Jurisdictional Statement — United States v. Halper

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OCTOBER TERM, 1987

UNITED STATES OF AMERICA, APPELLANT

Vv.

IRWIN HALPER

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

JURISDICTIONAL STATEMENT

CHARLES FRIED

Solicitor General

RICHARD K. WILLARD

Assistant Attorney General

THOMAS W. MERRILL

Deputy Solicitor General

Roy T. ENGLERT, JR.

Assistant to the Solicitor General

MICHAEL JAY SINGER

THOMAS M. BONDY

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 633-2217

_ “ae

‘te?

QUESTION PRESENTED

Whether the $2000-per-false-claim penalty prescribed

‘by the civil False Claims Act, 31 U.S.C. 3729-3731, when

applied to a defendant who has already been convicted

and punished under the criminal false claims statute (18

U.S.C. 287) for 65 false claims of $9 each, is in effect a

criminal penalty prohibited by the Double Jeopardy

Clause.

PARTIES TO THE PROCEEDING

In addition to the parties named in the caption, Morris

Halper, M.D., was named as a defendant in the govern-

ment’s complaint in the district court, but the complaint

was dismissed as against him pursuant to a stipulation.

TABLE OF CONTENTS

Page

EEL ee ce dba wascaseecececces l

es eee cid ccacecesccescccss l

Constitutional and statutory provisions involved ............ 2

ek a ewes cccescesccece 4

re y

EEE EE ES 22

TABLE OF AUTHORITIES

Cases:

Berdick v. United States, 612 F.2d 533 (Ct. Cl. 1979) .... 13

Brown v. United States, 524 F.2d 693 (Ct. Cl. 1975) ..... )

California v. Grace Brethren Church, 457 U.S. 393

Ne teak cbscccvcees 2

Chapman v. United States, 821 F.2d 523 (10th Cir.

ee eae k cbc cc ccveccccccce 10, 19

FCC v. League of Women Voters, 468 U.S. 364 (1984) ... 2

FTC v. Minneapolis-Honeywell Regulator Co., 344 U.S.

EEE ESS a, rn 2

Fleming v. Rhodes, 331 U.S. 100 (1947) ............... 2

Flemming v. Nestor, 363 U.S. 603 (1960) .............. 19

Helvering v. Mitchell, 303 U.S. 391 (1938) ............. 11, 20

Mayers v. Department of Health & Human Services, 806

F.2d 995 (lith Cir. 1986), cert. denied, No. 86-1887

es coc acc ecesescccccesess 10, 21

One Lot Emerald Cut Stones & One Ring v. United

I oon os occa ckcctevcosececs 19

Rex Trailer Co. v. United States, 350 U.S. 148 (1956) .... 9, 10

12, 13, 14, 15, 19, 20

United States v. Bekhrad, 672 F. Supp. 1529 (S.D. lowa

EL LE ALIASES EE 5

United States v. Bornstein, 423 U.S. 303 (1976) ......... 4,6

United States v. Cato Bros., 273 F.2d 153 (4th Cir. 1959),

cert. denied, 362 U.S. 927 (1960) ................... 8

United States v. Darusmont, 449 U.S. 292 (1981) ........ 2

United States v. Hill, No. MCA 84-2144-RV (N.D. Fla.

EE 5

IV Vv

Cases — Continued: Page Statutes and rule— Continued: Page

United States v. Hughes, 585 F.2d 284 (7th Cir. 1978) .... 8, 21 Eee ae Re 6

United States v. Jacobson, 467 F. Supp. 507 (S.D.N.Y. 18 U.S.C. 9

BN ins swcsicctedaadidce teem atads 8 sss lle ”

United States v. McNinch, 356 U.S. 595 (1958) ......... 17 i gr 19

United States v. One Assortment of 89 Firearms, 465 U.S. 42 U.S.C. 1320a-7a SOVGCCOEC Ce OU ERE ROH 006606466802 ES 10, 19-20

EE 06 cxdkwacsacdsdasdedcudeneeneeutanes ees 19 I ere Pree re MER ay 8

United States v. Ward, 448 U.S. 242 (1980) .......... 15, 19, 20 ;

United States ex rel. Fahner vy. Alaska, 591 F. Supp. 794 Miscellaneous:

i Se cad code ck baneee eed eaanbeneesuis

(N.D ) 15 H.R. Rep. 99-660, 99th Cong., 2d Sess. (1986) ...... 4, 6, 16, 17

United States ex rel. Marcus v. Hess, 317 U.S. 537

OE bes cc coc cccdauataccoineisiece dese passim S. Rep. 99-345, 99th Cong., 2d Sess. (1986) ............ 4, 6,

