficiently jurisdictional to require
us to decide a state's claim of Eleventh Amendment immunity before turning
to the merits. One indication to the contrary is Calderon, in which the
Supreme Court decided that it "must first address" whether a particular
action for a declaratory judgment was an Article III case or controversy
before deciding the Eleventh Amendment question on which certiorari had
been granted, observing that the Eleventh Amendment is "not co-extensive
with the limitations of judicial power in Article III." Calderon, 523
U.S. at ____ & n. 2, 118 S. Ct. at 1697 & n. 2. As between two jurisdictional
issues, there ordinarily is no obligation to decide one before the other.
See Steel Co., 523 U.S. at ____ n. 3, 118 S. Ct. at 1015 n. 3; In re Minister
Papandreou, 139 F.3d 247, 255 (D.C. Cir. 1998) (stating that dismissing
on nonmerits grounds such as personal jurisdiction or forum non conveniens,
before deciding subject-matter jurisdiction, is permissible under Steel
Co.).2 That the Court in Calderon thought itself obliged to decide the case
or controversy question first suggests that the Eleventh Amendment, a less
than pure jurisdictional question, need not be decided before a merits question.
One former judge of this court, in a concurring opinion criticizing the
hypothetical jurisdiction doctrine later rejected in Steel Co., pointed
in that direction. See Cross-Sound Ferry, 934 F.2d at 341 (Thomas, J., concurring
in part and concurring in the denial of petition) (reasoning that the rule
requiring consideration of jurisdictional issues before non-jurisdictional
issues might not apply if "the ground passed over sufficiently, though
not entirely, 'partakes of the nature' of a merits ground, or if the ground
rested upon 'sufficiently,' though not entirely, 'partakes of the nature
of a jurisdictional bar'" (quoting Edelman, 415 U.S. at 678, 94 S.
Ct. 1347)).
Another difficulty in applying Steel Co. here is that classifying the statutory
question in an Eleventh Amendment case as a "cause of action"
or merits question is, though technically accurate, somewhat misleading.
The determination of whether a particular action is properly asserted against
a state is also a kind of logical prerequisite to the jurisdictional inquiry.
The Eleventh Amendment only bars a federal court from hearing a "suit
in law or equity, commenced or prosecuted against one of the United States,"
and so it would seem perfectly appropriate-perhaps even necessary-for courts
to determine whether there is even such a suit before the court. That kind
of inquiry-sometimes classified as "jurisdiction to determine our jurisdiction,"
Nestor v. Hershey, 425 F.2d 504, 511 (D.C. Cir. 1969) (inquiring whether
student deferment sought was mandated by statute or within the discretion
of the draft board, as jurisdiction existed only for the former)-is fairly
common, even though the rulings made in determining jurisdiction are made
without certainty that jurisdiction actually exists. Occasionally, as in
this case, what a court says about an issue of statutory interpretation
that logically precedes the ultimate jurisdictional determination removes
any contention that the court's jurisdiction is in question. See, e.g.,
Webster v. Doe, 486 U.S. 592, 603-04, 108 S. Ct. 2047, 100 L.Ed.2d 632 (1988)
(using clear statement principles and the constitutional avoidance canon
to hold that statutory provision did not, despite language indicating that
the statute was committed to agency discretion, preclude judicial review
of constitutional claims).
If the Eleventh Amendment were a statutory provision stripping the federal
courts of jurisdiction, the inquiry whether the case before the court was
of the kind that the statute forbade would be a fairly routine form of jurisdictional
analysis.3 Accordingly, in determining whether the Eleventh Amendment bars
a particular suit, federal courts must decide a variety of issues that relate
to the question whether the suit is actually one brought against the state,
and do so before jurisdiction is finally resolved. See, e.g., Regents of
the University of California v. Doe, 519 U.S. 425, 429-30 & n. 5, 117
S. Ct. 900, 904 & n. 5, 137 L.Ed.2d 55 (1997) (noting that determining
whether a state agency is an "arm of the state" for Eleventh Amendment
purposes, such that the suit is one against the state itself, involves an
analysis of the state law provisions that define the agency's character);
Seminole Tribe of Florida v. Florida, 517 U.S. 44, 55-57, 116 S. Ct. 1114,
134 L.Ed.2d 252 (1996) (analyzing Indian Gaming Regulatory Act for the purpose
of determining if Congress, consistent with Eleventh Amendment abrogation
requirements, set forth a clear statement of its intent to provide for suits
against the states in federal court, and concluding that it did); Hafer
v. Melo, 502 U.S. 21, 24 n. *, 30-31, 112 S. Ct. 358, 116 L.Ed.2d 301 (1991)
(discussing, although not resolving, competing methods for determining whether
a suit for monetary damages is against a state official in his or her official
capacity, and thus against the state itself, or against a state official
in his or her personal capacity, to which the Eleventh Amendment does not
apply).
Still, it might be thought that the "jurisdiction to determine jurisdiction"
concept is not wholly satisfactory because whether states are persons under
the False Claims Act is also a cause of action question (which is what the
Fifth Circuit emphasized). But even if the cause of action aspect of the
statutory question takes it outside the "jurisdiction to determine
jurisdiction" doctrine, two additional considerations justify the approach
we have taken.
As our discussion already indicates, the "merits" question is,
in the Eleventh Amendment context, inextricably related to the "jurisdictional"
question. We noted this relationship in our opinion in explaining why the
Eleventh Amendment's clear statement rule, ordinarily applied to an abrogation
inquiry, is relevant in determining whether there is a cause of action against
the states. Even if we were to assume that states are defendant persons,
and then actually to decide that the Eleventh Amendment applied, we would
then have to ask whether, for abrogation purposes, the statute contains
a clear statement that states are to be defendants-which is more-or-less
the same statutory analysis that we previously undertook. This can be seen
in the Fifth Circuit's opinion, where the court held that the state's Eleventh
Amendment immunity was not abrogated because the Act did not contain the
requisite clear statement. See Foulds, 171 F.3d at 292. The only real difference
between the Fifth Circuit's analysis of the statute and our own is that
the Fifth Circuit had to actually hold that the Eleventh Amendment applied-a
serious constitutional issue-in order to get there.
We think this close relationship between the statutory and "jurisdictional"
issues, even putting aside "jurisdiction to determine jurisdiction,"
provides an independent ground on which to distinguish Steel Co. The relationship
between these two issues is quite different from the relationship between
an ordinary "cause of action" question and a pure jurisdictional
issue such as standing. The Court in Steel Co. rejected the contention that
merits questions could be decided before constitutional standing questions
because the Article III redressability requirement, for example, "has
nothing to do with the text of the statute relied upon" (except with
regard to entirely frivolous claims). Steel Co., 523 U.S. at ____ n. 2,
118 S. Ct. at 1013 n. 2. By contrast, the Court explained why merits questions
can be decided before statutory or prudential standing questions: the two
questions overlap to such an extent that it would be "exceedingly artificial
to draw a distinction between the two." Id. If an inextricable relationship
between statutory standing and the merits permits a court to decide the
merits first, the same order would seem appropriate for the two claims before
us.
In addition, we do not think our approach even implicates the concerns underlying
the Supreme Court's rejection of "hypothetical jurisdiction" because
the statutory question is logically antecedent to the Eleventh Amendment
question (even if it were not thought an aspect of "jurisdiction to
determine jurisdiction"). We have not chosen to decide a pure (and
relatively easier) merits question on the assumption that we have jurisdiction-the
paradigm of the hypothetical jurisdiction model. When a court decides, as
we do, that a statute does not provide for a suit against the states, there
is no risk at all that the court is issuing a hypothetical judgment-an advisory
opinion by a court whose very power to act is in doubt. See Steel Co., 523
U.S. at ____, 118 S. Ct. at 1016. Rather, the conclusion that the statute
does not provide for suits against the states in federal court is, in effect,
a resolution of the jurisdictional question, in that the Eleventh Amendment
can no longer be said to apply (which is quite different from saying, as
courts do under the hypothetical jurisdiction doctrine, that jurisdiction
does not matter because the same party arguing a lack of jurisdiction prevails
on the merits). The Supreme Court recently adopted precisely this reasoning
in deciding a class action certification issue before an asserted "array
of jurisdictional barriers," including ripeness, standing, and subject
matter jurisdiction. See Amchem Products, Inc. v. Windsor, 521 U.S. 591,
____, 117 S. Ct. 2231, 2244, 138 L.Ed.2d 689 (1997). The Court said that,
because resolution of the class certification issues was "logically
antecedent to the existence of any Article III issues, it [was] appropriate
to reach them first." Id. The Fifth Circuit's view instead is that
a court must assume that states are defendants under the Act and address
the Eleventh Amendment question at the outset, lest the court give an interpretation
of the statute that it has no power to give. See Foulds, 171 F.3d at 288
("[I]f the Eleventh Amendment removes our jurisdictional authority
to hear [the] case, we have no power to determine whether the False Claims
Act creates a cause of action against states. . . ."). But such an
approach ostensibly avoids the evils of "hypothetical jurisdiction"
(not really at issue) in favor of deciding a purely hypothetical jurisdictional
issue-that is, a jurisdictional issue that arises solely by virtue of the
statutory question assumed. Since the Eleventh Amendment issue in this case
"would not exist but for" that assumption, Amchem, 521 U.S. at
____, 117 S. Ct. at 2244 (quoting Georgine v. Amchem Prods., Inc., 83 F.3d
610, 623 (3d Cir. 1996)), we think it is appropriate for us to decide the
logically prior issue first.4
Perhaps most important, our reasoning is confirmed by several Eleventh Amendment
cases in which the Supreme Court itself has decided "cause of action"
questions before turning to the Eleventh Amendment. See, e.g., Hafer, 502
U.S. at 21-30, 112 S. Ct. 358 (holding that state officials sued in their
individual capacities are persons under 42 U.S.C. § 1983, and then
holding that the Eleventh Amendment presents no bar to such a suit); Lake
Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 398-402,
99 S. Ct. 1171, 59 L.Ed.2d 401 (1979) (deciding that a claim against an
interstate compact that required federal approval was a claim alleging a
deprivation of constitutional rights "under color of state law"
within the meaning of § 1983, and then deciding that the compact was
not entitled to Eleventh Amendment immunity)5; Monell v. Department of Social
Servs., 436 U.S. 658, 664-90 & n. 54, 98 S. Ct. 2018, 56 L.Ed.2d 611
(1978) (deciding that municipalities are persons under § 1983 and,
in conclusion, noting that the Eleventh Amendment would not bar such suits
to the extent that a municipality is not considered a part of the state
for Eleventh Amendment purposes); Mt. Healthy City Sch. Dist. Bd. of Educ.
v. Doyle, 429 U.S. 274, 278-80, 97 S. Ct. 568, 50 L.Ed.2d 471 (1977) (deciding
first that the contention that municipalities were not persons under §
1983 was a merits question that had been waived, and then deciding that
the Eleventh Amendment does not bar a suit against a municipality in federal
court); see also Doe v. Chiles, 136 F.3d 709, 713-21 (11th Cir. 1998) (deciding
first that a provision of the Medicaid Act created a federal right to reasonably
prompt provision of assistance enforceable under § 1983, and only then
concluding that the suit was not barred by the Eleventh Amendment). Though
these cases pre-date Steel Co., we think they lend considerable support-albeit
implicit-to our approach.
