Amicus Curiae Brief — Cook County v. United States Ex Rel. Chandler

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[4 Supreme Court, U.S.

wy, FILED

No. 01-1572 |

Sep 9 Me OCC*d

IN THE

Supreme Court of the

| 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

BRIEF OF THE NATIONAL ASSOCIATION OF

COUNTIES, NATIONAL LEAGUE OF CITIES,

NATIONAL GOVERNORS ASSOCIATION,

INTERNATIONAL CITY/COUNTY MANAGEMENT

ASSOCIATION, COUNCIL OF STATE

GOVERNMENTS, U.S. CONFERENCE OF MAYORS,

NATIONAL CONFERENCE OF STATE

LEGISLATURES, AND INTERNATIONAL

MUNICIPAL LAWYERS ASSOCIATION AS AMICI

CURIAE IN SUPPORT OF PETITIONER

ROBERT K. HUFFMAN RICHARD RUDA *

MIRIAM R. NEMETZ Chief Counsel

CHARLES A. ROTHFELD STATE AND LOCAL LEGAL

ROBERT L. BRONSTON CENTER

STEVEN J. DUFFIELD 444 North Capitol St., N.W.

MAYER, BROWN, ROWE & MAW Suite 345

1909 K Street, N.W. Washington, D.C. 20001

Washington, D.C. 20006 (202) 434-4850

(202) 263-3000

* Counsel of Record

L-— = —

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 — WASHINGTON, D. C. 20001

‘ ?

QUESTION PRESENTED

Whether local governmental entities are subject to gui tam

actions under the False Claims Act.

TABLE OF CONTENTS

Page

nT ccc ncnsmcenennennmecnsocsnccenceees i

TABLE OF AUTHIORITIES ....cccccccccccccsesessscccsesscsseseeees Vv

INTEREST OF THE AMICI CURIAE .........ccccccceeeeee0s l

SUMMARY OF ARGUMENT .............c.cccccccccceeeeeeeseees 3

a Te 5

I. CONGRESS MUST CLEARLY STATE ITS

INTENTION TO ABROGATE LOCAL

GOVERNMENTAL’ ENTITIES’ LONG-

STANDING IMMUNITY FROM PUNITIVE

A. Local Governmental Entities Have Long

Enjoyed Common Law Immunity From

STII cccxesssseseqnannssnnsnecnsecesesecazece 5

B. Congress Must Clearly State Its Intention

To Abrogate This Immunity By Statute....... 8

Il. THE FALSE CLAIMS ACT DOES NOT

REFLECT CONGRESSIONAL INTENT TO

SUBJECT LOCAL GOVERNMENTAL

ENTITIES TO PUNITIVE DAMAGT “........... 9

A. Congress Did Not Express An Intention To

Subject Local Governmental Entities To

ST TE IEP cniteiticenencgnemenasesneneceeesscvancce 9

B. Congress Did Not Subject Local

Governmental Entities To Punitive

IE IE cecepeennnsnnncenenszcoseesmnsecczccnoese 11

1. The 1986 Amendments Completely

Transformed The False Claims Act....... 11

(iii)

TABLE OF CONTENTS—Continued

a. The 1986 Amendments Converted

The False Claims Act To A

SS 12

b. The 1986 Amendments Vastly

Increased The Frequency Of Qui

Fat GTI cerescmnecesecenenmnsmemneemestienen 13

c. If Applied To Local Governmental

Entities, The 1986 Amendments

Would Prove Especially

a ee 13

2. The 1986 Amendments Contain No

Clear Statement Of Intent To Strip

Local Governmental Entities Of Their

Immunity From Punitive Damages ....... 16

NBII ...cccccccecesccscecesssesscesescsssnescessenssnssessesssessees 20

TABLE OF AUTHORITIES

CASES Page

Barnes v. Gorman, 122 S.Ct. 2097 (2002)............ 5

Carlson v. Green, 446 U.S. 14 (1980).............0000 7

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

Oe Gee iremensteiimemmeemnin passim

Cowles v. Mercer County, 7 Wall. 118 (1869)...... 10

Fisher v. City of Miami, 160 So. 2d 57 (Fla. Ct.

FE, FE cecteentciemimnsrntmeemmne 5

Foss v. Maine Turnpike Auth., 309 A.2d 339

FEE Ge erpreentnrcerepememenpeiliinsenenen 5

Hughes Aircraft Co. v. United States ex rel.

