Amicus Curiae Brief — Boeing Co. v. United States Ex Rel. Kelly

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7 = IN THE

Supreme Court of the United States

OCTOBER TERM, 1993

THE BOEING CORPORATION,

Petitioner,

V.

UNITED STATES EX REL. KELLY.

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

MOTION FOR LEAVE TO FILE BRIEF AS

AMICI CURIAE AND BRIEF OF AMICI CURIAE

ROCKWELL INTERNATIONAL CORPORATION,

LITTON INDUSTRIES, INC., AND

NORTHROP CORPORATION

IN SUPPORT OF PETITIONER

CAROLYN B. KUHL *

HENRY WEISSMANN

MUNGER, TOLLES & OLSON

355 South Grand Avenue

Thirty-Fifth Floor

Los Angeles, California 90071

(213) 683-9100

Counsel for Amici Curiae

January 14, 1994 * Counsel of Record

RRR CRE RARE ERATOR WE PEEL AMLETN

WILSON - Eres PRINTING Co __ INC. - 789-0096 - WASHINGTON. D.C. 20001

ee

In THE

Supreme Court of the United States

OCTOBER TERM, 1993

No. 93-817

THE BOEING CORPORATION,

rm Petitioner,

UNITED STATES EX REL. KELLY,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

MOTION FOR LEAVE TO FILE BRIEF

AS AMICI CURIAE

Rockwell International Corporation, Litton Industries,

Inc., and Northrop Corporation hereby move for leave

to file the attached brief as amici curiae in support of

petitioner. Petitioner has consented to the filing of this

brief, but respondent has not consented.

Movants obtain a significant portion of their revenue

under contracts with the United States government to

supply various military products. Movants have been

frequent targets of litigation under the False Claims Act

brought by qui tam relators. Collectively, movants have

been named as defendants in 25 cases brought by

qui tam relators in which the government has declined

to intervene. Movants have expended over $21.6 million

to defend themselves in such lawsuits. Movants expect

that this costly barrage of litigation by gui tam relators

will continue.

Because movants have been unwillingly involved in

such a large number of lawsuits brought by qui tam

relators, movants have unique insights into the practical

problems engendered by the lack of Executive Branch

control over such litigation. These insigiits will aid the

Court in deciding whether to examine the constitutional

issues presented by the petition.

In the proposed brief attached hereto, amici would

explain why Executive Branch control over litigation in-

stituted on behalf of the United States is a central require-

ment of the separation of powers. Amici further would

explain the respects in which the Executive Branch lacks

such control over qui tam litigation. In particular, amici

would describe the lack of Executive Branch control over

whether and where to initiate cases under the False Claims

Act, the lack of control over the conduct of such cases,

and the lack of control over their termination. Amici

further would describe, based on their own experiences,

how the absence of such control has adversely impacted

the rights of private parties such as the amici, as well as

the interests of the government.

Accordingly, movants respectfully request the Court

to grant their motion for leave to file the attached brief

as amici curiae.

