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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0564%3A11

## Record

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

## Text

-—~ oudenelaggliglaians
[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)

iv
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

v
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

vi
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

2

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.

3
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

4

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.

5
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”).

6

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.

7

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.

8

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

9

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

10

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

ll
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”).

12

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).

13

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.

14
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

15

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.

16

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

17

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

18

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.

19

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

20

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,
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
September 9, 2002 * Counsel of Record

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0564%3A11. Public record. Not legal advice.