Schumer, 520 U.S. 939 (1997).........ccccccceeeeeeee passim

Louisville R. Co. v. Letson, 2 How. 497 (1844)..... 10

McGrary v. President & Council of the City of

Lafayette, 12 Rob. 668 (La. 1846)................... 6

Monell v. Dep't of Soc. Servs., 436 U.S. 658

Gi Ul recestevenustmennsuntemnmntameatvnnensdhentpaninendvens 10

Perez v. Z Frank Oldsmobile, Inc., 223 F.3d 617

(7th Cir. 2000), cert. denied, 531 U.S. 1153

ee cncrsncenetinnsstistecsmeessemnnenapnmeeniieccninnen 12

Pierson v. Ray, 386 U.S. 547 (1967) .........cccce00e0 8

Texas Industries, Inc. v. Radcliff Materials, Inc.,

Se SE tcnescensemencssseennsamsegpenees 12

Town of Newton v. Wilson, 91 So. 419 (Miss.

UE rccnsmnsmatinemesiennnmsesiieeccemenseumsssssenanensases 5

United States v. Bornstein, 423 U.S. 303 (1976)... 9, 12

United States v. Cooper Corp., 312 U.S. 600

United States ex rel. Garibaldi v. Orleans Parish

Sch. Bd., 244 F.3d 486 (Sth Cir. 2001),

cert. denied, 122 S. Ct. 808 (2002)................... 10

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

eee 14

TABLE OF AUTHORITIES—Continued

Page

United States ex rel. Stevens v. Vermont Agency

of Natural Res., 162 F.3d 195 (2d Cir. 1998),

rev'd, 529 U.S. 765 (2000) ........cesseeereeererenrees 15

Vermont Agency of Natural Res. v. United States

ex rel. Stevens, 529 U.S. 765 (2000)...........0++++ passim

Will v. Michigan Dep't of State Police, 491 U.S.

ee 8-9

STATUTES, RULES AND REGULATIONS

31 U.S.C. § 3729(a) (2000)........0cceccerreereereeneenennens 12

31 U.S.C. § 3730(a) (1982) ........cccccceceeereeereeeeeenees 12

31 U.S.C. § 3730(D)(4) (1982).......cccccceeseereeeereeneees 13

31 U.S.C. § 3730 C1) (1982)....ccccererreereeerenneeees 13

31 U.S.C. § 3730( C2) (1982).....cccceccerreerreereerseees 13

31 U.S.C. § 3730(C) (2000)..........ccccereerseerseeeeenees 13

31 U.S.C. § 3730(d) (2000) ..........cccccseerserreereeeeneees 13

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

False Claims Act Amendments of 1986, Pub. L.

No. 99-562, §§ 3, 4, 100 Stat. 3153-3157

|, 12, 16

OTHER AUTHORITIES

JOHN T. BOESE, CIVIL FALSE CLAIMS AND QUI

TAM ACTIONS (20 €d. 2002) ..........ccccceeeeeseeeeees 13

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

1986 UB.C.C.AN. SBGG cccccccccccessccesccescccscesecee 18, 19

U.S. ATTORNEY’S MANUAL, § 9-27.220-230......... 14

IN THE

Supreme Court of the United States

No. 01-1572

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

BRIEF OF THE NATIONAL ASSOCIATION OF

COUNTIES, NATIONAL LEAGUE OF CITIES,

NATIONAL GOVERNORS ASSOCIATION,

INTERNATIONAL CITY/COUNTY MANAGEMENT

ASSOCIATION, COUNCIL OF STATE

GOVERNMENTS, U.S. CONFERENCE OF MAYORS,

NATIONAL CONFERENCE OF STATE

LEGISLATURES, AND INTERNATIONAL

MUNICIPAL LAWYERS ASSOCIATION AS AMICI

CURIAE IN SUPPORT OF PETITIONER

INTEREST OF THE AMICI CURIAE

Amici are organizations whose members include state,

county, and municipal governments and officials throughout

the United States.' Amici have an obvious and vital interest

' Pursuant to Rule 37.3 of the Rules of this Court, the parties have

consented to the filing of this brief, and their letters of consent have been

in judicial decisions affecting the exposure of local

governmental entities to penal sanctions such as those

imposed under the False Claims Act.

Local governmental entities have traditionally been

immune from suits seeking punitive damages. Nonetheless,

they have increasingly been named by qui tam relators as

defendants in False Claims Act suits. Unless it is reversed,

the Seventh Circuit’s determination that local governmental

entities are subject to FCA qui tam actions will throw open

the floodgates to a tidal wave of qui tam litigation against

such defendants.

The effect of subjecting cities, counties, towns, and

villages to FCA qui tam liability cannot be overstated.

Merely having to defend against such lawsuits will strain the

limited budgets of these entities. To avoid the risk of the

massive penalties that can be imposed under the FCA,

moreover, these entities (like the private entities subject to the

FCA) may be forced to pay significant sums to settle all but

the most frivolous of these cases. These unprecedented

expenditures may well interfere with the ability of local

governments to perform their essential functions and provide

services to their citizens. Indeed, a significant FCA judgment

could bankrupt a county, town, or other small municipality.

