Amicus Curiae Brief — Vermont Agency of Natural Resources v. United States Ex Rel. Stevens

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ng ech: No. 98-1828 /~) HILTED

SEP 3 18H

IN THE |

Supreme Court of the United Siig" =

October Term, 1998

STATE OF VERMONT AGENCY OF

NATURAL RESOURCES,

Petitioner,

v.

UNITED STATES OF AMERICA EX REL.

JONATHAN STEVENS,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF OF AMICI CURIAE STATES OF NEW YORK, ALABAMA, ALASKA,

ARIZONA, ARKANSAS, CALIFORNIA, COLORADO, CONNECTICUT,

DELAWARE, FLORIDA, GEORGIA, HAWAII, IDAHO, ILLINOIS, INDIANA,

IOWA, KANSAS, LOUISIANA, MAINE, MARYLAND, MICHIGAN, MISSISSIPPI,

MISSOURI, MONTANA, NEBRASKA, NEVADA, NEW HAMPSHIRE, NEW

JERSEY, NEW MEXICO, NORTH CAROLINA, NORTH DAKOTA, OHIO,

OKLAHOMA, OREGON, PENNSYLVANIA, RHODE ISLAND, SOUTH

DAKOTA, TENNESSEE, TEXAS, UTAH, VIRGINIA, WASHINGTON,

WEST VIRGINIA and WYOMING IN SUPPORT OF PETITIONER

ELIOT SPITZER

Attorney General of the

State of New Yor

Attorney for Amicus Curiae

State of New York

PREETA D. BANSAL

Solicitor General and

Counsel of Record

PETER H. SCHIFF

Deputy Solicitor General

HOWARD L. ZWICKEL

Assistant Attorney General

The Capitol

Albany, NY 12224

Dated: September 3, 1999 (518) 473-6857

(Additional Counsel Listed on Inside Cover)

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BILL PRYOR

Attorney General

State of Alabama

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BRUCE M. BOTELHO

Attorney General

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MARK PRYOR

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KEN SALAZAR

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Attorney General

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Attorney General

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The Capitol, PL-O1

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Attorney General

State of Georgia

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Atlanta, GA 30334-1300

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EARL I. ANZAI

Attorney General

State of Hawaii

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ALAN G, LANCE

Attorney General

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Boise, ID 83720-0010

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JAMES E. RYAN

Attorney General

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JEFFREY A. MODISETT

Attorney General

State of Indiana

219 Statehouse

Indianapolis, IN 46204

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OMAS J. MILLER

State of lowa

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CARLA J. STOVALL

Attorney General

State of Kansas

Judicial Building

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RICHARD P. IEYOUB

_ Attorney General

State of Louisiana

Department of Justice

Post Office Box 94005

Baton Rouge, LA 70804-9005

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ANDREW KETTERER

Attorney General

State of Maine

6 State House Station

Augusta, ME 04333

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J. JOSEPH CURRAN, JR.

Attorney General

State of Maryland

200 St. Paul Place

Baltimore, MD 21202-2202

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JENNIFER M. GRANHOLM

Attorney General

State of Michigan

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MIKE MOORE

Attorney General

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Jackson, MS 39205-0220

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(Names of Counsel Continued)

JEREMIAH W. (JAY) NIXON

Jefferson City, MO 65101

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JOSEPH P. MASUREK

Attorney General

State of Montana

Justice Building

P.O. Box 201401

215 N. Sanders

Helena, MT 59620-1401

(406)444-2026

DON STENBERG

Attorney General

State of Nebraska

Department of Justice

2115 State Capitol

Lincoln, NE 68509

(402) 471-2682

FRANKIE SUE DEL PAPA

Attorney General

State of Nevada

100 N. Carson St.

Carson City, NV 89701-4717

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PHILIP T. MCLAUGHLIN

Attorney General

State of New Hampshire

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JOHN J. FARMER, JR.

Attorney General

“ye New Jersey

. Hughes Justice Complex

P.O. Box 080

Trenton, NJ 08625

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PATRICIA A. MADRID

Attorney General

State of New Mexico

Post Office Drawer

Sante Fe, NM 87504-1508

(505) 827-6014

MICHAEL F. EASLEY

Attorney General

State of North Carolina

Department of Justice

P.O. Box 629

Raleigh, NC 27602-0629

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HEIDI HEITKAMP

Attorney General

State of North Dakota

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BETTY D. MONTGOMERY

Attorney General

State of Ohio

State Office Tower

30 East Broad Street, 17th Floor

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(614) 466-8980

W.A. DREW EDMONDSON

Attorney General

State of Oklahoma

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Suite 112

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(405) 522-3085

HARDY MYERS

Attorney General

State of Oregon

Justice Building

1162 Court Street NE

Salem, OR 97310

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D. MICHAEL FISHER

Attorney General

State of Pennsylvania

Strawberry Square, | 6th Floor

Harrisburg, PA 17120

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Names of Counsel Continued

SHELDON WHITEHOUSE

Attorney General

State of Rhode Island *

150 South Main Street

Providence, RI 02903-290

(401) 274-4400

MARK BARNETT

Attorney General

State of South Dakota

500 East Capitol Avenue

Pierre, SD 57501-5070

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PAUL G. SUMMERS

Attorney General

State of Tennessee

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JOHN CORNYN

Attorney General

State of Texas

Capitol Station

Post Office Box 12548

Austin, TX 78711-2548

(512) 936-1894

JAN GRAHAM

Attorney General

State of Utah

236 State Capitol

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MARK L. EARLEY

Attorney General

State of Virginia

900 East Main Street

Richmond, VA 23219

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CHRISTINE O. GREGOIRE

Attorney General

State of Washington

P.O. Box 40100

1125 Washington Street, S

Olympia, WA 98504-0100

(360) 753-6245

DARRELL V. McGrAw, Jr.

Attorney General

State of West Virginia

State Capitol

Room 26-E

Charleston, WV 25305

(304) 558-2021

GAY WOODHOUSE

Attorney General

State of Wyoming

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Cheyenne, WY 82002

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TABLE OF CONTENTS

Page

Pee CED on cin 74. 4.b Swe dns cWa des babes iii

Es Gr CI Sc cb ded daetamestcbcahaves 2

SPT, nua) dc ska ddwcesienenpovei 6

ARGUMENT

POINT I

A State is not a "person" subject to suit under the

Pe GED é 5k ccna canbe beret hd beser 8

A. Under both the “ordinary rule of statutory

construction” and the “plain statement”

rule, the word “person” in the liability sec-

tion of the False Claims Act should not

ND oa ed ha TS Waves Gah betes sdacce 8

B._ The legislative history of the False Claims Act

does not contain “affirmative evidence" that

Congress intended the word "person" to

I Sd inc 6 Fu na) URbl oe ormbeces 13

POINT Il

The Eleventh Amendment bars the federal courts

from exercising jurisdiction over a False Claims Act

lawsuit brought by a gui fam relator against a State . . 17

ieee

A. The Eleventh Amendment bars a suit in federal

court by a private citizen against a State under

a federal statute, such as the False Claims Act,

enacted under Article I of the Constitution ..... 18

B. The gui tam relator does not “stand in the

shoes” of the United States................. 20

C. This Court’s decision in Hughes Aircraft Co. —

v. United States ex rel. Schumer supports the

States’ Eleventh Amendment defense ......... 23

D. The States did not, in the “plan of the conven-

tion,” consent to be sued by a private qui fam

relator who has a separate legal interest in the

Fates Clatess Act laweult..... 2... .....55--, 25

Cn Cn. so wks cw thie holon taae eee 28

TABLE OF AUTHORITIES

Page

Cases

Alden v. Maine, 527U.S. ___, 119 §. Ct. 2240

SE 5 Chik dvinicca bh dernier as 7, 18, 19, 25, 26

Atascadero State Hosp. v. Scanlon, 473 U.S. 234

SS ack We 0h be eeie da lc tic aan Chica ens 10, 19

Ayers, Ex Parte, 123 U.S. 443 (1887) ................ 18

Blatchford v. Native Village of Noatak, 501 U.S.

