# Reply Brief — Cook County v. United States Ex Rel. Chandler

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Reply Brief
- **Published:** January 1, 2003
- **Citation:** 538 U.S. 119

## Text

| Supreme Court, U.S.
(i) FILED |

No. 01-1572 DEC 4 a:

IN THE

Supreme Court of the United States

CooK COUNTY, ILLINOIS,
Petitioner,
Vv.

UNITED STATES ex rel. JANET CHANDLER, Ph.D..,
Respondent.

On Writ of Certiorari to the
United States Court of Appeals
for the Seventh Circuit

REPLY BRIEF OF PETITIONER

RICHARD A. DEVINE
State 's Attorney of
Cook County. Illinois
500 Richard J. Daley Center
Chicago, Illinois 60602

Of Counsel: (312) 603-6934

JEROLD S. SOLOVY PATRICK T. DRISCOLL, JR.

BARRY SULLIVAN Deputy State’s Attorney

JENNER & BLOCK Chief, Civil Actions Bureau

One IBM Plaza DONNA M. LACH

Chicago, Illinois 60611 (Counsel of Record)

(312) 222-9350 SANJAY T. TAILOR

Special Assistant State's THOMAS M. BURNHAM
Attorneys Assistant State’s Attorneys

Attorneys for Petitioner

TABLE OF CONTENTS

Page
TAREE Ge ATTIRE ee ccccccceccsccescnssvcsesccsnssnesesesenes il
ET daichbccnlldlaidcuinssesnciinncicebopuniasiiasitacenutinidinnindaniniicen l

I. THERE IS NO EVIDENCE THAT THE
1863 ACT SUBJECTED LOCAL GOV-
ERNMENTS TO LIABILITY .................:c:c0000 l

Il. THERE IS NO - EVIDENCE THAT
CONGRESS INTENDED TO IMPOSE THE
FCA’S PUNITIVE DAMAGES ON LOCAL
Se eID U TED itbestnctstvcccersrsnenneneenensnennensecese 12

I eitnadilichiasteienianiccnscininantanmicccniniemsannemmnenesenten 19

(i)

TABLE OF AUTHORITIES
CASES Page
Albanese v. City Federal Sav. and Loan Ass'n,
710 F. Supp. 563 (D. N.J. 1989) oe eeees 8
Barnes v. District of Columbia, 91 U.S. 540
(BB 7S) .ccosssssessccansesessiestatatisiasiiiaimal 5
Barnes v. Gorman, 122 §. Ct. 2097 (2002) ........... 14
Board of Comm'rs v. Aspinwall, 24 How. 376
(| ) ner 2
City of Lafayette, La. v. Louisiana Power &
Light Co., 435 U.S. 389 (1978)........cccccseceeeseeees 12

City of Lincoln v. Ricketts, 297 U.S. 373 (1936)... a
City of Newport v. Fact Concerts, Inc., 453 U.S.

BET (BGBE ) ncccosccccssctnstesesiensentaimijmaaaniin sseapina passim
County of Cook v. City of Chicago, 311 Ill. 234
( 1GIDS) ..nccccecccccssantncnsmesnmesinstiiiamaainl 5

Cowles v. Mercer County, 74 U.S. (7 Wall.) 118

( TBP) ..<cascconscsessniensestttsansistatmmaminiemaaiaaaies 2
Hubbard v. United States, 514 U.S. 695 (1995)... 7
Hunt v. City of Boonville, 65 Mo. 620 (1877) ....... 4
Imbler v. Pachtman, 424 U.S. 409 (1976)............. 14
Kurzrok v. United States, 1 F.2d 209 (8th Cir.

Lancaster Cmty. Hosp. v. Antelope Valley Hosp.
Dist., 940 F.2d 397 (9th Cir. 1991), cert.

denied, 502 U.S. 1094 (1992)............cssccecsereeeeees 8
Monell v. Department of Soc. Serv. of City of
New York, 436 U.S. 658 (1978) ........cccccscesseeesees 2, 3,5

New York Central R.R. v. United States, 212 U.S.

SBE (IDB) ccceccsecctssncstinestutinannaiiaiiioneaiaiiamaals - 9
Ngiraingas v. Sanchez, 495 U.S. 182 (1990)......... a
Owen v. City of Independence, Mo., 445 U.S. 622

(BSGG) nnccccsccccccscenssnstitasitentapatenpitanmniiimiaiiaiicass 2,14
Paul v. Virginia, 75 U.S. (8 Wall.) 168 (1869)...... 5
Pierce v. Underwood, 487 U.S. 552 (1988)........... 13

Rainwater v. United States, 356 U.S. 590 (1958).. 8,9

—_— )— —_——

iii
TABLE OF AUTHORITIES—Continued

Page
Rowland v. California Men's Colony, Unit Il

Men's Advisory Council, 506 U.S. 194 (1993).. 4
Smith v. United States, 287 F.2d 299 (1961)......... 15
Tenney v. Brandhove, 341 U.S. 367 (1951)........... 14
Texas Indus., Inc. v. Radcliff Materials, Inc., 451

i enersinenieinnernmeneennenencennnsenenencete 12
United States v. Amedy, 24 U.S. (11 Wheat.) 392

EE TEETER Q
United States v. Bd. of Educ. of City of Union

City, Civil Action No. 83-2651, 1985 U.S.