In addition, the prospect of FCA liability may make some

municipalities reluctant to participate in federal programs.

Because of the importance of the question presented to

amici and their members, amici submit this brief to assist the

Court in its resolution of this case.

filed with the Clerk. Pursuant to Rule 37.6, amici state that this brief was

not authored in whole or in part by counsel for a party, and no person or

entity other than amici, their members or counsel has made a monetary

contribution to the preparation or submission of this brief.

SUMMARY OF ARGUMENT

Local governmental entities have been immune from

punitive damages at common law for over 150 years. In its

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

247 (1981), this Court reaffirmed the strong presumption that

local governmental entities are immune from punitive awards

imposed under federal law. The Court explained that neither

the retributive nor the deterrence rationale of punitive

damages was furthered by punishing governmental entities.

Instead, such awards operate only to punish the innocent

citizens of a municipality for the actions of others, threatening

increased taxes, reduced services, and bankruptcy of the

municipality itself.

Because of the longstanding common law tradition of

municipal immunity from punitive damages, this Court

presumes that Congress understands and respects that

immunity when it enacts federal law. As a result, this Court

will interpret federal statutes to retain the common law

immunity from punitive liability unless the statute clearly and

expressly provides to the contrary.

The False Claims Act contains no specific provision that

could possibly operate to deprive local governmental entities

of their immunity from punitive damages. The original

enactment of the FCA in 1863 provided no clear statement

that municipalities were “persons” subject to the Act. The

Seventh Circuit’s assumption that municipalities were

presumptively considered “persons” in 1863 results from its

misreading of this Court’s precedent.

The 1986 amendments to the FCA radically transformed

the statute, essentially creating a new cause of action. The

increased civil penalties and treble damages available

following the amendments converted the previous remedial

damages scheme into a punitive regime. The amendments

also vastly increased the financial incentives for private qui

tam relators to file suit, which has predictably given rise to a

flood of FCA litigation since 1986. Unlike the Federal

Government, moreover, private relators do not exercise

prosecutorial discretion in determining whether to threaten

municipalities with punitive liability under the FCA. It would

take an exceptionally clear statement to demonstrate that

Congress intended to subject local governments to this new,

untethered punitive liability.

The 1986 amendments contain no such clear statement.

This Court’s analysis in Vermont Agency of Natural Res. v.

United States ex rel. Stevens, 529 U.S. 765 (2000),

demonstrates that the 1986 FCA amendments did not evince

any intent by Congress to displace the traditional

governmental immunity from punitive damages. Tellingly,

the court below did not purport to find such a clear statement

in the FCA. Rather, the court inverted the correct approach,

incorrectly presuming that municipalities were “persons” in

1863 and requiring Cook County to find a clear statement that

it was immune from the FCA. Under the proper analysis,

employed by this Court in both City of Newport and Stevens,

governmental entities are presumed to be immune from the

FCA’s punitive damage scheme absent a clear statement in

the FCA that abrogates municipal immunity. No such clear

statement exists, and the judgment below accordingly must

be reversed.

ARGUMENT

I. CONGRESS MUST CLEARLY STATE ITS

INTENTION TO ABROGATE LOCAL

GOVERNMENTAL ENTITIES’ LONGSTAND-

ING IMMUNITY FROM PUNITIVE DAMAGES

A. Local Governmental Entities Have Long

Enjoyed Common Law Immunity From

Punitive Damages

Since the mid-nineteenth century, “the immunity of a

municipal corporation from punitive damages at common law

[has] not [been] open to serious question.” City of Newport v.

Fact Concerts, Inc., 453 U.S. 247, 259 (1981). As this Court

explained in City of Newport, “[ljocal units of government

initially were shielded from tort liability by the doctrine of

sovereign immunity.” /d. at 259 0.19. Although courts later

declined to extend absolute sovereign immunity to local

governments, they “viewed punitive damages as contrary to

sound public policy, because such awards would burden the

very taxpayers and citizens for whose benefit the wrongdoer

was being chastised.” /d. at 263.2 Accordingly, “[tJhe

general rule today is that no punitive damages are allowed

unless expressly authorized by statute.” Jd. at 261 n.21. See

also Barnes v. Gorman, 122 S.Ct. 2097, 2103 (2002)

(Stevens, J., concurring in the judgment).

In City of Newport, the Court reviewed in detail the reasons

why “[djamages awarded for punitive purposes * * * are not

? See, e.g., Foss v. Maine Turnpike Auth., 309 A.2d 339, 345-346 (Me.

