Petition — United States ex rel. Lapin v. International Business Machines Corp.

81-2218

No.

aah .

Office - Supreme Court, U.S. |

FILED

JUN 1 1982

ALEXANDER |. STEVAS,

CLERK

In the Supreme Court of the United States

October Term, 1982

UNITED STATES ex rel. JAKE LAPIN

Petitioner,

Vv.

INTERNATIONAL BUSINESS MACHINES CORP.

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals

For the Ninth Circuit

JAKE LAPIN, Pro Se

Counsel of Record

P. O. Box 23334

Honolulu, Hawaii 95822

(808) 923-3291

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QUESTIONS PRESENTED

1. Whether the District Court

erred in applying the jurisdictional bar

when the Plaintiff-Relator made a show-

ing that:

(a) the federal agencies to

whom the Relator made his prefiling

disclosures via hot lines established

by the Government to facilitate the

collection of such solicited information,

had failed to take the required corrective

action;

(Db) the General Services Admin-

istration and the United States Attorney

were more concerned with concealing the

fact that over the years certain Govern-

ment Contracting Officers allowed the

Defendant to become unjustly enriched at

taxpayer's expense by hundreds of millions

of dollars rather than taking that action

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required by 3 Stats. 723 to discontinue

these illegal contracting practice and

to make the required report of their

existence to the President;

(c) the information actually

provided by the Relator to the Govern-

ment prior to suit concerned only the

omission by the Government to claim

refunds due the Government and this

information could not and did not alert

the Government to any wrongdoing on the

part of the Defendant; and,

(d) the Defendant will be

permitted to permanently retain unclaimed

overbillings with impunity.

2. Is the District Court's decision

in accordance with expressed Congressional

intent and the essential purpose of the

False Claims Act?

Baal

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the Relator's pleadings in favor of

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Jake Lapin

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Sy _ International Business

‘Machines Corp.

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TABLE OF CONTENTS

Questions Presented . .

List of All Parties

Opinions Below ....

Jurisdiction .....

Statutory Provisions Involved

Statement of the Case

Reasons for Granting the Writ

ene lun en

Appendix:

Decision and Order Granting

Defendant's Motion to Dismiss

for Lack of Jurisdiction of

the United States District

Court (May 16, 198)

Opinion of the United States

Court of Appeals for the

Ninth Circuit (February

26, 1982) .....

Order of the United States

Court of Appeals for the

Ninth Circuit Denying

Motion for Rehearing

(April 26, de

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AL

A22

A25

VI

Table of Contents Cont.

Prefiling Disclosures of

Information to Govern-

ment by Relator .....

Affidavit of Relator's

Supervisor Included in

, . A30

Relator's Original Infor-

mation That Was Provided

te Dastrict Cowrt ...<++«-«-«- A33

._ * * A27

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VII

TABLE OF AUTHORITIES

Cases

Pettis ex rel. United

States v. Morrison-

Knudsen Co., 577 F.2d

668 (9th Cir.

1978) 8, 18, 413, 416, 417, 418, 423, A24

United States ex rel. Marcus

v. Hess, git U.S. 537, 63 S.

Ct. 379, 87 L.Ed. 443 (1943) . . 6, Al3

United States v. Pittman,

151 F.2d 851 (5th Cir. 1945)

cert. denied, 328 U.S. 843,

66 S.Ct. 1022, 90 L.Ed.

Dee Pee ae 16, Al3

United States v. Rippetoe,

178 P. 2d 735 (4th Cir.

1949) . 9, 11, 14, 15, 20, 413, 416, 417

Inited States v. Borden Co.,

347 U.S. 514, 74 S.Ct. 703,

98 L.Ed. 903 (1954) ....... A20

Carlson v. Coca-Cola Company,

483 F.2d 279 (9th Cir.

8) Sy a A20

United States v. Florida,

615 F.2d 1370 (5th Cir.

1980) * * . o- ae OS ' OF 8 TS „ * . 16 > A23

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Table of Authorities Cont.

Safir v. Blackwell, 579 F.2d

742 (2a Cir. 1978), cert. a

denied, 441 v. 3. 943

(1978) os a kg ok ee ee ee ee 16, A23

United States v. Aster

275 P. 2d 281 (3d Cir.},

cert. denied, 364 U.S.

