Opposition Brief — Northrop Grumman Corp. v. United States ex rel. Hyatt

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No. 96-17

In The

Supreme Court of the United States

October Term, 1996

S

NORTHROP GRUMMAN CORPORATION,

Petitioner,

UNITED STATES ex rel. MICHAEL A. HYATT,

Respondent.

+

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

SI

OPPOSITION TO PETITION

FOR WRIT OF CERTIORARI

S

Puitur E. BENSON

Counsel of Record

Linpa R. MacLean

Law Orrices or Puitur E. Benson

22885-F Savi Ranch Pkwy.

Yorba Linda, CA 92887

(714) 279-8195

Counsel for Respondent

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED FOR REVIEW

Whether a statutory amendment which is enacted while a

lawsuit is pending, and which affects the jurisdictional

authority of the trial court without affecting the substan-

tive rights, duties and liabilities of the parties, is to be

applied in keeping with this Court’s decision in Landgraf

v. USI Film Products, et al., 522 U.S. 244 (1994).

TABLE OF CONTENTS

Page

QUESTION PRESENTED FOR REVIEW .........--- i

TABLE OF AUTHORITIES ....... 6.00000 eeeeeeeeees iii

INTRODUCTION .......cccccecccceeeererssccesnees 1

ARGUMENT. .........--cscecseccceseesecsccscuceess 2

I. THE POSITION OF THE UNITED STATES AS

STATED IN SCHUMER SUPPORTS THE NINTH

CIRCUIT’S RULING IN HYATT AS WELL ..... 2

Il. THE NINTH CIRCUIT’S DECISION IS

ENTIRELY CONSISTENT WITH THIS COURT'S

DECISION IN LANDGRAF .........60000550055 5

CONCLUSION ...-ccsccnccccessesesvccesesseossses 14

ma

TABLE OF AUTHORITIES

Page

Cases

Bradley v. School Board of Richmond, 416 U.S. 696

PEs Hees aeu babe cicccerdless heubsovevetrelyebers 6

Houck ex rel. United States v. Folding Carton Admin.

Comm., 881 F.2d 494 (7th Cir. 1989), cert. denied,

Se SR SE CIID bee ctvepidiveecdutecsesbcivdes 2

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

116 S. Ct. 1845 (1996) (No. 95-1340)...... 2% 3,45

Landgraf v. USI Film Products, 511 U.S. 244 (1994)... passim

United States ex rel. Hyatt v. Northrop Corporation,

OO FSG BEZS Os Cie. 1996). 2... cc cevcevcccses. passim

United States ex rel. Kelly v. Boeing Company, 9 F.3d

PEEPS Ses NOME: voce Se seveNeesceadevedeudyess 6, 7

United States ex rel. Kreindler & Kreindler v. United

Technologies Corp., 985 F.2d 1148 (2d Cir.), cert.

es ee A PP ERO Sw icicsdcccvencedbaceduss 2

United States ex rel. Lindenthal v. General Dynamics

Corp., 61 F.3d 1402 (9th Cir. 1995) ............20.. 10

United States ex rel. Milam v. University of Texas

M.D. Anderson Cancer Center, 961 F.2d 46 (4th

Gt BPE we venusire ch rb cncoasal deopsbeavdueaiess 5, 11

United States ex rel. Precision Co. v. Koch Indus., 971

F.2d 548 (10th Cir. 1992), cert. denied, 507 U.S.

i ea ateonh aad cath ooh 6 coated icaeeat 2

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

GS Se 1552 eR Cie. 1996)... cccccdvcvese 10, 12, 13

United States v. TRW, Inc., 4 F.3d 417 (6th Cir. 1993) ...3, 4

Winfree v. Northern Pac. Ry. Co., 227 U.S. 296 (1913) ..... 9

iv

TABLE OF AUTHORITIES —- Continued

Page

STATUTES

31 US.C. Sect TOP ov kc elk cvs Hobs bu wiees tnewen 11

31 U.S.C. Section S750... ccctcccccscccesvccs 1, 11, 12

31 U.S.C. Section 3730(D)(4) .... 2... cece cee scecescees 2

31 U.S.C. Section 3730(e)(4) .......-. 6 eee eee 2, 4, 11, 13

31 USK. Section STS. accccdnccetycasdacegeds 4

INTRODUCTION

In its Petition for Writ of Certiorari Northrop Grum-

man Corporation (“Northrop”) requested the Court to

consider its petition in conjunction with the petition in

Hughes Aircraft Co. v. United States ex rel. Schumer, No.