1973) (“the deterrent function of exemplary damages is wholly negated” if

applied against innocent taxpayers); Fisher v. City of Miami, 160 So. 2d

57, 60 (Fla. Ct. App. 1964) (permitting punitive damages would

“penalize[] the public in order to accomplish nothing” because public

cannot control wrongdoers); Town of Newton v. Wilson, 91 So. 419,

419-420 (Miss. 1922) (subjecting taxpayers to “punishment for the

willful and malicious acts of its servants would be to contravene sound

public policy”).

sensibly assessed against the governmental entity itself.” /d.

at 267. The Court recognized that “[p]Junitive damages by

definition are not intended to compensate the injured party,

but rather to punish the tortfeasor whose wrongful action was

intentional or malicious, and to deter him and others from

similar extreme conduct.” Jd. at 266-267. As the Court

explained, neither the retributive nor the deterrence rationale

of punitive damages is furthered when those damages are

imposed upon local governmental entities.

“Regarding retribution,” the Court observed “that an award

of punitive damages against a municipality ‘punishes’ only

the taxpayers, who took no part in the commission of the

tort.” City of Newport, 453 U.S. at 267. Punitive damages

are “likely accompanied by an increase in taxes or a reduction

of public services for the citizens footing the bill.” bid.

These costs are borne disproportionately by the “widows,

orphans, aged men and women, and strangers” who depend

upon the services provided by the municipality. Jd. at 261

(quoting McGrary v. President & Council of the City of

Lafayette, 12 Rob. 668, 677 (La. 1846)). Thus, the Court

declared, “punitive damages imposed on a municipality are in

effect a windfall to a fully compensated plaintiff” that is paid

by persons who had no part in the wrongful conduct. /d. at

267. “Neither reason nor justice suggests that such

retribution should be visited upon the shoulders of blameless

or unknowing taxpayers.” Ibid.

The Court also concluded that the award of punitive

damages against local governments could not be justified on a

deterrence rationale. First, the Court found it unlikely that

local government officials “would be deterred from

wrongdoing by the knowledge that large punitive awards

could be assessed based on the wealth of their municipality.”

City of Newport, 453 U.S. at 268. As a result, “the impact on

the individual tortfeasor of this deterrence in the air is at best

uncertain.” Jd. at 269.

Second, to the extent that individual officials were

susceptible to deterrence by actions against the municipality,

the Court found no reason to believe that they could be

deterred only by penalties such as punitive damages. “The

more reasonable assumption is that responsible superiors are

motivated not only by concern for the public fisc but also by

concern for the Government's integrity.” Jd. at 269 (quoting

Carlson v. Green, 446 U.S. 14, 21 (1980)).

Third, the Court found that the deterrent effect of punitive

damages would not operate any more effectively on “the

electorate at large.” Jd. at 269. Even if such deterrence were

necessary or desirable, moreover, the Court concluded that

compensatory damages were likely sufficient to provide that

deterrence. See ibid. (“if additional protection is needed, the

compensatory damages that are available against a

municipality may themselves induce the public to vote the

wrongdoers out of office”).

Finally, the Court observed that “there is available a more

effective means of deterrence” than imposing punitive awards

on municipalities. City of Newport, 453 U.S. at 269.

Deterrence could be better obtained “[b]y allowing juries and

courts to assess punitive damages in appropriate circum-

stances against the offending official, based on his personal

financial resources.” Jbid. In sum, the Court concluded that

punitive damages would have their intended effect only if

they punished the wrongdoer, rather than the municipality for

which the wrongdoer worked.

While concluding that there is no public benefit to

imposing punitive damages on local governmental entities,

the Court emphasized that “the costs [of doing so] may be

very real.” Jd. at 270. Because the perceived “unlimited

taxing power” of a municipality makes it a deep pocket that is

a natural target for punitive damages suits, allowing punitive

damages against municipalities “may create a serious risk to

the financial integrity of these governmental entities.” /bid.

Given “the possible strain on local treasuries and therefore on

services available to the public at large,” the Court deemed it

“unwise to inflict the risk.” /d. at 271.

B. Congress Must Clearly State Its Intention To

Abrogate This Immunity By Statute

In City of Newport, this Court ruled that Congress did not

intend to subject local governmental entities to punitive

damages under the Civil Rights Act of 1871. That decision

establishes the proper framework for determining whether

Congress intended to abrogate such entities’ traditional

immunity from punitive damages when it enacted other

statutes, such as the FCA.

The Court posited that when it enacted the Civil Rights

Act, Congress was “familiar with common-law principles,”

including immunities, and “intended these common-law

principles to obtain, absent specific provisions to the

contrary.” City of Newport, 453 U.S. at 258. In particular, by

1871, the tradition of municipal immunity from punitive

damages was sufficiently strong that the Court presumed that

“Congress would have specifically so provided had it wished

to abolish the doctrine.” Jd. at 263 (quoting Pierson v.