On the other hand, the Court in Welch v. Texas Department of Highways and
Public Transportation, 483 U.S. 468, 107 S. Ct. 2941, 97 L.Ed.2d 389 (1987),
decided an Eleventh Amendment abrogation question and specifically reserved
the question whether the statute created a cause of action. See id. at 476
n. 6, 107 S. Ct. 2941 ("Because Eleventh Amendment immunity 'partakes
of the nature of a jurisdictional bar,' we have no occasion to consider
the State's additional argument that Congress did not intend to afford seamen
employed by the States a remedy under the Jones Act" (quoting Edelman,
415 U.S. at 678, 94 S. Ct. 1347)). This decision is hardly support for our
position. But we do not think the Court's comment that it had "no occasion"
to consider the cause of action question fairly should be read as a holding
that cause of action questions must be decided second. See also Petty v.
Tennessee-Missouri Bridge Com'n, 359 U.S. 275, 277-83, 79 S.Ct. 785, 3 L.Ed.2d
804 (1959) (holding that the two states had waived their Eleventh Amendment
immunity from suit in an interstate compact, and only then deciding that
interstate compacts were not exempt from the term "employer" in
the Jones Act, but giving no indication that that order of decision was
required). If that were so, Welch would be flatly inconsistent with the
cases cited above. Again, the Court in Welch referred to the quasi-jurisdictional
nature of the Eleventh Amendment-that it "partakes" of the nature
of a jurisdictional bar-which of course suggests that the order of decision
adopted was not a mandatory one.
Nor do we think, as did the Fifth Circuit, see Foulds, 171 F.3d at 286,
that Blatchford v. Native Village of Noatak, 501 U.S. 775, 111 S. Ct. 2578,
115 L.Ed.2d 686 (1991), is to the contrary. The Supreme Court did note in
Blatchford that, given the Eleventh Amendment bar, it would not express
a view about whether the respondent was a "tribe" within the meaning
of the statute in question, see Blatchford, 501 U.S. at 788 n. 5, 111 S.
Ct. 2578. But the statutory question was not a "cause of action"
question at all but rather a question concerning the jurisdictional statute
under which the respondent had sued, see 28 U.S.C. § 1362 (providing
for federal court jurisdiction for suits by tribes involving federal law).
At most, the Court in Blatchford, for reasons not entirely clear to us,
decided the case on Eleventh Amendment jurisdictional grounds instead of
addressing a purely statutory jurisdictional argument- whether the tribe
had even established jurisdiction in the first place as a "tribe"
under § 1362-that could have made unnecessary its various constitutional
holdings. See id. at 779-82, 111 S. Ct. 2578 (holding that suits by tribes
are barred by the Eleventh Amendment); id. at 783-86, 111 S. Ct. 2578 (holding
that § 1362 did not effect a delegation of the United States' exemption
from the Eleventh Amendment bar to tribes); see id. at 786-88, 111 S. Ct.
2578 (holding that § 1362 did not abrogate the states' Eleventh Amendment
immunity).6 And again, while there does not appear to be a requirement that
some jurisdictional grounds be decided before others, see Steel Co., 523
U.S. at ____ n. 3, 118 S. Ct. at 1015 n. 3, the Court's statement in Calderon
that it was required to decide a case or controversy question before reaching
the Eleventh Amendment, see Calderon, 523 U.S. at --, 118 S. Ct. at 1697,
casts considerable doubt on Blatchford's order of decision. In any event,
Blatchford certainly cannot be said to mandate the Fifth Circuit's view
that the Eleventh Amendment issue must always be decided first.
We have taken pains to discuss the issue that the Fifth Circuit identified
because of its importance. Although the issue is complex, and the case law
not altogether clear, we are confident that no authority or principle prohibits
our approach. And because it has the significant virtue of avoiding a difficult
constitutional question, we think it is also the preferable one.
1 Whether the Patsy rule relieves lower courts
of the sua sponte obligation to raise the Eleventh Amendment issue is a
matter of some controversy. See Coolbaugh v. Louisiana, 136 F.3d 430, 442
n. 5 (5th Cir. 1998) (Smith, J., dissenting) (collecting cases and authorities).
We have raised an Eleventh Amendment question on our own in a prior case,
see Morris v. Washington Metropolitan Area Transit Auth., 702 F.2d 1037,
1040 (D.C. Cir. 1983), but do not appear ever to have held whether we must
do so, notwithstanding Patsy.
2 The Fifth Circuit has concluded otherwise, holding that in the removal
context, a district court must decide subject matter jurisdiction before
personal jurisdiction. See Marathon Oil Co. v. Ruhrgas, 145 F.3d 211, 215-25
(5th Cir.) (en banc), cert. granted, ___ U.S. ___, 119 S. Ct. 589, 142 L.Ed.2d
532 (1998).
3 One analogy is cases involving the Norris-LaGuardia Act's bar on federal
courts issuing certain injunctions in labor disputes. See 29 U.S.C. §
104 (1994) ("No court of the United States shall have jurisdiction
to issue any restraining order or temporary or permanent injunction in any
case involving or growing out of any labor dispute to prohibit any person
or persons participating or interested in such dispute [from doing certain
acts]."). Not surprisingly, the Supreme Court has had to interpret
that provision, together with the provision defining it, see id. at §
113 ("A case shall be held to involve or grow out of a labor dispute
when the case involves persons who are engaged in the same industry, trade,
craft, or occupation. . . ."), to determine whether particular kinds
of cases fall within the jurisdictional bar. See, e.g., Burlington Northern
R. Co. v. Brotherhood of Maintenance of Way Employees, 481 U.S. 429, 440-44,
107 S .Ct. 1841, 95 L.Ed.2d 381 (1987) (rejecting restrictive interpretation
of Norris-LaGuardia Act, under which a "labor dispute" would only
include disputes in which the picketed employer is "substantially aligned"
with the primary employer); United States v. United Mine Workers of America,
330 U.S. 258, 269-89, 67 S. Ct. 677, 91 L.Ed. 884 (1947) (interpreting general
language of §§ 104 and 113 to exclude the United States, such
that where the United States seizes actual possession of mines or other
facilities and operates them, and where the United States is the employer
of the workers, the Norris-LaGuardia Act does not apply); id. at 250-51,
67 S. Ct. 677 (holding that district court properly issued restraining order
to preserve existing conditions while it determined whether it had jurisdiction
to issue injunctive relief, and that it had power to punish violations of
its orders as criminal contempt before the jurisdictional question was resolved).
4 Of course, we recognize some tension between Amchem and Steel Co., in
that a cause of action question is, in a sense, logically antecedent to
jurisdiction too: without a cause of action, the question whether a party
satisfies jurisdictional requirements would not arise. Yet Steel Co. clearly
requires a court to decide jurisdiction first. But the Court did not cast
any doubt on Amchem in Steel Co., and we think logical priority, as in Amchem,
should control here.
5 Lake Country Estates went so far as to state that this order of decision
was required. See Lake Country Estates, 440 U.S. at 398, 99 S. Ct. 1171
("Before addressing the immunity issues [of which the Eleventh Amendment
was one], we must consider whether petitioners properly invoked the jurisdiction
of a federal court [under 28 U.S.C. § 1331]."). Of course, as
the Court went on to explain, the question whether a plaintiff has a federal
cause of action sufficient to create jurisdiction under § 1331 is not
itself a jurisdictional argument (except in the rare circumstances in which
the cause of action is frivolous, see Steel Co., 523 U.S. at ____, 118 S.
Ct. at 1010 (citing Bell v. Hood, 327 U.S. 678, 682, 66 S .Ct. 773, 90 L.Ed.
939 (1946))). See Lake Country Estates, 440 U.S. at 398, 99 S. Ct. 1171
("[R]espondents' 'jurisdictional' arguments are not squarely directed
at jurisdiction itself, but rather at the existence of a remedy for the
alleged violation of their federal rights."). Still, after identifying
the argument as a cause of action argument, the Court resolved that issue
before even turning to the Eleventh Amendment question. If the Fifth Circuit
were right, the Court should have assumed the cause of action existed once
it satisfied itself that the claim was not a jurisdictional one.
6 The Ninth Circuit, interestingly enough, had decided the statutory jurisdictional
question before turning to the Eleventh Amendment issues. See Native Village
of Noatak v. Hoffman, 896 F.2d 1157, 1160-61 (9th Cir. 1990), rev'd, 501
U.S. 775, 111 S. Ct. 2578, 115 L.Ed.2d 686 (1991). The Supreme Court obviously
chose a different order, but did not in any way purport to reject this aspect
of the Ninth Circuit's approach.
APPENDIX C
UNITED STATES DISTRICT COURT
DISTRICT OF COLUMBIA
No. CIV. A. 92-2092 (EGS)
UNITED STATES OF AMERICA EX REL.
RONALD E. LONG, PLAINTIFF/RELATOR
v.
SCS BUSINESS & TECHNICAL
INSTITUTE, ET AL., DEFENDANTS
[Filed March 26, 1998]
MEMORANDUM OPINION & ORDER
SULLIVAN, District Judge.
