Petition for Writ of Certiorari — United States v. SCS Business & Technical Institute, Inc.
Supreme Court brief2000
Ask Donna
What actually matters in this document.
Text
\ Supreme Court, U.S.
iP
FILED
99 21S Au 2 1999
No.
OFFICE OF THE CLERK
In the Supreme Court of the Anited States
UNITED STATES OF AMERICA, PETITIONER
Vv.
SCS BUSINESS & TECHNICAL INSTITUTE, INC., ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT -
PETITION FOR A WRIT OF CERTIORARI
SETH P. WAXMAN
Solicitor General
Counsel of Record
DAVID W. OGDEN
Acting Assistant Attorney
General
BARBARA D. UNDERWOOD
Deputy Solicitor General
MALCOLM L. STEWART
Assistant to the Solicitor
General
MICHAEL F. HERTZ
DOUGLAS N. LETTER
JOAN E. HARTMAN
T. REED STEPHENS
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
‘ae AANA EAE Ne RN ASN LAAN CICA SEE AREER ANAT IRIN IER I aS
QUESTION PRESENTED
Whether a State or state agency is a “person” subject
to suit under the False Claims Act, 31 U.S.C. 3729 et
seq.
(I)
II
PARTIES TO THE PROCEEDINGS
The United States of America, represented by the
Attorney General of the United States, was an inter-
venor in the court of appeals and is the petitioner in this —
Court. The State of New York was an appellant/cross-
appellee in the court of appeals. The United States of
America ex rel. Ronald E. Long was an appellee/cross-
appellant in the court of appeals. Joseph P. Frey was an
appellant in the court of appeals. The following parties
were defendants in the district court and were treated
as appellees by the court of appeals: SCS Business &
Technical Institute, Inc.; Kamal Alsultany; Mohammed
(“Michael”) Alharmoosh; Sylvana Alharmoosh; Margue-
rite Alsultany; Casablanca Resorts Development of
Anguilla, Ltd.; Casablanca Resorts, Ltd.; Intervest
International Holding Corp.; and Intervest Holding
Corp.
TABLE OF CONTENTS
Opinion below ...........ss0:00000 pelememtionamniin
ASEAN SR LIC oe ROT
Constitutional and statutory provisions involved
Statement .............0000
eeeerereeseseesees
RITE ccmmnnnmnnmnnnmnnniimmmmmmenen
LI ET
eeecceeeeecrescees
TABLE OF AUTHORITIES
Cases:
Vermont Agency of Natural Resources v.
United States ex rel. Stevens, cert. granted,
No. 98-1828 (June 24, 1999)
Se eeeccerecesecces
Constitution and statutes:
8 eS ¢
False Claims Act, 31 U.S.C. 3729 et seq. ............
I lac terastnasiridheianianasiseainetiinnnt
ee
Seeeesceeceesesses
Seeeeceseeseescese
31 U.S.C. 3729(a)(1) ....
BL U.S.C. STZOANZ)H(T) ~-eorcverrcvverveseresvveeseveve
et EE: STEIN siinesinsindionsenieanseieevsiemnesinnsonne
Ot |
Be CIN erneecrensemevesioneniteenmeniens
31 U.S.C. 3730(c)(3) ....
Peereseccoresese
Seeeerecccecsrcees
Seeeereeseccsecess
Ee |
28 U.S.C. 2408(8) cecscceecceccceveerveeveeceeeeeeccc. ty
Peeerececcecseseees
(III)
*
a
EPWwWNwWwwwwnwnor wo Pp
In the Supreme Court of the United States
No.
UNITED STATES OF AMERICA, PETITIONER
Vv.
SCS BusINESS & TECHNICAL INSTITUTE, INC., ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
The Solicitor General, on behalf of the United States
of America, petitions for a writ of certiorari to review
the judgment of the United States Court of Appeals for
the District of Columbia Circuit in this case.
OPINION BELOW
The opinion of the court of appeals (App., infra, 1a-
42a) is reported at 173 F.3d 870. A supplemental
opinion of the court of appeals (App., infra, 43a-60a) is
reported at 173 F.3d 890. The opinion of the district
court (App., infra, 61a-103a) is reported at 999 F. Supp.
78.
JURISDICTION
The judgment of the court of appeals was entered on
April 2, 1999. On June 17, 1999, the Chief Justice ex-
tended the time for filing a petition for a writ of certio-
(1)
2
rari to and including August 2, 1999. The jurisdiction of
this Court is invoked under 28 U.S.C. 1254(1).
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
1. The Eleventh Amendment to the United States
Constitution provides:
The Judicial power of the United States shall not be
construed to extend to any suit in law or equity,
commenced or prosecuted against one of the United
States by Citizens of another State, or by Citizens
or Subjects of any Foreign State. |
2. Section 3729(a) of Title 31, United States Code,
provides in pertinent part:
False claims
(a) LIABILITY FOR CERTAIN ACTS.
—Any person who-
(1) knowingly presents, or causes to be
presented, to an officer or employee of the
United States Government or a member of the
Armed Forces of the United States a false or
fraudulent claim for payment or approval;
* * * * *
is liable to the United States Government for a
civil penalty of not less than $5,000 and not more
than $10,000, plus 3 times the amount of damages
which the Government sustains because of the act
of that person.
STATEMENT
1. The False Claims Act (FCA), 31 U.S.C. 3729
et seq., prohibits any “person” from “knowingly
present[ing], or caus[ing] to be presented, to an officer
or employee of the United States Government or a
member of the Armed Forces of the United States a
false or fraudulent claim for payment or approval.” 31
U.S.C. 3729(a)(1). The FCA also prohibits a variety of
related deceptive practices involving government
funds and property. 31 U.S.C. 3729(a)(2)-(7). A
“person” who violates the FCA “is liable to the United
States Government for a civil penalty of not less than
$5,000 and not more than $10,000, plus 3 times the
amount of damages which the Government sustains.”
31 U.S.C. 3729%(a).
Suits to collect the statutory penalties may be
brought either by the Attorney General, or by a private
person (known as a relator) in the name of the United
States, in an action commonly referred to as a qui tam
action. See 31 U.S.C. 3730(a) and (b)(1). When a qui
tam action is brought, the government is given an
opportunity to intervene to take over the suit. 31
U.S.C. 3730(b)(2) and (c)(3). If the government declines
to intervene, the relator conducts the litigation. 31
U.S.C. 3730(c)(3). If a qui tam action results in the re-
covery of civil penalties, those penalties are divided
between the government and the relator. 31 U.S.C.
3730(d).
2. The instant case involves a qui tam action filed by
Ronald E. Long, a former employee of the State of New
York. The defendants (respondents in this Court)
included, inter alia, the State of New York and a state
official. The state defendants moved to dismiss the
claims against them on various grounds.
4
The district court denied the state defendants’
motion to dismiss the qui tam claims against them.
App., infra, 61a-103a. The district court “rejectied])
New York’s argument that the Eleventh Amendment
bars an FCA action against a state.” Id. at 68a. The
court explained that “(t]he Eleventh Amendment is
not a bar to an FCA action because the United States
is always the plaintiff in a qui tam action and the
Eleventh Amendment does not prohibit suits by the
United States against States in federal court.” Jbid.
The court also held that a State is a “person” subject to
potential FCA liability under 31 U.S.C. 3729. App.,
infra, 69a-73a.
3. The State of New York filed an interlocutory
appeal, contending that it is not a “person” subject to
liability under the FCA, and that a qui tam suit against
it is barred by the Eleventh Amendment. The United
States government, represented by the Attorney
General, intervened pursuant to 28 U.S.C. 2403(a) to
defend the constitutionality of the FCA’s qui tam
provisions. See App., infra, 5a. The court of appeals
reversed the decision of the district court, holding that
a State is not a “person” within the meaning of Section
3729(a). Id. at la-42a. Although the court did not
squarely decide whether qui tam suits against state
defendants would violate the Eleventh Amendment, its
interpretation of Section 3729(a) was based in part on
the principle that ambiguous statutory provisions
should be construed in a manner that avoids substantial
constitutional questions. Jd. at 34a-42a.'
' The court of appeals subsequently issued a supplemental
opinion explaining the court’s determination that it was not re-
quired to resolve the Eleventh Amendment question before ad-
5
ARGUMENT
On June 24, 1999, this Court granted the petition for
a writ of certiorari in Vermont Agency of Natural
Resources v. Uniied States ex rel. Stevens, No. 98-1828.
The first question presented in that case is “[w]hether a
State is a ‘person’ subject to liability under 31 U.S.C.
3729(a) of the False Claims Act.” 98-1828 Pet. at i
The petition explains that the Second Circuit’s resolu-
tion of that interpretive question in Vermont Agency of
Natural Resources conflicts directly with the D.C.
Circuit’s decision in the instant case. See 98-1828 Pet.
at 7-12.
As our response to the certiorari petition in Vermont
Agency of Natural Resources explains (98-1828 U.S.
Br. at 11-13), the position of the United States is that a
State or state agency is a “person” subject to potential
FCA liability under 31 U.S.C. 3729(a). The Court’s de-
cision in Vermont Agency of Natural Resources will
very likely affect the proper disposition of the instant
case. The petition for a writ of certiorari should there-
fore be held pending this Court’s decision in Vermont
Agency of Natural Resources and then disposed of as
appropriate.
dressing the issue of statutory construction. See App., infra, 48a-
60a.
2 Vermont Agency of Natural Resources also presents the
question “[w]hether the Eleventh Amendment precludes a private
relator from commencing and prosecuting a False Claims Act suit
against an unconsenting State.” 98-1828 Pet. at i.
mr)
CONCLUSION
The petition for a writ of certiorari should be held
pending this Court’s decision in Vermont Agency of
Naiural Resources v. United States ex rel. Stevens, No.
98-1828, and disposed of as appropriate in light of the
resolution of that case.
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
DAVID W. OGDEN
Acting Assistant Attorney
General
BARBARA D. UNDERWOOD
Deputy Solicitor General
MALCOLM L. STEWART
Assistant to the Solicitor
General
MICHAEL F. HERTZ
DOUGLAS N. LETTER
JOAN E. HARTMAN
T. REED STEPHENS
Attorneys
AUGUST 1999
APPENDIX A
UNITED STATES COURT OF APPEALS
DISTRICT OF COLUMBIA CIRCUIT
Nos. 98-5133, 98-5149 AND 98-5150
UNITED STATES OF AMERICA, EX REL.
RONALD E. LONG, APPELLEE/CROSS-APPELLANT
Vv.
SCS BUSINESS & TECHNICAL
INSTITUTE, INC., ET AL., APPELLEES
STATE OF NEW YORK, APPELLANT/CROSS-APPELLEE
Vv.
ATTORNEY GENERAL OF THE UNITED STATES,
INTERVENOR
[Argued Jan. 14, 1999
Decided April 2, 1999]
OPINION
Before: WALD, SILBERMAN, and SENTELLE, Circuit
Judges.
Opinion for the Court filed by Circuit Judge
SILBERMAN.
(la)
2a
SILBERMAN, Circuit Judge:
The question presented in this appeal is whether
states are defendant persons under the False Claims
Act. Contrary to the decisions of the Second and Eighth
Circuits, see United States ex rel. Stevens v. Vermont
Agency of Natural Resources, 162 F.3d 195 (2d Cir.
1998); United States ex rel. Zissler v. Regents of the
Univ. of Minn., 154 F.3d 870 (8th Cir.1998), we hold
that they are not.
I.
Ronald Long was the Coordinator of Investigations
and Audit for the Bureau of Proprietary School Super-
vision of the New York State Department of Education,
the state agency that regulates proprietary schools. In
1989, he conducted an investigation of SCS Business
and Technical Institute, which operates five business
and technical schools in New York City, and discovered
that SCS allegedly had made false and fraudulent
claims to the federal government in return for federal
funding for students attending SCS schools under
tuition assistance programs. He also determined, ac-
cording to his complaint subsequently filed in district
court, that Joseph P. Frey, his supervisor at the
Bureau, and other officials in the State Department of
Education, knew about SCS’ fraudulent claims and
conspired with SCS to conceal the fraud in order to
secure further federal funding for SCS. They did so
because, after a 1990 change in New York State law,
the Bureau’s funding depended in substantial part on
tuition assessments and fines that SCS paid to the
Bureau. Long’s theory was that since the Bureau re-
ceived a share of the federal funds that SCS fraudu-
lently obtained from the United States, the Bureau had
sitieiiiiiinaiaiilaiiiiasiaaaiaa iin
3a
every incentive to see that fraud continue. He claims
that after he reported the results of his investigation to
state and federal authorities, Frey and other state
officials took actions to limit and subvert his investi-
gation.
Long was taken off the investigation and then fired in
1992, shortly after SCS settled administrative charges
brought against one of SCS’ schools by the state educa-
tion department. According to him, the settlement
agreement, which did not benefit the United States in
any way and grossly understated the extent of SCS’
fraudulent practices, was a sweetheart deal that was
but another instance of the state’s conspiracy with SCS
to conceal and perpetuate SCS’ fraud—a conspiracy
that he alleges continued until SCS filed for bankruptcy
in 1995. He alleges that after the settlement, New
York ignored evidence of SCS’ continuing fraud and
falsely represented to the United States that SCS’
fraud had ceased and that it was actively monitoring
SCS.
Long filed a complaint in the district court against
Frey, other state officials, the State of New York, SCS,
and various SCS officials. He brought his case as a qui
tam relator under the False Claims Act, 31 U.S.C.
§§ 3729 et seq. (1994), suing in the name of the United
States for the benefit of the United States and himself.
He contended that the state defendants violated the
Act by conspiring with SCS to have false claims
submitted to the United States and by causing false
claims to be submitted. The state defendants were also
alleged to have violated the whistle-blower provision of
the Act by harassing and wrongfully discharging Long,
and to have been unjustly enriched under state common
4a
law. The United States (the government) subsequently
intervened in the case against the SCS defendants, but
declined to intervene against the state defendants. The
state defendants moved to dismiss the complaint on the
grounds that states are not defendant persons under
the Act and that, even if they were, the Eleventh
Amendment to the United States Constitution would
bar the suit. It was also asserted that Long’s suit
against the state defendants was barred by the Act
because the allegations of fraud had been publicly dis-
closed and because Long was not an “original source” of
the information.
The district court denied in part the state defendants’
motion to dismiss, concluding that states are defendant
persons under the Act and that the Eleventh Amend-
ment does not bar the suit. See United States ex rel.
Long v. SCS Bus. & Technical Inst., 999 F. Supp. 78
(D.D.C. 1998).' The state defendants filed an interlocu-
tory appeal challenging the district court’s rejection of
their Eleventh Amendment defense, over which we
have jurisdiction under 28 U.S.C. § 1291 (1994) and the
collateral order doctrine. See Puerto Rico Aqueduct &
Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 144-
45, 113 S. Ct. 684, 121 L.Ed.2d 605 (1993). We exercise
pendent appellate jurisdiction over the “inextricably
intertwined” statutory question, Gilda Marz, Inc. v.
Wildwood Exercise, Inc., 85 F.3d 675, 679 (D.C. Cir.
1 The district court granted the motion to dismiss Long’s
whistleblower and unjust enrichment claims, the former because
the Eleventh Amendment bars private suits brought against the
state (although it does not bar Long’s claim for prospective relief
against Frey, a state official), and the latter because Long has no
standing to assert the government’s claim of unjust enrichment
under state common law. See Long, 999 F. Supp. at 91-93.
5a
1996) (quoting Swint v. Chambers County Comm’n, 514
U.S. 35, 51, 115 S. Ct. 1203, 131 L.Ed.2d 60 (1995)), of
whether states are defendant persons under the Act.’
Thirty-six states join as amici curiae in support of
appellant New York’s statutory and Eleventh Amend-
ment arguments, and appellee Long, the relator, is
joined by the government as intervenor defending the
constitutionality of the Act.
Il.
To persuade us to uphold the decision below,
appellees Long and the government must demonstrate
that the district court correctly interpreted the term
2 The district court also concluded that Long’s suit was not bar-
red by the public disclosure and original source provisions of the
Act. See Long, 999 F. Supp. at 87-89. Although the parties chal-
lenge aspects of those rulings on appeal, we need not address them
further given our resolution of the case in favor of New York. We
also decline to exercise pendent appellate jurisdiction over the
statutory whistle-blower and constitutional claims against appel-
lant Frey in his individual capacity. Although these claims are not
foreclosed by anything in our opinion, they are not in any way
related to the Eleventh Amendment and statutory construction
questions that we decide today. And although an inextricable
relation between claims is not a necessary condition for pendent
appellate jurisdiction, see Jungquist v. Sheikh Sultan Bin Khalifa
Al Nahyan, 115 F.3d 1020, 1027 (D.C. Cir. 1997), and efficiency
interests might counsel in favor of resolving these claims now, we
could not possibly terminate the entire case against Frey—even if
we agreed with him—because Long also asserted § 1983 claims
against him that the district court did not dismiss and from which
Frey does not now seek to appeal. That, coupled with the other-
wise unappealable nature of the order as to Frey, a separate
appellant, see Gilda Marz, 85 F.3d at 678, and the presence of
factual disputes in the briefs on the “original source” and “public
disclosure” questions, see id. at 679, leads us to reject Frey’s re-
quest that we resolve these claims now.
