Amicus Curiae Brief — Universal Health Servs., Inc. v. U.S. & Mass. ex rel. Escobar, 136 S. Ct. 582 (2015) (No. 15-7)

Supreme Court brief2015

Ask Donna

What actually matters in this document.

Text

No. 15-7

NN ——————————

IN THE

Supreme Court of the United States

UNIVERSAL HEALTH SERVICES, INC.,

Petitioner,

Vv.

UNITED STATES AND COMMONWEALTH OF MASSACHUSETTS

EX REL. JULIO ESCOBAR AND CARMEN CORREA,

Respondents.

On Writ of Certiorari

to the United States Court of Appeals

for the First Circuit

BRIEF OF U.S. SENATOR CHARLES E. GRASSLEY

AS AMICUS CURIAE IN SUPPORT OF RESPONDENTS

ROBERT L. KING

Counsel of Record

AARON M. ZIGLER

NOAH SMITH-DRELICH

KOREIN TILLERY, LLC

205 N. Michigan Avenue

Suite 1950

Chicago, Illinois 60601

(312) 641-9750

rking@koreintillery.com

Counsel for Amicus Curiae

March 3, 2016

SE OER OLED IT IE COMBRETACEAE A LOE FOE BRM HOES

TABLE OF CONTENTS

Page

EE CE PARP EE BED \ dicasesiesesecctnscnncvesesvesaccesss il

INTEREST OF AMICUS CURIAE ...............:.:0.0:0000 l

SUMMARY OF ARGUMENT .......................:0cceeeeeeees 1

ITT Uessibitniiciuicididsccniscasnnnsusddiinbiatntiioniniiimapedinicsnsanes 2

I. THERE IS NO EVIDENCE THAT

CONGRESS EVER INTENDED THE

FALSE CLAIMS ACT TO REQUIRE

AN EXPRESS FALSE STATEMENT

WHERE A CITIZEN KNOWINGLY

FAILS TO PROVIDE GOODS OR

SERVICES FOR WHICH THE

GOVERNMENT DID NOT BARGAIN. ......... 2

A. Since the Civil War, the FCA Has

Been Intended to Be a Flexible Tool

for Combating Fraud Against the

ne cdascneasnmeiadnapens 2

B. Congress’s Modern Amendments to

the FCA Embraced the Earlier Con-

gresss Original Intent and

Strengthened the Act’s Capacity to

Serve its Broad Remedial Purposes.......... 5

C. An Express False Statement of

Compliance Requirement Would

Contradict Congress’s FCA Policy

PUREE EE ERS Ri at Tt SOI A ER A OR 9

A ae lardcotiaiicn sa aaneseaiconinsekdiantibiaeibtaagnninn 11

TABLE OF AUTHORITIES

Page

CASES

Hughes Aircraft Co. v.

United States ex rel. Schumer,

I alae 4

Peterson v. Weinberger,

ee ee Es ITED cccickcisescdsssascuccdintecdecsnses i)

Rock Island, Arkansas & Louisiana R.R. Co. v.

United States,

RIA ETE RL Ae te eee 5

United States ex rel. Marcus v. Hess,

ee Se nos nceeninsbiienbeiuention 4

United States v. Bornstein,

I I i heel eas &

United States v. Griswold,

ee re I TI, I bostieciwncicadsncnnnsacinmiacsencecnenions 4

United States v. Henry,

BG Fee Ee Ce GA. NTS ence cinckcvenccccnssscosercvcccese 8

United States v. Neifert-White Co.,

I, a co ssalesiinanusheanimerele 5,7

United States v. Rivera,

og §. (3° Le 3b Serene neren 5

STATUTES AND OTHER AUTHORITIES

False Claims Amendments Act of 1986, Pub.

