Amicus Curiae Brief — Rockwell Intern. Corp. v. United States

(2) 7...

Ls JUL 14 2006

No. 05-1272 OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

ROCKWELL INTERNATIONAL CORP. AND BOEING NORTH

AMERICAN, INC.,

Petitioners,

V.

UNITED STATES OF AMERICA AND UNITED STATES OF

AMERICA EX REL. JAMES S. STONE,

Respondents.

On Petition For A Writ of Certiorari

To The United States Court of Appeals

For The Tenth Circuit

BRIEF OF AMICUS CURIAE CHAMBER OF

COMMERCE OF THE UNITED STATES OF

AMERICA IN SUPPORT OF PETITIONERS

Of Counsel: HERBERT L. FENSTER

ROBIN S. CONRAD Counsel of Record

AMAR D. SARWAL LAWRENCE S. EBNER

NATIONAL CHAMBER CORINNE A. FALENCKI

LITIGATION CENTER, INC. MCKENNA LONG &

1615 H Street, N.W. ALDRIDGE LLP

Washington, D.C. 20062 1900 K Screet, N.W.

(202) 463-5337 Washington, D.C. 20006

(202) 496-7500

Attorneys for Amicus Curiae

Chamber of Commerce of the

United States of America

——————— | Snes meee

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

j

TABLE OF CONTENTS

Page

INTEREST OF THE AMICUS CURIAE............. RETA l

SUMMARY OF ARGUMENT ooccccccccsccccsccccccccccececeecscece 3

ee NE ee RS aR Se AE Pre IER 4

J. THE CONSTITUTIONALITY OF THE QUI

TAM PROVISIONS UNDER ARTICLE II

REMAINS AN OPEN QUESTION ooccccccccccssssecssesees 4

I. THE QUI TAM PROVISIONS PRESENT

SUBSTANTIAL ARTICLE II ISSUES

WORTHY OF THIS COURT'S REVIEW ............. a

TIED siineisinbessntisiiaedaniccbaicaasiontehinenpiddinnudssnniaeenei 20

TABLE OF AUTHORITIES

CASES

Page

Aufmordt v. Hedden, 137 U.S. 310 (1890) .cccccscccccssessssecese 16

Buckley v. Valeo, 424 U.S. 1 (1976)........000000... 14, 15, 16, 17

Clinton v. City of New York, 524 U.S. 417 (1998)... l |

Edmund v. United States, 520 U.S. 651 (1997)............. 14,15

Freytag v. Comm 'r of IRS, 501 U.S. 868 (1991)..0.......000002. 15

GPM Gas Corp. v. Grynberg, 277 F.3d 1373 (Sth

Cir. 2001), cert. denied, 535 U.S. 1017 (2002)............. 12

Hughes Aircraft Co. v. United States ex rel. Schumer,

ee id ccccsiniediceniiiibindicsisiiiindiviaaaplinacnicnin 18, 19

Mistretta v. United States, 488 U.S. 361 (1989) ...0...000000.. 3,4

Morrison v. Olson, 487 U.S. 654 (1988) .....00..... 4, 15, 17, 20

Printz v. United States, 521 U.S. 898 (1997) o.oo. 3

Riley v. St. Luke's Episcopal Hosp., 196 F.3d 514

MESES RENN ray ee ee nim 6

Riley v. St. Luke's Episcopal Hosp., 252 F.3d 749

Se eth, PE II PIII oc: ccascisoisiinincsecnicandtansnensies passim

Ryder v. United States, 515 U.S. 177 (1995) .......... cece 14

United States ex rel: Kelly v. Boeing Co., 9 F.3d 743

(9th Cir. 1993), cert. denied, 510 U.S. 1140

pe iaidisciiddves shcieitenseiasieaianinodlnbbiiesietiagltll 7, 8, 12-

United States ex rel. Lindenthal v. General Dynamics

Corp., 61 F.3d 1402 (9th Cir. 1995) ooo. 19

United States ex rel. Taxpayers Against Fraud v.

General Elec. Co., 41 F.3d 1032 (6th Cir. 1994) ........ 7,8

United States v. Germaine, 99 U.S. 508 (879) ...cccccccceseeee. 16

Vermont Agency of Natural Resources v. United

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

STATUTES AND REGULATIONS

False Claims Act, 31 U.S.C. § 3730

1) -& > GIRENS OaDRene Neer Memre

MUS Sr. a Pate 15, 18

Ea ae 18

ee 16

I a a 16

SO BE on 18

ee i 18

ne te loa 16, 18

Sr ei l

MISCELLANEOUS

Richard A. Bales, A Constitutional Defense of Qui

Tam, 2001 Wis. L. Rev. 381 (2001) ..0...... cece cceeeeeeeee 8

IV

James T. Blanch, The Constitutionality of the False

Claims Act's Qui Tam Provision, 16 Harv. J.L. &

US RE FO CP i invsscsninieicneececacmnicdsibiaiamabiaeanieias. 9

John T. Boese, Civil False Claims and Qui Tam

Aateeen § 4.12 (SE OB. FOGG) ove. scseccsecsccccveciscssecdvccsssceses y

Evan Caminker, Comment, The Constitutionality of

Qui Tam Actions, 99 Yale L.J. 341 (1989)... cece, 9

Robert E. Johnston, Note, /00/ Attorneys General:

Executive-Employee Qui Tam Suits and the

Constitution, 62 Geo. Wash. L. Rev. 609 (1994) ............ S)

William E. Kovacic, The Civil False Claims Act As A

Deterrent To Participation In Government

Procurement Markets, 6 Sup. Ct. Econ. Rev.

re GHEE vindsincntiniitcnatdiainidaiaseeintinddaneane 12, 19, 20

Ara Lovitt, Note, Fight for Your Right to Litigate:

Qui Tam, Article Il, and the President, 49 Stan.