95-1340, wherein petitioner Hughes Aircraft had raised a

number of issues concerning the qui tam provisions of the

False Claims Act, 31 U.S.C. § 3730, including the question

of retroactivity raised herein by Northrop. On October 15,

1996, this Court granted certiorari in Schumer as to certain

issues only, but did include the jurisdictional question of

retroactivity. In light of this decision, the issue raised by

petitioner Northrop is already before the Court and will

no doubt be thoroughly briefed in the Schumer appeal.

Nevertheless, sound authority supported the reasoning of

the Ninth Circuit Court of Appeals decisions in both

Schumer and in United States ex rel. Hyatt v. Northrop

Corporation, 80 F.3d 1425 (9th Cir. 1996). As discussed

below, the Ninth Circuit’s rulings were entirely in keep-

ing with this Court’s decision in Landgraf v. USI Film

Products, et al., 511 U.S. 244 (1994). This conclusion, more-

over, was the expressed opinion of the Solicitor General

of the United States as set forth in the amicus brief filed

in Schumer at the invitation of this Court.

¢

ARGUMENT

I. THE POSITION OF THE UNITED STATES AS

STATED IN SCHUMER SUPPORTS THE NINTH

CIRCUIT’S RULING IN HYATT AS WELL.

At the close of its Petition for a Writ of Certiorari,

Northrop Grumman Corporation (“Northrop”) explicitly

requested that its petition be considered in conjunction

with that of the petitioner in Hughes Aircraft Co. v. United

States ex rel. Schumer, 116 S. Ct. 1845 (1996) (No. 95-1340).

Consequently, the position asserted by the Solicitor Gen-

eral in the amicus brief for the United States filed in

Schumer certainly should be considered in this context.

With respect to the retroactivity issue, the Solicitor

General made three cogent arguments, all in favor of the

propriety of the Ninth Circuit’s reasoning in Schumer and,

by implication, the decision in Hyatt as well.

First, the Solicitor General noted that both “the cur-

rent Section 3730(e)(4) and its predecessor version have

governed the jurisdiction of the district court rather than

the substantive rights and obligations of the parties,” and

cited in support the decisions in United States ex rel.

Kreindler & Kreindler v. United Technologies Corp., 985 F.2d

1148, 1157 (2d Cir.), cert. denied, 508 U.S. 973 (1993);

United States ex rel. Precision Co. v. Koch Indus., 971 F.2d

548, 551 (10th Cir. 1992), cert. denied, 507 U.S. 951 (1993);

and Houck ex rel. United States v. Folding Carton Admin.

Comm., 881 F.2d 494, 504, 506 & n. 9 (7th Cir. 1989), cert.

denied, 494 U.S. 1025, 1026, 1027 (1990). Thus, it is the

position of the United States, the real party in interest in

any qui tam case under the False Claims Act, that the

replacement of former Section 3730(b)(4) with current

Section 3730(e)(4), “neither prohibited previously lawful

conduct nor increased the penalties for violations” and

therefore “did not alter the existence or extent of peti-

tioner’s liability to the government,” but rather “simply

expanded the circumstances under which qui tam relators

may file suit to enforce that liability.” (Brief of United

States, Amicus, in Schumer, 8)

As the Solicitor General pointed out, the reasoning of

the Ninth Circuit in Schumer was entirely consistent with

the principles stated in Landgraf v. USI Film Products, 511

U.S. 244 (1994), wherein this Court had particularly noted

that it had “regularly applied intervening statutes confer-

ring or ousting jurisdiction, whether or not jurisdiction

lay when the underlying conduct occurred or when the

suit was filed” (id. at 274), and where Justice Scalia fur-

ther noted in his concurring opinion this Court’s “consis-

tent practice of giving immediate effect to statutes that

alter a court’s jurisdiction.” Ibid. at 292. Because the

amended provision governs the jurisdiction of the district

court without altering the substantive rights, liabilities or

duties of the defendant, the decision on retroactivity in

both Schumer and Hyatt was manifestly in keeping with

the principles stated in Landgraf, as the Solicitor General

likewise concluded.