WP RUP GT Fb0 tbat cabgdscaneuawkkin 7, 25, 26, 27

California State Bd. of Opiometry v. Federal Trade

Comm'n, 910 F.2d 976 (D.C. Cir. 1990) ............ 10

City of Newport v. Fact Concerts, Inc., 453 U.S. 247

ED 6805s Rass bbc hS MERE REN Head ph bbaiees 11

Dellmuth v. Muth, 491 U.S. 223 (1989)... 2... 0.6... 10

Edelman v. Jordan, 415 U.S. 651 (1974)... 2... 22... .. 19

Florida Prepaid Post-Secondary Educ. Expense Bd. v.

College Savings Bank, 527 U.S. __, 119 S. Ct.

NPE a be hog bo Glass bink bas deh s Oo es 19

Gravitt v. General Electric Co., 680 F. Supp. 1162

(S.D. Ohio), dismissed without op., 848 F.2d 190

(6th Cir.), cert. denied sub nom. General Electric

Co. v. United States, 488 U.S. 901 (1988) ........... 22

Gregory v. Ashcroft, 501 U.S. 452 (1991) .......... 11, 25

iv

Hans v. Louisiana, 134 U.S. 1 (1890) . 2... 6 oe ee ee 18

Hilton v. South Carolina Pub. Rys. Comm'n,

SERUE WGC Eee | ox cv vcciasdseeesaancectas 10, 11

Hughes Aircraft Co. v. United States ex rel.

Schumer, 520 U.S. 939 (1997)... 2... 6 eee ee 7, 23, 24

Idaho v. Coeur d'Alene Tribe, 521 U.S. 261 (1997) ..... 18

Marvin v. Trout, 199 U.S. 212 (1905) .... 2... 6. ee ees 21

New York, Ex parte, 256 U.S. 490 (1921) ...... 6.6.55. 19

New York v. United States, 505 U.S. 144 (1992) ......... 4

Penmhurst State Sch. and Hosp. v. Halderman,

GPa UE, SOE cc Mae hae pds oh eee se ia Gene 12

Principality of Monaco v. Mississippi,

TR RR Sa ree ere oer re 20

Puerto Rico Aqueduct & Sewer Auth. v. Metcalf &

Eddy, Inc., 506 U.S. 139 (1993) .... 2.6... eee. 18, 19

Searcy v. Philips Electronics North America Corp.,

ded @ Gio. me Pe eae eee 22

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

(POOR ck iicennckesescbbatubaneetetes 7, 17, 18, 19

South Dakota v. Dole, 483 U.S. 203 (1987). ........... 12

United States ex rel. Fine v. Chevron, U.S.A., Inc.,

72 F.3d 740 (9th Cir. 1995) (en banc), cert.

Ganied, SIF U.S. 1233 CRGBS) ow. cece te tev erences 15

United States ex rel. Foulds v. Texas Tech Univ.,

171 F.3d 279 (Sth Cir. 1999) ............, 3, 21, 22, 27

United States ex rel. Graber v. City of New York,

8 F. Supp. 2d 343 (S.D.N.Y. 1998) ............. 11, 16

United States ex rel. Hyatt v. Northrop Corp.,

ee A tk RRA ee 21

United States ex rel. Killingsworth v. Northrop Corp.,

SP Ee POPE: PO Sos vn hdc ee bcbwancs ces 22

United States ex rel. Kreindler v. United Technologies

Corp., 985 F.2d 1148 (2d Cir.), cert. denied, 508

U.S. 973 (1993)

United States ex rel. Long v. SCS Bus. & Technical

Inst., Inc., 173 F.3d 870, (D.C. Cir.), op.

supplemented, 173 F.3d 890 (D.C. Cir. 1999) .... passim

United States ex rel. Marcus v. Hess, 317 U.S. 53

(RE RISA CSP eal Re Agi ary Mega 7 hese 3,13

United States ex rel. Milam v. Univ. of Texas

M.D. Anderson Cancer Ctr., 961 F.2d 46

DUPED os Cer b ig da a sca Dy vive od oc cs der 21

United States ex rel. Rodgers v. Arkansas,

154 F.3d 865 (8th Cir. 1998) ............... 21, 23, 27

United States ex rel. Stevens v. Vermont

Agency of Natural Resources, 162 F.3d

195 (2d Cir. 1998), cert. granted, 119

EMPTOR Witch Cvcehde cee’ 4, 5, 19, 26, 27

vi

United States ex rel. Zissler v. Regents of the

Univ. of Mirmesota, 154 F.3d 870 (8th Cir. 1998) . . 13, 21

United States v. Bass, 404 U.S. 336 (1971) ... 2... 2. 2... 9

United States v. Bornstein, 423 U.S. 303 (1976) ...... 3,13

United States v. Cooper Corp., 312 U.S. 600 (1941) ...... 8

United States v. Halper, 490 U.S. 435 (1989) ........... 3

United States v. Texas, 143 U.S. 621 (1892) ........... 20

Welch v. Texas Dept. of Highways and Pub. Transp.,

es RE FS ree Pitty erent by ree 19

West Virginia v. United States, 479 U.S. 305 (1987) ..... 20

Will v. Michigan Dep't of State Police,

Bk | eR oe ee ree, we | 6, 8, 9, 10, 15

Wilson v. Omaha Indian Tribe, 442 U.S. 653 (1979) ...... 8

United States Constituti

RDS oc 660.206 ee 7, 17, 18, 19, 25

POG. nooo cvs navel aivesane badee eee 17

OVON RORGREINUEE 6 oo ons coc wacsetacweansebs passim

Fourteenth Amendment, $$ 2.0.0... 6. cc ccc cet eees 19

vii

Federal Statutes

i A ei oa isa ck eee dhe hae eeee 16

GT EN ee oo es a Bare vetoes 25, 26

31 U.S.C.:

RSE a See ree ORE re oe 2

1” TES Rie Seg ie ee anaes 3, 7, 15

TU RPSRPRR SNR Cone repeat ey rey Fe 20

Noo! ban Weguas Seah aka A eke. 2

SE 5. kos pans Oose s cee ou ue ee 22

SINR SARIS: Stee ra tarepre” sy be 22

DFT Sack ence bae tev venctsdew owes’ 22

ERPS Serr ona r en yr 22

DONE Gh. oad accvadecdeacnenapeet 21

RM es lay oak Vida taney roe 21

42 U.S.C.::

| Sere errr rer. ee eee ry et 16

| Rr per errr s fore nmr tf os 17

Ry Sk ewe ss ee deh Kew eew cen anes 16

Oia ois Exo ben resWeuken paws 10, 15

Miscellaneous

Act of Mar. 2, 1863, ch. 67,12 Stat. 698

aoe & S62 Oa oie

Act of Sept. 13, 1982, Pub. L. 97-258, 96 Stat. 877

Black’s Law Dictionary 1190 (3d ed. 1969)

a6 6.8 4 0-2 6182 ee

Cong. Globe, 37th Cong., 3d Sess., (1862)

False Claims Amendments Act of 1986, Pub. L.

No. 99-562, 100 Stat. 3153 (1986) .................

Federal Expenditures by State for Fiscal Year 1997

(April 1998), Bureau of the Census, U.S.