Dist. LEXIS 14917 (D.N.J. 1985)...............0006 11
United States v. Bornstein, 423 U.S. 303

Te 6, 8, 12, 13
United States v. Erie County Med. Ctr., 02-CV-

030S5E(Sr), 2002 U.S. Dist. LEXIS 22673

(W.D.N.Y. Oct. 30, 2002).............ccccccccseeees 3, 6, 11, 18
United States v. Escondido Union Sch. Dist., No.

ES 11
United States v. Griswold, 24 F. 361 (D. Or.

1885), aff'd 30 F. 762 (Cir. Or. 1887) ............... 7
United States v. Hudson & Goodwin, 11 U.S.

a 7
United States v. Jennison, 26 F. Cas. 608 (Cir.

Ct., D. Kan. 1874) (No. 15475) ........cccccceeeees 7
United States v. McNinch, 356 U.S. 595 (1958).... )
United States v. Mississippi Valley Generating

OR 9
United States v. TDC Mgt. Corp., Inc., 24 F.3d

ee 7
United States v. Wells, 519 U.S. 482 (1997).......... 13
United States ex rel. Chandler v. Cook County,

Illinois, 282 F.3d 448 (7th Cir. 2002)................ 8

iV
TABLE OF AUTHORITIES—Continued

United States ex rel. Garibaldi v. Orleans Parish
Sch. Bd., 244 F.3d 486 (Sth Cir.2001), cert.
denied, 122 S. Ct. 808, rhg. denied, 122 S. Ct.
ee 12
United States ex rel. Long v. SCS Business and
Technical Inst., Inc., 999 F. Supp. 78 (D.D.C.
1998), rev'd on other grounds, 173 F.3d 870
(D.C. Cir. 1999), cert. denied, 530 U.S. 1202,

ot Rf ee 18
United States ex rel. Marcus v. Hess, 317 U.S.
ee 9, 12,13
United States ex. rel. Satalich v. Los Angeles,
160 F. Supp. 2d 1092 (C.D. Ca. 2001) .............. 17, 18
Vermont Agency of Natural Resources v. United
States ex rel. Stevens, 529 U.S.765 (2000) ........ passim
FEDERAL STATUTES AND REGULATIONS
Oe | 6
|) 18
CS ee 16, 17
Act of Mar. 2, 1863, ch. 67, 12 Stat. 696............... 6, 7,9
Act of Feb. 25, 1871, 16 Stat. 431 ......................... 3
OTHER FEDERAL LEGISLATIVE MATERIAL
131 Come. Rec. 22,322 (19GS)..........ccorecreressereceeee 15
S. Rep. No. 99-345 (1986), reprinted in 1986,
er eee 15
MISCELLANEOUS

Brief for the United States as Amicus Curiae,
Barnes v. Gorman, (On Petition for a Writ
of Certiorari to the United States Court of
Appeals for the Eighth Circuit) (No. 01-682).... 14, 16

Vv
TABLE OF AUTHORITIES—Continued

Page

G. Field, Law of Damages § 80 (1876) ................. 8
Joan C. Williams, The Invention of the Municipal
Corporation: A Case Study in Legal Change,

34 Am. U.L. Rev. 369 (1985) ........cccccceseseeeseeees 4

ARGUMENT

In 1863, there was no legal presumption that “person”
included local governments for purposes of statutory con-
struction. Moreover, because local governments were not
recipients of federal funding, there was no need for Congress
to include them as “persons” when enacting the 1863 Act.
Indeed, by including criminal provisions in the 1863 Act,
Congress necessarily excluded local governments from its
liability provisions. Understandably, there are no reported
cases of local governments being sued prior to the FCA’s
1986 amendments. When, in 1986, Congress amended the
FCA to add punitive damages, local governments still were
not “persons.” See Vermont Agency of Natural Res. v. United
States ex rel. Stevens, 529 U.S. 765, 783 n.12 (2000)
(“person” has not changed since the 1863 Act). In any event,
Congress’ imposition of mandatory punitive damages,
without a clear expression that such damages were to apply to
local governments, effectively immunized local governments
from FCA liability. The policy considerations for not impos-
ing punitive damages on local governments are obvious—
innocent citizens bear the brunt of such damages either
through an increase in taxes or a decrease in needed services.
The Court’s reasoning in Stevens that “various features of the
FCA, both as originally enacted and as amended,” indicate
that States are not subject to the FCA, id. at 787, compels a
like conclusion that local governments are not subject to
the FCA.

I. THERE IS NO EVIDENCE THAT THE 1863
ACT SUBJECTED LOCAL GOVERNMENTS
TO LIABILITY.

1. Respondent, Relator, urges the statutory construction of
the 1863 Act adopted by the court of appeals, Pet. App. 8a,
in which a presumption is applied to the word “person,”
as used in Congressional enactments, to include local
governments. “Presumption” is a potent concept. Neither a

2

“non-controversial proposition,” Resp. Br., 13, 20, nor a
“contemporaneous understanding” of the suability of
municipal corporations, U.S. Br., 12 n.4, translates into
a “presumption.”

Relator cites a number of nineteenth century cases in which
local governmental bodies were sued in contract or tort, none
of which, with the exception of Cowles v. Mercer County, 74
U.S. (7 Wall.) 118 (1869), interprets the meaning of “person”
as used by Congress. Therefore, those cases shed no light on
the issue before the Court, whether Congress, by using the
term “person,” subjected local governments to liability under
the 1863 Act.