Ray, 386 U.S. 547, 555 (1967)). Accordingly, although

municipalities plainly were subject to compensatory liability

under the Civil Rights Act, the Court concluded that they

could not be held liable for punitive damages under that

statute.

Since City of Newport, the presumption against punitive

liability has been the starting point for any analysis of

whether local governmental entities are subject to punitive

damages under a particular statute. Absent “specific

provisions to the contrary,” this Court will conclude that

Congress intended for local governmental entities to retain

their traditional immunity from punitive damages. Jd. at 258

(emphasis added); see also Will v. Michigan Dep't of State

Police, 491 U.S. 58, 67 (1989) (Congress intends to retain

common law immunities existing at the time a statute

was enacted in the absence of “specific provisions to

the contrary”).

Il. THE FALSE CLAIMS ACT DOES NOT

REFLECT CONGRESSIONAL INTENT TO

SUBJECT LOCAL GOVERNMENTAL

ENTITIES TO PUNITIVE DAMAGES

Both the original False Claims Act and the 1986

amendments were enacted against the well-established

common law rule that local governmental entities are immune

from punitive damages. Accordingly, the Court will not

conclude that Congress intended to subject local governments

to the FCA’s penalties absent a clear statement of that intent.

In fact, there is no basis for finding congressional intent to

subject local governmental entities to the extraordinary risks

and burdens of defending suits under the FCA.

A. Congress Did Not Express An Intention To

Subject Local Governmental Entities To The

FCA In 1863

The False Claims Act was enacted in 1863 “with the

principal ‘goal of stopping the massive frauds perpetrated by

large [private] contractors during the Civil War.’” Vermont

Agency of Natural Res. v. United States ex rel. Stevens, 529

U.S. 765, 781 (2000) (quoting United States v. Bornstein, 423

U.S. 303, 309 (1976)) (alteration in Stevens). This legislative

purpose provides no basis to conclude that local

governmental entities were intended as potential defendants.

The text of the statute similarly does not indicate that

municipalities were among the FCA’s intended targets. The

statute applies to any “person” who commits the prohibited

acts. 31 U.S.C. § 3729(a). The statute does not define

“person,” and nothing in the text or legislative history

provides a basis for concluding that Congress intended to

include municipalities within that term.

The Seventh Circuit relied exclusively on Monell v. Dep 't

of Soc. Servs., 436 U.S. 658 (1978), in determining that, in

1863, Congress intended to make municipalities “persons

subject to the FCA. According to the court of appeals,

Monell establishes that “by 1844, wewhartarn’ ee

corporations were presumptively inc within the mean

pa sey Pet. App. 8a (citing Monell, 436 U.S. at 685-

689). The court of appeals appears to have misunderstood

this Court’s decision in Monell, however.

In Monell, this Court explained that, in 1844, it had

determined that private corporations should be treated as

” See 436 U.S. at 687-688 (citing Louisville R. Co.

v. Letson, 2 How. 497, 558 (1844)). But it was not until 1869

—six years after the FCA was enacted—that the Court

established that “the Letson principle extended * * * to

municipal corporations,” and that such entities routinely

became subject to suit in federal court. Monell, 436 U.S. at

688 (citing Cowles v. Mercer County, 7 Wall. 118, 121

(1869)). Monell thus does not support the Seventh Circuit s

conclusion that Congress intended to subject municipal

corporations to suit under the FCA in 1863.

Indeed, our research yields no cases between 1863 and

1986 (when Congress significantly amended the statute)

FCA. This strongly suggests a common understanding that

municipalities were not subject to the Act. See also United

States ex rel. Garibaldi v. Orleans Parish Sch. Bd., 244 F.3d

486, 490 n.4 (5th Cir. 2001) (finding only two cases prior to

this Court’s decision in Stevens—both decided after the 1986

amendments—considering whether municipalities are

“persons” within the meaning of the FCA), cert. denied, 122

S. Ct. 808 (2002).

B. Congress Did Not Subject Local Governmental

Entities To Punitive Damages In 1986

The 1986 amendments to the FCA fundamentally changed

the nature of the Act. Congress greatly enhanced the

penalties and damages imposed against violators, and it

dramatically expanded the role of private qui tam relators as

FCA plaintiffs. If Congress had intended to subject local

governmental entities to the threat of punitive damages in

suits brought by private parties, the presumption against the

imposition of punitive damages required a clear statement of

its intent to do so. The 1986 amendments, however, contain

no indication that Congress possessed such an intent.

