Chandler, Janet v. Cook County IL

In the

United States Court of Appeals

For the Seventh Circuit

Nos. 00-4110 & 01-1810

UNITED STATES of America ex rel.

Janet CHANDLER, Ph.D.,

Plaintiff-Appellant,

Cross-Appellee,

v.

COOK COUNTY, Illinois,/1

Defendant-Appellee,

Cross-Appellant.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 97 C 514--Robert W. Gettleman, Judge.

ARGUED SEPTEMBER 5, 2001--DECIDED January 22, 2002

Before FLAUM, Chief Judge, and POSNER and

RIPPLE, Circuit Judges.

RIPPLE, Circuit Judge. Janet Chandler,

Ph.D., brought this quitam action as

relator on behalf of the United States

under the False Claims Act ("FCA"), 31

U.S.C. sec.sec. 3729 et seq., to recover

funds that allegedly were obtained

fraudulently by defendants Hektoen

Institute for Medical Research

("Hektoen") and Cook County, Illinois, in

the administration of a drug treatment

program. The district court dismissed the

suit against Cook County, holding that,

as a municipality, the County was immune

from punitive damages under the FCA. Dr.

Chandler appealed and, for the reasons

set forth in this opinion, we reverse in

case No. 00-4110.

Cook County also appealed or, in the

alternative, requested mandamus, from the

district court’s discovery order

requiring Cook County to turn over

certain drug treatment records. We

believe the district court’s discovery

order does not comply with federal

privacy regulations. Therefore mandamus

will issue requiring the district court

to vacate its discovery order and to

proceed in conformity with this opinion.

I

BACKGROUND

A. Cook County as a Party

Dr. Janet Chandler brought this quitam

action against Hektoen and Cook County

for alleged misconduct in their handling

of a federal research grant./2 Cook

County Hospital ("CCH") applied for, and

received, a $5 million grant from the

National Institute of Drug Abuse ("NIDA")

to study the treatment of drug-dependant

pregnant women. Along with its grant

application, CCH submitted an assurance

of compliance plan to the Department of

Health and Human Services ("HHS"),

representing that CCH would comply with

federal human subject research

regulations. The grant initially was

awarded to CCH, but was transferred to

Hektoen, an affiliate of CCH established

to receive funds and conduct medical

research. The program was dubbed "New

Start"; it was designed to provide

treatment and conduct research. New Start

provided treatment to drug-dependant

pregnant women and studied the effect of

a stepped-up battery of medical and

social services on its patients, compared

with a control group receiving the

typical treatment available in the

community.

On September 1, 1993, Dr. Chandler was

hired as New Start’s project director.

While in this post, Dr. Chandler came to

believe that the defendants were

violating the terms of the grant and

federal regulations. Further, she

believed they were misrepresenting the

success of the New Start program and

submitting false progress reports to the

government, which included information on

"ghost" program participants who did not

exist. Dr. Chandler alleged that CCH did

not follow mandatory protocol for

research on human subjects and for

dispensing methadone to pregnant women,

did not obtain informed consent from

study participants, did not obtain

thorough medical or drug histories,

provided substandard care, failed to keep

accurate records and failed to randomize

participants.

In 1994, Dr. Chandler began to speak up,

informing physicians at CCH that she was

concerned with the handling of the New

Start program. She told them that the

program was violating the terms of the

grant, the assurance of compliance plan

and pertinent federal regulations.

Ultimately Dr. Chandler was discharged

and brought this action. She alleged that

CCH retaliated against her by revoking

some of her responsibilities and then

firing her in January 1995, after she was

accused of lying in her report to NIDA on

the study’s alleged failure.

Cook County moved to dismiss on the

ground that it was not a "person" within

the meaning of the False Claims Act. See

31 U.S.C. sec. 3729(a)./3 The district

court denied Cook County’s motion to

dismiss, holding that the County was a

person within the meaning of the FCA. See

Chandler v. Hektoen Inst., 35 F. Supp.2d

1078, 1084 (N.D. Ill. 1999) (Chandler I).

Specifically, the court was persuaded by

the definition of person within the Civil

Investigative Demand ("CID") provision of

the FCA, added in 1986. See 31 U.S.C.

sec. 3733(l)(4); Chandler I, 35 F.

Supp.2d at 1084. The statute defines

person as "any natural person,

partnership, corporation, association, or

other legal entity, including any State

or political subdivision of a State." 31

U.S.C. sec. 3733(l)(4). The district

court further held that the treble

damages provision of the FCA was not

punitive, so that municipalities’

traditional immunity from punitive

damages was not implicated. See Chandler

I, 35 F. Supp. 2d at 1084-85. Therefore,

Cook County’s motion was denied.

In 2000, the Supreme Court decided

Vermont Department of Natural Resources

v. United States ex rel. Stevens, 529

U.S. 765 (2000). Stevens held that states

were not persons within the meaning of

the FCA and concluded that the

trebledamages provision was punitive. See

id. at 783-84. Cook County filed a motion

to reconsider in light of Stevens. See

Chandler v. Hektoen Inst., 118 F. Supp.2d

902, 902 (N.D. Ill. 2000) (Chandler II).

The district court found nothing in

Stevens to "alter its conclusion that the

County is a ’person’ for purposes of the

FCA" but found that "it is quite clear

that under Stevens the County is immune

from the imposition of punitive damages."

Id. at 903. The court dismissed the case

against Cook County.