CAROLYN B. KUHL *

HENRY WEISSMANN

MUNGER, TOLLES & OLSON

355 South Grand Avenue

Thirty-Fifth Floor

Los Angeles, California 90071

(213) 683-9100

Counsel for Amici Curiae

January 14, 1994 * Counsel of Record

|

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .... ii

INTEREST OF THE AMICI CURIAE ......... 1

SUMMARY OF ARGUMENT uw 1

I in 3

I. THE UNCONSTITUTIONAL LACK OF EXE-

CUTIVE CONTROL IN THE APPOINTMENT

AND SUPERVISION OF QUI TAM LITIGA-

TION HAS RESULTED IN GRAVE AND

RECURRENT THREATS TO PRIVATE

I etic Saicsdescibea sla ssineienaddoeteabuadbcanisiuas-c.. 3

A. Executive Control Over The Initiation and

Pursuit of Litigation Is Constitutionally

_____ PGR eer Caen eS 3

B. Essential Attributes Of Executive Control

Are Absent Under The FCA ....... 4

C. The Practical Consequences Of The Lack Of

Executive Control Over Qui Tam Litigation

Under The FCA Pervade And Distort What

Should Be Government Litigation 5

1. The Qui Tam Relator’s Control Over The

Initiation Of Litigation 0 5

2. The Qui Tam Relator’s Control Over The

NR reid ee Bre? 13

3. The Qui Tam Relator’s Conduct Of The

EO MEETS ACR STO AE RS 14

4. The Qui Tam Relator’s Control Over The

Termination Of Litigation 17

Il. THE COURT SHOULD CONSIDER THESE

IMPORTANT CONSTITUTIONAL QUES-

tee AT THIS TINE 19

ta A AN ON SO ER 20

ii

TABLE OF AUTHORITIES

CASES Page

Buckley v. Valeo, 424 U.S. 1 (1976) ......000200000200000.... 3, 5

Gravitt v. General Electric Co., 680 F. Supp. 1162

(S.D. Ohio), cert. denied, 488 U.S. 901 (1988).. 17

Heckler v. Chaney, 470 U.S. 821 (1985) ~...00..000000... 5, 6

Juliano v. Federal Asset Disposition Ass’n, 736

Bo SU Se Ge RD piaeateestitctinn eesti 13

Morrison v. Olson, 487 U.S. 654 (1988) 00000. 4,5

United States ex rel. Brensilber v. Bauch & Lomb

Optical Co., 181 F.2d 545 (2d Cir. 1942), aff’d

per curiam, 320 U.S. 211 (1943) .....0000 10

United States ex rel. Grand v. Northrop, No. C-1-

A INES Rae RD er NL PO 16

United States ex rel. Killingsworth v. Northrop

Corp., No. 98-55868 (9th Cir.) ............................. 19

United States ex rel. McCoy v. Seaward Marine

Services, Inc., 1992 U.S. App. Lexis 17979 (4th

aT ae, 14

United States ex rei. Rohan v. Newbert, No. 92-

I ee a cahibediniaieieinaba 9

United States ex rel. Truong v. Northrop Corp..... 16

United States v. Bornstein, 423 U.S. 303 (1976)... 10

United States v. Halper, 490 U.S. 435 (1989) ........ 10

United States v. Nixon, 418 U.S. 683 (1974)........ 3

STATUTES

I acetal cetcaiod 8

en sccnsuunenininneetnsendaawese 13

False Claims Act, 31 U.S.C. §§ 3729 et seq. ............ passim

A ee I IY ain co deecencasbcsnenncetenecentansnesances 13

Ne als MINUET TTP an Sptescca secinchonschcedeetnhieebesiccciisninicnnne 4

MISCELLANEOUS

ABA Model Rules of Professional Conduct, Rule

REARS EEE ION ite a CET POST OT eT 10

Blanch, The Constitutionality of the False Claims

Act’s Qui Tam Provision, 16 Harv. J. L. Pub.

Pol. 701, 708, 756 (1993) (Student Note) .......... 6, 16

iii

TABLE OF AUTHORITIES—Continued

Page

Caminker, The Constitutionality of Qui Tam Ac-

tions, 99 Yale L.J. 341, 365 & n.121 (1989)........ 7

Constitutionality of the Qui Tam Provisions of the

False Claims Act, 13 Opp. Off. Legal Counsel

249, 1989 WL 418317 (1989) passim

Department of Justice Press Release No. 88-518. 13

Prepared Statement of Assistant Attorney General

Stuart M. Gerson, Hearing before the Subcom-

mittee on Civil and Constitutional Rights, Judi-

ciary Committee, U.S. House of Representatives,

102d Cong., 2d Sess. (April 1, NE sehr passim

S. Rep. No. 345, 99th Cong., 2d Sess. 5. | Seen 7,15

BRIEF OF

ROCKWELL INTERNATIONAL CORPORATION,

LITTON INDUSTRIES, INC., AND

NORTHROP CORPORATION

AS AMICI CURIAE

IN SUPPORT OF PETITIONER

INTEREST OF THE AMICI CURIAE

Rockwell International Corporation, Litton Industries,

[nc., and Northrop Corporation each obtain a significant

Proportion of their revenue under contracts with the

United States government to supply various military prod-

ucts. Amici collectively have been named as defendants

in 25 lawsuits brought by qui tam relators under the

False Claims Act (“FCA”), 31 U.S.C. $§ 3729 et seq.,

in which the government has declined to intervene.

Reductions in funding for military programs have

forced amici to lay off significant numbers of employees.

Qui tam lawsuits typically are brought by disgruntled

employees or former employees. Amici anticipate that

they will continue to be targeted as defendants in gui tam

litigation unless this Court holds the qui tam provisions

of the FCA unconstitutional.

SUMMARY OF ARGUMENT

Since the 1986 Amendments to the FCA made it

easier and more lucrative for relators to pursue gui tam

cases, such lawsuits have become a plague upon the de-

fense industry. During those seven years, the amici

filing this brief expended over $21.6 million in defending

qui tam lawsuits in which the government did not inter-

vene. By contrast, from 1986 through 1991 the federal

treasury received a total of only $225,000 from all cases

where the relator proceeded without the government.

Prepared Statement of Assistant Attorney General Stuart

M. Gerson, Hearings before the Subcommittee on Civil

and Constitutional Rights, Judiciary Committee, U.S.

House of Representatives, 102d Cong., 2d Sess., at 6

(April 1, 1992) (“Gerson Statement”),

2

Qui tam litigation is brought in the name of the gov-

ernment, and seeks to recover claims and penalties that

belong to the government, yet the government lacks effec-

tive instruments of control over such litigation. The qui

tam lawsuits authorized by the FCA are unique in that

the FCA leaves the government without the power either

to control the conduct of counsel acting in its name or to

decide whether, when and how to control the govern-

ment’s interest in its own claims.

When the claim asserted by the qui tam relator arises

out of a contractual relationship between the government

and a contractor, the relator’s unbridled discretion in

initiating and pursuing the action can drive a wedge be-

tween the government and its contracting partner. Qui

tam lawsuits prevent the government as a contracting

party from controlling when the government as a litigant

(embodied in the qui tam relator) claims that the con-

tract has been breached. Government contractors can no

longer trust that the decision of a contracting officer with

respect to a disputed issue will be final.