894 (1960) a eS. Pe el ee ae ee ee 16, 423

United States ex rel. Joseph

v. Cannon, 642 F.2d 1373

— . 0 TI. 429

Ix

Statutes and Regulations

26 0.8.6. 1298 ()) 2

31 U.S.C. 231 et seg pass

9.8.6. 1 „53. ALD

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OP Guat. GOS Sk wc ate 8 0 Al2

31 U.S.C. 3299 20

3 State. 7233 20

. 413

10 Op. Atty. Gen. 288 (1862) 20

Hawaii Revised Statutes,

Chapters 480, 481, 481A... 46

Miscellaneous

Rule 12(b)(1), F. R. c. 27. AL

Rule 56(f), F.R.C.P. F. 49

89 Cong. Rec. 10849 a

(Dee. 27, E9839) «ss eS eo we os AS

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No.

In the Supreme Court of the United States

October Term, 1982

UNITED STATES ex rel. JAKE LAPIN

Petitioner,

Vv.

INTERNATIONAL BUSINESS MACHINES CORP.

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals

For the Ninth Circuit

The Petitioner, Jake Lapin, respect-

| fully asks that a Writ of Certiorari issue

to review the final opinion of the United

States Court of Appeals for the Ninth

Circuit entered in this proceeding on

‘February 26, 1982. Rehearing was denied

2

on April 28, 1981, which action over-

ruled and denied Petitioner's Petition

for Rehearing of the Court's decision

entered February 26, 1982.

OPINIONS BELOW

The opinion of the Court of Appeals

for the Ninth Circuit is unpublished

Memorandum No. 80-4312, DC No. 79-0264,

dated February 26, 1982. The District

Court for the District of Hawaii's

opinion is reported in 490 F. Supp.

244. All opinions appear in the

Appendi= herein.

JURISDICTION

The opinion of the Court of Appeals

for the Ninth Circuit was entered on

February 26, 1982. A timely Petition

for Rehearing was denied on April 28,

1982, and this petition was filed within

90 days of that date. The jurisdiction

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STATUTORY PROVISIONS INVOLVED

28 U.S.C. 1254 (1).

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this petition.)

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STATEMENT OF THE CASE

On June 15, 1979, Petitioner-

Relator Jake Lapin filed a gui tam

action, pursuant to the False Claims

Act, 31 U.S.C. 231 et seg., on behalf

of himself and the United States against

International Business Machines Corp.

("IBM"). The complaint alleged that IBM

had made false claims upon the Government

in the form of overbillings for rentals

of automatic data processing ("ADP")

equipment by the various federal agencies

and it sought to assess the fines and

forfeitures against IBM prescribed by

Section 231.

First enacted in 1863 to protect

the Government against false claims

during times of war, the False Claims

Act has been used regularly to prosecute

frauds since its enactment. The most

5

striking provision of the Act, section

232(B), allows qui tam actions -- suits

by private citizens on behalf of the

Government as well as themselves. If a

suit by a gui tam plaintiff leads to

recovery, the plaintiff is entitled to

a portion of the recovery under section

232(E).

Petitioner-Relator Lapin commenced

this action pro se and disclaimed any

reward in the event the Government would

take over the suit. Section 232(C) gives

the Attorney General of the United States

the opportunity to enter the suit and

prosecute it. In its report to the

District Court, the United States, by the

Acting Assistant Attorney General,

declined to enter the suit. It stated

its “opinion that its rights (could) be

more effectively asserted under the

6

contract and through administrative

channels" and its concern that subject

matter jurisdiction may be lacking

under the 1943 amendments to the Act.

The Act was substantially amended

in 1943 following the decision in Marcus

v. Hess, 317 U.S. 537 (1943). That

case construed the Act to allow

"parasitic" suits, that is, suits based

solely upon information obtained from

the Government, including, for example,

from Government indictments. The 1943

amendments were intended to stem the

flood of parasitic suits by denying

jurisdiction in federal courts for suits

based on information in the possession

of the Government when the suit was filed.

Because the Petitioner-Relator

commenced this action pro se, the

district court refused t. allow the 5

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United States to be represented on a

pro se basis. Thus, Petitioner-Relator

obtained counsel on November 2, 1979 and

filed a First Amended Complaint on

December 26, 1979.

IBM moved to dismiss the action

because it considered the prefiling

disclosures of information to Govern-

ment by Relator (App. A27) and affidavit

by Relator's supervisor (App. A30) to

be an admission that Relator gathered

information regarding the alleged fraud

while he was an employee of the Govern-

ment and prior to filing Relator had

informed the Government of the basis

of his claim. There were some apparent

inconsistencies in the Relator's plead-

ings and these were resolved in favor

of Defendant.