8, 9, 10, 16, 17, 18, 21

Constitution, statutes and rule:

U.S. Const. Amend. V (Double Jeopardy Clause) ....... 2, 9,

11, 13, 20

False Claims Act, 31 U.S.C. (1940 ed.) 231 ............. 12

False Claims Act, 31 U.S.C. 3729-3731 ................ passim

PS dns 6o6eubddieeesiesdeees 2, 3, 4, 6, 20

ERs ong nb ntaceceoensoowetoennwes 6

Pp I. vcccceskerennsedeccessoasuas 6 a

ey os oc ks c¥eudaauwecusdeewdsue 4, 20

Pe es Nas ve dvewdedeseccehpankteedeas 11

False Claims Amendments Act of 1986, Pub. L. No.

a do cbcnade seenmeckeneweces 3,4

§ 2, 100 Stat. 3153-3154 (to be codified at 31

DAs SE o 6.0% é canncesnvuvesakinbent 3, 4, 15, 20

§ 2, 100 Stat. 3154 (to be codified at 31 U.S.C.

DEES cctccdeckoctanes vednenecceudsltecets 4,5

§ 3, 100 Stat. 3154 (to be codified at 31 U.S.C.

SEE oc auwkdstacceenseeckuetenaeeerentess 20

§ 5, 100 Stat. 3158 (to be codified at 31 U.S.C.

ED nc Gb eke 6k6oe bneetaennntiesdeldchens 18

§ 5, 100 Stat. 3158 (to be codified at 31 U.S.C.

BOE 6.6 cc ab eewenséduatin6eakiosdehseocens 7

i, Pr occeeen as awaes eeuueendecneed 6

Surplus Property Act of 1944, 50 U.S.C. (1946 ed.) App.

SD g bnaa sss cksncbassedsdedenbveiceecuisiesen 12, 13

Lf FS Re FU ew rrr peers er 6, 20

Jn the Supreme Court of the United States

OCTOBER TERM, 1987

No.

UNITED STATES OF AMERICA, APPELLANT

IRWIN HALPER

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

JURISDICTIONAL STATEMENT

OPINIONS BELOW

The opinion of the district court declaring the statute

unconstitutional as applied (App., infra, la-Sa) is reported

at 664 F. Supp. 852. A prior, superseded opinion of the

district court (App., infra, 6a-lla) is reported at 660 F.

Supp. 531. °

JURISDICTION

The judgment of the district court (App., infra, 12a)

was filed on October 21, 1987.' A notice of appeal to this

' An earlier judgment was filed on May 1, 1987. That judgment was

superseded when the district court issued a new opinion, altering the

relief awarded, in July 1987. The October 21 judgment was entered

pursuant to the July 1987 opinion. On October 28, 1987, the district

court On its Own motion entered yet a third judgment (App., infra,

15a), which did not come to our attention until December 1987. The

October 28 judgment, like the October 21 judgment, awards the

United States double damages of $1170 in accordance with the court’s

July 1987 opinion, but does not award the additional $130,000 to

which the United States is entitled under the $2000-per-false-claim

penalty prescribed by the False Claims Act. The October 28 judgment

(1)

Court (App., infra, 13a-14a) was filed on November 19,

1987. On January 13, 1988, Justice Marshall extended the

time within which to docket this appeal to and including

February 17, 1988. The jurisdiction of this Court is in-

voked under 28 U.S.C. 1252.?

CONSTITUTIONAL AND STA’ JTORY

PROVISIONS INV

The Double Jeopardy Clause of the Fifth Amendment

provides: “nor shall any person be subject for the same of-

fence to be twice put in jeopardy of life or limb.”

31 U.S.C. 3729, before its amendment in 1986, provided

in pertinent part:

A person not a member of an armed force of the

United States is liable to the United States Govern-

ment for a civil penalty of $2,000, an amount equal to

2 times the amount of damages the Government sus-

tains because of the act of that person, and costs of

the civil action, if the person—

(1) knowingly presents, or causes to be

presented, to an officer or employee of the

differs from the October 21 judgment only in that it explicitly awards

costs to the government. The October 21 judgment, which was cited in

our notice of appeal (id. at 13a), constitutes the court’s final judgment

in this case for purposes of appealing from the court’s holding in its

July 1987 opinion that the statute is unconstitutional as applied. See

FCC v. League of Women Voters, 468 U.S. 364, 373-374 n.10 (1984);

FTC v. Minneapolis-Honeywell Regulator Co., 344 U.S. 206, 211-212

(19Sz,.

