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

NOV 4 rz

No. 01-1572

In the cto

Supreme Court of the United States

CooK COUNTY, ILLINOIS,

Petitioner,

Vv.

UNITED STATES EX REL. JANET CHANDLER, PhD..

Respondent.

On Writ of Certiorari to the

United States Court of Appeals for the Seventh Circuit

BRIEF AMICUS CURIAE OF

TAXPAYERS AGAINST FRAUD,

THE FALSE CLAIMS ACT LEGAL CENTER

IN SUPPORT OF RESPONDENT

CHARLES J. COOPER

Counsel of Record

BR!tAN STUART KOUKOUTCHOS

COOPER & KIRK, PLLC

1500 K Street, N.W., Suite 200

Washington, D.C. 79005

(202) 220-9600

JAMES MOORMAN

TAXPAYERS AGAINST FRAUD,

THE FALSE CLAIMS ACT LEGAL CENTER

1220 19" St., NW, Suite 501

Washington, D.C. 20036

(202) 295-4826

November 2902

EE ns —— ee

BATEMAN & SLADE BOSTON. MASSACHUSETTS

BEST AVAILABLE COPY

TABLE OF CONTENTS

Se Se OD 6 Sb 0b ccd wtnsoscencencnns ili

INTEReos OF AMICI CURIA ....cccccccccccccceces ]

SUMMARY OF ARGUMENT ..................0005- l

SEE enh be nnn nndeded cencanalées isconndennte 3

I. COUNTIES ARE “PERSONS” SUBJECT TO LIABILITY

UNDER THE FALSE CLAIMS ACT ..........0-00065 3

A. Stevens Reaffirmed That the FCA’s

Reference to “Persons” Presumptively

Ce a ae 3

B. Municipal Corporations, Like Other

Corporations, Were Included Within the

FCA’s Reference to “Persons” When the

Statute Was Enacted in 1863. ............ 4

od As Stevens Held, Congress Did Not

Narrow the Meaning of “Persons”

When it Amended Other Language in the

Peet Ns cevdcdnacesdenes 48e0u08) 8

Il. FCA TREBLE DAMAGES APPLY TO ALL “PERSONS”

LIABLE UNDER THE STATUTE, INCLUDING COUNTIES 10

A. The Common-Law Presumption Against

Imposing Punitive Damages On Cities Does

Not Apply, Because Congress Designed

the FCA’s Treble Damages Remedy To

Be Compensatory Rather than Punitive, And

That Congressional Judgment Is Entitled

I rr re 12

B.

ii

Before Stevens, the FCA had always been

understood by this Court as compensatory,

and this Court has likewise characterized

some treble damages regimes as

compensatory rather than punitive ........ 12

The legislative analysis prescribed by

Newport reveals that Congress imposed

treble damages to ensure full compensation

for the U.S. Treasury, rather than as a

PUNITIVE MORSUTE 0.2... kee cece 14

Congress’s characterization of the FCA

as non-punitive is entitled to judicial

0 EE 19

Congress Deliberately Imposed Treble

Damages On All FCA Defendants,

Including Counties, Thereby Overriding

Any Common-Law Immunity

The FCA’s Treble Damages Do Not

Implicate The Policy Objections To

Punitive Damages That Concerned This

Court In Newport v. Fact Concerts ....... 25

EE EE oe ee 30

ill

TABLE OF AUTHORITIES

Cases Page

Agency Holding Corp. v. Malley-Duff & Assoc.,

483 U.S. 143 (1987) 2.0... ccc cece cece cere ee nnes 14

Alden v. Maine, 527 U.S. 706 (1999)... 6... cece eee eee 3

American Society of Mechanical Engineers v. Hydrolevel

Corp., 456 U.S. 556 (1982)... 6. eee eee eee eee ees 14

Bank of the United States v. Deveaux, 9 U.S. ,

(5 Chanch) 61 (1809) .. 0.6... cece cece eee ee ees

Bennis v. Michigan, 516 U.S. 442 (1996) .......66.0555 21

Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477 ,

CIDTTD on ccccccccccccccccseccccccccesccsccccces l

Carey v. Piphus, 435 U.S. 247 (1978) ... 60-2 seen 23

City of Newport v. Fact Concerts, 453 U.S. 247 (1981) passim

City Council of Montgomery v. Gilmer & 1uylor, ;

33 Ala. 116(1858) ........ cece cece cree eee e eens

Commisioners of Knox County v. Aspinwall, :

62 U.S. (21 How.) 539 (1859) 2... cece eee eee eens

Cowles v. Mercer County, 74 U.S. (7 Wall.) 118 (1869) ... 8

Elliot v. Concord, 27 N.H. 204 (N.H. 1853) ............. 5

Hudson v. United States, 522 U.S. 93 (1997) ... 2, 13, 19, 21

iv

Cases Page

Inhabitants of Searsmont v. Farwell, 3 Me. 450 (1825) .... 6

Int'l Union of Operating Engineers v. Flair Builders,

Gee SED niunddunweedunduenbnddeewhies 9

Louisville, Cincinnati and Charleston R.R.Co. v. Letson,

43 U.S. (2 How.) 497 (1844) .. 0.0.0. cee eee 7

Mayor, Aldermen, and Commonalty of the City of

New York v. Ransom, 64 U.S. 487 (1860) ............. 6

M'Gary v. President & Council of the City of Lafayette

12 Rob. 668 (La. 1846) ............... orn

Monell v. Dept. of Social Services,

GP OEY sunk ciduncvenkddéubeceeens passim

New York v. United States, 505 U.S. 144 (1992) ......... 28

Owen v. City of Independence, 445 U.S. 622 (1980) .. passim

Paul v. School Dist. No. 2,28 Vt. 575 (1856) ............ 7

Pennzoil Co. v. Texaco, Inc., 481 U.S. 1 (1987) ......... 28

Pierson v. Ray, 386 U.S. 547 (1967) .... 00... e eee, 11, 23

Rex Trailer Co. v. United States,

PP SPEED Scouse ncecadséuuccbsvkion 16, 17, 20

Tenney v. Brandhove, 341 U.S. 367, 376(1951) ..... 11, 25

Thayer v. City of Boston, 36 Mass. 511 (1837) .......... 5

Cases Page

Town Council of Akron v. McComb, 18 Ohio 229 (1849) ... 3

United States v. Barnette, 10 F.3d 1553 (11th Cir.),

cert. denied, 513 U.S. 816 (1994) ........ 6 cece eee 20

United States v. Bd. of Educ. of Union City, 1985

U.S.Dist. LEXIS 14917 (D.N.J. Oct. 15, 1985) ......... 8

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

United States v. Brekke, 97 F.3d 1043 (8th Cir. 19996),

cert. denied, 520 U.S. 1132 (1997) .... 2... - eee eeee 20

United States v. Gonzales, 520 U.S. 1 (1997) ..........-. 9

United States v. Griswold, 24 F. 361 (D.Ore. 1885) ...... 15

United States v. Halper, 490 U.S. 435 (1989), overruled

on other grounds by Hudson v. United States,

522 U.S. 93 (1997) .... 2. cece eee e eens 13, 16, 17, 21

United States v. Peters, 110 F.3d 616 (8" Cir. 1997) ..... 20

United States v. Rosenwasser, 323 U.S. 360 (1945) ....... 9

United States v. Turkette, 452 U.S. 576 (1981) ..........-. Z)