Ronald E. Long ("Long" or "relator") brought this action
as a relator on behalf of the United States alleging violations of the False
Claims Act ("FCA" or "the Act"), 31 U.S.C. §§
3729-3733, and on his own behalf pursuant to 42 U.S.C. § 1983. Long
named as defendants SCS Business & Technical Institute, Inc. ("SCS"),
Mohammed (a.k.a. Michael) Alharmoosh, President of SCS, Kamal Alsultany,
principal owner and Chairman of the Board of SCS, the State of New York
("New York"), and Joseph P. Frey ("Frey"). Pursuant
to the qui tam provisions of the FCA, the complaint was immediately put
under seal. See 31 U.S.C. § 3730(b)(2). The government intervened in
July 1995, and the Department of Justice filed a first amended complaint
against SCS, Michael Alharmoosh, and Kamal Alsultany in September 1995.1
The government declined, however, to intervene against New York and Frey.
Long then filed his second amended complaint in June 1996.
Pending before the Court are defendant New York's and defendant Joseph P.
Frey's motions to dismiss relator Long's second amended complaint for lack
of subject matter jurisdiction and for failure to state a claim upon which
relief can be granted, or, in the alternative, to dismiss Counts I and II
for failure to plead fraud with particularity.
I. FACTUAL ALLEGATIONS
Long, relator and plaintiff in this action, served as Coordinator of Investigations
and Audit for the Bureau of Proprietary School Supervision ("BPSS")
of the New York State Department of Education ("NYSED") from August
21, 1989 to April 8, 1992. BPSS is the state agency that regulates proprietary
schools in New York. Frey was Long's supervisor at BPSS. SCS managed five
proprietary schools in New York: two in Brooklyn, and one each in the Bronx,
Queens, and Manhattan.
Long's second amended complaint contains three counts against New York and
Frey. Count I alleges that New York, Frey, and SCS formed a conspiracy to
have false claims paid by the United States in violation of 31 U.S.C. §
3729(a)(3). Count II alleges that New York and Frey caused false claims
and reports to be presented to the United States for payment in violation
of 31 U.S.C. § 3729(a)(1) and (2). Count II also alleges that New York
and Frey were unjustly enriched as a result of the payments they received
from SCS. Count III alleges that New York and Frey harassed and wrongfully
discharged Long in violation of 31 U.S.C. § 3730(h) and 42 U.S.C. §
1983.
As Coordinator of Investigations for BPSS, Long directed an investigation
of SCS beginning in September 1989. SCS allegedly received federal funding
under a variety of federal programs for student financial assistance.2 Long
has alleged that the investigation he coordinated uncovered a variety of
fraudulent policies and acts by SCS that resulted in SCS receiving federal
moneys. This fraud included allegedly falsifying enrollment-eligibility
scores, training low-level SCS staff how to falsify records, assigning students
to courses for which they were ineligible and in which they were incapable
of participating, and refusing to make required refunds to students. BPSS
responded to Long's investigation by instituting administrative proceedings
against SCS. In February 1992, BPSS issued an "Order to Show Cause"
and a "Bill of Particulars" alleging that SCS had engaged in a
number of violations of New York law. BPSS and SCS reached a settlement
in March 1992.
Long alleges, however, that this was a "sweetheart" settlement
because the violations upon which it was based were confined to actions
of low-level personnel and to a small number of violations at one school,
even though, according to Long, New York officials, including Frey, knew
that the fraud was occurring at more than one school and that it included
actions by SCS management. Long further alleges that as a result of this
settlement, New York falsely represented to the federal government that
SCS was no longer engaging in fraud, and that New York was monitoring SCS.
Central to Long's claim is that BPSS allegedly received a share of the federal
funding that SCS fraudulently obtained. BPSS allegedly received this share
through tuition assessments and fines that SCS paid for violations of state
law. Long alleges that BPSS's share of SCS's federal funding was so large
that SCS was one of BPSS's major sources of funding. Further, Long alleges
that as a result of BPSS's interest in SCS's continued operation, BPSS engaged
in two illegal activities: it limited Long's investigation and it ignored
evidence that SCS continued to present fraudulent claims.
First, Long alleges that BPSS placed limitations on Long's investigation
of SCS resulting in the "sweetheart" settlement with SCS which
allowed SCS to continue to fraudulently receive federal moneys. Long alleges
that BPSS placed the following limitations on his investigation of SCS:
reducing the number of incidents of alleged fraud he was authorized to investigate,
rejecting evidence that SCS management and owners were involved in the fraud,
limiting the number of schools he was authorized to investigate, and placing
limitations on his documentation of evidence. Further, Long alleges that
BPSS refused to investigate information Long had gathered indicating that
SCS believed it was protected by its contacts in BPSS. Long also alleges
that in October 1991, Frey specifically prohibited Long from investigating
evidence of fraud by SCS management and owners.
After the 1992 settlement with SCS, Long alleges that BPSS ignored evidence
that SCS continued to receive federal moneys on a fraudulent basis in order
to allow SCS to continue receiving federal moneys. According to Long, New
York officials, including Frey, falsely represented to the federal government
that SCS was not engaged in fraud and that BPSS was continuing its investigation
when in fact it was not. Moreover, Long alleges that New York officials,
including Frey, indicated to the federal government in the 1992 settlement
that there was no indication of widespread fraud nor of involvement by management,
even though BPSS knew this was false.
Long asserts that he refused to follow his superiors' instructions regarding
the investigation of SCS and that, as a result, in November 1991, Frey informed
him that he would be demoted with a loss of pay effective April 8, 1992,
if Long had not resigned by that date. Long further alleges that in December
1991, he contacted the FBI to inform them of the evidence of fraud that
he had gathered, and that he felt BPSS's limitations on his investigation
were a result of the agency's interest in continuing to receive a share
of the federal moneys that SCS received. According to Long, the FBI then
launched an investigation (the Court assumes of SCS) in which Long assisted
the FBI by obtaining evidence from SCS. Long allegedly reported his cooperation
with the FBI to Frey. On January 14, 1992, Frey removed Long from the investigation
of SCS. Long alleges that Frey then ordered him to prepare a final report
of the investigation consisting of reporting one type of violation at one
school. Long alleges that he prepared this report under protest. On January
22, 1992, Long was placed on administrative leave.
Long finally alleges various acts by New York officials following his placement
on administrative leave and eventual termination. The essence of Long's
allegations are that New York colluded with SCS's continuing fraud, thereby
allowing SCS and BPSS to continue to receive federal moneys based on false
claims. Long alleges that New York officials, including Frey, ignored State
Comptroller reports in April and December 1992 which indicated that there
was continuing and broader fraud than had been stated in the 1992 "Order
to Show Cause." Long alleges that in February 1993, BPSS investigators
noticed indications of continuing fraud at SCS. Long alleges that New York
officials, including Frey, refused to act on that information, and instead
unreasonably ordered further investigation rather than taking steps to stop
the fraud. Thus, Long alleges that, between at least March 1993 and April
1994, New York and Frey knew that SCS continued to engage in fraudulent
activities, but did not act upon that information. SCS declared bankruptcy
in January 1995. Long alleges that between 1988 and 1991, the United States
paid SCS over $25 million per year in response to SCS's false claims, with
BPSS receiving a portion of these payments.
II. DISCUSSION
A complaint may be dismissed for failure to state a claim upon which relief
can be granted. Fed. R. Civ. P. 12(b)(6). The motion will be denied only
if the plaintiff could prove no set of facts which would entitle him to
relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d
80 (1957). In responding to a motion to dismiss, the Court treats all allegations
of fact in the complaint to be true, and draws all reasonable inferences
from those facts in favor of the plaintiff. See id; EEOC v. St. Francis
Xavier Parochial School, 117 F.3d 621, 624 (D.C. Cir. 1997); United States
ex rel. Alexander v. Dyncorp, Inc., 924 F.Supp. 292, 296 (D.D.C. 1996) (citing
United Parcel Serv., Inc. v. International Bhd. of Teamsters, 859 F. Supp.
590, 593 (D.D.C.1994)).
Federal courts are courts of limited jurisdiction. The party who invokes
federal court jurisdiction must "allege in [its] pleading the facts
essential to show jurisdiction," and "must support [those facts]
by competent proof." McNutt v. General Motors Acceptance Corp., 298
U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936).
New York has moved to dismiss the second amended complaint on the grounds
of lack of subject matter jurisdiction, failure to state a claim, and failure
to plead fraud with particularity as to Counts I and II. Defendant Frey
has moved to dismiss the second amended complaint on the grounds of plaintiff's
failure to state a claim, or, in the alternative for summary judgment on
the basis of Eleventh Amendment immunity and qualified immunity.
A. Whether New York and its Officials Are Proper Defendants in an False
Claims Act Suit
The first issue the Court considers in this case is New York's argument
that it has Eleventh Amendment immunity from suit under the FCA. This Court
rejects New York's argument that the Eleventh Amendment bars an FCA action
against a state. The Eleventh Amendment is not a bar to an FCA action because
the United States is always the plaintiff in a qui tam action and the Eleventh
Amendment does not prohibit suits by the United States against States in
federal court. See Seminole Tribe of Florida v. Florida, 517 U.S. 44, 71
n. 14, 116 S. Ct. 1114, 134 L.Ed.2d 252 (1996)(citing United States v. Texas,
143 U.S. 621, 644-45, 12 S. Ct. 488, 36 L.Ed. 285 (1892)) (noting that state
compliance with federal law is ensured by the fact that the federal government
can sue a state in federal court for a violation of federal law); United
States v. Mississippi, 380 U.S. 128, 140, 85 S. Ct. 808, 13 L.Ed.2d 717
(1965) ("[N]othing in [the Eleventh Amendment] or any other provision
of the Constitution prevents or has ever been seriously supposed to prevent
a State's being sued by the United States"). For this reason, states
have often been defendants in qui tam suits under the FCA. See United States
ex rel. Berge v. Board of Trustees of the Univ. of Alabama, 104 F.3d 1453
(4th Cir.) (state university defendant), cert. denied, -- U.S. --, 118 S.
