# Amicus Curiae Brief — Cook County v. United States Ex Rel. Chandler > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0564%3A13 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 2003 - **Citation:** 538 U.S. 119 ## Text Supreme Court, U.S. FILED J SEP 9 2002 No. 01-1572 OFFICE OF THE CLERK IN THE - Supreme Court of the United States Cook COUNTY, ILLINOIS, Petitioner, Vv. UNITED STATES £X REL. JANET CHANDLER, PH.D., Respondent. On Writ of Certiorari to the United States Court of Appeals for the Seventh Circuit BRIEF OF COUNTY OF ORANGE, CALIFORNIA; COUNTY OF SAN DIEGO, CALIFORNIA; AND THE CALIFORNIA STATE ASSOCIATION OF COUNTIES AS AMICI CURIAE IN SUPPORT OF PETITIONER JAMES R. ASPERGER WALTER DELLINGER GEORGE C. DEMOS (Counsel of Record) CAROL A. ABERNATHY JONATHAN D. HACKER O’MELVENY & MYERS LLP PAUL S. HORWITZ 400 South Hope Street O”MELVENY & MYERS LLP Los Angeles, California 90071 555 13th Street, N.W. (213) 430-6000 Washington, D.C. 20004 (202) 383-5300 Attorneys for Amici Curiae i TABLE OF CONTENTS . Congress Did Not Likely Intend To Leave Local Government Entities Subject To FCA Liability Based On An Indeterminate “Arm Of The State” Test . Local Government Entities Are Not “Persons” Under the FCA Regardless Of Who Is Suing ‘3 TABLE OF AUTHORITIES Page(s) CASES City of Newport v. Fact Concerts, Inc., oh § of) | 10, 11, 12, 13, 14 City of St. Louis v. Prapotnik, De yx 17 Cowles v. Mercer County, FO US. (7 Walk.) 188 (RBG) a ccccccesccccccssosssscsssssssessessssessed 6 ied v. Medical Planning Servs., Inc., 280 F.3d 684 (6th Cir. 2002)...............ccccssssessessseseeseseees 18 Louisville R. Co. v. Letson, 43 U.S. (2 How.) 407 (18466). .cccccccsccsscceveserccsessssnsescossonees 6 McGary v. President & Council of City of Lafayette, ee GP ae 11 McMillian v. Monroe County, Ala., SSO UD. FEE CIB) ccerecesssssvesssssessesssevsscesvienemmnnmnes 17 Monell v. Department of Social Services, SOG ULB. GOB CID IR cccccecscevccsccesssvesvsesiescsmnsessnnsssenient 5,6 Moor v. County of Alameda, GEE UG. GOB CI Tae ccccccececsccecssconensthssnsescnntsinsenteneneuments 18 Mt. Healthy City School Dist. Bd. of Educ. v. Doyle, : PE te, ee 16, 17 Printz v. United States, rR Gly, 5 Regents of University of California v. Doe, __ | htt G1). 17 Rehabilitation Ass'n of Va., Inc. v. Kozlowski, 42 F.3d 1444 (4th Cir. 1994)..............cccccscssscsersesseessnsees 15 Richman v. Sheahan, 270 F.3d 430 (7th Cir. 2001)..........cccceseeseseeee iacsenieens 17 iii TABLE OF AUTHORITIES Page(s) Schweiker v. Gray Panthers, a 15 Shalala v. Guernsey Memorial Hosp., re 15 United States ex rel. Chandler v. Cook County, Iil., 277 F.36 969 (Tihs Cir. 2002)...0cceccsccccccsccssceseseeseees passim United States ex rel. Dunleavy v. County of Delaware, a 13, 19 United States ex rel. Garibaldi v. Orleans Parish School Board, pT | 14 United States ex rel. Long v. SCS Bus. & Tech. Inst., Inc., IIIT TIL, TIT ccsictnrerenntetsesnsesenssressesscsest 9 United States ex rel. Marcus v. Hess, ee 9 United States ex rel. Zissler v. Regents of the Univ. of Minnesota, a 12 United States v. Bornstein, a 9 Vermont Agency of Natural Resources v. United States ex rel. Stevens, Le passim STATUTES a 7 EE Te 7 a 7 EE SR 7 Ee 7 iv TABLE OF AUTHORITIES Page(s) SURG. 6 CO cnccrcevicssiiennasssescinaiaiaritpieaitadialata 7 Ss Oh I... ssuiiestieesinamamieidiaal 9, 13 OCG AU... cuniniicaseninaneieiiammmatial g 5 ON ROI... cisisipsincicsmenaianiaiaimiaial g Gs Ne... ncusiantineibiaiiandinniaial 7 OE BI ccciniitnstnnsteinaiananin 7 SON BI ccessruntinietesnstatntiamammaniiians 7 NN BTU... cicimnitteiatamaminnliael 6, 13, 16 Pe TT 7 EE RI... ciccctsinssnnanenliiiiiaiaiaaitaiian 7 SUNN 0 OUI... 1 cisnteitsiuiminiannidaalieanicaiial 7 Ci its OER G .cciceslcntissdiatlitiaiasinaeninaal 1,2 i es CI TEOD....ucitsininiaiiinaaienaae 18 NTE Ee 2 i ll 1 Cal. Welf. & Inst. Code § 5651 .....cccsssccscsssssssecesssssneseeesssee 18 Cal. Welf. & Inst. Code § 5650.......ccsssssccsssssesecescecsnssseeeeses 18 Cal. Welf. & Inst. Code § 5651(a)(2).....ccsvssssssecessssneseeeessen 18 Cal. Welf. & Inst. Code § 5775.......cossscssssssscessssssseesessnseeeees 18 This brief is filed on behalf of the counties of Orange and San Diego, California, and the California State Association of Counties, as amici curiae in support of petitioner, with the written consent of the parties. INTEREST OF AMICI CURIAE The amici curiae are, or represent, county-level political subdivisions of the State of California. Each county is a re- cipient of federal funds, whether directly or through the State, for the administration and implementation of countless essential public services and programs. Amici are concerned that the Seventh Circuit’s opinion in this case, see United States ex rel. Chandler v. Cook County, Ill., 277 F.3d 969 (7th Cir. 2002), if affirmed by this Court, may put those pro- grams at significant risk, and wrongly penalize the very local taxpayers who are the intended beneficiaries of these federal funds. The County of Orange is a political subdivision of the State of California, see Cal. Const. art. XI, § 1, and was es- tablished in 1889, see Cal. Stats. 