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No. 98-1828: Vermont v. United States ex rel. Stevens | |||||||||||
No. 98-1828
2. Whether a qui tam suit against a State or state agency is barred by theEleventh Amendment. The opinion of the court of appeals (Pet. App. 1-85) is reported at 162F.3d 195. The opinion of the district court (Pet. App. 86-87) is unreported. The judgment of the court of appeals was entered on December 7, 1998. Apetition for rehearing was denied on April 13, 1999. Pet. App. 89-90. Thepetition for a writ of certiorari was filed on May 12, 1999. The jurisdictionof this Court is invoked under 28 U.S.C. 1254(1).
In the Supreme Court of the United States
STATE OF VERMONT AGENCY OF NATURAL RESOURCES, PETITIONER
v.
UNITED STATES OF AMERICA EX REL.
JONATHAN STEVENS, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
BRIEF FOR THE UNITED STATES
SETH P. WAXMAN
Solicitor General
Counsel of Record
DAVID W. OGDEN
Acting Assistant Attorney General
MICHAEL F. HERTZ
DOUGLAS N. LETTER
JOAN E. HARTMAN
MICHAEL E. ROBINSON
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
QUESTIONS PRESENTED
1. Whether a State or state agency is a "person" subject to suitunder the False Claims Act, 31 U.S.C. 3729 et seq.
In the Supreme Court of the United States
No. 98-1828
STATE OF VERMONT AGENCY OF NATURAL RESOURCES, PETITIONER
v.
UNITED STATES OF AMERICA EX REL.
JONATHAN STEVENS, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
BRIEF FOR THE UNITED STATES
OPINIONS BELOW
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 officeror employee of the United States Government or a member of the Armed Forcesof the United States a false or fraudulent claim for payment or approval."31 U.S.C. 3729(a)(1). The Act also prohibits a variety of related deceptivepractices involving government funds and property. 31 U.S.C. 3729(a)(2)-(7).A "person" who violates the FCA "is liable to the UnitedStates Government for a civil penalty of not less than $5,000 and not morethan $10,000, plus 3 times the amount of damages which the Government sustains."31 U.S.C. 3729(a).
For purposes of Section 3729, the term "person" is not defined.A different provision of the FCA authorizes the Attorney General to issuecivil investigative demands (CIDs) compelling the production of evidence.31 U.S.C. 3733. A CID may be issued "[w]henever the Attorney Generalhas reason to believe that any person may be in possession, custody, orcontrol of any documentary material or information relevant to a false claimslaw investigation." 31 U.S.C. 3733(a)(1). For purposes of Section 3733,"the term 'person' means any natural person, partnership, corporation,association, or other legal entity, including any State or political subdivisionof a State." 31 U.S.C. 3733(l)(4).
A suit to collect the statutory penalties may be brought either by the AttorneyGeneral, or by a private person (known as a relator) in the name of theUnited States, in an action commonly referred to as a qui tam action. Section3730(a) states that "[i]f the Attorney General finds that a personhas violated or is violating section 3729, the Attorney General may bringa civil action under this section against the person." Section 3730(b)(1)states that "[a] person may bring a civil action for a violation ofsection 3729 for the person and for the United States Government * * * inthe name of the Government."
When a qui tam action is brought, the complaint is filed in camera and remainsunder seal for at least 60 days. 31 U.S.C. 3730(b)(2). The Act providesthe government the opportunity to intervene in the suit "within 60days after it receives both the complaint and the material evidence andinformation," ibid., in which case the government "shall havethe primary responsibility for prosecuting the action, and shall not bebound by an act of the person bringing the action." 31 U.S.C. 3730(c)(1).If the government does not intervene within the initial 60-day period, "thecourt, without limiting the status and rights of the person initiating theaction, may nevertheless permit the Government to intervene at a later dateupon a showing of good cause." 31 U.S.C. 3730(c)(3). The Act furtherprovides that an FCA suit "may be dismissed only if the court and theAttorney General give written consent to the dismissal and their reasonsfor consenting." 31 U.S.C. 3730(b)(1). If a qui tam action resultsin the recovery of civil penalties, those penalties are divided betweenthe government and the relator.1
2. The instant case involves a qui tam suit filed against petitioner Stateof Vermont Agency of Natural Resources. The relator, Jonathan Stevens (arespondent in this Court), was an employee of petitioner at the time ofthe alleged FCA violations. The complaint alleged that petitioner had submittedfalse claims to the United States Environmental Protection Agency (EPA)in connection with federal grant programs administered by the EPA pursuantto, inter alia, the Clean Water Act of 1977, 33 U.S.C. 1251 et seq., andthe Safe Drinking Water Act, 42 U.S.C. 300f et seq. The gravamen of thesuit was that petitioner had overstated the amount of time spent by itsemployees on the federally-funded projects, thereby inducing the EPA topay grant money to which petitioner was not entitled. Pet. App. 5-7.