Ct. 301, 139 L.Ed.2d 232 (1997); United States ex rel. Milam v. University
of Texas M.D. Anderson Cancer Center, 961 F.2d 46 (4th Cir. 1992) (state
university defendant); United States ex rel. Weinberger v. Florida, 615
F.2d 1370 (5th Cir. 1980) (state defendant); Wilkins ex rel. United States
v. Ohio, 885 F. Supp. 1055 (S.D. Ohio 1995) (state defendant); United States
ex rel. Milam v. Regents of Univ. of California, 912 F. Supp. 868 (D. Md.
1995) (state university defendant); United States ex rel. Moore v. University
of Mich., 860 F. Supp. 400 (E.D. Mich. 1994) (state defendant); United States
ex rel. Fine v. University of California, 821 F. Supp. 1356 (N.D. Cal. 1993)
(state university defendant), aff'd, 72 F.3d 740 (9th Cir. 1995); United
States ex rel. Navarette v. Rockwell Int'l Corp., 730 F. Supp. 031, 1035
(D. Colo. 1990) (laboratory, operated and managed by state university, was
defendant).
In view of the foregoing persuasive authority, this Court holds that a qui
tam action may be brought against the State of New York because a qui tam
suit is commenced on behalf of the United States and the Eleventh Amendment
does not bar suits by the federal government against a state.
B. Whether New York and Its Officials Are "Persons" Within the
Meaning of the FCA
New York next argues that it is shielded from liability under the FCA because
a state cannot be considered a "person" under that statute. The
FCA provides, in pertinent part, that "any person" who causes
false claims and reports to be presented to the United States for payment,
or who forms a conspiracy to have false claims paid by the United States,
will be liable for treble damages and civil penalties. See 31 U.S.C. §
3729. This section of the FCA, however, does not define the word "person."
The "fundamental task in interpreting the FCA is 'to give effect to
the intent of Congress.'" United States ex rel. D.J. Findley v. FPC-Boron
Employees' Club, 105 F.3d 675, 681 (D.C. Cir.) (citations omitted), cert.
denied, -- U.S. --, 118 S. Ct. 172, 139 L.Ed.2d 114 (1997). "The starting
point for interpreting a statute is the language of the statute itself."
Id. To determine the meaning of the statute, the Court considers the statute's
language and structure, and its legislative history. See California State
Bd. of Optometry v. Federal Trade Comm'n, 910 F.2d 976, 979 (D.C. Cir. 1990).
Although the word "person" is ordinarily construed to exclude
a sovereign, this reading "may . . . be disregarded if '[t]he purpose,
the subject matter, the context, the legislative history, [or] the executive
interpretation of the statute . . . indicate an intent, by the use of the
term, to bring a state or nation within the scope of the law.'" International
Primate Protection League v. Administrators of Tulane Educ. Fund, 500 U.S.
72, 83, 111 S. Ct. 1700, 114 L.Ed.2d 134 (1991) (internal quotations omitted).
Although Congress did not define the word "person" in § 3729,
it did define that term in § 3733 of the FCA.3 That section defines
a "person," specifically for the purposes of that section, to
include a "state." 31 U.S.C. § 3733(l)(4). Moreover, courts
have allowed states to act as relators and bring civil suits for violations
of § 3729 on behalf of the United States where the qui tam provisions
allow a "person" to bring a civil suit. See 31 U.S.C. § 3730(b);
United States ex rel. Woodard v. Country View Care Center, Inc., 797 F.2d
888 (10th Cir. 1986) (State of Colorado as relator); United States ex rel.
Wisconsin v. Dean, 729 F.2d 1100 (7th Cir. 1984) (State of Wisconsin as
relator). In allowing states to act as relators, courts have thus interpreted
"person" to include a state in the context of who may commence
a qui tam action.
In the absence of express judicial authority as to whether a state may be
a defendant in a qui tam action, however, it is necessary to consider the
legislative history of the Act. The FCA was originally enacted during the
Civil War to combat the rampant fraud being perpetrated on the government
by defense contractors. See S. Rep. No. 99-345, at 8, 1986 U.S. Code Cong.
& Admin. News 5266. The FCA has been amended three times, with major
revisions in 1986. See id . The purpose of the 1986 amendments was to "make
the statute a more useful tool against fraud" in the face of continuing
fraud against the Government. Id. at 2. The Senate Report accompanying the
1986 amendments to the FCA sets out the broad reach of the statute. "In
its present form . . . [t]he False Claims Act reaches all parties who may
submit false claims. The term 'person' is used in its broad sense to include
partnerships, associations, and corporations . . . as well as States and
political subdivisions thereof." See id. at 8 (citations omitted).
On the other hand, New York argues that the Court should be guided by the
general understanding that construing the word "person" to include
states is generally disfavored. See Will v. Michigan Dep't of State Police,
491 U.S. 58, 64, 109 S. Ct. 2304, 105 L.Ed.2d 45 (1989)(citing Wilson v.
Omaha Tribe, 442 U.S. 653, 667, 99 S. Ct. 2529, 61 L.Ed.2d 153 (1979)).
New York's reliance upon Will is, however, misplaced. First, 42 U.S.C. §
1983 is clearly distinguishable from the FCA because § 1983 establishes
a cause of action for individual plaintiffs,4 whereas the FCA establishes
civil liabilities for frauds at the expense of the United States.5 See 31
U.S.C. § 3729. In an FCA action, therefore, the suit is always on behalf
of the federal government. See 31 U.S.C. §§ 3729, 3730(b). Since
§ 1983 creates a private cause of action, the analysis in Will necessarily
included Eleventh Amendment considerations. See Will, 491 U.S. at 66-67.
The reasoning underlying the Will Court's reluctance to construe "persons"
to include States for the purposes of § 1983 was "that if Congress
intend[ed] to alter the 'usual constitutional balance between the States
and the Federal Government,' it must make its intention to do so 'unmistakably
clear in the language of the statute.'" Will, 491 U.S. at 65 (quoting
Atascadero State Hospital v. Scanlon, 473 U.S. 234, 242, 105 S. Ct. 3142,
87 L.Ed.2d 171 (1985)). Because states are not immune from suits by the
federal government, however, Congress was not required to state in the FCA
that it intended to abrogate the states' sovereign immunity, as Congress
would have been required to do if it intended to subject states to private
suits by individuals.
After reviewing the language and purpose of the statute, this Court finds
no indication that Congress sought to create an exception for state actors
to perpetrate fraud upon the federal government, especially since states
are not immune to suits by the federal government in federal court. See
United States v. Rockwell Int'l Corp., 730 F. Supp. 1031, 1035 (D. Colo.
1990) (holding that state defendants are not entitled to Eleventh Amendment
immunity from suits brought pursuant to the FCA and noting that to "hold
otherwise would render meaningless the FCA's provision authorizing qui tam
actions against state agencies and officials operating under government
contracts"). Consistent with the intent and purpose of the FCA, the
Court therefore concludes that states are "persons" for the purposes
of § 3729 and that Congress did not intend to exempt states from the
FCA.
C. Whether the FCA's Damages Provisions Are Punitive and Therefore Inapplicable
to a State
As a final point, New York argues that the damages provision of the FCA
suggests that the statute has a punitive purpose, and consequently, that
the FCA cannot apply to the states because states enjoy a common law immunity
to punitive damages which can only be overcome by a clear congressional
statement of abrogation.
The purpose of the FCA is to enable the federal government to recover losses
it sustains as a result of fraud. See S. Rep. No. 99-345, at 2-8, 1986 U.S.
Code Cong. & Admin. News 5266. In interpreting the pre-1986 version
of the FCA, which provided for double damages and penalties, the Supreme
Court held that the FCA was a remedial, rather than punitive statute. See
United States v. Halper, 490 U.S. 435, 446, 449, 109 S. Ct. 1892, 104 L.Ed.2d
487 (1989) (the FCA's damages provision represents "rough remedial
justice" as long as rational relation exists between the government's
loss and the damages imposed); United States v. Bornstein, 423 U.S. 303,
314-315, 96 S. Ct. 523, 46 L.Ed.2d 514 (1976) (FCA's damages provision are
remedial except under extreme circumstances); United States ex rel. Marcus
v. Hess, 317 U.S. 537, 551-52, 63 S. Ct. 379, 87 L.Ed. 443 (1943) (purpose
of the FCA is to make the government whole for its losses and therefore
statute not punitive). The Court further reasoned that the federal government
is entitled to "rough remedial justice" and declined to impose
a more exact method of accounting on the Congress. United States v. Bornstein,
423 U.S. at 314-315.
With regard to the treble damages provision of the amended FCA, the Eighth
Circuit has held that the amended provision does not transform the statute
from a remedial to a punitive one. In United States v. Brekke, 97 F.3d 1043
(8th Cir. 1996), the court held that the FCA's treble damages were compensatory
rather than punitive. Id. at 1047. The court based its decision upon the
Supreme Court's reasoning in Halper that the "'Government is entitled
to rough remedial justice, that is, it may demand compensation according
to a somewhat imprecise formula.'" Brekke, 97 F.3d at 1047 (quoting
Halper, 490 U.S. at 446). This Court agrees with the reasoning in Brekke
and concludes that the federal government's recovery of treble damages gives
it "rough remedial justice" and therefore that the FCA is a remedial
statute.
Furthermore, there is no indication that Congress intended to change the
purpose of the statute from a remedial to a punitive one when it enacted
the 1986 Amendments. See S. Rep. No. 99-345, at 7, 1986 U.S. Code Cong.
& Admin. News 5266 (noting that the Committee clarified that knowing
standard did not require actual knowledge of fraud or specific intent to
commit the fraud in order to make it more appropriate for remedial actions)
(emphasis added).
Rather, the damages provision was amended for other reasons. First, Congress
saw the need to modernize the provision, which had not been changed since
the FCA was originally enacted 123 years ago. See id. at 2. Second, the
provision was changed to make it consistent with the false claims provision
in the 1986 Department of Defense Appropriations Act. See id. at 17. Third,
the increased damages provision gives effect to the overall purpose of the
1986 amendments to make the FCA more effective and to encourage qui tam
actions. See id. at 2. Although the amended FCA does not provide for a significant
increase in the percentage of the recovery to a qui tam relator,6 by virtue
of the increased damages, the relator stands to receive a larger recovery.
This increased recovery therefore serves the purpose of encouraging qui
tam actions.