United States ex rel. Chandler v. Cook County,

277 F.3d 969 (7™ Cir. 2002)... ......--+505- 9, 20, 24, 26

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

CTDED) 2 cc cccccccccccccccccccccscscccccess passim

vi

Cases Page

Vermont Agency v. United States ex rel. Stevens

529 U.S. 765 (2000) .................... —

Will v. Michigan, 491 U.S. 58 (1989) ............ 1,3, 4,5

Statutes and Constitutional Provisions

PN xc bcvddcdubecdcsucdbecscadeccs 19, 20

Eleventh Amendment......................... 8, 10,14

FO Ws POM vo ccccccccccccccococcecese: passim

FO Weis POD conv cecccevcccccccccceecennes 29

a 29

Ped cnoadueudhuude hide batieoass 29

dc acekenedibicddddtodsasc 29

IG wie 6 dnd kndd<cddelodaceicccncs 29

RE Pa EOE a 24, 29

Ciciieccece , CRAPS EGS Pi Dab e ere oy 22

ET on oduckeuu eas diiieauhadue' sas 17, 26

42 U.S.C. § 1983

Vii

Miscellaneous Page

L. Friedman, A HISTORY OF AMERICAN LAW ( Peers 6

M. Horwitz, THE TRANSFORMATION OF AMERICAN LAW

RSE ETE SEER eT ee 6

H.R. Rep. No. 660, 99" Cong., 2 Sess. (1986) ..... passim

T. Shearman & A. Redfield, A TREATISE ON THE LAW

OF NEGLIGENCE (1869) ......... cee ee cece eee eneees 4

SOURCES AND DOCUMENTS OF UNITED STATES

CONSTITUTIONS (W. Swindler ed. 1975) ..........+++: 6

S. Rep. No. 345, 99" Cong., 2™ Sess. (1986) ....... passim

192 Cong, Res. HE47D ........c.cccscscseeceeees 15,18

132 Cong. Rec. H6480 ... 2.6... 6c eee eee ee ee eens 18

132 Cong. Rec. H6482 .... 6... cece cece 15

132 Cong.Rec. H9388 ... 2... eee ee eee eee eee 18

SOD Cams, Be: GOUMIG .n ccc vcccccseccctcccccveces 18

132 Cong.Rec. $15036 .......-: cece e cece e cece eeees 18

li lil le

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INTEREST OF AMICUS CURIAE

Amicus curiae Taxpayers Against Fraud, the False Claims

Act Legal Center, is a nonprofit public interest organization

dedicated to combating fraud against the federal government

through the promotion of the qui tam provisions of the False

Claims Act, 31 U.S.C. § 3729 et seq. (“FCA” or “the Act”). It

has a profound interest in ensuring that the Act is appropriately

interpreted and utilized. The issue here is the applicability of the

FCA to local government entities accused of defrauding the U.S.

Treasury. Creation of municipal immunity from the FCA would

gravely undermine the efficacy of the Act in policing fraud on

the federal government by exempting from liability the cities and

counties that receive hundreds of billions of dollars in federal

funds.

SUMMARY OF ARGUMENT

A corporation is a “person” that can be sued under the False

Claims Act, 31 U.S.C. § 3729(a). That is a presumption

expressly reaffirmed by this Court in Vermont Agency v. United

States ex rel. Stevens, 529 U.S. 765, 782 (2000). It was well

established when the FCA was enacted in 1863 that municipal

corporations, like other corporations, were liable in court for

their wrongs. See Will v. Michigan, 491 U.S. 58 (1989);City of

Newport v. Fact Concerts, 453 U.S. 247 (1981); Owen v. City of

Independence, 445 U.S. 622 (1980); Monell v. Dept. of Social

Services, 436 U.S. 658 (1978). When Congress amended the

FCA in 1986, it did not narrow that meaning of “person.” Rather,

it stated that it understood “persons” to include cities and

counties. Therefore, counties such as Petitioner Cook County

may be held liable under the FCA.

' Letters of consent from both parties have been filed with the Clerk of the

Court. No counsel for any party authored this brief in whole or in part, nor

did any party make a monetary contribution to the brief, which has been

financed and prepared by amicus curiae and its counsel.

2

The common-law rule against imposing punitive damages

on cities does not apply here because Congress designed and

characterized the FCA’s treble damages as compensatory

liquidated damages, not as punishment. In 1986 Congress

increased the FCA’s double damages remedy, which this Court

has always deemed compensatory, to treble damages, in order to

ensure that the Treasury is made whole for the injuries wrought

by false claims. Treble damages ensure full compensation for

such things as the cost of discovery, investigation and

prosecution of frauds, pre-judgment interest, and consequential

damages. Congress expressly designated the FCA’s treble

damages as compensatory, not punitive, and that legislative

judgment is entitled to judicial deference. See United States v.

Bornstein, 423 U.S. 303 (1976); Hudson v. United States, 522

U.S. 93 (1997).

The FCA’s treble damages bear none of the indicia of

punitive damages, nor do they implicate the policy concerns

about punitive damages that troubled this Court in Newport v.

Fact Concerts. But even if the FCA’s treble damages were to be

deemed punitive, Congress has displaced the common-law rule

against imposition of punitive damages. Congress did so in 1986

by deliberately increasing the Treasury’s recovery to treble

damages in the face of (1) the settled presumption that municipal

corporations are “persons” liable under the Act, and (2)

Congress’s own express recognition in the legislative record that

municipalities are “persons” under the Act.

To be sure, a treble damages judgment might be burdensome

on a county. But one does not stumble innocently into FCA

I’ »bility: it is imposed only for intentional fraud. When the

choice as to who should bear the cost of that fraud is between the

taxpayers of the county that perpetrated and benefitted from the

fraud, and the innocent and injured taxpayers of the United

States, Congress’s choice is clear. And it is Congress, not the

judicial branch, that the Constitution empowers to make that

3

choice. Petitioner asks this Court not just to shield cities and

counties from treble damages, but to immunize them completely

from any liability whatever under the False Claims Act. A

decision immunizing Cook County from any and all FCA

liability, on the basis of a common-law rule that Congress has

overridden, would be a usurpation of legislative power.

ARGUMENT

I. COUNTIES ARE “PERSONS” SUBJECT TO LIABILITY UNDER

THE FALSE CLAIMS ACT.

A. Stevens Reaffirmed That the FCA’s Reference to

“Persons” Presumptively Includes Counties.

Vermont Agency v. United States ex rel. Stevens, 529 U.S.

765 (2000), held that States could not be sued under the FCA due

to the “longstanding interpretive presumption that ‘person’ does

not inchade the sovereign.” Jd. at 780. “[C]omity anc respect for

our federal system demand that something more than mere use

of the word ‘person’ demonstrate the federal intent to authorize

suit against a sovereign state. /d. at 780 n.9. “[I}f Congress

intends to alter the ‘usual constitutional balance between the

States and the Federal Government,’ it must make its intention

to do so ‘unmistakably clear in the language of the statute.””

Will v. Michigan, 491 U.S. 58, 65 (1989).

But no such “clear statement” rule proxects “municipal

corporations” because, unlike States, they are not sovereign.

Alden v. Maine, 527 U.S. 706, 756 (1999). Therefore, “[t}here

is certainly no constitutional impediment to municipal liability”

under the FCA. Monell v. Dept. of Social Services, 436 U.S.

658, 690 n.54 (1978).

Indeed, Stevens explicitly reaffirmed that the “presumption

with regard to corporations is just the opposite of the one

4

governing here: they are presumptively covered by the term

person.’” 529 U.S. at 782 (emphasis added). “‘[A]ny natural

person, partnership, corporation, association, or other legal

entity” is “presumptively covered by the term ‘person.”” /d. at

784 n.14 (original emphasis). The Court stressed that nothing in

the text, structure or history of the FCA “cast[s] doubt upon the

courts’ assumption that §3729(a) extends to corporations.” Jd.

This Court has held many times that, like private corporate

bodies, public corporations such as “municipalities are persons.”

Will, 491 U.S. at 70. See also id at 69 n.9 (“towns, cities, and

counties” are subject to suit); Owen v. City of Independence, 445

U.S. 622, 639 & n.19 (1980) (all “local governmental units” are

subject to suit as “persons”); Monell, 436 U.S. at 687 (“the

‘usual’ meaning of the word ‘person’ would extend to municipal

corporations”); City of Newport v. Fact Concerts, 453 U.S. 247,

259 (1981) (“a municipality, like a private corporation, was to be

treated as a natural person subject to suit for a wide range of

tortious activity.”).

