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

i SEP 9 2002

No. 01-1572

ORFICB OF THE CLERK

an .

IN THE

SUPREME COURT OF THE UNITED STATES

COOK COUNTY, ILLINOIS,

Petitioner,

-V.-

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 AMICI CURIAE THE CITY OF NEW YORK,

THE CITY OF BOSTON, THE CITY AND COUNTY OF

SAN FRANCISCO, THE CITY OF CHICAGO, THE

CITY OF INDIANAPOLIS, AND THE CITY OF

MILWAUKEE IN SUPPORT OF PETITIONER

MICHAEL A. CARDOZO,

Corporation Counsel

Attorney for Amicus Curiae

The City of New York

____100 Church Street

New York, NY 10007

(212) 788-0999

LEONARD J. KOERNER,*

GAIL RUBIN,

of Counsel. ti

*Counsel of Record

September 9, 2002

© <r ome

— —>--<

MARA S. GEORGES

Corporation Counsel

of the City of Chicago

121 N. LaSalle Street

Room 600

Chicago, IL 60601

312-744-7764

MERITA A. HOPKINS

Corporation Counsel

City of Boston

Law Department

Room 615/City Hall

Boston, MA 02201

617-635-4018

DENNIS J. HERRERA

City Attorney

Office of the City Attorney

A. SCOTT CHINN

Corporation Counsel of the

City of Indianapolis

1601 City/County Bldg.

200 E. Washington St.

Indianapolis, IN 46204

317-327-4055

GRANT F. LANGLEY

City Attorney

City of Milwaukee

200 E. Wells St. #800

Milwaukee, WI 53202

414-286-2601

City and County of San Francisco

1 Dr. Carlton B. Goodlett P1.

San Francisco, CA 94102

415-554-3853

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .ocscccccccsccscsscssssssessssessssssveee ii

INTERESTS OF AMICI CURIAE vocossssesccssssscsssssssssssssseoe 1

SUMMARY OF ARGUMENT ..cccscssscessscsessssvesesseesessseven 4

ARGUMENT

POINT I

THE FCA’S PUNITIVE REMEDIES ARE

INCONSISTENT WITH THE

PRESUMPTION AGAINST IMPOSING

PUNITIVE DAMAGES ON

GOVERNMENTAL ENTITIES. -csscosescosescosesoossses 6

POINT II

THE TERM “PERSON” WAS NOT

PRESUMED TO INCLUDE LOCAL

GOVERNMENTS IN 1863 ccccscccesescosesssecsssssscsoeee 7

POINT III

THE HISTORICAL CONTEXT OF THE

FCA INDICATES THAT CONGRESS DID

NOT INTEND THE TERM “PERSON” TO

INCLUDE LOCAL GOVERNMENTS. ............ 13

a 16

TABLE OF AUTHORITIES

Cases Page

Bank of the United States v. Deveaux,

Pe GD ctreatnteennstenneiiniotinen 10

Board of Commissioners v. Aspinwall,

24 How. 376, 65 U.S. 376 (1861)...............cccccceeeeees 12

City of Newport v. Fact Concerts, Inc.,

453 U.S 247, 101 S.Ct. 2748 (1981)... 4,6

Cowles v. Mercer County,

7 Wall. 118, 74 U.S. 118 (1869) 00... 10, 12

Louisville R. Co. v. Letson,

ee ee ccihiinntintinenererinntnsemmisnaipentamsiaiiiaibts 10

Monell v. Dep't of Soc. Servs.,

436 U.S. 658, 98 S.Ct. 2018 (1978) ........ 5, 10, 11, 12

Paul v. Virginia,

8 Wall. 168, 75 U.S. 168 (1869) .....0.... cece 11

Pierson v. Ray,

386 U.S. 547, 87 S.Ct. 1213 (1967) 20.0.0... ceeeeeeeeeee 4

Quern v. Jordan,

440 U.S. 332, 99 S.Ct. 1139 (1979) ssvssssscesssesssesceee I]

United States v. Bornstein,

423 U.S. 303, 96 S.Ct. 523 (1976)...........cccccccceeeeeees 13

-ii-

United States ex rel. Chandler v. Cook County,

277 F.3d 969 (7th Cir. 2000),

cert. granted sub nom. Cook County

v. United States ex rel. Chandler,

8 Ee 1,5

United States ex rel. Marcus v. Hess,

SET UD. S37, GS SIL. S79 (IDES) ncccccccccccccecccccccsess 15

Vermont Agency of Naturai Resources v.