B. Discovery

Dr. Chandler brought this action on

January 27, 1997. She sought the records

of the New Start program in discovery.

The voluminous records contained inter

alia physicians’ notes, consent forms,

medical records, patient questionnaires

and drug test results. The County

resisted, pointing to federal regulations

requiring researchers to keep drug and

alcohol treatment records confidential.

On January 7, 1999, the district court

granted Dr. Chandler’s motion to compel

and ordered Cook County to produce the

records with patient-identifying

information redacted. Notice was sent to

the former New Start patients, informing

them that "Janet Chandler has been given

permission by the Court to review your

New Start records, so long as all the

identifying information and other

personal information on the records is

blacked out." R.72, Ex.B. The notice also

provided the former patients with forms

to reply if they wanted to object to the

disclosure or if they consented to the

disclosure of identifying information.

The patients were informed that if they

did nothing, the redacted records would

be disclosed to Dr. Chandler and her

representatives.

Over the next year or so, the parties

were contentious about the quality of the

redacted records. Dr. Chandler’s

attorneys claimed that many records were

missing or incomplete. There was a

problem with the index created by Cook

County to obscure patient identifying

information in compliance with the

court’s discovery order. The court

ordered the County to produce a "key" to

cross-reference original and substituted

file numbers because the substituted file

numbers could not be linked with a large

quantity of study data. In early 2001,

Dr. Chandler went back to the district

court seeking access to the unredacted

patient records.

On March 5, 2001, the district court

ordered Cook County to turn over

unredacted patient records to Dr.

Chandler’s representatives and asked the

parties to draft protective orders. On

March 14, 2001, the district court

entered a protective order governing the

disclosure of unredacted patient records

to Dr. Chandler’s attorneys. The order

limited disclosure to three of Dr.

Chandler’s attorneys and one paralegal

for ten days. They were prohibited from

disclosing information to anyone,

including Dr. Chandler and were not

permitted to record any of the

information. Cook County sought an

emergency stay pending appeal. After

briefing from both sides, the motions

panel of this court granted the stay on

June 12, 2001 and denied Dr. Chandler’s

motion to dismiss for want of

jurisdiction. We consolidated the two

appeals.

II

DISCUSSION

The False Claims Act establishes civil

penalties for "[a]ny person" who, inter

alia, "knowingly presents, or causes to

be presented, to an officer or employee

of the United States Government . . . a

false or fraudulent claim for payment or

approval," or who "conspires to defraud

the Government by getting a false or

fraudulent claim allowed or paid." 31

U.S.C. sec. 3729(a)(1), (3). Such a

person "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 be

cause of the act of that person." Id.

sec. 3729(a). The FCA may be enforced by

the Attorney General, id. sec. 3730(a),

or by a private person, known as a

relator, who brings a quitam suit "for

the person and for the United States

Government . . . in the name of the

Government," id. sec. 3730(b). A quitam

suit is filed in camera, and remains

under seal for sixty days. Id. sec.

3730(b)(2). The relator must present all

material evidence to the Government;

during the sixty day period, the

Government may intervene and proceed with

the action itself. Id. If the Government

declines to assume responsibility for the

suit, the relator may proceed on his own.

Id. sec. 3730(b)(4)(B). If the suit is

successful, the relator receives a

portion of the Government’s award. Id.

sec. 3730(d). If the Government takes

over, the relator will receive between 15

and 25 percent of the Government’s

proceeds, "depending upon the extent to

which the person substantially

contributed to the prosecution of the

action," plus reasonable expenses. Id.

sec. 3730(d)(1). If the relator proceeds

on his own, he will receive between 25

and 30 percent of the proceeds, plus

reasonable expenses. Id. The quitam

relator is also protected by a

"whistleblower" provision which provides

relief to any employee who suffers

retaliation for bringing a claim under

the FCA or assisting an employee-relator

who does so. Id. sec. 3730(h). The

whistleblower protection extends to any

relator who brings a claim in good faith,

whether or not it is successful.

A.

We must determine whether Cook County is

a "person" within the meaning of the

FCA./4

The issue is one of statutory

interpretation. Therefore we must

ascertain the will of Congress; we must

determine whether Congress, when it

enacted the FCA, intended counties to be

defendants in quitam suits.

We begin, as always, with the text of

the statute. Congress provides no

definition of "person" within sec. 3729.

There have been only cosmetic changes to

this section since the FCA was first

adopted in 1863; therefore, the

definition of person has remained

constant throughout the FCA’s history.

See Stevens, 529 U.S. at 783 n.12. The

Supreme Court has noted that, by 1844,

both private and municipal corporations

were presumptively included within the

meaning of "person." See Monell v. Dep’t

of Soc. Serv., 436 U.S. 658, 685-89

(1978). Nowhere in the text is there an

exception for suits against

municipalities. Nor have the parties

suggested any other statutory provision

that would limit the text before us.

The structure of the statute does not

appear to bar a finding that counties may

be sued under the FCA. The FCA creates a

mechanism designed to discover and

correct fraud against the federal

government. In a quitam suit, the relator

must inform the Department of Justice of

his intention to sue and must keep his

suit under seal for sixty days while the

Justice Department decides whether to

prosecute the action itself./5 The

parties have not suggested anything in

the structure of the FCA, when read as a

whole, that would require anything other

than a straight-forward reading of the

text.