B. Municipal Corporations, Like Other

Corporations, Were Included Within the FCA’s

Reference to “Persons” When the Statute Was

Enacted in 1863.

When the FCA was enacted it was hornbook law that

“[t]here is nothing in the character of a municipal corporation

which entitles it to an immunity from liability for such

malfeasances as private corporations or individuals would be

liable for in a civil action.” T. Shearman & A. Redfield, A

TREATISE ON THE LAW OF NEGLIGENCE §120, p. 139 (1869)

(quoted in Owen, 445 U.S. at 640). Furthermore, “this fact was

well known to Congress” in the 1860s. Monell, 436 U.S. at 688.

See also id. at 688 n.50 (““Counties, cities and corporations of all

sorts .. . have become thoroughly established to be an individual

or person’”) (Court’s brackets and citation omitted).

5

Petitioner effectively asks the Court to revisit and reject this

entire body of authority holding that counties are persons. Pet.

Br. 13.2 Petitioner concedes that cities and counties were

understood to be “persons” in 1869, but contends that this was

’ not the case in 1863 when the FCA was enacted. See Pet. Br. 14-

16. Perhaps something magical and revolutionary is supposed to

have transpired in those six short years. Given that Petitioner

asks this Court to replow old ground, it is remarkable that

Petitioner did not survey that terrain more thoroughly itself:

Petitioner’s legal history is simply wrong.

As Chief Justice Lemuel Shaw wrote in 1837, “[t]hat an

action sounding in tort, will lie against a corporation, though

formerly doubted, seems now too well settled to be questioned.

And there seems no sufficient ground for a distinction in this

respect, between cities and towns and other corporations.”

Thayer v. City of Boston, 36 Mass. 511, 516 (1837) (emphasis

added).’

This Court’s own decisions — the ones Petitioner carefully

avoids — confirm that cities and counties were liable (just like

other corporate persons) long before 1863. In Owen, citing cases

from as early as 1825, decades before the FCA was enacted, this

~

? Curiously, Petitioner discusses only the Monell decision and fails to

mention, much less distinguish, the similar holdings in Owen, Will, and

Newport. See Pet. Br. 13-14.

3 See also Town Council of Akron v. McComb, 18 Ohio 229, 230 (1849)

(holding that “a municipal corporation is liable for an injury resulting to the

property of another,” and rejecting the assertion: that such a ruling

“introduced a new doctrine in reference to corporations, opposed to the

current of authorities, and of doubtful propriety”); Elliot v. Concord, 27

N.H. 204, 208, 209 (N.H. 1853) (“the general policy of the law oe is to

subject the town to the action of the party who suffers damage, and “‘it

cannot admit of question that the town is liable, in the first instance, to the

sufferer” as any other defendant would be).

6

Court recognized that counties “were treated as natural persons

for virtually all purposes of constitutional and statutory analysis.

. . . Local government units were regularly held to answer in

damages for a wide range of statutory and constitutional

violations.” 445 U.S. at 639 & n.19. “[I]t was understood that

a municipality’s tort liability in damages was identical to that of

private corporations and individuals.” Jd. at 640.4

Among the cases cited by Owen was Commissioners of

Knox County v. Aspinwall, 62 U.S. 539 (1859). Knox County

was a federal suit against a county for failure to pay interest on

municipal bonds. 62 U.S. at 540. The dissent objected that the

suit could not be brought because the defendant was a municipal

corporation, id. at 546, but the Court dismissed this argument as

a “minor point[] . . . which we have considered, but which it is

not important should be particularly noticed.” /d. at 546.°

* It is hardly surprising that private and public corporations were treated

alike in this regard, because both corporate forms were created in the same

way: by the grant of a charter from the sovereign. If anything, municipal

corporations preceded private corporations. Most eighteenth century

corporations were “cities or boroughs,” L. Friedman, A HISTORY OF

AMERICAN LAW 166 (1973), and “the archetypal American corporation of

the eighteenth century [wa]s the municipality . . . in the nineteenth century

it [wa]s the modern business corporation.” M. Horwitz, THE

TRANSFORMATION OF AMERICAN LAW 1780-1860 112 (1977). One of the

natural incidents of corporate status was the ability to sue and be sued like

other persons. Several colonial charters, including those of Massachusetts,

Connecticut, Rhode Island, and Georgia, specified that the non-sovereign

corporate bodies established thereunder could sue and be sued. See 5

SOURCES AND DOCUMENTS CF UNITED STATES CONSTITUTIONS 36 (W.

Swindler ed. 1975) (Massachusetts); 2 id. at 131 (Connecticut); 8 id. at 363

(Rhode Island); 2 id. at 434 (Georgia).

* In Owen this Court also relied upon Mayor, Aldermen, and

Commonallty of the City of New York v. Ransom, 64 U.S. 487, 489 (1860)

(upholding a patent infringement suit brought by an individual against the

city in federal court); Inhabitants of Searsmont v. Farwell, 3 Me. 450, 452

(1825) (holding a town liable at common law for breach of contract

7

In Newport v. Fact Concerts, citing cases from as early as

1846, this Court stated that “it was generally understood” that “a

municipality, like a private corporation, was to be treated as a

natural person subject to suit for a wide range of tortious

activity.” 453 U.S. at 259.°

Petitioner arrives at the opposite (and erroneous) conclusion

about municipal liability because Petitioner confuses the issue of

liability with the issue of jurisdiction. The former question asks

whether a municipal corporation can be sued as a party; the latter

asks how one pleads federal diversity jurisdiction over a

corporate entity: need one aver only the State of the defendant s

incorporation, or must one also aver the State residence -

citizenship of each of the corporation’s individual corporators

See Pet. Br. at 14-16 (discussing corporate status “for purposes

of jurisdiction” in “federal courts”). That issue has no bearing on

this case.’

‘ j , 6)(damages action

damages); and Paul v. School Dist. No. 2,28 Vt 575 (185

oan : municipal school district for wrongful discharge and breach of

contract).

6 Among the cases cited by Newport were City Council of Montgomery

v. enue @ Taylor, 33 Ala. 116(1858), and M’Gary v. President & re

of the City of Lafayette, 12 Rob. 668 (La. 1846). Montgomery — —

the proposition that municipal corporations were persons that coul we

liable for negligence and found it to be “consistent with reason, gor -

by justice, and supported by a preponderance of authority. 33 Ala. at =

M’Gary held a municipal corporation liable, and further held that the

plaintiff was entitled to full damages because the defendant s status as os

public corporation was no basis on which to limit the plaintiff s recovery

a bare indemnity.” 12 Rob. at 668-69, 674.

. Petitioner discusses all involved questions of pleading federal

enatunamaies over corporations and did not purport to cast = on

the settled proposition that municipal corporations could be su trae

court wherein the plaintiff could obtain jurisdiction. See Bank of the Unite

States v. Deveaux, 9 U.S. (5 Cranch) 61, 86-87, 91-92 (1809); Louisville,

Cincinnati and Charleston R.R.Co. v. Letson, 43 U.S. (2 How.) 497, 554

C. As Stevens Held, Congress Did Not Narrow the

Meaning of “Persons” When it Amended Other

Language in the FCA in 1986.

Stevens held that Congress made no significant changes to

the operative language of §3729(a) in 1986 and, therefore, that

the 1863 understanding of the term “person” continues to govern

interpretation of the FCA. The “term ‘person’ has remained in

the statute unchanged since 1863; the 1986 amendment merely

changed the modifier ‘[a]’ to ‘any.’” 529 U.S. at 783 n.12

(brackets by the Court).