United States ex rel. Stevens,

529 U.S. 765, 120 S.Ct. 1858 (2000) ........ 4,7, 13,14

Will v. Michigan Dep't of State Police,

491 U.S. 58, 109 S.Ct. 2204 (1989)... 11

Constitutional Provisions

ne nee 11

ESE ENTE 10, 11, 12

Statutes.

Act of July 2, 1862, ch. 130, 12 Stat. 503.000.000.000... 15

Act of Mar. 2, 1863, ch. 67, 12 Stat. 696.................00000. 14

Act of Feb. 25, 1871, §2, 16 Stat. 431 00000. eee 11

Act of Mar. 2, 1887, 24 Stat. 440................::cccccccceeeeeeeees 15

Civil Rights Act of 1871, 42 U.S.C. §1983................. 6, 10

Legislative History

Cong. Globe, 37th Cong., 3d Sess. 952 (1863)............... 13

Cong. Globe, 42d Cong., 1* Sess. 752 (1871)..........00-++- 10

H.R. Rep. No. 2,

37" Cong., 2¢ Sess., pt. ii-a (1862) .........ce.c0000-. 13,14

H.R. Rep. No. 49,

37" Cong., 3d Sess. (Mar. 3, 1863) ........ccccesceceeseeees 13

T. Durant, Report to Joint Comm.

on Revision of Laws 2 (1873) .............ccccceccsseeeeeeeees 11

Other

George F. Break, Fiscal Federalism in theUnited

States: The First 200 Years, Evolution and

Outlook, in Advisory Comm. on Intergovern-

mental Relations, The Future of Federalism

Ge Be Oe ee crcsccsnnssseenssnnessersceseen 15

Roger W. Cooley, Handbook of the Law of

Municipal Corporations (1914) ..........c0cccsceeeeeeeeeees 8

John F. Dillon, A Treatise on the Law of Municipal

Corporations (5™ €d. 1911) ...ccccceccessessesseesseesessvee 8,9

Charles Fairman, History of the Supreme Court of the

EE Ee eee en 12

ee ty i OE CE ES CEI A ep

James B. Helmer, Jr. & Robert C. Neff, Jr.,

War Stories: A History of the Qui Tam

Provisions of the False Claims Act, the 1986

Amendments to the False Claims Act, and

Their Application in the United States ex rel.

Gravitt v. General Electric Co. Litigation,

18 Ohio N.U. L. Rev. 35 (1991)...........c.cccccsccereseees 13

Arnold M. Howitt, Managing Federalism: Studies in

Intergovernmental Relations (1984)...................000. 15

Joan C. Williams, The Invention of the Municipal

Corporation: A Case Study in Legal Change,

34 Am. U.L. Rev. 369 (1965S) ..........ccceccrccosssccscsseeeees 9

No. 01-1572

IN THE

SUPREME COURT OF THE UNITED STATES

COOK COUNTY, ILLINOIS,

Petitioner,

-V.-

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 AMICI CURIAE THE CITY OF NEW