6a
“person” (liable for making a false claim) in § 3729(a) of
the False Claims Act to include states.* In that respect,
they have no little burden because the statute does not
define the term “person” and, as the Supreme Court
has remarked before, “in common usage, the term ‘per-
son’ does not include the sovereign, [and] statutes em-
ploying the [word] are ordinarily construed to exclude
it.” Will v. Michigan Dep’t of State Police, 491 U.S. 58,
64, 109 S. Ct. 2304, 105 L.Ed.2d 45 (1989) (quoting
Wilson v. Omaha Indian Tribe, 442 U.S. 653, 667, 99 S.
Ct. 2529, 61 L.Ed.2d 153 (1979) (quoting United States
v. Cooper Corp., 312 U.S. 600, 604, 61 S. Ct. 742, 85
L.Ed. 1071 (1941))) (alteration in original); see also, e.g.,
Georgia v. Evans, 316 U.S. 159, 161-62, 62 S. Ct. 972, 86
L.Ed. 1346 (1942).‘
3 The statute provides, in relevant part:
(a) Liability for certain acts. Any person who—
(2) knowingly makes, uses, or causes to be made or
used, a false record or statement to get a false or fraudulent
claim paid or approved by the Government;
(3) conspires to defraud the Government by getting a
false claim allowed or paid . . . is liable to the United States
Government. .. .
31 U.S.C. § 3729 (1994).
4 As appellees observe, the Eighth Circuit rejected application
of this rule in interpreting the False Claims Act on the ground that
the presumption of sovereign exclusion applies only to the enacting
sovereign. See Zissler, 154 F.3d at 874. However, the Court in
Will applied this rule even though the enacting sovereign (the
United States) was different from the state sovereigns excluded
from the term person, see Will, 491 U.S. at 64, 109 S. Ct. 2304,
implicitly rejecting the Eighth Circuit’s position as it was then
ee
Ta
This “often-expressed understanding,” Will, 491 U.S.
at 64, 109 S. Ct. 2304, is not a “hard and fast rule of
exclusion,” Wilson, 442 U.S. at 667, 99 S. Ct. 2529
(quoting Cooper, 312 U.S. at 604-05, 61 S. Ct. 742), and
depends in important part on the “context, the subject
matter, legislative history, and executive interpreta-
tion,” id.—which sounds like rather garden variety
statutory interpretation. But if the Will-Wilson rule
has any meaning at all, it must create at minimum a
default rule; states are excluded from the term person
absent an affirmative contrary showing. See Inter-
national Primate Protection League v. Administrators
of Tulane Educ. Fund, 500 U.S. 72, 83, 111 S. Ct. 1700,
114 L.Ed.2d 134 (1991) (noting that the “conventional
reading” of person to exclude states may be “dis-
regarded” if there is an affirmative showing of Con-
gress’ intent to include them). This interpretive princi-
ple, the Supreme Court tells us, is “particularly applica-
ble” where, as here, “it is claimed that Congress has
subjected the states to liability to which they had not
been subject before.” Will, 491 U.S. at 64, 109 S. Ct.
2304; see also Wilson, 442 U.S. at 667, 99 S. Ct. 2529.
We think, therefore, that the district court had it back-
wards when it concluded that it found “no indication
that Congress sought to create an exception for state
actors to perpetrate fraud upon the federal government
Long, 999 F.Supp. at 85.°
articulated in Justice Brennan’s dissent, see id. at 73, 109 S. Ct.
2304 (Brennan, J., dissenting).
5 In reaching this conclusion, the district court was guided by
its assumption that the “clear statement” rule of Will, 491 U.S. at
65, 109 S. Ct. 2304, did not apply—an issue which we take up be-
low. But the district court incorrectly equated Will’s “clear state-
ment” rule with the traditional rule presuming that the term
8a
Our review of the “legislative environment,” Evans,
316 U.S. at 161, 62 S. Ct. 972, leads us to doubt
appellees have met their burden. As we noted, neither
the Act as currently written nor as originally passed in
1863 defines the term person. Indeed, the original Act
distinguished for punishment purposes between fraudu-
lent acts committed by “any person in the land or naval
forces of the United States,” Act of March 2, 1863, 37th
Cong., 3d Sess., ch. 67, § 1, 12 Stat. 696, and “any person
not in the military or naval forces of the United States,”
id. at § 3, 12 Stat. 698. Since states would not have
been thought to fall within either classification, that Act
can hardly be said to supply facially the requisite aff-
irmative showing that the Will-Wilson default rule
requires.°
person does not include states. Compare Will, 491 U.S- at 65 (clear
statement rule), with id. at 64, 109 S. Ct. 2304 (default rule that
person does not include states). Even if the former rule were not
implicated here, the latter rule—which all parties concede applies-
dictates a presumption opposite to the one the district court
applied.
6 The Second Circuit explained this problem away by reasoning
that the Congress’ undeniable intent to include military contrac-
tors in the Act refuted any attempt to read “persons not in the
military” as impliedly referring only to natural, as opposed to cor-
porate, persons. See Stevens, 162 F.3d at 205-06. The default rule
of statutory construction governing corporations as “persons,”
however, is precisely the opposite of the default rule that we must
apply in this case. See Wilson, 442 U.S. at 666, 99 S. Ct. 2529 (stat-
ing that the “word ‘person’ for purposes of statutory construction,
unless the context indicates to the contrary, is normally construed
to include” corporations). Since we must look for an affirmative
intent to include states, that contractors, under the default rule for
corporations, could have been thought to be “person([s] not in the
military” is hardly supportive of appellees’ case.
9a
Appellees nevertheless invoke the broad purposes
and legislative history of the Civil War statute. We
think that is not helpful because, as the Supreme Court
has said, Congress’ primary concern at the time—
admittedly not its exclusive one—was to put an end to
“frauds perpetrated by large [military] contractors
during the Civil War.” United States v. Bornstein, 423
U.S. 308, 309, 96 S. Ct. 523, 46 L.Ed.2d 514 (1976); see
United States ex rel. Graber v. City of New York, 8 F.
Supp.2d 348, 352 (S.D. N.Y. 1998).’ Appellees point to
the Supreme Court’s statement that Congress sought
to “reach all types of fraud, without qualification, that
might result in financial loss to the Government.”
United States v. Neifert-White Co., 390 U.S. 228, 232, 88
S. Ct. 959, 19 L.Ed.2d 1061 (1968) (holding that the
term “claim” was not limited to claims submitted for
payments due and owing from the government, but
included claims for favorable action by the government
upon applications for loans). But we think that descrip-
tion is too general—it was also made in an entirely dif-
ferent context—to answer the serious question whether
states were made potential defendants under the Act.
(According to appellees’ reasoning, foreign govern-
ments that entered into commercial dealings with the
United States would also be potential defendants.)
Similarly unpersuasive is the policy proposition put
forward by the Eighth Circuit, see Zissler, 154 F.3d at
874, that a truly effective anti-fraud statute would sub-
ject states to liability since states receive substantial
amounts of money from the federal government. See
also JOHN T. BOESE, CIVIL FALSE CLAIMS AND QUI
TAM ACTIONS, at 2-91 (1993) (stating that states can be
defendant persons because they are “major recipients
7 Of course, Stevens, not Graber, is Second Circuit law.
10a
of federal funds”). A court looks to legislative purpose
under the default rule in order to locate a congressional
intent “to bring state or nation within the scope of the
law,” Cooper, 312 U.S. at 605, 61 S. Ct. 742, not to
“engraft on a statute additions which [the court]
think[s] the legislature logically might or should have
made,” id. Even if one assumes that states commit a
good deal of fraud against the federal government, it
cannot seriously be argued that the very purpose of the
Act would be thwarted if states were not liable under
the Act. Compare California v. United States, 320 U.S.
577, 585, 64 S. Ct. 352, 88 L.Ed. 322 (1944).°
That takes us to the legislative history. Appellees
point us first to an 1862 House Committee Report that,
in discussing various frauds committed during the Civil
War, referred to certain state officials that had used
war contracts for personal profit. See H.R. REP. No. 2,
37th Cong., 2d Sess., at xxxviiixxxix (1862). But the
report specifically stated that these examples of fraud
were not committed against the United States govern-
ment. See id. at xxxviii. So the prior report is a rather
8 In Zissler, 154 F.3d at 874, the Eighth Circuit relied on
United States v. California, 297 U.S. 175, 186, 56 S. Ct. 421, 80
L.Ed. 567 (1936), for the proposition that it would be a mistake to
exclude the states from an “act of Congress, all-embracing in scope
and national in its purpose, which is as capable of being obstructed
by state as by individual action,” id. But the Supreme Court made
that statement only after it had “fairly . . . inferred” that the
purpose of the Federal Safety Appliance Act, albeit implicit, was to
subject state-run railroads to liability. See id. If the mere use of
the term person in a broad statute with national purposes, which
states were equally capable of violating, were sufficient to bring
the states within the statute’s scope, the interpretive rule pre-
suming the opposite would be largely ineffectual, if not wholly
eviscerated.
a
lila
tenuous link to the Act Congress passed one year later.
But see Stevens, 162 F.3d at 206 (concluding that “it is
difficult to suppose” that Congress “had forgotten the
results of this extensive investigation” when it passed
the False Claims Act) (emphasis added). Even if there
were a stronger tie, the Supreme Court has held that
legislative history indicating an intent to impose liabil-
ity on state officials is not evidence of an intent to
subject the states themselves to liability. See Will, 491
U.S. at 68-69, 109 S. Ct. 2304. The bottom line is that
appellees have not pointed to anything in the legislative
history of the 1863 Act, or in the events leading up to it,
indicating that Congress actually contemplated impos-
ing liability on the states.
Because the enacting Congress’ intent is, to be
charitable, rather opaque, appellees turn our attention
to the 1986 amendments to the False Claims Act and to
a related statute also passed in 1986. The provision of -
the 1986 amendments that changed 31 U.S.C. § 3729(a)
from imposing liability on “[a] person not a member of
an armed force of the United States” to “[a]ny person”
did not, however, substantively expand the meaning of
defendant persons under the Act. See Stevens, 162 F.3d
at 206-07 (holding that states are persons but conceding
that this change was not “envisioned as broadening the
class of persons who could be held liable under the
Act”); Graber, 8 F. Supp.2d at 354-55. It is true that the
amendment expanded the types of individuals subject
to the Act to include those in the military. Still, that
change tells one nothing about the basic meaning of the
term person, or more specifically, whether Congress
intended to include states within that term. The legis-
lative history accompanying the amendment reveals
Congress’ extremely limited objective. See S. REP. No.
12a
345, 99th Cong., 2d Sess., at 17-18 (1986), reprinted in
U.S.C.C.A.N. 5266, 5282-83 (explaining that the alt-
eration of § 3729(a) was intended to provide for mone-
tary recovery against persons in the military and that,
prior to 1986, a court martial was the only available
remedy).’ It is understandable, therefore, why appel-
lees do not actually claim that states were made
defendant persons by virtue of the 1986 amendment to
§ 3729(a). Instead, their argument is that states have
been defendant persons all along; various provisions
added by the 1986 Congress—which we discuss be-
low—simply make that clear. In other words, appellees,
by relying on these recent amendments, seek to
illuminate the 1863 Congress’ “original intent.” We are
rather dubious about such an approach. As the Su-
preme Court has observed, such subsequent provisions
are really “beside the point” because they do not
“reflect any direct focus by Congress upon the meaning
of the earlier enacted provisions.” Almendarez-Torres
v. United States, 523 U.S. 224, 118 S. Ct. 1219, 1227, 140
L.Ed.2d 350 (1998); Atkinson v. Inter-American Dev.
Bank, 156 F.3d 1335, 1342 (D.C.Cir.1998).
Be that as it may, we are not persuaded that these
added provisions can bear the weight appellees would
place on them. Appellees argue that Congress’ decision
to define “person” to include states in the Civil In-
vestigative Demand section of the Act, see 31 U.S.C.
® The Eighth Circuit thought that this amendment more
broadly “evidenced consideration of whom to hold liable” under the
amended Act. Zissler, 154 F.3d at 874. But there is nothing in the
text of the statute or in any of the legislative history indicating
that Congress’ consideration of “whom to hold liable” extended
beyond its intent, expressed in the statute, to bring military per-
sons within the scope of the Act.
13a
§ 3733(1)(4) (1994), indicates (some) Congress’ intent to
include states as persons throughout the whole Act,’°
even though this provision applies only to the Civil
Investigative Demand section. See 31 U.S.C. § 3733(/)
(For purposes of this section . . .) (emphasis added).
Appellees question why Congress would create a
discovery tool to be used to gain information possessed
by states if the Act did not already authorize false
claims actions against them. See also Stevens, 162 F.3d
at 207. It seems rather obvious, however, that states
could provide useful evidence to establish that private
contractors, for example, made false claims. Nor do
appellees gain very much by pointing to the Program
Fraud Civil Remedies Act, 31 U.S.C. § 3801 et seq.
(1994), which Congress also passed in 1986 to create an
alternative administrative remedy to lawsuits under
the False Claims Act. Unlike the False Claims Act, this
Act expressly defined the persons subjected to admi-
nistrative liability yet omitted states from the defini-
tion. See id. at § 3801(a)(6). Appellees suggest that the
exclusion of states from § 3801(a)(6) compels an infer-
ence that § 3729(a) includes states. We do not agree
because the two provisions are not part of the same
legislative enactment (not even the same century). See
Halverson v. Slater, 129 F.3d 180, 186 (D.C. Cir. 1997)
(citing Russello v. United States, 464 U.S. 16, 23, 104 S.
Ct. 296, 78 L.Ed.2d 17 (1983)). We share appellant’s
view, moreover, that, since both acts proscribe essen-
tially the same conduct, compare 31 U.S.C. § 3802(a)(1)-
(2) with 31 U.S.C. § 3729(a), it would have been quite
10 The CID section permits the government to conduct dis-
covery of persons who “may be in possession, custody, or control of
any documentary material or information relevant to a false claims
investigation.” 31 U.S.C. § 3733(a)(1).
14a
bizarre for Congress to exempt states from administra-
tive liability if it had thought that states already were
subject to the more onerous False Claims Act liability
of treble damages and penalties. In sum, we are in-
clined to view the omission of states from the definition
of person in the administrative act, to the extent it is
relevant at all, as more supportive of New York’s
argument.
Indeed, appellant and its amici, turning the blade,
point out that the 1986 amendments, which increased
liability from double to treble damages and increased
the civil penalty, see 31 U.S.C. § 3729(a), created a form
of punitive damages that would be palpably incon-
sistent with state liability. Congress is not thought to
impose punitive damages on public entities lightly.
Imposition of such a penalty has been held to be
inconsistent with public policy since it gives the plaintiff
a windfall at the expense of the blameless or unknowing
taxpayers who must foot the bill for the government’s
transgressions. See City of Newport v. Fact Concerts,
Inc., 453 U.S. 247, 258-71, 101 S. Ct. 2748, 69 L.Ed.2d
616 (1981). It is true that the Supreme Court has al-
ready analyzed the Act in a related context and con-
cluded that the statute is remedial in nature, see, e.g.,
Bornstein, 423 U.S. at 314-15, 96 S. Ct. 523, but as
appellant rightly points out, it did so when the statute
provided for double damages of which the government
received a one-half share, so that the statute at that
time truly did no more than make the government
whole, see Graber, 8 F. Supp.2d at 349 n. 3. Even as-
suming that it is possible to characterize the increased
liability imposed by the 1986 amendments as remedial,
that would only indicate at best that in this respect the
1986 Congress legislated in such a way that would have
15a
been consistent with state liability. The 1863 Congress,
by contrast, made clear as day that it intended criminal,
and a fortiori punitive, sanctions: the original statute
provided for criminal penalties, including imprisonment
for one to five years, for non-military persons (the class
of persons said to include states) convicted under the
Act, as well as fines. See § 3, 12 Stat. at 698. Those
provisions are surely inconsistent with the concept of
state liability.
Appellees’ last sortie into the background of the 1986
amendments uncovered a piece of legislative history
that they regard as the “smoking gun.” They point to a
Senate Report issued at the time Congress amended
certain provisions of the Act that includes a section
entitled “History of the False Claims Act and Court
Interpretations.” See S. REP. No. 345, 99th Cong., 2d
Sess., at 8 (1986), reprinted in U.S.C.C.A.N. 5266, 5273.