The legislative history confirms that Congress understood

the 1863 FCA to reach counties that defraud the federal

government: “The term ‘person’ is used in its broad sense to

include partnerships, associations, and corporations . . . as well

as States and political subdivisions thereof.” S. Rep. No. 345,

99" Cong., 2d Sess. 8 (1986) (emphasis added). Stevens stated

that this report sets forth Congress’s understanding of the

meaning of the original FCA, as enacted in 1863, 529 U.S. at 783

n.12, under which cities had (contrary to Petitioner's

misrepresentations) been defendants in FCA actions. See, e.g.,

United States v. Bd. of Educ. of Union City, 1985 U.S. Dist.

LEXIS 14917 (D.N.J. Oct. 15, 1985). This passage therefore

negates any insinuation that Congress, in 1986, intended to

narrow the term “person” or otherwise disturb the long-

established understanding that “person” includes counties.

. To be sure, Stevens made plain that the Senate Report was

mistaken in its historical conclusion that States were “persons”

under the FCA in 1863. 529 U.S. at 783 n. 12. The sovereign

immunity of states, established by the Eleventh Amendment and

centuries of legal tradition, cannot be overturned without a clear

(1844); Cowles v. Mercer County, 74 U.S. (7 Wall.) 118, 121-22 (1869).

9

statement in the statutory text; a single sentence from a

legislative report will not suffice. /d. at 780-81 & n.9; 783 n.12.

But, as Stevens itself reiterated, with respect to municipalities the

presumption is precisely opposite: that they are persons. /d. at

782. As the court below explained, “while the committee report

was incorrect with respect to the liability of states under the FCA

before 1986, we believe it was correct in asserting that political

subdivisions of states were, and are, subject to suit under the

FCA so long as they are not properly considered arms of the state

itself.” United States ex rel. Chandler v. Cook County, 277 F.3d

969, 975 n.8 (7" Cir. 2002).

The Senate Report confirms that Congress’s intent in

amending the FCA in 1986 was to adhere to this long settled

statutory interpretation. The point is not that the 1986 Senate

Report tells us what the 1863 Congress intended — it does

nothing of the sort. Rather, it tells us that the 1986 Congress

fully understood that cities and counties had always been

“persons” subject to the FCA, and that Congress nevertheless

deliberately increased the remedy to treble damages. Thus did

Congress override the common-law rule against imposition of

punitive damages, as explained in Part II.B. below.

If anything, the 1986 amendment to § 3729(a) broadened the

meaning of “person.” As the Stevens Court noted, the indefinite

article “a” was changed to “any,” and the Act thus reaches “any

person” without qualification. 529 U.S. at 783 n.12. “Read

naturally, the word ‘any’ has an expansive meaning, that is, ‘one

or some indiscriminately of whatever kind.’” United States v.

Gonzales, 520 U.S. 1, 5 (1997). Because the term “any” imports

“no restriction,” United States v. Turkette, 452 U.S. 576, 580

(1981), or “limitation,” Jnt'l Union of Operating Engineers v.

Flair Builders, 406 U.S. 487, 491 (1972), it “leaves no doubt as

to the congressional intention to include all” members of the

category identified by the enactment. United States v.

Rosenwasser, 323 U.S. 360, 363 (1945).

10

This analysis is buttressed by the settled proposition that

Congress intended the FCA to be broadly construed. See S. Rep.

No. 345 at 7-8, 11; United States ex rel. Marcus v. Hess, 317

U.S. 537, 541 n.5 (1943) (“*The statute is a remedial one. . . . and

should be construed accordingly.””). In Monell the Court

explained how this rule of broad construction is to be applied to

the precise question presented here:

since municipalities through their official acts could,

equally with natural persons, create the harms intended

to be remedied by [the statute], and, further, since

Congress intended [the statute] to be broadly construed,

there is no reason to suppose that municipal

corporations would have been excluded from the sweep

of [the statute].

436 U.S. at 685-86.

Therefore, the 1986 amendments and their legislative history

establish that Congress did not narrow the definitior of “person”

to exclude the counties and cities that had always been

understood to be included in the Act.

Il. FCA TREBLE DAMAGES APPLY TO ALL “PERSONS”

LIABLE UNDER THE STATUTE, INCLUDING COUNTIES.

Neither the Eleventh Amendment nor the principle of

sovereign immunity extends to municipal corporations, hence

there is no absolute rule immunizing counties from punitive

damages. There is only a presumption against such liability,

derived from the common law and used by this Court as an aid

in statutory interpretation. See Newport, 453 U.S. at 263;

Stevens, 529 U.S. at 785. Whether that common-law immunity

applies under the FCA is a question of “statutery construction,”

Owen, 445 U.S. at 635, and requires a “careful inquiry into

considerations of both history and policy.” Newport, 453 U.S. at

1]

259. If there is “evidence that Congress intended to disturb the

settled common-law immunity,” that congressional intent is

controlling. Newport, 453 U.S. at 266."

This Court should affirm the ruling below, that FCA treble

damages may be imposed on counties, for three independent

reasons: (1) the common-law presumption against imposing

punitive damages on cities does not apply here, because

Congress designed the FCA’s treble damages remedy as

compensation rather than punishment and that legislative

judgment is entitled to judicial deference; (2) Congress in any

event displaced the presumption when it enacted an elaborate,

carefully crafted damages regime for the FCA; and (3) the

policies that weigh against imposition of punitive damages,

which this Court reviewed in Newport, are not implicated by the

FCA treble damages provisions.

* Newport quoted Pierson v. Ray, 386 U.S. 547, 555 (1967), to the effect

that “‘Congress would have specifically so provided had it wished to

abolish” a particular immunity doctrine. 453 U.S. at 263. But neither

Newport nor Pierson in fact required Congress to disavow a common-law

rule in so many words. Accordingly, this Court has repeatedly held that it

is enough that the “legislative record” provide “clear indication” of

Congress’s intent to establish a different rule. Pierson, 386 U.S. at 554. See

also Newport, 453 U.S. at 263-64 (common-law immunity may be

overridden by congressional “intent’ as revealed in “legislative debates” and

“legislative history”); Tenney v. Brandhove, 34) U.S. 367, 376 (1951)

(question is whether “Congress thought it had exercised the power” to

establish the liability in question).

12

A. The Common-Law Presumption Against Imposing

Punitive Damages On Cities Does Not Apply, Because

Congress Designed the FCA’s Treble Damages

Remedy To Be Compensatory Rather than Punitive,

And That Congressional Judgment Is Entitled To

Deference.

Petitioner appears to labor under the misapprehension that

the FCA was required to contain a phrase such as “we hereby set

aside common-law municipal immunity and impose punitive

damages on cities.” Pet. Br. 22. As explained above, pages 10-

11 & note 8, that is not the legal standard. But even if it were,

there is a more immediate reason why Congress did not utter any

such incantation to set aside the presumption against punitive

damages: Congress designed the FCA’s treble damages to be

compensatory, not punitive, and the presumption is therefore

simply inapplicable. Congress’s characterization of the FCA’s

treble damages as compensatory is entitled to substantial

deference.

1. Before Stevens, the FCA had always been

understood by this Court as compensatory, and

this Court has likewise characterized some

treble damages regimes as compensatory rather

than punitive.

As this Court acknowledged in Stevens, it has consistently

held that the double damages imposed by the original 1863 FCA

“were remedial rather than punitive.” 529 U.S. at 785. In Hess,

the Court squarely held that FCA “proceedings are remedial.”

317 U.S. at 549. Compensation was the legislative purpose, and

“the device of double damages plus a specific sum was chosen

to make sure that the government would be made completely

whole.” Jd. at 551-52. In United States v. Bornstein, 423 U.S.