As required by the FCA, see 31 U.S.C. 3730(b)(2), the complaint in thiscase was filed in camera and under seal and was not served upon petitioner.Pet. App. 7. The United States declined to intervene to take over the action,and the complaint was subsequently unsealed and served. Id. at 7-8.2 Petitionermoved to dismiss the action, arguing that (1) a State or state instrumentalityis not a "person" subject to liability under the FCA, 31 U.S.C.3729; and (2) qui tam suits against state entities are barred by the EleventhAmendment. Pet. App. 8.
The district court denied the motion to dismiss. Pet. App. 86-87. The courtheld that "the Eleventh Amendment does not bar suits such as the instantone because the United States, which has the ability to sue a state, isthe real party in interest and ultimately the primary beneficiary of a successfulqui tam action." Id. at 86. The court also observed, with respect tothe issue of statutory construction, that "it would be anomalous toacknowledge that a state is a 'person' within the meaning of the statuteif it chooses to bring a False Claims Act suit, but that the same stateis not a 'person' if named as a defendant." Id. at 87.
3. Petitioner filed an interlocutory appeal, and the court of appeals affirmed.Pet. App. 1-85.3
a. The court of appeals first held that the Eleventh Amendment does notbar a qui tam suit against a State or state agency. Pet. App. 14-18. Thecourt observed that under established law, the Eleventh Amendment has noapplication to suits by the United States. Id. at 15-16. The court framedthe relevant constitutional question as "whether a qui tam suit underthe FCA should be viewed as a private action by an individual, and hencebarred by the Eleventh Amendment, or one brought by the United States, andhence not barred." Id. at 16. In light of "[t]he interests tobe vindicated, in combination with the government's ability to control theconduct and duration of the qui tam suit," the court of appeals concludedthat the Eleventh Amendment does not bar qui tam actions against state defendants.Ibid.
The court explained that in its view "[t]he real party in interestin a qui tam suit is the United States," since a qui tam suit is intendedto redress fraud against the United States and the bulk of any recoverygoes to the government. Pet. App. 16. The court also observed that the governmentpossesses substantial control over qui tam litigation, since it may interveneat the outset of the suit and retains significant prerogatives even if itdoes not intervene. Id. at 17. "In light of the fact that qui tam claimsare designed to remedy only wrongs done to the United States, and in lightof the substantial control that the government is entitled to exercise oversuch suits," the court held that a qui tam suit "is in essencea suit by the United States and hence is not barred by the Eleventh Amendment."Id. at 18.
b. The court of appeals also held that petitioner is a "person"subject to the liability provision of the FCA, 31 U.S.C. 3729. Pet. App.19-30. The court held that the interpretive question is not governed byany "plain statement" rule, explaining that "[t]he Act doesnot intrude into any area of traditional state power. The goal of the statuteis simply to remedy and deter procurement of federal funds by means of fraud.The States have no right or authority, traditional or otherwise, to engagein such conduct." Id. at 20-21. The court observed that "[w]hetherthe term 'person' when used in a federal statute includes a State cannotbe abstractly declared, but depends upon its legislative environment."Id. at 21 (quoting Sims v. United States, 359 U.S. 108, 112 (1959)). Inthe court of appeals' view, several aspects of the FCA and its legislativehistory support the conclusion that a State or state agency is a "person"subject to liability under the Act. Id. at 21-30. The court explained, interalia, that States have historically been regarded as "person[s]"authorized to file qui tam actions under 31 U.S.C. 3730(b)(1), see Pet.App. 21-24; that the Act has been construed broadly as covering all fraudsupon the United States, including frauds perpetrated by state officials,see id. at 25-28; and that the word "person" is defined to includeStates for purposes of 31 U.S.C. 3733, which governs the issuance of CIDs,see Pet. App. 28-29.
c. Senior District Judge Weinstein, sitting by designation on the courtof appeals, dissented. The dissenting judge concluded that the suit wasbarred by the Eleventh Amendment. Pet. App. 31-85.