The authorities cited by Relator demonstrate no more than
that the law was still evolving prior to the Court’s decision in
Cowles. See, e.g., Monell v. Department of Soc. Serv. of City
of New York, 436 U.S. 586, 673 (1978) (noting that “Board of
Comm'rs v. Aspinwall, 24 How. 376 (1861), [was] the first of
many cases upholding the power of federal courts to enforce
the Contract Clause against municipalities”). By 1863, “the
state courts did not speak with a single voice with regard to
the tort liability of municipal corporations . . . [and] no state
court had ever held that municipal corporations were always
liable in tort in precisely the same manner as other persons.”
Monell, 436 U.S. at 720-21 (Rehnquist, J., dissenting); see
also Owen v. City of Independence, Mo., 445 U.S. 622, 639
(1980) (noting that, although, in 1871, “[{ljocal governmental
units were regularly held to answer in damages for a wide
range of statutory and constitutional violations, . . .
a municipality was not subject to suit for all manner of
tortious conduct”).'

' Relator argues that nothing happened between 1863 and the Cowles
decision in 1869 to lead to the extension of the meaning of “person” to
include local governments. Resp. Br., 12. Actually, a great deal
happened. The Civil War ended, and the Reconstruction period began.

3

In contrast, by the time Congress enacted the Civil Rights
Act of 1871, local governments were considered “persons”
for purposes of statutory construction both under the Court’s
1869 decision in Cowles and by Congress’ 1871 enactment of
the Dictionary Act. Act of Feb. 25, 1871, § 2, 16 Stat. 431.
Yet, in holding that local governments were subject to
liability under Section 1983 of the Civil Rights Act, the Court
in Monell did not rely solely on a “presumption” that local
governments were “persons” in 1871. Rather, the Court also
considered the legislative history for indications of Con-
gressional intent, the general treatment of municipal
corporations in 1871, and the Dictionary Act. See Monell,
436 U.S. at 686-89. As Cook County explained in its initial
brief, Pet. Br., 13-19, applying those same considerations to
the 1863 Act leads to the conclusion that the term “person”
did not include local governments. See United States v. Erie
County Med. Ctr., 02-CV-0305 E(Sr), 2002 U.S. Dist. LEXIS
22673, at *17 (W.D.N.Y. Oct. 30, 2002).

2. The United States argues that local governments “are as
capable as natural persons or commercial corporations of sub-
mitting false claims for payment to the federal government”
and thereby threaten the federal fisc. U.S. Br., 15. Notably,
the United States nowhere explains under what circumstances
local governments could have done so in 1863, or, for that
matter, whether local governments were receiving any money
from the federal government in 1863.

Relator equates municipal corporations with private corpo-
rations, which were presumptively included within the term
“person” by $863. Resp, Br., 15-22. In a broad sense, the
term “corporation” applies to any body politic and corporate,
including even the United States. See Ngiraingas v. Sanchez,

The Thirteenth, Fourteenth, and Fifteenth Amendments became law
between 1865 and 1870. To enforce the Fourteenth Amendment, Con-
gress enacted the Civil Rights Act of 1871, which subjected local govern-
ments to liability. See Monell, 436 U.S. at 665, 685-86.

4

495 U.S. 182, 202 and n.8 (1990) (Brennan, J., dissenting)
(citations omitted). However, Congress does not always use
the tcrm in its broadest meaning. Generally, statutes make
clear, either through express language or clear implication,
whether they refer to municipal or other kinds of corpo-
rations, or to both.? When a statute is not specific as to
Congress’ intent regarding the scope of the term “corpora-
tion,” the Court has looked to other factors to determine the
legislature’s intent. See, e.g., City of Lincoln v. Ricketts, 297
U.S. 373, 374, 376-77 (1936) (examining Bankruptcy Act for
legislative intent before concluding that “corporation” was
being used in a broad sense to include municipal cor-
porations); contrast Rowland v. California Men’s Colony,
Unit Il Men's Advisory Council, 506 U.S. 194, 201-09 (1993)
(despite inclusion of “association” in Dictionary Act’s
definition of “person,” Court found that certain features of in
forma pauperis statute suggested that Congress only intended
for natural persons to proceed under that statute). In neither
Cowles nor Monell did the Court equate public corporations
with private corporations as early as 1863. See also City of
Newport v. Fact Concerts, Inc., 453 U.S. 247, 262 (1981)
(distinguishing between municipal and private corporations)
(citing Hunt v. City of Boonville, 65 Mo. 620, 625 (1877)).

In the early and mid-nineteenth century, the law regarding
the corporate structure of local governments was evolving
differently in the different states, with some local gov-
ernments considered municipal corporations and others quasi-
corporations. See Joan C. Williams, The /nvention of the
Municipal Corporation: A Case Study in Legal Change, 34
Am. U.L. Rev. 369, 372, 392-410 (1985). The liability

* Neither Relator nor her amici curiae disputes that many statutes, such
as those listed in Pet. Br., 26-27, Airport Proprietors Br., 12-13, and
Orange County Br., 7 n.4, demonstrate that Congress makes its intention
clear when it wishes to include local governments within the purview of a
statute.

— see ae

5

of municipal corporations, “made such by acceptance of a
willage or city charter,” was greater than that of involuntary
quasi-corporations, “known as counties, towns, schvol-
districts, and especially the townships of New England.” See
Barnes v. District of Columbia, 91 U.S. 540, 552 (1875).°
Moreover, in the mid-nineteenth century, Congress was
aware that even private corporations were not treated as
“persons” for all purposes. See Monell, 436 U.S. at 720
(Rehnquist, J., dissenting) (noting that while private corpora-
tions were “citizens” for purposes of .\rticle III, they were not
for purposes of the Privileges and Immunities Clause) (citing
Paul v. Virginia, 75 U.S. (8 Wall.) 168 (1869)).