As part of what purported to be purely descriptive
history, see id. (“In its present form, the False Claims
Act. . . .“), the Report states:
The False Claims Act reaches all parties who may
submit false claims. The term “person” is used in its
broad sense to include partnerships, associations,
and corporations . . . as wellas States and
political subdivisions thereof. Cf. Ohio v. Helvering,
292 U.S. 360, 370, 54 S. Ct. 725, 78 L.Ed. 1307 (1934);
Georgia v. Evans, 316 U.S. 159, 161, 62 S. Ct. 972, 86
L.Ed. 1346 (1942); Monell v. Department of Social
Services of the City of New York, 436 U.S. 658, 98 S.
Ct. 2018, 56 L.Ed.2d 611 (1978).
Id. (emphasis added) (footnote omitted).
l6a
According to appellees, the Report confirms that the
Congress of 1863, over a hundred years before, in-
tended to include states as defendant persons—an
argument that two of our sister circuits and the district
court below accepted. See Stevens, 162 F.3d at 206-07;
Zissler, 154 F.3d at 874-75; Long, 999 F. Supp. at 84-85.
This portion of the Report, it should be understood, is
not linked with any of the substantive amendments
made by the 1986 Congress. It is instead a legislative
observation about what § 3729(a), enacted by an earlier
Congress, means. Courts sensibly accord such “post-
enactment legislative history,” arguably an outright
“contradiction in terms,” Sullivan v. Finkelstein, 496
U.S. 617, 631, 110 S. Ct. 2658, 110 L.Ed.2d 563 (1990)
(Scalia, J., concurring), only marginal, if any, value, see
Wright v. West, 505 U.S. 277, 295 n. 9, 112 S. Ct. 2482,
120 L.Ed.2d 225 (1992) (“[T]he views of a subsequent
Congress form a hazardous basis for inferring the
intent of an earlier one.”) (quoting Consumer Product
Safety Comm’n v, GTE Sylvania, Inc., 447 U.S. 102,
117, 100 S. Ct. 2051, 64 L.Ed.2d 766 (1980) (quoting
United States v. Price, 361 U.S. 304, 318, 80 S. Ct. 326, 4
L.Ed.2d 334 (1960)))." Post-enactment legislative
'! It is unclear what appellees think they add by pointing to a
1981 General Accounting Office Report that documented recent
instances of state officials defrauding the United States govern-
ment—of which the Senate apparently was aware when amending
the statute in 1986. See S. REP. No. 345, 99th Cong., 2d Sess., at 2
& n.1 (1986), reprinted in U.S.C.C.A.N. at 5266, 5267 (citing GAO
Report to Congress, FRAUD IN GOVERNMENT PROGRAMS: How
EXTENSIVE Is IT? HOW CAN IT BE CONTROLLED ? (1981)). Not
only is evidence of an intent to impose liability on state officials
(which itself would be a tenuous inference from this report)
distinct from an intent to impose liability on the states themselves,
see Will, 491 U.S. at 68-69, 109 S. Ct. 2804, but a report
17a
history—perhaps better referred to as “legislative
future”—becomes of absolutely no significance when
the subsequent Congress (or more precisely, a commit-
tee of one House) takes on the role of a court and in its
reports asserts the meaning of a prior statute. See
Pierce v. Underwood, 487 U.S. 552, 566, 108 S. Ct. 2541,
101 L.Ed.2d 490 (1988); In re North, 50 F.3d 42, 45-46
(D.C. Cir. 1995). The Senate Report actually was more
modest; it appeared only to describe the way in which
the Supreme Court had interpreted the Act. Still, its
author either did not read the cited cases very care-
fully, or perhaps more likely, made an unforgivably
misleading use of the “cf.” signal. None of the cases
interpreted the term “person” under the False Claims
Act, and all three stand for the unremarkable proposi-
tion that governmental entities can be included in the
term person when Congress so intends.” In short, the
Report is of no legal significance. Accord United States
ex rel Graber, 8 F. Supp.2d at 354-55.”
documenting contemporary instances of state fraud could hardly
be thought to illuminate the intent of the enacting Congress in
1863.
2 The Report’s resort to these inapposite cases is unsurprising
since, at the time of the 1986 amendments, only one decision in-
volved a qui tam suit against the state, and that decision held that
states were not persons under the Act. See United States ex rel.
Weinberger v. Florida, 615 F.2d 1370, 1371 (5th Cir. 1980) (describ-
ing district court’s decision to that effect and vacating on the
ground that, under an older and since modified version of the
present 31 U.S.C. § 3730, the district court lacked subject matter
jurisdiction because the federal government had knowledge of the
facts underlying the relator’s suit).
8The Eighth Circuit thought that 1986 amendments to
§ 3729(a) warranted giving the 1986 Report greater interpretive
weight, even on the assumption that the Report’s understanding of
the pre-1986 caselaw was incorrect. See Zissler, 154 F.3d at 874.
18a
Nevertheless, appellees contend that we have asked
the wrong question in searching the legislative materi- -
als for affirmative indications that Congress intended to
include states as defendant persons in § 3729(a).
Instead, they would have us start with the presumption
that states are defendant persons and look only for
some indication that Congress intended to exclude
states. They justify this approach by arguing that
states can be plaintiffs under § 3730(b)(1) (providing
that “[a] person may bring a civil action for a violation
of section 3729 for the person and for the United States
Government”), and that the same statutory term, per-
son, is used to describe the eligible class of plaintiffs."
The word person is presumed to have the same mean-
ing in different sections of the same statute. See, e.g.,
Commissioner v. Lundy, 516 U.S. 235, 250, 116 S. Ct.
647, 133 L.Ed.2d 611 (1996). Appellees, then, would use
the canon of consistent meaning (following the Second
and Eighth Circuits) to trump the Will-Wilson default
rule. See Stevens, 162 F.3d at 205; Zissler, 154 F.3d at
875; see also BOESE, supra, at 2-92 (reasoning that
states are defendant persons under the Act because
they are proper qui tam plaintiffs).
The consistent meaning canon is brandished as if the
question whether states could be qui tam relators were
Again, the change to § 3729(a) had nothing to do with the meaning
of the term person. The portion of the Report in question, more-
over, makes no reference whatsoever to the slight alteration actu-
ally made to § 372%a). It is merely a commentary on the past.
14 Although New York seemed insistent that it can have it both
ways—that it can be a plaintiff but not a defendant—the states,
appearing as amici, seemed quite prepared to abandon any claim
that they could sue as plaintiffs; the threat of being a qui tam
defendant apparently “concentrated their minds.”
19a
a statutory given. But it is not. We recognize that
other courts have assumed that states can be qui tam
relators, see, e.g., United States ex rel. Woodard v.
Country View Care Ctr., Inc., 797 F.2d 888 (10th
Cir.1986); United States ex rel. Wisconsin v. Dean, 729
F.2d 1100 (7th Cir. 1984), even though the term person
under § 3730(b)(1) is no more clearly defined than it is
under § 3729(a). The argument that states are plaintiffs
is based on a provision passed in 1986 conferring juris-
diction on the district courts “over any action brought
under the laws of any State for the recovery of funds
paid by a State or local government if the action arises
from the same transaction or occurrences as [a qui tam
suit] brought under Section 3730.” 31 U.S.C. § 3732(b).
If states are the only parties who could bring a state
law suit to recover state funds, the argument goes, and
if a state is forbidden by § 3730(b)(5) from intervening
in another party’s qui tam suit, see id. at § 3730(b)(5)
(providing that “[wJhen a person brings an action under
this subsection no person other than the Government
may intervene or bring a related action based on the
facts underlying the pending action”), it seems to follow
that the Congress which enacted § 3732(b) intended
states to be qui tam relators under the Act. Otherwise,
it is argued, the provision conferring jurisdiction over
the state’s claim under state law has little meaning.
The legislative history lends.some support to this rea-
soning. See S. REP. No. 345, 99th Cong., 2d Sess., at 16
(1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5281
(explaining that the provision was enacted in response
to comments from the National Association of Attor-
neys General and was intended to allow “State and local
governments to join State law actions with False
Claims Act actions brought in Federal district court if
such actions grow out of the same transaction or occur-
20a
rence”); see also id. at 12-13, reprinted in 1986
U.S.C.C.A.N. at 5277-78 (disapproving of Dean decision
on unrelated jurisdictional grounds but not questioning
the State of Wisconsin’s ability to be a qui tam
plaintiff); Stevens, 162 F.3d at 204-05 (discussing Senate
Report).
The more obvious reading of § 3732(b), however, is
that it authorizes permissive intervention by states for
recovery of state funds (creating what is in effect an
exception to § 3730(b)(5)’s apparent general bar on
intervention by all other parties except for the United
States).. See BOESE, supra, at 4-13 (explaining that
§ 3732(b) “does not require the state to be a relator for
jurisdiction to exist,” noting the possibility that it
permits intervention by states, but making no reference
to § 3730(b)(5)). Or Congress might even have meant
§ 3732(b) to provide supplemental jurisdiction for a non-
state relator to join a federal false claim action with an
action to recover state funds under a state qui tam sta-
tute, which several states have enacted. See, e.g., Cal.
Gov’t Code § 12650 et seq. (West 1998); Fla. Stat Ann.
§ 68.081-092 (West 1998).
In any event, the argument that states are relators
under § 3730(b)(1) is rather strained. To the extent it
relies on the Senate Report author’s knowledge of one
suit by a state relator, it is no more persuasive than the
analogous argument based on the Report’s “recogni-
tion” of prior suits against state defendants. The
argument, moreover, depends on the proposition that
§ 3730(b)(5) prevents all parties, except for the United
States, from intervening in another relator’s qui tam
action. Yet it is not at all clear that this provision pre-
cludes all forms of party joinder, which would effec-
2la
tively limit gui tam actions to single relators. See
United States ex rel. Precision Co. v. Koch Indus., Inc.,
31 F.3d 1015, 1017 (10th Cir. 1994) (holding that
§ 3730(b)(5) does not prohibit all forms of joinder but
only prevents permissive intervention in a relator’s suit
by unrelated parties under Fed. R. Civ. P. 24(b)(2)). If
states could join as co-plaintiffs with private relators or
the federal government, then § 3732(b) could be given
full meaning without reading § 3730(b)(1) to include
states as relators.
It should be apparent, then, that whether states can
be qui tam relators presents an extraordinarily difficult
question of statutory interpretation in its own right.
Although appellees do not acknowledge it, their argu-
ment would require us to puzzle through that ques-
tion—not squarely presented to us—in order to resolve
the actual question before us (itself no easy one) in their
favor. The consistent meaning canon does not have
much usefulness if in order to apply it a court has to
struggle that hard to determine the second meaning,
against which the first is to be compared. Given the
uncertainty governing the question whether states can
be relators, we think the proper course is to decide only
the issue before us.”
16 Even assuming arguendo that states can be relators, we
doubt that the consistent meaning canon is appropriately applied
in this case. The canon itself has an important exception “[w]Jhere
the subject-matter to which the words refer is not the same in the
several places where they are used.” Atlantic Cleaners & Dyers,
Inc. v. United States, 286 U.S. 427, 433, 52 S .Ct. 607, 76 L.Ed. 1204
(1982). Imposing liability is quite different from conferring a right
to sue, and as we noted above, the Will-Wilson default rule has
added force when the question is whether states are subject to
liability as persons. See Will, 491 U.S. at 64, 109 S. Ct. 2304. The
22a
canon also encounters potentially insurmountable difficulties when
the “meanings” are enacted by two different Congresses—which is
an obvious flaw in appellees’ effort to use the 1986 amendments’
effect on the term person in § 3730(b)(1) to give consistent meaning
to the term person in § 3729(a), which was enacted by the 1863
Congress. ,
It might be argued that the 1986 amendments merely clarified
that Congress has intended states to be relators since 1863, and
that the consistent meaning canon really applies to the 1863 Con-
gress alone. But this theory would require us, quite illogically, to
interpret the 1986 legislative action as a declaration of what a
Congress over a century earlier intended. The action of the 1986
Congress tells us, at most, what the 1986 Congress thought about
states as qui tam relators (and as we noted above, it does not tell
us very much); it does not purport to tell us, nor could it, what the
1863 Congress intended. See Rainwater v. United States, 356 U.S.
590, 593, 78 S. Ct. 946, 2 L.Ed.2d 996 (1958) (stating that 1918
amendment to the criminal provisions of the False Claims Act was
at most “merely an expression of how the 1918 Congress inter-
preted a statute passed by another Congress more than a half
century before” and had “very little, if any, significance” in inter-
preting the original Act’s civil provisions). Although the Supreme
Court occasionally says that “[s]ubsequent legislation which
declares the intent of an earlier law is entitled to great weight in
statutory construction,” Loving v. United States, 517 U.S. 748, 770,
116 S. Ct. 1737, 135 L.Ed.2d 36 (1996) (quoting Conswmer Product
Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 118 n. 3, 100
S. Ct. 2051, 64 L.Ed.2d 766 (1980) (quoting Red Lion Broadcasting
Co. v. FCC, 395 U.S. 367, 380-81, 89 S. Ct. 1794, 23 L.Ed.2d 371
(1969))), the Supreme Court’s application of that principle has been
rather inconsistent, see Paramount Health Sys., Inc. v. Wright,
138 F.3d 706, 709-11 (7th Cir. 1998) (comparing this rule with the
competing rule that the views of a subsequent Congress in legisla-
tive history form a hazardous basis for inferring the intent of an
earlier one). And we are unaware of any Supreme Court holding in
which a subsequent declaration has been used, not to discern the
current meaning of a statute post-declaration, see, e.g., Seatrain
Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 595-96, 100 S. Ct.
800, 63 L.Ed.2d 36 (1980); Red Lion Broadcasting, 395 U.S. at 380-
23a
Ill.
Appellees have not persuasively demonstrated a
congressional intent to include states as defendant
persons under the False Claims Act. That being so, the
default rule would seem to dictate that they are not.
We hesitate in resting solely on this ground, however,
since the Supreme Court has never explained just how
much of a showing suffices to overcome the presump-
tion against interpreting persons to include states, and
indeed on occasion has employed the rule in a somewhat
diluted fashion. See, e.g., Sims v. United States, 359
U.S. 108, 111-12, 79 S. Ct. 641, 3 L.Ed.2d 667 (1959);
United States v. California, 297 U.S. 175, 186, 56 S. Ct.
421, 80 L.Ed. 567 (1936); Ohio v. Helvering, 292 U.S. at
370-71, 54 S. Ct. 725. We think there are additional con-
siderations, however, that resolve all doubts in New
York’s favor.
A.
Were we to agree with appellees that states can be
defendants under the False Claims Act, we would be
obliged to decide whether, as appellant New York con-
tends, the Eleventh Amendment bars a qui tam suit by
a private relator against a state in federal court. The
Amendment states that “[t]he Judicial Power of the
United States shall not be construed to extend to any
suit in law or equity, commenced or prosecuted against
one of the United States by Citizens of another State,
or by Citizens or Subjects of any Foreign State.” U.S.
81, 89 S. Ct. 1794, but instead to interpret the meaning of a statute
prior to the declaration. Appellees’ attempt to apply the consistent
meaning canon to the 1863 Congress depends on precisely such a
“retroactive clarification.”
24a
Const. amend. XI. Although it has been read to bar
suits by plaintiffs not identified in the text of the
amendment itself, such as citizens of the state being
sued, see Hans v. Louisiana, 134 U.S. 1, 10-11, 10S. Ct.
504, 383 L.Ed. 842 (1890), and foreign sovereigns, see
Principality of Monaco v. Mississippi, 292 U.S. 313,
330-32, 54 S. Ct. 745, 78 L.Ed. 1282 (1934), it is well
settled that it poses no bar to a suit by the United
States against a state in federal court. The states’ con-
sent to such suits is thought to be inherent in the con-
stitutional plan and necessary to the very permanence
of the Union. See, e.g., West Virginia v. United States,
479 U.S. 305, 311, 107 S. Ct. 702, 98 L.Ed.2d 639 (1987);
Monaco, 292 U.S. at 329, 54 S. Ct. 745; United States v.
Texas, 143 U.S. 621, 641-46, 12 S. Ct. 488, 36 L.Ed. 285
(1892). Reasoning from this unobjectionable proposi-
tion, three of our sister circuits have held that, since a
qui tam suit against a state is essentially a suit by and
for the United States, the Eleventh Amendment does
not preclude a qui tam suit in federal court. See
Stevens, 162 F.3d at 201-03; United States ex rel.
Rodgers v. Arkansas, 154 F.3d 865, 868 (8th Cir. 1998);
United States ex rel. Milam v. University of Texas
M.D. Anderson Cancer Ctr., 961 F.2d 46, 50 (4th Cir.
1992); see also United States ex rel. Fine v. Chevron,
U.S.A., Inc., 39 F.3d 957, 962-63 (9th Cir. 1994), vacated
on other grounds, 72 F.3d 740 (9th Cir. 1995) (en banc).
We think our sister circuits have paid insufficient
attention to the Supreme Court’s decision in Blatchford
v. Native Village of Noatak, 501 U.S. 775, 111 S. Ct.