The 1986 amendments to the FCA did not

change the meaning of "person" nor did

these legislative changes explicitly

include or exclude suits against

municipalities. However, three of the

changes to the FCA made by Congress in

1986 are relevant to this case. That

year, Congress adopted what is now 31

U.S.C. sec. 3733, which permitted the

Attorney General to issue a Civil

Investigative Demand ("CID") to "any

person" who "may be in possession,

custody, or control of any . . .

information relevant to a false claims

law investigation." See 31 U.S.C. sec.

3733(a)(1). A CID requires its recipient

to produce documents, answer

interrogatories and give oral testimony.

Id. Political subdivisions of states were

included within the CID provision’s

definition of "person." See id. sec. 3733

(l). Second, Congress adopted a

"whistleblower" statute, protecting

relators and their witnesses from

retaliation by employers. See id. sec.

3730(h). Finally, Congress increased the

penalties for violations, from $2,000 per

claim and double damages to $5,000-

$10,000 per claim and treble damages. Id.

sec. 3729(a)./6 We believe that a

proper understanding of each of these

changes points to a finding of continued

municipal liability.

The CID provision was added to provide

the Justice Department with a new weapon

to discover fraud and investigate false

claim suits. That section defines

"person" as "any natural person,

partnership, corporation, association, or

other legal entity, including any State

or political subdivision of a State." Id.

sec. 3733(l)(4)./7 The CID’s defini-tion

of person at least demonstrates that

Congress intended that states and their

subdivisions be potential targets of

false claim investigations. Although this

definition does not demonstrate

Congressional intent to impose liability

on municipalities, it certainly does not

support an inference that Congress

intended them to be exempt. Every change

made in 1986 made it more likely for FCA

claims to be filed and to succeed.

Further, the legislative history of the

1986 amendments, in particular that

accompanying the whistleblower provision,

makes it likely that the Congress, when

voting on the amendments, was aware that

the FCA might reach municipalities. The

Senate Judiciary Committee’s report

states that "[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." S. Rep. 99-345 at 8 (1986),

reprinted in 1986 U.S.C.C.A.N. 5266,

5273./8 In discussing the whistleblower

provision, the Com-mittee report defines

"employers" to "include public as well as

private sector entities." See id. at 34-

35. Unless municipalities are subject to

suit under the FCA, Congress would have

no reason to be concerned that

municipalities might retaliate against

their employees for bringing FCA claims.

Given that states are excluded from the

definition of "person" within the FCA,

the only public entities remaining are

municipal corporations and other

political subdivisions of states which

are not arms or agencies of state

government.

This reading of the 1986 amendments is

compatible with other evidence that

Congress’ purpose in enacting those

amendments was to increase the

effectiveness of the Act. See S. Rep. No.

99-345 at 2 (1986) ("In order to make the

statute a more useful tool against fraud

in modern times, the Committee believes

the statute should be amended in several

significant respects. The proposed

legislation seeks not only to provide the

Government’s law enforcers with more

effective tools, but to encourage any

individual knowing of Government fraud to

bring that information forward.").

Congress also increased the percentage of

the Government’s proceeds a relator may

receive where the Government assumes

responsibility for the action. Before

1986, a relator’s share was capped at ten

percent of the award. See 31 U.S.C. sec.

3729 (c)(1) (1983). Now, a court has

discretion to give the relator between

fifteen and twenty-five percent, but

fifteen percent is the minimum award. 31

U.S.C. sec. 3730(d)(1). Before 1986, if a

relator proceeded on his own, his

potential award was capped at twenty-five

percent, see 31 U.S.C. sec. 3729(c)(2)

(1983); now twenty-five percent is the

minimum he would receive, with a maximum

of thirty percent. 31 U.S.C. sec.

3730(d)(2). These changes both encourage

quitam suits and encourage cooperation

with the Department of Justice.

The 1986 amendments also added several

provisions which deter frivolous suits

and give courts the discretion to

restrict a relator’s participation in

suits when the Government has intervened.

The district court can restrict the

relator’s participation if he remains in

the case for purposes of harassment, 31

U.S.C. sec. 3730(c)(2)(C); the court may

stay discovery if the relator’s actions

interfere with the Government’s

investigation, id. sec. 3730(c)(4). If

the basis for the suit was information

that was already available, a district

court may limit a relator’s recovery to

10 percent of the award, id. sec.

3730(d)(1), or bar the suit entirely

unless the Attorney General prosecutes

the case, id. sec. 3730(d)(4)(A). If the

relator himself planned or was guilty of

violations of the FCA, the court may

dismiss his suit. Id. sec. 3730(d)(3). If

the relator proceeds with the suit

himself and the court finds that the suit

was "clearly frivolous, clearly vexatious

or brought primarily for purposes of

harassment," the court may award the

defendant attorneys’ fees and expenses.

Id. sec. 3730(d)(4). Finally, the FCA

bars suits against members of Congress,

members of the judiciary and senior

executive branch officials. Id. sec.

3730(e)(2). These changes gave courts

more discretion to regulate quitam suits

and to weed out illegitimate actions.

Congress also changed the knowledge

element of the offense, making success

more likely. Some confusion had arisen

about the standard of intent necessary

for a finding of liability under the FCA.