Fe. "S ©. DS ee l

Fraud Enforcement & Recovery Act of 2009

(FERA), Pub. L. No. 111-21,

GRRE IRA RE ee en arte nS a 1

Eee tea) SL atime rata nese

132 Cong. Rec. H6482

SI, IR TL, BUD cn cocnecsccccadununccstaceccene

132 Cong. Rec. $11238-04

I I lis I src ena siesiaisnwateotenomini

1986 U.S.C.C.A.N. 5266, 5268...................0.es000.

ee PRIS: SEITE vicdacevcccevicvedccasksnivsierninnes

Be as Wa cetiictcintisnstnnisanidsssascsosctonds

ROS UF. CAIN, GIG vcvceseessssccccscccestscesecs

Cong. Globe, 37th Cong., 3d Sess. 955-56

PER IIE deteuschidcenciemrenciaunincgiianioebanintelinesibcnesenie’

Defense Procurement Fraud Law Enforce-

ment, Hearing before the Subcommittee on

Administrative Practice and Procedure of

the Committee on the Judiciary, 99th

SERS EMSS eR As

Department of Justice, Fraud Statistics—

Health and Human Services, October 1,

1987 - September 30, 2015.............0000..00000...

FCA Hearing Before the Subcommittee on

Administrative Practice and Procedure of

the Committee on the Judiciary, 99th

NA TRESS EES AE ENE Ne

Report of the Economic Crime Council to the

Attorney General: Investigation and Pros-

ecution of Fraud in Defense Procurement

and Health Care Benefits Programs, U.S.

DEPARTMENT OF JUSTICE, Washington,

aeRO te 0 ND iin 25

Shoddy Army Contracts, Sacramento Daily

GG er EE li Sed ccsnsttiiemiccdadnonsenens

Wayne Andrews, The Vanderbilt Legend 77-

BERRIEN ead isa SEER oe Riera 8 ale AE ae Lo

INTEREST OF AMICUS CURIAE!

Senator Charles E. Grassley was the principal

sponsor in the Senate of the False Claims Amend-

ments Act of 1986, Pub. L. No. 99-562, 100 Stat.

3153, which modernized the FCA and made it a more

effective weapon against Government fraud. Senator

Grassley was also one of the Senate sponsors of the

Fraud Enforcement & Recovery Act of 2009 (FERA),

Pub. L. No. 111-21, 123 Stat. 1617, which further

strengthened the FCA as a weapon against fraud af-

fecting federal programs. In addition to serving as

Senate sponsor, Senator Grassley has remained ac-

tive in Congress in defending the original intent of

the legislation. Senator Grassley thus has a strong

interest in ensuring that the Court interprets the

FCA in accordance with Congress’s intent.

SUMMARY OF ARGUMENT

Never, throughout its long history, has the FCA

required that a knowingly false or fraudulent claim

for payment be accompanied by an express false cer-

tification of compliance. Congress wrote the FCA

broadly to make it equal to the task of reining in the

increasingly resourceful and ever-changing ways in

which swindlers attempt to cheat the Government.

Then, recognizing that false and fraudulent claims

can take “many forms,” the 1986 Congress reaffirmed

that (1) the FCA’s core purpose is to capture every

‘ No counsel for a party authored this brief in whole or part,

and no counsel or party made a monetary contribution to fund

the preparation or submission of this brief. No person other

than Senator Grassley and his counsel made any monetary con-

tribution to its preparation and submission. The parties have

consented to this filing.

form of fraudulent scheme that threatens the public

fisc, and (2) the Act must be broadly construed to

serve these ends. The key question before the Court

is this: Is an express false certification required for

purposes of the FCA when a contractor knowingly

provides goods and services the Government clearly

did not bargain for? The answer, Senator Grassley

submits, is no.

ARGUMENT

I. THERE IS NO EVIDENCE THAT

CONGRESS EVER INTENDED THE FALSE

CLAIMS ACT TO REQUIRE AN EXPRESS

FALSE STATEMENT WHERE A CITIZEN

KNOWINGLY FAILS TO PROVIDE GOODS

OR SERVICES FOR WHICH THE

GOVERNMENT DID NOT BARGAIN.

Petitioner and its amici argue that the FCA’s lan-

guage is qualified by an unwritten limitation: that

false claims knowingly made in violation of Govern-

ment requirements are false only if accompanied by a

false express certification of compliance. Pet. Br. at

36; see also Brief of Washington Legal Foundation at

20; Brief of the National Association of Criminal De-

fense Lawyers at 21. Such a narrow construction of

the FCA runs contrary to Congress’s original intent

to address fraud against the Government and then to

strengthen and correct narrowing interpretations of

the Act through its 1986 and 2009 amendments.

A. Since the Civil War, the FCA Has Been

Intended to Be a Flexible Tool for Com-

bating Fraud Against the Government.