2578, 115 L.Ed.2d 686 (1991). In Blatchford, the Court
held that a statute giving federal district courts original
jurisdiction of suits brought by an Indian tribe in-
volving federal law did not constitute a delegation to
25a
the tribes of the United States’ ability, free from the
Eleventh Amendment bar, to sue the states as the
tribes’ trustee. See id. at 785-86. Although the Court
held that Congress intended no delegation in the jurisd-
ictional statute, the Court was dubious that such a
delegation would have been constitutionally permissi-
ble:
We doubt . . . that that sovereign exemption can
be delegated-even if one limits the permissibility of
delegation ... to persons on whose behalf the United
States itself might sue. The consent, “inherent in
the convention,” to suit by the United States—at the
instance and under the control of responsible
federal officers—is not consent to suit by anyone
whom the United States might select; and even con-
sent to suit by the United States for a particular
persons’s benefit is not consent to suit by that
person himself.
Id. at 785 (emphasis added).
It seems to us that permitting a qui tam relator to
sue a state in federal court based on the government’s
exemption from the Eleventh Amendment bar involves
just the kind of delegation that Blatchford so plainly
questioned. See Rodgers, 154 F.3d at 869 (Panner, J.,
dissenting). Nor are we persuaded by the argument
that the Court in Blatchford was concerned about a
possible delegation of the United States’ Eleventh
Amendment exemption just because the injury to be
remedied was the tribe’s and not the United States’.
See Stevens, 162 F.3d at 203. The problems inherent in
expanding the states’ consent to suit by the United
States to suits “by anyone whom the United States
might select,” Blatchford, 501 U.S. at 785, 111 S. Ct.
26a
2578, are no less troublesome where, as here, the injury
on which the suit is premised is a pecuniary injury to
the United States. One should bear in mind that the
United States’ ability to sue is broad; it is not limited to
suits to protect the federal fisc. See, e.g., In re Debs,
158 U.S. 564, 584, 15 S. Ct. 900, 39 L.Ed. 1092 (1895),
disapproved of on other grounds Bloom v. Illinois, 391
U.S. 194, 208, 88 S. Ct. 1477, 20 L.Ed.2d 522 (1968).
Indeed, the United States’ very ability to sue as the
tribes’ trustee, which was unquestioned in Blatchford,
depended on an injury to the United States as sover-
eign when injury was inflicted on the tribes. See
United States v. Minnesota, 270 U.S. 181, 194, 46 S. Ct.
298, 70 L.Ed. 539 (1926). It does not seem reasonable,
therefore, to distinguish Blatchford as an anti-delega-
tion principle applicable only where the “injury” is an
injury to someone other than the United States. The
problem in either case is whether, consistent with the
constitutional plan, the United States can delegate its .
own exemption from the Eleventh Amendment bar to
another party.
Whatever the ultimate resolution of the question, we
think it presents a serious constitutional issue. It is
quite a stretch to claim that such a delegation was part
of the inherent constitutional design, or that the per-
manence of the union somehow depends on giving the
United States broad latitude to permit private parties
to sue the states in the federal courts on the United
States’ behalf. Compare United States v. Texas, 143
USS. at 644-45, 12 S. Ct. 488. To assume that the United
States possesses plenary power to do what it will with
its Eleventh Amendment exemption is to acknowledge
that Congress can make an end-run around the limits
that that Amendment imposes on its legislative choices.
27a
Imagine that Congress is contemplating a new statute,
to be enacted pursuant to its Article I powers, which
would create a private cause of acticn against the states
in federal court. Since the Court’s decision in Seminole
Tribe of Florida v. Florida, 517 U.S. 44, 116 S. Ct. 1114,
134 L.Ed.2d 252 (1996), Congress would not be able to
enact such a statute, irrespective of its clarity in
imposing liability against the states, because Congress
is without constitutional power to abrogate the states’
Eleventh Amendment immunity under its Article I
powers. See id. at 57-73, 116 S. Ct. 1114. Yet if Con-
gress is permitted to use the qui tam device to create a
private cause of action against the states brought on
behalf and in the name of the United States, it can
reach precisely the same end without constitutional
impediment. See Jonathan R. Siegel, The Hidden
Source of Congress’s Power to Abrogate State Sover-
eign Immunity, 73 TEX. L. REV. 539, 556-64 (1995)
(approving of this outcome); see also Blatchford, 501
U.S. at 785-86, 111 S. Ct. 2578 (noting that the tribe’s
“delegation theory” was designed to avoid the con-
straints on congressional abrogation of the states’
Eleventh Amendment immunity). Admittedly, Con-
gress could have imposed liability against the states if it
chose to put enforcement of the statute “at the instance
end under the control of responsible federal officers.”
Blatchford, 501 U.S. at 785, 111 S. Ct. 2578; see also
Seminole Tribe, 517 U.S. at 71 n. 14, 116 S. Ct. 1114.
But the quite different legislative choice of authorizing
private parties to haul sovereign states into federal
court against their will, ordinarily foreclosed unless
Congress successfully abrogates the states’ immunity,
suddenly becomes an all too easy legislative option.
28a
Long and the government would avoid the Blatch-
ford delegation difficulty by asserting that in qui tam
suits the United States is the real party in interest; a
qui tam suit is therefore essentially a suit by and for
the United States. See, e.g., Stevens, 162 F.3d at 202;
Milam, 961 F.2d at 49 (concluding that the United
States is the real party in interest because of “the
structure of the qui tam procedure, the extensive
benefit flowing to the government from any recovery,
and the extensive power the government has to control
the litigation”). This argument appears to us merely to
sidestep the core problem because it ignores the
relator’s undisputed role as a party with a cause of
action under the Act. The “real party in interest” rule
ordinarily requires that the suit be brought by the
“person who, according to the governing substantive
law, is entitled to enforce the right.” 6A CHARLES
ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY
KANE, FEDERAL PRACTICE & PROCEDURE § 1543, at
334 (2d ed.1990); see Fed R. Civ. P. 17(a) (stating that
“every action shall be prosecuted in the name of the
real party in interest”). There is no question that the
False Claims Act gives such a right to the relator, see
31 U.S.C. § 3730(b) (“A person may bring a civil action
for a violation of section 3729 for the person and for the
United States Government.”) (emphasis added), and the
statutory right to bring suit is sufficient to satisfy the
real party in interest requirement, even if the suit is
brought for the benefit of some other party, see Fed. R.
Civ. P. 17(a) (second sentence); 6A Charles Alan
Wright, Arthur R. Miller & Mary Kay Kane, Federal
Practice & Procedure § 1550, at 384. In any event,
contrary to the suggestion of the district court, see
Long, 999 F. Supp. at 83-84, a qui tam action is brought
for the benefit of both the relator and the United
29a
States, not for the benefit of the United States alone.
See 31 U.S.C. § 3730(b) (authorizing gui tam suit “for
the person and for the United States Government”).
Nor does it make any difference that the False Claims
Act requires the relator to sue “in the name of the
Government,” 31 U.S.C. § 3730(b), because the pro-
cedural question of in whose name the suit must be
brought is distinct from the substantive legal question
whether the plaintiff has a cause of action. See 6A
Charles Alan Wright, Arthur R. Miller & Mary Kay
Kane, Federal Practice & Procedure § 1544, at 340."
Accordingly, we do not think the relator’s technical
status as a “real party in interest” is inconsistent with
the conclusion of our sister circuits that the United
States is a “real party in interest” as well. See, e.g.,
Stevens, 162 F.3d at 202; Rodgers, 154 F.3d at 868;
United States ex rel. Hyatt v. Northrop Corp., 91 F.3d
1211, 1217 n. 8 (9th Cir. 1996); Milam, 961 F.2d at 49. It
is, after all, not unheard of for there to be two real
parties in interest to a cause of action. See 6A
CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY
KAY KANE, FEDERAL PRACTICE & PROCEDURE § 1545,
at 351-53 (in cases of partial assignments, the assignor
and assignee are both real parties in interest); id. §
1546, at 360 (same for partial subrogation). More
6 The district court concluded that Long’s claim under the
whistle-blower provision of the False Claims Act, 31 U.S.C.
§ 3730(h), was barred by the Eleventh Amendment because, unlike
a qui tam suit under § 3730(b) brought in the name of the United
States, a claim under § 3730(h) is a true “private right of action.”
Long, 999 F. Supp. at 92. We disagree; a qui tam suit under
§ 3730(b) is no less a cause of action, and the relator is no less a
party prosecuting that action, because the action is brought in the
name of the United States.
30a
important, although we are aware of a variant of the
doctrine used in a related Eleventh Amendment
context, see, e.g., Ford Motor Co. v. Department of
Treasury, 323 U.S. 459, 464, 65 S. Ct. 347, 89 L.Ed. 389
(1945) (analyzing whether a state defendant is the “real
party in interest” such that a suit against a state entity,
though not nominally against the state, would be barred
by the Eleventh Amendment), we do not see how the
doctrine can be used to convert a party with a statutory
cause of action into a “nonparty-party.””” In short, we
think the real party in interest doctrine is plainly
irrelevant to the Eleventh Amendment question
presented in this case. See Rodgers, 154 F.3d at 869
(Panner, J., dissenting).
Nor do we think, as appellees suggest, that the
government’s control over a relator’s suit alters the
result. We acknowledge that the government takes
the greater share of any recovery, see 31 U.S.C. §
3730(d)(1),(2), and that the statute gives the United
States considerable control over the relator’s suit, see,
e.g., id. at § 3730(b)(2)(providing that the government
can intervene in the suit as of right within sixty days
after receiving the relator’s complaint, evidence, and
information); id. at § 3730(b)(1) (relator cannot dismiss
his own suit without written consent of the court and
the Attorney General); id. at § 3730(c)(3)-(4) (even if the
17 One of the principal concerns motivating the Eleventh
Amendment inquiry into whether the state is the “real party in
interest” defendant (or in other words that the actual defendant is
an “arm of the state”) is that an individual plaintiff’s recovery will
be paid out of the state treasury. See Regents of the University of
California v. Doe, 519 U.S. 425, 117 S. Ct. 900, 904, 187 L.Ed.2d 55
(1997). That is the precise concern presented by a private relator
recovering against a state defendant in a qui tam suit.
3la
government does not intervene, it may monitor the
proceedings and stay discovery in certain situations);
id. at 3730(c)(3) (government can intervene at any time
upon a showing of good cause); id. § at 3730(c)(2)(A)
(government may dismiss the suit after notice to the
relator and a hearing); id. at § 3730(c)(2)(B) (govern-
ment may settle the suit with the defendant over the
relator’s objection if the court approves after a
hearing). Still, we simply do not see how the govern-
ment’s potential exercise of its power renders the
relator any less a party. Whatever the degree of con-
trol the United States exercises, we think it is telling
that, although there are some intimations to that effect,
no court has actually held that the relator is not a party
to the qui tam suit merely because of the United
States’ potential ability to control the prosecution of the
suit.
The relator appears to remain a party whether or not
the United States intervenes. In either situation, the
relator’s rights must be protected under the statute.
See 31 U.S.C. § 3730(c)(3) (providing that the court may
permit the United States to intervene for good cause
but must not “limit[ ] the status and rights of the per-
son initiating the action”); id. at § 3730(c)(1) (providing
that the relator “shall have the right to continue as a
party to the action,” subject to certain limitations, even
after the United States intervenes). This is important
because the Eleventh Amendment must be satisfied for
every claim in the suit, see Pennhurst State Sch. &
Hosp. v. Halderman, 465 U.S. 89, 121, 104 S. Ct. 900, 79
18 There are, however, substantial restrictions on the United
States’ power incorporated within these provisions. See Stevens,
162 F.3d at 223-24 (Weinstein, J., dissenting).
32a
L.Ed.2d 67 (1984), and the presence of the United
States as a co-plaintiff does not ordinarily remove the
Eleventh Amendment bar for claims by other plaintiffs,
see id. at 103 n. 12, 104 S. Ct. 900; but see Rodgers, 154
F.3d at 870 (Panner, J., dissenting) (distinguishing for
Eleventh Amendment purposes between cases in which
the United States intervenes from those in which it
does not). But assuming arguendo that the Eleventh
Amendment would not pose a problem in cases in which
the United States actually intervenes in a suit against a
state, the government did not do so in the present case.
That fact, coupled with the government’s intervention
limited to the claim against the private defendants,
suggests that the government does not lightly take on
the task of probing into the internal operations of the
sovereign states, and may well think it better to leave
such politically unpalatable tasks for the qui tam
relators of the world. Yet, the government wishes the
option to sit back while the relator brings an action
against a state, thus removing itself from direct
accountability and from the subtle political pressures
that might have precluded the lawsuit in the first place
had the United States been more actively involved from
the start. See Stevens, 162 F.3d at 225-29 (Weinstein,
J., dissenting). That seems quite at odds with the
obvious purpose of the Eleventh Amendment since
such a suit is emphatically not one brought “at the in-
stance and under the control of responsible federal
officers.” Blatchford, 501 U.S. at 785, 111 S. Ct. 2578.
We seriously doubt that the government, under the
Eleventh Amendment, is entitled to transfer all of the
benefits that accrue to it as a plaintiff in the federal
courts when it chooses to watch from the sidelines.
That could be described as allowing the government to
have its constitutional cake and eat it too.
33a
It has also been contended that, despite the clear
statutory language giving relators a cause of action and
treating them as parties vested with rights and
protections, relators should be seen instead as self-
appointed government counsel. See Stevens, 162 F.3d
at 202; Milam, 961 F.2d at 49 (“Congress has let loose a
posse of ad hoc deputies to uncover and prosecute
frauds against the government.”); Siegel, supra, 73
TEX. L. REV. at 556-57; Evan Caminker, The Con-
stitutionality of Qui Tam Actions, 99 YALE L. J. 341,
353 (1989). It has even been suggested that the rela-
tor’s economic interest in the lawsuit makes him more
like a contingency fee lawyer than a party. See Stevens,
162 F.3d at 202 (acknowledging that the qui tam
plaintiff has an interest in the action’s outcome, but
stating that “his interest is less like that of a party than
that of an attorney working for a contingent fee” and
citing cases noting that relators’ primary motivation is
a monetary reward and not the public good). We
simply do not understand the analogy; typically both
the client and the attorney have an economic interest in
litigation. In this sense, a relator looks no different to us
than, let us say, an applicant for a broadcast license. It
is therefore not possible to contend that the False
Claims Act is an open-ended letter of engagement from
the government as client to a posse of prospective
attorneys. See United States ex rel. Farrell v. SKF,
USA, Inc., 32 F. Supp.2d 617, 617-18 (W.D.N.Y. 1999)
(rejecting contention by qui tam defendant that, since
the relator is only the United States’ lawyer and the
United States always remains a party litigant, the
defendant was entitled to discovery from the United
States even though the United States had not
intervened in the suit). To accept the “private
Attorneys General” characterization as anything more
34a
than an inapt convention would run headlong into the
problems of how a party with a statutory right to sue
on his own behalf can be thought to be acting in a
representational capacity, see 31 U.S.C. § 3730(b), why
the client would need the court’s permission to inter-
vene in his own suit, see id. at § 3730(c)(3), or to dismiss
the lawyer’s “suit,” see id. at § 3730(c)(2)(A), and why
the lawyer’s “status and rights” would be worthy of
statutory protection in the event the client chooses to
intervene in the lawyer’s action, see id. at § 3730(c)(3).”
Although, as we have indicated, we have profound
doubts that the Eleventh Amendment permits this
lawsuit against New York even if Congress implicitly
authorized relators to bring suits against the states, we
do not rest our decision on an interpretation of the
Constitution. Instead, bearing in mind that we must
decide this difficult constitutional issue only if the term
person in the Act is interpreted as including states, and
that it seems quite dubious that Congress intended that
result, the appropriate course seems to us to interpret
“person” as not including states.
The venerable doctrine of construing statutes in such
a way as to avoid serious constitutional questions has
two important prerequisites. First, the “statute must
be genuinely susceptible to two constructions,” and this
determination must be made “after, and not before, [the
19 Of course, if the government actually hired a lawyer to bring
its own cause of action, the Blatchford delegation problem would
not arise. But as we have explained at length, that is not what the
False Claims Act does.
35a
statute’s] complexities are unraveled.” Almendarez-
Torres, 118 S. Ct. at 1228; see also United States v.
Espy, 145 F.3d 1369, 1372 (D.C. Cir. 1998); Association
of Am. Physicians & Surgeons, Inc. v. Clinton, 997
F.2d 898, 906, 910-11 (D.C. Cir. 1993). Furthermore,
the constitutional question must be one that presents a
“serious likelihood that the statute will be held uncon-
stitutional.” Almendarez-Torres, 118 S. Ct. at 1228; see
also Association of Am. Physicians & Surgeons, 997
F.2d at 906 (constitutional question must be a “grave”
one); Espy, 145 F.3d at 1372.