The Solicitor General’s second argument in Schumer

addressed one of the principal points also raised by peti-

tioner Northrop herein, the purported “conflict” between

the Sixth Circuit’s decision in United States v. TRW, Inc., 4

F.3d 417, 422-423 (6th Cir. 1993), cert. denied, 114 S. Ct.

1370 (1994), and the Ninth Circuit’s approach to the retro-

activity issue. The position of the United States, however,

is that there simply is not “an irreconcilable circuit con-

flict on this question,” since TRW pre-dated this Court's

decision in Landgraf such that there is no basis for con-

cluding that Sixth Circuit, if called upon to reconsider the

question, would adhere to its previous ruling. Signifi-

cantly, the 1993 decision in TRW failed to even consider

whether Section 3730(e)(4) was a jurisdictional provision,

which was a consideration which, after Landgraf, played a

significant role in the Ninth Circuit’s decisions both in

Schumer and here.

The Solicitor General’s third and final argument on

this score was an eminently practical one:

The effective date of the statutory amendment at

issue here is October 27, 1986. See False Claims

Amendments Act of 1986, Pub. L. No. 99-562,

100 Stat. 3153. The longest statute of limitations

under. the FCA, including equitable tolling, is

ten years. 31 U.S.C. § 3731(b)(2). As of October

27, 1996, new cases involving claims arising

before the passage of the 1986 amendments will

be barred by the statute of limitations. Even if a

square circuit conflict existed, the question pre-

sented therefore is not of sufficient continuing

importance to warrant this Court’s review.

(Brief of United States, Amicus, in Schumer, 10)

In summary, the stated position of the United States

on the retroactivity issue in Schumer is that the Ninth

Circuit’s approach is entirely in keeping with Landgraf,

that the purported circuit conflict is of dubious signifi-

cance and that even assuming such a conflict exists in the

abstract, the inevitable operation of the applicable statute

of limitations will, in a matter of days, render this dispute

largely an academic question in any event. Under these

circumstances, the Solicitor General recommended denial

of the petition in the Schumer action. Since petitioner

herein specifically invited the Court to consider the then

anticipated amicus brief by the Solicitor General in

Schumer in the context of this petitioner, Northrop should

not be heard to complain now that the position of the

United States as articulated in the Solicitor General's brief

squarely supports the decisions and reasoning of the

Ninth Circuit in both Schumer and Hyatt.

Il. THE NINTH CIRCUIT’S DECISION IS ENTIRELY

CONSISTENT WITH THIS COURT’S DECISION

IN LANDGRAF.

In Landgraf this Court cautioned that “deciding when

a statute operates ‘retroactively’ is not always a simple or

mechanical task. .. . A statute does not operate ‘retro-

spectively’ merely because it is applied in a case arising

from conduct antedating the statute’s enactment, or

upsets expectations based in prior law.” Landgraf, 511 U.S.

at 268-269 (citation omitted). Petitioner Northrop presents

just such a simplistic mechanical analysis, and one which

ignores both the fundamental reasoning of Landgraf and

the particular features of qui tam litigation under the

False Claims Act which bear directly on this analysis.

As petitioner Northrop is well aware, in any qui tam

action under the FCA, the United States government is

the real party in interest. See United States ex rel. Milam v.