1889, at 123. It receives federal funds for a variety of purposes, including health care, education, and a variety of other vital functions. One of the divisions of the county that receives and administers federal funds is the county Health Care Agency (“OCHCA”). OCHCA receives federal funds directly through the Medi- care program and indirectly through the Medicaid program (which provides funds to the state, which in turn provides them to local government entities). ' Letters of consent from both parties have been filed with the Clerk of the Court. In accordance with Rule 37.6, amici state that no counsel for any party drafted this brief in whole or in part, and no persons or enti- ties other than amici curiae made any monetary contribution to its preparation or submission. 2 The County of San Diego is a political subdivision of the State of California, see Cal. Const. art. XI, § 1, and was one of the first counties established in the State, see Cal. Stats. 1850, ch. 15, at 58 (Feb. 18. 1850). It administers numerous essential local programs and services that receive federal funds. The California State Association of Counties (“CSAC”) is a non-profit corporation. The membership consists of the 58 California counties, including both Orange and San Diego Counties. CSAC sponsors a Litigation Coordination Pro- gram, which is administered by the County Counsels’ Asso- ciation of California and is overseen by the Association’s Litigation Overview Committee, comprised of county coun- sels throughout the state. The Litigation Overview Commit- tee monitors litigation of concern to counties statewide and has determined that this case is a matter affecting all coun- ties. INTRODUCTION AND SUMMARY OF ARGUMENT The False Claims Act (“FCA” or “Act”) subjects to li- ability under its provisions “[a]Jny person” who, inter alia, knowingly submits a false or fraudulent claim for payment to the United States. 31 U.S.C. § 3729. In Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000), this Court held that the term “person” — which is not explicitly defined in the statute — does not encompass States. The question in this case is whether the same term encompasses /ocal government entities, such as petitioner Cook County, Illinois and the amici California local gov- ernment entities. The court of appeals in this case answered that question in the affirmative, distinguishing Stevens on the basis of what the court of appeals deemed its “central hold- ing”: “states are not within the FCA’s definition of ‘person’ because of the ‘longstanding interpretive presumption that “person” does not include the sovereign.”” Chandler, 277 3 F.3d at 980 (quoting Stevens, 529 U.S. at 780). Believing that this presumption “cuts the other way for municipalities,” id., the court of appeals refused to accept any aspect of Ste- vens as governing here, see id. at 981 (“The rationale of Ste- vens simply cannot support the interpretation that Cook County wishes to place upon it.”). That conclusion is wrong in general and in all its particu- lars. There is no categorical presumption that local govern- ment entities are statutory “persons” unless Congress says otherwise, and even if there were, Stevens does not in fact pivot narrowly on the opposite presumption that States are not “persons.” To the contrary, the Court in Stevens found States to be outside the term “persons” for additional, inde- pendent reasons based in the text, structure, and history of the Act, as well as in the distinct presumption that States are immune from the kind of punitive damages liability available under the statute. All of those reasons apply equally to local government entities. The applicability of Stevens to such entities is also im- plicitly demonstrated by the court of appeals’ concession that the FCA necessarily excludes local government entities when they are acting as “arms of the state itself.” Chandler, 277 F.3d at 975 n.8. Given the intensely fact- and local-law spe- cific nature of the arm of the state inquiry, that rule not only would mean that some local government entities within a State are outside the scope of the Act, while others are not; it would also mean that even a single agency might be subject to lability under the Act for some programs and not for oth- ers, or perhaps even for the use of some funds but not for others within the same program. The much more sensible rule would treat all local government entities equally under the statute. And since it is at Jeast clear that such entities must be excluded when acting as arms of the state, the right result is to exclude them altogether. 4 Finally, amici are compelled to emphasize that the statu- tory meaning of “person” — whether it encompasses State and local government entities, that is — does not change with the reading of the statute’s text could confer such simultaneously contradictory meanings on a single term, and this Court should make that simple point clear so that the time and re- sources of courts and litigants are not diverted down such a blind alley. ARGUMENT This Court in Stevens held that the False Claims Act does not include States within the undefined statutory “person{s] subject to liability under its provisions. The question in this case is whether local government entities, too, are excluded from the ambit of the statute. The answer to that question 1s yes — and the answer is the same whether the active plaintiff is a private relator, the United