It is obvious from what we have said already that
these requirements are satisfied in this case. As we
have just explained at length, the Eleventh Amend-
ment question is, at bare minimum, a serious one. It
could not be suggested, moreover, that we are dis-
torting the language of the statute in order to avoid a
constitutional question. The more obvious reading is to
exclude states from “person.” The more difficult task is
to demonstrate that the inclusion of states as defen-
dant persons is a fair reading of the statute. There can
be no objection to avoiding a constitutional question
that is implicated only by a rather strained reading of
the statute.
We think it relevant—if not decisive—to observe
that the avoidance canon coincides in this case with two
additional related canons of construction that impose
upon Congress an obligation of specificity. When “Con-
gress intends to alter the ‘usual constitutional balance
between the States and the Federal Government,’
“federal courts insist that Congress “make its intention
to do so ‘unmistakably clear in the language of the
statute.’” Will, 491 U.S. at 65, 109 S. Ct. 2304 (quoting
36a
Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 242,
105 S. Ct. 3142, 87 L.Ed.2d 171 (1985)); see also Gregory
v. Ashcroft, 501 U.S. 452, 464, 111 S. Ct. 2395, 115
L.Ed.2d 410 (1991) (linking clear statement rule with
constitutional avoidance canon). The Court in Will
derived this “clear statement” rule from the Eleventh
Amendment cases requiring an explicit textual intent
to abrogate a state’s Eleventh Amendment immunity,
but noted its applicability in a range of contexts in
which Congress alters the federal-state balance of
power. See Will, 491 U.S. at 65, 109 S.Ct. 2304.” In
Gregory, the Court applied this “plain statement” prin-
ciple where Congress’ imposition of liability under the
Age Discrimination in Employment Act would “upset
the usual constitutional balance” by interfering with the
states’ fundamental role in defining the qualifications of
their state judges. Jd. at 460-61, 111 S. Ct. 2395; see id.
at 464-67, 111 S. Ct. 2395 (holding that Congress did not
make a sufficiently clear statement in the ADEA that
state judges are within the Act’s coverage). It cannot
seriously be disputed that if Congress were required to
make its intentions “clear and manifest,” Will, 491 U.S.
at 65, 109 S. Ct. 2304, in order to impose False Claims
Act liability on the states, it has failed to do so.
Appellees contend that there is no justification for
applying this clear statement rule of Will or Gregory
because treating states as defendant persons would not
actually alter the constitutional balance of powers
between the federal and state governments. Such an
2 Indeed, in Will itself the Eleventh Amendment was not a
concern because the question whether states were persons under
§ 1983 arose in the context of a state court case, and the Eleventh
Amendment does not apply in state courts. See Will, 491 U.S. at
63-64, 109 S. Ct. 2304.
37a
alteration occurs, for example, when Congress seeks to
remove the states’ sovereign immunity in their own
courts, as in Will, 491 U.S. at 67, 109 S. Ct. 2304, or
when Congress attempts to interfere with an essential
governmental function, as in Gregory, 501 U.S. at 460,
111 S. Ct. 2395. Since this case arose in federal court
and because the fraudulent conduct proscribed cannot
be thought an essential governmental function, appel-
lees argue that neither Will nor Gregory apply.
We are unpersuaded by various crabbed analyses of
the Court’s “clear statement” jurisprudence that we
have seen. To characterize the relevant state function
at issue, as the Second Circuit did, as frawdulent con-
duct, see, e.g., Stevens, 162 F.3d at 204 (“The States
have no right or authority, traditional or otherwise, to
engage in [fraudulent] conduct.”), is to assume the con-
clusion that the function is not an essential one. Using
that logic, the Court in Gregory would have declined to
apply a clear statement rule because it is not essential
for the state to discriminate against elderly judges.
Appellees, for their part, describe the governmental
function at issue in this case as the process by which a
state receives federal funding-which they argue cannot
possibly be described as an essential state function. The
state, in other words, is simply a supplicant coming to
the federal sovereign. That characterization, in our
view, is still too narrow because the Act’s imposition of
liability necessarily interferes with a state’s sovereign
performance of a range of indisputably essential func-
tions, such as the administration of a state education
department involved in the present case. See Ambach
v. Norwick, 441 U.S. 68, 76, 99 S. Ct. 1589, 60 L.Ed.2d
49 (1979) (“Public education, like the police function,
‘fulfills a most fundamental obligation of government to
38a
its constituency.’”) (quoting Foley v. Connelie, 435 U.S.
291, 297, 98 S. Ct. 1067, 55 L.Ed.2d 287 (1978)); Brown
v. Board of Educ., 347 U.S. 483, 493, 74 S. Ct. 686, 98
L.Ed. 873 (1954) (“[E]ducation is perhaps the most
important function of state and local governments.”).
That the federal government funds in part that function
does not destroy its essentiality to the state. To accept
that hypothesis, given present tax and spending mecha-
nisms, would go a long way toward burying federalism.
The Supreme Court has applied Gregory as we do,
focusing on the state functions necessarily affected by
operation of the statute, and not exclusively on the
actual conduct proscribed by Congress. See Gregory,
501 U.S. at 463, 111 S. Ct. 2395 (essential state function
with which ADEA liability would interfere was the
“authority of the people of the States to determine the
qualifications of their most important government offi-
cials” in their state Constitutions); see also Pennsylva-
nia Dep’t of Corrections v. Yeskey, 524 U.S. 206, 118 S.
Ct. 1952, 1953-54, 141 L.Ed.2d 215 (1998) (assuming
that imposition of ADA liability against state prisons
would interfere with the essential state function of
“exercising ultimate control over the management of
state prisons”); BFP v. Resolution Trust Corp., 511
U.S. 531, 544 & n. 8, 114 S. Ct. 1757, 128 L.Ed.2d 556
(1994) (applying Gregory to Bankruptcy Code provi-
sions governing constructively fraudulent transfers,
and explaining that the state function was not general
authority over debtor-creditor law, but the “essential
sovereign interest in the security and stability of title
to land” necessarily affected by application of the
Bankruptcy Code to foreclosure sales). We thus do not
think it is appropriate to look myopically only to the
state’s formal submission of the claim to the govern-
39a
ment and to ignore the underlying governmental func-
tions to which the claim relates.”
Appellees similarly give an overly restrictive reading
of Will. It is true that the Court in Will pointed to the
states’ sovereign immunity in their own courts as a
supporting reason for concluding that Congress did not
intend to make states persons under 42 U.S.C. § 1983.
See Will, 491 U.S. at 66-67, 109 S. Ct. 2304. But the
Court nowhere even suggested that abrogation of state
sovereign immunity was the only alteration of the
constitutional balance that justified use of the clear
statement rule, nor did it rely on the idea of essential
state functions implicit in the later decision in Gregory.
Will could be read to suggest—although we are uncer-
tain of this—that it was the very imposition of a new
liability against the state that would have altered the
constitutional balance of powers.
Whether or not Will or Gregory can be taken as far
as we have suggested,” there is a second related clear
21 It could be argued, we suppose, that because False Claims
Act liability is only triggered when the state requests money from
the federal government, it brings any interference with its essen-
tial functions on itself. But we do not see any basis in Gregory for
eliminating the need for a clear statement simply because the
liability imposed is conditioned on a voluntary act by the state.
The clear statement rule of Pennhurst State School and Hospital
v. Halderman, 451 U.S. 1, 17, 101 S. Ct. 1531, 67 L.Ed.2d 694
(1981)—which requires a clear statement when Congress imposes
conditions on grants of federal money—seems flatly inconsistent
with such an argument.
2 The government would have us instead limit the Court’s clear
statement rules because of the significant reliance interests
created by Congress’ and the federal agencies’ assumption that
states, to whom they entrusted large sums of money, are covered
40a
statement canon that bears on our case. In cases in-
volving congressional abrogation of a state’s Eleventh
Amendment immunity, the applicability of the clear
statement rule is well-established and the uncertainties
in defining the scope of the Will and Gregory versions
of that rule disappear. See Dellmuth v. Muth, 491 U.S.
223, 230, 109 S. Ct. 2397, 105 L.Ed.2d 181 (1989). Appel-
lees contend that that rule does not apply, however,
because they conclude that the Eleventh Amendment is
not a bar to a qui tam suit (and thus that no abrogation
is necessary). But it seems highly artificial to conclude
that Congress labors under an obligation of utmost
textual specificity when it seeks to abrogate the states’
Eleventh Amendment immunity when that immunity is
otherwise certain, but that liability against the states—
potentially implicating the Eleventh Amendment—can
be imposed willy-nilly, using as imprecise a term as
by the Act. For the proposition that reliance interests can trump
clear statement rules, the government relies on Hilton v. South
Carolina Public Railways Comm'n, 502 U.S. 197, 205-07, 112 S.
Ct. 560, 116 L.Ed.2d 560 (1991) (holding that Will is a rule of statu-
tory construction, not of constitutional law, and that the reliance
interests created by the Court’s prior decision interpreting the
Federal Employers’ Liability Act to include state-owned railroads
warranted adherence to stare decisis rather than to the clear state-
ment rule). That the Court feels obliged to disregard the clear
statement rule because of reliance interests that it created through
its own precedent is of course quite different from the govern-
ment’s contention. Any reliance interests in this case are not the
judiciary’s doing, but rather stem from the legislature’s and the
federal agencies’ assumption, based on weak post-enactment leg-
islative history, that states were, or ought to be, covered by the
Act. Since Congress easily could have included states within the
definition of person if it so intended, the government can hardly be
heard to complain now (on behalf of Congress) that Congress, in
effect, wrote the states a blank check.
4la
“person.” We think there is significant conceptual
overlap—though admittedly not an identity—between
the abrogation inquiry and the statutory construction
question whether Congress intended to include states
as defendant persons. The Supreme Court’s conclusion
that Congress has failed to abrogate with the requisite
specificity is often based on Congress’ failure explicitly
to provide for suits against the states in federal
court—the precise failing of the False Claims Act that
raises the question in this appeal. See, e.g., Dellmuth,
491 U.S. at 231-32, 109 S. Ct. 2397; Atascadero State
Hosp., 473 U.S. at 245-46, 105 S. Ct. 3142. So although
we recognize that the Eleventh Amendment’s clear
statement rule has always been applied to an abrogaion
inquiry—rather than to a threshold question as to
whether the Eleventh Amendment applies—we do not
think it wholly irrelevant to the latter.
Appellees’ argument against using the Eleventh
Amendment’s clear statement rule follows from their
prior conclusion that the Eleventh Amendment does
not apply to this case. Appellees therefore assume that
states are persons for the purpose of rejecting New
York’s Eleventh Amendment defense, and then pro-
ceed to reject the Eleventh Amendment’s clear state-
ment rule when actually interpreting the statute pre-
viously assumed to include states—sort of a divide and
conquer strategy. The statutory construction issue is,
however, inextricably linked with the jurisdictional one,
which is precisely why we decline to assume that states
are persons in order to conduct an Eleventh Amend-
ment inquiry that could be avoided if the assumption
were not made in the first place. We think thé correct
resolution is to read the Act in such a way that avoids
the serious constitutional question whether the Elev-
42a
enth Amendment bars qui tam suits against the state in
federal court. In so doing, we rely on the constitutional
avoidance canon buttressed by the family of “clear
statement” rules applicable when Congress attempts to
legislate in the way that appellees contend it has
legislated.”
*x* * *
In the end it comes to this: if we must decide whether
states constitutionally can be defendants in federal
court under the Act, Congress must make its intent
clear. The decision of the district court is therefore
reversed.
So ordered.
“3 New York would also have us apply the clear statement rule
of Pennhurst, 451 U.S. at 17, 101 S. Ct. 1531, under which Con-
gress must unambiguously set forth conditions it imposes on the
grant of federal money when it exercises its spending power.
Because we have enough—more than enough—clear statement
rules to resolve this case, we need not decide whether False
Claims Act liability can be seen as a condition imposed on a grant
of federal money.
43a
APPENDIX B
UNITED STATES COURT OF APPEALS DISTRICT
OF COLUMBIA CIRCUIT
Nos. 98-5133, 98-5149 AND 98-5150
UNITED STATES OF AMERICA, EX REL. RONALD E.
LONG, APPELLEE/CROSS-APPELLANT
Vv.
SCS BusINESS & TECHNICAL INSTITUTE, INC., ET AL.,
APPELLEES
STATE OF NEW YORK, APPELLANT/CROSS-APPELLEE
Vv.
ATTORNEY GENERAL OF THE UNITED STATES,
INTERVENOR
[April 30, 1999]
SUPPLEMENTAL OPINION
Before: WALD, SILBERMAN, and SENTELLE, Circuit
Judges.
Opinion for the Court filed by Circuit Judge
SILBERMAN.
44a
SILBERMAN, Circuit Judge:
In the same week that our opinion issued, the Fifth
Circuit held that the Eleventh Amendment bars a False
Claims Act qui tam suit against a state in federal court.
See United States ex rel. Foulds v. Texas Tech Univer-
sity, 171 F.3d 279 (5th Cir. 1999). The court thought it
was obliged to decide that issue before reaching the
question we decided—whether the statute provides for
a qui tam action against a state—because the Eleventh
Amendment issue is jurisdictional. Although we cer-
tainly discussed the serious nature of the Eleventh
Amendment issue as it bore on our order of decision, we
did not consider whether, as a matter of judicial
authority, we too were obliged to decide that issue.
Since our sister circuit implicitly challenged our juris-
diction—even though no party before us did—and our
mandate has not issued, under these unusual circum-
stances, we think it appropriate to issue this supple-
mental opinion to explain why we believe we should
stick with the order of decision we adopted.
The Fifth Circuit reasoned as follows: since the ques-
tion whether a relator can sue a state under the Act is a
cause of action or merits question, and since the ques-
tion whether a federal court can hear such a suit under
the Eleventh Amendment is a jurisdictional one, the
latter must be resolved before the former. See id. at
286. The principal authority that the Fifth Circuit
relied on is Steel Co. v. Citizens for a Better Environ-
ment, 523 U.S. 83, 118 S. Ct. 1003, 140 L.Ed.2d 210
(1998), in which the Supreme Court held that a question
of Article III standing must be decided before the
statutory question whether a cause of action exists. See
id. at - , 118 S. Ct. at 1012-16. In so holding,
ia
45a
the Court rejected the doctrine of “hypothetical
jurisdiction,” under which lower courts—including this
one, see, ¢.g., Cross-Sound Ferry Servs., Inc. v. ICC,
934 F.2d 327, 333 (D.C. Cir. 1991)—had assumed
jurisdiction in order to reach the merits, where the
merits question was easier and the prevailing party on
the merits would be the same as the prevailing party
were jurisdiction denied. See Steel Co., 523 U.S. at
—___, 118 S. Ct. at 1012 (disapproving of Cross-Sound
and other lower court decisions). The doctrine, the
Court said, is flatly inconsistent with core principles
limiting the role of Article III courts: “For a court to
pronounce upon the meaning or the constitutionality of
a state or federal law when it has no jurisdiction to do
so is, by very definition, for a court to act ultra vires.”
Id. at__, 1188S. Ct. at 1016.
We did not address this Steel Co. question in our
opinion, we confess, because we did not focus on it.
Indeed, New York—whose immunity from suit is at
stake—specifically urged us, apparently unlike Texas in
Foulds, to decide the statutory question first on the
ground that nonconstitutional grounds should be con-
sidered before constitutional ones. Admittedly, we
ordinarily are obliged to raise jurisdictional questions
on our own, so the parties’ litigating tactics would not
excuse our oversight. Still, the Eleventh Amendment
bar on suits against the states in federal court is not a
garden variety jurisdictional issue. Although the
Amendment speaks in terms of the limits of the judicial
power, see U.S. Const. Amend. XI (“The Judicial power
of the United States shall not be construed to extend
. .. . ), a State can waive its Eleventh Amendment
defense and consent to suit in federal court, and the
Supreme Court has held that there is no obligation for
46a
the Court to raise the issue swa sponte. See Wisconsin
Dep’t of Corrections v. Schacht, 524 U.S. 381, ____ -
___, 118 S. Ct. 2047, 2052-53, 141 L.Ed.2d 364 (1998)
(citing Atascadero State Hsp. v. Scanlon, 473 U.S. 234,
241, 105 S. Ct. 3142, 87 L.Ed.2d 171 (1985) and Patsy v.
Board of Regents of Fla., 457 U.S. 496, 515 n. 19, 102 S.
Ct. 2557, 73 L.Ed.2d 172 (1982)).
To be sure, the Court has also held that the “Elev-
enth Amendment defense sufficiently partakes of the
nature of a jurisdictional bar so that it- need not be
raised in the trial court,” Edelman v. Jordan, 415 U.S.
651, 678, 94 S. Ct. 1347, 39 L.Ed.2d 662 (1974); see Burk-
hart v. Washington Metropolitan Area Transit Author-
ity, 112 F.3d 1207, 1216 (D.C. Cir. 1997), and indeed can
be raised for the first time in the Supreme Court, see
Ford Motor Co. v. Department of Treasury, 323 U.S.