Hh, ERIE: UOT Bie cancciesincuniscidenaledantosacanaacmeh tienen Y

Memorandum Opinion For The Attorney General,

Constitutionality of the Qui Tam Provisions of

the False Claims Act, 13 U.S. Op. Off. Legal

Counsel 207 (1989), 1989 WL

PO incinliininsiciscsoniniinasacientasiiinniiidiiieiataaias mma passim

Memorandum Opinion For The General Counsels Of

The Federal Government, 7he Constitutional

Separation of Powers Between the President and

Congress, 20 U.S. Op. Off. Legal Counsel 124

CODD, SI We te PIE cinisisissssncnticciciciciaacesaedamelibniin 10

-

Vv

Statement of Stuart M. Gerson, Assistant Attorney

General, Before the Subcomm. on Civil and

Constitutional Rights of the House Comm. on the

Judiciary, 102d Cong. 20 (1992) 0000.00 cceecceceeeeeeeeeees 19

U.S. Gov. Accountability Office, /nformation on

False Claims Act Litigation (2006).................ccc000- 11,12

INTEREST OF THE AMICUS CURIAE

The Chamber of Commerce of the United States of

America (“the Chamber’) is the world’s !argest federation of

business organizations.’ lt represents an underlying

membership of more than three million businesses of every

size, im every business sector, and frora every geographic

region of the country. One of the Chamber's primary

Missions 1s to represent the interests of its members by filing

amicus curiae bricfs in cases involving issues of national

importance to American business.

This 1s such a case because the gui tam provisions of

the 1986 False Claims Act (“FCA”) threaten every federal

government contractor, health care provider, and grant

recipient in the United States. The Court should review this

appeal for two reasons:

First, the circuits are split on how to interpret the

“original source” jurisdictional requirement for gui tam suits,

31 U.S.C. § 3730(e)(4). The original source rule affords an

important protection against the filing of unmeritorious or

vexatious gui fam suits by relators who do not genuinely

possess otherwise unknown factual information directly

relating to submission of false claims against the

Government.

Second, and even more fundamentally, the Court

should grant review to resolve, at last, the constitutional

' Pursuant to Sup. Ct. R. 37.6, the Chamber states that no counsel

for a party has written this brief in whole or in part and that no

person or entity, other than amicus curiae, its members, or its

counsel, has made a monetary contribution to the preparation or

submission of this brief.

Pursuant to Sup. Ct. R. 37.2, written consent to the filing of

this brief has been obtained from counsel for Petitioners and

Respondents, and the documents reflecting consent have been

filed with the Clerk's office.

i]

question that the Court explicitly reserved in Vermont

Agency of Natural Resources v. United States ex rel. Stevens,

529 U.S. 765 (2000): Whether the gui tam provisions, which

vest self-appointed private relators with sweeping powers to

initiate and conduct civil false claims litigation on behalf of

the United States, violate the Appointments and Take Care

Clauses of Article Il of the Constitution. Because this is a

threshold question underlying the entire gui tam scheme, the

Chamber’s amicus brief focuses on that issue and the reasons

why the Court should grant certiorari to address it.

The gui tam provisions present a separation of

powers question that directly implicates congressional

encroachment of Executive Branch constitutional duties. It

is a clearly defined, long debated, and fully mature issue

which has been smoldering just below the surface of the

more than 5,000 gui tam actions that have been filed since

the current provisions were enacted two decades ago.

During this period many Chamber members, especially those

involved in defense procurement and the nation’s health care

system, have been subjected to a continuing barrage of gui

tam suits brought by officious bounty hunters. In the vast

majority of cases, the Department of Justice, following

investigation, has declined to support the relators’ fraud

claims, which gui tam defendants nevertheless are forced to

litigate or settle at substantial cost.

The Chamber has consistently contended, including

in amicus briefs filed with this Court in Stevens and the Fifth

Circuit in Riley v. St. Luke's Episcopal Hosp., 252 F.3d 749

(5th Cir. 2001), that the 1986 gui tam provisions are a blatant

example of unconstitutional congressional interference with

performance of Executive Branch responsibilities. The

instant gui tam appeal, where the Department of Justice

clearly exercised its prosecutorial discretion, initially

declining to intervene and subsequently deciding to support

only some of the relator’s claims, presents an ideal vehicle

for resolving the Article II issue. Accordingly, the Chamber

is submitting this brief to urge the Court to grant review.

SUMMARY OF ARGUMENT

“This Court consistently has given voice to, and has

reaffirmed, the central judgment of the Framers of the

Constitution that, within our political scheme, the separation

of governmental powers into three coordinate Branches is

essential to the preservation of liberty.” Mistretta v. United

States, 488 U.S. 361, 380 (1989). The FCA’s qui tam

provisions, 31 U.S.C. § 3730(b), represent a serious breach

of the separation of powers. “The Constitution does not

leave to speculation who is to administer the laws enacted by

Congress; the President, it says, ‘shall take Care that the

Laws be faithfully executed,’ Art. Il, § 3, personally and

through officers whom he appoints (save for such inferior

officers as Congress may authorize to be appointed by the

‘Courts of Law’ or by ‘the Heads of Departments’ who are

themselves Presidential appointees), Art. [[, § 2.” Printz v.