303, 315 (1976), the Court confirmed “this make-whole purpose”

of the FCA’s double damages provision: “this method of

13

computation comports with the congressional judgment that

double damages are necessary to compensate the Government

completely for the costs, delays, and inconveniences occasioned

by fraudulent claims.” In United States v. Halper, 490 U.S. 435

(1989), overruled on other ground by Hudson v. United States,

522 U.S. 93 (1997), the Court explained that “proceedings under

the statute were remedial and designed to ‘protect the

government from financial loss’— rather than to ‘vindicate

public justice.’” 490 U.S. at 444°

The argument that the FCA’s treble damages trigger the

common-law presumption against imposition of punitive

damages on counties is predicated on a passage in Stevens

wherein this Court remarked that treble damages “are essentially

punitive in nature,” 529 U.S. at 784. Given that the result in

Stevens was compelled by the principles of State sovereign

immunity, the Court had no occasion to elaborate further and no

occasion to examine Congress’s findings on FCA treble

damages. Furthermore, if Stevens’ reference to treble damages

were understood as a holding that all treble damages are

necessarily punitive, it would be in tension with cases in which

° It has been argued that the justification for doubling damages in the

1863 FCA was to offset the portion of the recovery (50%) that went to a

successful gui tam relator under the o: \ginal Act. See Brief Amicus Curiae

of Delaware County at 7. But this Court has already rejected this point.

First, double damages were awarded even when the United States brought

suit itself, in which case the Treasury received every nickel of the judgment.

Second, the relator’s portion of any award was cut to a maximum of 25% in

1943, and Congress placed other restrictions on qui tam actions, yet [i}n

adopting these changes, Congress did not make any adjustment in the

double-damages provision, again suggesting that it thought that double

damages are necessary to make the United States whole in fraudulent claim

cases.” Bornstein, 423 U.S. at 316 n.11 (emphasis added).

14

this Court has held that some treble damage regimes must be

understood as primarily compensatory.'°

The question of whether (and for which purposes) a

particular treble damages regime should be deemed punitive or

remedial is a subtle one not susceptible to hasty categorical

resolution. Amicus Taxpayers Against Fraud therefore suggests

that Stevens’ characterization of FCA treble damages must be

understood in light of the Court’s interpretive presumption in

that case—dictated by the Eleventh Amendment—that sovereign

States are not “persons” under the FCA. That consideration

carries no weight where, as here, the Court has confirmed that

the opposite interpretive presumption applies — i.e., private and

municipal corporations are “persons” under the FCA.

2. ‘The legislative analysis prescribed by Newport

reveals that Congress imposed treble damages

to ensure full compensation for the U.S.

Treasury, rather than as a punitive measure.

The legislative record reveals that Congress amended the

FCA in 1986 to increase recoverable damages from double to

© See, e.g., American Society of Mechanical Engineers v. Hydrolevel

Corp., 456 U.S. 556, 757-76 (1982) (unlike punitive damages, antitrust

treble damages can be imposed on an agency theory because “the antitrust

private action was created primarily as a remedy for the victims of antitrust

violations”); Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477, 485-86

(1977) (although antitrust treble damages “play an important role in

penalizing wrongdoers . . . it is nevertheless true that the treble-damages

provision, which makes awards available only to injured parties, and

measures the awards by a multiple of the injury actually proved, is designed

primarily as a remedy”); Agency Holding Corp. v. Malley-Duff & Assoc.,

483 U.S. 143, 151 (1987) (“Both RICO and the Clayton Act are designed to

remedy economic injury by providing for the recovery of treble damages,

costs, and attorney's fees... Moreover, both statwies aim to compensate the

same type of injury”).

15

triple the amount of the fraud specifically “to enhance the

Government’s ability to recover losses sustained as a result of

fraud against the Government.” S. Rep. No. 345 at 1. See also

H.R. Rep. No. 660 at 16. Congress stressed that the remedies

available under the | 863 Act were in dire need of modernization.

See S. Rep. No. 345 at 2, 4; H.R. Rep. No. 660 at 63; 132 Cong.

Rec. H6479 (Sept. 9, 1986) (statement of Rep. Glickman), id.

(statement of Rep. Brooks). As Representative Rodino

explained, “This statute has existed for 123 years but is out of

date and no longer an effective tool for prosecution of civil fraud

cases.” 132 Cong. Rec. M6482.

Accordingly, the 1986 amendment increased the damages

recoverable in order to “prowide the Government with a more

effective tool for the recovery of the dollar losses suffered

through fraud.” /d. Im concluding that, “[bJecause of this lapse

of time, some of the provisions of the Act are outdated,” the

House Report specifically noted the deleterious effects of a

century of inflation on the adequacy of the FICA’s double

damages remedy. H.R.Rep. No. 99-660 at 17. Congress

concluded that treble damages were necessary to “make the

Government whole for its losses; and to update the penalty

enacted in 1863 to reflect the passage of time and the effects of

inflation.” Jd. at 20 (emphasis added).

No change in the remedial character of the FCA’s damages

was either intended or inadvertently wrought by Congress in tthe

1986 Amendments. Congress expressly reaffirmed that “‘(the

statute is a remedial one. It is intended a the ae

against the hungry and unscrupulous host that encompasses it on

every side, and should be construed accordingly.’” S. Rep. No.

345 at 11 (quoting United States v. Griswold, 24 F. 361, 366 (D.

Or. 1885)) (emphasis added). Congress expressly and repeatedly

rejected the proposition that the FCA sweble damages regime was

punitive in nature: “False Claims Act proceedings are civil and

remedial in nature and are brought to recover compensatory

16

damages.” S. Rep. No. 345 at 31 (emphasis added). See also id

at 31 (FCA is “remedial,” “notwithstanding the fact that the Act

permits a treble recovery,” and therefore appropriate standard of

proof is preponderance of the evidence); H.R. Rep. No. 660, 99"

Cong., 2d Sess. 25 (1986) (“The False Claims Act is basically a

remedial statute’’).

Not one of the briefs submitted by Petitioner and its amici,

nor any decision striking down the FCA’s application to

municipalities, even mentions these congressional findings.

| This Court has long endorsed a standard of “rough remedial

justice” under the FCA. Halper, 490 U.S. at 446. When fraud

has been committed on the Treasury, “the precise amount of the

Government's damages and costs may prove to be difficult, if not

impossible, to ascertain.” Jd. at 449. See also Rex Trailer Co. v.

United States, 350 U.S. 148, 153 (1956) (same). This Court has

therefore held that the government “may demand compensation

according to somewhat imprecise formulas.” Halper, 490 U.S.

at 446. The FCA’s damages multiplier “is comparable to the

recovery under liquidated-damage provisions which fix

compensation for anticipated loss.” Rex Trailer, 350 U.S. at 153.

Because the damages resulting from a fraud on the public fisc

“may be difficult or impossible to ascertain, . . . it is the function

of liquidated damages to provide a measure of recovery in such

circumstances.” /d. at 153-54.

Therefore, this Court has unanimously declared that

“(1 ]iquidated-damage provisions, when reasonable, are not to be

regarded as penalties.” Rex Trailer, 350 U.S. at 151. The Court

has further held that the FCA’s multiple darnages remedy “does

not rise to the level of ‘punishment’ merely because Congress

provided for civil recovery in excess of the Government's actual

damages.” Halper, 490 U.S. at 442. Indeed, this Court stated in

Hess that “Congress might have provided here . . . for recovery

of ‘threefold damages.’ . . . This Court has noted the general

ee

17

practice in state statutes of allowing double or treble or even

quadruple damages.” 317 U.S. at 550-51 (emphasis added). All

of this is a matter of legislative discretion.

This Court has also repeatedly endorsed Congress’s goal of

“afford[ing] the government complete indemnity for the injuries

done it.” Hess, 317 U.S. at 549. See also Halper, 490 U.S. at

445 (same); Bornstein, 423 U.S. at 315 & n. 11 (same); Rex

Trailer, 350 U.S. at 152 (same). Those injuries include “not

merely the amount of the fraud itseif, but also ancillary costs,

such as the costs of detection and investigation, that routinely

attend the Government’s efforts to root out deceptive practices

directed at the public purse.” Halper, 490 U.S. at 445. See also

id. at 446 n.6 (“prosecutorial costs . .. must also be factored into

the determination”). Since the government does not get a

separate award of attorneys’ fees or investigative costs inan FCA

suit, the trebling of damages is readily understood as a means of

roughly approximating the total losses inflicted on the

government by the defendant's fraud.'' Nor does the FCA

provide the government with a separate award of pre-judgment

interest to compensate the Treasury for the carrying costs or

opportunity costs imposed by public fraud. Again, treble

damages make up for that.