2 “[A} direct appeal {under 28 U.S.C. 1252] may be taken when, as

here, a federal statute has been held unconstitutional as applied to a

particular circumstance.” United States v. Darusmont, 449 U.S. 292,

293 (1981) (per curiam); see California v. Grace Brethren Church, 457

U.S. 393, 405 (1982) (citing Fleming v. Rhodes, 331 U.S. 100, 102-103

(1947)).

Government or a member of an armed force a

false or fraudulent ciaim for payment or ap-

proval; [or]

(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; [or]

(3) conspires to defraud the Government by

getting a false or fraudulent claim allowed or

paid * * *.

31 U.S.C. 3729, as amended by Section 2 of the False

Claims Amendments Act of 1986, Pub. L. No. 99-562, 100

Stat. 3153, 3153-3154, provides in pertinent part:

(a) * * * Any person who—

(1) knowingly presents, or causes to be

presented, to an officer or employee of the

United States Government or a member of the

Armed Forces of the United States a false or

fraudulent claim for payment or approval; [or]

(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; [or]

(3) conspires to defraud the Government by

getting 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 * * *,

* * * A person violating this subsection shall also be

liable to the United States Goverment for the costs of

a civil action brought to recover any such penalty or

damages.

STATEMENT

1. The civil False Claims Act, 31 U.S.C. 3729-3731,

was first enacted in 1863 and signed into law by President

Lincoln in an effort to “stop{] the massive frauds

perpetrated [against the Union Army] by large [defense]

contractors during the Civil War.” United States v. Born-

stein, 423 U.S. 303, 305 n.1, 309 (1976). It is “the Govern-

ment’s primary litigative tool for combatting fraud” (S.

Rep. 99-345, 99th Cong., 2d Sess. 2 (1986); see H.R. Rep.

99-660, 99th Corg., 2d Sess. 18 (1986)). “[T]his statute has

been used more than any other in defending the Federa!

treasury against [fraud]” (S. Rep. 99-345, supra, at 4).

In pertinent part, the statute gives the United States (31

U.S.C. 3730(a)) a civil cause of action against defined

classes of persons who seek the payment of false claims by

the federal government (see 31 U.S.C. 3729). The version

of the statute that was in effect at the time of the false

claims in this case provides that, if a defendant is deter-

mined to have committed a false claim violation within the

meaning of the Act, the government is entitled to recover a

civil penalty of $2000 plus double damages and costs. 31

U.S.C. 3729. The $2000-rer-claim penalty remained in the

statute, unchanged, from 1863 to 1986 (H.R. Rep. 99-660,

supra, at 17).

>On October 27, 1986, the President signed into law the False

Claims Amendments Act of 1986, Pub. L. No. 99-562, 100 Stat. 3153

(1986 Amendments). The 1986 Amendments revise the civil False

Claims Act to provide in most instances for a civil penalty of from

$5000 to $10,000 plus triple damages and costs. See 1986 Amendments

§ 2, 100 Stat. 3153-3154. It is the position of the United States that

(with limited exceptions) the 1986 Amendments are applicable to all

2. Appellee was the manager of New City Medical

Laboratories, Inc. (New City), which provided medical

services for patients eligible for benefits under the federal

Medicare program (App., infra, 6a). Providers under that

program are entitled to federal reimbursement, at

specified rates, for services rendered to Medicare re-

cipients. From about January 1982 to December 1983, ap-

peilee submitted 65 different false claims for reimburse-

ment to Blue Cross and Blue Shield of Greater New York

(Blue Cross), a fiscal intermediary of the Department of

Health and Human Services, which administers the

Medicare program (id. at 7a). Each of the 65 claims

demanded payment of $12 for a service whose perform-

ance was actually reimbursable for only three dollars (id.

at 7a-8a). Blue Cross was unaware of the misrepresenta-

tions, and it paid New City the full amount that it re-

quested (ibid.). New City was thus overpaid by a total of

$585.

When the government became aware of his fraud, ap-

pellee was indicted on 65 counts under the criminal false

cases pending on their effective date, including cases in which the false

claims were made earlier. See United States v. Hill, No. MCA

84-2144-RV (N.D. Fla. Nov. 12, 1987). But see United States v.

Bekhrad, 672 F. Supp. 1529 (S.D. lowa 1987). The government did

not assert a demand for civil penalties under the amended version of

the statute in the present case, however, and accordingly the only

question before this Court concerns the constitutionality of the

pre-1986 version of the statute.