Both Relator and the United States argue that Cowles did
not change the law because the question was “non-
controversial,” Resp. Br., 20, and because Cowles did not
overrule a prior understanding. U.S. Br., 11. The pre-Cowles
cases upon which Relator and the United States rely do
nothing more than show what the law was for certain
purposes in certain states, which is insufficient to establish a
“presumption” that the word “person” included local gov-
ernments for purposes of Congressional enactments as early
as 1863. Indeed, it was not until the Cowles decision in 1869
that the Court first held that local governments could be
treated as natural persons. See Erie County, 2002 U.S. Dist.
LEXIS 22673, at *13.

The United States, U.S. Br., 13, points to the Court's
comment in Stevens that corporations were “presumptively

* Relator hastily concludes that Cook County was a “full-blooded
‘corporation’ as of 1863.” Resp. Br., 17 n.3. In fact, the distinction
between municipal corporations and quasi-corporations existed in Illinois,
and, as late as 1924, the Illinois Supreme Court explained that, in contrast
to municipal corporations, which existed at the request of the people,
counties were involuntary quasi-municipal corporations, “rank{ed] low in
the scale or grade of corporate existence.” County of Cook v. City of
Chicago, 311 Il. 234, 239-41 (1924).

6

covered by the term ‘person.”” Stevens, 529 U.S. at 782
(emphasis in original) (citing | U.S.C. § 1). Because the
presumption that municipal corporations are embraced in the
word “person” for purposes of statutory construction did
not exist in 1863, see Erie County, 2002 U.S. Dist. LEXIS
22673, at *17 n.19, the Court’s reference in Stevens to
“corporations” in the Dictionary Act is limited to private
corporations. Indeed, quoting United States v. Bornstein for
the proposition that “the FCA was enacted in 1863 with the
principal goal of ‘stopping the massive frauds perpetrated by
large [private] contractors during the Civil War,’” the Court
in Stevens added “private” to make clear that private corpo-
rations, not public ones, were targeted by Congress in the
1863 Act. See Stevens, 529 U.S. at 781 (quoting Bornstein,
423 U.S. 303, 309 (1976)). Moreover, the 1863 Act itself
specifically referenced an “officer or agent of any banking or
other commercial corporation, and . . . member of any
mercantile or trading firm,” barring such individuals from
employment by the United States “for the transaction of
business with such corporation or firm.” Act of Mar. 2, 1863,
ch. 67, § 8, 12 Stat. 696, 698-99. Pet. Br. App. 36a. Clearly.
Congress itself made a distinction in the 1863 Act between
municipal and commercial corporations.

There was no presumption by 1863 that local governments
were included in the term “person” in Congressional enact-
ments or that all local governments had a uniform corporate
identity that equated with a private corporation. Thus, the
term “person” in the 1863 Act did not presumptively include
local governments.

3. Even if the Court finds that the term “person”
presumptively included local governments in 1863, the
mandatory criminal penalties imposed under the 1863 Act
establish that Congress did not intend that presumption to
apply to the 1863 Act. Relator and the United States contend
that this argument proves too much, noting that, just as a local

7

government cannot be imprisoned, neither can a private
corporation. Resp. Br., 23; U.S. Br., 13. However, it is the
fact that a local government cannot be subject to any criminal
penalty that distinguishes it from a private corporation. Thus,
contrary to Relator’s and the United States’ assertions, the
County’s interpretation of the 1863 Act does not exclude
private corporations from liability.

Federal crimes are created solely by statute, as opposed to
common law. See United States v. Hudson & Goodwin, \1
U.S. (7 Cranch) 32, 33 (1812). The 1863 Act “made it a
criminal offense for any person, whether a civilian or a
member of the military services,” to present upon the United
States any claim for payment “‘knowing such claim to be
false, fictitious or fraudulent."” Hubbard v. United States,
514 U.S. 695, 704 (1995) (quoting 1863 Act). Among other
things, Section | of the 1863 Act provided that any person
who “shall steal, embezzle, or knowingly and willfully
misappropriate” shall be subject to criminal punishment. Act
of Mar. 2, 1863, ch. 67, 12 Stat. 696, 697. Pet. Br. App. 33a.
Not only did the 1863 Act impose an actual knowledge of
fraud and/or willfulness element, in other parts of Section |, it
also imposed an “intent to defraud” and “intent to cheat”
element. /d. at 696-97; Pet. Br. App., 33a; see also United
States v. Jennison, 26 F. Cas. 608, 610 (Cir. Ct., D. Kan.
1874) (No. 15475) (judge charging jury that under 1863 Act
they must find that defendant intended to defraud govern-
ment); Kurzrok v. United States, | F.2d 209, 211 (8th Cir.
1924) (rejecting defendant’s contention that there was insuf-
ficient evidence upon which jury could have found that
defendant “intended to defraud the United States” in violation
of FCA); United States v. Griswold, 24 F. 361, 365 (D. Or.
1885), aff'd 30 F. 762 (Cir. Or. 1887) (“A forfeiture cannot
occur under section 5438, Rev. St. [codification of criminal
provision of 1863 Act], without the party incurring the
same being guilty of both fraudulent intent and conduct.”);
United States v. TDC Mgt. Corp., Inc., 24 F.3d 292, 297