Congress adopted sec. 3729(b) which

defines knowing and knowingly to mean

that a person "(1) has actual knowledge

of the information; (2) acts in

deliberate ignorance of the truth or

falsity of the information; or (3) acts

in reckless disregard for the truth or

falsity of the information, and no proof

of specific intent to defraud is

required." 31 U.S.C. sec. 3729(b). This

definition sets a fairly low standard,

making it easier for the United States to

prevail in FCA actions.

We must conclude that a study of the

text and structure of the Act, supported

by the available legislative history,

leads to the conclusion that Congress

intended to include counties within the

meaning of "person."

B.

Cook County nevertheless urges that we

are prohibited from interpreting the

statute to include counties because of

the municipalities’ traditional, common-

law immunity from punitive damages. The

Supreme Court in Stevens stated that, by

increasing the damages from double to

treble in 1986, the FCA was transformed

from a remedial statute to a punitive

one. See Stevens, 529 U.S. at 785-86./9

Because damages under the FCA are now

considered to be punitive, we turn to the

question of whether Congress has made it

sufficiently clear that municipalities do

not enjoy the traditional common-law

immunity of municipalities from punitive

damages for FCA claims.

We begin with the Supreme Court’s

decision in City of Newport v. Fact

Concerts, 453 U.S. 247 (1981). See Doe v.

County of Centre, 242 F.3d 437, 454 (3d

Cir. 2001) (using City of Newport to

analyze whether municipalities were

immune from punitive damages in suits

brought under the Americans with

Disabilities Act and the Rehabilitation

Act). In Newport, the Court was called

upon to decide whether a municipality was

immune from punitive damages under 42

U.S.C. sec. 1983. See Newport, 453 U.S.

at 249. The Court could find no evidence

that Congress intended to disturb

thesettled common-law immunity of

municipalities from punitive judgments.

See id. at 265. Under the sec. 1983

statutory scheme, there is no guidance

from Congress as to the damages to be

imposed, or to the limits on the amount

of punitive damages a jury may assess.

Compensatory damages, designed to make

the victim of unconstitutional behavior

whole, are a permissible basis of

recovery and, although punitive damages,

properly calculated, serve many salutary

purposes when a truly egregious situation

is presented, they remain a windfall for

the fully compensated plaintiff. There is

always the danger that the "deep pocket"

of the municipality’s tax base will tempt

a jury to succumb to an unprincipled

determination. See Newport, 453 U.S. at

270. In light of these factors, the Court

in Newport found no basis for

disregarding the presumption that a

municipal entity ought not be subjected

to such a liability.

In Newport, the court identified a "two-

part approach" for "scrutinizing a claim

of immunity proffered by a municipality."

Id. at 259. Such a claim requires

"careful inquiry into considerations of

both history and policy" to determine

"both the policies that it [the immunity]

serves and its compatibility with the

purposes" of statutes, id. Earlier, in

Owen v. City of Independence, 445 U.S.

622, 635 (1980), the Court had noted that

"the question of the scope of a

municipality’s immunity from liability .

. . is essentially one of statutory

interpretation." For instance, in the

context of sec. 1983, the Court concluded

in Newport that immunity from punitive

damages was not inconsistent with the

purposes of sec. 1983, see Newport, 453

U.S. at 271; however, in Owen, the Court

held that municipal immunity based on the

good faith of its officers was

inconsistent with sec. 1983, see Owen,

445 U.S. at 657. In both cases, the Court

looked at the fit between the purpose of

the asserted immunity and the

Congressional intent in enacting sec.

1983.

Given the Supreme Court’s analysis in

Newport, we must examine the purpose of

municipal immunity from punitive damages

to determine if it is consistent with the

False Claims Act. In the context of

section 1983, the Supreme Court wrote in

Newport: "Compensation was an obligation

properly shared by the municipality

itself, whereas punishment properly

applied only to the actual wrongdoers."

Newport, 453 U.S. at 263. Punitive

damages are borne by "the very taxpayers

and citizens for whose benefit the

wrongdoer [is] being chastised." Id.

Ordinarily, punitive damages "are in

effect a windfall to a fully compensated

plaintiff, and are likely accompanied by

an increase in taxes or a reduction of

public services for the citizens footing

the bill." Id. at 267.

However, not all punitive damage regimes

are identical. Indeed, there are

important differences between those

available under sec. 1983 and those

imposed by the FCA. Under the FCA, at

least a portion of the recovery will come

from the monies taken by the municipality

through its false claims, whereas under

sec. 1983 both the compensatory and

punitive damages come directly from the

tax base. Further, in the FCA context,

the taxpayers themselves have been

enriched by the fraudulent conduct of the

municipality. Presumably any ill-gotten

gains from the federal government produce

more services or lower taxes. Thus, even

though some of the burden of the FCA’s

treble damages shifts to the local

taxpayers, this shift is not unjust,

because the local taxpayers have already

received, without justification, some of

the benefit. Congress’ precision in

crafting the FCA’s damage regime suggests

to us that it carefully considered all

its options before enacting this

particular system. Unlike sec. 1983, the

FCA does not need to borrow a common-law

conception of damages; Congress has

provided a clear and consistent remedy

for all violations of the FCA. And,

unlike under sec. 1983, we need not worry

about the "broad discretion traditionally

accorded to juries in assessing the

amount of punitive damages," Newport, 453

U.S. at 270, because the FCA affords the

judge little discretion in imposing

penalties on offenders.