Although we believe that the decision of the court of appeals is correct,we agree with petitioner that the case warrants this Court's review. Thebroad issue presented here is whether a private relator may prosecute aqui tam suit under the FCA against a State or a state agency. That issueencompasses two subsidiary questions. The first is whether, as a matterof statutory interpretation, a State or state agency is a "person"subject to liability under the FCA, 31 U.S.C. 3729. If so, the second questionis whether the Eleventh Amendment bars the particular remedy of a privaterelator's qui tam action against an unconsenting State.
As the petition for a writ of certiorari explains (Pet. 5-17), both thebroad issue and each of the subsidiary questions are currently the subjectof circuit conflicts. In the view of the United States, the instant caseprovides a good vehicle-and the best available-for resolution of those conflicts,which warrant this Court's attention. The petition should therefore be granted.
1. Like the Second Circuit in the instant case, the Eighth Circuit has heldboth that a State is a "person" subject to liability under theFCA, 31 U.S.C. 3729, and that the Eleventh Amendment does not bar qui tamsuits against state defendants. See United States ex rel. Zissler v. Regentsof the Univ. of Minn., 154 F.3d 870, 872-875 (1998) (deciding statutoryquestion); United States ex rel. Rodgers v. Arkansas, 154 F.3d 865, 867-868(1998) (deciding Eleventh Amendment question), petition for cert. pending,No. 98-1664 (filed Apr. 14, 1999). The Fourth and Ninth Circuits have rejectedEleventh Amendment challenges to such suits without squarely addressingthe question whether a State is a "person" within the meaningof Section 3729. See United States ex rel. Berge v. Board of Trustees ofthe Univ. of Ala., 104 F.3d 1453, 1457-1459 (4th Cir.), cert. denied, 522U.S. 916 (1997); United States ex rel. Milam v. University of Tex. M.D.Anderson Cancer Ctr., 961 F.2d 46, 48-50 (4th Cir. 1992); United Statesex rel. Fine v. Chevron, U.S.A., Inc., 39 F.3d 957, 962-963 (1994), vacatedon other grounds, 72 F.3d 740 (9th Cir. 1995) (en banc), cert. denied, 517U.S. 1233 (1996).
By contrast, two other courts of appeals have held that qui tam suits againststate defendants are not permitted. The Fifth Circuit has held that suchactions are barred by the Eleventh Amendment. See United States ex rel.Foulds v. Texas Tech Univ., 171 F.3d 279, 283-288 (1999). The D.C. Circuithas held that a State or a state agency is not a "person" subjectto liability under 31 U.S.C. 3729; the court did not resolve the EleventhAmendment question, though its statutory analysis was heavily influencedby constitutional considerations. See United States ex rel. Long v. SCSBus. & Technical Inst., Inc., No. 98-5133, 1999 WL 178713, at *2-*17(Apr. 2, 1999), supplemental opinion, No. 98-5133, 1999 WL 252644 (Apr.30, 1999). The fact that four different courts of appeals have addressedthese issues within the past two months attests to the recurring importanceof the questions presented in this case. Review by this Court is warrantedto resolve the existing conflicts in authority.
2. In addition to the petition in the instant case, the State of Arkansas'scertiorari petition in Arkansas v. United States ex rel. Rodgers, No. 98-1664(filed Apr. 14, 1999), is pending before this Court. That petition, however,is limited to the question whether private qui tam actions are barred bythe Eleventh Amendment. See Pet. at i, Arkansas, supra (question presented);Rodgers, 154 F.3d at 867-868 (court of appeals' discussion limited to EleventhAmendment issue).4 Resolution of that constitutional issue, standing alone,would leave unresolved the existing circuit conflict regarding the questionwhether a State is a "person" subject to liability under the FCA.