8

(D.C. Cir. 1994) (intent to deceive is element of fraud under
pre-1986 version of FCA).* As local governments were not
thought capable of forming criminal intent, the word “person”
in the 1863 Act cannot sensibly be interpreted to include
local governments. See City of Newport, 453 U.S. at 264
n.23 (quoting G. Field, Law of Damages § 80 (1876))
(“*[Municipal corporations] cannot . . . be supposed capable
of doing a criminal act.””).°

While the 1863 Act originally provided both criminal and
civil sanctions in the same statute, those provisions were
subsequently bifurcated. Rainwater v. United States, 356
U.S. 590, 592 n.8 (1958). In the Revised Statutes of 1878,
the civil sanctions were codified as Sections 3490-3494 and
the criminal sanctions as Section 5438. /d.° The Court has
narrowly interpreted Section 5438 of the Revised Statutes,
which was largely a re-enactment and codification of Sec-
tion | of the 1863 Act. See United States ex rel. Marcus v.

* In 1986, Congress amended the FCA so that “proof of specific intent
to defraud” was no longer required, making it easier for the federal
government and relators to prevail. United States ex rel. Chandler v.
Cook County, 277 F.3d 969, 976 (7th Cir. 2002) (citing 31 U.S.C.
§ 3729(b)). Pet. App. 12a-13a.

* Even RICO’s expansive reach, Resp. Br., 25, does not extend to local
governments, which cannot form the requisite intent. See Lancaster
Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397, 404 (9th Cir.
1991), cert. denied, 502 U.S. 1094 (1992) (civil RICO claim against
public hospital fails “because government entities are incapable of
forming a malicious intent,” an element of the predicate criminal act);
Albanese v. City Fed. Sav. and Loan Ass'n, 7\0 F. Supp. 563, 567 (D.N_J.
1989) (township cannot form criminal intent to commit predicate acts and
thus cannot be held liable under civil RICO statute).

* Section 5438, titled Crimes, made certain acts to defraud the United
States crimes punishable by imprisonment or fine, while Section 3490
made the violation of Section 5438 subject to forfeitures of $2,000 per
false claim and double damages. Rainwater, 356 U.S. at 592 n.8; see also
Bornstein, 423 U.S. at 306.

9

Hess, 317 U.S. 537, 542 (1943) (Ҥ 5438 is criminal and for
that reason in interpreting so much of its language as it shares
in common with § 3490 we must give it careful scrutiny lest
those be brought within its reach who are not clearly in-
cluded”); United States v. McNinch, 356 U.S. 595, 598 (1958)
(noting that in construing Section 5438 it is “actually con-
struing the provisions of a criminal statute” and that “[s}uch
provisions must be carefully restricted, not only to their literal
terms but to the evident purpose of Congress in using those
terms, particularly where they are broad and susceptible [of]
numerous definitions”); see also Rainwater, 356 U.S. at
592-93.

This same reasoning would not have excluded private
corporations from liability under the 1863 Act. While both
local governments and private corporations cannot be
imprisoned, a private corporation, unlike a local government,
can be held criminally liable. See, e.g., New York Central
R.R. v. United States, 212 U.S. 481, 492-94 (1909). Indeed,
as the United States correctly points out, a corporation was
held to be a person subject to a penal statute as early as 1826.
U.S. Br., 10 n.3 (citing United States v. Amedy, 24 U.S. (11
Wheat.) 392, 412-13 (1826)). Moreover, Section 8 of the
1863 Act provided that “no officer or agent of any banking or
other commercial corporation, and no member of any
mercantile or trading firm . . . shall be employed or shall act
as an officer or agent of the United States for the transaction
of business with such corporation or firm.” Act of Mar. 2,
1863, ch. 67, § 8, 12 Stat. 696, 698-99. Pet. Br. App. 36a.
By its express terms, a violation of Section 8 occurred simply
by virtue of the conflict of interest with no showing that the
corporation submitted a false claim to the United States. Cf.
United States v. Mississippi Valley Generating Co., 364 U.S.
520, 549-50 (1961) (“the statute [restatement of Section 8 of
1863 Act] is more concerned with what might have happened
in a given situation than with what actually happened”).
That Congress would have prohibited conflicts of interest in

10

transactions between commercial corporations and the United
States but not have prohibited commercial corporations from
submitting false claims defies common sense.

Thus, even if the Court finds that the term “person”
presumptively included local governments in 1863, the
criminal context in which the term was used in the 1863 Act
overcomes that presumption.

4. Recognizing that “person” has remained in the FCA
unchanged since 1863, see Stevens, 529 U.S. at 783 n.12, the
United States cites the FCA’s 1982 amendments for the
proposition that they “reinforce” the conclusion that Con-
gress, in 1863, intended local governments to be subject to
the 1863 Act. The United States bases this proposition on
Monell’s holding that local governments were persons under
Section 1983 as well as the Court’s holdings that the FCA
covered all forms of fraud against the United States and that
the damages available at that time were compensatory. U.S.
Br., 15-16. The United States reads too much into the 1982
amendments.

First, Monell’s holding is limited to Section 1983, enacted
eight years after the 1863 Act. Second, while the 1863 Act
was intended to cover all types of fraud, it was not “intended
to cover all types of fraudsters.” See Stevens, 529 U.S. at 781
n.10 (emphasis in original). Third, the Court’s holdings
regarding the FCA’s double damages are not controlling
because those damages simply provided the federal gov-
ernment with full compensation, not punitive damages.
Finally, as the Court in Stevens noted, “[i]n 1982, Congress
made «a housekeeping change” which resulted in the
incorporation of “the term of art ‘member of an armed force’
throughout Title 10 of the United States Code.” Stevens, 529
U.S. at 782. Therefore, the 1982 amendments neither create a
presumption nor reinforce that local governments were
included as “persons” under the 1863 Act.