The FCA damages scheme mandated by

Congress is not divided into compensatory

and punitive damages. Under the FCA,

damages are limited to $10,000 per claim

plus three times the amount of the false

claims. 31 U.S.C. sec. 3729(a). Although

the trebling of the actual loss is indeed

a significant enhancement and punitive in

nature, it is nevertheless a response

specifically determined by Congress as

necessary for the effective operation of

the FCA. It could not be more clear that

Congress, in adopting this approach,

addressed the situation with careful

precision as to what sort of damage

scheme was necessary to achieve the goals

of the statute. Notably, Congress did

make an exception to the general measure

of damages when the person who has

defrauded the Government cooperates

before having learned of the

investigation. 31 U.S.C. sec.

3729(a)(7)(A)-(C). In such a case, the

court has discretion to impose double,

rather than treble, damages. Id. The

damages are imposed by the judge, not the

jury. See In re Schimmels, 85 F.3d 416,

416 n.1 (9th Cir. 1996). By contrast,

Congress made no adjustment to the

general scheme for municipal entities.

The Supreme Court has noted that the

definition of "person" has remained

unchanged since the adoption of the FCA

in 1863. See Stevens, 529 U.S. at 782-83.

As noted above, counties were subject to

suit in 1863. Were we to hold counties

immune from the FCA’s damages scheme, we

would frustrate the clear intention of

Congress. The original FCA damages regime

was remedial. See United States v.

Bornstein, 423 U.S. 303, 315 (1976). In

1986, in an effort to increase the

effectiveness of the FCA, Congress

increased the per claim penalty from

$2,000 to a minimum of $5,000 and the

overall damages from double to treble. To

hold that municipalities are immune, we

would have to conclude that, in effecting

this increase, Congress intended to

exempt municipalities from the FCA sub

silentio.

Congress was aware of the Court’s

decisions in Newport and Bornstein; it

was only in 2000 that the Supreme Court

characterized the FCA’s remedy as

punitive. Congress also was aware of the

presumption that municipalities are

included within the meaning of the term

"person," see Monell v. Dep’t of Soc.

Serv., 436 U.S. 658, 685-89 (1978), and

that municipalities are treated

differently from states within our

constitutional system, see Comm.

Communications Corp. v. Boulder, 455 U.S.

40, 51-53 (1982), superseded by 15 U.S.C.

sec.sec. 34-36; Lafayette v. Louisiana

Power & Light Co., 435 U.S. 389, 394-96

(1978), superseded by 15 U.S.C. sec.sec.

34-36. In enacting the 1986 changes to

the statute, which form the basis of Cook

County’s immunity argument, Congress did

not indicate in any way that it intended

to exempt municipal entities from the

scope of the statute. When it desires to

exempt municipal entities from federal

statutory schemes, Congress has not

hesitated to do so. See, e.g., 15 U.S.C.

sec.sec. 34-36 (exempting local

government units from liability for

damages under the antitrust statute); 42

U.S.C. sec. 1981a(b)(1) (exempting

governments from punitive damages under

employment discrimination statute).

Dr. Chandler and the United States

suggest that, if we hold Cook County to

be immune from punitive damages, we ought

to hold further that Cook County may

still be sued under the FCA, but be held

to a lower measure of damages. In our

view, the legislative record affords us

no justification for undertaking such

judicial blue-penciling of the statute.

Congress has provided one remedy for

violations of the False Claims Act. If

municipalities are immune from punitive

damages, then they are, effectively,

immune from liability under the FCA.

There is no indication that Congress

intended the FCA to apply to municipal

entities but at a lower penalty. See

United States ex rel. Garibaldi v.

Orleans Parish Sch. Bd., 244 F.3d 486,

493 (5th Cir. 2001). As we have just

noted, the penalty scheme is a carefully

measured approach by Congress designed to

impose a penalty compatible with the

objectives of the Act. We therefore must

either apply the entire statute to

municipal entities or declare them to be

exempt under the FCA.

Billions of dollars flow from the

federal government to municipalities each

year. Congress, in creating, in 1863, and

then strengthening, in 1986, a

comprehensive mechanism designed to

remedy fraud against the federal

government clearly determined that

recipients of federal funds must be

subject to such a deterrent. Given this

legislative judgment, municipalities’

common-law immunity from suit is

inconsistent with Congress’ purpose in

adopting the FCA. Unlike sec. 1983, which

creates a cause of action without

specifying a remedy, the FCA includes a

carefully crafted remedy for violations.

Accordingly, despite the presumption

against the imposition of punitive

damages on municipalities, it is clear

that Congress, in enacting the 1986

changes to the FCA, made a conscious

choice to increase the recoverable

damages while in no way indicating that

it wished to exempt municipalities.

Therefore, the interpretive presumption

has been overcome.

C.

Nevertheless, Cook County contends, the

Supreme Court’s decision in Stevens

mandates a different result. The district

court, as had the Fifth Circuit, see

Garibaldi, 244 F.3d at 493-94, agreed. We

believe that this proposition is unsound

and respectfully disagree with the

conclusion reached by our sister

circuit./10 In our view, such a

reading of Stevens cannot be squared with

the essential rationale of that opinion

nor with the established doctrinal

differences, long recognized in our

jurisprudence, between the status of the

states of the Union and municipal

entities. See Stevens, 529 U.S. at 779-

80. Stevens quite appropriately

recognizes that the states, as sovereign

entities within our federal union, must

be accorded, in their relationships with

the federal government, certain

attributes of sovereignty. Cf., Printz v.