YORK, THE CITY OF BOSTON, THE CITY AND

COUNTY OF SAN FRANCISCO, THE CITY OF

CHICAGO, THE CITY OF INDIANAPOLIS, AND

THE CITY OF MILWAUKEE IN SUPPORT OF

PETITIONER

INTERESTS OF AMICI CURIAE

The City of New York, the City of Boston, the City

and County of San Francisco, the City of Chicago, the City

of Indianapolis and the City of Milwaukee, respectfully

submit this brief as amici curiae in support of reversal of

the judgment of the United States Court of Appeals for the

Seventh Circuit in United States ex rel. Chandler v. Cook

County, 277 F.3d 969 (7 Cir. 2002), cert. granted sub

nom. Cook County v. United States ex rel. Chandler, 122

S.Ct. 2657 (2002).' The Seventh Circuit’s determination in

' Pursuant to Rule 37.6 of this Court, amici represent that

counsel for amici authored this brief in its entirety and that no

this case that local governments are amenable to suit under

- the federal False Claims Act (“FCA”) involves a vitally

important issue for local governments around the country

facing potentially overwhelming liability exposure under

the Seventh Circuit’s decision. Allowing this decision to

stand will subject local governments to the FCA’s massive

punitive remedies of treble damages plus penalties and will

undermine this Court’s long-standing presumption that

local governments are immune from punitive remedies in

the absence of explicit statutory authorization.

The City of New York is a political subdivision of

the State of New York that annually receives billions of

dollars in federal funds either directly from the United

States or through the State for numerous essential

municipal services and programs. In some instances, the

City of New York is responsible for providing these

essential services to its citizens and for implementing these

programs, and in other instances, the City is responsible for

determining eligibility for these programs. Generally, the

federal government and the State of New York disburse the

funds and monitor their expenditure.

The City of Boston is a political subdivision of the

Commonwealth of Massachusetts. The City and County of

San Francisco is a political subdivision of the State of

California. The City of Boston and the City and County of

San Francisco annually receive significant sums of federal

funds either directly from the United States or through the

State for essential municipal services and programs.

person or entity other than amici and their representatives made

any monetary contribution to the preparation or submission of

this brief. The filing of this amici brief is accompanied by the

written consent of all parties.

Subjecting the City of Boston and the City and County of

San Francisco to treble damage liability under the FCA

would harm local taxpayers who would be called upon to

pay those damages, and would also harm the beneficiaries

of essential local services, who would face the reduction or

elimination of those services to pay those damages.

The City of Chicago is the largest municipality in

the Seventh Circuit, which rendered the erroneous decision

below. The City of Indianapolis is the largest city in

Indiana and is located within the Seventh Circuit. The City

of Chicago and the City of Indianapolis are very concerned

that if the Seventh Circuit’s decision is not reversed, they

will be subject to treble damages and attorney's fees under

the FCA.

The City of Milwaukee is a political subdivision of

the State of Wisconsin. In fiscal 2001, the City of

Milwaukee received approximately $50.6 million in federal

dollars to either spend or administer primarily for

Community Development Block Grants and for public

health and law enforcement purposes.

Amici are deeply interested in the outcome of this

case. Amici submit that, in seeking to combat private

military profiteering during the Civil War by enacting the

FCA, and in subsequently amending the statute to augment

punitive remedies, Congress never intended to burden local

taxpayers with treble damages, penalties and a windfall to

an individual whistleblower. Amici urge the Court to

reverse the Seventh Circuit’s determination that local

governments are “persons” subject to suit under the FCA.

SUMMARY OF ARGUMENT

This case involves battling presumptions governing

the interpretation of the word “person” in a gui tam suit

under the FCA. In concluding that a State is not a “person”

under the FCA, this Court held that the treble damages and

civil penalties imposed under the FCA were “punitive in

nature.” Vermont Agency of Natural Resources v. United

States ex rel. Stevens, 529 U.S. 765, 784-85, 120 S.Ct.

1858, 1869 (2000). Accordingly, the long-standing

“presumption against imposition of punitive damages on

governmental entities” counseled against imposing State

qui tam liability under the FCA. /d., citing City of Newport

v. Fact Concerts, Inc., 453 U.S. 247, 101 S.Ct. 2748

(1981). The rationale for this common law protection is

that punitive sanctions against governmental entities punish

innocent taxpayers, not actual wrongdoers, and subject

those entities to undue fiscal constraints. City of Newport,

453 U.S. at 259-64, 101 S.Ct. at 2756-58. In City of

Newport, this Court stated the general rule that, in light of

the presumption of municipal immunity, “Congress would

have specifically so provided had it wished to abolish the

doctrine.” Jd. at 263, 101 S.Ct. at 2758, citing Pierson v.