IBM's motion to dismiss was heard

8

on March 17, 1980 and on May 16, 1980,

the district court issued a decision and

order granting Defendant IBM's Motion

to Dismiss for lack of subject matter

jurisdiction. The district court ruled

that section 232(C) of the False Claims

Act deprived the court of jurisdiction.

There are four major points in the

ruling. First, that decision purported

vO apply the rule laid down by the Ninth

Circuit in Pettis X. Morrison-Knudsen

Co., 577 F.2d 668 (9th Cir. 1978), that

section 232(C) precludes jurisdiction

where the informer gives his "information"

to the Government before filing suit and

then the Government fails to enter the

suit. The district court stated that

since “Lapin has told the United States

the suspicions upon which he bases his

suit," his action was barred.

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Second, the decision recognized the

exception to the jurisdictional bar

established in United States v. Rippetoe,

178 F.2d 735 (4th Cir. 1949), where the

information on which the suit is based

is already possessed by a Government

employee, but that person has partic-

ipated in the fraud and is interested in

concealing it. The district court said

it found no specific support for the

Rippetoe exception in the record.

Third, the decision briefly treated

the issue of how much information in the

hands of the Government at the time of

the suit is sufficient to raise the

jurisdictional bar. On this point, the

district court again claimed it followed

the Pettis decision. The district court

held it was unnecessary to examine the

amount of information because "Lapin

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does not even allege that he has more

information than does the Government."

Finally, the decision said that

there was no reason to delay ruling ...

pending discovery, since it is not even

alleged that such discovery would show

that Plaintiff-Relator had more infor-

mation than did the Government at the

time the suit was filed.”

Plaintiff-Relator thereafter timely

moved for reconsideration of the decision

and order. In the affidavits and exhibits

submitted with the motion and memorandum

that followed, the Plaintiff-Relator

addressed each of the four points in the

decision and order. Primarily these

materials showed from the Record that the

suit was based on original information in

the hands of the Plaintiff-Relator at

the time of filing (See App. A33) and

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that the information possessed by the

Government at that time was negligible.

The materials also demonstrated support

in the Record for excepting this suit

from the jurisdictional bar under the

rule in Rippetoe or under a similar

rationale. In a short memorandum

Defendant IBM opposed reconsideration on

procedural grounds.

On June 9, 1980, Judge King denied

the motion for reconsideration without

elaboration. Plaintiff-Relator there-

after made timely appeal to the United

States Court of Appeals for the Ninth

Circuit on June 10, 1980. Oral argument

was held on January 12, 1982 which was

limited to fifteen minutes per party,

and a memorandum decision was issued

on February 26, 1982. On March 9, 1982,

Relator Lapin, acting pro se, filed his

13

REASONS FOR GRANTING THE WRIT

The Courts of Appeal are in conflict

with respect to the question of whether

an informer can file and prosecute a

31 U.S.C. 232 gui tam action after such

informer provides certain information

concerning false claims and the Govern-

ment either fails to take action on such

disclosures or elects not to take over

the suit.

This question is of considerable

importance in view of the fact that the

General Accounting Office has determined

that the United States is overcharged

by about $25 billion each year.

Presently, practically every

federal agency has established its own

hot line for the purpose of soliciting

information from the public concerning

fraud, waste, and/or abuse in Government

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for the purpose of taking corrective

action on suth disclosures. However,

corrective action is not always taken

because the Department of Justice's

Civil Divison is not adequately staffed

to prosecute actions for, the recovery

of false claims that were paid by the

Government. Also, there have been

numerous instances where the federal

agencies, after becoming aware of

false claims, prefer to conceal them

or frustrate any private prosecution

because such false claims were made

possible because Government officials

violated federal laws and regulations.

Within this scenario the Courts of

Appeal are in conflict as to the right

of an informer to bring an action.

For example, the Fourth Circuit, in

United States v. Rippetoe, 176 F.2d 753

15

(4th Cir. 1949), is the most liberal in

allowing the private prosecution of

31 U.S.C. 232 actions. In addition to

not requiring that the Relator negative

information alleged to be in the hands

of the Government, Rippetoe allows

exceptions to the literal language of

the statute to carry out the legislative

purpose and to avoid absurd consequences.