United States, 52\ U.S. 898, 922 (1997). By enacting the

qui tam provisions, however, Congress has invaded Article II

territory. It has impermissibly (i) seized, reassigned, and

diffused the Executive Branch’s Appointments power by

allowing private relators essentially to appoint themselves as

“Officers of the United States,” and (ii) empowered such

financially motivated gui tam relators (including disgruntled

former employees proceeding in their own self interest) to

obstruct or impair the Executive Branch’s ability to “take

Care” by vesting them with significant authority to

prosecute, at their sole discretion, alleged false claims for,

and in the name of, the United States, against any

government contractors, health care providers, or grant

recipients that they choose to target.

This Court has “not hesitated to strike down

provisions Of law . . . that undermine the authority and

independence of one or another coordinate Branch,”

Mistretta, 488 U.S. at 382, especially where a federal statute

“prevents the Executive Branch from accomplishing its

constitutionally assigned functions,” id. at 383 (internal

quotation marks omitted). That is the case here. The gui

fam provisions flout the Appointments Clause and

undermine the Executive Branch prosecutorial discretion

embodied in the Take Care Clause. The constitutionality of

the qui tam provisions under Article Il remains an important

and unresolved question worthy of this Court’s review, even

under the lenient “sufficient control” criterion set forth in

Morrison v. Olson, 487 U.S. 654 (1988) (upholding the now-

~ expired independent counsel provisions of the Ethics in

Government Act of 1978). Indeed, in 2000 the Court raised

the qui tam Article Il issue in Vermont Agency of Natural

Resources v. United States ex rel. Stevens, 529 U.S at 778

n.8, but expressed no view on it, other than to rebuke the

dissent’s unsupported assertion that historical evidence of

various types of qui fam actions in England and America

somehow establishes that the substantially different 1986

FCA qui tam provisions can be reconciled with the

Appointments and Take Care Clauses.

ARGUMENT

1. THE CONSTITUTIONALITY OF THE QUI

TAM PROVISIONS UNDER ARTICLE II

REMAINS AN OPEN QUESTION

This Court should resolve, once and for all, the

enduring but fundamental question of whether the FCA’s gui

fam provisions, 31 U.S.C. § 3730(b), violate Article Il of the

Constitution, specifically the Appointments and Take Care

Clauses. Six years ago, in Stevens, the Court explicitly

reserved the Article II issue for consideration in an

appropriate case. The gui fam provisions, and the voracious

litigation industry that they have engendered, continue to

present a real-world separation of powers issue that calls into

question Congress’ ability to undermine Article IT Executive

Branch responsibilities however it deems expedient. As long

as this Court allows to remain unchecked the FCA’s brazen

reassignment and = diffusion of Executive Branch

prosecutorial discretion to private, self-appointed,

unsupervised, financially motivated gui tam relators, an

emboldened Congress will continue to act as if Article |

enables it to abrogate or alter the Executive Branch’s clearly

delineated Article Il powers, duties, and prerogatives.

In Stevens the Court held, based in part on “the long

tradition of gui tam actions in England and the American

Colonies . . . history [that] is particularly relevant to the

constitutional standing inquiry,” 529 U.S. at 774, that gui

tam relators have Article Ul standing under the FCA.

Writing for the majority, however, Justice Scalia not only

acknowledged the separate Article II question, but also

specifically saved it for another day. /c. at 778 n.8 (“In so

concluding, we express no view on the question of whether

qui tam suits violate Article Il, in particular the

Appointments Clause of § 2 and the ‘take Care’ Clause of

§ 3.”). He noted that in Stevens, in which the qui tam relator

alleged submission of false claims by a state agency to a

federal agency (a type of gui tam suit which the Court held

cannot be maintained under the statute), “Petitioner does not

challenge the qui tam mechanism under either of those

[Article II] provisions, nor is the validity of gui tam suits

under those provisions a jurisdictional issue that we must

resolve here.” /bid.

To make it very clear that the Article II question

remained open, the Stevens Court, ibid., chided the dissent

for “proceed{ing] to volunteer an answer,” see id at 801

(Stevens, J., dissenting) (asserting that “{t}he historical

evidence summarized by the Court . . . together with the

evidence that private prosecutions were commonplace in the

19th century . . . is also sufficient to resolve the Article II

question”). See Riley v. St. Luke's Episcopal Hosp., 252

F.3d 749, 770 (Sth Cir. 2001) (en banc) (Smith, J.,

dissenting) (the “majority in Stevens expressly disclaimed

any view with regard to Article Il challenges . . . the fact that

the majority in Stevens took pains to point out that it was not

deciding the constitutionality of gui tam suits under Article LU

suggests strongly that the Court did not think this issue is

easily decided by history.”); Pet. App. 24a (“The Stevens

Court . . . was careful to specify that it was expressing no

opinion concerning other constitutional challenges to gui tam

actions, namely whether they violate the Take Care and

Appointments Clauses of Article IL”).