Ray, 386 U.S. 547, 555, 87 S.Ct. 1213, 1218 (1967).

Application of the presumption against the

imposition of punitive remedies on governmental entities

should lead to a similar conclusion in this case: local

governments are not “persons” under the FCA.? However,

? Amici address only whether a local governmental entity is a

proper qui tam defendant, not whether it is a proper qui tam

_ relator. See Stevens, 529 U.S. at 787 n.18, 120 S. Ct. at 1871

~ n.18 (leaving open question of whether States can be “persons”

for purposes of commencing FCA qui tam action after finding

that States were not “persons” for purposes of gui tam liability).

4

ee nen pe IE,

in holding Cook County amenable to suit under the FCA,

the Seventh Circuit rejected this interpretive rule, holding

just the opposite: that Congress must specifically indicate

its intent to exempt local governments from the FCA’s

statutory scheme imposing punitive remedies. United

States ex rel. Chandler v. Cook County, 277 F.3d 969, 979

(7" Cir. 2002). The Seventh Circuit reached this result by

presuming that local governments were included within the

meaning of the word-“person” in 1863. Jd. at 974. The

court below sought to rely for this presumption on Monell

v. Dep't of Soc. Servs., 436 U.S. 658, 98 S.Ct. 2018 (1978),

where this Court found that it was clear by 1871 that

“corporations should be treated as natural persons for

virtually all purposes of constitutional and statutory

analysis.” Monell, 436 U.S. at 687, 98 S.Ct. at 2034. The

-court below implicitly reasoned that local governments

were corporations, and therefore presumed them to be

“persons” in accordance with the Circuit Court’s reading of

Monell.

The Seventh Circuit’s assumption that in 1863, the

word “person” in the FCA included local governments

because “corporations” presumptively included local

governments, is, however, erroneous. The evolving state of

the law regarding the corporate status of local governments

in 1863 indicates that Congress would not have presumed

that “corporations” included local governments. Moreover,

the historical context in which the FCA was enacted

demonstrates that Congress was concerned with fraud by

private contractors, not local governments. Thus,

consistent with Stevens, the presumption against the

imposition of punitive remedies on governmental entities,

combined with the fact that Congress did not envision Jocal

governments as “persons” in 1863, dictate that local

governments should not be subject to suit under the FCA.

5

ARGUMENT

I

THE FCA’S PUNITIVE REMEDIES

ARE INCONSISTENT WITH THE

PRESUMPTION AGAINST IMPOSING

PUNITIVE DAMAGES ON

GOVERNMENTAL ENTITIES.

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

247, 101 S.Ct. 2748 (1981), this Court held that

municipalities were immune from punitive damages under

the Civil Rights Act of 1871, 42 U.S.C. §1983. In so

holding, the Court reviewed the long history of municipal

immunity, and reiterated that “(t]he general rule today is

that no punitive damages are allowed unless expressly

authorized by statute.” /d. at 260 n.21, 101 S.Ct. at 2756

n.21. The rationale for this common law immunity from

punitive remedies is simple: punishment should be

imposed only against actual wrongdoers and not against the

taxpaying citizens of the community. Jd. at 261-63, 101

S.Ct. at 2756-58. The presumption against punitive

remedies protects “the public from unjust punishment, and

the municipalities from undue fiscal constraints.” Jd. at

263, 101 S.Ct. at 2757-58. The Court recognized the

serious fiscal consequences of imposing punitive remedies

_on local governments, stating that the “windfall” to the

plaintiff is “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

unknowing taxpayers.” Jd. at 267, 101 S.Ct. at 2760.