Furthermore, the trebling of FCA damage awards

compensates the federal government for the consequential

damages flowing from a fraud on the public fisc. The FCA

'! Although an FCA defendant “shall also be liable to the United States

Government for the costs of a civil action to recover any such penalty or

damages,” 31 U.S.C. 3729(a), those “costs” do not include attorneys’ fees

or the costs of the government's investigation. The relator in a successful qui

tam action may recover “an amount for reasonable expenses which the court

finds to have been necessarily incurred, plus reasonable attorneys’ fees and

costs,” 31 U.S.C. 3730(d)(1), but those recoveries do not make the

government whole because they go to the relator.

18

makes no separate award for such consequential injuries. Indeed,

Congress enacted the treble damages provision in 1986 as an

alternative to adding consequential damages to the prior statute's

award of double damages.

The original House version of the bill proposed in 1986

provided for a separate award of consequential damages on top

of the doubling of actual damages. See S. Rep. No. 345 at 39:

132 Cong. Rec. H6479 (statement of Rep. Glickman); id.

(statement of Rep. Brooks). Consequential damages were

favored by the House so that the FCA would “make the

Government whole for its losses; and to update the penalty

enacted in 1863 to reflect the passage of time and the effects of

inflation.” H.R. Rep. No. 660 at 20. See also 132 Cong. Rec.

H6480 (statement of Rep. Fish) (the House bill “would make

consequential damages the measurement standard — thus

allowing a recovery for indirect losses that are the result of the

fraud as well as actual direct losses. This is a realistic, fair

change which ensures the recovery will reflect actual

replacement cost in every instance.”). In the subsequent

conference between the House and Senate, a compromise was

reached that deleted consequential damages and substituted

treble damages. See 132 Cong. Rec. $11238 (Aug. 11, 1986)

(statement of Sen Dole); 132 Cong. Rec. $15036-37 (Oct. 3,

1986) (statement of Sen. Grassley); 132 Cong. Rec. H9388 (Oct.

7, 1986) (statement of Rep. Glickman).

Therefore, the treble damages provision of the FCA should

be understood as doing nothing more than “afford{ing] the

government complete indemnity for the injuries done it,” Hess,

317 U.S. at 549, including the costs of investigation, attorneys’

fees, pre-judgment interest, and consequential damages. Surely

the taxpayers and the Treasury are entitled to nothing less.

In both Stevens and Newport, this Court defined punitive

damages as damages “‘beyond that amount which will be

19

799

sufficient for [the injured party’s] indemnification.”” Stevens,

§29 U.S. at 785 n.15 (citation omitted); Newport, 453 USS. at

261 (same). Because the treble damages provision is nothing

more than a full indemnity, it cannot, by definition, be deemed

punitive. It therefore does not implicate a municipality ’s

common-law immunity from punitive damages.

3. | Congress’s characterization of the FCA as non-

punitive is entitled to judicial deference.

This Court has indicated that congressional judgments about

the damages necessary to make the Treasury whole are entitled

to judicial deference. Damages under the FCA are to be

calculated and characterized in the way that “most faithfully

conforms to the language and purpose of the Act.” Bornstein,

423 U:S. at 314. To determine whether double damages were a

remedy or a punishment in Bornstein, the Court inquired into

what “Congress intended.” 423 U.S. at 314. The Court expressly

adopted an understanding of the FCA that “comports with the

congressional judgment that double damages are necessary to

compensate the Government completely.” /d. at 315 (emphasis

added).

In Hudson v. United States, 522 U.S. 93, 103-04 (1997), a

case involving the Fifth Amendment's ban on double jeopardy,

this Court unanimously held that courts should defer to the

congressional characterization of a statute as civil and remedial

rather than criminal and punitive. The touchstone for such

determinations is what “Congress intended” with respect to the

statute’s penalties, id. at 103, and that intention governs unless

the party challenging the law adduces “the clearest proof that

Congress mischaracterized its own enactment, id at 104.

Accordingly, the Hudson Court refused to deem a statute's

penalties “‘so punitive in form and effect as to render them

criminal despite Congress’ intent to the contrary.’” 522 U.S. at

104 (emphasis added).

20

If courts are required, even in the context of the Fifth

Amendment’s Double Jeopardy Clause, to give great weight to

Congress’s own characterization of a statute as civilly remedial

or criminal punitive, and to overrule that determination only

upon the “clearest proof,” then a fortiori the courts should defer

to a congressional judgment as to whether a statute is remedial

or punitive when, as in the case at hand, no constitutional right

is at stake. As the Court has repeatedly concluded with respect

to the FCA, the “inherent difficulty of choosing a proper specific

sum which would give full restitution was a problem for

Congress.” Hess, 317 U.S. at 552 (emphasis added); Rex Trailer,

350 U.S. at 152 (same).

Here there is no evidence, let alone “the clearest proof,” that

Congress’s characterization of the FCA’s treble damages as

remedial was either arbitrary or inaccurate. “It could not be more

clear that Congress, in adopting this approach, addressed the

situation with careful precision as to what sort of damage scheme

was necessary to achieve the goals of the statute.” Chandler, 277

F.3d at 978. And it was Congress’s manifest judgment that the

treble damages available under the 1986 Amendments are

compensatory.”

? Prior to this Court’s statement in Stevens, the Courts of Appeals had

consistently reached the same conclusion. See United States v. Peters, 110

F.3d 616, $17 (8" Cir. 1997) (“the FCA's treble-damages provision, which

went into effect in 1986, is likewise in the nature of rough remedial justice

and therefore not punitive for double-jeopardy purposes.”); United States

v. Brekke, 97 F.3d 1043, 1048 (8th Cir. 1996) (“Although the False Claims

Act authorizes treble damages . . . [a] multiple recovery of this type is

compensatory rather than punitive, even though it contains a penalty

element, unless the amount sought by the government ‘bears no rational

relation to the goal of compensating the Government for its loss’”), cert

denied, 520 U.S. 1132 (1997); United States v. Barnette, 10 F.3d 1553,

1 $59-60 (1 1th Cir.) (award of treble damages under the FCA does “‘no more

than make the Government whole’” and is non-punitive “rough justice”),

cert. denied, 513 U.S. 816 (1994). These decisions were not discussed in

Stevens.

<_< ee ee

21

To be sure, the FCA’s treble damages also have a deterrent

effect. See H.R. Rep. No. 660 at 20. But that does not mean that

treble damages are inherently punitive. As this Court has noted

with respect to the FCA, “for the defendant even remedial

sanctions carry the sting of punishment.” Halper, 490 U:S. at

447 n.7. Since defendants would prefer not to pay for their

wrongs, even the imposition of compensatory damages deters

misconduct. Hence there are no “‘solely’ remedial (i.e., entirely

nondeterrent)” damages. Hudson, 522 U.S. at 102. Deterrence

and punishment are not the same thing. See Bennis v. Michigan,

516 U.S. 442, 452 (1996) (“Forfeiture . . . serves a deterrent

purpose distinct from any punitive purpose”); Hudson, 422 US.

at 105 (same). Thus in Bornstein this Court held that the FCA’s

double damages were remedial, not punitive, 423 U.S. at 314-15,

while simultaneously holding that the damages should be

doubled prior to the deduction of any offset amounts, because

“(tj]his method of computation . . . maximizes the deterrent

impact of the double-damages provision,” id. at 317.