* As the district court noted (App., infra, 8a), the fact that appellee

submitted the false claims to an intermediary rather than directly to

the government does not in any way shield him from liability under

either the civil or the criminal false claims statute. Congress has now

codified this rule. See 1986 Amendments § 2, 100 Stat. 3154 (to be

codified at 31 U.S.C. 3729%(c)).

claims statute (18 U.S.C. (1982 ed.) 287), which makes it a

crime to “make[] or present{] * * * any claim upon or

against the United States, or any department or agency

thereof, knowing such claim to be false, fictitious, or

fraudulent.”* On July 9, 1985, appellee was convicted on

all 65 counts as well as 16 counts of mail fraud. He was

fined $5000 and sentenced to two years’ imprisonment.

App., infra, 8a.

3. On April 11, 1986, the government commenced this

civil action against appellee under the civil False Claims

Act, 31 U.S.C. 3729-3731. At the time the action was in-

stituted, that Act provided in pertinent pari that a person

who “knowingly presents, or causes to be presented [to the

government] a false or fraudulent claim for payment or

approval,” or who “knowingly makes * * * a false * * *

statement to get a false or fraudulent claim approved,” “is

liable to the United States Government for civil penalty of

$2,000, an amount equal to 2 times the amount of

damages the Government sustains * * * and costs of the

civil action” (31 U.S.C. 3729(1), (2)). Because the statute

provided for a civil penalty of $2000, the government

sought a total civil penalty of $130,000, i.e., $2000 for

each of appellee’s 65 violations.° The government also

sought double damages ($1170) and costs.

In an initial opinion filed on April 29, 1987, the district

court granted summary judgment for the government on

> Appellee was charged, tried, and sentenced under the pre-1986

version of this statute. Section 7 of the 1986 Amendments, 100 Stat.

3169, revised the wording of this statute but did not change the

substance of the offense. See 18 U.S.C. (Supp. IV) 287.

® When a defendant submits several fraudulent demands tor pay-

ment, in general each individual false payment demand gives rise to a

separate false claim violation for purposes of the False Claims Act.

See United States vy. Bornstein, 432 U.S. at 309 0.4; S. Rep. 99-345,

supra, at 8, 9; H.R. Rep. 99-660, supra, ai 21.

;

the question of appellee’s liability (App., infra, 6a).

Noting that appellee’s conviction under the criminal false

claims statute “necessarily determined” (id. at 8a) that he

shad knowingly submitted false claims, the court ruled that

appellee was collaterally estopped from denying liability in

this civil action (id. at 9a).’

The court, however, declined to impose the civil penalty

of $130,000 that the government had requested. Stating

that “the amount by which the 65 claims were inflated was

$9.00 for each claim, or [a total of] $585” (App., infra,

10a), the court declared that “the total amount necessary

to make the Government whole bears no rational relation

to the $130,000 penalty the Government seeks” (ibid.).

The «court regarded a civil penalty of $130,000 as

disproportionate to appellee’s total overbillings, and it

suggested that such a penalty would constitute, in effect, a

“criminal” punishment (id. at 9a, 10a). Because appellee

had already been criminally convicted and sentenced for

his commission of the acts on which this civil action is

based, the court stated that appellee “would have a valid

double jeopardy defense” (id. at 10a) if a penalty of

$130,000 were imposed in this case.

Apparently because of its double jeopardy concerns, the

court construed the statute to mean that “the imposition of

a civil penalty of $2000 for each false claim [is not] man-

datory” (App., infra, 10a). The court then determined that

“a civil penalty of $2,000 on 8 of the 65 claims, or $16,000,

will reasonably compensate the Government for actual

damages as well as expenses incurred in investigating and

prosecuting this action” (ibid.). Accordingly, the court im-

posed on appellee a $16,000 civil penalty (id. at 11a).

’ The new, amended version of the statute contains an explicit col-

lateral estoppel provision. See 1986 Amendments § 5, 100 Stat. 3158

(to be codified at 31 U.S.C. 3731(d)).

4. The government moved for reconsideration of the

district court’s decision pursuant to Fed. R. Civ. P. 59(e).

The government argued that it was well established that

the statute requires a separate civil penalty of $2000 for

each false claim and that the court therefore lacked the

discretion to award a penalty of less than $130,000 in this

case. The court thereupon issued a new opinion and judg-

ment (App., infra, la-Sa, 12a), agreeing with the govern-

ment’s statutory interpretation but holding the statute un-

constitutional as applied.

The court acknowledged that it had erred in interpreting

the statute to allow less than a total civil penalty of $2000

for each statutory infraction (App., infra, 2a).* The court

therefore revisited the double jeopardy concerns expressed

in its previous opinion. It recognized (App., infra, 3a-4a,

9a) that in United States ex rel. Marcus v. Hess, 317 U.S.