een

In Stevens, this Court reiterated the presumption

against the imposition of punitive remedies on

governmental entities in holding that States are not

“persons” subject to suit under the FCA. Stevens, 529 U.S.

at 784-85, 120 S.Ct. at.1869-70. The Court specifically

rejected the argument that City of Newport was inapplicable

in the context of the FCA, reading City of Newport to mean

that the Court was “concerned with imposing punitive

damages on taxpayers under any circumstances.” Jd. at 785

n.15, 120 S.Ct. at 1869 n.15. Further, this Court explicitly

found that the FCA remedy of treble damages plus civil

penalties is, in fact, “punitive in nature.” Jd. at 784, 120

S.Ct. at 1869.

The presumption of governmental immunity from

such punitive remedies as appear in the FCA is rebutted

only if Congress explicitly so provides. Because there is no

such explicit congressional instruction here, the

presumption of governmental immunity mandates a finding

that local governments are not “persons” under the FCA.

Il

THE TERM “PERSON” WAS NOT

PRESUMED TO INCLUDE LOCAL

GOVERNMENTS IN 1863.

This Court in Stevens held that, because the term

“person” in the FCA “has remained in the statute

unchanged since 1863,” it is the intent of the 1863

Congress that should be analyzed, not the 1986

amendments to the statute. Stevens, 529 U.S. at 783 n.12,

120 S.Ct. at 1868 n.12. The Court in Stevens also noted

that corporations are presumptively covered by the term

“person.” Jd. at 782, 120 S.Ct. at 1868. Hence, the

7

pertinent question here is whether, in 1863, it was so clear

that the term “corporation” included local governments that

Congress would have presumed “person” as used in the

FCA to have included local governments.

An analysis of treatises on local government

establishes that local governments would not likely have

been presumptive “corporations” in 1863. While

“municipal corporations” “duly incorporated not

primarily to enforce state laws, but chiefly to regulate the

local affairs of the city, town or district incorporated by

proper legislation and administration” -- did exist, many

local governments were not “municipal corporations” in

1863. Roger W. Cooley, Handbook of the Law of

Municipal Corporations 15 (1914). A local government

might also take the form of a “quasi-corporation,” which

was not in fact a “corporation,” but “an almost

corporation.” /d. at 12-13. Depending on state law, quasi-

corporations included counties, townships, school districts,

road districts, public commissioners, boards of supervisors,

school trustees and the like. Jd. at 494-95. Quasi-

corporations were not only not real corporations, they were

exempt from the “general law of corporations.” Jd. at 496

(“Subject to statutory regulation, there are, of course,

certain peculiar qualities and attributes common to all quasi

corporations, which distinguish them from municipalities,

and exempt them from the general law of corporations.”).

There were significant differences between

“municipal corporations” and ‘“quasi-corporations.”

“Municipal corporations” were given corporate capacity at

the request of or with the consent of the inhabitants, while

“quasi-corporations” were mere subdivisions of the State.

1 John F. Dillon, A Treatise on the Law of Municipal

Corporations §10 p. 30-33 (1872). Depending on state

- ee er es C8 ED Oe |

law, “municipal corporations” would be liable for their

torts, but “quasi-corporations” would not be liable unless

made so by express legislative enactrrent. /d. at 33. A

local government that was a “municipal corporation” in one

State may have been a “quasi-corporation” in another State.

State law. governing the corporate nature of local

governments developed differently in different States in the

first half of the nineteenth century. In New York, for

example, which followed English law, only a chartered

borough could be a corporation -- so towns were not

corporations. Joan C. Williams, The Invention of the

Municipal Corporation: A Case Study in Legal Change, 34

Am. U.L. Rev. 369, 372, 392-93 (1985). Even towns and

villages which were incorporated by statute were

distinguished from chartered boroughs, which were the

“real” corporations. Jd. at 400, 392-410. Towns and

villages might be “quasi corporations” or they might be

“corporations for a particular purpose,” but they were not

“real” corporations. /d. at 403-10. By contrast, in

Massachusetts, courts early on held that New England

towns were a new type of “municipal” corporation. /d. at

410-14.