States, or both. A. The Analysis In Stevens Applies Equally To Local Government Entities This Court in Stevens rested its conclusion that States are outside the scope of the “person[s]” covered by the FCA on several grounds. First, the Court observed, there is the gen- eral presumption that States are not statutory “persons in congressional acts unless Congress clearly says so. Second, the text of the Act supports the conclusion that States are not tion. Fourth, and finally, the presumption that punitive dam- ages are not applicable to government entities supports the 5 same result. Contrary to the conclusion of the court of ap- peals in this case, all of these reasons equally compel the conclusion that local entities are not “person[s]” under the Act. 1. The Presumption Against Imposing Liability On Gov- ernment Entities The court of appeals correctly observed that the Stevens Court construed the FCA partly on the basis of an interpre- tive presumption that “states, as sovereigns, are not included within the term ‘person.”” 277 F.3d at 980. The court of ap- peals incorrectly concluded, however, that this presumption has no application to local government entities. Jd. The court of appeals rested its view on the ground that the presumption operative in Stevens was one “applied to protect the states because of their dignity as sovereigns within our system of federalism.” Jd. “Such constitutional concems applicable to states,” the court believed, “do not apply to municipalities.” Jd. But the case on which the court primarily relied for its view that local government entities are entitled to 10 presumptive constitutional respect, Monell v. Department of Social Services, 436 U.S. 658 (1978), does not stand for anything nearly so sweeping. To the contrary, this Court has specifically held that the “distinction” drawn in Monell and similar cases “between States and municipali- ties” is “peculiar to the question of whether a governmental entity is entitled to Eleventh Amendment sovereign immu- nity,” and — more to the point for present purposes — does not apply “to the question of whether a governmental entity is protected by the Constitution’s guarantees of federalism.” Printz v. United States, 521 U.S. 898, 931 n.15 (1997).’ ? Ironically, the court of appeals cited Printz as an example of the Court’s deference to state sovereignty, but in fact the federal law at issue in Printz acted only upon county officials, see 521 U.S. at 931 n.15. The 6 Outside the confines of the Eleventh Amendment, in other words, the general federalism guarantee animating the pre- sumption that operated in Stevens ensures respect for the dignity and role of government entities af all levels. Indeed, even on its own terms Monell did not rely on a sweeping general rule that local government entities are “persons” for purposes of congressional enactments unless Congress clearly says otherwise. To the contrary, the entire discussion in Monell cited by the court of appeals here is about the specific text and history of § 1983. See Monell, 436 US. at 685-89. And the court of appeals’ citation of that same discussion for the proposition that in Monell the Court “noted that, by 1844, both private and municipal corpora- tions were presumptively included within the meaning of ‘person,”” Chandler, 277 F.3d at 974 (citing 436 US. at 685- 89), is flatly incorrect. What the Monell Court actually says is that by 1844 the rule that natural persons do not include private corporations was abandoned, in Louisville R. Co. v. Letson, 43 U.S. (2 How.) 497, 558 (1844), and that it was not until 1869 — six years after the enactment of the False Claims Act — that “the Letson principle was automatically and with- out discussion extended to municipal corporations.” Monell, 436 U.S. at 688 (citing Cowles v. Mercer County, 74 U.S. (7 Wall.) 118, 121 (1869)).’ point quotation in the text is that outside the context of the Elev- Hain oe anristeot counties and their officers are entitled to the same con- stitutional respect as are states and their officers. “o- ; ; ens 42 evidence that municipal corporations were subject to liability under U.S.C. § 1983. See Monell, 436 US. at 688-89 (citing Act of aca 1871, § 2, 16 Stat. 431). Because that act was passed cight years the enactment of the False Claims Act, it also provides no assistance m determining the scope of the word “person” in the earlier legislation. 7 The court of appeals’ rule that local government entities are always “persons” unless Congress clearly says otherwise — the exact opposite of the presumption applied in Stevens -— thus finds no support in the cases the court cites. Nor does Congress itself appear to count on the existence of such a presumption in its modern statute-drafting: statute after stat- ute explicitly defines “persons” to include counties, munici- palities and other local governmental entities within their purview.’ If silence in a statutory definition mandated the conclusion that such entities are included because of some presumption to that effect, all of those definitional provisions would be superfluous. They are not, for no such presump- tion exists, as Congress well knows. Even if local government entities do not enjoy precisely “the same privilege of place within our constitutional struc- ture enjoyed by the states,” Chandler, 277 F.3d at 975 n.7, the material point is that local government entities are not burdened with a presumption exactly opposite that of the States, as the court of appeals believed. The question, then, is whether, absent a presumption working against local gov- ernment entities, the text, history and policies of the False Claims Act support the inference that local government enti- ties are to be considered “persons” even though State gov- ernment entities are not. But before addressing this question, it is well to note that even with respect to the analysis of States, the Court in Stevens did not rely solely on a presump- tion that they are to be excluded. To the contrary, the Court’s analysis of the text, history and other policies of the * See, e.g., 10 .S.C. § 2507(f(1); 15 U.S.C. § 77b(aX(2); 15 U.S.C. § 3002(1); 15 U.S.C. § 3301(26); 16 U.S.C. § 4903(4); 30 U.S.C. § 1522(6X(7); 33 U.S.C. § 1362(5); 33 U.S.C. § 1901(a\8); 33 U.S.C. § 2701(27); 33 U.S.C. § 1362(5); 42 U.S.C. § 2014(s); 42 U.S.C. § 6903(15); 50 U.S.C. § 167(2). Act stand entirely on their own. As we shall see, they also the same conclusion with respect to local entities as they do for the States. 2. The Statute’s Text Though the statute provides no textual definition of “per- son,” the Stevens Court still identified at least several clues in the text of the current statute (beyond » federalism beset re interpretive presumption) that States are not inc within that term. First, the Court compared the empty term “person” in the Act’s basic liability provision, 31 US.C. § 3729, with the section providing for civil investigative de- mands, id. § 3733, which goes out of its way to define “per- son” to include “a State,” but only “[flor purposes of this sec- tion,” id. § 3733(). “The presence of such a definitional provision in § 3733, together with the absence of such a pro- vision from the definitional provisions contained in § 3729 .. . suggests that States are not ‘persons’ for purposes of qui tam liability under § 3729.” Stevens, 529 U.S. at 784° That analysis supports the same result here, for § 3733 also de- fines “person” to include a “political subdivision of a State.” The presence of that definitional provision in § 3733, to- gether with its absence from § 3729, thus suggests that coun- . The Seventh Circuit’s attempt to distinguish Stevens by asserting that the Court’s statutory reading there rested on the “presumption that States are not included within the definition of ‘person,”” Chandler, 277 F.3d at 975 n.7, misreads Stevens, which did not rest this pomt on its earlier discussion of the presumption against State liability but on a read- ing of the statutory text itself. See Stevens, 529 U.S. at 784 (noting that its conclusion that “States [were] not subject to qui tam liability” was supported by “[s}everal features of the current statutory scheme”). 9 ties, too, are not “persons” for purposes of qui tam liability under § 3729.° 3. The Statute’s History An historical look at the statute’s text also provided the Stevens Court with an even more specific clue to the mean- ing of “person.” The Court explained: As the historical context makes clear, and as we have often observed, the FCA was enacted in 1863 with the principal goal of “stopping the massive frauds perpe- trated by large [private] contractors during the Civil War.” United States v. Bornstein, 423 U.S. 303, 309 (1976); see also United States ex rel. Marcus v. Hess, 317 U.S. 537, 547 (1943). Its liability provision — the precursor to today’s § 3729(a) — bore no indication that States were subject to its penalties. Indeed, far from indicating that States were covered, it did not even make clear that private corporations were, since it applied only to “any person not in the military or naval forces of the United States, nor in the militia called into or actually employed in the service of the United States,” and imposed criminal penalties that in- cluded imprisonment. Act of Mar. 2, 1863, ch. 67, § 3, 12 Stat. 698. 529 U.S. at 781-82 (alterations in original; footnote omitted). * There is no reason to think that the mere provision to the federal government of the power to issue civil investigative demands (“CIDs”) to government entities means that Congress necessarily contemplated that such entities could be substantively liable: as the Stevens Court noted, CIDs enable the federal government to obtain from government entities “useful evidence in investigations of private contractors.” Ste- vens, 529 U.S. at 784 n.13; see also United States ex rel. Long v. SCS Bus. & Tech. Inst., Inc., 173 F.3d 870, 877 (D.C. Cir. 1999) (same). 10 All of those observations dictate exclusion of local gov- ernment entities from the meaning of “person.” The statute’s focus on the frauds of “private contractors,” as the Court de- scribed it,’ would no more encompass the acts of local go - military . . .” — focused on “natural persons” would also tend to exclude local government entities as much as it would States. The same is true for the imposition of “criminal pen- alties that included imprisonment”: it is as metaphysically impossible to cart a county off to the hoosegow as it 1s to lock up a State. 