Although not every breach of contract should give rise

to an FCA violation, there is no realistic protection against

frivolous qui tam lawsuits. On the one hand, a relator

has an enormous incentive to construct an argument that

the contractor has committed some breach of the con-

tract, that the contractor’s claim for payment was there-

fore fraudulent, and that the relator should recover 30

percent of the contract price of the entire defense system.

On the other hand, there is no effective deterrent even to

baseless suits. Although the qui tam relator is theoreti-

cally subject to a claim for attorney’s fees for bringing a |

frivolous action, this threat does not discourage relators

with few assets, especially when compared to the huge

potential upside of a fluke victory or the attactive prospect

of a “strike suit” settlement.

The stakes in qui tam cases are enormous. Relators’

suits commonly involve weapons programs for which the

Ne eT

3

defendant has been paid tens or hundreds of millions of

dollars. Penalties under the FCA include treble damages,

plus attorney’s fees, plus between $5,000 and $10,000

per false claim. Relators have invented outlandish theories

of what constitutes a “claim” for payment so as to in-

flate the penalties even beyond the amount of actual

damages.

The prospects of multi-million dollar recoveries, the

small downside risk of suing, and the lack of effective

control by the Executive Branch have led to an intoler-

able state of affairs. Relators bring suits that the govern-

ment would not bring, and pursue cases in a manner that

the government would not pursue them. This harms both

defendants, such as the amici, and the government itself.

The Court should consider the important constitutional

issues raised by the Petition for Certiorari in this case

now. Delay would only produce further burdensome ex-

pense for the defense industry, with little gain for the

government.

ARGUMENT

I. THE UNCONSTITUTIONAL LACK OF EXECU-

TIVE CONTROL IN THE APPOINTMENT AND

SUPERVISION OF QUI TAM LITIGATION HAS

RESULTED IN GRAVE AND RECURRENT

THREATS TO PRIVATE RIGHTS.

A. Executive Control Over The Initiation and Pursuit

of Litigation Is Constitutionally Required.

The qui tam relator prosecutes a case in the name of,

and on behalf of, the United States. The power to initi-

ate and pursue litigation on behalf of the United States

has always been understood to be a function reserved to

the Executive Branch of our government. See Buckley vy.

Valeo, 424 U.S. 1, 128 (1976); United States v. Nixon,

418 U.S. 683, 693 (1974). The irreducible core of this

principle is that suit cannot be maintained in the name

of the United States contrary to the policies of the Execu-

tive Branch that manifest the President’s duty to “take

4

Care that the Laws be faithfully executed.” U.S. Const.,

Art. IT, § 3.

This is why the Court in Morrison v. Olson permitted

Congress to impose some restrictions on that Executive

prerogative only when the restrictions leave the Executive

with “sufficient control” over the litigation “to ensure

that the President is able to perform his constitutionally

assigned duties.” 487 U.S. 654, 696 (1988). The Court

in Morrison applied this criterion in rejecting the separa-

tion of powers challenge to the Ethics in Government

Act. Central to the Court’s reasoning was its observation

that the Attorney General (“AG”) retained the following

means of supervising and controlling the Independent

Counsel (“IC”):

* The AG has the power to initiate an investigation.

* The AG’s decision not to request the appointment

of an IC is unreviewable, and no IC may be ap-

pointed unless the AG so requests.

* The AG has the power to define the scope of the

investigation. The IC’s jurisdiction is defined with

reference to the facts submitted by the AG.

The AG retains some control over the IC’s con-

tinuing activities.

* The IC must follow the policies of the Depart-

ment of Justice (“DOJ”) unless it is not pos-

sible to do so.

* The AG can remove the IC for good cause.

See id.

These aspects of Executive control over the initiation

and conduct of litigation on behalf of the United States

are essential not only for the preservation of the powers

of the President, but also for the protection of individual

rights.

B. Essential Attributes Of Executive Control Are

Absent Under The FCA.

The FCA delegates to self-appointed private parties

the right to bring an enforcement action, a power which

5

Buckley reserved to the Executive Branch. The FCA

deprives the Executive of the very powers of control that

Morrison held to be essential to the constitutionality of

the Ethics in Government Act:

* The qui tam relator is self-appointed. See 31

U.S.C. § 3730(b).

The qui tam relator decides whether and when to

initiate a case. See id. |

* The qui-tam relator is not bound by the policies

of the DOJ.

The qui tam relator solely controls the scope of

the case, and has every incentive to make the

theory of the case as broad as possible. See id.

and discussion at p. 11, infra.

The qui tam relator may not be removed by the

Attorney General or a court, even for good cause.

See § 3730(c)(1)-(3).

Unlike the IC, therefore, the qui tam relator is free of

any significant control by the Executive. The FCA estab-

lishes no controls to ensure that a qui tam relator accords

private parties the protections that would result from

Executive control. To the contrary, the gui tam relator

is not politically accountable and has a direct and per-

sonal incentive to pursue cases under the FCA to the

maximum extent possible. This regime is not only the-

oretically prone to abuse of private rights, but as shown

in the following section, has actually resulted in such

abuse.

C. The Practical Consequences Of The Lack Of Execu-

tive Control Over Qui Tam Litigation Under The

FCA Pervade And Distort What Should Be Govern-

ment Litigation.