1. The 1986 Amendments Completely Trans-

formed The False Claims Act

The 1986 amendments transformed the FCA from a

seldom-employed remedial statute into a sledgehammer that

gives private relators the financial incentive to pursue even

marginal claims. These amendments were more than mere

adjustments to the law. They created “a new cause of action,

not just an increased likelihood that an existing cause of

action will be pursued.” Hughes Aircraft Co. v. United States

ex rel. Schumer, 520 U.S. 939, 950 (1997)."

‘ Although the amendments radically altered the remedies available

under the Act and the incentives for private qui tam relators to file suit

under the Act, the amendments did not enlarge the scope of “persons”

subject to the Act. See Stevens, 529 U.S. at 783 n.12 (“the term ‘person’

has remained in the statute unchanged since 1863”).

a. The 1986 Amendments Converted The

False Claims Act To A Punitive Statute

The 1986 amendments changed the FCA from a statute

desi to compensate the Federal Government to one

ec to punish offenders. The FCA’s original damages

provisions—$2,000 per violation plus double damages (see

Act of Mar. 2, 1863, ch. 67, § 3, 12 Stat. 698)—were remedial

rather than punitive. See Stevens, 529 U.S. at 785

(contrasting earlier remedial model with post-1986 punitive

damages); Bornstein, 423 U.S. at 314 (“Congress intended

the double-damages provision to play an important role in

compensating the United States”) (emphasis added). In 1986,

however, Congress increased defendants’ potential liability to

$10,000 for each false claim. See False Claims Act

Amendments of 1986, Pub. L. No. 99-562, §§ 3, 4, 100 Stat.

3154, 3157 (1986). In addition, Congress increased the

double-damages provision to treble damages. Ibid.; compare

31 U.S.C. § 3730(a) (1982) with 31 U.S.C. § 3729%a) (2000).

This Court has expressly held that “the current version of

the FCA imposes damages that are essentially punitive in

nature.” Stevens, 529 U.S. at 784. As the Court explained in

Texas Industries, 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,

not to ameliorate the liability of wrongdoers.” Even the court

of appeals did not question that the 1986 FCA amendments

created a punitive damages regime. See Pet. App. I3a

(“damages under the FCA are now considered to be

punitive”); see also Perez v. Z Frank Oldsmobile, Inc., 223

F.3d 617, 624 (7th Cir. 2000) (Easterbrook, J.) (“Treble

damages are a form of punitive damages.”), cert. denied, 53!

U.S. 1153 (2001).

b. The 1986 Amendments Vastly Increased

The Frequency Of Qui Tam Suits

To encourage the filing of gui tam actions, the 1986

amendments also provided substantial new incentives to

private relators who sue under the Act. Schumer, 520 U.S. at

949. Prior to 1986, no gui tam relator could maintain an FCA

suit based upon “evidence or information the Government

had when the action was brought.” 31 U.S.C. § 3730(b)(4)

(1982); see also Schumer, 520 U.S. at 945. In addition, the

bounties were smaller (between 10% and 25%), and the

relator had no right to any minimum recovery. 31 U.S.C.

§§ 3730(c\(1), 3730(c(2) (1982).

After the 1986 amendments, relators can sue even on

information already in the hands of the Federal Government.

If the United States does not intervene in a lawsuit, relators

are guaranteed a bounty of no less than 25%, and up to 30%,

of the total recovery. 31 U.S.C. §§ 3730(c), 3730(d) (2000).

Even if the United States chooses to intervene, the relator

retains a role as a party in the litigation and must receive

between 15% and 25% of the proceeds of the suit. /bid.

Together with the dramatic increase in the penalties imposed

under the Act, these changes greatly enhanced relators’

potential recovery and therefore increased their incentive

to sue.

c. If Applied To Lecal Governmental

Entities, The 1986 Amendments Would

Prove Especially Burdensome

If Congress intended the 1986 amendments to encourage

the filing of False Claims Act suits by private relators, it

certainly succeeded. In 1987 only 33 relators filed qui tam

FCA suits; by 1999, the annual total had grown to 481. See

JOHN T. Boese, Civil FALSE CLAIMS AND Qu! TAM ACTIONS,

Appendix H, at H-1 (2d ed. 2002). As a result, between 1986

and 2001 qui tam relators received a whopping $745 million

in bounties under the FCA. /bid.

The reasons for this expansion are obvious. By raising and

guaranteeing the relators’ percentage recovery, increasing the

minimum penalty for every false claim, and adding the

punitive treble-damages provision, Congress gave relators an

enormous financial incentive to file qui tam suits. Relators

have responded, cashing in for almost three-quarters of a

billion dollars since the enactment of the amendments. With

a False Claims Act plaintiff's bar now well-established and

soliciting business, and with the Federal Government's

spending continuing to grow, the number of qui tam suits

the public good, and tempered by ongoing attention to

ensuring that the suit remains in the federal interest. See U.S.