459, 467, 65 S. Ct. 347, 89 L.Ed. 389 (1945). Given these
somewhat conflicting rules, see Schacht, 524 U.S. at
___, 118 S. Ct. at 2055 (Kennedy, J., concurring), the
Court has frankly recognized that the Eleventh
Amendment is a rather peculiar kind of “jurisdictional”
issue. See Calderon v. Ashmus, 523 U.S. 740, sin. 2,
118 S. Ct. 1694, 1697 n. 2, 140 L.Ed.2d 970 (1998)
(“While the Eleventh Amendment is jurisdictional in
the sense that it is a limitation on the federal court’s
judicial power, and therefore can be raised at any stage
of the proceedings, we have recognized that it is not
coextensive with the limitations on judicial power in
Article III.”); Idaho v. Coeur d’Alene Tribe of Idaho,
521 U.S. 261, 267, 117 S. Ct. 2028, 1388 L.Ed.2d 438
(1997) (“The Amendment, in other words, enacts a sov-
ereign immunity from suit, rather than a nonwaivable
limit on the federal judiciary’s subject-matter juris-
diction.”). The Court’s most recent opinion noted that
47a
the question whether Eleventh Amendment immunity
is a matter of subject matter jurisdiction is an open one.
See Schacht, 524 U.S. at , 1188S. Ct. at 2054.
New York’s explicit request that we first decide the
statutory question could therefore be seen as a kind of
agreement to assert its Eleventh Amendment defense
only if it loses on the statutory one (a “springing”
defense, as it were). As the Supreme Court has recently
made clear, “[tJhe Eleventh Amendment . . . does not
automatically destroy original jurisdiction,” but instead
“grants the State a legal power to assert a sovereign
immunity defense should it choose to do so.” Schacht,
524 US. at__, 118 S. Ct. at 2052 (emphasis added). A
state can waive its immunity from suit in the context of
a litigation, see, e.g., Ford Motor Co., 323 U.S. at 467-69,
65 S. Ct. 347, as long as it does so unequivocally, see
Atascadero, 473 U.S. at 246-47, 105 S. Ct. 3142. Al-
though there are difficult questions about whether the
state’s attorneys must be authorized by state law to
waive the state’s immunity, and about whether such
authorization, if needed, has been granted, compare id.
(suggesting that such authorization is necessary) with
Schacht, 524 U.S. at - , 118 S. Ct. at 2055-56
(Kennedy, J., concurring) (questioning whether in the
removal context specific authorization is required), it
may well be that New York’s approach amounts to a
partial consent to suit on the statutory question—
subject to a later Eleventh Amendment defense. And if
so, we might be obligated to decide the statutory
question first.
But even if we were not so obligated, we think that
we are at least permitted to do so. Had New York
chosen not to assert its Eleventh Amendment defense
48a
below, or even before us, it would not have been pre-
cluded from raising it thereafter. See Calderon, 523
U.S. at ___s in. 2, 118 S. Ct. at 1697 n. 2 (Eleventh
Amendment “can be raised at any stage of the proceed-
ings”); but cf. Schacht, 524 U.S. at ___, 118 S. Ct. at
2055 (Kennedy, J., concurring) (criticizing this rule
because “permitting the belated assertion of the Elev-
enth Amendment bar . . . allow/[s] States to proceed
to judgment without facing any real risk of adverse
consequences”). Unless that defense is asserted by the
state, a court is arguably not obliged to raise the issue
itself since the Supreme Court has made clear that the
usual obligation to raise jurisdictional issues swa sponte
does not apply (at least to the Court itself) in Eleventh
Amendment cases. See Patsy, 457 U.S. at 515 n. 19, 102
S.Ct. 2557.1 Therefore New York’s litigation strat-
egy—an Eleventh Amendment argument in the alter-
native—suggests that, at least, we are entitled to
reverse the Steel Co. order. After all, Steel Co.’s rule is
premised on a court’s lack of power to reach the merits
without establishing its jurisdiction. In the Eleventh
Amendment context, where a court lacks power only if
a state claims that it does, it is arguable that we have
no obligation to decide the Eleventh Amendment issue
first if the state does not demand that we do so.
1 Whether the Patsy rule relieves lower courts of the sua
sponte obligation to raise the Eleventh Amendment issue is a
matter of some controversy. See Coolbaugh v. Louisiana, 136 F.3d
430, 442 n. 5 (5th Cir. 1998) (Smith, J., dissenting) (collecting cases
and authorities). We have raised an Eleventh Amendment ques-
tion on our own in a prior case, see Morris v. Washington Metro-
politan Area Transit Auth., 702 F.2d 1037, 1040 (D.C. Cir. 1983),
but do not appear ever to have held whether we must do so, not-
withstanding Patsy.
49a
Moreover, the quasi-jurisdictional or “hybrid” status
of the Eleventh Amendment, see Schacht, 524 U.S. at
___, 118 S. Ct. at 2055 (Kennedy, J., concurring), raises
questions about Steel Co.’s applicability in this context,
quite apart fron. New York’s request that we interpret
the statute first. Since the Eleventh Amendment at
most “partakes of the nature of a jurisdictional bar,”
Edelman, 415 U.S. at 678, 94 S. Ct. 1347, it seems fair
to ask whether the Eleventh Amendment is sufficiently
jurisdictional to require us to decide a state’s claim of
Eleventh Amendment immunity before turning to the
merits. One indication to the contrary is Calderon, in
which the Supreme Court decided that it “must first
address” whether a particular action for a declaratory
judgment was an Article III case or controversy before
deciding the Eleventh Amendment question on which
certiorari had been granted, observing that the Elev-
enth Amendment is “not co-extensive with the limita-
tions of judicial power in Article III.” Calderon, 523
U.S. at__s & n. 2, 118 S. Ct. at 1697 & n. 2. As be-
tween two jurisdictional issues, there ordinarily is no
obligation to decide one before the other. See Steel Co.,
523 U.S. at __in. 8, 118 S. Ct. at 1015 n. 3; In re
Minister Papandreou, 139 F.3d 247, 255 (D.C. Cir.
1998) (stating that dismissing on nonmerits grounds
such as personal jurisdiction or forum non conveniens,
before deciding subject-matter jurisdiction, is permissi-
ble under Steel Co.).2 That the Court in Calderon
thought itself obliged to decide the case or controversy
2 The Fifth Circuit has concluded otherwise, holding that in the
removal context, a district court must decide subject matter juris-
diction before personal jurisdiction. See Marathon Oil Co. v.
Ruhrgas, 145 F.3d 211, 215-25 (5th Cir.) (en banc), cert. granted,
__ U.S. ___, 119 S. Ct. 589, 142 L.Ed.2d 532 (1998).
50a
question first suggests that the Eleventh Amendment,
a less than pure jurisdictional question, need not be
decided before a merits question. One former judge of
this court, in a concurring opinion criticizing the hypo-
thetical jurisdiction doctrine later rejected in Steel Co.,
pointed in that direction. See Cross-Sound Ferry, 934
F.2d at 341 (Thomas, J., concurring in part and concur-
-ring in the denial of petition) (reasoning that the rule
requiring consideration of jurisdictional issues before
non-jurisdictional issues might not apply if “the ground
passed over sufficiently, though not entirely, ‘partakes
of the nature’ of a merits ground, or if the ground
rested upon ‘sufficiently,’ though not entirely, ‘partakes
of the nature of a jurisdictional bar’” (quoting Edel-
man, 415 U.S. at 678, 94 S. Ct. 1347)).
Another difficulty in applying Steel Co. here is that
classifying the statutory question in an Eleventh
Amendment case as a “cause of action” or merits ques-
tion is, though technically accurate, somewhat mislead-
ing. The determination of whether a particular action is
properly asserted against a state is also a kind of logical
prerequisite to the jurisdictional inquiry. The Eleventh
Amendment only bars a federal court from hearing
a “suit in law or equity, commenced or prosecuted
against one of the United States,” and so it would seem
perfectly appropriate—perhaps even necessary—for
courts to determine whether there is even such a suit
before the court. That kind of inquiry—sometimes
classified as “jurisdiction to determine our jurisdiction,”
Nestor v. Hershey, 425 F.2d 504, 511 (D.C. Cir. 1969)
(inquiring whether student deferment sought was
mandated by statute or within the discretion of the
draft board, as jurisdiction existed only for the
former)—is fairly common, even though the rulings
5la
made in determining jurisdiction are made without
certainty that jurisdiction actually exists. Occasionally,
as in this case, what a court says about an issue of
statutory interpretation that logically precedes the
ultimate jurisdictional determination removes any
contention that the court’s jurisdiction is in question.
See, e.g., Webster v. Doe, 486 U.S. 592, 603-04, 108 S. Ct.
2047, 100 L.Ed.2d 632 (1988) (using clear statement
principles and the constitutional avoidance canon to
hold that statutory provision did not, despite language
indicating that the statute was committed to agency
discretion, preclude judicial review of constitutional
claims).
If the Eleventh Amendment were a statutory pro-
vision stripping the federal courts of jurisdiction, the
inquiry whether the case before the court was of the
kind that the statute forbade would be a fairly routine
form of jurisdictional analysis.* Accordingly, in
3 One analogy is cases involving the Norris-LaGuardia Act’s
bar on federal courts issuing certain injunctions in labor disputes.
See 29 U.S.C. § 104 (1994) (“No court of the United States shall
have jurisdiction to issue any restraining order or temporary or
permanent injunction in any case involving or growing out of any
labor dispute to prohibit any person or persons participating or
interested in such dispute [from doing certain acts].”). Not sur-
prisingly, the Supreme Court has had to interpret that provision,
together with the provision defining it, see id. at § 113 (“A case
shall be held to involve or grow out of a labor dispute when the
case involves persons who are engaged in the same industry, trade,
craft, or occupation. . . .”), to determine whether particular kinds
of cases fall within the jurisdictional bar. See, e.g., Burlington
Northern R. Co. v. Brotherhood of Maintenance of Way Em-
ployees, 481 U.S. 429, 440-44, 107 S .Ct. 1841, 95 L.Ed.2d 381 (1987)
(rejecting restrictive interpretation of Norris-LaGuardia Act,
under which a “labor dispute” would only include disputes in which
the picketed employer is “substantially aligned” with the primary
52a
determining whether the Eleventh Amendment bars a
particular suit, federal courts must decide a variety of
issues that relate to the question whether the suit is
actually one brought against the state, and do so before
jurisdiction is finally resolved. See, e.g., Regents of the
University of California v. Doe, 519 U.S. 425, 429-30 &
n. 5, 117 S. Ct. 900, 904 & n. 5, 187 L.Ed.2d 55 (1997)
(noting that determining whether a state agency is an
“arm of the state” for Eleventh Amendment purposes,
such that the suit is one against the state itself, involves
an analysis of the state law provisions that define the
agency’s character); Seminole Tribe of Florida v.
Florida, 517 U.S. 44, 55-57, 116 S. Ct. 1114, 134 L.Ed.2d
252 (1996) (analyzing Indian Gaming Regulatory Act for
the purpose of determining if Congress, consistent with
Eleventh Amendment abrogation requirements, set
forth a clear statement of its intent to provide for suits
against the states in federal court, and concluding that
it did); Hafer v. Melo, 502 U.S. 21, 24 n. *, 30-31, 112 S.
Ct. 358, 116 L.Ed.2d 301 (1991) (discussing, although
not resolving, competing methods for determining
whether a suit for monetary damages is against a state
official in his or her official capacity, and thus against
employer); United States v. United Mine Workers of America, 330
U.S. 258, 269-89, 67 S. Ct. 677, 91 L.Ed. 884 (1947) (interpreting
general language of §§ 104 and 113 to exclude the United States,
such that where the United States seizes actual possession of
mines or other facilities and operates them, and where the United
States is the employer of the workers, the Norris-LaGuardia Act
does not apply); id. at 250-51, 67 S. Ct. 677 (holding that district
court properly issued restraining order to preserve existing condi-
tions while it determined whether it had jurisdiction to issue injun-
ctive relief, and that it had power to punish violations of its orders
as criminal contempt before the jurisdictional question was re-
solved).
53a
the state itself, or against a state official in his or her
personal capacity, to which the Eleventh Amendment
does not apply).
Still, it might be thought that the “jurisdiction to
determine jurisdiction” concept is not wholly satisfac-
tory because whether states are persons under the
False Claims Act is also a cause of action question
(which is what the Fifth Circuit emphasized). But even
if the cause of action aspect of the statutory question
takes it outside the “jurisdiction to determine jurisdic-
tion” doctrine, two additional considerations justify the
approach we have taken.
As our discussion already indicates, the “merits”
question is, in the Eleventh Amendment context, inex-
tricably related to the “jurisdictional” question. We
noted this relationship in our opinion in explaining why
the Eleventh Amendment’s clear statement rule, ordi-
narily applied to an abrogation inquiry, is relevant in
determining whether there is a cause of action against
the states. Even if we were to assume that states are
defendant persons, and then actually to decide that the
Eleventh Amendment applied, we would then have to
ask whether, for abrogation purposes, the statute con-
tains a clear statement that states are to be defen-
dants—which is more-or-less the same statutory analy-
sis that we previously undertook. This can be seen in
the Fifth Circuit’s opinion, where the court held that
the state’s Eleventh Amendment immunity was not ab-
rogated because the Act did not contain the requisite
clear statement. See Foulds, 171 F.3d at 292. The only
real difference between the Fifth Circuit’s analysis of
the statute and our own is that the Fifth Circuit had to
54a
actually hold that the Eleventh Amendment applied—a
serious constitutional issue—in order to get there.
We think this close relationship between the statu-
tory and “jurisdictional” issues, even putting aside
“jurisdiction to determine jurisdiction,” provides an
independent ground on which to distinguish Steel Co.
The relationship between these two issues is quite
different from the relationship between an ordinary
“cause of action” question and a pure jurisdictional
issue such as standing. The Court in Steel Co. rejected
the contention that merits questions could be decided
before constitutional standing questions because the
Article III redressability requirement, for example,
“has nothing to do with the text of the statute relied
upon” (except with regard to entirely frivolous claims).
Steel Co., 523 U.S. at__s in. 2, 118 S. Ct. at 1013 n. 2.
By contrast, the Court explained why merits questions
can be decided before statutory or prudential standing
questions: the two questions overlap to such an extent
that it would be “exceedingly artificial to draw a dis-
tinction between the two.” Jd. If an inextricable rela-
tionship between statutory standing and the merits
permits a court to decide the merits first, the same
order would seem appropriate for the two claims before
us.
In addition, we do not think our approach even im-
plicates the concerns underlying the Supreme Court’s
rejection of “hypothetical jurisdiction” because the
statutory question is logically antecedent to the Elev-
enth Amendment question (even if it were not thought
an aspect of “jurisdiction to determine jurisdiction”).
We have not chosen to decide a pure (and relatively
easier) merits question on the asswmption that we have
55a
jurisdiction—the paradigm of the hypothetical juris-
diction model. When a court decides, as we do, that a
statute does not provide for a suit against the states,
there is no risk at all that the court is issuing a
hypothetical judgment—an advisory opinion by a court
whose very power to act is in doubt. See Steel Co., 523
U.S. at__, 118 S. Ct. at 1016. Rather, the conclusion
that the statute does not provide for suits against the
states in federal court is, in effect, a resolution of the
jurisdictional question, in that the Eleventh Amend-
ment can no longer be said to apply (which is quite
different from saying, as courts do under the hypo-
thetical jurisdiction doctrine, that jurisdiction does not
matter because the same party arguing a lack of juris-
diction prevails on the merits). The Supreme Court
recently adopted precisely this reasoning in deciding a
class action certification issue before an asserted “array
of jurisdictional barriers,” inciuding ripeness, standing,
and subject matter jurisdiction. See Amchem Products,
Inc. v. Windsor, 521 U.S. 591, ___, 117 S. Ct. 2231,
2244, 138 L.Ed.2d 689 (1997). The Court said that, be-
cause resolution of the class certification issues was
“logically antecedent to the existence of any Article III
issues, it [was] appropriate to reach them first.” Jd.
The Fifth Circuit’s view instead is that a court must
assume that states are defendants under the Act and
address the Eleventh Amendment question at the
outset, lest the court give an interpretation of the
statute that it has no power to give. See Foulds, 171
F.3d at 288 (“(I]f the Eleventh Amendment removes
our jurisdictional authority to hear [the] case, we have
no power to determine whether the False Claims Act
creates a cause of action against states. . . .”). But
such an approach ostensibly avoids the evils of “hypo-
thetical jurisdiction” (not really at issue) in favor of
56a
deciding a purely hypothetical jurisdictional issue—that
is, a jurisdictional issue that arises solely by virtue of
the statutory question assumed. Since the Eleventh
Amendment issue in this case “would not exist but for”
that assumption, Amchem, 521 U.S. at ___, 117 S. Ct.
at 2244 (quoting Georgine v. Amchem Prods., Inc., 83
F.3d 610, 623 (3d Cir. 1996)), we think it is appropriate
for us to decide the logically prior issue first.‘
Perhaps most important, our reasoning is confirmed
by several Eleventh Amendment cases in which the
Supreme Court itself has decided “cause of action”
questions before turning to the Eleventh Amendment.