University of Texas M.D. Anderson Cancer Center, 961 F.2d

46, 50 (4th Cir. 1992). Indeed, one of the reasons the

constitutionality of the 1986 amendments to the qui tam

provisions of the FCA was so hotly debated in the decade

following enactment was because numerous defendants

contended that a qui tam plaintiff lacked sufficient stand-

ing to pursue such civil prosecution. Over the years,

however, federal courts at the trial court and appellate

level articulated the relationship between the United

States and a qui tam plaintiff as one between the real

party in interest, the government and an authorized

agent or assignee, the relator, whose standing to sue is

granted by and at the discretion of Congress, but who

serves in the capacity of one seeking redress for an injury

done to the United States itself and not to the relator

personally. See United States ex rel. Kelly v. Boeing Com-

pany, 9 F.3d 743, 747-749 (9th Cir. 1993).

The unique features of qui tam litigation simply can-

not be ignored in the context of the retroactivity analysis

without running afoul of this Court’s statement in Bradley

v. School Board of Richmond, 416 U.S. 696, 717 (1974) that

the nature and identity of the parties, the nature of their

rights and the nature of the impact of the change in law

upon those rights must be addressed in the retroactivity

context. Landgraf certainly did not overrule or undermine

this earlier pronouncement in Bradley, but instead reaf-

firmed Bradley's essential holding that the law in effect at

the time the court renders its decision must be applied

unless to do so would result in “manifest injustice,” in

other words, unless such application would operate to

affect the substantive rights of the parties. Landgraf, 511 U.S.

at 278-279.

Landgraf clarified that a change in law has such a

substantive effect where its application would “impair

rights a party possessed when he acted, increase a party’s

liability for past conduct, or impose new duties with

respect to transactions already completed.” Landgraf, 522

U.S. at 280. The entire thrust of the reasoning in Landgraf,

however, was the explicit distinction made between a

genuine retroactive effect upon the substantive rights, lia-

bility or duties of a party, versus an effect which, though

it is applied in a case involving conduct antedating the

new law’s enactment and may very well “upset expecta-

tions based in prior law” (Landgraf, 511 U.S. at 269) does

not affect the substantive rights, liabilities or legal duties

involved.

In applying this analysis in the qui tam context it is

therefore necessary to bear in mind the actual status of

relator. Quite simply, a qui tam plaintiff has no indepen-

dent status as a party plaintiff apart from the circum-

scribed status conferred upon such relator by Congress to

act on behalf of the United States government. See Kelly,

supra, 9 F.3d at 748. It is the government's rights, as the

real party in interest, which are at issue in any qui tam

action, whether or not the United States formally inter-

venes to assume primary control of the litigation. Sim-

ilarly, the liability in issue is the defendant's liability to

the United States, not to the relator himself, just as the

duties in question arising from past transactions are those

from past transactions between the United States and the

defendant, not from transactions between the defendant

and the individual relator.

The clear lesson of Landgraf is that any change in law

will, to some degree, upset expectations based in prior

law. Landgraf, 511 U.S. at 269-270, n. 24. Consequently, it

will always be possible to pose a simplistic and mechani-

cal protest that the challenged law “attaches new legal

consequences” to events completed before the law’s

enactment. An analytical approach which starts with the

broad generality that new legal consequences now attach

to some kind of pre-enactment conduct, and which, with-

out further analysis of whether truly substantive rights

are involved, then leaps to the conclusion that therefore

the new law necessarily has an impermissible retroactive

effect is precisely the kind of reasoning rejected in Land-

graf as simplistic and mechanical. It is ultimately a useless

approach, since the premise applies so universally to all

new enactments of law that the argument proves every-

thing and nothing simultaneously. This is, however, the .

very analysis presented in Northrop’s petition.

Northrop contends that the conduct in issue is “dis-

closure of information to the government” and that the

“important legal consequence” of the amended provision

is that whereas under prior law such disclosure pre-

empted a qui tam action, now that is no longer necessarily

so. (Pet. Br. 8-9) Then, without further ado, Northrop

concludes that, “This analysis makes clear that the

amended § 3730 would have a retroactive effect in the

instant case.” (Pet. Br. 9) Northrop therefore skirts

entirely the critical question of what bearing the conduct

it claims to be in issue, i.e., the relator’s disclosure of

information to the government, has upon the substantive

rights, liabilities or duties of the actual parties, the United

States and Northrop itself.