Neither of the post-Stevens court of appeals opinions

that address the Article II issue illuminate the subject in a

way that mitigates the continuing need for this Court to

decide the question. In Riley, a qui tam action against health

care providers, a divided Fifth Circuit panel originally held

that the gui tam provisions do violate the Take Care Clause

and the separation of powers doctrine. See 196 F.3d 514,

530 (Sth Cir. 1999). But on rehearing, a divided en banc

court of appeals, despite the Stevens majority’s admonition,

repeatedly relied upon the conclusory dictum in the Stevens

dissent in holding that the gui fam provisions do not violate

Article Il. See Riley, 252 F.3d at 752-53. (“[T]he dissent in

Stevens noted that history alone resolves the question of

whether the qui tam provisions in the FCA violate Article

Il.”); id. at 758 n.13 (“The dissent in Stevens plainly stated

that the FCA’s qui tam provisions do not violate the

Appointments Clause.”).

In holding that the qui tam provisions do not

represent an “unconstitutional intrusion” of “the

constitutional separation of powers doctrine under the Take

Care and Appointments Clauses of Article II,” id. at 751, the

> The panel did not reach the Appointments Clause question. See

Rilev, 196 F.3d at 531.

en bane majority in Riley asserted “it is logically inescapable

that the same history that was conclusive on the Article III

question in Stevens with respect to qui tam lawsuits initiated

under the FCA 1s similarly conclusive with respect to the

Article II question concerning this statute.” /d at 752.

Judge Smith (joined by Judge DeMoss) wrote a

comprehensive dissent to the en banc opinion. He explained

that “[t}he Article IL issues raised by the FCA, however,

were not so easily disposed of by history, and thus the

majority did not address them in Stevens.” /d. at 772.

“(T]he nature of the standing inquiry dictates that special

attention be paid to historical practice. Such extreme

deference need not be given, by contrast, within the context

of Article II challenges.” /bid.”

The other post-Stevens court of appeals decision on

Article Il is the Tenth Circuit’s opinion below. The court

relied upon Riley, and also the two pre-Stevens court of

appeals decisions which found no Article II violation. See

Pet. App. 26a, 28-29a (discussing Riley; United States ex rel.

Taxpavers Against Fraud v. General Elec. Co., 41 F.3d

1032, 1041 (6th Cir. 1994); United States ex rel. Kelly v.

Boeing Co., 9 F.3d 743, 759 (9th Cir. 1993)). But this

Court’s doctrinal-based rationale in Stevens for holding that

qui tam relators have Article III] standing—that “[t]he FCA

can reasonably be regarded as effecting a partial assignment

of the Government’s damages claims,” 529 U.S. at 773

(emphasis added)—casts substantial doubt upon the Article

1] analyses in Taxpayers Against Fraud and Kelly. Those

* Judge Smith observed, based on a Supreme Court case “which

was decided just four months before Stevens,” that “Justice Scalia.

the author of the majority opinion in Stevens, and Justice Thomas

and perhaps Justice Kennedy, seem to have reservations as to the

constitutionality of gui tam actions under Article Il.” Riley, 252

F.3d at 770 (Smith, J., dissenting).

analyses are predicated upon the notion, subsequently

rejected in Stevens, that the qui tam provisions do not vest

relators with governmental power. See Taxpavers Against

Fraud, 41 F.3d at 1041 (“Although a relator may sue in the

government's name, the relator is not vested with

governmental power.”); Ke/ly, 9 F.3d at 758 (“The fact that

relators sue in the name of the government docs not vest

them with any governmental powers. .. .”). Judge Smith's

dissenting opinion in Ri/ey elaborates upon this conflict with

Stevens:

[T]here can be no mistake that, in the wake of

Stevens, a relator is litigating on behalf of the

government, because Stevens explicitly states that a

relator is only a partial assignee, and accordingly, the

part of the claim the relator is not litigating for

himself he is litigating for the government.

[E]ven though the government signs over to the

relator sufficient partial interest in the litigation to

qualify for Article III standing, the majority interest

that is not signed over--and therefore still owned by

the government--must be prosecuted by an officer of

the United States under the Appointments Clause,

and must be faithfully managed by the Executive

under the Take Care Clause.

Riley, 252 F.3d at 772 (Smith, J., dissenting).

Thus, the court of appeals decisions rejecting Article

It challenges to the FCA’s qui tam provisions, both before

and after the Stevens majority carmarked the issue for future

consideration by this Court, do not comprise a coherent or

cogent body of precedent, but instead actually reflect a

longstanding debate among lower court jurists.’ Indeed, the

* Legal scholars and commentators also continue to debate the

Article ll issue. See, e.g., Richard A. Bales, A Constitutional

Defense of Qui Tam, 2001 Wis. L. Rev. 381, 384 (2001) (“Despite

(footnote continued on next page)

question of whether the 1986 gui tam provisions violate

Article Il has been percolating at least since July 1989, when

the Department of Justice’s Office of Legal Counsel

prepared a formal Memorandum Opinion for the Attorney

General which argued—in remarkably emphatic terms—that

the gui tam provisions are unconstitutional. Assistant

Attorney General William P. Barr’s Memorandum stated.

for example, as follows:

[Q]ui tam suits pose a devastating threat to the

Executive's constitutional authority and to the

doctrine of separation of powers. \f qui tam suits are

(footnote continued from previous page)

the FCA’s long history, its constitutionality is still open to

question.”); James T. Blanch, The Constitutionality of the False

Claims Act's Qui Tam Provision, 16 Harv. J.L. & Pub. Pol’y 701

(1993) (scrutinizing the various arguments relied upon by district

courts and academics to uphold the constitutionality of the qui tam

provisions and concluding that none of these arguments

adequately address the constitutional problems that the provision

presents); Evan Caminker, Comment, The Constitutionality of Qui

Tam Actions, 99 Yale L.J. 341, 348 (1989) (identifying “the

constitutional values potentially threatened by the qui tam device”

and “analyzing the validity and persuasive force of the arguments

they inspire”); Robert E. Johnston, Note, /00/ Attorneys General:

Executive-Employee Qui Tam Suits and the Constitution, 62 Geo.