Department of Commerce, Publication FES/97

H.R. Rep. No. 99-660 (1986)

H.R. Rep. No. 97-651 (1982)

16:3 222 Cb 6.8 ee ae oe ee 28 eee

es @ @ © @ 9 6:06

H.R. Rep. No. 2, 37th Cong., 2d Sess., (1862)

1986 U.S.C.C_A.N. 5266

oct @4 ww 6 6 8B re. es ¢.3:4¢.6 a oO 2 a.2 8

1982 U.S.C.C_A.N. 1895

S. Rep. No. 99-345 (1986)

Ye @2 42482647 2.2 pa’ se 42 Os & a ee F

The Federalist No. 81

e626. 6 64.0¢@ 6a 6 CGA Ow SOS wm ae & Oe 6..e 4

No. 98-1828

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM 1999

STATE OF VERMONT AGENCY OF

NATURAL RESOURCES,

Petitioner,

V.

UNITED STATES OF AMERICA EX REL.

JONATHAN STEVENS,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF OF AMICI] CURIAE STATES OF NEW YORK, ALA-

BAMA, ALASKA, ARIZONA, ARKANSAS, CALIFORNIA,

COLORADO, CONNECTICUT, DELAWARE, FLORIDA,

GEORGIA, HAWAII, IDAHO, ILLINOIS, INDIANA, IOWA,

KANSAS, LOUISIANA, MAINE, MARYLAND, MICHIGAN,

MISSISSIPPI, MISSOURI, MONTANA, NEBRASKA, NE-

VADA, NEW HAMPSHIRE, NEW JERSEY, NEW MEXICO,

NORTH CAROLINA, NORTH DAKOTA, OHIO, OKLA-

HOMA, OREGON, PENNSYLVANIA, RHODE ISLAND,

SOUTH DAKOTA, TENNESSEE, TEXAS, UTAH, VIRGINIA,

WASHINGTON, WEST VIRGINIA AND WYOMING IN

SUPPORT OF PETITIONER

2

STATEMENT OF AMICI INTEREST

The States of New York, Alabama, Alaska, Arizona,

Arkansas, California, Colorado, Connecticut, Delaware, Florida,

Georgia, Hawaii, Idaho, Illinois, Indiana, lowa, Kansas, Louisi-

ana, Maine, Maryland, Michigan, Mississippi, Missouri,

Montana, Nebraska, Nevada, New Hampshire, New Jersey,

New Mexico, North Carolina, North Dakota, Ohio, Oklahoma,

Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee,

Texas, Utah, Virginia, Washington, West Virginia and Wyoming

urge this Court to reverse the decision and order of the United

States Court of Appeals for the Second Circuit which held that

the petitioner, Vermont Agency of Natural Resources, was a

“person” subject to the liability provisions of the federal False

Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733, and that it could

be sued by a private citizen under that statute.

This appeal presents two important issues affecting the liability

of States under the FCA. Both issues are of fundamental

importance to the States and have been the subject of recent

conflicting determinations by the United States Courts of

Appeals. The first issue is whether a State is a “person” who

may be sued under the FCA. The second is whether a State’s

Eleventh Amendment immunity prevents a private citizen, known

as a qui fam relator, from prosecuting the FCA suit against a

State to reap a financial reward. Although the lawsuit is brought

“in the name of the Government,” the relator sues for himself as

well as for the United States. 31 U.S.C. § 3730(b)(1).

The decision below undermines the amici States’ interests and

upsets the federalist balance in two important ways. First, its

holding that States are subject to suit under the FCA exposes the

States and their taxpayers to very significant financial liability.

Second, its holding that States can be sued by private citizens

undermines the States’ sovereignty and weakens the States’

ability to administer complex federal programs.

3

With respect to financial liability, the FCA provides for treble

damages and a civil penalty of not less than $5,000 and not more

than $10,000 for filing false claims. See 31 U.S.C. § 3729(a).'

In many cases, the penalty provision has been construed to apply

to each claim filed.

Under many federal programs, States or entities they regulate

file thousands of claims and numerous reports each year with

federal agencies. Because a single policy or practice that is

found to be wrongful could taint each and every claim filed, and

because there is a six-year statute of limitations under the FCA,

a single state policy or practice exposes the States to enormous

civil penalties together with three times the actual damages

incurred by the federal government.

For example, in (/nited States ex rel. Foulds v. Texas Tech

Univ., 171 F.3d 279 (Sth Cir. 1999), the plaintiff alleged that

staff physicians at Texas Tech Health Sciences Center routinely

signed patient charts and Medicare/Medicaid billing forms

certifying that they personally performed or supervised the

performance of treatment for patients when in fact the patients

were allegedly seen only by residents. The qui fam relator

alleged that based upon this wrongful practice, the State

defendant submitted over 400,000 false claims and received over

$20 million in overpayments. Foulds, 171 F.3d at 282 & n.2.

Because each false claim could result in a penalty of up to

' The original statute provided for recovery of double damages and a

penalty of $2.000. which this Court found to be compensatory based on the

government's additional costs in attempting to recover money owed to it.

See United States v. Halper, 490 U.S. 435, 446 (1989), United States v.

Bornstein, 423 U.S. 303, 314-15 (1976). United States ex rel. Marcus v.

Hess, 317 U.S. 537, 551-52 (1943). The 1986 FCA amendments increased

the remedy to treble damages and the penalty to a fine of $5,000 to $10,000.

False Claims Amendments Act of 1986, Pub. L. 99-562, §2, 100 Stat. 3153

(1986). ;

4

$10,000, the State's liability in that case could amount to

hundreds of millions, or even billions, of dollars.

The States’ fiscal concerns are not simply a matter of conjec-

ture. Since the FCA was amended in 1986, “[r]ewards in the

tens of millions have been reported in a single suit.” United

States ex rel. Stevens v. Vermont Agency of Natural Resources,

162 F.3d 195, 222 (2d Cir. 1998) (Weinstein, J., dissenting),

cert. granted, 119 S. Ct. 2391 (1999). Federal grants to State

and local governments more than doubled from $115 billion in

1988 to $230 billion in 1997. See Federal Expenditures by State

for Fiscal Year 1997 at 46, Table 11 (April 1998), Bureau of the

Census, U.S. Department of Commerce, Publication FES/97. A

substantial portion of that money comes from social welfare

programs, such as Medicaid, which are ready targets for FCA

lawsuits because their complex regulatory scheme and vast scope

often result in overpayments to States. See, e.g., Stevens, 162

F.3d at 222 (discussing shift in emphasis under the FCA from

defense-contractor cases to health care-related cases arising

under the Medicare and Medicaid programs) (Weinstein, J.,

dissenting).

With respect to the issue of State sovereignty, the lower

court’s holding that a private person qui fam relator can sue a

State despite the bar of the Eleventh Amendment seriously

weakens the State’s ability to administer complex public assis-

tance and police power programs. States administer these federal

programs, such as Medicaid, Aid To Families With Dependent

Children (now Temporary Assistance To Needy Families) and

the Clean Water Act, under a scheme that has been described as

one of “cooperative federalism.” New York v. United States, 505

U.S. 144, 167 (1992). When a private person is authorized by

Congress to sue a State with respect to its administration of one

of these complex programs, the State loses a meaningful

opportunity to resolve the matter through negotiation or through

5

the political process, even if such a resolution would be in the

public interest.