1. The Qui Tam Relator’s Control Over The Initia-

tion Of Litigation.

The ability to decide whether and when to institute

an action on behalf of the government is central to the

Executive’s authority to enforce the law. Heckler vy.

6

Chaney, 470 U.S. 821, 832 (1985). The Ethics in Gov-

ernment Act preserves this power at the threshold due to

the AG’s unreviewable authority to decide whether to

initiate a preliminary investigation and whether to apply

for appointment of an IC. Even after the IC is appointed,

the AG retains indirect control because the IC is required

to follow DOJ enforcement guidelines.

Under the FCA, however, the qui tam relator has un-

restrained authority to bring an action and the Executive

cannot prevent the relator’s institution of suit. See

Blanch, The Constitutionality of the False Claims Act’s

Qui Tam Provision, 16 Harv. J. L. Pub. Pol. 701, 756

(1993) (Student Note). Under the FCA, the gui tam

relator may file suit without advance authorization from

or even notification to the government. 31 U.S.C. § 3730

(b)(1). After the complaint is filed, the gui tam relator

must supply the government with a copy of the complaint

and all material information and evidence the relator

possesses. Id. § 3730(b)(2). At that point, the existence

of the relator’s suit is a fait accompli. The government’s

choices are limited to intervening to pursue the case, or

declining to intervene and allowing the relator to pursue

the case on his or her own. /d. § 3730(b) (4).

As a result, the gui tam relator can institute suit under

the FCA in circumstances in which the Executive would

decide that the national interest would be better served

by not suing, or by suing at a later date. Some examples

follow.

* National Security.

The relator’s institution of suit may implicate national

security interests. For example, the relator may allege

that the defendant has falsely certified that certain per-

formance criteria have been satisfied in connection with

a classified weapons program. Resolution of that claim

may require discovery and disclosure of the performance

criteria in question, which could undermine the nation’s

interest in preserving the secrecy of such information.

The government may have decided that the nation’s secur-

7

ity is more important than the alleged fraud, particularly

if the government’s subsequent experience with the weap-

ons system has demonstrated that the performance criteria

have been satisfied or exceeded. The relator, however,

is interested in his or her own financial gain, and is not

concerned with these broader national interests. Cf.

Caminker, The Constitutionality of Qui Tam Actions, 99

Yale L.J. 341, 365 & n.121 (1989).

* Criminal Investigations.

The relator’s institution of suit may undermine an

ongoing criminal investigation. The FCA allows the gov-

ernment to ask the court to stay discovery in the qui tam

case for 60 days by showing that discovery would inter-

fere with the government’s investigation or prosecution of

a criminal or civil matter. 31 U.S.C. § 3730(c)(4). In

order to extend the 60-day stay, the government must

show that it has pursued the investigation or proceedings

with “reasonable diligence.” Jd. This standard was in-

tended to restrict significantly the government’s ability to

delay the gui tam suit. See S. Rep. No. 345, 99th Cong.,

2d Sess., at 25 (1986) (“the court should carefully

scrutinize any additional government requests for exten-

sions by evaluating the government's progress with its

criminal inquiry”). In several cases, district courts have

refused to grant the government’s requests for extensions

sought to avoid interference with criminal investigations.

See Constitutionality of the Qui Tam Provisions of the

False Claims Act, 13 Opp. Legal Counsel 249, 1989

WL 418317, *9 (1989) (“Barr Op.”).

The relator’s pursuit of the case may alert potential

criminal targets to the existence of a criminal investiga-

tion, and may disclose key information including the

government’s litigation strategy. See id.; Gerson State-

ment at 8. In addition, the existence of the qui tam suit

may impair the government’s ability to negotiate a com-

prehensive settlement of civil and criminal charges. See

id.

* Alternative Remedies.

The relator’s initiation of suit under the FCA may pre-

vent or impair the government’s ability to resolve the

dispute with the defendant informally or on terms that

are better suited to the nature of the conduct at issue.

The relator may claim, for example, that the defendant

has incorporated product components different from those

specified in the contract. In such a case, the relator could

allege that the defendant made a claim for payment under

the contract knowing that it had not complied with the

precise terms of the contract, and therefore in violation of

the FCA. In this way, the relator may attempt to turn

even a minor breach of contract into a lawsuit claiming

treble damages and $10,000-per-occurrence penalties. The

fact that the substituted component actually works better

than the one specified in the contract is of no import to

the relator.

The government, however, may evaluate such a case

quite differently. The government may recognize that the

defendant has committed a technical breach of the con-

tract, but may view that breach as minor. The govern-

ment may determine that the government’s interest would

be better served by overlooking this breach, or by resolv-

ing the issue through informal discussions. The govern-

ment is likely to take this view when the basic intent of

the contracting parties has been met, despite the defend-

ant’s technical breach. This is particularly true when

the government has a strong interest in preserving a use-

ful course of dealing with the defendant, as where the

defendant is one of a limited number of parties qualified

to supply specialized military products. See Barr Op. at

*Fi,

Relators’ pursuit of this type of case likely will adversely

affect relations between the government and contractors.