* The court stated in its amended opinion that “[{t}he Government

now has cited to compelling authority that, in the absence of Govern-

ment consent, the $2,000 penalty for each false claim is mandatory”

(App., infra, la-2a). See, e.g., United States v. Hughes, 585 F.2d 284,

286 (7th Cir. 1978) (“This [$2000-per-false-claim] forfeiture provision

is mandatory; it leaves the trial court without discretion to alter the

statutory amount.”); Brown v. United States, 524 F.2d 693, 705-706

(Ct. Cl. 1975); United States v. Cato Bros., 273 F.2d 153, 156 (4th Cir.

1959), cert. denied, 362 U.S. 927 (1960); United States v. Jacobson,

467 F. Supp. 507, 508 (S.D.N.Y. 1979). The Senate Judiciary Com-

mittee has recently reconfirmed this understanding of the pre-1986

statute (S. Rep. 99-345, supra, at 8 (emphasis added)):

In its present form, the False Claims Act empowers the United

States to recover double damages * * *. In addition, the United

States may recover one $2,000 forfeiture for each false claim sub-

mitted in support of a claim. The imposition of this forfeiture is

automatic and mandatory for each claim which is found to be

false. The United States is entitled to recover such forfeitures

solely upon proof that false claims were made, without proof of

any damages.

537 (1943), this Court had held that the False Claims Act’s

$2000 penalty provision was civil, not criminal, and

therefore did not implicate the Double Jeopardy Clause.

The court nevertheless found this case distinguishable on

its facts from Hess, because “[t}he penalty imposed in

Hess was approximately equal to the actual loss sustained

by the government” (App., infra, at 4a). Focusing on a

perceived “tremendous disparity between actual damage

and the ‘civil penalty’ in this case” (ibid.), the court

repeated its earlier statement that a penalty of $130,000 in

this case would “bear[{] no rational relation to the Govern-

ment’s loss” (id. at Sa). The court concluded (ibid.):

[T]he $130,000 penalty sought in this case amounts

to a criminal penalty for violations for which Halper

has already been punished.

Judgment in this amount would violate the Double

Jeopardy Clause. The statute, therefore, is un-

constitutional as applied to Halper, and the sought-

after relief of $130,000 must be denied.

The court limited the government’s recovery to double

damages ($1170) and costs, with no civil penalty at all

(App., infra, Sa).

THE QUESTION IS SUBSTANTIAL

The district court in this case has struck down as un-

constitutional the statute “that has been used more than

any other in defending the Federal treasury against

{fraud]” (S. Rep. 99-345, supra, at 4). The district court’s

holding —that the False Claims Act’s civil penalty provi-

sion is really a “criminal” penalty provision in the cir-

cumstances of this case and therefore violates the Double

Jeopardy Clause—is at odds with United States ex rel.

Marcus v. Hess, supra, and Rex Trailer Co. v. United

States, 350 U.S. 148 (1956), in which this Court rejected

the double jeopardy analysis that the district court

adopted here.

The error in the district court’s decision is not limited to

its inconsistency with this Court’s decisions in Hess and

Rex Trailer. The district court’s ruling also disregards

Congress’s recent amendments of the False Claims Act.

Although the views of a subsequent Congress are, of

course, not controlling with regard to the meaning of a

prior enactment, they are nevertheless instructive. In

amending this statute in 1986, Congress increased the civil

penalties for false claims and explicitly reaffirmed that the

statute’s “civil penalties” are indeed civil, not criminal, for

double jeopardy and other purposes. The district court's

view that the civil penalty in this case is disproportionately

harsh cannot ve squared with Congress’s view that even

more severe penalties are appropriate. By characterizing

the False Claims Act’s civil penalties as “civil” in some

cases and “criminal” in other cases, depending on the

court’s view of whether the penalty is proportionate to the

magnitude of the defendant’s fraud in the particular case,

the theory embraced by the district court also threatens

serious disruption of a statutory enforcement scheme that

Congress recently reaffirmed in “the Government's

primary litigative tool for combatting fraud” (S. Rep.

99-345, supra, at 2).°

* The district court’s theory, if followed, would hamper the govern-

ment’s Ongoing enforcement efforts not only under the False Claims

Act, but also under other, similar statutory schemes that provide tor

civil penalties in addition to criminal sanctions. See, e.g., Chapman v.

United States, 821 F.2d $23, $28-S29 (Oth Cir. 1987) (holding Civil

Monetary Penalties Act, 42 U.S.C. 1320a-7a, “civil” and rejecting

double jeopardy claim); Mayers v. Department of Health & Human

Services, 806 F.2d 995, 999 (Lith Cir. 1986) (holding same statute

“civil”), cert. denied, No. 86-1887 (Oct. 5, 1987).