For example, the underlying dispute in this case concerns

whether the Vermont Agency of Natural Resources properly

used an accounting mechanism to reflect the time employees

spent on federal projects. In the ordinary course, this type of

dispute would be resolved administratively between the state

agency and the federal agency. However, the relator does not

share the federal government’s broader interest in maintaining

harmonious relations with the States. The relator’s sole concern

is to reap a huge reward. As Judge Weinstein points out, the

relator’s allegations “drive[] a wedge between the two agencies,

inhibiting a productive, collaborative partnership, generating

suspicion and turning what should be a cooperative relationship

into a strained and awkward one.” Sevens, 162 F.3d at 229

(Weinstein, J., dissenting).’

Furthermore, because the private party is seeking only to

obtain a large settlement or judgment, he does not concern

himself with the disruption that burdensome discovery and trial

will have on the States’ administration of the program. Counsel

for the relator in Long, for example, sought and obtained the

production of voluminous documents from the New York State

Education Department. He also noticed numerous depositions

of current or former State employees.

? In United States ex rel. Long v. SCS Bus. & Technical Inst., Inc., 173

F.3d 870 (D.C. Cir.), op. supplemented, 173 F.3d 890 (D.C. Cir. 1999), the

6

Both issues presented in the petition therefore involve

important matters of federalism that affect the States’ relations

with the federal government. A reversal of the rulings below is

essential to ensure that the States’ sovereignty is protected

against unnecessary encroachment by the United States and the

principle of cooperative federalism is maintained.

SUMMARY OF ARGUMENT

For 136 years, the FCA has imposed liability upon any

“person” who engages in specified conduct to defraud the United

States but it has not defined the word “person.” According to

well-established rules of statutory construction, the ordinary

meaning of the word “person” does not include a State. Will v.

Michigan Dep't of State Police, 491 U.S. 58, 64 (1989). That

construction is to be followed absent "affirmative evidence” that

Congress intended to cover States in the FCA.

Furthermore, where a federal statute alters the federal balance

of powers, the “plain statement” rule requires that Congress

expressly make known within the law itself its decision to include

States. This ensures that Congress has in fact confronted, and

intended to impose, the new liability upon the States. The FCA

results in an alteration in the federal balance of powers because

it gives more authority to the federal government, which can

now sue a State for treble damages and civil penalties, and it

authorizes private citizens to sue States and disrupt the States’

administration of complex social welfare and police power

programs.

The FCA does not contain a “plain statement” that States are

subject to the liability provision. The language used in other

sections of the original and amended statute together with the

legislative history contain no “affirmative evidence” that Con-

gress intended to include States as defendants in FCA lawsuits.

In fact, the statute and its history support the opposite view --

7

States were not meant to be subject to the liability provision of

the FCA. Therefore, because the statute does not expressly

apply to a State, the “plain statement” rule requires that States

not be included within the scope of 31 U.S.C. § 3729(a).

The decision below should also be reversed on the second

ground presented in the petition, that a~ vate person, acting as

a qui tam relator, cannot sue a State under the FCA because of

the bar of the Eleventh Amendment to the U.S. Constitution.

Under this Court’s decision in Seminole Tribe of Fla. v. Florida,

517 U.S. 44, 72-73 (1996), Congress does not have the authority

to abrogate a State’s immunity from suit by private citizens in

federal court under its Article | power. There is no dispute that

the FCA was enacted pursuant to Congress’ Article I power.

Therefore, a private citizen’s FCA suit against Vermont should

be barred.

The relator cannot avoid the State’s Eleventh Amendment

immunity defense by claiming that he “stands in the shoes of the

government.” The language and structure of the gui tam

provisions of the statute, as well as this Court’s decision in

Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S.

939 (1997), demonstrate that the qui fam relator sues for himself

as well as for the United States and that he has an independent

interest in, and significant control over, the litigation.

Even if the relator were considered to be the agent or designee

of the federal government, this Court has strongly suggested in

Blatchford v. Native Village of Noatak, 501 U.S. 775, 785

(1991), that the United States is without authority, absent

“compelling evidence,” to delegate or assign its right to sue a

State to a third party. In A/den v. Maine, 527 U.S. ---, ---, 119

S. Ct. 2240, 2264 (1999), this Court stated that there must be

“compelling evidence” in the constitutional design that the States

had waived their immunity in state court. See Alden, 119 S. Ct.

at 2255. The respondent and the United States have completely

failed to present any evidence that the State’s waiver of

immunity “in the plan of the convention” with respect to the

federal government extends to anyone whom the United States

might select to sue on its behalf. Accordingly, the qui tam

provisions of the FCA run afoul of the Eleventh Amendment.

ARGUMENT

POINT I

A STATE IS NOT A "PERSON" SUBJECT TO SUIT

UNDER THE FALSE CLAIMS ACT.

A State is not a “person” within the meaning of the liability

provision of the FCA under two well-established rules of

statutory construction. First, statutes which impose liability

upon a “person” are not construed to apply to States unless there

is affirmative evidence that Congress intended to include them.

In the FCA, neither the legislative history nor the statutory

context contains affirmative evidence of inclusion. Second,

when Congress enacts a statute which shifts the balance of

power from States to the federal government, or otherwise

interferes with the States’ sovereignty, it must make explicit in

the law that States are covered. The FCA is such a law and

there is no “plain statement” that States are covered by the

Statute.

A. Under Both The “Ordinary Rule of Statutory

Construction” and the “Plain Statement” Rule,

The Word “Person” In The Liability Section of the

False Claims Act Should Not Include A State.

““[I]n common usage, the term ‘person’ does not include the

sovereign, [and] statutes employing the [word] are ordinarily

construed to exclude it." Will, 491 U.S. at 64 (quoting Wilson

9

v. Omaha Tribe, 442 U.S. 653, 667 (1979) (quoting United

States v. Cooper Corp., 312 U.S. 600, 604 (1941))). This rule

of exclusion applies to the sovereign enacting the statute as well

as to States. Long, 173 F.3d at 874 n.4, citing Will, 491 U.S. at

64. Absent “affirmative evidence" that Congress intended to

include States in a law which would expose them to liability, this

particular rule of statutory construction compels their exclusion.

See Long, 173 F.3d at 874. As discussed in Point I(B) infra,

such “affirmative evidence” is completely absent in the history of

the FCA statute.

In addition, when a federal statute alters the federal-state

balance of powers, the “plain statement” rule requires that

Congress specifically include States within the text of the statute.

This Court has set forth the circumstances under which the

“plain statement” rule applies. The rule applies when Congress

enacts a law which: (1) alters the usual balance of power

between the state and federal governments, (2) pre-empts the

historic powers of the States, or (3) imposes a new condition on

the States’ receipt of federal money.

The rule is derived from principles of federalism and a respect

for state sovereignty. A “plain statement” compels Congress to

address expressly the effect of including States within federal

statutes that could alter the ordinary balance of power between

the state and federal governments or otherwise interfere with

state sovereignty. As Justice Marshall explained in U/nited States

v. Bass, 404 U.S. 336 (1971):

[iJn traditionally sensitive areas, such as legislation

affecting the federal balance, the requirement of clear

statement assures that the legislature has in fact faced,

and intended to bring into issue, the critical matters

seasalacidh te tee tesllialal Gatien

10

Id. at 349. See also Hilton v. South Carolina Pub. Rys.

Comm'n, 502 U.S. 197, 206 (1991) (“the requirement of a clear

statement by Congress to impose such [monetary] liability [on

the States] creates a rule that ought to be of assistance to

Congress and the courts in drafting and interpreting legislation.”’);

California State Bd. of Optometry v. Federal Trade Comm'n,

910 F.2d 976, 981 (D.C. Cir. 1990) ("This rule of statutory

construction serves to ensure that the States’ sovereignty

interests are adequately protected by the political process.").