1]

If anything, by not explicitly expressing an intent to subject
local governments to liability, the amendments to the FCA in
1982, as well as in 1986, in fact, reinforce that “person” in the
1863 Act never included local governments. Indeed,
Congress’ imposition of mandatory punitive damages in
1986, from which local governments are immune, further
confirms that the term “person” in the FCA does not include
local governments. See Erie County, 2002 U.S. Dist. LEXIS
22673, at *20-21.

5. A more compelling indication that Congress subjected
local governments to liability under the 1863 Act would be a
history of lawsuits brought against local governments. How-
ever, none exists prior to the 1986 amendments. Neither of
the two matters that Relator cites, Resp. Br., 32, establishes
that local governments were sued, let alone held liable, under
the FCA prior to the enactment of the 1986 amendments.
United States v. Bd. of Educ. of City of Union City was a suit
for violations of the FCA, common law fraud, breach of
contract, unjust enrichment, and conversion brought against
multiple defendants, including a number of individuals who
had been convicted for the same conduct. Civil Action No.
83-2651, 1985 U.S. Dist. LEXIS 14917 (D.N.J. 1985). It is
not clear under which cause of action the Board of Education
was being sued; however, insofar as the Board of Education,
as a third-party plaintiff, attempted to join in the United
States’ summary judgment motion on the FCA claims against
the individual defendants, id., it seems extremely unlikely
that the United States was pursuing an FCA claim against the
Board of Education. United States v. Escondido Union Sch.
Dist., No. 78-0845-S (S.D. Cal.), has no opinion from which
one can glean the cause of action brought against the
defendant School District or whether the question regarding a
local government's status as a “person” under the FCA was
raised. Notably, the United States has not commented on
either of these cases.

12

ll. THERE IS NO EVIDENCE THAT CONGRESS
INTENDED TO IMPOSE THE FCA’S PUNITIVE
DAMAGES ON LOCAL GOVERNMENTS.

The Court presumes “that Congress expects its statutes to
be read in conformity with this Court’s precedents.” United
States v. Wells, 519 U.S. 482, 495 (1997). Therefore, when,
in 1986, Congress increased the FCA’s civil remedy from
double to treble damages and the fines from $2,000 to
between $5,000 and $10,000, it knew that the double
damages of the FCA were not punitive. Marcus, 317 U.S. at
550; Bornstein, 423 U.S. at 531 n.11. Congress also knew
that treble damages, like those in the antitrust laws, would
have been punitive. Stevens, 529 U.S. at 785-86 (citing
Marcus, 317 U.S. at 550); see also Texas Indus., Inc. v.
Radcliff Materials, Inc., 451 U.S. 630, 639 (1981) (“[t}he
very idea of treble damages reveals an intent to punish past,
and to deter future, unlawful conduct”).’ Congress also knew
that the Court recognized a long-standing immunity from the
imposition of punitive damages against governmental entities
and that Congress must expressly manifest its intention
to abrogate the immunity. City of Newport, 453 U.S.

” That treble damages can be assessed against local governments under
the antitrust laws does not compel a different result. “Antitrust laws in
general, and the Sherman Act in particular, are the Magna Carta of free
enterprise.” City of Lafayette, La v. Louisiana Power & Light Co., 435
U.S. 389, 398 n.16 (1978). In City of Lafayette, the Court determined that
the antitrust laws were drafted with the purpose of reaching all
commercial activity, including a municipality's commercial activity. /d
at 408 (“If municipalities were free to make economic choices counseled
solely by their own parochial interests and without regard to their
anticompetitive effects, a serious chink in the armor of antitrust protection
would be introduced at odds with the comprehensive national policy
Congress established.”). “The [FCA] and the antitrust laws are not
analogous in this regard” because the FCA does not have “the same broad
scope as the antitrust laws.” L/nited States ex rel. Garibaldi v. Orleans
Parish Sch Bd, 244 F.3d 486, 494 (Sth Cir. 2001), cert. denied, 122 S.
Ct. 808, rhg. denied, 122 S. Ct. 1198 (2002).

13

at 259, 260 n.21, 263. Finally, Congress knew that the United
States had remedies other than the FCA to recover damages
from local governments. Thus, Congress was aware of
the consequence of trebling the damages with no indication
of an intent to impose the mandatory damages on local
governments.

1. Relator downplays the punitive nature of the FCA’s
mandatory treble damages plus fines plus relator’s attorneys
fees, arguing that the increase “was necessary to assure full
compensation to the federal government” since the percent-
tage paid to relators was increased. Resp. Br., 39. However,
unlike the double damages at issue in Marcus, 317 U.S. 537,
or Bornstein, 423 U.S. 303, under the 1986 amendments, the
federal government’s share of the damages far exceeds the
amount necessary to make it whole. Even though a relator
may receive up to 30% of both the treble damages and fines,
the federal government receives in excess of double the
damages. Where the United States brings an action itself, it
receives the full treble damages plus fines. The rationales of
Marcus and Bornstein, thus, do not justify the windfall to the
United States under the current mandatory treble damages.