There are other indicia of punitive damages that FCA treble

damages do not display, and that therefore confirm that

Congress’s characterization of FCA damages as compensatory 1s

appropriate. First, unlike FCA damages, puniive damages are

a separate element of a judgment, imposed in accord with

separate jury instructions, that are added on top of the initial

award of compensatory damages. See Newport, 453 U.S. at 252-

53 (describing jury instructions on punitive damages); id. at 256

n.12 (“we deal with a wholly separable issue of law, on which

the jury rendered a special verdict”); id. at 267 (“These damages

are assessed over and above the amount necessary to compensate

the injured party.”). Punitive damages are expressly imposed as

punishment, and they are tailored to punish the particular

defendant before the court, with the goal that the amount be

sufficient to sting this defendant. See Newport, 453 USS. at 270

(“evidence of a tortfeasor's wealth is traditionally admissible as

22

a measure of the amount of punitive damages that should be

awarded”).

The FCA’s treble damages are nothing like this. They are

imposed as one lump sum and are not divided into compensatory

and punitive elements. There is no attention paid to the

resources of the particular defendant when calculating FCA

damages; damages are simply tripled in every case, as a form of

liquidated damages to assure full compensation for the

government.

Second, the Court has stressed that punitive damages are

“evidently vindictive,’” Stevens, 529 U.S. at 785 n.15; Newport,

453 U.S. at 261, and are meant to punish those who act with

“malice,” Newport, 453 U.S. at 261, 262, 267. Accordingly,

Newport held that punitive damages were unavailable against

cities under 42 U.S.C. § 1983 because a government entity “can

have no malice independent of the malice of its officials” and

therefore such damages “are not sensibly assessed against the

governmental entity itself.” 453 U.S. at 267.

In contrast, there is nothing insensible or incongruous about

imposing FCA treble damages on counties because there is no

“malice” requirement under the FCA. Indeed, when amending

the FCA in 1986, Congress expressly rejected any sort of scienter

requirement, whether malice or any other “specific intent to

submit the false claim,” as wholly out of place in what Congress

deemed a “remedial” statute. S. Rep. No. 345 at 7. See also id

at 13, 20-21, 31; H.R.Rep.No. 660 at 20-21; 31 U.S.C. § 3729(b)

(1986) (“no proof of specific intent to defraud is required”).

Therefore, FCA treble damages are not punitive. Congress

amended the FCA to impose treble damages in order to assure

full indemnity for the U.S. Treasury — the rough remedial

justice that this Court has repeatedly endorsed as compensatory,

not punitive. Because the FCA’s treble damages are not

23

punitive, they do not implicate the common-law presumption

against imposition of punitive awards on cities that concerned

the Court in Newport.

B. Congress Deliberately Imposed Treble Damages On

All FCA Defendants, Including Counties, Thereby

Overriding Any Common-Law Immunity.

As explained above, this Court has held that congressional

intent controls. The search is for “evidence that Congress

intended to disturb the settled common-law immunity” by

imposing punitive damages. Newport, 453 U.S. at 266. This

inquiry yields a different answer in this case than in Newport.

In Newport there was no indication that Congress intended

to impose punitive damages. Indeed, 42 U.S.C. § 1983 is

entirely silent on the question of what damages are available: it

states only that defendants shall be “liable to the party injured in

an action at law.” See Newport, 453 U.S. at 258 n.17. Because

Congress had not specified which damages remedies were

available, this Court turned to the common law for guidance in

filling in the blanks. See id. at 267-68; cf Carey v. Piphus, 435

U.S. 247, 255-58 & nn. 11, 13 (1978). It made perfect sense to

hold that the same body of common law that made punitive

damages available under § 1983 also limited the population of

defendants on whom such damages could be imposed. As the

Court noted, the “general rule today is that no punitive damages

are allowed unless expressly authdrized by statute.” Newport,

453 U.S. at 261 n. 21 (quoted in Pet. Br. 24-25).

Newport dictates the opposite result in this case, because in

the FCA Congress “expressly authorized” treble damages “by

statute.” There is no question that Congress “specifically

provided” for treble damages. Pierson v. Ray, 386 U.S. at 555;

Newport, 453 U.S. at 263. “Unlike § 1983, the FCA does not

need to borrow acommon-law conception of damages; Congress

24

has provided a clear and consistent remedy for all violations of

the FCA.” Chandler, 277 F.3d at 978.

As demonstrated above, the structure and legislative history

of the 1986 FCA Amendments reveal painstaking legislative

attention to the goal of making the Treasury whole for frauds and

the need for updating a century-old statutory remedy. Congress

knew how to limit recovery to the previous level of double

damages when it deemed it appropriate. See 31 U.S.C. §

372%a\(7)(A)-(C) (providing that double rather than treble

damages may be imposed when the person who defrauded the

Government cooperates before learning of the investigation). “It

could not be more clear that Congress, in adopting this approach,

addressed the situation with careful precision as to what sort of

damage scheme was necessary to achieve the goals of the

statute.” Chandler, 277 F.3d at 978.

Congress carefully crafted its treble damages remedy with

the express understanding that municipal corporations, like

private corporations, were “persons” subject to the FCA. Indeed.

as shown above, Congress explicitly noted that it was acting on

the premise that the FCA’s reference to “person” included

“political subdivisions” of States. S. Rep. No. 345 at 8. See Part

L.C., supra. With that interpretation of § 3729(a) in mind,

Congress deliberately increased the remedy to treble damages

and thereby overrode any contrary common-law rule.

The only alternative explanation is that Congress, in a fit of

legislative sleepwalking, increased damages from double to

treble and sub silentio exempted cities and counties from the

False Claims Act entirely. This is Petitioner's theory, see Pet.

Br. 21, and it is absurd.

Thus, even assuming arguendo that the FCA’s treble

damages are to be considered punitive, it is manifest that

Congress “thought it had exercised the power” to impose treble

25

damages. Tenney v. Brandhove, 341 U.S. 367, 376 (1951).

Therefore, the common-law presumption that cities are not

subject to punitive damages has been displaced by Congress's

deliberate imposition of treble damages in the 1986 FCA

Amendments.

C. The FCA’s Treble Damages Do Not Implicate The

Policy Objections To Punitive Damages That

Concerned This Court In Newport v. Fact Concerts.

Even absent evidence of congressional intent to override the

presumption against imposing punitive damages on cities, the

presumption on its own terms, as explained by this Court, does

not constitute a universally applicable policy. Thus, after

deciding in Newport that there was no evidence that Congress

intended to disturb the common-law immunity, the Court stated

that it would proceed to “determine whether considerations of

public policy dictate a contrary result.” 453 U.S. at 266. ‘The

Court concluded that it would be “unwise” to allow a punitive

award against a city “[a]bsent a compelling reason . . . not

present here.” 453 U.S. at 271.

In the case at hand we have a compelling public policy

reason established by Congress itself — securing full indemnity

for frauds committed on the United States by a non-sovereign

city or county. In contrast to Newport, the victim in this case is

not a single party but We the People, and if a fraud is found at

trial treble damages will be appropriate to achieve the compelling

congressional objective of ensuring that the U.S. Treasury 1s

made whole.

With respect to the policies that weigh against imposition of

punitive damages on a city, Newport distinguishes itself. The

Court expressed its aversion to imposing punitive damages on

cities under § 1983 because of the “windfall to a fully

compensated plaintiff.” 453 U.S. at 267. In the first place, as

26

explained above, in the judgment of Congress the Treasury is not

fully compensated without treble damages. This distinguishes

an FCA award from a punitive award that, by definition, is added

on top of the fully adequate compensatory award. In enacting the

larger damages remedy in 1986, Congress “addressed the

situation with careful precision” and “specifically determined”

that treble damages are “necessary for the effective operation of

the FCA.” Chandler, 277 F.3d at 978.

Second, in contrast to punitive damages regimes where an

already fully compensated plaintiff may reap a windfall when a

court diverts to him a punitive award that serves the public law

function of visiting society’s punishment, under the FCA the

Treasury, having borne the full weight of the defendant's fraud,

is also the recipient of every dime of damages whenever the

United States brings suit.