4. The Presumption Against Government Liability For Punitive Damages A final key point relied upon by the Stevens Court was that “the current version of the FCA imposes damages that are essentially punitive in nature” — the Act’s treble damages provision — “which would be inconsistent with state qui fam liability in light of the presumption against imposition of pu- nitive damages on governmental entities.” 529 U.S. at 784- 85 (emphasis added). On its face that reasoning would ex- tend the presumption to local government entities, and in fact the very case cited by the Stevens Court in support of this anti-punitive damages presumption — City of Newport v. Fact Concerts, Inc., 453 U.S. 247 (1981) — applies it to a munici- pal corporation, to hold that punitive damages are not avail- able under § 1983. As Stevens itself describes it, in City of Newport the Court was “concerned with imposing punitive 1 See also John T. Boese, CIviL FALSE CLAIMS AND QuI TAM ACTIONS § 1.019[A], at 1-6 (2001-2 Supp.) (“the vast spending that arose from the Union government’s military effort led to widely- publicized abuses by unscrupulous private contractors (emphasis 11 damages on taxpayers under any circumstances.” 529 U.S. at 785 n.15. The presumption against punitive damages liability for government entities cited in Stevens — which is truly a gen- eral presumption — rests on the premise that schemes de- signed to deter, and even to punish, official government wrongdoing, ought not inflict punishment on innocent tax- payers and citizens. Punitive damages “imposed on a mu- nicipality are in effect a windfall to a fully compensated plaintiff, and are likely accompanied by an increase in taxes or a reduction of public services for the citizens footing the bill. Neither reason nor justice suggests that such retribution should be visited upon the shoulders of blameless or un- knowing taxpayers.” City of Newport, 453 U.S. at 267. It is one thing for the federal government to reclaim funds im- properly obtained or converted by a local government entity, and thereby effectively demand that taxpayers cough up benefits they never should have received; it is another thing altogether to make taxpayers effectively pay additional pen- alties for acts they never personally committed or ratified: [Punitive damages] can never be allowed against the innocent. Those which the plaintiff has recovered in the present case . . ., being evidently vindictive, can- not, in our opinion, be sanctioned by this court, as they are to be borne by widows, orphans, aged men and women, and strangers, who, admitting that they must repair the injury inflicted by the Mayor on the plain- tiff, cannot be bound beyond that amount, which will be sufficient for her indemnification. City of Newport, 453 U.S. at 261 (quoting McGary v. Presi- dent & Council of City of Lafayette, 12 Rob. 668, 677 (La. 1846)). For that reason, the Court explained in City of New- port, the common law had long recognized an immunity 12 from punitive damages liability for government entities. Jd. at 260. This is not to say — and neither Stevens nor City of New- port says — that the presumption means the federal govern- ment is without recourse in deterring and punishing local government wrongdoing. The federal government has other ways of obtaining recovery of monies wrongfully obtained by local governments, see, €.g., United States ex rel. Zissler v. Regents of the Univ. of Minnesota, 154 F.3d 870, 871 (8th Cir. 1998) (claims for unjust enrichment, payment by mis- take, disgorgement of profits, and breach of fiduciary duties); Boese, supra, at 1-36 (noting that United States frequently brings common law claims instead of False Act Claims be- cause False Claims Act statute of limitations has expired), and the threat of a large compensatory damages or restitution hit, coupled with interest, is itself an adequate deterrent in many cases. The federal government can always pursue criminal sanctions against individual officials who musap- propriate funds. Further, because counties and other local governments are inherently political bodies, “the discharge of offending officials who were appointed and the public ex- coriation of those who were elected,” Newport, 453 US. at 269, can be expected to exert particularly strong deterrent force. And, in the end, the presumption against government liability for punitive damages is just that: a presumption, one that can be overcome by a sufficiently clear specification of congressional intent to abrogate the traditional government immunity from punitive damages. See City of Newport, 453 US. at 258. It is nevertheless a presumption with sharp teeth. The Court simply will not construe a statute silent or ambiguous as to the provision of punitive damages against government entities — any government entities — as authorizing such dam- ages. “Unless Congress clearly provides otherwise, a local 13 local governmental entity is immune from punitive damages awards.” United States ex rel. Dunleavy v. County of Dela- ware, 279 F.3d 219, 222 (3d Cir.) (emphasis added), petition for cert. filed, 70 U.S.L.W. 3742 (U.S. May 20, 2002 ) (No. 01-1711). General language alone will not suffice to over- come this presumption — even where the statute in question is one that, like 42 U.SC, § 1983, deliberately targets public entities. See City of Newport, 453 U.S. at 258 (noting that the Court “consistently has declined to construe the general language of § 1983 as automatically abolishing such tradi- tional immunities by implication”). The FCA provides for sanctions above and beyond sim- ple restitution, sanctions that are “essentially punitive in na- ture.” Stevens, 529 U.S. at 784. These include the automatic trebling of damages in ai] cases where the defendant did not actively cooperate in the investigation, as well as civil penal- ties of up to $10,000 per claim. 