Wash. L. Rev. 609 (1994) (arguing that even qui tam suits brought

by executive-branch employees are unconstitutional); Ara Lovitt,

Note, Fight for Your Right to Litigate: Qui Tam, Article II, and the

President, 49 Stan. L. Rev. 853, 853 (1997) (“[T]he qui tam

provisions of the False Claims Act, which allow private citizens to

litigate on behalf of the United States, violate the separation of

powers by interfering with the Executive Branch’s authority to

‘take Care that the Laws be faithfully Exccuted.’”); see also 1

John T. Boese, Civil False Claims and Qui Tam Actions § 4.12 (3d

ed. 2006) (“Constitutionality Of The Relator’s Role”).

LO

upheld, it would mean Congress will have carte

blanche to divest the executive branch of its

constitutional authority to enforce the laws and vest

that authority in its own corps of private bounty

hunters.

* * *

The Office of Legal Counsel believes that the qui tam

provisions of the False Claims Act are patently

unconstitutional. In our view, this is not even a close

question.

Constitutionality of the Qui Tam Provisions of the False

Claims Act (“Barr Mem.”), 13 U.S. Op. Off. Legal Counsel

207, 208-209 (1989), 1989 WL 595854. Although Assistant

Attorney General Barr unequivocally opined, only three

years after enactment of the 1986 Amendments, “that qui

tam suits brought by private parties to enforce the claims of

the United States plainly violate the Appointments Clause of

the Constitution,” id. at 221, one of his successors in the

Office of Legal Counsel, Assistant Attorney General Walter

Dellinger, in a 1996 Memorandum Opinion for the Gencral

Counsels of the Federal Government, “disapprove[d] the

Appointments Clause analysis and conclusion of an earlier

opinion of this Office.” The Constitutional Sevaration of

Powers Between the President and Congress, 20 U.S. Op.

Off. Legal Counsel 124, 146 n.65 (1996), 1996 WL 876050.

The Department of Justice, by opposing Supreme

Court review and defending the constitutionality of the gui

fam provisions under Article II, is in the odd position of

supporting the unabated crosion of its own constitutionally

based prosecutorial discretion. This is far more troublesome

than mere advocacy of a bizarre litigation position; it

represents an attempt by the Executive Branch to condone

-Congress’ breach of the separation of powers, namely

congressional tampering with the Executive Branch’s Article

If duties under the Appointments and Take Care Clauses. By

arguing that the gui tam provisions pass Article II muster, the

L]

Justice Department (i.e., Executive Branch) in effect is

attempting to cede its own prosecutorial duties to Congress,

which has simultaneously arrogated and reassigned those

duties to private, self-appointed, gui tam relators, whom the

statute affords virtually unfettered discretion to sue on behalf

of the United States. The Court should not permit such a

blatant violation of the separation of powers to persist any

longer. As Justice Kennedy explained,

[t]o say the political branches have a somewhat free

hand to reallocate their own authority would seem to

require acceptance of two premises: first, that the

public good demands it, and second, that liberty is not

at risk. The former premise is inadmissible. The

Constitution’s structure requires a stability -which

transcends the convenience of the moment. . . . The

latter premise, too, is flawed. Liberty is always at

stake when one or more of the branches seeks to

transgress the separation of powers.

Clinton v. City of New York, 524 U.S. 417, 449-50 (1998).

(Kennedy, J., concurring) (internal citations omitted).

If the 1986 qui tam provisions violate Article IL, then

20 years of unconstitutional litigation (primarily against

government contractors and health care providers) 1s enough.

Between Fiscal Years 1987 and 2005, more than 5,100 gui

tam cases were filed, and the number of gui tam cases has

continued to increase as a proportion of total FCA cases. See

U.S. Gov. Accountability Office, Information on False

Claims Act Litigation 25 (2006). But the Justice Department

has elected to pursue only a small percentage of gui tam

suits. /d at 29. Sums recovered in cases where the

Department declined to intervene represent less than 5% of

recoveries from all qui tam suits and less than 3% of total

FCA recoveries. /d. at 1, 5, 35. In his dissenting opinion in

Riley, Judge Smith, who analyzed gui tam statistics,

concluded that the “figures show that the cases in which thé

12

government declines to intervene are generally the meritless

cases.” Riley, 252 F.3d at 767 n.24 (Smith, J., dissenting).

Thus, any suggestion that a finding of unconstitutionality

“would result in the disablement of an effective law

enforcement tool is utterly without support.” /bid. The fact

that “[iJn many instances, the costs of defending against

unsuccessfuk qui tam suits are recoverable against the

government” under various contract clauses further

diminishes whatever economic benefit the Government

derives from the majority of gui fam suits. William E.

Kovacic, The Civil False Claims Act As A Deterrent To

Participation In Government Procurement Markets, 6 Sup.