See, e.g., Hafer, 502 U.S. at 21-30, 112 S. Ct. 358 (hold-
ing that state officials sued in their individual capacities
are persons under 42 U.S.C. § 1983, and then holding
that the Eleventh Amendment presents no bar to such
a suit); Lake Country Estates, Inc. v. Tahoe Regional
Planning Agency, 440 U.S. 391, 398-402, 99 S. Ct. 1171,
59 L.Ed.2d 401 (1979) (deciding that a claim against an
interstate compact that required federal approval was a
claim alleging a deprivation of constitutional rights
“under color of state law” within the meaning of § 1983,
and then deciding that the compact was not entitled to
Eleventh Amendment immunity)’, Monell v. Depart-
* Of course, we recognize some tension between Amchem and
Steel Co., in that a cause of action question is, in a sense, logically
antecedent to jurisdiction too: without a cause of action, the ques-
tion whether a party satisfies jurisdictional requirements would
not arise. Yet Steel Co. clearly requires a court to decide jurisdic-
tion first. But the Court did not cast any doubt on Amchem in
Steel Co., and we think logical priority, as in Amchem, should
control here.
5 Lake Country Estates went so far as to state that this order
of decision was required. See Lake Country Estates, 440 U.S. at
57a
ment of Social Servs., 436 U.S. 658, 664-90 & n. 54, 98 S.
Ct. 2018, 56 L.Ed.2d 611 (1978) (deciding that
municipalities are persons under § 1983 and, in
conclusion, noting that the Eleventh Amendment would
not bar such suits to the extent that a municipality is
not considered a part of the state for Eleventh
Amendment purposes); Mt. Healthy City Sch. Dist. Bd.
of Educ. v. Doyle, 429 U.S. 274, 278-80, 97 S. Ct. 568, 50
L.Ed.2d 471 (1977) (deciding first that the contention
that municipalities were not persons under § 1983
was a merits question that had been waived, and then
deciding that the Eleventh Amendment does not bar a
suit against a municipality in federal court); see also
Doe v. Chiles, 1386 F.3d 709, 713-21 (11th Cir. 1998)
(deciding first that a provision of the Medicaid Act
created a federal right to reasonably prompt provision
of assistance enforceable under § 1983, and only then
concluding that the suit was not barred by the Eleventh
398, 99 S. Ct. 1171 (“Before addressing the immunity issues [of
which the Eleventh Amendment was one], we must consider
whether petitioners properly invoked the jurisdiction of a federal
court [under 28 U.S.C. § 1331].”). Of course, as the Court went on
to explain, the question whether a plaintiff has a federal cause of
action sufficient to create jurisdiction under § 1331 is not itself a
jurisdictional argument (except in the rare circumstances in which
the cause of action is frivolous, see Steel Co., 523 U.S. at __, 118
S. Ct. at 1010 (citing Bell v. Hood, 327 U.S. 678, 682, 66 S .Ct. 773,
90 L.Ed. 939 (1946))). See Lake Country Estates, 440 U.S. at 398,
99 S. Ct. 1171 (“[RJespondents’ ‘jurisdictional’ arguments are not
squarely directed at jurisdiction itself, but rather at the existence
of a remedy for the alleged violation of their federal rights.”). Still,
after identifying the argument as a cause of action argument, the
Court resolved that issue before even turning to the Eleventh
Amendment question. If the Fifth Circuit were right, the Court
should have assumed the cause of action existed once it satisfied
itself that the claim was not a jurisdictional one.
58a
Amendment). Though these cases pre-date Steel Co.,
we think they lend considerable support—albeit im-
plicit—to our approach.
On the other hand, the Court in Welch v. Texas De-
partment of Highways and Public Transportation, 483
U.S. 468, 107 S. Ct. 2941, 97 L.Ed.2d 389 (1987), decided
an Eleventh Amendment abrogation question and spec-
ifically reserved the question whether the statute
created a cause of action. See id. at 476 n. 6, 107 S. Ct.
2941 (“Because Eleventh Amendment immunity ‘par-
takes of the nature of a jurisdictional bar,’ we have no
occasion to consider the State’s additional argument
that Congress did not intend to afford seamen em-
ployed by the States a remedy under the Jones Act”
(quoting Edelman, 415 U.S. at 678, 94 S. Ct. 1347)).
This decision is hardly support for our position. But we
do not think the Court’s comment that it had “no
occasion” to consider the cause of action question fairly
should be read as a holding that cause of action ques-
tions must be decided second. See also Petty v.
Tennessee-Missouri Bridge Com’n, 359 U.S. 275, 277-
83, 79 S.Ct. 785, 3 L.Ed.2d 804 (1959) (holding that the
two states had waived their Eleventh Amendment
immunity from suit in an interstate compact, and only
then deciding that interstate compacts were not
exempt from the term “employer” in the Jones Act, but
giving no indication that that order of decision was
required). If that were so, Welch would be flatly incon-
sistent with the cases cited above. Again, the Court in
Welch referred to the quasi-jurisdictional nature of the
Eleventh Amendment—that it “partakes” of the nature
of a jurisdictional bar—which of course suggests that
the order of decision adopted was not a mandatory one.
59a
Nor do we think, as did the Fifth Circuit, see Foulds,
171 F.3d at 286, that Blatchford v. Native Village of
Noatak, 501 U.S. 775, 111 S. Ct. 2578, 115 L.Ed.2d 686
(1991), is to the contrary. The Supreme Court did note
in Blatchford that, given the Eleventh Amendment bar,
it would not express a view about whether the respon-
dent was a “tribe” within the meaning of the statute in
question, see Blatchford, 501 U.S. at 788 n. 5, 111 S. Ct.
2578. But the statutory question was not a “cause of
action” question at all but rather a question concerning
the jurisdictional statute under which the respondent
had sued, see 28 U.S.C. § 1362 (providing for federal
court jurisdiction for suits by tribes involving federal
law). At most, the Court in Blatchford, for reasons
not entirely clear to us, decided the case on Eleventh
Amendment jurisdictional grounds instead of address-
ing a purely statutory jurisdictional argument—
whether the tribe had even established jurisdiction in
the first place as a “tribe” under § 1362—that could
have made unnecessary its various constitutional hold-
ings. See id. at 779-82, 111 S. Ct. 2578 (holding that
suits by tribes are barred by the Eleventh Amend-
ment); id. at 783-86, 111 S. Ct. 2578 (holding that § 1362
did not effect a delegation of the United States’ exemp-
tion from the Eleventh Amendment bar to tribes); see
id. at 786-88, 111 S. Ct. 2578 (holding that § 1362 did not
abrogate the states’ Eleventh Amendment immunity).°
And again, while there does not appear to be a
6 The Ninth Circuit, interestingly enough, had decided the
statutory jurisdictional question before turning to the Eleventh
Amendment issues. See Native Village of Noatak v. Hoffman, 896
F.2d 1157, 1160-61 (9th Cir. 1990), rev'd, 501 U.S. 775, 111 S. Ct.
2578, 115 L.Ed.2d 686 (1991). The Supreme Court obviously chose
a different order, but did not in any way purport to reject this
aspect of the Ninth Circuit’s approach.
60a
requirement that some jurisdictional grounds be de-
cided before others, see Steel Co., 523 U.S. at__n.. 8,
118 S. Ct. at 1015 n. 3, the Court’s statement in
Calderon that it was required to decide a case or
controversy question before reaching the Eleventh
Amendment, see Calderon, 523 U.S. at ——, 118 S. Ct.
at 1697, casts considerable doubt on Blatchford’s order
of decision. In any event, Blatchford certainly cannot
be said to mandate the Fifth Circuit’s view that the
Eleventh Amendment issue must always be decided
first.
We have taken pains to discuss the issue that the
Fifth Circuit identified because of its importance. Al-
though the issue is complex, and the case law not
altogether clear, we are confident that no authority or
principle prohibits our approach. And because it has
the significant virtue of avoiding a difficult constitu-
tional question, we think it is also the preferable one.
6la
APPENDIX C
UNITED STATES DISTRICT COURT
DISTRICT OF COLUMBIA
No. CIV. A. 92-2092 (EGS)
UNITED STATES OF AMERICA EX REL.
RONALD E. LONG, PLAINTIFF/RELATOR
Vv.
SCS BUSINESS & TECHNICAL
INSTITUTE, ET AL., DEFENDANTS
[Filed March 26, 1998]
MEMORANDUM OPINION & ORDER
SULLIVAN, District Judge.
Ronald E. Long (“Long” or “relator”) brought this
action as a relator on behalf of the United States
alleging violations of the False Claims Act (“FCA” or
“the Act”), 31 U.S.C. §§ 3729-3733, and on his own
behalf pursuant to 42 U.S.C. § 1983. Long named as
defendants SCS Business & Technical Institute, Inc.
(“SCS”), Mohammed (a.k.a. Michael) Alharmoosh,
President of SCS, Kamal Alsultany, principal owner
and Chairman of the Board of SCS, the State of New
York (“New York”), and Joseph P. Frey (“Frey”). Pur-
suant to the qui tam provisions of the FCA, the com-
plaint was immediately put under seal. See 31 U.S.C.
§ 3730(b)(2). The government intervened in July 1995,
and the Department of Justice filed a first amended
62a
complaint against SCS, Michael Alharmoosh, and
Kamal Alsultany in September 1995.’ The government
declined, however, to intervene against New York and
Frey. Long then filed his second amended complaint in
June 1996.
Pending before the Court are defendant New York’s
and defendant Joseph P. Frey’s motions to dismiss rela-
tor Long’s second amended complaint for lack of sub-
ject matter jurisdiction and for failure to state a claim
upon which relief can be granted, or, in the alternative,
to dismiss Counts I and II for failure to plead fraud
with particularity.
I. FACTUAL ALLEGATIONS
Long, relator and plaintiff in this action, served as
Coordinator of Investigations and Audit for the Bureau
of Proprietary School Supervision (“BPSS”) of the New
York State Department of Education (“NYSED”) from
August 21, 1989 to April 8, 1992. BPSS is the state
agency that regulates proprietary schools in New York.
Frey was Long’s supervisor at BPSS. SCS managed
five proprietary schools in New York: two in Brooklyn,
and one each in the Bronx, Queens, and Manhattan.
Long’s second amended complaint contains three
counts against New York and Frey. Count I alleges
that New York, Frey, and SCS formed a conspiracy to
1 Together with Mr. Alsultany, the government also named as
defendants Ms. Marguerite Alsultany, Casablanca Resorts Devel-
opment of Anguilla, Ltd., Casablanca Resorts, Ltd., Intervest In-
ternational Holding Corporation, and Intervest Holding Corpora-
tion (collectively, the “Alsultany and Caribbean Defendants”). In
April 1996, the government filed a second amended complaint and,
at that time, Ms. Sylvana Alharmoosh was added as a defendant.
63a
have false claims paid by the United States in violation
of 31 U.S.C. § 3729(a)(3). Count II alleges that New
York and Frey caused false claims and reports to be
presented to the United States for payment in violation
of 31 U.S.C. § 3729(a)(1) and (2). Count II also alleges
that New York and Frey were unjustly enriched as a
result of the payments they received from SCS. Count
III alleges that New York and Frey harassed and
wrongfully discharged Long in violation of 31 U.S.C.
§ 3730(h) and 42 U.S.C. § 1983.
As Coordinator of Investigations for BPSS, Long
directed an investigation of SCS beginning in Septem-
ber 1989. SCS allegedly received federal funding under
a variety of federal programs for student financial
assistance.’ Long has alleged that the investigation he
coordinated uncovered a variety of fraudulent policies
and acts by SCS that resulted in SCS receiving federal
moneys. This fraud included allegedly falsifying
enrollment-eligibility scores, training low-level SCS
staff how to falsify records, assigning students to
courses for which they were ineligible and in which
they were incapable of participating, and refusing to
make required refunds to students. BPSS responded to
Long’s investigation by instituting administrative pro-
ceedings against SCS. In February 1992, BPSS issued
an “Order to Show Cause” and a “Bill of Particulars”
alleging that SCS had engaged in a number of violations
of New York law. BPSS and SCS reached a settlement
in March 1992.
2 These programs include Pell Grants, Supplemental Educa-
tional Opportunity Grants, PLUS/SLS loans, and federally-guaran-
teed Stafford Loans.
64a
Long alleges, however, that this was a “sweetheart”
settlement because the violations upon which it was
based were confined to actions of low-level personnel
and to a small number of violations at one school, even
though, according to Long, New York officials, includ-
ing Frey, knew that the fraud was occurring at more
than one school and that it included actions by SCS
management. Long further alleges that as a result of
this settlement, New York falsely represented to the
federal government that SCS was no longer engaging
in fraud, and that New York was monitoring SCS.
Central to Long’s claim is that BPSS allegedly
received a share of the federal funding that SCS
fraudulently obtained. BPSS allegedly received this
share through tuition assessments and fines that SCS
paid for violations of state law. Long alleges that
BPSS’s share of SCS’s federal funding was so large that
SCS was one of BPSS’s major sources of funding.
Further, Long alleges that as a result of BPSS’s in-
terest in SCS’s continued operation, BPSS engaged in
two illegal activities: it limited Long’s investigation
and it ignored evidence that SCS continued to present
fraudulent claims.
First, Long alleges that BPSS placed limitations on
Long’s investigation of SCS resulting in the “sweet-
heart” settlement with SCS which allowed SCS to
continue to fraudulently receive federal moneys. Long
alleges that BPSS placed the following limitations on
his investigation of SCS: reducing the number of
incidents of alleged fraud he was authorized to investi-
gate, rejecting evidence that SCS management and
owners were involved in the fraud, limiting the number
of schools he was authorized to investigate, and placing
RES ik Pia gS IS eco ne ae om as acct
65a
limitations on his documentation of evidence. Further,
Long alleges that BPSS refused to investigate infor-
mation Long had gathered indicating that SCS believed
it was protected by its contacts in BPSS. Long also
alleges that in October 1991, Frey specifically prohib-
ited Long from investigating evidence of fraud by SCS
management and owners.
After the 1992 settlement with SCS, Long alleges
that BPSS ignored evidence that SCS continued to
receive federal moneys on a fraudulent basis in order to
allow SCS to continue receiving federal moneys. Ac-
cording to Long, New York officials, including Frey,
falsely represented to the federal government that SCS
was not engaged in fraud and that BPSS was con-
tinuing its investigation when in fact it was not. More-
over, Long alleges that New York officials, including
Frey, indicated to the federal government in the 1992
settlement that there was no indication of widespread
fraud nor of involvement by management, even though
BPSS knew this was false.
Long asserts that he refused to follow his superiors’
instructions regarding the investigation of SCS and
that, as a result, in November 1991, Frey informed him
that he would be demoted with a loss of pay effective
April 8, 1992, if Long had not resigned by that date.
Long further alleges that in December 1991, he con-
tacted the FBI to inform them of the evidence of fraud
that he had gathered, and that he felt BPSS’s limita-
tions on his investigation were a resuli of the agency’s
interest in continuing to receive a share of the federal
moneys that SCS received. According to Long, the
FBI then launched an investigation (the Court assumes
of SCS) in which Long assisted the FBI by obtaining
66a
evidence from SCS. Long allegedly reported his coop-
eration with the FBI to Frey. On January 14, 1992,
Frey removed Long from the investigation of SCS.
Long alleges that Frey then ordered him to prepare a
final report of the investigation consisting of reporting
one type of violation at one school. Long alleges that he
prepared this report under protest. On January 22,
1992, Long was placed on administrative leave.
Long finally alleges various acts by New York
officials following his placement on administrative leave
and eventual termination. The essence of Long’s alle-
gations are that New York colluded with SCS’s con-
tinuing fraud, thereby allowing SCS and BPSS to
continue to receive federal moneys based on false
claims. Long alleges that New York officials, including
Frey, ignored State Comptroller reports in April and
December 1992 which indicated that there was con-
tinuing and broader fraud than had been stated in the
1992 “Order to Show Cause.” Long alleges that in
February 1993, BPSS investigators noticed indications
of continuing fraud at SCS. Long alleges that New
York officials, including Frey, refused to act on that
information, and instead unreasonably ordered further
investigation rather than taking steps to stop the fraud.
Thus, Long alleges that, between at least March 1993
and April 1994, New York and Frey knew that SCS
continued to engage in fraudulent activities, but did not
act upon that information. SCS declared bankruptcy in
January 1995. Long alleges that between 1988 and
1991, the United States paid SCS over $25 million per
year in response to SCS’s false claims, with BPSS
receiving a portion of these payments.