United States, 521 U.S. 898, 918-21, 926-

28 (1997) (holding that Congress could

not commandeer state executive officers

to enforce federal gun control law);

Seminole Tribe v. Florida, 517 U.S. 44,

55, 70-72 (1996) (holding that Congress

cannot abrogate states’ 11th Amendment

immunity through the powers granted in

Article 1 of the federal constitution).

Among these attributes is the presumption

that states, as sovereigns, are not

included within the term "person." See

Stevens, 529 U.S. at 780.

The central holding of Stevens is that

states are not within the FCA’s

definition of "person" because of the

"longstanding interpretive presumption

that ’person’ does not include the

sovereign." Stevens, 529 U.S. at 780.

"The presumption is ’particularly

applicable where it is claimed that

Congress has subjected the States to

liability to which they had not been

subject before.’" Id. at 781 (quoting

Will v. Mich. Dep’t of State Police, 491

U.S. 58, 64 (1989)). This presumption is

applied to protect the states because of

their dignity as sovereigns within our

system of federalism. It is akin to the

clear statement rule which requires "that

if Congress intends 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 (internal citations and

quotations omitted). The presumption cuts

the other way for municipalities. See

Monell v. Dep’t of Soc. Serv., 436 U.S.

658, 685-89 (1978). The Supreme Court has

never imposed this same requirement on

Congressional efforts to make municipal

entities amenable to federal legislation.

Cf. Bd. of Trustees v. Garrett, 531 U.S.

356, 368-69 (discussing the different

requirements for imposing federal

liability on states and municipalities);

Monell, 436 U.S. at 701 (stating that

absent a clear statement to the contrary,

municipalities were presumptively

included within the meaning of the term

"person"). Such constitutional concerns

applicable to states do not apply to

municipalities. Therefore, there is no

such rule of construction applicable

here. Cf., Garrett, 531 U.S. at 368-69

("[Cities and counties] are subject to

private claims for damages under the ADA

without Congress’ ever having to rely on

sec. 5 of the Fourteenth Amendment to

render them so. It would make no sense to

consider constitutional violations on

their part . . . when only the States are

the beneficiaries of the Eleventh

Amendment."); Alden v. Maine, 527 U.S.

706, 756 (1999) ("The second important

limit to the principle of sovereign

immunity is that it bars suits against

States but not lesser entities. The

immunity does not extend to suits

prosecuted against a municipal

corporation or other governmental entity

which is not an arm of the State."). The

rationale of Stevens simply cannot

support the interpretation that Cook

County wishes to place on it.

Accordingly, counties are not only

amenable to the FCA but also are subject

to the same penalties as other

defendants.

III

A.

In light of the above discussion, Cook

County will once again be a party to this

action. We therefore must address its

appeal of the district court’s discovery

order of March 14, 2001. Normally,

discovery rulings are unappealable,

because the disadvantaged party has a

remedy at the end of the district court

proceedings./11 This court has held

that a party seeking to obtain appellate

review of a discovery order before

judgment should accept a contempt

citation, and then appeal. See Allendale

Mutual Ins. Co. v. Bull Data Sys. Inc.,

32 F.3d 1175, 1179 (7th Cir. 1994).

"[R]equiring the complaining party to

take some risk--to back up his belief

with action--winnows weak claims." Reise

v. Bd. of Regents, 957 F.2d 293, 295 (7th

Cir. 1992). However, in extraordinary

circumstances, mandamus may be an

appropriate remedy where the petitioner

can show "irreparable harm . . . and a

clear right to the relief sought." In re

Sandahl, 980 F.2d 1118, 1119 (7th Cir.

1992). We believe Cook County has made

such a showing here.

"Mandamus may not be used to get around

the limitations on the appealability of

interlocutory orders." Mulay Plastics,

Inc. v. Grand Trunk Western R.R. Co., 742

F.2d 369, 371 (7th Cir. 1984). However,

the circumstances here present the

necessary predicate for such an

extraordinary remedy. The district

court’s discovery order implicates

regulations protecting the

confidentiality and integrity of

federally-funded substance abuse

programs. See 42 U.S.C. sec. 290dd-2; 42

C.F.R. sec.sec. 2.11, 2.63-64. If Cook

County is correct, allowing Dr.

Chandler’s representatives to view the

unredacted patient records would cause

serious harm to those patients’ privacy

rights and to the federal programs

protected by a comprehensive regulatory

scheme. Congress and the Department of

Health and Human Services have made it

clear that regulations are necessary to

protect "the patient, the physician-

patient relationship, and the treatment

programs." See 42 C.F.R. sec. 2.64(d). It

is not only the privacy rights of

individual patients that are at stake

here, but also the continued

effectiveness and viability of important

substance abuse treatment programs. See

United States v. Smith, 789 F.2d 196,

205-06 (3d Cir. 1986) (noting that "there

is a public interest in maintaining the

confidentiality of patient records" in

drug and alcohol treatment programs).

Patients will be less willing to seek

treatment if patient confidentiality is

not strictly protected. The First

Circuit, in upholding the validity of

sec. 2.63 wrote: "The purpose of [the

statute] is clear. Congress recognized

that absolute confidentiality is an

indispensable prerequisite to successful

alcoholism research. Moreover,

confidentiality is necessary to encourage

successful alcoholism treatment. Without

guarantees of confidentiality, many

individuals with alcohol problems would

be reluctant to participate fully in

alcoholism programs." Whyte v. Conn. Mut.