The Court therefore concludes that the FCA's penalties are not punitive,
but rather remedial, as long as a rational relation exists between the government's
loss and the damages assessed.
Given the Court's conclusions that New York may be sued under the FCA, that
New York may be considered a "person" within the context of the
FCA, and that the damages provisions of the FCA are not punitive, the Court
goes on to consider the subject matter jurisdiction provisions of the FCA.
D. Whether this Court Has Subject Matter Jurisdiction Under the FCA
Long brings his action under the FCA against New York and against his supervisor,
Joseph P. Frey. New York, in its motion to dismiss, argues that the FCA
precludes this Court from asserting subject matter jurisdiction over this
action. The Court must look to the language of the statute itself to assess
the merits of defendant's contention. Consumer Product Safety Comm'n v.
GTE Sylvania Inc., 447 U.S. 102, 100 S. Ct. 2051, 64 L.Ed.2d 766 (1980).
The FCA sets out a two-part test to determine whether a court has subject
matter jurisdiction over plaintiff's qui tam action and prohibits
private plaintiff suits based upon the public disclosure of allegations
or transactions in a criminal, civil, or administrative hearing, in a congressional,
administrative, or Government Accounting Office report, hearing, audit,
or investigation, or from the news media, unless the action is brought by
the Attorney General or the person bringing the action is an original source
of the information.
31 U.S.C. § 3730(e)(4)(A) (emphasis added). The statute defines an
"original source" as
an individual who has direct and independent knowledge of the information
on which the allegations are based and has voluntarily provided the information
to the Government before filing an action under this section which is based
on the information.
31 U.S.C. § 3730(e)(4)(B) (emphasis added).
Thus, the Court must first determine if the allegations raised in this suit
were publicly disclosed under the meaning of the statute. If the allegations
were publicly disclosed, the Court may only assert subject matter jurisdiction
over this qui tam action if plaintiff was an original source of the information.
1. Public Disclosure Inquiry
Although both Long and New York agree that the allegations of fraud against
SCS were publicly disclosed under the FCA as part of New York's 1992 administrative
proceedings against SCS, the parties disagree as to whether New York's alleged
fraud was publicly disclosed.
New York argues that because the allegations against SCS and New York are
inextricably linked, Long can not "parse out" each claim and treat
the allegations separately for purposes of determining whether public disclosure
has occurred. In support of its position, New York cites a Tenth Circuit
case which held that when a "qui tam action is based in any part upon
publicly disclosed allegations or transactions," the court must then
proceed to the "original source" inquiry. See United States ex
rel. Precision Co. v. Koch Industries, 971 F.2d 548 (10th Cir. 1992).
Long first asserts that even though the allegations against SCS were publicly
disclosed, the allegations against New York and Frey were not publicly disclosed,
and therefore Long is not jurisdictionally barred from raising this claim.
See United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d
645, 657 (D.C. Cir. 1994) (holding public disclosure under § 3730(e)(4)(A)
occurs "only when specific allegations of fraud or the vital ingredients
to a fraudulent transaction exist in the public eye") Here, only two
of the many components of the alleged conspiracy by New York were publicly
disclosed: that the SCS had acted fraudulently and that New York had settled
with SCS. These two details, however, do not constitute the "vital
ingredients" of the allegations against New York. Further, this circuit
stated that "Congress sought to limit qui tam actions 'to those in
which the relator has contributed significant independent information [that
is not already in the public domain].'" United States ex rel. D.J.
Findley v. FPC Boron Employees' Club, 105 F.3d 675, 682 (D.C. Cir. 1977)
(citing Quinn, 14 F.3d at 653). In his claim, Long demonstrates that he
has knowledge of substantive information concerning the allegations of fraud
against New York and Frey, separate from what has already been disclosed
concerning SCS. In reviewing Long's allegations, the Court concludes that
the allegations against New York and Frey are separate and distinct from
those against SCS.
New York next argues that even if the allegations against SCS are found
to be separate from those against New York, Long's disclosures to federal
authorities and to the United States Department of Education ("DOE")
constitute a public disclosure because they took place within the course
of his administrative investigation. See United States ex rel. Fine v. Advanced
Sciences, Inc., 99 F.3d 1000, 1004 (10th Cir. 1996) (holding relator publicly
disclosed when he provided information regarding contractor fraud to his
to age discrimination representative); United States ex rel. Doe v. John
Doe Corp., 960 F.2d 318, 323 (2d Cir. 1992) (holding public disclosure occurred
when fraud disclosed to defendant's employees during investigation).
Long asserts that disclosure to federal authorities and to the DOE is not
within the statute's meaning of "public disclosure." Specifically,
Long argues that disclosure of the results of the investigation conducted
by three year a state administrative agency to federal authorities does
not fit within the meaning of the "public disclosure" provision
of the FCA.
Allegations of fraud are publicly disclosed "when they are placed in
the public domain." United States ex rel. Dick v. Long Island Lighting
Co., 912 F.2d 13, 18 (2d Cir. 1990). In this case, the results of Long's
administrative investigation were disclosed to federal authorities. Courts
have recognized that this is sufficient to place the government on the trail
of the alleged wrongdoing:
In deciding whether the information conveyed to the court is "based
upon a publicly disclosed allegation or transaction," the question
is whether the information in the public domain "... could at least
have alerted law enforcement authorities to the likelihood of wrongdoing
. . ."
United States ex rel. Alexander v. Dyncorp, Inc., 924 F. Supp. 292, 299
(D.D.C. 1996) (quoting Quinn, 14 F.3d at 654). Here, because Long alerted
federal authorities, making them aware of the purported fraudulent conduct,
the allegations became "publicly disclosed" within the meaning
of the FCA. This leads the Court to the "original source" inquiry.
2. Original Source Inquiry
It is well established that the purpose of the 1986 amendments to the FCA
was to allow a relator's claim where disclosure to federal authorities has
taken place, but where the relator is an original source. Hughes Aircraft
Co. v. United States ex rel. Schumer, 520 U.S. 939, 117 S. Ct. 1871, 138
L.Ed.2d 135 (1997). Under § 3730(e)(4)(B), Long must demonstrate that
he has "direct and independent knowledge" of the information on
which the allegations are based, and that he "voluntarily provided
[such] information" to the government prior to filing suit. See also
United States ex rel. D.J. Findley v. FPC-Boron Employees' Club, 105 F.3d
at 690 ("To qualify as an 'original source,' the relator must also
have 'voluntarily provided the information to the government' before filing
a qui tam suit which is 'based on the information.'").
First, New York argues that Long did not have "direct" knowledge
because as coordinator of the investigation, Long received his information
from other people. "Direct" signifies "marked by absence
of an intervening agency." Quinn, 14 F.3d at 656. New York further
argues that Long did not have independent knowledge because it was his job
to obtain this information. Quinn elucidates that the original source provision
requires the "relator to possess direct and independent knowledge of
the 'information' supporting any essential element of the underlying fraud
transaction," but "does not require that the qui tam relator possess
direct and independent knowledge of all of the vital ingredients to a fraudulent
transaction." Quinn, 14 F.3d at 657. Long more than satisfies the "direct
knowledge" aspect of the FCA provision because, through his own labor,
he gained first hand knowledge of defendant's fraudulent conduct. See Cooper
ex rel. United States v. Blue Cross & Blue Shield of Fla., Inc., 19
F.3d 562, 568 (11th Cir. 1994) (per curiam) (finding "direct knowledge"
when relator acquired information through three years of his own research
prior to public disclosure).
Moreover, Long's knowledge of the allegations is "independent"
because it is "knowledge that is not itself dependant on public disclosure
to federal authorities." See Quinn, 14 F.3d at 656. In fact, the reverse
occurred in that Long was the one to notify the federal authorities. To
find that Long is barred from bringing this qui tam action would undermine
the purpose behind the 1986 amendments: to discourage "parasitic suits"
while encouraging parties to reveal fraudulent conduct to the government.
Finally, New York argues that Long does not satisfy the "voluntarily
provided" element of § 3730(e)(4)(B) because reporting such information
to his employer and the federal government was his job. The Court finds
this argument without merit because Long was employed by a state agency
and therefore, Long had no duty to report the results of his investigation
to federal authorities.
The Court concludes that Long is an "original source" of the allegations
against New York and Frey within the meaning of the FCA. Thus, this Court
properly invokes subject matter jurisdiction over this action under §
3730(e)(4) of the FCA because, even though there was public disclosure,
Long meets the statutory requirement for an original source.
E. Whether Long has Pled Fraud with Particularity as to Count I
A failure to plead fraud with particularity is a ground for dismissal for
failure to state a claim upon which relief can be granted. Fed. R. Civ.
P. 9(b); see United States ex rel. Alexander v. Dyncorp, Inc., 924 F. Supp.
292, 302 (D.D.C. 1996) (citing Shushany v. Allwaste, Inc., 992 F.2d 517,
520 (5th Cir. 1993)).
Count I of the complaint alleges that New York and defendant Frey engaged
in a conspiracy in violation of 31 U.S.C. § 3729(a)(3). In support
of this allegation, Long alleges that New York officials agreed among themselves
and with SCS to conceal and protect pervasive fraud in which the New York
officials knew SCS was engaging, thereby allowing the fraud to continue.
New York argues that Long has not pled the fraud he has alleged against
them with particularity because he has not specified the material elements
of the conspiracy, and because he has not "demonstrated" that
the New York officials and SCS reached an agreement in order to get a false
claim paid.
Section 3729(a)(3) of the FCA makes liable any person who "conspires
to defraud the Government by getting a false or fraudulent claim allowed
or paid." Under this section, the relator must show:
(1) that defendant conspired with one or more persons to have a fraudulent
claim paid by the United States,
(2) that one or more of the conspirators performed any act to have such
a claim paid by the United States, and
(3) that the United States suffered damages as a result of the claim.
United States v. Bouchey, 860 F.Supp. 890, 893 (D.D.C. 1994) (citing cases).
Since the first criterion of § 3729(a)(3) involves an allegation of
fraud, under Rule 9(b) of the Federal Rules of Civil Procedure, "the
circumstances constituting fraud [must] . . . be stated with particularity."
See Quinn, 14 F.3d at 655 n. 10. This requires that the Long describe the
fraudulent conduct rather than merely make conclusory allegations of fraud.