Ct. Econ. Rev. 201, 201 (1998). Yet, the filing of gui tam

suits, including frivolous or otherwise unmeritorious suits

that defendants settle to avoid harassment, adverse publicity,

strained relations with the Government, and _ litigation

burdens and costs, remains a lucrative business: Between

1986 and 2005, more than $1.6 billion was awarded to qui

tam relators and their attorneys. GAO at 5.

The 20-year old Article II issue surely requires no

further percolation. This Court should grant review and use

this case, which squarely presents the Article II question, as

the vehicle for completing the gui tam constitutional analysis

that it began six years ago in Stevens. Unlike other qui tam

appeals, where the United States chose not to intervene at

all,” here the Government, following investigation, initially

declined to intervene, but then based on information ~

discovered in a separate case, elected to intervene only to

support certain of Respondent Stone’s claims. See Pet. at 3-

4. The carefully considered, selective exercise of

—

> See, e. g., United States ex rel. Kelly v. Boeing Co., 9 F.3d 743

(9th Cir. 1993), cert. denied, 510 U.S. 1140 (1994); GPM Gas

Corp. v. Grvnberg, 277 F.3d 1373 (Sth Cir. 2001), cert. denied,

535 U.S. 1017 (2002). ~

13

prosecutorial discretion embodied by the Government's

actions in this case only underscores the question of whether

Congress, through enactment of the gui ‘am provisions, has

impermissibly encroached upon Executive Branch duties and

prerogatives regarding conduct of litigation on behalf of the

United States.”

Il. THE QUI TAM’ PROVISIONS PRESENT

SUBSTANTIAL ARTICLE Il ISSUES WORTHY

OF THIS COURT’S REVIEW

In reserving the question of whether the FCA’s qui

fam provisions violate the Article Il Appointments and Take

Care Clauses, this Court’s Stevens majority was careful to

avoid even an implicit endorsement of the dissent’s facile

assertion that “historical evidence,” such as “evidence that

private prosecutions were commonplace in the [9th

century,” is “sufficient to resolve the Article II question.”

529 U.S. at 801 (Stevens, J., dissenting). As Justice Scalia

cautioned, “[i]t is only the dissent that proceeds to volunteer

an answer.” /d. at 778 n.8 (emphasis added).

In his Ri/ey dissent, Judge Smith discussed at length

why, unlike the issue of Article III standing addressed in

Stevens, where this Court focused on the historical meaning

of “Cases and Controversies,” 529 U.S. at 774, “history is

* The lower court was “not persuaded that in the circumstances of

this case, the separation of powers, as embodied in the Take Care

Clause, has been transgressed.” Pet. App. 27a. But the court’s

analysis is based on the erroneous premise that “the Government

was a full and active participant in the litigation as it jointly

prosecuted the case with Stone.” /bid. The court of appeals

skirted the question of whether there is an Article Ul violation

where, as actually happened here, a relator prosecutes at least

some of his claims without the Government's active participation

OT support.

\4

not controlling” on the separate Article II question. Riley,

252 F.3d at 772 (Smith, J., dissenting). For example, he

noted that “at the time the first gui fam acts were passed, the

executive was in its infancy .... Thus, the exigencies of a

weak Executive led Congress to pass a number of gui tam

acts.” Jd. at 774. “[{T}he encroachment on the Executive

was less than it 1s today, because the Executive now exists as

a robust branch that could prosecute the claims be[en] given

to relators by the FCA.” /d. at 775 n.38. See also Barr

Mem. at 232 (“History cannot save qui tam”); id. at 237

(“Congress's aggrandizing enactments should not serve as

conclusive precedent on the scope of Congress’s own

authority.”).

In its opinion below, the Tenth Circuit, although

relying upon Ri/ey, appears to have abandoned any attempt

at a history-based rationale for upholding the qui tam

provisions under Article II... Nevertheless, the lower court’s

Appointments Clause and Take Care Clause analyses are

circular and unconvincing, and they only underscore the

need for this Court’s review.

1. Appointments Clause, U.S. Const., Art. fl, § 2,

cl. 2. Writing for the Court in Edmund v. United States, 520

U.S. 651, 659 (1997), Justice Scalia emphasized that “the

Appointments Clause of Article Il is more than a matter of

‘etiquette or protocol’; it is among the significant structural

safeguards of the constitutional scheme.” “The Clause ts a

bulwark against one branch aggrandizing its power at the

expense of another branch, but it 1s more: it ‘preserves

another aspect of the Constitution’s structural integrity by

preventing the diffusion of the appointment power.” Ryder

v. United States, 515 U.S. 177, 182 (1995) (quoting Freytag

v. Comm 'r of IRS, 501 U.S. 868, 878 (1991)).

In Buckley v. Valeo, 424 U.S. 1, 125-26 (1976), the

Court explained “that the term ‘Officers of the United States’

as used in Art. II. . . is a term intended to have substantive

meaning” (emphasis added). “[I]ts fair import ts that any

15

appointee exercising significant authority pursuant to the

laws of the United States is an ‘Officer of the United States,”

and must, therefore, be appointed in the manner prescribed

by § 2, cl. 2 of that Article.” /d at 126 (emphasis added);

see also Edmund, 520 U.S. at 662 (“The exercise of

‘significant authority pursuant to the laws of the United

States’ marks . . . the line between officer and nonofficer”)

(quoting Buckley).