That issue of statutory construction will retain significance regardlessof this Court's resolution of the Eleventh Amendment question. If the EleventhAmendment does not preclude qui tam suits against state defendants, suchactions can go forward if, but only if, a State is a "person"subject to liability under the Act. If the Eleventh Amendment does bar privatequi tam actions against state defendants, resolution of the statutory questionwill remain important, since the alternative FCA remedy of a suit broughtor taken over by the Attorney General is viable only if a State is a "person"under Section 3729. Because the petition in the instant case presents boththe statutory and constitutional issues, it provides a better vehicle forresolution of the existing circuit conflicts than does the petition in No.98-1664.5
3. The court of appeals correctly decided the statutory and constitutionalissues presented by this case.
a. "Whether the term 'person' when used in a federal statute includesa State cannot be abstractly declared, but depends upon its legislativeenvironment." Sims v. United States, 359 U.S. 108, 112 (1959) (quotedat Pet. App. 21). Where application of a particular statutory provisionto state entities would trench upon sovereign prerogatives or "upsetthe usual constitutional balance of federal and state powers," Gregoryv. Ashcroft, 501 U.S. 452, 460 (1991), and where the statute's text andhistory do not affirmatively evidence a congressional intent that Statesbe covered, the term "person" may appropriately be construed toexclude the States. As the court of appeals correctly recognized, however,the FCA "does not intrude into any area of traditional state power."Pet. App. 21. The Act serves "to remedy and deter procurement of federalfunds by means of fraud," and "[t]he States have no right or authority,traditional or otherwise, to engage in such conduct." Ibid. Petitionerchose to accept the benefits of a federal grant program, and it is neitheranomalous nor surprising that petitioner-like other federal fund recipients-issubject to the substantive and remedial provisions designed to ensure thatit is entitled to the money and that the funds are used for their intendedpurpose.6
The FCA's legislative history supports the conclusion that States are subjectto the Act's liability provisions. The Senate Report accompanying the 1986FCA amendments states that "[t]he False Claims Act reaches all partieswho may submit false claims. The term 'person' is used in its broad senseto include partnerships, associations, and corporations as well as Statesand political subdivisions." S. Rep. No. 345, 99th Cong., 2d Sess.8 (1986) (citations omitted). As the court of appeals explained, moreover,States have historically been regarded as appropriate relators in qui tamsuits brought under the Act. See Pet. App. 22- 23. Because the FCA authorizesqui tam suits to be brought by a "person," 37 U.S.C. 3730(b)(1),Congress's use of the same word to describe potential defendants suggeststhat any entity (including a State) that is authorized to file suit as arelator is also subject to liability under Section 3729. Pet. App. 23-24;Commissioner v. Lundy, 516 U.S. 235, 250 (1996) (referring to the "normalrule of statutory construction that identical words used in different partsof the same act are intended to have the same meaning").
b. The Eleventh Amendment does not apply to suits by the federal government.See Pet. App. 15 (citing cases). Even where an FCA action is filed and prosecutedby a private relator, the suit is brought (at least in substantial part)on behalf of the United States, both because the suit is intended to redressfraud against the United States and because the government takes the lion'sshare of any recovery. See id. at 16. As the court of appeals explained,moreover, the government retains significant prerogatives in qui tam litigationeven when it declines to intervene to take over the conduct of a suit. Seeid. at 17. "In light of the fact that qui tam claims are designed toremedy only wrongs done to the United States, and in light of the substantialcontrol that the government is entitled to exercise over such suits,"the court of appeals correctly held that the instant suit "is not barredby the Eleventh Amendment." Id. at 18.
4. Currently pending before this Court are College Savings Bank v. FloridaPrepaid Postsecondary Education Expense Board, No. 98-149 (argued Apr. 20,1999); Florida Prepaid Postsecondary Education Expense Board v. CollegeSavings Bank, No. 98-531 (argued Apr. 20, 1999); Kimel v. Florida Boardof Regents, cert. granted, No. 98-791 (Jan. 25, 1999); and United Statesv. Florida Board of Regents, cert. granted, No. 98-796 (Jan. 25, 1999).At issue in those cases is whether Congress validly authorized private damagesactions against States for false advertising (No. 98-149), patent infringement(No. 98-531), and age discrimination in employment (Nos. 98-791 and 98-796).None of those cases arises under the FCA, and none involves applicationof the principle that suits by the United States are outside the coverageof the Eleventh Amendment. The Court's decisions in those cases are thereforeunlikely to resolve the existing circuit conflicts regarding the statutoryand constitutional questions presented here.
The petition for a writ of certiorari should be granted.
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
DAVID W. OGDEN
Acting Assistant Attorney General
MICHAEL F. HERTZ
DOUGLAS N. LETTER
JOAN E. HARTMAN
MICHAEL E. ROBINSON
Attorneys
MAY 1999
1 If the government takes control of the litigation, the relator shall,with limited exceptions, "receive at least 15 percent but not morethan 25 percent of the proceeds of the action or settlement of the claim."31 U.S.C. 3730(d)(1). If the government declines to take control of thelitigation and the relator prosecutes the suit, the relator's share "shallbe not less than 25 percent and not more than 30 percent of the proceeds."31 U.S.C. 3730(d)(2).