ATTORNEY’S MANUAL, § 9-27.220-230. By contrast, qui tam

relators “are motivated primarily by prospects of monetary

reward rather than the public good.” Schumer, 520 U.S. at

of personal ill will or the hope of gain.” Schumer, 520 U.S. at

949 (quoting United States ex rel. Marcus v. Hess, 317 U.S.

537, 541 n.5 (1943)).

5 This point was made forcefully by Judge Weinstein in his dissenting

opinion (subsequently vindicated by this Court) from the Second Circuit's

decision in Stevens: “Entrusting the United States’ decision to sue a state

to a qui tam relator, with an incentive to sue even when the merits of the

must consider whether the overall benefits of bringing suit

justify the often astronomical litigation expenses that the

municipality must bear in defending against such suits, not to

mention the risk that its citizens will suffer through decreased

services or that taxpayers will be forced to pay higher taxes.

Those interests are only compounded when the litigation in

question will result in punitive damages. Local governmental

entities therefore deserve—and presumably would receive if

they were subject to FCA suits—the fully informed judgment

and discretion of professional prosecutors.

The rational gui tam relator, however, would ignore many

of the factors that the Federal Government would consider in

deciding whether to pursue litigation against a municipality.

The relator would not face the political restraints that would

rein in the Federal Government’s litigation against a local

government. The relator, who may not even reside in the

community subject to the suit, might not be concerned about

the impact her suit would have on the community or its

citizens. These factors would reduce the chances of reaching

an early resolution, and would increase the likelihood of

expensive and protracted litigation.

The severity of the FCA’s regime of punitive damages and

the jeopardy to which it would expose local governments

provide compelling reasons for this Court to require an

suit are questionable, and even though its prosecution harms the interests

of the federal government, the state and the ongoing re:ationship between

the two sovereigns, effectively short circuits the moderating processes

afforded congresspersons and state and federal administrators.” mated

States ex rel. Stevens v. Vermont Agency of Natural Res., 162 F.3d 195,

225 (2d Cir. 1998), rev'd, 529 U.S. 765 (2000). Although Judge

Weinstein’s analysis concerned the effect of qui tam suits upon States, he

expressly noted that the congressional communication disrupted by the

FCA “is often, most importantly, conducted on behalf of state and

municipal governments and their officials.” Id. at 226 (emphasis added);

see generally id. at 225-229.

exceptionally clear statement from Congress that it intended

to subject governmental entities to this “new cause of action”

and all of its attendant burdens and dangers. Schumer,

520 U.S. at 950. As we next show, however, the 1986

FCA amendments contain not even the slightest hint that

Congress intended to subject local governmental entities to

punitive liability.

2. The 1986 Amendments Contain No Clear

Statement Of Intent To Strip Local

Governmental Entities Of Their Immunity

From Punitive Damages

Because the 1986 amendments created a “new cause of

action” implementing a punitive damages scheme (Schumer,

520 U.S. at 950), Congress understood that it was required to

provide a clear and unambiguous statement in the statute if it

intended to subject local governmental entities to punitive

damages under the FCA. The 1986 amendments contain no

such clear statement. See Pub. L. No. 99-562, 100 Stat. 3153.

The proper analysis in this case closely tracks the analysis

employed by this Court in Stevens. In Stevens, the Court

evaluated whether States were subject to suit under the False

Claims Act. In determining whether States were “person[s}”

within the meaning of that term as used by Congress in 1863,

the Court applied the “longstanding interpretive presumption

that ‘person’ does not include the sovereign.” Stevens, 529

U.S. at 780. After reviewing the text of the FCA, the Court

concluded that “the text of the original statute does less than

nothing to overcome the presumption that States are not

covered.” Jd. at 782. With no textual evidence to rebut the

presumption, the Court held that States were not proper

defendants under the FCA. See id. at 787-788.

The same logic controls here. In this case, the Court

begins with the presumption, established in City of Newport,

that local governmental entities are not subject to punitive

damages. Like the presumption that States are not “persons,”

the presumption of municipal immunity from punitive

damages “is, of course, not a ‘hard and fast rule of

exclusion.”” Stevens, 529 U.S. at 781 (quoting United States

v. Cooper Corp., 312 U.S. 600, 604-605 (1941)). But, also

like the presumption that States are not “persons,” the

presumption of municipal immunity from punitive damages

“may be disregarded only upon some affirmative showing of

Statutory intent to the contrary.” /bid. In this case there is no

clear statement of statutory intent t subject local

governments to punitive damages, either in the 1863

enactment or in the 1986 amendments. As in Stevens, then,

the FCA “does less than nothing to overcome the

presumption.” 529 U.S. at 782.