Respondent Hyatt submits that Northrop’s failure to

squarely address this central question is due to peti-

tioner’s apparent inability to overcome the cogent reason-

ing of the Ninth Circuit’s ruling that there was no such

substantive effect here. Northrop attacks the Ninth Cir-

cuit’s decision on two grounds, starting with the circuit

court’s conclusion that the amended law in no way

altered Northrop’s underlying liability. Petitioner con-

tends that:

This argument is flatly inconsistent with Land-

graf, which makes clear that an alteration of the

underlying substantive obligation is not the

only way in which a statute may have a retroac-

tive effect. Such an effect exists if application of

the statute would ‘impair rights a party pos-

sessed when he acted, increase a gy liabili

for past conduct, or impose new duties wit

respect to transactions already com-

pleted.’ .. . Thus, even if the underlying obliga-

tion is not altered, a new statute will still have a

retroactive effect if it increases a party’s liability

for past conduct or impairs a party’s pre-exis-

ting rights.

(Pet. Br. 10-11)

Northrop then argues that by “reviving a barred cause” a

“complete defense” previously available to Northrop was

eliminated “thereby impairing Northrop’s pre-existing

rights and increasing its liability.” (Pet. Br. 11) In a foot-

note on the same page (fn. 5) Northrop contends that this

result is “no less retroactive . . . than the revival of a claim

barred by the defense of limitations” and then concludes

that it was therefore deprived of a material defense which

did more than merely resist the remedy, but actually —

disproved the action. (Pet. Br. 12, relying upon Winfree v.

Northern Pac. Ry. Co., 227 U.S. 296, 301-02 (1913).)

In each particular of this argument, Northrop is flatly

wrong. Contrary to Northrop’s assertion, the Ninth Cir-

cuit clearly considered each of the three possible substan-

tive areas set forth in Landgraf, including impairment of

10

any rights, the factor of increased liability and the possi-

ble imposition of new duties. Hyatt, 80 F.3d at 1428.

Relying upon its earlier decisions, however, the Hyatt

court ruled that the amended provision neither impaired

any rights the defendant previously possessed, nor

increased liability for past conduct, nor imposed any new

duties upon defendant which it did not already bear.

Furthermore, the Ninth Circuit specifically noted and

relied upon its earlier decision in United States ex rel.

Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1516 (9th Cir.

1995) wherein it was held that the amendment does not

“infringe on the substantive rights of the defendant.” The

Ninth Circuit likewise reiterated its explicit rejection of

the argument that the amendment eliminated a material

defense, as earlier stated in United States ex rel. Lindenthal

v. General Dynamics Corp., 61 F.3d 1402, 1408 (9th Cir.

1995). See Hyatt, 80 F.3d at 1429. Thus, any suggestion

that the Ninth Circuit failed to consider these various

issues and instead narrowly limited its review to the

question of increased liability is readily disproved by

reference to the Ninth Circuit’s decision itself.

Additionally, however, it is apparent that in reaching

its conclusions on these various matters, the Ninth Cir-

cuit followed, rather than departed from, the prescribed

approach mandated by Landgraf. The Ninth Circuit’s

approach took into account the actual relationship

between the real party in interest, the United States, the

status of the relator vis-a-vis the United States, and the

resulting relationship between the real party in interest’s

rights and the rights, duties, and possible liability of the

defendant. It is this primary and fundamental analysis

«

11

which compelled the conclusions reached by the Ninth

Circuit on these discrete issues.

Thus, the right of the United States to performance of

contractual and other obligations free from fraud is estab-

lished in 31 U.S.C. § 3729, and elsewhere in other statu-

tory provisions but, not in the qui tam provisions of

§ 3730. Similarly, the liability of a defendant for fraud

against the federal government arises from the substan-

tive provisions of § 3729, not § 3730, just as the defen-

dant’s duties towards the government arise from

contractual, statutory and regulatory contexts other than

the procedural provisions of § 3730.