Never, throughout its long history, has the FCA

required that a knowingly false or fraudulent claim

for payment be accompanied by an express false cer-

tification of compliance. No such requirement has ev-

er been a part of the FCA’s text, nor has one ever

been suggested in any legislative history.

At the time of its passage, Congress intended that

the FCA be used to combat the myriad fraudulent

schemes perpetrated on the Government in the midst

of the Civil War. See, e.g., Cong. Globe, 37th Cong.,

3d Sess. 955-56 (1863) (statements of Sens. Wilson,

Howard, Davis). The contractors who supplied defec-

tive, non-conforming goods and services to the Gov-

ernment were not required to provide “certifications

of compliance.” Unsurprisingly, then, there is no evi-

dence that Congress in 1863 would have intended

express false certification to be a prerequisite for lia-

bility under the statute. Rather, legislators were

simply concerned then, as they were in later years,

that the Government not fall prey to contractors who

knowingly provide what the Government never in-

tended to pay for. In other words, Congress sought to

ensure that payments made by the Government, as

Petitioners state, “truthfully reflect the services ren-

dered.” Pet. Br. at 4

Congress passed the FCA in response to wide-

spread military contractor fraud against the Union

Army in the Civil War. Congress had received re-

ports of numerous fraudulent schemes: that the same

mules were being sold repeatedly to Army quarter-

masters; that rotted ship hulls had been re-painted

and then sold as new to the Navy; that infantry boots

were manufactured from cardboard; that uniform

cloth was made from recycled rags; and that gun-

powder barrels were shipped containing sawdust.

See, e.g., 132 Cong. Rec. H6482 (daily ed. Sept. 9,

1986) (statement of Rep. Berman); Wayne Andrews,

The Vanderbilt Legend 77-84 (1941); Cong. Globe,

37th Cong., 3d Sess. 955 (1863); Shoddy Army Con-

tracts, Sacramento Daily Union, Sept. 27, 1861, at 4;

Cong. Globe, 37th Cong., 3d Sess. 955 (1863). Con-

gress was faced with an unprecedented problem: an

epidemic of fraud arising from a diverse multitude of

conspirators threatening the Treasury.

Realizing that existing laws and enforcement pow-

ers were inadequate to combat these frauds, Con-

gress passed the False Claims Act. See Cong. Globe,

37th Cong., 3d Sess. 955-56 (1863) (statements of

Sens. Wilson, Howard, Davis). Congress wrote the

FCA broadly to make it equal to the task of reining

in the increasingly resourceful and ever-changing

ways in which swindlers attempt to cheat the Gov-

ernment. As one contemporary court noted:

[The False Claims Act] is intended to protect the

treasury against the hungry and unscrupulous

host that encompasses it on every side, and

should be construed accordingly. It was passed

upon the theory ... 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 ... un-

der the strong stimulus of personal ill 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 pub-

lic vessel.

United States v. Griswold, 24 F. 361, 366 (D. Or.

1885); see also United States ex rel. Marcus v. Hess,

317 U.S. 537, 541 n.5 (1943) (quoting Griswold with

approval); Hughes Aircraft Co. v. United States ex rel.

Schumer, 520 U.S. 939, 949 (1997) (same). Courts

through the years have continued to recognize that

Congress intended the FCA to be flexible and far-

reaching, and to ensure that “contractors ... ‘turn

square corners when they deal with the govern-

ment.” United States v. Rivera, 55 F.3d 703, 709 (1st

Cir. 1995) (quoting Rock Island, Arkansas & Louisi-

ana R.R. Co. v. United States, 254 U.S. 141, 143

(1920) (Holmes, J.)); United States v. Neifert-White

Co., 390 U.S. 228 (1968).

What Congress did not do was require contractors

to provide an express false certification of compliance

to trigger liability. And there was no reason for it to

do so. The means by which the Government was pro-

vided with goods and services in 1863 did not include

compliance forms complete with tidy compliance cer-

tification checkboxes. Moreover, there is no evi-

dence—and it is nonsensical to suggest—that Con-

gress would not have minded the Government paying

for cardboard boots as long as the cardboard boot

supplier did not affirmatively lie about the boots con-

taining cardboard. Given these realities of how con-

tractors supplied the Government, an express certifi-

cation requirement would have made little sense to

Congress in 1863, particularly in light of Congress's

central concern at the time: to protect “our Treasury

(from being] plundered from day to day by bands of

conspirators.” Cong. Globe, 37th Cong., 3d Sess. 955

(statement of Sen. Howard).