See United States ex rel. Stinson v. Provident Life & Accident Ins.
Co., 721 F. Supp. 1247, 1258 (S.D. Fla. 1989) (citing Lincoln Nat'l Bank
v. Lampe, 414 F.Supp. 1270, 1278-79 (N.D. Ill. 1976)). To survive a motion
to dismiss, the complaint must contain the folowing particulars: the time,
place and content of the false misrepresentations, the fact misrepresented,
what was given up or retained as a result of the fraud, and the individual
who made the misrepresentation. See Bouchey, 860 F. Supp. at 893. However,
an exception to these requirements exists when this information is exclusively
within the knowledge and control of the moving party. See Wilkins ex rel.
United States v. Ohio, 885 F. Supp. 1055, 1061 (S.D. Ohio 1995). Long is,
however, only required to allege this information, not "demonstrate"
it, as defendants contend. See Blusal Meats, Inc. v. United States, 638
F. Supp. 824, 828 (S.D.N.Y. 1986).
To satisfy the first criterion of § 3729(a)(3), that defendant conspired
to have a false claim paid, Long alleges that New York officials conspired
with SCS "to conceal and to protect" the pervasive fraud of the
SCS defendants in order to have the United States pay false claims. Long
does not, as New York contends, however, stop here. Rather, in support of
this allegation, Long alleges that the conspiracy occurred at least between
October 1990 and January 1995; that it occurred in New York; that the fraud
consisted of New York officials not preventing SCS from presenting what
the New York officials knew were false claims for federal educational assistance
consisting of recruiting and accepting ineligible students, placing students
in ineligible courses and classes, falsifying attendance and other records,
and withholding refunds due to students; that New York received a portion
of the federal funding; and that New York officials were able to maintain
and potentially advance their positions with the state as a result of the
conspiracy. Finally, the complaint names a number of New York officials
who were part of the alleged conspiracy, including Joseph P. Frey, who was
Long's supervisor. Presuming the truth of these allegations pursuant to
the Rule 12(b)(6) standard, as the Court must at this juncture, see id.;
EEOC v. St. Francis Xavier Parochial School, 117 F.3d 621, 624 (D.C. Cir.
1997), Long has satisfied the first criterion consistent with the Rule 9(b)
standard.
The second criterion of § 3729(a)(3) requires that Long show that any
one of the conspirators performed an act to have a false claim paid. In
his complaint, Long asserts, inter alia, that New York officials rejected
and ignored evidence that Long had uncovered in his investigation that the
SCS defendants were engaged in those fraudulent activities, and that the
New York officials limited Long's investigation in order to allow the SCS
officials to continue to present false claims. Thus, Long has alleged that
the overt acts which the New York officials performed were, inter alia,
allowing the alleged fraud to continue in the face of evidence uncovered
by Long's investigation and limiting Long's investigation in numerous ways
in order to allow the fraud to continue. Presuming the truth of these allegations
pursuant to the Rule 12(b)(6) standard, Long has satisfied the second criterion
consistent with the Rule 9(b) standard.
The final criterion of § 3729(a)(3) requires that the United States
suffer damages as a result of the false claim. Long asserts that the United
States lost $25 million per year as a result of these false claims. Presuming
the truth of these allegations pursuant to the Rule 12(b)(6) standard, Long
has satisfied the third criterion consistent with the Rule 9(b) standard.
Accordingly, New York's motion to dismiss this count for failure to plead
fraud with particularity with respect to Count I is therefore DENIED.
F. Whether Long Has Stated a Claim under § 3729(a)(1) & (2)
Count II of the complaint alleges that New York knowingly caused false and
fraudulent claims based upon false records to be presented to the federal
government in violation of 31 U.S.C. § 3729(a)(1) and (2), and that
New York was unjustly enriched thereby. Long alleges that New York officials
caused the presentation of false claims and the making and using of false
records and statements to achieve the payment or approval of a false or
fraudulent claim, by, in essence, failing to prevent SCS from filing false
claims even after New York officials knew that SCS was engaging in presenting
false claims. New York argues that Long has failed to state a claim for
relief under §§ 3729(a)(1) and (a)(2) because New York had no
affirmative duty to prevent false claims from being presented.
The FCA establishes the liability of any person who knowingly causes false
or fraudulent claims and/or records to be presented to the federal government
for payment. § 3729(a)(1) and (2); see Bouchey, 860 F. Supp. at 893.
According to the Senate Report, this knowing standard does not require either
actual knowledge of the fraud or specific intent to commit the fraud. See
S. Rep. No. 99-345, at 7, 1986 U.S. Code Cong. & Admin. News 5266. Therefore,
in order to survive a motion to dismiss for failure to state a claim, the
relator must only show (1) that there was a request for payment, and (2)
that it was a fraudulent request. See id. Since the second criterion is
an allegation of fraud, it is subject to the same particularity requirements
outlined above. See Fed. R. Civ. P. 9(b).
At issue here is what is intended under the FCA to "cause" a false
claim to be presented. The FCA reaches anyone who knowingly participates
in causing the federal government to pay a false claim. See United States
ex rel. Marcus v. Hess, 317 U.S. at 544-45; S. Rep. 99-345, at 9, 1986 U.S.
Code Cong. & Admin. News 5266 ("The False Claims Act is intended
to reach all fraudulent attempts to cause the Government to pay out sums
of money. . . ."). Thus, for example, the FCA reaches subcontractors
who cause general contractors to present false claims. See United States
v. Bornstein, 423 U.S. at 309. The FCA has been held to reach conduct which
results in a loss to the government, even though the defendant did not "make
an actual demand for the money." United States v. McLeod, 721 F.2d
282, 284 (9th Cir. 1983) (holding that a defendant who converted and refused
to return money, resulting in a financial loss to the government, was sufficient
to invoke the FCA). The FCA has also been held to reach the operating policy
of a defendant which caused others to present false claims to the government.
United States v. Teeven, 862 F. Supp. 1200, 1223 (D. Del. 1992) (holding
that defendants, whose policy to withhold refunds due to students resulted
in inflated default claims to the government, were liable under the FCA
because the "[d]efendants knowingly assisted in causing the Government
to pay claims which were grounded in fraud."). Thus, in broad terms,
the FCA reaches all parties who "engage[] in a fraudulent course of
conduct that causes the government to pay a claim for money." United
States v. Incorporated Village of Island Park, 888 F. Supp. 419, 439 (E.D.
N.Y. 1995).
The question here is whether New York knowingly "caused" false
claims to be presented when it allegedly did not prevent the claims from
being presented. First, New York contends that Long has not alleged that
New York was under a duty to revoke SCS's licenses once it became aware
of the fraudulent conduct, and in support, it cites the relevant New York
state code regarding the administrative procedure the NYSED was required
to follow before taking disciplinary action against SCS. Second, New York
argues Long has not alleged that New York had a legal obligation to the
United States Government to disclose the alleged fraud being perpetrated
by the SCS defendants.
The Court finds both of New York's arguments unpersuasive. First, the issue
is not whether the New York defendants violated the FCA by not closing down
the SCS schools once New York learned of the alleged fraud. The issue here
is whether New York's alleged failure to act was a course of conduct that
allowed fraudulent claims to be presented to the federal government. Long
has alleged, with the requisite specificity, that New York officials allowed
false claims to be presented to the federal government over a number of
years, and even after it knew that false claims were being made.
Finally, New York argues that in order for it to be liable under the FCA,
Long must allege with the requisite particularity that the New York defendants
had the same knowledge as SCS regarding the falsity of each claim. This
is a misreading of the FCA as applied to this situation. Here, Long must
allege with the requisite specificity that New York allowed what it knew
to be false claims to be presented to the United States. Long has alleged
that as a result of the findings of his investigations, New York knew that
SCS was presenting false claims and that it did not stop SCS from doing
so. Thus, New York does not have to be in the same position as SCS. The
FCA prohibits both presenting false claims and causing false claims to be
presented. See 31 U.S.C. § 3729(a)(1), (2). Long has not contended
that New York presented the false claims itself, rather his contention is
that New York caused the false claims to be presented. At this stage of
the proceedings, the Court finds that Long has alleged the fraud prohibited
by § 3729(a)(1) and (2) with sufficient particularity to clear the
Rule 9(b) hurdle.
Accordingly, New York's motion to dismiss Count II for failure to state
a claim upon which relief can be granted is DENIED.
G. Long's Unjust Enrichment Claim on Behalf of the United States
Count II also seeks to invoke the equitable powers of the Court and charges
that New York was unjustly enriched by its share of the payments that the
federal government made to the SCS defendants. New York argues that Long
does not have standing to pursue this common law claim because it is a claim
that is personal to the United States and therefore the qui tam relator
has not suffered an injury in fact.
The relator has standing to bring the FCA claim "either because of
his financial stake in the outcome or because Congress statutorily assigned
him part of the Government's cause of action." United States ex rel.
Mayman v. Martin Marietta Corp., 894 F. Supp. 218, 225 (D. Md. 1995) (citing
Thomas R. Lee, Comment, The Standing of Qui Tam Relators Under the False
Claims Act, 57 U. Chi. L. Rev. 543, 555-570 (1990)). An unjust enrichment
claim, however, is a common-law cause of action separate and distinct from
the FCA claim. In order to bring an unjust enrichment claim, the Long must
show (1) that he conferred a benefit upon the defendant; (2) that the defendant
knew he was receiving this benefit; and that (3) it would be inequitable
for the defendant to retain the benefit. See Bouchey, 860 F. Supp. at 894.
Because it is the United States, and not the relator, who conferred the
benefit at issue in this case (i.e. federal funding), and at whose expense
it would be inequitable for the defendant to retain the benefit, Long does
not have standing to bring this unjust enrichment.7 Therefore, New York's
motion to dismiss Long's unjust enrichment claim is GRANTED.