The United States furthermore has the right to desig-

nate those individuals who are authorized to act on its

behalf, whether such individuals do so in the capacity of

a Department of Justice attorney or as a private citizen

whose authority is derived from a direct grant of stand-

ing by Congress. The defendant, however, simply has no

“right” to choose whether its alleged wrongdoing will be

addressed by one of the “regular troops” of the DOJ!

versus a private citizen acting as a relator, any more than

any defendant has a “right” to choose which of a number

of specific government employed attorneys will be

responsible for representing the government's interests in

a given case. Consequently, because a defendant has no

“right” to select between and among various individuals

acting as agents for the United States, a provision such as

31 U.S.C. § 3730(e)(4) which alters or expands the pool of

potential authorized agents in this regard simply does not

' See Milam, supra, 961 F.2d at 49.

12

implicate a vested or substantive, right. Furthermore, no

“material defense” which actually “disproved the right of

action,” was eliminated when Congress eniarged the pool

of available individuals authorized to act on the govern-

ment’s behalf. A “material” defense disproves liability.

The amendments to 31 U.S.C. § 3730 merely affected who

might represent the government’s interest, not what con-

duct was actionable.

Northrop’s complete failure to address these issues

head on necessarily infects its second attack on the Ninth

Circuit’s ruling. In essence, Northrop complains that the

Ninth Circuit side-stepped the pertinent inquiry by hold-

ing that the amendments were jurisdictional in nature,

without recognizing that “what matters under Landgraf is

not whether Congress used the magic word ‘jurisdiction’;

what matters is whether the statute merely regulates the

authority of particular courts or whether it also creates or

destroys substantive rights.” (Pet. Br. 14) This is indeed

an ironic assertion, since the Hyatt decision and the line

of authority preceding it dealt explicitly with the issue of

whether any substantive right was affected by the

amended law, while it is Northrop’s own petition which

is notably devoid of anything more than conclusory repe-

titions of the same arguments considered and rejected

time and again in those thoughtfully reasoned appellate

decisions.

The Ninth Circuit did not merely conclude, ab initio,

that the provision was jurisdictional and that nc further

analysis was therefore necessary, but rather first con-

cluded that no substantive rights, duties or liabilities

were implicated and therefore concluded, as it had in

13

Schumer, that because no substantive interest was impli-

cated, the normal “presumption that jurisdictional provi-

sions will be applied retrospectively” had not been

rebutted. Hyatt, 80 F.3d at 1429. This was not only gener-

ally in line with the approach expressed in Landgraf, but

strictly in keeping with the very analysis mandated

therein.2 Thus neither of Petitioner Northrop’s attacks

upo.. the Ninth Circuit’s reasoning withstand scrutiny.

+

2 Northrop’s contention that the amendments to the FCA,

unlike the Civil Rights Act, must stand or fall collectively on the

retroactivity issue, rather than undergoing a discrete

examination depending upon which provision is at issue,

appears to be more of an afterthought than an argument.

Apparently the only support for this position Northrop could

find was in the papers filed in the case below by the government

years ago and only shortly after the FCA was amended. Of

course, the current position of the government is quite different,

as is demonstrated by the recent amicus brief filed by the

Solicitor General at the express invitation of this Court in the

Schumer appeal. The approach of a section-by-section analysis

need not be deemed a “per se” requirement in order for

common sense alone to demonstrate that where different

sections in fact implicate different concerns, some procedural,

some substantive, an unthinking requirement that all provisions

necessarily stand or fall together runs afoul of Landgraf's

essential precepts. Furthermore, in this instance there is nothing

in either the statutory language overall or in the legislative

history which suggests that Congress intended the retroactivity

of any one subsection to determine that of all others. On the

contrary, to the extent that any “compromise” can be discerned,

it can be equally argued that the careful accommodations made

within 31 U.S.C. § 3730(e)(4) represent Congress’ balancing of

the competing interests between expanded qui tam participation

and the danger of parasitic suits which bring no new

information to light, such that no further “compromise” need be

judicially imposed.

14

CONCLUSION

For the foregoing reasons the petition should be

denied.

Respectfully submitted,

Puitur E. BENSON

Counsel of Record

Linpa R. MacLean

Law Orrices or Puitur E. BENSON

22885-F Savi Ranch Pkwy.

Yorba Linda, CA 92887

(714) 279-8195

‘Counsel for Respondent