In 1863, there simply was no uniform national

consensus on the legal status of local governments as

“corporations,” as reflected by the variability of state laws

and the differing assumptions concerning local

governments, cities, towns, counties and other public

entities. The absence of a uniform understanding of the

status of local governments in 1863 makes it highly

unlikely that Congress simply presumed that the term

“corporation” would include local governments.

As support for its position that local governments

were presumed to be corporations and hence “persons”

under the FCA, the Seventh Circuit relied on this Court’s

statement in Monell that “by 1871, it was well understood

that corporations should be treated as natural persons... .”

436 U.S. at 687, 98 S.Ct. at 2034. However, the Seventh

Circuit failed to note the Court’s distinction between

private corporations and municipal corporations. /d. at

688, 98 S.Ct. at 2034. While it is true that the “Deveaux

doctrine,” denying that private corporations were “citizens”

as that term was used in Article III and the Judiciary Act of

1789, had been abandoned by 1844, id. at 687-88, 98 S.Ct.

at 2034, citing Louisville R. Co. v. Letson, 2 How. 495, 558

(1844) and Bank of the United States v. Deveaux, 5 Cranch

61, 86 (1809), no such understanding had been reached

with respect to municipal corporations. Indeed, this Court

in Monell was quite clear that the principle of treating

corporations as persons was not “automatically without

discussion extended to municipal corporations” until 1869,

six years after the FCA was enacted. Monell, 436 U.S. at

688, 98 S.Ct. at 2034, citing Cowles v. Mercer County, 7

Wall. 118, 121, 74 U.S. 118 (1869). This period of

uncertainty concerning the status of corporations was noted

in the debates over the Civil Rights Act of 1871. See Cong.

Globe, 42d Cong., 1* Sess. 752 (1871) (Rep. Shellabarger)

(“[Counties], cities, and corporations of all sorts, after

years of judicial conflict, have become thoroughly

established to be an individual or person or entity of the

personal existence, of which, as a citizen, individual or

inhabitant, the United States Constitution does take note

and endow with faculty to sue and be sued in the courts of

the United States”)(emphasis supplied), cited in Monell,

436 U.S. at 688 n.50, 98 S.Ct. at 2034 n.50.

10

Further, even this Court’s 1844 decision that private

corporations were “citizens” of a State within the meaning

of the jurisdictional provisions of Art. III did not mean that

corporations were to be treated as “persons” for all

purposes or were presumptive “persons” for purposes of

statutory construction. For example, in 1869, the Court

held that private corporations were not “citizens” within the

meaning of the Privileges and Immunities Clause, U.S.

Const. art. IV, § 2. Paul v. Virginia, 8 Wall. 168, 75 U.S.

168 (1869). Congress itself did not create a statutory

presumption that the word “person” included “bodies

politic and corporate” until the 1871 Dictionary Act, which

so presumed “unless the context shows that such words

were intended to be used in a more limited sense.” Act of

Feb. 25, 1871, §2, 16 Stat. 431. Because the FCA was

enacted in 1863, eight years prior to the 1871 Dictionary

Act, the statutorily-created presumption could not have

applied to the FCA. See Quern v. Jordan, 440 U.S. 332,

341 n.11, 99 S.Ct. 1139, 1145 n.11 (1979) (Dictionary Act

presumption inapplicable to 1871 Civil Rights Act when it

came more than five years after passage of the Civil Rights

Act of 1866, which served as the model). Even this

congressional presumption was short-lived, as _ the

Dictionary Act was amended in 1874 to eliminate the

definition. See Will v. Michigan Dep't of State Police, 491

U.S. 58, 81, 109 S.Ct. 2304, 2318 (1989)(Brennan, J.

dissenting)(citing T. Durant, Report to Joint Comm. on

Revision of Laws 2 (1873)).