31 U.S.C. § 3729(a). As Stevens holds, those sanctions implicate the “presumption against imposition of punitive damages on governmental en- tities.” 529 U.S. at 785. And the general language of the FCA providing liability for unspecified “person[s]” obvi- ously cannot overcome the presumption that such punitive damages cannot be applied against a government entity. Nor do the FCA penalty provisions suggest viable distinctions in the nature of the defendants to whom they might be applied. Interpreting the silent word “person” to include local gov- ernment entities thus would have the effect of imposing on such entities punitive damages liability without any explicit indication that Congress intended for such entities to be within the category of persons who could be liable for such damages. And if the presumption articulated in City of New- port and repeated in Stevens means anything at all, it is that such an inference cannot be allowed. The consequences of disregarding the presumption in this 14 context would be serious. The facts of United States ex rel. Garibaldi v. Orleans Parish School Board, 244 F.3d 486 (Sth Cir. 2001), cert. denied, 122 S. Ct. 808 (2002), illustrate the problem. There, a jury found that the Orleans Parish School Board had submitted false unemployment insurance and worker’s compensation insurance claims to the federal government. There can be no doubt those findings were se- rious, and resulted in a serious loss to the federal government — some $7.6 million, by the jury’s reckoning. See Garibaldi, 244 F.3d at 488. Because of the treble damage provisions of the False Claims Act, however, this judgment ballooned to an award of $22.8 million, on top of a separate civil penalty of $7.85 million. See id. As the Fifth Circuit noted in fol- lowing this Court’s decisions in Stevens and Newport, [PJunishing a local government is pointless. The pun- ishment, in the form of higher taxes or reduced public services, is visited upon the blameless. Neither the taxpayers nor the schoolchildren of Orleans Parish played any role in the conduct giving rise to the School Board’s liability. Extracting damages from them — damages that are far more than is needed to compensate the federal government for whatever losses it has suffered — is supported, as the Supreme Court has said, by, “[nJeither reason nor justice.” [Newport, 253 U.S. 267, 101 S. Ct. 2748]. Garibaldi, 244 F.3d at 491-92. Garibaldi is just one example of the kind of harm that would be caused by the court of appeals’ construction of the FCA. The experience of amici confirms the simple intuition that a huge proportion of the federal funds handled by local government entities are funds relating to education programs or welfare/social safety net funds, all of which are typically directed at assisting especially innocent, vulnerable or needy citizens and taxpayers. Even assuming the worst of motives 15 and conduct by the receiving government entity, it makes little sense to inflict on that entity a crippling financial pen- alty, which will necessarily be borne by the innocent, vulner- able and needy either in the form of reduced services, or in- creased taxes to satisfy the exaction. Realistically speaking, however, the motives and conduct of government entities are rarely so starkly invidious. This is especially the case when the entity — like OCHCA — is charged with processing or making claims for payment under federal programs such as Medicare and Medicaid, which have rightly been described as “among the most completely impenetrable texts within human experience.” Rehabilitation Ass'n of Va., Inc. vy. Kozlowski, 42 F.3d 1444, 1450 (4th Cir. 1994); see Schweiker v. Gray Panthers, 453 U.S. 34, 43 (1981) (Medi- care laws are “Byzantine”); Shalala v. Guernsey Memorial Hosp., 514 U.S. 87, 96 (1995) (“comprehensive and intri- cate” cost reimbursement regulations consumed some “624 pages of the Code of Federal Regulations” in 1994). It is inevitable that mistakes are made in that process, and it may be unsurprising that such mistakes will sometimes be viewed as willful, but it is wholly unacceptable that extra penalties for such errors should be exacted from the program intended to help those most in need.* * The court of appeals in this case rejected these concerns on the ground that, even though the FCA’s penalty provision “shifts” the burden of payment “to the local taxpayers,” the shift would not be unjust “be- cause the local taxpayers have already received, without justification, some of the benefit.” Chandler, 277 F.3d at 978. That argument borders on the frivolous: assuming it is true at all that taxpayers received some of the benefit, the question is nor whether they should effectively repay the amount they improperly received. It is whether they should be forced to pay penalties in addition to that amount, as punishment for the gov- ernment entity's conduct. This Court’s cases have answered that ques- tion squarely and consistently no ~ at least absent the clearest specifica- tion by Congress that taxpayers should bear such burdens. 