1. The district court’s decision is inconsistent with this

Court’s decision in United States ex rel. Marcus v. Hess,

supra. In Hess, various electrical contractors had engaged

in a collusive bidding scheme on a federally funded public

works project. They were convicted under the criminal

false claims statute and fined $54,000 (317 U.S. at 545).

An action was then brought against the same contractors

under the civil False Ciaims Act.'®° The complaint sought

the imposition of 56 civil penalties of $2000 each, for a

total civil penalty of $112,000 (317 U.S. at 540). The

defendants asserted that the civil suit was barred by the

Double Jeopardy Clause on the ground that imposition of

a civil penalty of $112,000 over and above the previous

criminal fine would constitute a second criminal punish-

ment for the same conduct (id. at 548).

This Court rejected the defendants’ argument. The

Court began with the premise that double jeopardy at-

taches only in a criminal proceeding (317 U.S. at 549

(quoting Helvering v. Mitchell, 303 U.S. 391, 399 (1938))):

Congress may impose both a criminal and a civil sanc-

tion im respect to the same act or omission; for the

double jeopardy clause prohibits merely punishing

twice, or attempting a second time to punish criminal-

ly, for the same offense. The question for decision is

thus whether [the statute in question] imposes a

criminal sanction.

The Court then explained that, unlike the purpose of the

criminal false claims statute, which is to punish

wrongdoers and “to vindicate public justice” (Hess, 317

U.S. at 548-549), “the chief purpose of the [civil False

'© The civil action was brought by a private party, in the govern-

ment’s name, pursuant to the False Claims Act’s gui tam provisions

(31 U.S.C. 3730(b)).

Claims Act] was to provide for restitution to the govern-

ment of money taken from it by fraud” (/d. at 551).

The Court acknowledged that, in any particular case,

the civil penalty of $2000 might exceed the amount of the

fraud actually perpetrated on the government. But the

Court emphasized that the statute—especially when con-

sidered in light of its criminal counterpart (see 317 U.S. at

549) — was clearly intended to provide a civil remedy, and

that “[t}his remedy does not lose the quality of a civil ac-

tion because more than the precise amount of so-called ac-

tual damage is recovered.” Jd. at 550. The Court con-

cluded, therefore, that there was no merit to the defend-

ants’ argument “that the $2,000 ‘forfeit and pay’ provision

is ‘criminal’ rather than ‘civil’ ” (id. at 551).''

This Court’s holding in Hess was reiterated 13 years

later in Rex Trailer Co. v. United States, supra. In Rex

Trailer, the defendant was criminally convicted of using

fraud in buying surplus war assets from the government

and was fined $25,000 (350 U.S. at 149). After the

criminal conviction, the government filed a civil action

under the Surplus Property Act of 1944, 50 U.S.C. (1946

ed.) App. 1635, seeking the imposition of five civil

penalties of $2000 each based on the same five acts of

fraud that gave rise to the criminal proceeding. The de-

fendant asserted that the previous criminal conviction

posed a double jeopardy bar to the government’s civil

penalty proceeding (350 U.S. at 150).

As in Hess, this Court rejected the defendant’s argu-

ment. “The only question for * * * decision,” the Court

observed, “is whether [the civil penalty provision] is civil

'' The phrase “forfeit and pay” came from the language ol the ver-

sion of the civil False Claims Act then in effect, 31 U.S.C. (1940 ed.)

231, which provided that anyone who submits a false claim against the

government “shall forfeit and pay to the United States the sum of two

thousand dollars” plus double damages and costs.

or penal” (350 U.S. at 150). Noting that the Surplus Prop-

erty Act’s civil penalty provision was “virtually identical”

(id. at 152 a.4) to the civil penalty provision in the False

Claims Act that was upheld in Hess, the Court followed

Hess and concluded that the $2000 civil penalty provision

al issue was civil, not criminal, and therefore did not im-

plicate the Double Jeopardy Clause (id. at 152).

The defendant in Rex Trailer sought to bolster its argu-

ment by using the same argument that the district court

employed in the present case: that the penalty was

disproportionate to the government’s actual loss under the

circumstances of that case. Indeed, in Rex Trailer the

defendant’s fraud had not been shown to have resulted in

any damages to the government (350 U.S. at 152). The

Court rejected this effort to escape from Hess. Repeating

Hess’s admonition that “ ‘[t}he inherent difficulty of

choosing a proper specific sum which would give full

restitution was a problem for Congress’ ” (ibid. (quoting

Hess, 317 U.S. at 552)), the Court explained that the $2000

civil penalty provision was essentially a “liquidated-

damage” provision (350 U.S. at 151, 153). The fact that

the civil penalty provision effectively served as a

liquidated-damages clause, to provide a rough, across-the-

board measure of the government’s recovery, did not

“transform[] what was clearly intended as a civil remedy

into a criminal penalty” (id. at 154).