Nor is the enforcement by the federal courts of the

Contract Clause against municipal corporations in

municipal bond cases as early as 186! a sufficient basis

from which to conclude that Congress would have

presumed the term “person” in the FCA to include local

governments. See, e.g., Board of Commissioners v.

11

Aspinwall, 24 How. 376, 65 U.S. 376 (1861), cited in

Monell, 436 U.S. at 673 n.28, 98 S.Ct. at 2027 n.28. First,

even in Monell, this Court did not date the presumption that

municipal corporations were persons for Art. II] purposes

from the Aspinwall decision, but rather from the 1869

decision of Cowles v. Mercer County, 7 Wall. 118, 74 U.S.

118 (1869). See Monell, 436 U.S. at 688, 98 S.Ct. at 2034.

The Supreme Court in Cowles recognized that the question

“whether the board of supervisors of Mercer County can be

sued in the Circuit Court of the United States by citizens of

other States than Illinois” was the only question presented

by the case “which has not been heretofore fully considered

and repeatedly adjudicated.” Cowles, 74 U.S. at 121.

Thus, despite the Aspinwall line of cases, the Supreme

Court in 1869 believed that the Art. III question was not

then fully settled.

Second, in cases such as Aspinwall, the Supreme

Court declared a “special rule” involving a municipal

corporation’s obligation to honor bonds issued in support of

railroads, a rule which was subject to resistance in the

States and the state courts for many years. See VI Charles

Fairman, History of the Supreme Court of the United

States: Reconstruction and Reunion 1864-1888, ch. XVII,

at 947, and 918-1009 (1971). The wide-ranging defiance in

the States, id., makes it unlikely that Congress in 1863 used

these particular cases to presume anything about the

corporate status of local governments.

The Seventh Circuit was accordingly mistaken in

reading Monell as supporting a presumption that local

governments were considered “corporations” or “persons”

at the time of the enactment of the FCA in 1863. Given the

evolving state of the law at the time regarding local

governments, there simply was no such presumption.

12

st ee ee S

THE HISTORICAL CONTEXT OF THE

FCA INDICATES THAT CONGRESS

DID NOT INTEND THE TERM

“PERSON” TO INCLUDE LOCAL

GOVERNMENTS.

This Court has already observed that, “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 perpetrated by large

[private] contractors during the Civil War.’” Stevens, 529

U.S. at 781, 120 S.Ct. at 1867, quoting United States v.

Bornstein, 423 U.S. 303, 309, 96 S.Ct. 523, 528 (1976). In

1863, the Congress of the United States was receiving

“alarming reports from the battlefield. These reports

concerned Union soldiers opening crates of muskets only to

find them filled with sawdust instead of arms. Reports of

the same horses and mules being sold to the United States

cavalry three and four times further demonstrated a serious

problem with war profiteers.” James B. Helmer, Jr. &

Robert Clark Neff, Jr., War Stories: A History of the Qui

Tam Provisions of the False Claims Act, the 1986

Amendments to the False Claims Act, and Their

Application in the United States ex rel. Gravitt v. General

Electric Co. Litigation, 18 Ohio N.U. L. Rev. 35 (1991)

(citations omitted). Abuses were being committed by

contractors, suppliers, railroads, sutlers and even military

officers in connection with the war effort. See generally

H.R. Rep. No. 2, 37" Cong., 2d Sess., pt. ii-a (1862) (“1862

House Rep.”); H.R. Rep. No. 49, 37" Cong., 3d Sess. (Mar.

3, 1863) (“1863 House Rep.”); Cong. Globe, 37" Cong. 3d

Sess. 952-58 (1863).

13

The legislative history gives no hint of abuses by

state or local governments. The 1862 House Report, which

was not prepared in connection with the 1863 FCA or in

connection with any proposed false claims legislation,

mentioned States only twice: once, as victims of fraud in

their role as purchasers of military supplies, 1862 House

Rep. at XXXVIII; see Stevens, 529 U.S. at 783 n.12, 120 S.