A contractor may be less likely to disclose to the govern-

1 See 5 U.S.C. §§ 571 et seq. (facilitating alternative dispute res-

olution for disputes involving government).

9

ment a mistake or the substitution of a component if the

contractor knows that the approval of a government

representative cannot be relied upon, and that a qui tam

lawsuit could be brought. This result undermines the

government's efforts to encourage informal working part-

nerships between the contracting agencies and defense

contractors. Similarly, a government representative may

be less likely to overlook or compromise a mistake or to

allow a product substitution when that decision will be

examined and second-guessed by a relator and a court

after the fact. The result is that contractors and the gov-

ernment are likely to be less forthcoming and more rigid

in their dealings, undermining the efficient management

and administration of government contract programs.

See id.

* Prosecutorial Discretion.

Relators initiate lawsuits under the FCA in cases where

the government, in the exercise of prosecutorial discre-

tion, would decline to bring suit. The relator may sue a

deep-pocket company in a case in which the government

would decline to sue because the company has fired the

individual responsible for the wrongdoing, see Barr Op.

at *9, or because the company has taken satisfactory

corrective action including voluntary restitution to the

government.

United Sta ex rel. Rohan v. Newbert, No. 92-55546

(9th Cir.), i — @ of many examples. In Rohan, a Litton

employee embezzled funds from the Company. When the

government alerted Litton to this conduct, Litton co-

operated with the government agents in gathering infor-

mation that was used in a successful criminal prosecution

of the employee, and Litton made necessary accounting

adjustments so the government did not bear the loss of

the embezzled funds. The government chose to take no

action against Litton, given that Litton was the victim of

the embezzlement, had cooperated in the investigation,

and had taken satisfactory corrective action. Another

former Litton employee, however, brought a qui tam

10

claim against Litton based on each claim for reimburse-

ment to the government that incorporated the embezzled

amounts. Litton prevailed on a motion for summary

judgment and on appeal, but only after expending a large

amount of money and time defending a suit that never

should have been brought. Had the government been able

to exercise its prosecutorial discretion, the case would not

have been filed.

Another factor influencing prosecutorial discretion is

whether the facts of the case are well-suited to litigating

novel legal principles. The government may decide that

the facts frame the legal issue in a way that is likely to

produce an unwelcome precedent, and therefore may

choose to await another case in which to attempt to estab-

lish the principle. The relator, however, lacks this broad

view. This problem is compounded by the fact that

counsel for the relator may be less qualified to advocate

these legal positions. Accordingly, relators’ prerogative

to institute suit may produce a body of law that under-

mines the government’s continuing interests.

* Claims the Relator Cannot Prove.

A government prosecutor is to refrain from pursuing a

case that is not supported by probable cause. ABA

Model Rules of Professional Conduct, Rule 3.8.° A re-

lator, however, does not operate under such. constraint.

2 Although the ABA Rule specifically addresses criminal cases,

it articulates considerations applicable to all enforcement actions

brought in the name of the government, whether criminal or civil.

Moreover, this Court has held that the extraordinarily harsh reme-

dies authorized by the False Claims Act can constitute “penalties”

under the Double Jeopardy Clause, United States v. Halper, 490

U.S. 435 (1989), and other courts similarly have determined that

the Act should be viewed as a criminal or penal statute. United

States v. Bornstein, 423 U.S. 303, 313 n.8 (1976) (False Claims

Act must be construed as “ ‘the provisions of a criminal statute

[and] [s]luch provisions must be carefully restricted’” (citation

omitted) ) ; United States ex rel. Brensilber v. Bauch & Lomb Opti-

cal Co., 181 F.2d 545, 547 (2d Cir. 1942) (False Claims Act “is not

only penal, but drastically penal’), aff'd per curiam, 320 U.S. 211

(1943).

11

A relator may file suit even when the prospects for suc-

cess are small, because the recovery if that chance ma-

terializes is so large. Even if the relator knows that the

case is weak, he or she may file suit in the hope of sur-

viving motions and reaching a jury—because who knows

what an inflamed jury might award? This is not, and

should not be, the manner in which the government de-

cides whether to bring an enforcement action under a

penal statute such as the FCA. Moreover, there is no

effective deterrent even to baseless suits by qui tam re-

lators. The threat of sanctions for a frivolous action is

not taken seriously by most relators, who have few assets

with which to pay such an award. Compared to the tan-

talizing prospect of a huge recovery Or even a nuisance

settlement, the availability of such sanctions is not an

effective check on baseless lawsuits.

In addition, relators frame the allegations of their com-

plaints as broadly as possible in order to maximize poten-

tial recovery. See Gerson Statement at 18 (referring to

the “uncomfortable number” of “ ‘kitchen sink’ complaints

containing every conceivable broad allegation without any

specific evidence whatsoever”). Such blunderbuss plead-

ing is dangerous not only because it introduces baseless

claims, but also because it encompasses (sometimes acci-

dentally) potentially valid claims that the relator is un-

able to prove. Because any settlement or judgment will

bind the government as a matter of res judicata even when

the government does not intervene, relators’ interest in

expansive allegations can foreclose the government'’s future

ability to pursue legitimate claims. See Barr Op. at *10.