The application of the FCA to States fits squarely within the

circumstances in which the "plain statement" rule applies.

First, the rule applies when a federal statute alters the constitu-

tional balance of power. Thus, "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." Wi//, 491 U.S. at 65

(quoting A/ascadero State Hosp. v. Scanlon, 473 U.S. 234, 242

(1985)).

Such an alteration occurs when Congress abrogates the States’

Eleventh Amendment immunity because “abrogation of sover-

eign immunity upsets ‘the fundamental constitutional balance

between the Federal Government and the States’.” De//muth v.

Muth, 491 U.S. 223, 227 (1989) (quoting Afascadero, 473 U.S.

at 238). Because a qui fam lawsuit under the statute abrogates

State sovereign immunity (see Point II infra), a “plain statement”

that States are covered by the law is required.

The federal balance of power can also be shifted when

Congress enacts a law which exposes a State to a new liability

since the liability may result in diminished authority for the

States. In Will, this Court applied the rule to a statute, 42

U.S.C. § 1983, “where it [was] claimed that Congress has

subjected the States to liability to which they had not been

subject before.” Will, 491 U.S. at 64.

-—

_

When Congress subjects States to a new and substantial

damages liability, such as the treble damages and civil penalty.

provisions of the FCA, the usual federal balance of powers has

been shifted away from the States to the national government.

In these circumstances a "plain statement" of inclusion is "of

assistance" to the courts in evaluating Congress’ intent. See

Hilton, 502 U.S. at 206.

The "plain statement" rule is particularly applicable when a

federal statute imposes punitive type damages on the States. At

common law governmental entities were not subject to punitive

damages because it was believed such damages punish blameless

taxpayers. It has been considered to be “contrary to sound

public policy” to impose punitive damages on a governmental

entity absent clear Congressional intent. City of Newport v. Fact

Concerts, Inc., 453 U.S. 247, 263 (1981). By providing for

treble damages and increasing the amount of the civil penalty to

$10,000, the 1986 FCA amendments in fact “created a form of

punitive damages that would be palpably inconsistent with state

liability." Long, 173 F.3d at 877; see also United States ex rel.

Graber v. City of New York, 8 F. Supp. 2d 343, 349 (S.D.NLY.

1998).

Second, the "plain statement" rule applies when Congress

enacts a law which undermines the historic or essential powers

of the States. For example, in Gregory v. Ashcroft, 501 U.S.

452, 460-61 (1991), the Court determined that Congress must

explicitly state its intent to include state court judges under the

Age Discrimination in Employment Act because their inclusion

interferes with a State’s fundamental role in defining the qualifi-

cations of its judiciary.

An FCA qui tam lawsuit seriously interferes with the States’

ability to administer essential state programs. While the statute

is concerned with ensuring that the federal government recover

money wrongfully obtained, the underlying allegations in FCA

12

lawsuits against States will frequently involve the States’

administration of complex federal programs. As the D.C. Circuit

properly concluded in Long:

To characterize the relevant state function at issue, as

the Second Circuit did, as fraudulent conduct ... is to

assume the conclusion that the function is not an

essential one.... [T]he Act’s imposition of liability

necessarily interferes with a state’s sovereign perfor-

mance of a range of indisputably essential functions,

such as the administration of a state education depart-

ment involved in the present case.... That the federal

government funds in part that function does not

destroy its essentiality to the state.

Long, 173 F.3d at 887-888 (emphasis in original) (citations

omitted).

Third, the "plain statement" rule applies when Congress

imposes a condition upon the States’ receipt of federal funds

which preempts the State’s traditional authority. Pennhurst

State Sch. and Hosp. v. Halderman, 451 U.S. 1, 16 (1981);

South Dakota v. Dole, 483 U.S. 203, 207 (1987). The reason

for this aspect of the rule is that “[b]y insisting that Congress

speak with a clear voice, we enable the States to exercise their

choice knowingly, cognizant of the consequences of their

participation.” Pennhurst, 451 U.S. at 17.

The fact that States may be compelled to pay treble damages

and civil penalties under the FCA must be viewed as an addi-

tional condition for the States’ receipt of federal money. When

States accept federal funds under other federal programs, they

agree to repay the amount of money that they are overpaid, not

treble damages and civil penalties. Therefore, Congress must

explicitly inform the States in the FCA that they are subject to

13

this additional condition for their receipt of federal funds under

other federal programs.

In sum, the “plain statement" rule must apply to the FCA

because it (1) alters the usual constitutional balance of powers,

(2) interferes with States’ administration of essential programs,

and (3) imposes a new condition on the receipt of federal money.

Because the FCA does not contain a “plain statement" that a

State is a liable "person", States must be excluded from the

coverage of the statute.’

B. The Legislative History of the False Claims Act

Does Not Contain "Affirmative Evidence" That

Congress Intended The Word "Person" To In-

clude States.

There is no “affirmative evidence” in the legislative history of

the FCA that Congress intended to inc/ude States within its

scope. The FCA was adopted in 1863 to combat rampant fraud

by large private contractors during the Civil War. See Bornstein,

423 US. at 309; Marcus, 317 U.S. at 547. By enacting the

FCA, Congress sought to stop this plundering of the Union's

treasury. See, e.g., Cong. Globe, 37th Cong., 3d Sess., 952-958

(1863).

As originally enacted, the statute prohibited “any person not

in the military" from submitting a false claim for payment to the

United States. Where liability was found, the statute provided

3 The Second Circuit’s decision in Stevens and the Eighth Circuit's

decision in United States ex rel. Zissler v. Regents of the Univ. of Minne-

sota, 154 F.3d 870 (8th Cir. 1998), misapply these rules of statutory

construction in several areas principally because they fail to take account of

the extent to which the statute interferes with the States’ sovereign interests.

In Long, the D.C. Circuit took great pains to explain the errors in those

decisions. For purposes of this brief. we refer to that decision which

properly evaluates the States’ interests under the FCA.

14

for both civil penalties (double damages plus a fine of two

thousand dollars and costs) and possible criminal imprisonment.

See Act of Mar. 2, 1863, ch. 67, § 3, 12 Stat. 698. Thus, the

legislative context in which the word “person” was used strongly

suggests that States were not included because a State plainly

could not submit a claim to the United States for payment of

military expenses.

Similarly, the 1863 legislative debates centered around

individual plunderers, not States. See, e.g., Cong. Globe, 37th

Cong., 3d Sess. 955 ("The bill offers, in short, a reward to the

informer who comes into court and betrays his coconspirator, if

he be such") (remarks of Sen. Howard); id. at 958 ("if a man

swindles the government in times like this there ought never to

be any limitation") (remarks of Sen. Grimes).

In an attempt to counter the original statutory language and

legislative history, the United States argues that fraud by state

officials was a concern of Congress at the time. It relies on a

legislative report by a House investigating committee that

reported in 1862 upon the grossest frauds on the government

concerning war contracts. See H.R. Rep. No. 2, 37th Cong., 2d

Sess. (1862). There is a brief discussion in the report of wrong-

ful actions taken by state officials. However, in that discussion,

"the report specifically stated that these examples of fraud were

not committed against the United States government." Long,

173 F.3d at 876 (quoting H.R. Rep. No. 2, 37th Cong., 2d Sess.

at xxxviil) (emphasis in original). In fact, the committee report

suggests that the States were often victims of fraud, not perpe-

trators: “[i]n this emergency, of all others, the State and the

nation should demand the highest integrity of those invested with

public trusts, and each should hold their agents, by rigid scrutiny,

to a severe accountability.” H.R. Rep. No. 2, 37th Cong., 2d

Sess., at Xxxix.