H. Long's Count III Claim of Wrongful Discharge Against New York and Defendant
Frey
1. Whether Long's Claim Against New York Is Barred by the Eleventh Amendment
Count III of Long's second amended complaint alleges that New York and Frey
harassed and disharged him in violation of 31 U.S.C. § 3730(h). Section
3730(h) contains the "whistleblower" protection provisions of
the FCA and provides that any employee whose employment is adversely affected
as a result of actions taken to further a qui tam action is "entitled
to all relief necessary to make the employee whole" and grants district
courts jurisdiction over such actions. 31 U.S.C. § 3730(h). The question
here is whether, as New York argues, the Eleventh Amendment prohibits the
application of § 3730(h) to a state defendant because Congress has
not unequivocally abrogated state sovereign immunity, or, as Long argues,
whether § 3730(h) is an integral component of the qui tam provisions
and therefore, that a suit against a state is not barred by the Eleventh
Amendment because it is brought on behalf of the United States.
Sections 3730(a)-(h) contain the FCA's qui tam provisions. Section 3730(b)
establishes the qui tam cause of action providing that an action for a violation
of § 3729 shall be brought "for the person and for the United
States Government . . . in the name of the Government." § 3730(b).
Section 3730(h), the final subsection in the qui tam section, contains the
whistleblower protection provisions, which state that "[a]n employee
may bring an action in the appropriate district court of the United States
for the relief provided in this subsection." § 3730(h) (emphasis
added). Thus, § 3730(h) differs from § 3730(b) in that, although
§ 3730(h) is part of the qui tam provisions, it does not provide that
an action brought pursuant to this section is brought in the name of the
United States. The whistleblower provision is therefore properly understood
as authorizing a private right of action distinct from the qui tam action
authorized by § 3730(b).
Under the Eleventh Amendment, a suit by an individual against a state, in
federal court, proceeds only if "Congress clearly intended to abrogate
the States' sovereign immunity . . . [and if] the Act [in which the immunity
is abrogated] was passed 'pursuant to a valid exercise of power.'"
Seminole Tribe of Florida v. Florida, 517 U.S. 44, 58, 116 S. Ct. 1114,
134 L.Ed.2d 252 (1996) (quoting Green v. Mansour, 474 U.S. 64, 68, 106 S.
Ct. 423, 88 L.Ed.2d 371 (1985)). If Congress intends to abrogate a state's
immunity, Congress' abrogation must be expressed in a "clear legislative
statement" in the statute. Blatchford v. Native Village of Noatak,
501 U.S. 775, 786, 111 S. Ct. 2578, 115 L.Ed.2d 686 (1991); see also Dellmuth
v. Muth, 491 U.S. 223, 227-228, 109 S. Ct. 2397, 105 L.Ed.2d 181 (1989).
Under the clear statement standard, then, a statement in the legislative
history of a statute, but not in the statute itself, fails to be a clear
statement of congressional intent to abrogate.
Section § 3730(h) authorizes any employee to bring an action against
his or her employer. At issue is whether in using the word "employer"
Congress has abrogated state sovereign immunity. This section of the FCA
does not define "employer." However, in the Senate Report accompanying
the bill, Congress elaborated upon what it meant by "employer."
The report states that, as with the whistleblower protection provisions
in other federal statutes after which this provision was patterned, "the
definition[] of . . . 'employer' should be all inclusive . . . includ[ing]
public as well as private sector entities." See S. Rep. No. 99-345,
at 35, 1986 U.S. Code Cong. & Admin. News 5266. Under the clear statement
standard, however, the Court must find that Congress' intent to protect
whistleblowers does not extend to whistleblowers whose employer is a state
because Congress did not clearly state such intention in the statute, even
if the legislative history suggests such an intention.
District courts construing § 3730(h) similarly have held that actions
brought against states pursuant to this section are barred by the Eleventh
Amendment because the language in § 3730(h) does not unequivocally
state a congressional intent to abrogate the states' immunity to suit. Accord
United States ex rel. Moore v. University of Mich., 860 F. Supp. at 404-05
(dismissing relator's § 3730(h) claim against a state entity on Eleventh
Amendment grounds because, even though it is part of the qui tam provisions,
§ 3730(h) creates a private cause of action and does not specifically
provide that the United States be a party to the action); see also Wilkins
ex rel. United States v. Ohio, 885 F. Supp. 1055, 1067 (S.D. Ohio 1995)
(citing Thiokol Corp. v. Department of Treasury, 987 F.2d 376 (6th Cir.
1993) (holding that Eleventh Amendment barred an action under § 3730(h)
for compensatory relief, but not for prospective injunctive relief against
officials in their official capacities)).
To sidestep the Eleventh Amendment bar, Long argues that an action under
§ 3730(h) should be considered an action on behalf of the United States
because the whistleblower provision encourages individuals to come forward
with information about fraud committed against the United States. See United
States ex rel. Foulds v. Texas Tech Univ., 980 F. Supp. 864, 871 (N.D. Tex.
1997) (allowing suit against state entity under § 3730(h) based on
the conclusion that the United States would suffer the greatest harm if
§ 3730(h) did not protect state employees because whistleblowers would
not be encouraged to come forward for fear of retaliation). While as a practical
matter, Long's argument may be correct that without the protection of §
3730(h), state employees will be reluctant to come forward for fear of retaliation,
under this Court's interpretation of the statute, an action under §
3730(h) is a private cause of action, and not an action on behalf of the
United States. Under the clear statement rule, therefore, Congress must
clearly state in the statute that it intends to extend liability under §
3730(h) to states.
While a state employee may be reluctant to come forward with information
without the protection § 3730(h) provides, the financial incentives
of bringing a qui tam action remain. Therefore, the Court cannot conclude
that the purpose of the statute would be frustrated by failure to apply
§ 3730(h) to a state employer. The Court thus holds that an action
for monetary relief under § 3730(h) may not be brought against a state
because of its Eleventh Amendment immunity from suits by individuals. Because
this Court finds that Congress did not abrogate state sovereign immunity
in § 3730(h), New York's motion to dismiss Count III is GRANTED.
2. Whether Long's Count III Claim of Wrongful Discharge Against Defendant
Frey Is Barred by the Eleventh Amendment
Although the Eleventh Amendment bars suits by an individual against a state
employer under § 3730(h) for monetary relief, the Eleventh Amendment
does not prevent a suit under Ex Parte Young, 209 U.S. 123, 28 S. Ct. 441,
52 L.Ed. 714 (1908), against a state official, in his official capacity,
where the remedy sought is prospective injunctive relief against the state
official to "'end a continuing violation of federal law.'" Seminole,
517 U.S. at 73 (internal citation omitted). Seminole instructs, however,
that an Ex Parte Young action is not generally available "where Congress
has prescribed a detailed remedial scheme for the enforcement against a
State of a statutorily created right." Seminole, 517 U.S. at 73. In
the FCA, Congress' remedial scheme consists simply of creating a cause of
action for qualified whistleblowers and granting district courts jurisdiction
to adjudicate those causes of action. Creating a cause of action cannot
be considered a "detailed remedial scheme" and therefore, an Ex
Parte Young action should be allowed where a state is the defendant-employer
in a claim under § 3730(h).
Defendant Frey's argument for dismissal is that New York, and not Frey is
Long's "employer" and therefore, that Frey cannot be liable under
§ 3730(h). In his official capacity, however, Frey represents New York,
and as such, can be considered Long's employer under § 3730(h). The
Court therefore holds that Long may maintain his claim under § 3730(h)
for prospective injunctive relief against Frey. Defendant Frey's motion
to dismiss Long's § 3730(h) claim in Count III therefore is GRANTED
insofar as Long seeks monetary relief, but DENIED insofar as Long seeks
prospective injunctive relief.
3. Whether Long's § 3730(h) Claim Against Defendant Frey Fails to State
a Claim Upon Which Relief Can Be Granted
As this Court has held that Long's § 3730(h) claim may proceed against
defendant Frey for prospective injunctive relief, the question remains whether
Long has stated a claim upon which relief can be granted.
Under § 3730(h), any employee whose employment is adversely affected
"because of lawful acts done by the employee on behalf of the employee
or others in furtherance of an action under this section" is "entitled
to all relief necessary to make the employee whole." § 3730(h).
The statute indicates that the acts that are protected "include[] investigation
for, initiation of, testimony for, or assistance in an action filed or to
be filed under this section." Id. In order to state a claim under this
section, the relator must show (1) he took actions that are protected by
the statute, (2) the defendants knew that he took these actions, and (3)
he was fired in retaliation for those actions. See Robertson v. Bell Helicopter
Textron Inc., 32 F.3d 948, 951 (5th Cir. 1994). Pursuant to a Rule 12(b)(6)
motion, the Court need only satisfy itself that assuming that the relator's
allegations are true, he has sufficiently alleged these elements.
New York8 argues that Long has not stated a claim under § 3730(h) because
it was Long's job to investigate possible false claims against the federal
government, and therefore, he was not "acting for himself or others
in furtherance of a FCA action," as required by the statute.
The Senate Report accompanying the enacted version of the bill instructs
courts to broadly interpret which activities are protected. See S. Rep.
No. 99-345, at 34, 1986 U.S. Code Cong. & Admin. News 5266. Long alleges
that the protected actions he took in furtherance of this action were his
refusal to limit his investigation as his supervisors instructed him and
reporting the results of his investigation to federal authorities. Drawing
all reasonable inferences in favor of Long, by not limiting his investigation,
and by reporting both the results of his investigation and New York's interest
in the federal funds disbursed to SCS, this Court can reasonably conclude
that Long discovered fraud which was in furtherance of his qui tam action.
The second element under § 3730(h) the relator must show is that the
defendant know that the relator was engaged in protected activities. See
also S. Rep. No. 99-345, at 35, 1986 U.S. Code Cong. & Admin. News 5266
("the whistleblower must show the employer had knowledge the employee
was engaged in 'protected activity'"). Frey argues that Long has not
stated a claim under § 3730(h) because Long has not alleged that his
supervisors had noticed that he was pursing a FCA action against them.
In Robertson, the Fifth Circuit interpreted the knowledge requirement to
mean that the employee must actually accuse his employer of defrauding the
government. See Robertson, 32 F.3d at 951. The Robertson court made this
determination in the context of an employee whose job was to substantiate
costs his employer was charging the government, and so reasoned that since
this was his job, merely questioning his supervisors about costs did not
satisfy the statute. See id. at 951-52.
Other courts have not required an express accusation, but rather have analyzed
whether the actions that Long allegedly took could reasonably have "put
defendants on notice of a possible qui tam action." United States ex
rel. Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1522 (10th Cir.