The Court held in Buckley that “primary

responsibility for conducting civil litigation in the courts of

the United States for vindicating public rights . . . may be

discharged only by persons who are ‘Officers of the United

States’ within the language” of the Appointments Clause.

424 U.S. at 140. The FCA’s gui tam provisions violate the

Appointments Clause because they empower private relators,

who have not been appointed by the Executive Branch (or

any other Branch), to function as “Officers of the United

States” by “exercising significant authority pursuant to the

laws of the United States,” id. at 126, specifically the

“primary responsibility” for conducting litigation on behalf

of the United States, id. at 140.’

The statute provides that “[a] person may bring a

civil action for a [FCA] violation . . . fo- the United States

Government,” and “[t}he action shall be brought in the name

of the Government.” 31 U.S.C. § 3730(b)(1) (“Actions by

private persons”). See also ray 529 U.S. at 774 n4

(noting that “a qui fam relator is, in effect, suing as a partial

” Self-appointed qui tam relators are not appointed by any branch

of the Government. Thus, the FCA does not provide for the type

of limited “interbranch appointments” which the Court

countenanced in Morrison v. Olson, 487 U.S. 654, 675 (1988).

Moreover, Appointments Clause violations are not predicated on

whether Congress has arrogated Executive Branch power to itself.

See Freytag v. Comm'r of IRS, 50\ U.S. at 878.

16

assignee of the United States”). Regardless of whether the

Government intervenes, the awesome power that the FCA

assigns to anv person who chooses to commence a gui tam

action “for” and “in the name of” the United States

represents, in and of itself, a serious violation of the

Appointments Clause (and the Take Care Clause too).

Further, “[i]f the Government elects not to proceed with the

action, the person who initiated the action shall have the

right to conduct the action.” 31 U.S.C. § 3730(c)(3). Even if

the Government intervenes as to some or all claims, the

relator continues to act as a party with significant nights. /d.

§ 3730(c)\(1), (2). Here, Respondent Stone effectively led

the litigation, not only during the six year period prior to the

Government’s intervention, but also after the Government

intervened to support some, but not all, of Stone’s claims.

See Pet. at 25. “There can be no doubt that qui tam relators

are exercising significant governmental power . . . to level

fraud charges against other private citizens and hail them

into court to answer to these alleged public offenses, with the

possibility of collecting not only damages but substantial

civil penalties.” Barr Mem. at 222.

The lower court’s circular holding that qui fam

relators are not ““officers’ for purposes of Article II” because

they “do not serve in any office of the United States” not

only begs the question of whether they are officers, but also

trivializes the Appointments Clause. Pet. App. 25a. Rather

than heeding this Court’s admonition to give the term

“Officers of the United States” its intended “substantive

meaning,” Buckley, 424 U.S. at 126, and not limit the term to

the ancient formalistic definition provided in United States v.

Germaine, 99 U.S. 508, 509-510 (1879), the court of

appeals, did precisely the latter. Relying upon Germaine and

Aufmordt v. Hedden, 137 U.S. 310 (1890), the court

elevated form over substance, focusing, for example, on the

fact that relators “are not entitled to the benefits of

officeholders, such as drawing a government salary.” Pet.

7

App. 25a. The Fifth Circuit’s opinion in Riley, 252 F.3d at

757-58, suffers from the same faulty logic.

“The Court has twice held . . . that persons litigating

on behalf of the United States are officers of the United

States.” Riley, 252 F.3d at 768 (citing Buckley, 424 U.S. at

113, 140; Morrison, 487 U.S. at 671 n.12). Because the

Statute vests qui fam relators with significant authority to

initiate, conduct, and settle civil FCA litigation on behalf of

the United States, they are “Officers of the United States”

within the Framers’ intended substantive meaning of that

term. As a result, the qui tam provisions violate the

Appointments Clause because they enable relators to appoint

themselves to act as Government officers with broad

prosecutorial authority. Further, as in Ri/ey, the lower court

here “ignores . . . the question that logically follows its

conclusion that relators are not officers: whether non-

officers may prosecute claims owned by the United States.”

Id. at 767 (Smith, J., dissenting). “Supreme Court precedent

makes it plain that the answer to this question is no.” /d. at

768.

2. Take Care Clause, U.S. Const., Art. II, § 3. The

exercise of prosecutorial discretion to enforce the laws of the

United States is an Executive Branch function inherent in the

Take Care Clause. See Buckley, 424 U.S. at 138 (“A lawsuit

is the ultimate remedy for a breach of the law, and it is to the

President, and not to the Congress, that the Constitution

entrusts the responsibility to ‘take Care that the Laws be

faithfully executed.’”). In Morrison v. Olson, 487 U.S. at

696, the Court held that in order to avoid violation of the

Take Care Clause, a statute divesting the Executive Branch

of some measure of prosecutorial discretion must “give the

Executive Branch sufficient control ... to ensure that the

President is able to perform his constitutionally assigned

duties.”

As Petitioners explain, none of the statutory

safeguards which the Morrison majority held gave the

18

Attorney General “sufficient control” over court-appointed

independent counsels, are present in the FCA qui tam relator

provisions. See Pet. at 29. “Qui tam is far more dangerous:

there is simply no way to cage this beast.” Barr Mem. at

211. One highly significant difference with the independent

counsel provisions considered in Morrison, 1s that qui tam

relators are private, self-appointed individuals, who function

as Officers of the United States even though their interests

do not necessarily coincide with those of the Government.