16 Accordingly, for all the foregoing reasons, the bases identified in Stevens for excluding States from the ambit of the undefined “persons” covered by the FCA apply equally to local government entities such as petitioner and the under- signed amici. B. Congress Did Not Likely Intend To Leave Local Government Entities Subject To FCA Liability Based On An Indeterminate “Arm Of The State” Test The conclusion that local government entities should be treated the same as States for purposes of substantive FCA liability is confirmed by closer scrutiny of a subtle yet sig- nificant concession made in the court of appeals opinion. While local government entities are not themselves excluded from the statute, the court reasoned, that result holds only “so long as they are not properly considered arms of the state it- self” 277 F.3d at 975 n. 8. Part of that reasoning has to be correct: inasmuch as Stevens holds that the States are not subject to suit under the FCA, no political subdivision that 1s, or is acting as, a part of the State itself, could logically be subjected to suit either. The problem with the reasoning 1s that it presupposes that Congress would choose to leave the treatment of local government entities’ potential liability un- der the FCA to the “arm of the state” inquiry, which turns out to be a most unlikely presupposition, given the vagaries of that inquiry. The question whether a local government entity is an arm of the state most often arises in the context of the Eleventh Amendment (or in the closely related context of § 1983 li- ability). While Eleventh Amendment immunity does not generally “extend to counties and similar municipal corpora- tions,” Mt. Healthy City School Dist. Bd. of Educ. v. Doyle, 429 US. 274, 280 (1977), the immunity afforded States also applies to local entities, including counties and other agen- } 17 cies, when they constitute “arm[s] of the State partaking of the State’s Eleventh Amendment immunity.” Jd. The in- quiry into whether a local entity is acting as the arm of the State can focus on the “essential nature and effect” of the lo- cal entity’s conduct, Regents of University of California v. Doe, 519 U.S. 425, 429 (1997) (internal quotation marks omitted), or on the particular “nature of the entity created by state law,” id. (internal quotation marks omitted), or both — which means that the same local agency may be an arm of the state depending on which of its functions are at issue. See, e.g., McMillian v. Monroe County, Ala., 520 U.S. 781, 786 (1997) (concluding that county sheriffs in Alabama are state officers when performing law enforcement functions); Richman v. Sheahan, 270 F.3d 430, 439 (7th Cir. 2001) (“[A] county sheriff may act as an arm of the state when per- forming certain functions.”) (emphasis added), cert. denied, 122 S. Ct. 1439 (2002). The complication that arises in the Eleventh Amendment context is that the States vary widely among themselves — and even within themselves — in the ways in which they distribute State power, the forms of the entities designated to exercise such power, the extent to which those entities may exercise such power, and so on. See City of St. Louis v. Prapotnik, 485 U.S. 112, 124 (1988) (“The States have extremely wide latitude in determining the form that local government takes, and local preferences have led to a profusion of distinct forms.”). Of particular rele- vance here, the “importance of counties and the nature of county government have varied historically from region to region, and from state to state.” McMillian, 520 U.S. at 795. As applied in the FCA context, the individualized arm of the state approach thus would lead to intensely complicated questions of substantive FCA liability for counties and other local government entities. Because the very same local en- tity can be an arm of the state for one purpose but not an- 18 other, litigants and courts will be forced to evaluate the ex- tent to which the local entity was handling federal funds pur- suant to the mandate of or at the direction of the State, for example. See Gottfried v. Medical Planning Servs., Inc., 280 F.3d 684, 692 (6th Cir. 2002). The problem is not theoreti- cal. As this Court has noted previously, apes acting within their general authority may mot be arms 0 state for some purposes. See Moor v. County of Alameda, 411 U.S. 693 (1973) (counties are generally not arms of the state and therefore qualify as citizens for purpose of diversity jurisdiction). But California counties do perform many func- tions as direct agents for the state. For example, the counties are required to prepare detailed contracts with the state which define the scope and range of mental health services which the county will arrange for or provide. See CAL. WELF. & INST. CODE §§ 5650 & 5651. These services include those that the State itself is mandated to provide pursuant to federal law. CAL. WELF. & INST. CODE § 5651(a)(2); CAL. GOv. Cope § 7576. Further, each county also can function