1996). In Ramseyer, the court found that Long had not satisfied this requirement
where the plaintiff's job was to monitor compliance with Medicaid requirements
and she complained to her supervisors that the company was not complying
with these requirements. See id. at 1522-23. The court found, however, that
on the facts of that case, the "[p]laintiff gave no suggestion that
she was going to report such noncompliance to government officials."
See id. at 1523.
In another case, Mikes v. Strauss, 889 F. Supp. 746 (S.D. N.Y. 1995), the
court reasoned that "insist[ing] upon an express or even an implied
threat of [a qui tam] action . . . is wholly unrealistic in an employment
context." Id. at 753. In Mikes, the court held that the notice rule
required that the employee show that the "employer [had] reason to
believe that the employee was contemplating a qui tam action against it."
Id. The Mikes court allowed a § 3730(h) action to proceed where, although
the employee did not make any specific accusations of fraud against her
employer, her complaints to her supervisor "clearly impl[ied] that
defendant's activities were unlawful." Id.
In the present case, Long alleges that he disregarded Frey's, his supervisor's,
instructions to limit his investigation, that Frey knew that his instructions
were being disregarded, and that, although Frey apparently eventually acquiesced,
Frey resisted Long's recommendation that federal authorities be notified
of the information developed in the course of the investigation. Long further
alleges that federal authorities suggested that Long seize SCS documents
that were in danger of being destroyed, that he reported his cooperation
with the federal authorities to Frey, and that Frey objected to Long's seizure
of the documents and directed him to return them to SCS. Thus, unlike the
facts in Robertson and Ramseyer, Long's supervisors allegedly knew that
he was cooperating with federal officials. Soon thereafter, Long was removed
from supervision of the investigation, demoted, and eventually fired. Taking
these factual allegations as true for the purposes of a motion to dismiss,
this Court finds that the facts as alleged gave New York and Frey reason
to believe that Long would pursue a FCA claim against them.
The third element under § 3730(h) requires that the employee show that
he was fired in retaliation for engaging in protected activities. See also
S. Rep. No. 99-345, at 35, 1986 U.S. Code Cong. & Admin. News 5266 ("the
whistleblower must show . . . the retaliation was motivated, at least in
part, by the employee's engaging in protected activity"). The employee
is required to establish this by a preponderance of the evidence. See S.
Rep. No. 99-345, at 35, 1986 U.S. Code Cong. & Admin. News 5266. Once
this has been satisfied, the burden then shifts to the employer "to
prove affirmatively that the same decision would have been made even if
the employee had not engaged in protected activity." Id.
In the present case, Long alleges that he was removed from his position
following his assisting federal authorities to obtain, by means of a subpoena
duces tecum, information in the files of his employer, which his employer
allegedly intended to return to SCS, and which federal authorities felt
they needed for their investigation of SCS. This, together with the other
allegations outlined above, taken as true for the purposes of this Rule
12(b)(6) motion together with all reasonable inferences from them, satisfy
Long's burden at this stage of the proceedings of showing that he was terminated
in retaliation for protected activities.
As this Court finds that Long has stated a claim upon which relief can be
granted under § 3730(h), Frey's motion to dismiss this claim under
Count III is DENIED.
I. Whether Defendant Frey is Entitled to Summary Judgment on Long's §
1983 Claim
The Court may grant a motion for summary judgment only where there is no
"genuine issue as to any material fact and viewing the evidence in
the light most favorable to the nonmoving party, the movant is entitled
to prevail as a matter of law." Fed. R. Civ. P. 56(c); Diamond v. Atwood,
43 F.3d 1538, 1540 (D.C. Cir. 1995).
Long filed his original complaint, under seal, in September 1992. Long later
filed an amended complaint on March 15, 1995, in which he named Frey as
a defendant.9 Defendant Frey argues that Long's claim against him under
§ 1983 is barred by the three year statute of limitations that applies
to Long's claim.
The statute of limitations applicable to a § 1983 action is the state
statute of limitations for personal injury actions, which in this case,
is three years both for New York, see Rodriguez v. Chandler, 641 F. Supp.
1292 (S.D. N.Y. 1986), and for the District of Columbia. See Banks v. Chesapeake
& Potomac Tel. Co., 802 F.2d 1416 (D.C. Cir. 1986); Greenfield v. District
of Columbia, 623 F. Supp. 47 (D.D.C. 1985) (citing D.C. Code § 12-301(8)).
Furthermore, a civil rights claim begins to accrue when the aggrieved party
knows or has reason to know of the injury which is the basis for the §
1983 action. See Cox v. Stanton, 529 F.2d 47, 50 (4th Cir. 1975) ( "Federal
law holds that the time of accrual is when plaintiff knows or has reason
to know of the injury which is the basis of the action.").
Although it is undisputed that Long was notified of his demotion on November
22, 1991 and placed on administrative leave on January 22, 1992, Long was
not terminated until April 8, 1992. Defendant Frey argues that Long had
notice and his claim began to accrue at the latest, in January 1992. Long
argues, however, that because his termination did not become effective until
April 1992, his claim, filed March 15, 1995, is therefore timely.
On the record before this Court, it is not clear whether Long had notice
prior to April 8, 1992, that he would be terminated from his position. Because
the statute of limitations begins to accrue when the aggrieved party has
notice of injury, the precise date on which Long received notice that he
would be terminated from employment is crucial to whether this claim is
barred. Based on the record before the Court at this time, the Court cannot
determine the precise date on which Long had notice. Therefore, because
there is a genuine issue of material fact, the Court will DENY defendant
Frey's motion for summary judgment without prejudice to reconsideration
of the motion after discovery is conducted on the issue of when Long received
notice that he would be terminated.
Because the Court does not decide whether Long's § 1983 claim against
Frey for prospective injunctive relief is barred by the three-year statute
of limitations, the Court does not reach defendant Frey's argument for qualified
immunity at this time.
III. CONCLUSION
Accordingly, it is hereby
ORDERED that the State of New York's motion to dismiss as to relator Long's
unjust enrichment claim is GRANTED; and it is further
ORDERED that the State of New York's motion to dismiss as to relator Long's
§ 3730(h) claim is GRANTED; and it is further
ORDERED that the State of New York's motion to dismiss [125-1] as to all
other claims is DENIED; and it is further
ORDERED that defendant Frey's motion to dismiss as to relator Long's §
3730(h) claim for monetary relief is GRANTED; and it is further
ORDERED that defendant Frey's motion to dismiss Long's § 3730(h) claim
in Count III is GRANTED insofar as Long seeks monetary relief, but DENIED
insofar as Long seeks prospective injunctive relief; and it is further
ORDERED that defendant Frey's motion to dismiss [127-1] as to all other
claims is DENIED; and it is further
ORDERED that defendant Frey's motion for summary judgment as to relator
Long's § 1983 claim is DENIED without prejudice.
1 Together with Mr. Alsultany, the government also named as defendants Ms.
Marguerite Alsultany, Casablanca Resorts Development of Anguilla, Ltd.,
Casablanca Resorts, Ltd., Intervest International Holding Corporation, and
Intervest Holding Corporation (collectively, the "Alsultany and Caribbean
Defendants"). In April 1996, the government filed a second amended
complaint and, at that time, Ms. Sylvana Alharmoosh was added as a defendant.
2 These programs include Pell Grants, Supplemental Educational Opportunity
Grants, PLUS/SLS loans, and federally-guaranteed Stafford Loans.
3 Section 3733 of the FCA provides the federal government with a Civil Investigative
Demand ("CID"). The CID enhances the federal government's investigatory
powers to enable it to obtain documents or testimony relevant to a FCA investigation.
31 U.S.C. § 3733(a); S. Rep. No. 99-345, at 33, 1986 U.S. Code Cong.
& Admin. News 5266. Thus, this section requires states to provide this
information to the federal government. See 31 U.S.C. § 3733.
4 See id. at 64, 1986 U.S. Code Cong. & Admin. News 5266. The full text
of 42 U.S.C. § 1983 provides:
Every person who, under color of any statute, ordinance, regulation, custom,
or usage, of any State or Territory or the District of Columbia, subjects,
or causes to be subjected, any citizen of the United States or other person
within the jurisdiction thereof to the deprivation of any rights, privileges,
or immunities secured by the Constitution and laws, shall be liable to the
party injured in an action at law, suit in equity, or other proper proceeding
for redress.
5 New York urges, however, that in Will, the Supreme Court announced the
"rule" that States are never "persons" in federal statutes
regardless of whether the suit brought pursuant to the statute would be
brought by an individual plaintiff or by the United States, relying upon
a case from this circuit. California State Bd. of Optometry v. Federal Trade
Comm'n, 910 F.2d 976 (D.C. Cir. 1990). In California State Board, the question
facing the D.C. Circuit was whether a state, acting in its sovereign capacity,
is subject to regulation by the FTC under the Magnuson-Moss Amendments to
the Federal Trade Commission Act, which granted the FTC rulemake authority
to define specific acts or practices as unfair. Id. at 978-79. In addition
to New York's overbroad reading of the holding in Will, its reliance on
California State Board, a case construing an agency's power, in that case,
the FTC, to regulate states under a statute enacted by Congress, pursuant
to its Commerce Clause power, is misplaced.
6 Under the former FCA, when the government intervened, the relator would
receive 10% of the recovery; and when the government did not intervene,
the relator would receive 25% of the recovery. See S. Rep. No. 99-345, at
27, 1986 U.S. Code Cong. & Admin. News 5266. Under present law, when
the government intervenes, the relator receives between 10% and 20% of the
recovery; and when the government does not intervene, the relator receives
between 20% and 30% of the recovery. 31 U.S.C. § 3730(d)(1), (2).
7 Since the Court has decided this issue on the grounds of standing, the
Court does not reach New York's Eleventh Amendment argument.
8 Both New York and Frey argue that Long fails to state a claim under §
3730(h). Although the Court holds that New York is not a proper defendant
for a claim under § 3730(h), the Court considers New York's arguments
as Defendant Frey's. Furthermore, in his own motion, Defendant Frey has
adopted New York's arguments. See Frey Mem. P & A at 1.
9 Although Long's original complaint and his amended complaint are sealed,
Long does not dispute that Frey was not named as a defendant before March
1995.