15

There is also no evidence that the discussion in the report

concerning state officials was even considered by the Congress

the following year when it enacted the FCA. The sole reference

to this report during the following year’s debate over the FCA

was by Senator Wilson of Massachusetts, who referred to the

committees’ work in discussing a proposed amendment to the bill

that had to do only with private contractors and had nothing to

do with States. Cong. Globe, 37th Cong., 3d Sess., 956.

Furthermore, even if Congress had intended to include state

officials as “persons,” the United States confuses the wrongful

actions of individual state officials with the imposition of liability

under the FCA against States. In Wi//, this Court specifically

rejected the argument that Congress intended to include States

within the coverage of 42 U.S.C. § 1983 even though there was

debate in Congress of the effect of including state officials within

the civil rights statute. Wil/, 491 U.S. at 68-69; see also Long,

173 F.3d at 876.

For 123 years, from 1863 until 1986, the statute was "largely

unchanged." H.R. Rep. No. 99-660, at 17 (1986). In 1982, the

wording of the liability section was slightly revised to “[a] person

not a member of an armed force of the United States.” There

was no intent to make any substantive change. See Act of Sept.

13, 1982, Pub. L. No. 97-258, 96 Stat. 877; H.R. Rep. No. 97-

651, at 1, 3, 143 (1982), reprinted in 1982 U.S.C.C.A.N. 1895,

1897, 2037.

In 1986, the FCA was substantially amended. Congress

sought to provide stronger measures to combat fraud, and to

encourage “private” individuals to sue private enterprise.

S. Rep. No. 99-345, at 23-24 (1986), reprinted in 1986

U.S.C.C.A.N. at 5288-89; H. Rep. No. 99-660, at 23 (1986);

United States ex. rel. Fine v. Chevron, U.S.A., Inc., 72 F.3d 740,

742 (9th Cir. 1995) (en banc), cert. denied, 517 U.S. 1233

(1996). Despite major changes to the statute in 1986, the

liability provision in 31 U.S.C. § 3729(a) continued to apply to

16

"[aJny person." The only change made to the scope of that

provision was that persons in the military were now made subject

to the FCA. The legislative history indicates that this change

was limited to the military and was not intended otherwise to

broaden the class of persons who could be held liable under the

Act. See S. Rep. No. 99-345, at 18 (1986), reprinted in 1986

U.S.C.C_A.N. at 5283; see also Long, 173 F.3d at 876; Graber 8,

F. Supp. 2d at 354-55. In fact, the Congressional Budget Office

advised that the 1986 amendments were “expected to involve no

significant costs to the federal government or to State or local

governments.” S. Rep. No. 99-345, at 37 (1986), reprinted in

1986 U.S.C.C_A.N. 5266, 5302.4

Thus, Congress in 1863 did not intend to include States within

the liability provision of the FCA and, since that time, Congress

has maintained virtually the same words to define liability

without any intent to broaden the coverage under the statute to

include States. There simply is no argument to be made from

this history that Congress provided “affirmative evidence” of an

intent to include States within the scope of the liability provision

of the statute.

A finding that the FCA cannot be applied to the States does

not leave the United States without viable remedies. Most

federal programs contain provisions requiring States to repay

monies improperly received. See, e.g., 7 U.S.C. § 2020(g)

(Food Stamps); 42 U.S.C. § 604 (Aid To Families With Depend-

ent Children); 42 U.S.C. § 1396(c) (Medicaid). Although rarely

used, the federal government has the authority under many of

* The D.C. Circuit in Long properly concluded. based upon a detailed

analysis of the 1986 amendments, other textual changes made in the course

of the 1986 FCA amendments and the legislative history, that there is no

“affirmative evidence” to even suggest that a State was intended to be

included as a liable "person" as a result of the 1986 amendments. See Long,

173 F.3d at 876-879. for a complete discussion of this history.

17

these programs to terminate federal financial participation for

substantial noncompliance. See, e.g., 42 U.S.C. § 1316(a)

(Social Security, Supplemental Security Income and Medicaid).

If existing administrative remedies are inadequate to ensure the

recovery of money erroneously or wrongfully obtained by the

States, those mechanisms should be improved rather than having

the plain language of the FCA ignored.

POINT Il

THE ELEVENTH AMENDMENT BARS THE

FEDERAL COURTS FROM EXERCISING

JURISDICTION OVER A FALSE CLAIMS ACT

LAWSUIT BROUGHT BY A QUI TAM RELA-

TOR AGAINST A STATE

The Eleventh Amendment functions as a limitation upon the

federal court's authority under Article III of the Constitution.

Under this Court’s decision in Seminole Tribe of Florida,

Congress is without authority, by virtue of the Eleventh Amend-

ment, to allow a private citizen to sue a State in federal court

under a statute enacted under Article I of the Constitution.

Because the FCA was enacted under Article I and a qui fam

rr ‘or is a private citizen suing a State, a suit by a qui fam

re.ator against a State is barred.

The federal government asserts that the Amendment does not

apply because the relator simply stands in its shoes. However,

the statutory scheme of the FCA establishes that the relator

asserts his own cause of action based upon a legal interest in the

lawsuit that is separate from that of the United States.

Furthermore, Congress may not delegate the United States’

right to sue a State to a private citizen relator. The States’

consent to suit in the "plan of the convention" by the United

States does not extend to private citizen qui fam relators because

there is no “compelling evidence” that States agreed to such suits

in the constitutional design. Indeed, the United States and the

relator have presented no such evidence with respect to a qui

fam lawsuit.

A. The Eleventh Amendment Bars A Suit By A

Private Citizen Against A State Under A Federal

Statute, Such As The False Claims Act, Enacted

Under Article I of the Constitution.

The Eleventh Amendment exemplifies the principle of state

sovereign immunity that was implicit in the design of the

Constitution when it was ratified. See, e.g., Alden, 119 S. Ct. at

2246-47 (“the States’ immunity from suit is a fundamental aspect

of the sovereignty which the States enjoyed before the ratifica-

tion of the Constitution, and which they retain today”); /daho v.

Coeur d'Alene Tribe, 521 U.S. 261, 267-68 (1997).

The Amendment ensures that state sovereign interests are

protected from suit in federal court by private citizens. It

prevents a federal court from entertaining a lawsuit and issuing

a judgment for money damages that must be paid out of a State's

treasury. Seminole Tribe of Fla., 517 U.S. at 58. The Amend-

ment's "very object and purpose ... [was] to prevent the indignity

of subjecting a state to the coercive process of judicial tribunals

at the instance of private parties." Ex parte Ayers, 123 U.S. 443,

505 (1887); see also Alden, 119 S. Ct. at 2247; Puerto Rico

Aqueduct & Sewer Auth. v. Metcalf & Eddy Inc., 506 U.S. 139,

146 (1993).

This Court has broadly interpreted the Amendment. Since

1890, it has been construed to prevent a private citizen of the

same State (as well as a citizen of another State or a foreign

State) from suing the State in federal court. Hans v. Louisiana,

19

134 U.S. 1 (1890). With only two exceptions, neither of which

apply to the FCA,’ a private citizen is prevented, as a

consequence of the Eleventh Amendment, from seeking any

relief in federal court against a State or a State agency. Puerto

Rico Aqueduct & Sewer Auth., 506 U.S. at 144; Welch v. Texas

Dept. of Highways and Pub. Transp., 483 U.S. 468, 480 (1987),

Edelman, 415 U.S. at 662-63; Ex parte New York, 256 U.S. 490,

497 (1921).

Consequently, the Eleventh Amendment prevents Congress

from authorizing a private citizen to sue a State in federal court

under a statute enacted under Article I of the Constitution.