as the exclusive managed care organization within its geographic boundaries for purposes of controlling the provision of men- tal health services to Medicaid beneficiaries. CAL. WELF. & INST. CODE §§ 5775, et seq. These functions are intertwined, since the affected populations overlap. Under the view ad- vanced by the court of appeals, such counties could be held liable under the FCA for claims made in conjunction with one function but not the other if a court was to find that one of these interrelated functions was done as an arm of the state and the other was not. The one thing they will know for sure is that they cannot know for sure to what extent they will be governed by the federal false claims law, which is an out- come no one can applaud. The fact that such difficulties already arise in the context of establishing basic Eleventh Amendment immunity is no 19 reason to assume Congress wanted to import those same dif- ficulties into the FCA. The nature of Eleventh Amendment immunity essentially dictates differential treatment between State and local government entitiesim-that particular context. On the one hand, no local entity that is truly distinct from the “State” is entitled to the protection of the Amendment by its terms; on the other hand, every “State” is entitled to protec- tion under the Amendment. Thus, if some nominally distinct entity is acting in fact as an arm of the State, it cannot be de- nied immunity because of the inconvenience of the inquiry. While the inquiry is therefore necessarily individualized under the Eleventh Amendment, it does not have to be so - under a statute like the FCA. The question is whether to as- sume that Congress, by making “persons” liable without de- fining them, would have intended to create disuniformity and uncertainty with respect to local government FCA liability by tracking the individualized Eleventh Amendment inquiry and protecting local governments only to the extent they are found to be arms of the State. The answer surely is no: hav- ing excluded States, the sensible policy result would be to provide the same treatment for a// government entities at a// levels. C. Lecal Government Entities Are Not “Persons” Under the FCA Regardless Of Who Is Suing Them It should be clear from all we have said that we believe the issue in this case is one of substantive FCA liability, viz., whether or not local government entities are “persons” under the statute. It remains only to note that the answer to this question cannot turn on the identity or status (private or fed- eral) of the party suing the “person,” despite suggestions of a contrary possibility in some opinions. See Stevens, 529 U.S. at 789 (Ginsburg, J., concurring); Dunleavy, 279 F.3d 219, 221 n.1 (3d Cir. 2002). We submit that the answer is clear 20 and should be made explicit now, to forestall pointless litiga- tion of the point in the lower courts. It is difficult to identify even a colorable argument for why an entity that is not a “person” when sued by a private pears to be this: to the extent Stevens can be said to rest ¢'- tirely on an interpretive canon that presumptively excludes States but not local government entities from the word “per- son” in suits by private parties, that rationale would not ap- ply to suits by the federal government and thus the exact same word can be read differently. The problems with this view are self-evident. Is the entity a “person” when the suit is first filed on behalf of the United States, but then stops be- ing a “person” if the U.S. declines to intervene? Or is the entity not a “person at first, but then becomes one if the United States decides to participate? Is the entity in that suit only a “person” when the United States seeks discovery, but not when the relator does? What if the U.S. settles, but the private relator wants to object to the settlement? Is the entity a “person” when negotiating with the U.S. but not when the relator tries to object? Or is the entity mever a “person unless the suit is brought by the U.S. only? But isn’t the re- lator suing only as an assignee of the U.S. anyway? 21 by Stevens — the rule disfavoring punitive damages against government entities — certainly is not limited to private suits, but evinces a concern about “imposing punitive damages on [innocent] taxpayers under any circumstances.” Stevens, 529 U.S. at 785 n.15 (emphasis added). Forcing the typically needy beneficiaries of government programs to suffer a spe- cial penalty for a local government entity’s wrongdoing is a senseless policy judgment no matter what party is bringing the suit, which is the heart of the reason why no government entity — state or local — is properly included within the mean- ing of the term “person” in the FCA. CONCLUSION For the foregoing reasons, this Court should reverse the judgment of the court of appeals in this case. Respectfully submitted, JAMES R. ASPERGER WALTER DELLINGER GEORGE C. DEMOS (Counsel of Record) CAROL A. ABERNATHY JONATHAN D. HACKER O”’MELVENY & MYERS LLP PAUL S. HORWITZ 400 South Hope Street O’MELVENY & MYERS LLP Los Angeles, California 90071 555 13th Street, N.W. (213) 430-6000 Washington, D.C. 20004 (202) 383-5300 September 9, 2002 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0564%3A13. Public record. Not legal advice.