Indeed, Stevens provides additional grounds for upholding

municipal immunity from the punitive damages imposed

under the FCA. In support of its holding that States were not

subject to suit under the FCA, the Court noted that the

punitive damages made available by the 1986 amendments to

the FCA “would be inconsistent with state gui tam liability in

light of the presumption against imposition of punitive

damages on governmental entities.” Stevens, 529 U.S. at

784-785 (citing City of Newport, 453 U.S. at 262-263).

Obviously, the Court did not find in the 1986 amendments

any statement of congressional intent to abrogate

governmental immunity from punitive damages. Stevens thus

compels reversal of the judgment below.

The Seventh Circuit did not purport to find any clear

Statement of congressional intent to subject local

governmental entities to punitive damages in the 1986

amendments. Instead, the court of appeals inverted the

correct analysis. Proceeding on its mistaken understanding

(Pet. App. 8a) that municipalities were presumptively

“persons” at the time the original FCA was enacted in 1863

(which we refute at pages 9-11, supra), the court performed a

cursory search for a clear statement that municipalities had

been exempted from the more onerous sanctions that

Congress enacted in 1986. See, ¢.g., Pet. App. 17a ( In

enacting the 1986 changes to the statute, dining Congress did

not indicate in any way that it intended to exempt municipal

entities from the scope of the statute.”). Even ‘if

municipalities had been subject to the original Act’s remedial

sanctions, a clear and affirmative statement of intent to

impose the new punitive regime on municipalities would have

been necessary. Because municipalities were not clearly

subject even to the 1863 Act, however, the Seventh C ircuit’s

inference from congressional silence of the intention to

impose punitive damages under the beefed-up Act was wholly

unreasonable.

It is a sign of the superficiality of the Seventh Circuit's

analysis that it purported (Pet. App. 10a) to find vindication

of its conclusion in a snippet of the legislative history of the

FCA amendments. The court of appeals cited a 1986 Senate

Report defining “person” to include “all parties who may

submit false claims * * * [including] States and political

subdivisions thereof.” S. Rep. No. 99-345, at 8 (1986),

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

Of course, this Court had previously dismissed that exact

passage as “setting forth a Senate Committee’s (erroneous)

understanding of the meaning of the statutory term enacted

some 123 years earlier.” Stevens, 529 U.S. at 783 n.12.

Undaunted by this Court’s analysis, the Seventh Circuit

proceeded to place near-controlling emphasis on that sentence

in the Senate Report, based on its subjective confidence that it

understood all of the reasons why the sentence was

“erroneous.” Pet. App. 10a-11an.8. But the court missed the

point of this Court's warning—the views of a Senate

Committee 123 years following the enactment of a statute

provide poor insight into the intent of the Congress more than

a century before.

This Court explained in Stevens that legislative history

alone “would be unequal to the task” of providing a

sufficiently clear statement of intent to override a

presumption. 529 U.S. at 783 n.12. In fact, the legislative

history of the 1986 amendments supports the conclusion that

Congress understood municipalities to retain their common

law immunity from punitive damages. The Congressional

Budget Office’s report of the cost estimate of the False

Claims Amendment Act stated that “[t]hese amendments are

expected to involve no significant costs to * * * state or local

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

1986 U.S.C.C.A.N. 5266. Certainly, the higher damages

available under the Act, as well as the increased risk of

lawsuits under the 1986 amendments, would represent a

“significant cost[]” to any entity subject to the FCA. /bid.

That no such cost was anticipated for municipalities weighs

against a finding that Congress intended to abrogate their

immunity from punitive damages under the FCA.

At the end of the day, the 1986 FCA amendments simply

do not contain any clear statement that Congress intended to

displace the traditional common law immunity and subject

local governmental entities to punitive damages under the

FCA. Significantly, even the court below did not purport to

find a sufficiently clear statement in the FCA of

congressional intent to displace immunity. Instead, it

subjected Cook County to the FCA’s punitive damage

scheme only by inverting the proper analytical framework

and placing the burden on Cook County to produce textual

statutory evidence that it was immune.

Under the correct analysis—one similar to that conducted

by this Court in City of Newport and Stevens—it is clear that

neither the original 1863 FCA nor the 1986 FCA amendments

contain a clear statement by Congress that local governmental

entities are to be stripped of their common law immunity and

subjected to the FCA punitive damages regime. This Court

should therefore reverse the judgment of the Seventh C ircuit

and hold that local governmental entities are immune from

suits brought under the False Claims Act.

CONCLUSION

The judgment of the court of appeals should be reversed.

Respectfully submitted,