Defendants typically win these baseless lawsuits, but at

great cost in terms of money and time. Defendants still

must hire counsel, investigate the facts, file motions, and

sometimes engage in discovery. Even when the case is

frivolous, the stakes are enormous, and defendants must

take seriously any case brought under the FCA. As a

result, an inordinate amount is spent on litigation that

would be avoided if the government were in control of

the initiation of lawsuits under the FCA. As mentioned

12

above, the amici filing this brief have collectively spent

over $21.6 million on legal fees defending cases brought

by qui tam relators in which the government has declined

to intervene.

* * * *

The government could attempt to prevent relators from

proceeding with some of these types of cases by interven-

ing and requesting dismissal at the outset of the case.

Under the FCA, however, the government must obtain

court approval to dismiss. Id. § 3730(c)(2)(A). The

relator can oppose the government’s motion, leaving the

court to decide which “representative” of the government

should prevail. The relator can thereby force a case to

go forward even when the government asks that it be

dismissed.

This procedure, moreover, is not an effective substitute

for the government’s traditional prerogative to decide

whether to bring suit. When the government declines to

initiate suit because the evidence is ambiguous, because

of countervailing government interests, or because of thé

cooperation of the potential defendant, it need not articu-

late or defend these reasons outside of the Executive

Branch. It is quite a different matter for the government

to justify in a public forum the dismissal of a case that

already has been brought in its name. In order to request

dismissal, the government must be willing to expend sig-

nificant resources to engage in an adversary proceeding

with a relator. It also must be willing to subject its

prosecutorial reasoning to public scrutiny. Many in Con-

gress and the press are of the view that every allegation

of fraud on the government should be pursued with ex-

treme vigor. These individuals are poised to attack the

Executive upon the slightest indication that the pursuit

of fraud claims is being cut off.

The government almost never moves to dismiss cases

that it would not have brought in the exercise of its dis-

cretion. The government frequently has declined to in-

tervene to request dismissal, even in cases where the

ee

13

government has found “insufficient evidence” to support

the allegations—_of the complaint.*—Indeed,- in the- seven

years since the amendments expanding the FCA, amici

are aware of only one case in which the government has

intervened and requested dismissal.‘

2. The Qui Tam Relator’s Control Over The Forum.

The FCA authorizes qui tam relators to bring suit in

an appropriate District Court. 31 U.S.C. § 3730(b). In

many instances, this undermines the Statutory regime for

resolution of government contract disputes by the Boards

of Contract Appeals and the United States Court of

Federal Claims. These are expert forums specifically

designated to consider and decide issues of public con-

tract interpretation. 41 U.S.C. $§ 606, 609. Appeal from

both the Boards of Contract Appeals and from the Court

of Federal Claims is to the Court of Appeals for the

Federal Circuit. /d. § 607(g); 28 U.S.C. § 1295(a) (3).

The statutory scheme is designed to ensure expertise in

the adjudicative bodies and uniformity in the develop-

ment of public contracts law.

The FCA, however, undermines this carefully designed

statutory scheme by permitting relators to bypass the

administrative mechanism and bring suit directly in Dis-

trict Court. The defendant and the government thereby

are deprived of the benefit of the expertise of the Boards

of Contract Appeals and the Court of Federal Claims.

District Courts, which seldom deal with government con-

tract disputes, are more likely to decide them in a manner

at variance from the intentions and practices of the de-

fendant and the government. In addition, District Courts

in different jurisdictions may decide similar contract dis-

putes in different ways, thus producing conflicting decision-

3 See DOJ Press Release No. 88-518 (regarding United States

ex rel, Stillwell v. Hughes Helicopter Co., Inc., et al.)

4 Juliano v. Federal Asset Disposition Ass’n, 736 F. Supp. 348

(D.D.C. 1990). There, the government intervened to request dis-

missal only of a federal governmental agency and individuals acting

in their official capacity.

14

making that is particularly inappropriate for government

contracts.

If the gui tam provisions of the FCA did not exist,

the Executive would weigh these considerations against

the appropriateness of seeking recovery under the FCA

in each case. The relator, however, has no interest in

these competing factors, but desires only to obtain the

greatest and fastest monetary recovery. Although the

government may pursue administrative or other remedies

while the qui tam action is pending, 31 U.S.C. § 3730

(c)(5), the statute does not require the qui tam suit to

be stayed in the meantime.

3. The Qui Tam Relator’s Conduct Of The Case.

Once the government declines to intervene in a case

instituted by a gui tam relator under the FCA, the gov-

ernment is unable to control the relator’s day-to-day

management of the case. “If 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). The lack of Executive control

over the conduct of the litigation brought on behalf of the

government produces serious problems for both the gov-

ernment and private defendants.

The relator is free to adopt legal positions in the litiga-

tion that are at odds with the positions that the Executive

has taken or would take. For example, the relator may

advocate an interpretation of a term of a contract between

the defendant and the government that is contrary to the

view taken by both the defendant and the government.

See, e.g., United States ex rel. McCoy v. Seaward Marine

Services, Inc., 1992 U.S. App. Lexis 17979 at *10-11

(4th Cir. 1992). The defendant in such cases is required

to finance the defense of a case brought on a theory that

both contracting parties agree is unfounded.