To be sure, if an FCA suit is brought under the statute's gui

fam provisions, a successful relator will end up with some

portion of the total damage award. But the relator’s portion is

not an arbitrary allocation made on an ad hoc basis. It is

statutorily prescribed (in great detail) and judicially policed. See

31 U.S.C. § 3730(d). The briefs of Petitioner and its amici

(whose ranks include cities and counties accused of defrauding

the federal government) display great distaste for gui tam

lawsuits. See Pet. Br. 36-37, Brief Amicus Curiae of Nat’! Ass’n

of Counties ef a/. at 11, 13-14; Brief Amicus Curiae of 43 Local

Gov't Airport Proprietors at 11. But regardless what FCA

defendants may think, Congress saw a need for this particular

remedy, and that is the end of the matter. The gui tam provision

“was passed upon the theory, based on experience as old as

modern civilization, that one of the least expensive and most

effective means of preventing frauds on the Treasury is to

make the perpetrators of them liable to actions by private

persons acting . . . under the strong stimulus of personal ill

=> ~

re eg ee

27

will or the hope of gain. Prosecutions conducted by such

means compare with the ordinary methods as the

enterprising privateer does to the slow-going public vessel.”

Hess, 317 US. at 541 n.5.

Therefore, the relator’s share that generates successful FCA

lawsuits cannot be considered an instance of waste or diversion

of public funds, nor may federal courts disparage or act in

derogation of the FCA on the basis of Congress’s endorsement

of the gui tam mechanism. “Congress has power to choose this

method to protect the government from burdens fraudulently

imposed upon it; to nullify the . . . statute because of dislike of

the independent informer sections would be to exercise a veto

power which is not ours.” Hess, 317 U.S. at 541 n.5.

The Newport Court was also concerned that punitive awards

against cities under § 1983 could be unpredictable, given: (1) the

“broad discretion traditionally accorded to juries in assessing the

amount of punitive damages;” and (2) the fact that, because

“evidence of a tortfeasor’s wealth is traditionally admissible as

a measure of the amount of punitive damages that should be

awarded, the unlimited taxing power of a municipality may have

a prejudicial impact on the jury, in effect encouraging it to

impose a sizable award.” 453 U.S. at 270. These concerns do

not exist under the FCA. Neither judge nor jury has unbridled

discretion to set punitive damages under the FCA because there

are no separate punitive awards: damages are trebled by statutory

mandate. No runaway juries are possible and there is no

consideration of the defendant’s wealth or taxing power.

An FCA judgment against a county could indeed be

substantial — but only if the defendant county's fraud on the U.S

Treasury were substantial. And in that event the damages

visited upon the defendant would be proportionate to the totality

of the injury inflicted on the Treasury by the defendant's fraud.

28

A defendant’s complaints about the size of an adverse judgment

are entitled to no weight where the “exceptional magnitude of

those consequences is the product” of “the immensity” of the

underlying transaction and wrongdoing. Pennzoil Co. v. Texaco,

Inc., 481 U.S. 1, 34 (1987) (Stevens, J., concurring). As

demonstrated above, the FCA imposes treble damages to ensure

that the U.S. Treasury is made whole (including interest,

investigative and prosecutorial costs, and consequential

damages). It is not a cause of action for unjust enrichment

against counties and their constituents, and therefore mere

disgorgement of improperly obtained federal funds is not the

measure of damages.

Petitioner and its amici voice concerns that counties forced

to compensate the U.S. Treasury fully for their frauds might have

to cut back on local services. Of course, the municipal services

that Petitioner refers to are usually subsidized by federal funds.

Indeed, Petitioner and its amici confirm the need for rigorous

enforcement of the FCA by describing the wide range of local

services — from airports to police — for which cities use federal

dollars (and for which cities have been sued by the federal

government for fraud). Enforcement is essential to ensure that

those scarce federal dollars are not squandered through fraud. If

cities choose to ask for federal money, they must take such funds

on the terms Congress chooses — and one of those conditions is

that cities not defraud the U.S. Treasury, and be subject to treble

damages if they do. “As conventional notions of the proper

objects of government spending have changed over the years, so

has the ability of Congress to ‘fix the terms on which it shall

disburse federal money to the States."” New York v. United

States, 505 U.S. 144, 158 (1992).

The taxpayers of a city or county found to have defrauded

the federal government might well feel the pinch of an FCA

judgment in terms of increased taxes or decreased services. But

(contrary to the argument of Amicus Curiae Orange Cty. at 15)

29

a municipal corporation does not innocently and inadvertently

stumble into fraud any more than a private corporation does.

Liability under the FCA is not a trap for the unwary: liability is

imposed not for mere mistakes, but only for acts of fraud that are

knowing, intentional, and willful. 31 U.S.C. §§ 3729(a)(1),

(a)(2), (a4), (a(S), (a6) & (a)(7).

It may well be regrettable that taxpayers who had no direct

part in the frauds of their county officials will suffer the indirect

cost of remedying those frauds. But the same is true of innocent

employees thrown out of work when their corporate employers

are held liable for treble damages under the FCA. Moreover, if

the county that commits fraud is not to be held liable for the full

cost of the injury it has inflicted upon the Treasury, upon whom

should that unavoidable cost be imposed? As Petitioner and its

amici concede, the taxpayers of that county are the ones who,

even if they were not active parties to their county’s fraud,

nevertheless benefitted from that fraud insofar as their county

reaped an undue and indeed fraudulent increase in federal tax

support for the county's programs, an increase which redounded

to those taxpayers in the form of lower county taxes and

enhanced county services. Amicus Nat'l Ass’n of Public

Hospitals at 19; Amicus 43 Local Gov’ts at 10; Amicus Orange

Cty. at 11; Pet. Br. 35. When the choice as to who should bear

the cost of that fraud is between the hapless taxpayers of the

county that perpetrated and benefitted from the fraud, and the

innocent and injured taxpayers of the United States, Congress's

choice is clear. And it is Congress, not the judicial branch, that

the Constitution empowers to make that choice.

It cannot be overemphasized that the result urged by

Petitioner and its amici would negate any FCA liability for cities

and counties that commit intentional fraud on the U.S. Treasury.

See Pet. Br. 25 (total “immunity from suit”); id. at 37 (“absolute

governmental immunity”). This, despite the fact that Petitioner

and its amici concede that “‘a local government can properly be

30

made to pay compensation for the wrongful acts of its agents.”

Pet. Br. 35. See also Amicus Orange Cty. at 11. Petitioner

hastens to reassure the Court that other legal mechanisms,

including common law claims, exist under which the United

States might seek the compensation that Petitioner would deny

it under the FCA. Pet. Br. 37-38; Amicus Orange Cty. at 12. But

Congress determined that such alternatives were inadequate and

unreliable, and that is why it enacted the False Claims Act with

its treble damages remedy and its qui tam provisions. See supra

pages 26-27. Neither Petitioner nor this Court is empowered to

second-guess that legislative judgment. If Petitioner and its

amici think that the FCA is over-kill, let them make their case to

Congress.

CONCLUSION

The federal government disburses hundreds of billions of tax

dollars to local governments every year. That level of funding

creates enormous opportunity — and enormous temptation — for

fraud by cities and counties, and the FCA is the weapon

Congress has forged to combat that fraud. The judgment below

should therefore be affirmed.

Respectfully submitted,

CHARLES J. COOPER

Counsel of Record

BRIAN STUART KOUKOUTCHOS

COOPER & KIRK, PLLC

Suite 200

'£00 K Street, N.W.

Washington, D.C. 20005

(202) 220-9600

November 2002

JAMES MOORMAN

AMY WILKEN

BRET BOYCE

TAXPAYERS AGAINST FRAUD,

THE FALSE CLAIMS ACT LEGAL CENTER

1220 19" St., NW, Suite 501

Washington, D.C. 20036

(202) 296-4826

Counsel for Amicus Curiae