Life Ins. Co., 818 F.2d 1005, 1010 (1st

Cir. 1987); see also Mosier v. Am. Home

Patient, Inc., 170 F. Supp.2d 1211, 1214

(N.D. Fla. 2001) (noting that "this

particular privilege is a strong one").

The same is true of drug treatment. In

short, because important private and

public rights will be irretrievably

compromised if the County is correct but

the information is nevertheless released

prior to the entry of a final judgment,

mandamus is an appropriate remedy.

B.

We therefore turn to an assessment of

Cook County’s contention that the

district court’s order is violative of

the statute and regulations.

Federal law restricts the disclosure of

information obtained "in connection with

the performance of any program or

activity relating to substance abuse

education, prevention, training,

treatment, rehabilitation or research"

conducted by the United States or with

federal money. 42 U.S.C. sec. 290dd-2.

Disclosure is permitted with patient con

sent, 42 U.S.C. sec. 290dd-2(b)(1), or

"[i]f authorized by an appropriate order

of a court of competent jurisdiction

granted after application showing good

cause therefor, including the need to

avert a substantial risk of death or

serious bodily harm," id. sec. 290dd-

2(b)(2)(C). "In assessing good cause the

court shall weigh the public interest and

the need for disclosure against the

injury to the patient, to the physician-

patient relationship, and to the

treatment services. . . . [T]he court, in

determining the extent to which any

disclosure of all or any part of any

record is necessary, shall impose

appropriate safeguards against

unauthorized disclosure." Id. sec. 290dd-

2(b)(2)(C).

The regulations divide information into

two categories-- confidential and non-

confidential communications. The New

Start records contain both. In both

situations, when a court is preparing to

order disclosure, notice must be sent to

the patients and they must be afforded

"[a]n opportunity to file a written

response to the application, or to appear

in person, for the limited purpose of

providing evidence on the statutory and

regulatory criteria for the issuance of

the court order." 42 C.F.R. sec. 2.64(b).

Such notice must be "adequate." Id.

Notice was sent in 1999, after the

district court’s ruling on January 7 of

that year granting Dr. Chandler’s motion

to compel. That notice informed patients

that redacted copies of their records

would be disclosed to Dr. Chandler’s

counsel. By contrast, patients have not

been notified, and the March 14 order

does not contemplate such notice, that

unredacted copies of their records will

be disclosed to Dr. Chandler’s

representatives. To be adequate, notice

must inform patients both of the nature

of the disclosure and to whom the

information will be disclosed. Patients

must know what is at stake before they

can make an informed decision about their

potential intervention in Dr. Chandler’s

lawsuit. Patients who may not have been

concerned enough about the disclosure of

redacted records to intervene may well

wish to be heard if the court is prepared

to order disclosure of unredacted

records.

Once notice has been given, with respect

to both confidential and other

communications, the district court must

find that "(1) other ways of obtaining

the information are not available or

would not be effective; and (2) the

public interest and need for disclosure

outweigh the potential injury to the

patient, the physician-patient

relationship and the treatment services."

42 C.F.R. sec. 2.64(d). If a patient does

not consent, confidential communications

may only be disclosed by court order if:

(1) The disclosure is necessary to

protect against an existing threat to

life or of serious bodily injury . . .

(2) The disclosure is necessary in

connection with investigation or

prosecution of an extremely serious

crime, such as one which directly

threatens loss of life or serious bodily

injury, including homicide, rape,

kidnapping, armed robbery, assault with a

deadly weapon, or child abuse and

neglect; or (3) The disclosure is in

connection with litigation or an

administrative proceeding in which the

patient offers testimony or other

evidence pertaining to the content of

confidential communications.

42 C.F.R. sec. 2.63(a). Because none of

those conditions apply here, any

confidential communications must be

redacted before Dr. Chandler’s

representatives may view the records.

The district court’s discovery order

violates these regulations. It permits

four individuals, three of Dr. Chandler’s

attorneys and a paralegal, to view all of

the records for ten days. It places no

restrictions on the type of information

that will be made available to them. The

statute and regulations do not

contemplate even limited disclosure of

non-confidential communications without

notice or of confidential communications

without one of the conditions of sec.

2.64 being satisfied./12 Dr. Chandler

maintains that she has no need to view

confidential materials, therefore, the

court should be able to craft an order

which satisfies both the regulations and

Dr. Chandler’s legitimate need to view

some of the non-confidential

communications.

Mandamus will issue requiring the

district court to vacate its discovery

order. Given the lapse of time between

the 1999 notice and the disclosure, new

notice should be sent to all patients

whose records might be examined by Dr.

Chandler’s representatives. Further,

notice must be sufficiently clear that

the New Start patients will understand,

without the aid of counsel, what is at

stake and what they must do to assert

their rights. No disclosure may be made

until sufficient time has passed to give

the patients an opportunity to decide

whether to intervene and to seek legal

assistance.

Conclusion

Cook County is a person within the

meaning of the False Claims Act and does

not enjoy immunity from the FCA’s damages

scheme. Therefore, the district court’s

decision in 00-4110 is REVERSED and the

case is REMANDED with orders to reinstate

Cook County as a party to this action.