B. Congress’s Modern Amendments to the

FCA Embraced the Earlier Congress’s

Original Intent and Strengthened the

Act’s Capacity to Serve its Broad Re-

medial Purposes.

When Congress took up the pen once more in 1986

to strengthen the False Claims Act, Senator Grassley

and his colleagues echoed the concerns of the Act’s

original supporters. As in 1863, among Congress’s

chief concerns were frauds involving the provision of

goods and services that failed to conform to the Gov-

ernment’s requirements. As Senator Grassley re-

marked, the “Civil war era horror stories,” like “con-

tractors selling boxes of sawdust in place of boxes of

muskets and reselling horses to the cavalry two and

three times” still “sound all too familiar.” 132 Cong.

Rec. S11238-04 (daily ed. Aug. 11, 1986) (statement

of Sen. Grassley). The FCA is “in desperate need of

reform.”... [T]he Government needs help and, in fact,

needs lots of help to adequately protect the Treasury

against growing and increasingly sophisticated

fraud.” Id.

Senator Grassley was not alone in recognizing the

seriousness of this problem. During one Senate hear-

ing, a speaker testifying on behalf of Business Execu-

tives for National Security (BENS) presented a list of

defense contractors that were currently under inves-

tigation for fraud. Among these frauds were “non-

compliance with contract” and “product substitution.”

FCA Hearing Before the Subcommittee on Adminis-

trative Practice and Procedure of the Committee on

the Judiciary, 99th Cong. 109 (1985) (statement of D.

Wayne Silby, representative from BENS). In addi-

tion, the Inspector General of the Department of De-

fense (DOD) testified that defense contractors were

supplying the Government with “shoddy material”

such as “armorplate that is one-fourth the specifica-

tion” or a “parachute shroud line that is made out of

25-year-old nylon tire cord.” Defense Procurement

Fraud Law Enforcement, Hearing before the Sub-

committee on Administrative Practice and Procedure

of the Committee on the Judiciary, 99th Cong. 22

(1985) (statement of Joseph Sherick, Inspector Gen-

eral, Department of Defense).

The only significant difference between 1986 and

1863 seemed to be the size and scope of the fraudu-

lent schemes assaulting the public fisc.

At the time of the 1986 amendments, the Depart-

ment of Justice informed Congress tivat fraud was

“draining 1 to 10 percent of the entire Federal budg-

et,” or “$10 to $100 billion annually.” S. Rep. 99-345,

at 3 (1986), 1986 U.S.C.C.A.N. 5266, 5268. One of the

primary offenders, Congress recognized, was health

care fraud, which had become a major drain on public

resources by 1986. See, e.g., S. Rep. 99-345, at 21-22

(1986), 1986 U.S.C.C.A.N. 5286-87 (“[C]laims under

the Medicare and Medicaid programs are claims ‘up-

on or against the Government.”). In a 1985 report to

Congress by the Economic Crime Council—an adviso-

ry body to the DOJ established by the Attorney Gen-

eral—the Council established health care programs

as an “area[] of national significance relatihg to eco-

nomic crime.” Report of the Economic Crime Council

to the Attorney General: Investigation and Prosecu-

tion of Fraud in Defense Procurement and Health

Care Benefits Programs, U.S. DEPARTMENT OF

JUSTICE, Washington, D.C., 1985, at i.

Recognizing that false and fraudulent claims can

take “many forms,” S. Rep. 99-345, at 9 (1986), 1986

U.S.C.C.A.N. 5274, the 1986 Congress reaffirmed

that (1) the FCA’s core purpose is to capture every

form of fraudulent scheme that threatens the public

fisc, and (2) the Act must be broadly construed to

serve these ends. Specifically noting that “[t]he Su-

preme Court’s Opinion in United States v. Neifert-

White Co., 390 U.S. 228 (1968), indicated that the

False Claims Act ‘was intended to reach all types of

fraud, without qualification, that might result in fi-

nancial loss to the Government,” the 1986 Congress

expressed its “strong[] endorse[ment] [of] this inter-

pretation of the act.” S. Rep. 99-345, at 19 (1986),

1986 U.S.C.C.A.N. 5284 (emphasis added).

And as in 1863, there is no evidence Congress con-

templated a “qualification” of an express false certifi-

cation of compliance. Quite the contrary. The legisla-

tive history demonstrates that Congress was specifi-

cally concerned with, among other things, implicitly

false or fraudulent behavior in goods and services con-

tracts.