Indeed, Rippetoe makes an exception where

there is a showing that Government

employees were either a party to the

transactions which enabled the false

claims to be paid or desire to conceal

the fact that such false claims were,

in fact, paid. Thus, under Rippetoe,

neither the Government nor the unjustly-

enriched Defendant would be able to

frustrate any efforts on the part of an

informer to privately prosecute a

16

31 U.S.C. 232 action after the Govern-

ment declines to enter the suit.

The Second, Third, and Fifth

Circuits allow an informer to prosecute

an action after the Government declines

to take over the suit when the informer

can show that he possessed original

information that he did not disclose

to the Government prior to filing suit.

Safir v. Blackwell, 579 F.2d 742 (2d

Cir. 1978), cert. denied, 441 U.S. 943

(1978); United States v. Aster, 275 F.2d

281 (34 Cir.), cert. denied, 364 U.S.

894 (1960); United States v. Pittman,

151 F.2d 851 (5th Cir. 1945), cert.

denied, 328 U.S. 843 (1946); United

States v. Florida, 615 F.2d 1370 (5th

Cir. 1980).

The District of Columbia Circuit

allows an informer to prosecute a

17

31 U.S.C. 232 action after the Govern-

ment refuses to take over the suit when

the information in possession of the

Government prior to the filing of the

suit could not } ve alerted the Govern-

ment to any wrongdoing on the part of the

Defendant. This Circuit also requires

that any inconsistencies in the Relator's

pleadings be resolved in favor of the

Relator. United States ex rel. Joseph

v. Cannon, 642 F.2d 1373 (D.C. Cir. 1981).

The Ninth Circuit has established

a functional test rather than apply the

comparative test previously used by the

Second, Third, and Fifth Circuits and

thus will not allow an informer to pros-

ecute an action when the evidence and

information in possession of the United

States at the time the False Claims Act

eas brought was sufficient to enable it

.

18

adequately to investigate the case and to

make a decision whether to prosecute.

Pettis v. Morrison-Knudsen Co., 577

F.2d 668 (9th Cir. 1978).

19

CONCLUSION

The Ninth Circuit Court of Appeals

should have overruled the district court

and allowed the private prosecution of

this suit to judgment because the Relator

made a showing that:

(1) The Government could never have

had sufficient information to investigate

the case and decide whether to prosecute

because it neither maintained the nec-

essary records nor preserved an audit

trail from which it could reconstruct

computer rental transactions ring the

years the 1410 model was replaced with

a 360 series model computer;

(2) A typical overbilling for

replacing a second-generation 1410 model

computer with a third generation 360/50

model computer during 1968 amounted to

$56,000 because the required performance

20

testing period was delayed for the

purpose of setting up the replacement

computer to accommodate the same programs

used by the replaced computer;

(3) The Public Record discloses

that the General Services Administration

allowed its Contracting Officers to

permit the Defendant to engage in billing

practices which were specifically

prohibited by 3 Stats. 723, 31 U.S.C. 529,

and 10 Op. Atty. Gen. 288 (1862) and

then concealed these facts it the report

it made to Congress via the Special

Counsel to the Merit Systems Protection

Board;

(4) The Rippetoe exception and/or

a Rippetoe-like exception puts the Relator

outside the scope of the jurisdictional

bar because the Public Record on file

with the Merit Systems Protection Board's

amie.

21

Office of the Special Counsel di: loses

that the United States Attorney respon-

sible for prosecuting this action, after

declining to enter the suit, then took

action to prevent the FBI from completing

an investigation underway of IBM's

billing practices;

(5) All and any inconsistencies in

Re lator's pleadings were wrongfully

resolved in favor of Defendant;

(6) The jurisdictional bar was

never intended by Congress to apply to

non-parasitical suits where the Relator

had previously disclosed to the Govern-

ment information that it had solicited

by virtue of its expressed or implied

promise to take the necessary corrective

action and then refuses to take the

corrective action required by federal

law;

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(7) The literal application of the

amendment language defeats the essential

purpose of the statute and leads to the

absurd consequence of IBM being able to

permanently retain with impunity hundreds

of millions of dollars it illegally

overbilled the Government; and,

(8) The Respondent is a judicially-

recognized whistle blower entitled to

statutory protection in his endeavor

to correct that waste, fraud, and/or

abuse that he had previously disclosed

to the Government for the expressed

purpose of correction and thus can assume

the role of a private United States

Attorney when the Government, through

its own Attorney, fails to act under

the mandate of federal law requiring

it to act.