Alternatively, the relator may put forth a view of the

contract that the government has not considered. The

relator’s advocacy of such positions in the litigation (e.g.,

15

in responses to interrogatories or requests for admission)

could be argued to bind the government with respect to

the future administration of this and similar contracts,

At a minimum, the defendant that continues to pursue a

conflicting contractual interpretation is at peril of con-

tinuing liability. Moreover, the court or a jury will decide

whether the relator’s view of the meaning of the contract

is correct. This resolution will bind the government and

the contractor through the operation of res judicata. See

S. Rep. 345, 99th Cong., 2d Sess. 27: Barr Op. at *8.

Accordingly, private Parties and the government may be

required to modify the administration of the contract,

even though that result was not intended and is not de-

sired by either of the contracting parties, because of the

relator’s intermeddling.

The government lacks any effective means of control-

ling these abusive tactics by relators. The government’s

ability to file amicus briefs in support of defendants’ posi-

tions is not an effective remedy. In order to Participate

in this manner, the government would be required to

conduct a detailed review of all pleadings filed by every

relator. Government attorneys would be required to at-

tend all court hearings and trials at which relators’ counsel

might make arguments with which the government dis-

agrees. The government simply lacks the resources to

monitor qui tam litigation in this manner. Indeed, the

lack of government resources was used in Congress to

justify expansion of the qui tam provisions in 1986.

Finally, even when the government does participate as

amicus, the court may reject the views expressed by the

Executive and adopt those advocated by the relator.

This result would be avoided if the Executive and the

defendant were the only parties to the litigation.

As a more extreme measure, the government could

move to intervene if it recognizes that the relator’s man-

agement of the case threatens the government’s interests.

Yet this course of action also is ineffective. The statute

only authorizes the government to ask the court to limit

the realtor’s participation when it is repetitious, irrelevant,

16

or for purposes of harassment, as for example by limiting

the number of witnesses, limiting the length of testimony,

or limiting cross-examination. 31 U.S.C. § 3730(c)(2)

(C). There is no provision permitting the government to

ask the court to limit the /egal arguments that the relator

can assert.

Conceivably, the government could move to intervene

and to dismiss the case, but this is even more unlikely

than intervention and dismissal at the outset of the case.

Moreover, when the government elects not to intervene

at the outset of the litigation. the court may permit the

government to intervene later “without limiting the status

and rights of the person initiating the action.” § 3730

(c)(3). It has been argued that this provision means

that the government cannot later intervene for the purpose

of dismissing the action. See Blanch, supra, 16 Harv.

J. L. Pub. Pol. at 708.

Relators’ control over the management of litigation

can produce adverse effects apart from the advocacy of

legal positions contrary to those that are or would be

asserted by the government. Relators often demand to

obtain the government’s investigative files and to interview

or depose the government’s investigators and other wit-

nesses. Such conduct interferes with the government’s

investigative process, and diverts the valuable time and

attention of government employees. See Barr Op. at *10.

In addition, relators without required clearances may

demand the production of classified documents, compro-

mising the government’s interest in preserving the secrecy

of such material.°

5 For example, in United States ex rel. Truong v. Northrop Corp.,

CV 88-967 MRP (C.D. Cal.), a qui tam case in which the govern-

ment declined to intervene, the Court ordered Northrop to produce

certain documents to the relator, including classified materials.

Thereafter, an Air Force officer wrote to Northrop to advise of

“Northrop’s obligation under the contract and the law to not turn

over classified information or documents.” See also United States

ex rel. Grand v. Northrop, No. C-1-91-222 (S.D. Ohio), where the

government moved to intervene to ask for reconsideration of the

ia dacane etait eaten

17

Relators have gone much further in their “discovery”

efforts. Some employee-relators have stolen confidential

documents from the defendant for use in the litigation (and

claimed that such conduct was protected by the whistle-

blower provision of the FCA, 31 U.S.C. § 3730(h) ).

Such conduct in furtherance of an action “for the United

States government,” § 3730(b), would not be counte-

nanced by the government.

4. The Qui Tam Relator’s Control Over The Termi-

nation Of Litigation.

Qui tam relators’ control over the termination of liti-

gation under the FCA also reflects the unconstitutional

evisceration of Executive control, and produces severe

practical consequences for private defendants.

Neither the relator nor the government has the ability

unilaterally to settle a case under the FCA. A defendant

cannot settle the case with the relator alone. The govern-

ment must be advised of the settlement, and may object

to it. The FCA provides that a case brought by a relator

under the FCA canont be dismissed without the consent

of the court and the AG. 31 U.S.C. § 3730(b)(1). On

the other hand, a defendant cannot settle with the govern-

ment alone. A settlement between the defendant and the

government is not effective unless the relator’s objections

are heard and the court finds that the settlement is “fair,

adequate, and reasonable.” 31 U.S.C. § 3730(c)(3)(B).

Court approval, moreover, is not a foregone conclusion

where the relator claims the settlement is inadequate. In

Gravitt v. General Electric Co., 680 F. Supp. 1162 (S.D.