This Court has noted that “[a]s a class of plaintiffs, gui tam

relators are different in kind than the Government. They are

motivated primarily by prospects of monetary reward rather

than the public good.” Hughes Aircraft Co. v. United States

ex rel. Schumer, 520 U.S. 939, 949 (1997) (holding that 1986

FCA Amendments do not apply retroactively).

As a result, gu: tam relators frequently commence

litigation “for the United States Government,” and “in the

name of the Government,” 31 U.S.C. § 3730(b)(1), which

the Government itself, in exercising its Article I

prosecutorial discretion, either would not commence, or

continue to pursue, for any number of reasons, including of

course, lack of ment. Nevertheless, for reasons unrelated to

the “public good,” gui tam relators can vigorously pursue

their statutory “right to conduct the action,” id.

§§ 3730(b)(4)(B), 3730(c)(3), such as by exacting a

substantial monetary settlement from the defendant

(including a tempting 15%—30% bounty for the relator and

his attorney). And if the Government, following

investigation, imtervenes and then seeks dismissal or

settlement, gui tam relators can object, id. §§ 3730(c)(2)(A),

(B), and seek court approval to proceed with prosecution of

the action. See Barr Mem. at 216-220 (discussing the

statute’s adverse impact on the Government’s enforcement

role).

This private FCA enforcement scheme, which

Congress enacted to pressure the Executive Branch because

19

it was dissatisfied with that Branch’s pursuit of defense

contractor fraud during the 1980s, see Pet. at 29-30, has been

repeatedly abused by the very individuals to whom Congress

has entrusted and transferred the Executive Branch’s

prosecutorial discretion. The principal harm to. the

Government, industry, and the public is the pursuit of

frivolous or unmeritorious, and sometimes vexatious, qui

tam suits, especially after the Government (the Department

of Justice and/or Department of Defense or other supposedly

defrauded agency) determines that there has been no

misconduct. See, e.g., Hughes Aircraft Co., 520 U.S. at 943

n.| (noting that the Government ultimately reversed its

preliminary determination that it had been improperly

charged and concluded that the defense contractor defendant

“actually benefited” the Government financially); United

States ex rel. Lindenthal v. General Dynamics Corp., 61 F.3d

1402 (9th Cir. 1995) (affirming dismissal of qui tam suit

against defense contractor where, based in part on trial

testimony of numerous Air Force witnesses, the quality of

defendant’s drawings met its contractual obligations and the

A Force’s expectations). See generally Kovacic, supra at

232 (“That the purchasing agencies or the Department of

Justice regard sucli a suit as ill-conceived does not impede

the initiation and prosecution of such cases by relators.”).

To say the least, unmeritorious gui tam actions

“waste defendants’ and the courts’ resources,” as well as

those of the Justice Department. Statement of Stuart M.

Gerson, Assistant Attorney General, Before the Subcomm.

on Civil and Constitutional Rights of the House Comm. on

the Judiciary, 102d Cong. 20 (1992). Because “{rJelators

who have no interest in the smooth execution of the

Government’s work have a strong dollar stake in alleging

fraud whether or not it exists,’ Barr Mem. at 220.

unwarranted gui fam actions also can have a chilling effect

on the working relationships between Government agencies

and their contractors. See Kovacic, supra at 239 (qui tam

20

provisions are “a serious impediment’). The Tenth Circuit's

expansive interpretation of the statute’s “original source”

jurisdictional requirement only opens the floodgates wider.

Herc, because the Government eventually intervened,

the Tenth Circuit was unconvinced “that the presence of a

qui tam relator in the litigation so hindered the Government’s

prosecutorial discretion as to deprive the Government of its

ability to perform its constitutionally assigned

responsibilities.” Pet. App. 27a. In so concluding, the court

of appeals mistakenly assumed that once the Government

intervenes, the relator has no significant continuing role to

play in the litigation. That is neither true in general nor in

this case, especially since the Government, exercising its

prosecutorial discretion, declined to support certain of

Respondent Stone’s claims, which he continues to pursue on

his own. As indicated above, supra n.6, the lower court,

although purporting to address the circumstances of this

case, made no effort to defend the constitutionality of the qui

fam provisions under the Take Care Clause where the

Government exercises its discretion to support some but not

all of the relator’s claims. Stone’s right under the FCA qui

fam provisions to pursue the very claims which the

Government carefully considered and then declined to

support dramatically highlights the statute’s Article II

infirmities. The Article IL gui tam question is not “clad, so to

speak, in sheep’s clothing . . . this wolf comes as a wolf,”

Morrison, 487 U.S. at 699 (Scalia, J., dissenting), and it

continues to cry out for this Court’s review.

CONCLUSION

The petition for a writ of certiorari should be granted.

21

Respectfully submitted,

Of Counsel: HERBERT L. FENSTER

ROBIN S. CONRAD Counsel of Record

AMAR D. SARWAL LAWRENCE S. EBNER

NATIONAL CHAMBER CORINNE A. FALENCKI

LITIGATION CENTER, INC. MCKENNA LONG &

1615 H Street, N.W. ALDRIDGE LLP

Washington, D.C. 20062 1900 K Street, N.W.

(202) 463-5337 Washington, D.C. 20006

(202) 496-7500

Attorneys for Amicus Curiae

Chamber of Commerce of the

United States of America

July 2006

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