Florida Prepaid, 119 S. Ct. at 2205; Seminole Tribe of Fla., 517

U.S. at 72-73. Because there is no dispute that “the FCA was

enacted under Article I of the Constitution,” a lawsuit brought

by a private party against a State arising under the FCA should

be barred by the Eleventh Amendment. S/evens, 162 F.3d at 223

(Weinstein, J., dissenting).

> First. a State may consent to be sued by expressly waiving its

. Alden, 119 S. Ct. at 2258: Seminole Tribe of Fla., 517 U.S. at

65; Atascadero, 473 U.S. at 238; Edelman v. Jordan, 415 U.S. 651, 673

(1974). Second. Congress may enact appropriate legislation under § 5 of

eee ene See i ocaeemies

Amendment and therein expressly authorize a suit by a private

a State. Alden, 119 S. Ct. at 2267. Florida Prepaid Post-Secondary Educ.

Expense Bd. v. College Savings Bank, 527 U.S. --. ---. 119 S. Ct. 2199,

2205 (1999); Seminole Tribe of Fla., $17 U.S. at 55, 59, 65-66, Atascadero,

473 US. at 246.

20

B. The Qui Tam Relator Does Not “Stand In The

Shoes” Of The United States.

The United States is not prevented by the Eleventh Amend-

ment from suing a State in federal court.° According to the

federal government, the qui fam relator’s suit is als> not barred

by the Amendment because the relator “stands i) th, shoes” of

the United States which is “the real party in interest.” The

argument is wrong because it is based upon an incorrect analysis

of the role of the relator in the FCA statutory scheme.

It has long been recognized that in a qui fam action the relator

“states that he sues as we// for the state as for himself." Black's

Law Dictionary 1251 (3d ed. 1969) (emphasis in original). This

rule continues to apply to the FCA.

The original FCA statute provided a financial reward for “the

person bringing said suit and prosecuting it to final judgment.”

Act of Mar. 2, 1863, ch. 67, § 6, 12 Stat. 698 (emphasis added).

The statute now provides that "[a] person may bring a civil

action for a violation of section 3729 for the person and for the

United States Government." 31 U.S.C. § 3730(b) (emphasis

added).

Those courts which have rejected a State’s Eleventh Amend-

ment immunity on the theory that the gui fam relator has no

interest in the FCA lawsuit because he or she acts merely as the

“agent” or “delegee” of the United States, which is the only “real

party in interest” in the FCA lawsuit, misconstrue the statutory

* This Court has explained that. with respect to the United States, there

has been "'a surrender of this [Eleventh Amendment] immunity in the plan

of the convention."" Principality of Monaco v. Mississippi, 292 U.S. 313,

322-323 (1934)(quoting The Federalist No. 81). see also West Virginia v.

United States, 479 U.S. 305, 311 (1987), United States v. Texas, 143 U.S.

621, 644-45 (1892).

21

scheme.’ The fact that the United States may receive the largest

share of the proceeds or that the “focus of the Act is on exposing

fraud on the government and recovering resulting government

losses” (U/nited States ex rel. Rodgers v. Arkansas, 154 F.3d

865, 868 (8th Cir. 1998)), does not mean that the gui fam relator

is without his own legal interest. See also Long, 173 F.3d at

883-84; Foulds, 171 F.3d at 290.

The structure of the FCA ensures, in two principal respects,

the qui fam relator’s status as a separate party with an independ-

ent interest in the FCA lawsuit. First, the statute provides the

relator with a significant financial interest in the judgment or

settlement. It provides that the relator’s share of the damages

and penalties “shall be not less than 25 percent and not more

than 30 percent of the proceeds.” 31 U.S.C. § 3730(d)(2). The

relator is also entitled, if he prevails, to attorney’s fees, costs and

expenses from the defendant. 31 U.S.C. §§ 3730(d)(1), (2).

Second, the statute gives the relator a substantial right to

prosecute the FCA lawsuit to final judgment or settlement. The

” See. e.g.. Zissler, 154 F.3d at 872 (“[T]he United States is the real

party in interest because of its significant control over the course of the

litigation and its dominant share of the proceeds thereof.... [T]he relator

‘has no interest in the matter whatever except as [a common informer].””)

(quoting Marvin v. Trout, 199 U.S. 212, 225 (1905)), United States ex rel.

Hyatt v. Northrop Corp., 91 F.3d 1211, 1215 (9th Cir. 1996)("qui tam

plaintiffs are merely agents suing on behalf of the [United States] govern-

ment, which is always the real party in interest"). United States ex rel.

Kreindler v. United Technologies Corp., 985 F.2d 1148, 1154 (2d Cir.) (“In

a qui tam action. the plaintiff sues on behalf of and in the name of the

government and invokes the standing of the government resulting from the

fraud injury... The government remains the real party in interest. however,

in the FCA suit.”). cert. denied, 508 U.S. 973 (1993), United States ex rel.

Milam v. Univ. of Texas M.D. Anderson Cancer Ctr., 961 F.2d 46, 49 (4th

Cir. er adhe aetusotsamegragie serpy tala yey sateen —d

general, and his recovery is analogous to a lawyer's contingent

ares Mee napcenine Gln oy gt etna pe irra

definition, were suffered by the government.”).

22

FCA provides that, if the Government decides not to intervene

at the outset or move 10 dismiss the action, the relator has the

“right” to prosecute the action through final judgment or

settlement. 31 U.S.C. §§ 3730(b)(4)(B), (c)(2)(A), (c(3). The

relator is then responsible for all aspects of the case, including

discovery, trial preparation and trial. See Foulds, 171 F.3d at

293 (“It is Foulds--not the United States as sovereign--who

controls all strategic litigation decisions in the case ... and it is

Foulds who maintains sole responsibility for financing the

litigation and for its costs.”).

Although the United States can seek to intervene at a later

stage of the proceedings, the federal government must show

“good cause” to do so. 31 U.S.C. § 3730(c)(3). In addition,

when the United States intervenes at a later stage, it does so

“without limiting the status and rights of the person initiating the

action.” 31 U.S.C. § 3730(c)(3). If the Government intervenes

and attempts to settle the case, the court must hear any objec-

tions by the relator to the proposed settlement. 31 U.S.C. §

3730(cX2)(B). See Gravitt v. General Electric Co., 680 F.

Supp. 1162, 1165 (S.D. Ohio) (upholding relator's objection to

government's proposed settlement and allowing relator to

proceed with the FCA action despite government's position),

dismissed without op., 848 F.2d 190 (6th Cir.), cert. denied sub

nom. General Electric Co. v. United States, 488 U.S. 901

(1988).*

* The Courts of Appeals are divided as to whether. if the relator wishes to

settle the case where the federal government has not intervened. the United

States is entitled to review and. if appropriate, veto the proposed settlement.

Compare Searcy v. Philips Electronics North America Corp., 117 F.3d 154,

158-60 (Sth Cir. 1997) (government has power to veto settlement because the

United States is a real party in interest even if it does not control the FCA suit),

with United States ex rel. Killingsworth v. Northrop Corp., 25 F.3d 715, 723

(%h Cir. 1994) (federal government's consent to dismissal is only required

during the initial 60-day period (or any extensions of that period) when the

federal government decides whether or not to intervene in the FCA lawsuit).

23

Thus, according to the scheme of the FCA, the qui tam relator

does not “stand in the shoes of the government.” Rather, as

Judge Panner recognized in his opinion in Rodgers, supra:

This action was commenced, and is being prosecuted,

by two private citizens. The United States was not

consulted before this action was filed. It did not

screen the claims before filing to ensure that prosecu-

tion was warranted, and it has since declined to

prosecute this action in its own right.... The United

States has little control over the conduct of this

litigation, unless it intervenes as a party or by moving

to dismiss the action.