Ohio), cert. denied, 488 U.S. 901 (1988), for example,

the court disapproved a settlement between the govern-

ment and the defendant (which the relator had opposed)

because it found the government’s investigation to be

inadequate. A few years arid many litigation dollars

Court’s order that Northrop produce classified documents to the

qui tam relator.

18

later, the case settled for the same figure. See Barr Op.

at *10.°

As a practical matter, therefore, the structure of the

FCA requires the defendant to negotiate a settlement with

both the government and the relator. This is often ex-

tremely difficult, because the interests of the government

and the relator directly conflict. The defendant typically

is willing to pay a fixed sum to settle the case, but is

indifferent as to how that sum is allocated. The govern-

ment wishes to maximize recovery to the federal Treasury

by minimizing e recovery of the relator, and therefore

argues that the payment is mostly attributable to the

government’s claims. The relator, on the other hand,

wishes to maximize his or her personal recovery, and

therefore argues that a large portion of the payment is

attributable to his or her “personal” claims, such as

claims for workplace harassment under 31 U.S.C. § 3730

(h), or for attorney’s fees." The defendant is caught in

this crossfire. The result is cases in which all parties

agree on the sum the defendant shouid pay to settle, but

the case cannot settle because the parties disagree on how

it should be allocated. This problem is even more severe

where the government asserts the right to veto a settle-

ment between the defendant and the relator without ac-

tually intervening to take over the pursuit of the case.

In that situation, neither the defendant, nor the relator,

6 The requirement of court approval of a settlement between the

government and a private party is itself an unconstitutional restric-

tion on Executive authority. The qui tam relator brings a claim on

behalf of the government. The government, as the owner of the

claim, should have the prerogative to settle it with the defendant.

The FCA’s restriction of the Executive’s prerogative to settle its

own claims creates an unprecedented judicial intrusion into the

President’s judgment. See Barr Op. at *10 & n.7.

7 See Gerson Statement at 22 (reporting that, wh’le the federal

Treasury has received only $225,000 in connection with qui tam

cases in which the DOJ has declined to intervene, private plaintiffs

have structured settlements so that they and their attorneys have

received, or have requested the DOJ to approve, more than $6.1

million in additional payments).

19

nor the government wish to pursue the case, but the case

cannot settle.*

II. THE COURT SHOULD CONSIDER THESE IMPOR-

TANT CONSTITUTIONAL QUESTIONS AT THIS

TIME.

This case presents an unusual opportunity for the Court

to address the important constitutional defects of the

FCA. The Court may not soon have another such op-

portunity, because few qui tam cases reach the Courts of

Appeals. Most cases brought by relators are won by de-

fendants, or are settled before trial. See California Law-

yer, December 1993, at 40 (comments of Stuart Gerson).

If the Court were to decline to grant the writ in this

case, the delay in this Court’s resolution of the constitu-

tional issues would harm the public greatly. As noted

above, there are significant costs in terms of money and

time of defending cases brought by relators under the

FCA. in contrast to these significant costs imposed by

qui tam litigation under the FCA, the benefits to the fed-

eral Treasury are minimal. From 1986 through 1991,

there were about 265 qui tam cases in which the govern-

ment declined to intervene. See Gerson Statement at 19.

The federal Treasury has received only $225,000 in all

of these cases combined, or less than $1,000 per case on

average. Id. at 6. This compares to $150 million re-

covered in gui tam cases in which the government has

intervened, and over $1 billion in total fraud recoveries.

Id. at 7.

The adverse effects resulting from the lack of Execu-

tive control over the initiation and conduct of litigation

under the FCA are particularly severe in the wake of

layoffs resulting from the restructuring of the defense

industry. Former employees often are left without ready

job prospects, and are easily tempted by the prospect of

a big judgment against their former einployers. Plaintiffs’

8 See United States ex rel. Killingsworth v. Northrop Corp., No.

93-55863 (9th Cir.)

20

attorneys are ready to exploit this market. These attor-

neys are turning increasingly to the FCA as a lucrative

adjunct to traditional wrongful termination claims, par-

ticularly in light of the restrictions imposed by State

courts on tort recove y for employment terminations. In

short, gui tam claims are booming in proportion to the

contraction of the defense industry.

The Ninth Circuit’s ruling in this case, unless reviewed

by this Court, will definitively foreclose this constitu-

tional challenge to qui tam litigation under the FCA in

all cases brought in West Coast states. Becausc many

defense contracto’s (including each of the amici) have

a major presence on the West Coast and have laid off

many employees in those states. the effect of the Ninth

Circuit’s ruling is severe. It will require the defense in-

dustry to spend millions of dollars defending cases

brought under an unconstitutional provision. These are

cases that would not have been brought or pursued if the

FCA permitted the degree of Executive control over this

type of litigation that the Constitution requires.

—— CONCLUSION

For the foregoing reasons, the Court should grant the

petition for certiorari.

Respectfully submitted,

CAROLYN B. KUHL *

HENRY WEISSMANN

MUNGER, TOLLES & OLSON

355 South Grand Avenue

Thirty-Fifth Floor -

Los Angeles, California 90071

(213) 683-9100

Counsel for Amici Curiae

January 14, 1994 * Counsel of Record