The district court’s approach in this case cannot be

squared with this Court’s explicit rejection of the defend-

ants’ double jeopardy arguments in Hess and Rex Trailer.

In characterizing the False Claims Act’s penalties as

“criminal,” the district court in this case has adopted a

position that this Court has already twice rejected. See

Berdick v. United States, 612 F.2d 533, 538 (Ct. Cl. 1979)

(citing Hess; “the forfeitures required by the False Claims

Act are civil, not criminal, * * * and the double jeopardy

provisions of the Fifth Amendment do not apply”).

The district court erred in its effort to distinguish Hess.

Although “[{t}he penalty imposed in Hess was approx-

imately equal to the actual loss sustained by the govern-

ment” (App., infra, 4a; see Hess, 317 U.S. at 540), this

Court’s decision did not in any way turn on the amount of

damages inflicted on the government in that particular

case. Indeed, Rex Trailer expressly rejected the

defendant’s double jeopardy argument in the face of a

contention that the government had suffered no loss at all.

Moreover, the district court’s theory that a statute can

be “civil” in some cases and “criminal” in others, depend-

ing on whether it leads (in the court’s view) to a dispropor-

tionate sanction, would produce bizarre consequences.

Consider two proceedings both brought under the False

Claims Act, one involving a $112,000 penalty for 56 false

claims costing the government $100,000 and the other in-

volving a $130,000 penalty for 65 false claims costing the

government $585. If the first proceeding is “civil” (follow-

ing Hess) and the second is “criminal” (under the decision

below), then in the second case—but not the first —the

government would be required to prove its case beyond a

reasonable doubt. Conversely, in the first case the defend-

ant would be entitled to take discovery under the liberal

provisions of the Federal Rules of Civil Procedure, but the

defendant in the second case would be allowed only the

more limited discovery available in criminal cases. Indeed,

under the district court’s theory a case might proceed to

trial as a “civil” case only later to be held “criminal” (and

to require more procedural safeguards) if the evidence

developed at trial led the district court to question the

“proportionality” of the civil penalty or if the court of ap-

peals disagreed with the district court’s conclusion that the

penalty was not unduly disproportionate.

This Court’s decisions do not support any such case-by-

case analysis of whether a statute is “civil” or “criminal” in

nature. To the contrary, once it is established that Con-

gress intended to create a “civil” penalty, this Court “in-

quire[s] * * * whether the statutory scheme [i]s so punitive

either in purpose or in effect as to negate [Congress’s] in-

tention.” United States v. Ward, 448 U.S. 242, 248-249

(1980) (emphasis added). The question whether this

Statutory scheme is so punitive as to be “criminal” was

answered long ago in Hess and Rex Trailer. The district

court’s attempt to fashion a case-specific exception to

those decisions warrants review and reversal. '?

2. In two respects, Congress’s receni amendment of

the statute buttresses this Court’s rulings in Hess and Rex

Trailer that the False Claims Act’s civil penalty provision

is indeed “civil” and does not implicate double jeopardy

concerns. First, Congress has now raised the civil penalty

from $2000 per false claim to “not less than $5,000 and not

more than $10,000” per false claim. 1986 Amendments

§ 2, 100 Stat. 3154 (to be codified at 31 U.S.C. 3729(a)).

Congress’s substantial increase of the statutory penalty

weighs against the district court’s suggestion that imposi-

tion of the smaller, preexisting $2060 penalty in this case

'? The civil penalty in this particular case is as large as it is not

because Congress has provided for an excessive penalty, but because

the defendant has defrauded the government 65 times. See Uniied

States ex rel. Fahner vy. Alaska, 591 F. Supp. 794, 801-802 (N.D. Il.

1984) (imposing civil penalty in excess of one million dollars tor de-

tendant’s commission of more than 500 False Claims Act violations;

“[wjhile the total damage award in this action may appear to be ex-

cessive, it reaches such proportions for the sole reason that [the de-

fendant] has been tound to have submitted 551 separate talse claims”).

is excessive. Second, in amending the False Claims Act,

Congress explicitly reaffirmed that the civil penalty provi-

sion is intended to be a civil sanction. Congress’s own

characterization of the penalty as civil is entitled to great

weight and militates against the district court’s contrary

conclusion that the sanctions would be “criminal” in this

case.

a. Prompted by extensive findings that fraud “per-

meates generally all Government programs” (S. Rep.