Reflecting the importance of combating frauds in-

volving provision of non-conforming goods, the 1986

Senate Report made clear that “a false claim may

take many forms, the most common being a claim for

goods or services not provided, or provided in viola-

tion of contract terms, specification, statute, or regu-

lation.” S. Rep. 99-345, at 9 (1986), 1986 U.S.C.C.A.N.

5274 (emphasis added). That language describes the

so-called implied certification theory of falsity.

The cases cited in the Senate Report similarly un-

derscore the viability of the implied certification the-

ory. Both United States v. Bornstein, 423 U.S. 303

(1976) (subcontractor was liable for causing contrac-

tor to overbill the Government for goods that did not

meet the Government’s specifications, despite the

fact that there was no express certification of compli-

ance or active concealment by the contractor of the

subcontractor’s noncompliance), and United States v.

Henry, 424 F.2d 677 (5th Cir. 1970) (contractor deliv-

ered goods that did not meet Government specifica-

tions, but the invoices at issue contained no express

certification regarding compliance with those certifi-

cations), involved impliedly false certifications.

The 1986 Senate Report also expressly describes

ineligible claims for payment as being “false or

fraudulent.” Congress specifically identified claims

submitted by Medicare and Medicaid providers who

are ineligible to receive payment under those pro-

grams, citing Peterson v. Weinberger, 508 F.2d 45

(5th Cir. 1975) (“A claim is within the purview of the

False Claims Act if it is grounded in fraud which

might result in financial loss to the Government.”).

There should be no doubt that Congress employed

broad statutory language aimed at least in part at

certifications of eligibility for Government payment,

particularly under programs like Medicare and Med-

icaid.

C. An Express False Statement of Compli-

ance Requirement Would Contradict

Congress’s FCA Policy Aims.

Finally, it is helpful to consider the policy ramifica-

tions of requiring, for the first time, an express false

statement of compliance for False Claims Act liabil-

ity.

The FCA is primarily concerned with the conduct

of knowingly requesting payment for something for

which the Government did not bargain—whether or

not that conduct is associated with false representa-

tions, express or otherwise. After all, a delivery of

muskets mislabeled “sawdust” would not implicate

FCA concerns. In Petitioner's words, the Government

would not argue that the goods were not “truthfully

rendered.” Pet. Br. at 4. But should the Court adopt

Petitioner’s restrictive interpretation, Pet. Br. at 3-4,

42; Resp. Br. at 41-55, the knowing provision of boxes

of sawdust in place of muskets, shoddy uniforms, and

parachutes made out of quarter-century old nylon

cord would all escape lability, unless the contractor

orally or in writing specifically stated it had provided

everything according to the Government’s specifica-

tions. In these examples, regardless of what the con-

tractor said or did not say, the Government did not

get what it paid for, and the contractor knew it. And

if the Court agrees that eligibility for federal pro-

grams is not an actionable element under the FCA,

Pet. Br. at 29-33, then persons or entities that are

not qualified at all to participate in the program may

also escape liability for fraud. Resp. Br. at 49. The

financial consequences of this would be severe. From

1987 to 2015, over $31.1 billion has been recovered in

healthcare-related FCA actions. See Department of

Justice, Fraud Statistics—Health and Human Ser-

vices, October 1, 1987 — September 30, 2015, availa-

ble at https://www.justice.gov/opa/file/796866/ down-

load.

The key question before the Court is this: Is an

express false certification required for purposes of

the FCA when a contractor knowingly provides goods

and services the Government clearly did not bargain

for? The answer, Senator Grassley submits, is no. It

has always been no. Senator Grassley does not ex-

press an opinion on whether the historically ground-

ed, congressionally reaffirmed theory of implied false

certification of liability applies to the facts of this

case. But if the Court denies the theory altogether, it

would severely hamper the Government’s ability to

recover taxpayer funds lost to fraud.

CONCLUSION

For these reasons and those in the respondent’s

brief, the judgment of the court below that implied

false certifications fall within the FCA should be af-

firmed.

Respectfully submitted,