Ct. at 1868 n.12; and a second time, as market competitors

with the federal government for military supplies from

foreign suppliers. 1862 House Rep. at LXXVIII. Local

governments are not mentioned at all in any of the

legislative materials, either in connection with “abuses” or

with government contracts.

Nor is it likely that members of Congress in 1863

would presume that a statute addressing “any claim upon or

against the Government of the United States” for “payment

or approval” would apply to local governments. Act of

Mar. 2, 1863, ch. 67, 12 Stat. 696. First, by contrast to the

shoemakers, tent pole makers, blanket, and horse and mule

suppliers described by Congress as involved in war

profiteering, there is nothing in the historical record to

indicate that local governments served as suppliers or

contractors to the Government of the United States during

the Civil War. See 1862 House Rep. passim. Since there

was no custom or practice of federal-local contracting, it is

unlikely that Congress would have envisioned a local

government submitting a “claim for payment or approval”

to the Government of the United States.

Second, federal fiscal contributions even to the

States were extremely limited in the mid-nineteenth

century, and primarily took the form of land grants, which

were regarded as “‘gifts’ of the federal government and

subject to no legally binding constraints.” George F.

14

SOE Re ee te

a

Break, Fiscal Federalism in the United States: The First

200 Years, Evolution and Outlook, in Advisory

Commission on Intergovernmental Relations, The Future of

Federalism in the 1980s, at 41 (July 1981) (“Fiscal

Federalism”). See also Amold M. Howitt, Managing

Federalism: Studies in Intergovernmental Relations 4

(1984) (“Managing Federalism”). It was only in the

Mornll Act of 1862, supporting education in the

agricultural and mechanical arts, that Congress established

the first land grant program to the States that had any

accountability requirements. Act of July 2, 1862, ch. 130,

12 Stat. 503. Not until 1887, in the Hatch Act, did

Congress provide for annual cash grants to the States, in

support of agricultural experiment stations, and attach

compliance requirements. Act of Mar. 2, 1887, 24 Stat.

440; Fiscal Federalism at 43; Managing Federalism at 4.

See United States ex rel. Marcus v. Hess, 317 U.S. 537,

544, 63 S. Ct. 379, 384 (1943)(at the time of the passage of

the FCA, federal aid to States consisted primarily cf land

grants).

In 1863, Congress was just beginning to envision

the possibility of attaching conditions to state land grants.

As for local governments, there do not appear to have been

any conditional grants, or grants of any kind. Thus, there

was little chance that Congress had local governments in

mind when discussing “claims for payment or approval”

submitted to the federal government.

15

CONCLUSION

For all of the above reasons, the judgment of the

United States Court of Appeals for the Seventh Circuit

should be reversed.

Respectfully submitted,

~ MICHAEL A. CARDOZO

Corporation Counsel of the

City of New York

Attomey for Amicus Curiae

The City of New York

100 Church Street

New York, New York 10007

212-788-0995

LEONARD J. KOERNER*

GAIL P. RUBIN

*Counsel of Record

OTHER AMICI

MARA S. GEORGES A. SCOTT CHINN

Corporation Counsel Corporation Counsel of the

of the City of Chicago City of Indianapolis

121 N. LaSalle Street

Room 600

Chicago, IL 60601

312-744-7764

1601 City/County Bldg.

200 E. Washingtcn St.

Indianapolis, IN 46204

317-327-4055

16

a —

MERITA A. HOPKINS

Corporation Counsel

City of Boston

Law Department

Room 615/City Hall

Boston, MA 02201

617-635-4018

DENNIS J. HERRERA

City Attorney

Office of the City Attorney

GRANT F. LANGLEY

City Attorney

City of Milwaukee

200 E. Wells St. #800

Milwaukee, WI 53202

414-286-2601

City and County of San Francisco

1 Dr. Carlton B. Goodlett P1.

San Francisco, CA 94102

415-554-3853

17