The district court’s discovery order runs

afoul of federal privacy regulations and

violates important private rights

andpublic policies. Therefore, MANDAMUS

will issue in 01-1810, and the district

court is ordered to enter a new

protective order consistent with this

opinion. Each party shall bear its own

costs in these appeals.

No. 00-4110 REVERSED and REMANDED

No. 01-1810 MANDAMUS ISSUED

FOOTNOTES

/1 The Hektoen Institute for Medical Research, a

defendant in this action in the district court,

filed a motion for non-involvement in this

appeal. The court granted that motion.

/2 Dr. Chandler initially sued Cook County Hospital

in addition to these defendants. The hospital was

found to have no identity independent of Cook

County and was dismissed from the case. See

United States ex rel. Chandler v. Hektoen Inst.,

35 F. Supp.2d 1078, 1086 (N.D. Ill. 1999).

/3 Sec. 3729 provides:

(a) Any person who--

(1) knowingly presents, or causes to be present-

ed, 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;

(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 get-

ting a false or fraudulent claim allowed or paid;

. . .

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.

31 U.S.C. sec. 3729(a).

/4 Under Illinois law, Cook County is a "home rule"

unit. Secretary of State of Illinois, Illinois

Counties & Incorporated Municipalities 30 (1993);

see also Ill. Const. Art. VII sec. 6; Nevitt v.

Langfelder, 623 N.E. 2d 281, 285 (Ill. 1993)

(noting that Cook County and the City of Chicago

are the only home rule units in Illinois with

populations in excess of 1 million people).

"Except as limited by this Section, a home rule

unit may exercise any power and perform any

function pertaining to its government and affairs

including, but not limited to, the power to

regulate for the protection of the public health,

safety, morals and welfare; to license; to tax;

and to incur debt." Ill. Const. Art. VII, sec.

6(a). Home rule status is automatically granted

to any municipality with a population greater

than 25,000 and any county with a chief executive

elected by the voters, or any municipality who

chooses such status by referendum. Id. The legis-

lature may preempt the taxing power of a home

rule unit by a three-fifths vote of both houses.

See id. sec. 6(g). The legislature may also

preempt, by ordinary majority vote, "any power or

function of a home rule unit other than a taxing

power" or certain local improvements and special

services. Id. sec.sec. 6(h), (l).

/5 There is no reason to presume that a decision by

the Justice Department not to assume control of

the suit is a commentary on its merits. The

Justice Department may have myriad reasons for

permitting the private suit to go forward includ-

ing limited prosecutorial resources and confi-

dence in the relator’s attorney.

/6 This change shifted the FCA’s damages regime from

a compensatory system to a punitive one, see

Stevens, 529 U.S. at 785-86, thereby implicating

municipalities’ common-law immunity from punitive

damages. See infra sec. II(B).

/7 The Supreme Court in Stevens found that this

definition militated against a finding that

states were within the definition of "person."

See Stevens, 529 U.S. at 784. The court reasoned

that if Congress wanted to include states within

the ambit of sec. 3729, it could have provided a

similar definition within that provision. Id.

Given the presumption that States are not includ-

ed within the definition of "person," "the fail-

ure to add States to sec. 3729 suggests that

States are not subject to quitam liability under

sec. 3729." Id. at 784 n.14. Municipalities and

other political subdivisions, however, are pre-

sumptively within the meaning of "person." Con-

gress’ inclusion of "political subdivision of a

State" within sec. 3733’s definition of person

and its exclusion from sec. 3729’s definitions

section does not have the same meaning as Con-

gress’ similar action with regard to states. We

need not draw the same inference the Supreme

Court drew from this aspect of the statute’s

structure because Cook County does not enjoy the

same privilege of place within our constitutional

structure enjoyed by states.

/8 The Supreme Court in Stevens found this statement

to be erroneous. See Stevens, 529 U.S. at 783

n.12. The committee’s error, however, was in

presuming that "person" in its broad sense in-

cluded states which, as Stevens points out, is

not the case. Given the sovereign status of

states, Congress must do something more to bring

states within the coverage of a federal law than

enact a law aimed at "persons," even if that term

is used in its broadest sense. See id. at 780-81.

The same is not true of municipal corporations

and other governmental bodies within state bound-

aries. Therefore, while the committee report was

incorrect with respect to the liability of states

under the FCA before 1986, we believe it was

correct in asserting that political subdivisions

of states were, and are, subject to suit under

the FCA so long as they are not properly consid-

ered arms of the state itself.

/9 The Supreme Court had held that the double damag-

es recoverable before 1986 were remedial. See

United States v. Bornstein, 423 U.S. 303, 315

(1976).

/10 Because our holding on this point creates an

intercircuit conflict, this opinion has been

circulated to the entire court. Circuit Rule

40(e). No judge in active service has requested

a vote to hear this case en banc.

/11 Because Cook County is reinstated, we need not

consider the County’s argument that we have

jurisdiction under the doctrine of Dellwood Farms

v. Cargill, Inc., 128 F.3d 1122 (7th Cir. 1997).

Dellwood held that "[w]hen the [discovery] order

is directed against a nonparty, as it is here, he

has no appellate remedy at the end of the litiga-

tion, so he is allowed to appeal immediately."

Id. at 1125.

/12 The regulations provide that:

Disclose or disclosure means a communication of

patient identifying information, the affirmative

verification of another person’s communication of

patient identifying information, or the communi-

cation of any information from the record of a

patient who has been identified.

42 C.F.R. sec. 2.11.