Relator also argues that Congress intended the treble
damages to be compensatory, but “ultimately settled on the
simpler scheme of treble damages.” Resp. Br., 38. Simpler
or not, the FCA’s damages are punitive. See Stevens, 529
U.S. at 784-85. “[I}t is the function of the courts and not the
Legislature . . . to say what an enacted statute means.” Pierce
v. Underwood, 487 U.S. 552, 566 (1988). For example, it is
safe to assume that Congress always intends to enact a
constitutional statute, but that well-meaninged intent does not
prohibit the Court from holding that an enactment is
unconstitutional. Likewise, even if Congress considered the
treble damages scheme in the 1986 amendments to be com-
pensatory, the Court in Stevens has determined otherwise.

14

Relator’s distinction between “common-law punitive dam-
ages” and treble damages that are “essentially punitive in
nature,” Resp. Br., 44-45, leads nowhere. “Punitive damages,
by definition, are damages in excess of those necessary to
provide recompense.” Brief for the United States as Amicus
Curiae at *16, Barnes v. Gorman (On Petition for a Writ of
Certiorari to the United States Court of Appeals for the
Eighth Circuit) (No. 01-682). Whether punitive damages are
imposed against a local government by a jury award or by a
mandatory punitive damages scheme, the result is the same:
they punish “only the taxpayers, who took no part in the
commission of the tort . . . and are likely accompanied by an
increase in taxes or a reduction of public services for the
citizens footing the bill.” City of Newport, 453 U.S. at 267.

2. By using terms such as “sub silentio,” “repeal,” Resp.
Br., 32, 33, “oust,” U.S. Br., 17, and “remove,” K&R Br., 8,"
Relator and her amici curiae ask the Court to invert the well-
established standard for the imposition of punitive damages
on local governments from one requiring an explicit indi-
cation of abrogation from Congress to one requiring a mere
inference. See, e.g., Barnes v. Gorman, 122 S. Ct. 2097,
2103 (2002) (Stevens, J., concurring) (“absent clear congres-
sional intent to the contrary, municipalities are not subject to
punitive damages”) (citing City of Newport, 453 U.S. 247);
Owen, 445 U.S. at 704 (“immunities ‘well-grounded in his-
tory and reason’ [were not] abrogated ‘by covert inclusion in
the general language’) (quoting /mbiler v. Pachtman, 424
U.S. 409, 418 (1976) (quoting Tenney v. Brandhove, 341 U.S.
367, 376 (1951)). To begin with, since local governments
were not “persons” under the 1863 Act, there was nothing in

*The Taxpayers Against Fraud further argue that the 1986 amend-
ments changed the meaning of “person” to broaden it and that the FCA’s
treble damages are not punitive. Taxpayers Br., 9, 12-23. Those argu-
ments run directly counter to the Court's conclusions in Stevens. Stevens,
529 U.S. at 783 n.12, 784-85.

1S

1986 to “oust” or “repeal.” Moreover, the inferences that
Relator and her amici curiae have pressed do not indicate any
Congressional intent to impose punitive damages on local
governments.

The Senate Committee Report’s citation to Smith v. United
States, 287 F.2d 299 (1961), Resp. Br., 32, does not constitute
a clear expression of Congressional intent to impose punitive
damages on local governments. In Smith, the executive
director of a governmental housing project was convicted
under the FCA. /d. at 300. Not only does Smith have nothing
to do with liability of local governments under the FCA, the
Senate Report did not cite Smith for Relator’s proposition that
Congress understood that local governments could violate the
FCA. S. Rep. No. 99-345, at 18-19, reprinted in 1986
U.S.C.C.A.N, at 5283-84.

Nor does Congress’ 1985 increase of damages for false
claims involving contracts with the Department of Defense
infer a Congressional intent to impose punitive damages on
local governments. U.S. Br., 25-26. In 1985, Congress
decided that some fraudsters could be held liable for double
damages under the FCA and others for treble damages under
the Department of Defense Authorization Act. Also, in 1985,
Congress first proposed to add mandatory treble damages to
the FCA for all fraud claims. 131 Cong. Rec. 22,322 (1985).
Thus, Congress’ adoption of a treble damages scheme in the
FCA to comport with the same scheme under the Department
of Defense Authorization Act, see S. Rep. No. 99-345, at 17,
reprinted in 1986 U.S.C.C.A.N. at 5282, is not an explicit
indication of Congressional intent to impose the FCA’s
punitive damages on local governments.

The United States’ argument that, given “Congress's
overriding intent to strengthen and expand” the FCA, it is
“unlikely” that Congress would have exempted local gov-
ernments from the 1986 amendments, U.S. Br., 19, is partic-
ularly curious in light of the position it took earlier this year

16

in another case before the Court. There, the United States, as
amicus curiae, argued: “A court should not impute to Con-
gress an intent to allow a punitive damages remedy absent a
clear congressional directive,” and even when “punitive
damages are found to be available in certain circumstances,
this Court has declined to recognize a punitive damages
remedy against municipalities.” Brief for the United States as
Amicus Curiae at *7, *17, Barnes v. Gorman (On Petition for
a Writ of Certiorari to the United States Court of Appeals for
the Eighth Circuit) (No. 01-682). In that case, the United
States correctly stated: “the Court in Fact Concerts did not
presume that punitive damages were available against munic-
ipalities unless Congress said otherwise, . . . Instead, in Fact
Concerts, the Court first looked to whether there was any
evidence that in enacting Section 1983, Congress had
intended to override the ‘common-law tradition’ that punitive
damages were not available against a municipality.” /d. at
*17 (citing City of Newport, AS3 U.S. at 261). The United
States’ position in Barnes v. Gorman that “the proper
presumption in the absence of clear Congressional guidance
is against inference of a punitive damages remedy,” id. at *11
(heading for its first argument), is directly applicable to this
case. Without a clear indication from Congress that the
FCA’s punitive damages are to be imposed on local govern-
ments, the federal government is left to resort to more
traditional causes of action against local governments.