2 The United States is a party in this Court, however, because it intervenedin the court of appeals pursuant to 28 U.S.C. 2403(a) to defend the quitam provisions of the FCA against petitioner's constitutional challenge.See Pet. App. 9.
3 As the court of appeals observed, this Court has held that a districtcourt order denying a motion to dismiss based on a claim of Eleventh Amendmentimmunity is immediately appealable. See Pet. App. 9 (citing Puerto RicoAqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 147(1993)). The court of appeals concluded that it possessed "pendentappellate jurisdiction" over the question "whether qui tam suitsagainst the States are authorized by the Act." Id. at 19.
4 In an opinion issued the same day as its opinion in Rodgers, the EighthCircuit held that a State or state agency is a "person" withinthe meaning of Section 3729. See Zissler, 154 F.3d at 872- 875. Zisslerwas subsequently resolved through a monetary settlement, and pursuant toa stipulation among the parties the district court entered an order of dismissal.
5 It is not entirely clear that the statutory question was properly beforethe court of appeals. This case involves petitioner's interlocutory appealfrom the district court's denial of its motion to dismiss. See Pet. App.8-9. This Court has held that the denial of a motion to dismiss on EleventhAmendment grounds is immediately appealable under the collateral order doctrine.See Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc.,506 U.S. 139, 144-145 (1993). In the instant case, the Second Circuit heldthat it possessed "pendent appellate jurisdiction" over the questionwhether qui tam suits against States are authorized by the FCA. Pet. App.19; accord Long, 1999 WL 178713, at *2.
This Court has generally disapproved the concept of pendent appellate jurisdiction.See Swint v. Chambers County Comm'n, 514 U.S. 35, 49-50 (1995). The Courthas suggested, however, that the exercise of such jurisdiction might beproper under some circumstances, as where the appealable and non-appealablerulings are "inextricably intertwined," or where review of the"pendent" holding is "necessary to ensure meaningful reviewof the" ruling that is independently appealable. Id. at 50-51. Evenassuming that the district court's denial of petitioner's motion to dismisson statutory grounds is not independently subject to immediate appellatereview, we believe that the statutory issue is logically antecedent to theEleventh Amendment question, and that the court of appeals' exercise ofpendent appellate jurisdiction was therefore proper. Indeed, it would contraveneaccepted principles of constitutional adjudication for this Court to determinewhether the Eleventh Amendment bars the instant qui tam action without firstdeciding whether Congress has authorized such suits to be filed againststate entities.
In any event, any uncertainty about reviewability of the statutory claimin this case affects equally all four cases that are currently ripe forreview, as they are all state interlocutory appeals from district courtdenials of motions to dismiss. Compare Rodgers, 154 F.3d at 867; Long, 1999WL 178713, at *2; Foulds, 171 F.3d at 283. Thus, because there are strongreasons to find reviewability here, certiorari should be granted in theinstant case, in which the courts below squarely addressed both questions.
6 In construing the statutory term "person," it is important tobear in mind that qui tam actions prosecuted by private relators compriseonly one category of FCA suits. The Act also authorizes the Attorney Generalto file an FCA action, 31 U.S.C. 3730(a), and it permits the governmentto intervene to take over the conduct of a suit initially filed by a private relator, 31 U.S.C. 3730(c)(1). Wherethe government intervenes in a qui tam action to take over the conduct ofthe litigation, the suit is not meaningfully different, for Eleventh Amendmentpurposes, from a suit initially brought by the United States. Because suitsbrought or taken over by the government are not subject to any colorableEleventh Amendment objection, the term "person" should not begiven an artificially narrow construction simply because inclusion of Statesas potential defendants may create a difficult constitutional issue in quitam actions prosecuted by private relators. Cf. Pennsylvania v. Union GasCo., 491 U.S. 1, 11 (1989) ("For purposes of * * * lawsuits [broughtby the United States against a State], States are naturally just like 'anynongovernmental entity'; there are no special rules dictating when theymay be sued by the Federal Government, nor is there a stringent interpretiveprinciple guiding construction of statutes that appear to authorize suchsuits.").