99-345, supra, at 2)—particularly health-care benefit pro-

grams (id. at 4) such as the Medicare program involved in

this case (id. at 2!)—Congress revised the False Claims

Act in 1986 “[iJn order to make the statute a more useful

tool against fraud in modern times” (id. at 2). See also

H.R. Rep. 99-660, supra, at 21. Congress determined that

“[t}his growing pervasiveness of fraud necessitates mod-

ernization of” the Act (S. Rep. 99-345, supra, at 2) because

“some of the provisions of the Act are outdated” (H.R.

Rep. 99-660, supra, at 17). In particular (ibid.),

the current law permits the United States to recover

double damages plus $2,000 for each false or

fraudulent claim. This penalty has not been changed

since 1863. The Congressional Research Service has

reported that, based on the Consumer Price Index,

the buying power of $2,000 in 1863 would be close to

$18,000, today.

Thus, emphasizing that it shared “the apparent belief of

the act’s initial drafters that defrauding the Government is

serious enough to warrant an automatic forfeiture rather

than leaving fime determinations with district courts,

possibly resulting in discretionary nominal payments” (S.

Rep. 99-345, supra, at 17), Congress decided to strengthen

the civil penalties that the government is entitled to recover

from those who “plunder[] * * * the public treasury”

(United States v. McNinch, 356 U.S. 595, 599 (1958)) by

making false claims.

The amended version of the statute increased the civil

penalty per false claim from $2000 to any amount in the

$5000-to-$10,000 range and imposed triple rather than

double damages. The legislative history of the amer dment

makes it clear that Congress strengthened the govern-

ment’s civil remedies because it determined that more

severe sanctions were needed in order to stem the tide of

rampant fraud inflicted on the government. See H.R. Rep.

99-660, supra, at 18 (estimating government’s loss to fraud

at “hundreds of millions of dollars to more than $50

billion per year”); S. Rep. 99-345, supra, at 3 (giving larger

estimates and noting that “[t}he cost of fraud cannot

always be measured in dollars and cents, however”).'?

Given Congress’s substantial increase of the amount of

'3 Congress acted in order to deter those who would defraud the

government as well as to compensate the government for its monetary

and nonmonetary losses caused directly and indirectly by false claims.

See, e.g., H.R. Rep. 99-660, supra, at 18. Such a purpose was well

within Congress’s power in enacting civil remedies. As this Court

wrote in Hess, 317 U.S. at 550-551 (citations and footnote omitted),

Congress might have provided here as it did in the anti-trust laws

for recovery of “threefold damages . . . sustained and the cost of

suit, including a reasonable attorney’s fee.” Congress could re-

main fully in the common law tradition and still provide punitive

damages. “By the common as well as by statute law, men are

often punished for aggravated misconduct or lawless acts by

means of civil action and the damages inflicted by way of penalty

or punishment given to the party injured.” This Court has noted

that the general practice in state statutes of allowing double or

treble or even quadruple dainages. Punitive or exemplary

damages have been held recoverable under a statute like this

which combines provision for criminal punishment with others

which afford a civil remedy to the individual injured. The law can

provide the same measure of damage for the government as it can

for an individual.

the statutory cjvil penalty, coupled with the legislative

determination that the increased amount was necessary to

provide the government with an adequate weapon against

the “pervasive” fraud in government programs (S. Rep.

99-345, supra, at 3), the district court erred by substituting

its judgment for that of Congress as to the excessiveness of

the smaller, $2000 civil penalties sought in this case.'*

b. Congress’s recent amendments not only increased

the amount of the civil penalty to which the government is

entitled, but in addition reaffirmed that the statute’s civil

penalties are indeed “civil.” Referring to Congress’s addi-

tion to the statute of a provision “to make clear that in

civil fraud actions, the Government is required to prove all

essential elements of the cause of action [only] by a

preponderance of the evidence” (S. Rep. 99-345, supra, at

30-31; see 1986 Amendments § 5, 100 Stat. 3158 (to be

codified at 31 U.S.C. 3731(c))), the Senate Judiciary Com-

mittee took pains to explain that False Claims Act pro-

ceedings are civil in nature (S. Rep. 99-345, supra, at 31).

The Senate report makes explicit Congress’s repudiation

'* lt bears emphasis that, in raising the civil penalty from $2000 per

talse claim to $5000 to $10,000 per false claim, Congress was aware

that the civil penalty would be substantial in cases in which the defend-

amt commits many violations. The Senate report speaks to this very

situation (S. Rep. 99-345, supra, at 9):

Each separate *** “false payment demand” constitutes a

separate claim tor which a forfeiture shall be imposed * * *, and

this is true although many such claims may be submitied to the

Government at one time. For example, a doctor who completes

separate Medicare claims for each patient treated will be liable tor

a torteuure tor each such form that contains false entries even

though several such forms may be submitted to the fiscal in-

termediary al one ume.