As for the whistleblower provision, it is not at all implau-
sible that Congress may have subjected local governments to
liability for retaliation but not for submitting a false claim.
Relator ignores the range of other actions that could be taken
by the United States against a local government in response to
disclosures of fraud, such as threatening the withdrawal of
federal funding, which can be the death knell of a program.
Thus, that local governments may be subject to retaliation
liability under 31 U.S.C. § 3730(h) does not lead to the

17

inexorable conclusion that they may also be subject to
liability for submitting a false claim.

Relator’s amicus curiae, K&R Limited Partnership, cites a
line of cases holding that an employee must show a distinct
possibility that a viable FCA suit can be brought against her
employer to state a claim for retaliation under Section
3730(h). K&R Br. 19. However, the only courts to have
considered whether a local government is an “employer”
under Section 3730(h) held that a local government could be
sued for retaliating against its employee, despite the fact that
it cannot be sued for submitting a false claim. In United
States ex. rel. Satalich v. Los Angeles, 160 F. Supp. 2d 1092
(C.D. Ca. 2001), the court, after observing that the whistle-
blower provision applied to “any” employer, explained:

While it may seem unlikely that a non-target employer
would engage in retaliatory conduct, this case dem-
onstrates the propriety of interpreting section 3730(h)
literally, and permitting the action to go forward.
Specifically, this case presents a circumstance where an
employer without FCA liability could be in cahoots with
other non-municipal entities that are potentially liable,
and for that reason may be motivated to silence a
whistleblower. Moreover, the remedies provision of
section 3730(h) does not impose punitive damages.
Thus, the Court is not confronted with the considerations
of history and policy which support municipal immunity
from section 3729 liability. Given the obvious policy
considerations that underlie the enactment of section
3730(h), the Court concludes that Plaintiff should be

18

permitted to maintain this action, irrespective of whether
the City bears any potential liability under section 3729.

Id. at 1107-08; see also Erie County, 2002 U.S. Dist. LEXIS
22673, at *13.” As Cook County argued in its initial brief,
Pet. Br., 30, the Senate Committee Report’s definition of
“employer” in the whistle-blower provision, upon which
Relator places great reliance, Resp. Br., 31, is too thin a reed
to support a finding that Congress abrogated the common-law
local governmental immunity from punitive damages. C/
United States ex rel. Long v. SCS Business and Technical
Inst., 999 F. Supp. 78, 93 (D.D.C. 1998), rev'd on other
grounds, 173 F.3d 890 (D.C. Cir. 1999), cert. denied, 530
U.S. 1202 (2000) (“Congress' intent to protect whistleblowers
does not extend to whistleblowers whose employer is a state
because Congress did not clearly state such intention in
the statute, even if the legislative history suggests such an
intention.”’).

Neither Cook County nor its amici curiae have suggested
that local governments cannot be held accountable for fraud
upon the United States. The FCA, however, with its punitive
damages, is not the appropriate remedy for fraud committed
by a local government in its use of federal funds. Nothing
about the real punishment inflicted by the FCA is “hyper-
bolic.” Resp. Br., 46. Funds used to satisfy a punitive
damages judgment against a local government necessarily
means less money to spend on schools, hospitals, airports,
roads, and numerous other programs and services provided by
local governments. Thus, the burden of the FCA’s punitive
damages is felt by innocent people throughout this country,
from school children to the medically indigent to the users of

* As in Satalich, Relator, here, alleges that Cook County was in
cahoots with its co-defendant, the Hektoen Institute for Medical Research
(“Hektoen”), a suable entity under the FCA. Because Hektoen employed
Relator, her retaliatory discharge claim against Cook County was dis-
missed. Pet. App. 48a.

_ eee ee

19

public airports, to name but a few. These innocent victims of
the FCA’s punitive damages have no means of “avoid[ing]
such dilemmas.” Resp. Br., 46. While Congress has the
power to impose punitive damages on local governments, the
Court has always required a clear indication of Congressional
intent. No clear indication exists anywhere in the history of
the FCA of a Congressional intent to subject local govern-
ments to liability under the FCA, much less punitive
damages.

Consistent with the Court’s analyses in Stevens and City of
Newport, the Court should reverse the judgment of the court

of appeals.
CONCLUSION

For the reasons set forth above and in Petitioner’s Brief, as
well as for the reasons set forth in the briefs filed by the amici
curiae in support of the Petitioner, Cook County, Illinois, the
court of appeals’ decision should be reversed.

Respectfully submitted,

RICHARD A. DEVINE
State 's Attorney of
Cook County, Illinois
500 Richard J. Daley Center
Chicago, Illinois 60602
Of Counsel: (312) 603-6934

JEROLD S. SOLOVY PATRICK T. DRISCOLL, JR.
BARRY SULLIVAN Deputy State’s Attorney
JENNER & BLOCK Chief, Civil Actions Bureau

One IBM Plaza DONNA M. LACH

Chicago, Illinois 60611 (Counsel of Record)

(312) 222-9350 SANJAY T. TAILOR

Special Assistant State's THOMAS M. BURNHAM
Attorneys Assistant State’s Attorneys

Attorneys for Petitioner

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0564%3A09. Public record. Not legal advice.