Rodgers, 154 F.3d at 869 (Panner, D.J., dissenting) (footnote

omitted).

C. This Court’s Decision In Hughes Aircraft Co. v.

United States ex rel. Schumer Supports The States’

Eleventh Amendment Defense.

This Court’s recent decision in Hughes Aircraft is entirely

consistent with the State’s Eleventh Amendment defense. It

recognizes that the qui fam relator has a separate interest in the

FCA lawsuit.

Hughes Aircraft was commenced and prosecuted by a relator

based upon allegedly false claims submitted by the company

between 1982 and 1984. Because the United States had declined

to intervene or to move to dismiss the action, the FCA lawsuit

was being prosecuted only by the qui ‘am relator. Hughes

Aircraft, 520 U.S. at 943 n.2. Under the provisions of the FCA

in effect when the conduct occurred, the relator’s suit would

have been dismissed because the suit was based on information

the government had received. /d. at 952. However, the relator

did not sue until after 1986 and, as a result of the 1986 FCA

24

amendments, the relator’s suit might be allowed. The question

presented to and decided by this Court was whether the 1986

amendment was retroactive.

In holding that the amendment was not retroactive, the

Hughes Court reasoned that a suit by the relator stands on a

different footing from a suit by the United States. Therefore,

even though the federal government’s alleged injury was the

same, the fact that the relator could not sue the company prior

to 1986 but might be able to sue it after 1986 changed the

substance of the cause of action. /d. at 948. Justice Thomas

explained the basis for this conclusion:

As a class of plaintiffs, gui tam relators are different in

kind than the Government. They are motivated pri-

marily by prospects of monetary reward rather than

the public good....Qui fam relators are thus less likely

than is the Government to forego an action arguably

based on a mere technical noncompliance with report-

ing requirements that involved no harm to the public

fisc.

Id. at 949 (footnote omitted); see also id. at 949 n.5 (“That a

qui tam suit is brought by a private party ‘on behalf of the United

States,’ ... does not alter the fact that a relator's interests and the

Government's do not necessarily coincide”); Long, 173 F.3d at

884 (“[T]he procedural question of in whose name the suit must

be brought is distinct from the substantive legal question whether

the plaintiff has a cause of action.”) (citation omitted).

Thus, Hughes Aircraft stands for the proposition that the qui

fam relator has a separate legal interest in the FCA lawsuit from

that of the United States. Consequently, he stands as a private

party who has commenced and is prosecuting a lawsuit against

a State without the State’s consent to suit.

25

D. The States Did Not, In The “Plan Of The Conven-

tion,” Consent To Be Sued By A Private Qui Tam

Relator Who Has A Separate Legal Interest In The

False Claims Act Lawsuit.

Even if the qui tam relator is considered to be “standing in the

shoes” of the federal government, the Eleventh Amendment

would still bar the relator’s lawsuit. The States did not consent

to be sued, in the “plan of the convention,” by a private qui fam

relator whom the United States designates to assist it under the

FCA.

The Constitution establishes a system of "dual sovereignty."

Gregory, 501 U.S. at 457; see also Alden, 119 S. Ct. at 2247.

Under a system of dual sovereignty, this Court must find

compelling evidence of a waiver of sovereign immunity before

it concludes that the States’ surrender of immunity in the “plan

of the convention” to the United States included suits com-

menced and prosecuted by private citizens on behalf of the

federal government. See Alden, 119 S. Ct. at 2255 (“In exercis-

ing its Article I powers Congress may subject the States to

private suits ... only if there is ‘compelling evidence’ that the

States were required to surrender this power to Congress

pursuant to the constitutional design.”). The federal govern-

ment, however, has put forth no evidence at all to show that the

States intended, at the time of ratification, to consent to be sued

by qui tam relators who prosecute lawsuits on their own behalf

as well as on behalf of the federal government.

In Blatchford this Court strongly indicated that the States’

waiver of immunity to the United States does not extend to

private parties who sue a State "on behalf" of the United States.

Blatchford held that Alaska Native villages could not sue a State

a suit by a tribe, 28 U.S.C. § 1362, did not abrogate the States’

Eleventh Amendment immunity. Because the United States is

26

authorized in appropriate cases to sue a State as the trustee of

the tribe, the tribes argued, infer alia, that Congress had enacted

through 28 U.S.C. § 1362 "a general delegation of the authority

to sue on the tribes’ behalf from the Federal Government back to

tribes themselves." Blatchford, 501 U.S. at 783.

The Blatchford Court rejected the tribes’ argument. Justice

Scalia expressed serious doubt that Congress had the authority

to circumvent a State’s sovereign immunity by delegating to a

tribe the power to sue a State on behalf of the United States:

We doubt, to begin with, that that sovereign exemp-

tion can be delegated -- even if one limits the

permissibility of delegation (as respondents propose)

to persons on whose behalf the United States itself

might sue. The consent, ‘inherent in the convention,’

to suit by the United States -- at the instance and

under the control of responsible federal officers -- is

not consent to suit by anyone whom the United States

might select...

Id. at 785 (emphasis in original).

Considered together, A/den and Blatchford are entirely

supportive of the States’ argument that the qui fam provisions of

the FCA violate the Eleventh Amendment because there has been

no showing that the States’ consent in the “plan of the conven-

tion” extended to private gui fam relators.

In Stevens, the Second Circuit reasoned that Blatchford is

inapposite because the tribes were seeking to sue in their own

behalf for payment of money to themselves and not, as here, on

behalf of the United States. Blatchford, however, cannot be so

easily distinguished. As Judge Silberman wrote in Long:

27

It seems to us that permitting a qui fam relator to sue

a state in federal court based on the government’s

exemption from the Eleventh Amendment bar involves

just the kind of delegation that Blatchford so plainly

questioned.... The problems inherent in expanding the

states’ consent to suit by the United States to suits by

anyone whom the United States might select,’ ... are no

less troublesome where, as here, the injury on which

the suit is premised is a pecuniary injury to the United

States.

Long, 173 F.3d at 882 (citations omitted), see also id. at 883

(“{T]he United States’ very ability to sue as the tribes’ trustee,

which was unquestioned in Blatchford, depended on an injury to

the United States as sovereign when injury was inflicted on the

tribes.... It does not seem reasonable, therefore, to distinguish

Blatchford as an anti-delegation principle applicable only where

the ‘injury’ is an injury to someone other than the United

States.”); Foulds, 171 F.3d at 293 (same); Rodgers, 154 F.3d at

869 (Panner, J., dissenting) (same); Stevens, 162 F.3d at 224

(Weinstein, J., dissenting) (same).

In sum, the gui tam relator cannot sue a State under the FCA

through a fiction that he simply “stands in the shoes” of the

federal government. If the United States determines that it must

pursue litigation against a State, it may not sit on the sidelines

and allow the qui fam relator to assume the unpalatable task of

prosecuting an FCA lawsuit against a State. In the event this

Court finds that a State is a “person” subject to suit under the

FCA, it must then conclude that the qui ‘am lawsuit is barred by

the Eleventh Amendment.

28

CONCLUSION

The decision and order of the Second Circuit should be

reversed in its entirety.

Dated: Albany, New York

September 3, 1999

Respectfully submitted,

ELIOT SPITZER

Attorney General of the State of New York

Attorney for Amicus Curiae

State of New York

PREETA D. BANSAL

Solicitor General and Counsel of Record

PETER H. SCHIFF

Deputy Solicitor General

HOWARD L. ZWICKEL

Assistam Attorney General

Of Counsel