67a
Il. DISCUSSION
A complaint may be dismissed for failure to state a
claim upon which relief can be granted. Fed. R. Civ. P.
12(b)(6). The motion will be denied only if the plaintiff
could prove no set of facts which would entitle him to
relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct.
99, 2 L.Ed.2d 80 (1957). In responding to a motion to
dismiss, the Court treats all allegations of fact in the
complaint to be true, and draws all reasonable infer-
ences from those facts in favor of the plaintiff. See id;
EEOC v. St. Francis Xavier Parochial School, 117 F.3d
621, 624 (D.C. Cir. 1997); United States ex rel. Alexan-
der v. Dyncorp, Inc., 924 F Supp. 292, 296 (D.D.C. 1996)
(citing United Parcel Serv., Inc. v. International Bhd.
of Teamsters, 859 F. Supp. 590, 593 (D.D.C.1994)).
Federal courts are courts of limited jurisdiction. The
party who invokes federal court jurisdiction must
“allege in [its] pleading the facts essential to show
jurisdiction,” and “must support [those facts] by com-
petent proof.” McNutt v. General Motors Acceptance
Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135
(1936).
New York has moved to dismiss the second amended
complaint on the grounds of lack of subject matter
jurisdiction, failure to state a claim, and failure to plead
fraud with particularity as to Counts I and II. Defen-
dant Frey has moved to dismiss the second amended
complaint on the grounds of plaintiff's failure to state a
claim, or, in the alternative for summary judgment on
the basis of Eleventh Amendment immunity and quali-
fied immunity.
68a
A. Whether New York and its Officials Are Proper
Defendants in an False Claims Act Suit
The first issue the Court considers in this case is
New York’s argument that it has Eleventh Amendment
immunity from suit under the FCA. This Court rejects
New York’s argument that the Eleventh Amendment
bars an FCA action against a state. The Eleventh
Amendment is not a bar to an FCA action because the
United States is always the plaintiff in a qui tam action
and the Eleventh Amendment does not prohibit suits
by the United States against States in federal court.
See Seminole Tribe of Florida v. Florida, 517 U.S. 44,
71 n. 14, 116 S. Ct. 1114, 184 L.Ed.2d 252 (1996)(citing
United States v. Texas, 143 U.S. 621, 644-45, 12 S. Ct.
488, 36 L.Ed. 285 (1892)) (noting that state compliance
with federal law is ensured by the fact that the federal
government can sue a state in federal court for a viola-
tion of federal law); United States v. Mississippi, 380
U.S. 128, 140, 85 S. Ct. 808, 138 L.Ed.2d 717 (1965)
(“[N]othing in [the Eleventh Amendment] or any other
provision of the Constitution prevents or has ever been
seriously supposed to prevent a State’s being sued by
the United States”). For this reason, states have often
been defendants in qui tam suits under the FCA. See
United States ex rel. Berge v. Board of Trustees of the
Univ. of Alabama, 104 F.3d 1453 (4th Cir.) (state uni-
versity defendant), cert. denied, —— U.S. ——, 118 S.
Ct. 301, 1389 L.Ed.2d 232 (1997); United States ex rel.
Milam v. University of Texas M.D. Anderson Cancer
Center, 961 F.2d 46 (4th Cir. 1992) (state university
defendant); United States ex rel. Weinberger v. Florida,
615 F.2d 1370 (5th Cir. 1980) (state defendant); Wilkins
ex rel. United States v. Ohio, 885 F. Supp. 1055 (S.D.
Ohio 1995) (state defendant); United States ex rel.
69a
Milam v. Regents of Univ. of California, 912 F. Supp.
868 (D. Md. 1995) (state university defendant); United
States ex rel. Moore v. University of Mich., 860 F. Supp.
400 (E.D. Mich. 1994) (state defendant); United States
ex rel. Fine v. University of California, 821 F. Supp.
1356 (N.D. Cal. 1993) (state university defendant), aff'd,
72 F.3d 740 (9th Cir. 1995); United States ex rel.
Navarette v. Rockwell Int’l Corp., 730 F. Supp. 031,
1035 (D. Colo. 1990) (laboratory, operated and managed
by state university, was defendant).
In view of the foregoing persuasive authority, this
Court holds that a qui tam action may be brought
against the State of New York because a qui tam suit is
commenced on behalf of the United States and the
Eleventh Amendment does not bar suits by the federal
government against a state.
B. Whether New York and Its Officials Are “Persons”
Within the Meaning of the FCA
New York next argues that it is shielded from liabil-
ity under the FCA because a state cannot be considered
a “person” under that statute. The FCA provides, in
pertinent part, that “any person” who causes false
claims and reports to be presented to the United States
for payment, or who forms a conspiracy to have false
claims paid by the United States, will be liable
for treble damages and civil penalties. See 31 U.S.C.
§ 3729. This section of the FCA, however, does not
define the word “person.”
The “fundamental task in interpreting the FCA is ‘to
give effect to the intent of Congress.’” United States ex
rel. D.J. Findley v. FPC-Boron Employees’ Club, 105
F.3d 675, 681 (D.C. Cir.) (citations omitted), cert. de-
70a
nied, —— U.S. ——, 118 S. Ct. 172, 189 L.Ed.2d 114
(1997). “The starting point for interpreting a statute is
the language of the statute itself.” Jd. To determine
the meaning of the statute, the Court considers the
statute’s language and structure, and its legislative his-
tory. See California State Bd. of Optometry v. Federal
Trade Comm’n, 910 F.2d 976, 979 (D.C. Cir. 1990). Al-
though the word “person” is ordinarily construed to ex-
clude a sovereign, this reading “may . . . be dis-
regarded if ‘(t]he purpose, the subject matter, the
context, the legislative history, [or] the executive
interpretation of the statute . . . indicate an intent, by
the use of the term, to bring a state or nation within the
scope of the law.’” International Primate Protection
League v. Administrators of Tulane Educ. Fund, 500
U.S. 72, 83, 111 S. Ct. 1700, 114 L.Ed.2d 134 (1991) (in-
ternal quotations omitted).
Although Congress did not define the word “person”
in § 3729, it did define that term in § 3733 of the FCA.’
That section defines a “person,” specifically for the pur-
poses of that section, to include a “state.” 31 U.S.C.
§ 3733(1)(4). Moreover, courts have allowed states to
act as relators and bring civil suits for violations of §
3729 on behalf of the United States where the qui tam
provisions allow a “person” to bring a civil suit. See 31
U.S.C. § 3730(b); United States ex rel. Woodard v.
Country View Care Center, Inc., 797 F.2d 888 (10th Cir.
3 Section 3733 of the FCA provides the federal government
with a Civil Investigative Demand (“CID”). The CID enhances the
federal government’s investigatory powers to enable it to obtain
documents or testimony relevant to a FCA investigation. 31
U.S.C. § 3733(a); S. Rep. No. 99-345, at 33, 1986 U.S. Code Cong. &
Admin. News 5266. Thus, this section requires states to provide
this information to the federal government. See 31 U.S.C. § 3733.
Tla
1986) (State of Colorado as relator); United States ex
rel. Wisconsin v. Dean, 729 F.2d 1100 (7th Cir. 1984)
(State of Wisconsin as relator). In allowing states to act
as relators, courts have thus interpreted “person” to
include a state in the context of who may commence a
qui tam action.
In the absence of express judicial authority as to
whether a state may be a defendant in a qui tam action,
however, it is necessary to consider the legislative
history of the Act. The FCA was originally enacted
during the Civil War to combat the rampant fraud
being perpetrated on the government by defense
contractors. See S. Rep. No. 99-345, at 8, 1986 U.S.
Code Cong. & Admin. News 5266. The FCA has been
amended three times, with major revisions in 1986. See
id . The purpose of the 1986 amendments was to “make
the statute a more useful tool against fraud” in the face
of continuing fraud against the Government. /d. at 2.
The Senate Report accompanying the 1986 amend-
ments to the FCA sets out the broad reach of the
statute. “In its presert form . . . [t]he False Claims
Act reaches all parties who may submit false claims.
The term ‘person’ is used in its broad sense to include
partnerships, associations, and corporations . . . as
well as States and political subdivisions thereof.” See
id. at 8 (citations omitted). —
On the other hand, New York argues that the Court
should be guided by the general understanding that
construing the word “person” to include states is
generally disfavored. See Will v. Michigan Dep't of
State Police, 491 U.S. 58, 64, 109 S. Ct. 2304, 105
L.Ed.2d 45 (1989)(citing Wilson v. Omaha Tribe, 442
U.S. 653, 667, 99 S. Ct. 2529, 61 L.Ed.2d 153 (1979)).
12a
New York’s reliance upon Will is, however, misplaced.
First, 42 U.S.C. § 1983 is clearly distinguishable from
the FCA because § 1983 establishes a cause of action for
individual plaintiffs, whereas the FCA establishes
civil liabilities for frauds at the expense of the United
States.° See 31 U.S.C. § 3729. In an FCA action, there-
fore, the suit is always on behalf of the federal govern-
ment. See 31 U.S.C. §§ 3729, 3730(b). Since § 1983
creates a private cause of action, the analysis in Will
necessarily included Eleventh Amendment considera-
tions. See Will, 491 U.S. at 66-67. The reasoning
4 See id. at 64, 1986 U.S. Code Cong. & Admin. News 5266.
The full text of 42 U.S.C. § 1983 provides:
Every person who, under color of any statute, ordinance,
regulation, custom, or usage, of any State or Territory or the
District of Columbia, subjects, or causes to be subjected, any
citizen of the United States or other person within the
jurisdiction thereof to the deprivation of any rights, privileges,
or immunities secured by the Constitution and laws, shall be
liable to the party injured in an action at law, suit in equity, or
other proper proceeding for redress.
5 New York urges, however, that in Will, the Supreme Court
announced the “rule” that States are never “persons” in federal
statutes regardless of whether the suit brought pursuant to the
statute would be brought by an individual plaintiff or by the
United States, relying upon a case from this circuit. California
State Bd. of Optometry v. Federal Trade Comm’n, 910 F.2d 976
(D.C. Cir. 1990). In California State Board, the question facing the
D.C. Circuit was whether a state, acting in its sovereign capacity,
is subject to regulation by the FTC under the Magnuson-Moss
Amendments to the Federal Trade Commission Act, which
granted the FTC rulemake authority to define specific acts or
practices as unfair. Jd. at 978-79. In addition to New York’s
overbroad reading of the holding in Will, its reliance on California
State Board, a case construing an agency’s power, in that case, the
FTC, to regulate states under a statute enacted by Congress,
pursuant to its Commerce Clause power, is misplaced.
73a
underlying the Will Court’s reluctance to construe
“persons” to include States for the purposes of § 1983
was “that if Congress intend[ed] to alter the ‘usual con-
stitutional balance between the States and the Federal
Government,’ it must make its intention to do so ‘un-
mistakably clear in the language of the statute.’” Will,
491 U.S. at 65 (quoting Atascadero State Hospital v.
Scanlon, 473 U.S. 234, 242, 105 S. Ct. 3142, 87 L.Ed.2d
171 (1985)). Because states are not immune from suits
by the federal government, however, Congress was not
required to state in the FCA that it intended to abro-
gate the states’ sovereign immunity, as Congress would
have been required to do if it intended to subject states
to private suits by individuals.
After reviewing the language and purpose of the
statute, this Court finds no indication that Congress
sought to create an exception for state actors to perpe-
trate fraud upon the federal government, especially
since states are not immune to suits by the federal
government in federal court. See United States v.
Rockwell Int'l Corp., 730 F. Supp. 1031, 1035 (D. Colo.
1990) (holding that state defendants are not entitled to
Eleventh Amendment immunity from suits brought
pursuant to the FCA and noting that to “hold otherwise
would render meaningless the FCA’s provision author-
izing qui tam actions against state agencies and officials
operating under government contracts”). Consistent
with the intent and purpose of the FCA, the Court
therefore concludes that states are “persons” for the
purposes of § 3729 and that Congress did not intend to
exempt states from the FCA.
74a
C. Whether the FCA’s Damages Provisions Are Puni-
tive and Therefore Inapplicable to a State
As a final point, New York argues that the damages
provision of the FCA suggests that the statute has a
punitive purpose, and consequently, that the FCA
cannot apply to the states because states enjoy a
common law immunity to punitive damages which can
only be overcome by a clear congressional statement of
abrogation.
The purpose of the FCA is to enable the federal
government to recover losses it sustains as a result of
fraud. See S. Rep. No. 99-345, at 2-8, 1986 U.S. Code
Cong. & Admin. News 5266. In interpreting the pre-
1986 version of the FCA, which provided for double
damages and penalties, the Supreme Court held that
the FCA was a remedial, rather than punitive statute.
See United States v. Halper, 490 U.S. 435, 446, 449, 109
S. Ct. 1892, 104 L.Ed.2d 487 (1989) (the FCA’s damages
provision represents “rough remedial justice” as long as
rational relation exists between the government’s loss
and the damages imposed); United States v. Bornstein,
423 U.S. 303, 314-315, 96 S. Ct. 523, 46 L.Ed.2d 514
(1976) (FCA’s damages provision are remedial except
under extreme circumstances); United States ex rel.
Marcus v. Hess, 317 U.S. 537, 551-52, 63 S. Ct. 379, 87
L.Ed. 443 (1943) (purpose of the FCA is to make the
government whole for its losses and therefore statute
not punitive). The Court further reasoned that the
federal government is entitled to “rough remedial jus-
tice” and declined to impose a more exact method of ac-
counting on the Congress. United States v. Bornstein,
423 U.S. at 314-315.
75a
With regard to the treble damages provision of the
amended FCA, the Eighth Circuit has held that the
amended provision does not transform the statute from
a remedial to a punitive one. In United States v.
Brekke, 97 F.3d 1048 (8th Cir. 1996), the court held that
the FCA’s treble damages were compensatory rather
than punitive. Jd. at 1047. The court based its decision
upon the Supreme Court’s reasoning in Halper that the
““Government is entitled to rough remedial justice, that
is, it may demand compensation according to a some-
what imprecise formula.’” Brekke, 97 F.3d at 1047
(quoting Halper, 490 U.S. at 446). This Court agrees
with the reasoning in Brekke and concludes that the
federal government’s recovery of treble damages gives
it “rough remedial justice” and therefore that the FCA
is a remedial statute.
Furthermore, there is no indication that Congress
intended to change the purpose of the statute from a
remedial to a punitive one when it enacted the 1986
Amendments. See S. Rep. No. 99-345, at 7, 1986 U.S.
Code Cong. & Admin. News 5266 (noting that the Com-
mittee clarified that knowing standard did not require
actual knowledge of fraud or specific intent to commit
the fraud in order to make it more appropriate for
remedial actions) (emphasis added).
Rather, the damages provision was amended for
other reasons. First, Congress saw the need to mod-
ernize the provision, which had not been changed since
the FCA was originally enacted 123 years ago. See id.
at 2. Second, the provision was changed to make it
consistent with the false claims provision in the 1986
Department of Defense Appropriations Act. See id. at
17. Third, the increased damages provision gives effect
16a
to the overall purpose of the 1986 amendments to make
the FCA more effective and to encourage qui tam
actions. See id. at 2. Although the amended FCA does
not provide for a significant increase in the percentage
of the recovery to a qui tam relator,’ by virtue of the
increased damages, the relator stands to receive a
larger recovery. This increased recovery therefore
serves the purpose of encouraging qui tam actions.
The Court therefore concludes that the FCA’s penal-
ties are not punitive, but rather remedial, as long as a
rational relation exists between the government’s loss
and the damages assessed.
Given the Court’s conclusions that New York may be
sued under the FCA, that New York may be considered
a “person” within the context of the FCA, and that the
damages provisions of the FCA are not punitive, the
Court goes on to consider the subject matter jurisdic-
tion provisions of the FCA.
D. Whether this Court Has Subject Matter
Jurisdiction Under the FCA
Long brings his action under the FCA against New
York and against his supervisor, Joseph P. Frey. New
York, in its motion to dismiss, argues that the FCA
6 Under the former FCA, when the government intervened,
the relator would receive 10% of the recovery; and when the gov-
ernment did not intervene, the relator would receive 25% of the
recovery. See S. Rep. No. 99-345, at 27, 1986 U.S. Code Cong. &
Admin. News 5266. Under present law, when the government in-
tervenes, the relator receives between 10% and 20% of the recov-
ery; and when the government does not intervene, the relator re-
ceives between 20% and 30% of the recovery. 31 U.S.C. §
3730(d)(1), (2).
77a
precludes this Court from asserting subject matter
jurisdiction over this action. The Court must look to
the language of the statute itself to assess the merits of
defendant’s contention. Consumer Product Safety
Comm’n v. GTE Sylvania Inc., 447 U.S. 102, 100 S. Ct.
2051, 64 L.Ed.2d 766 (1980).
The FCA sets out a two-part test to determine
whether a court has subject matter jurisdiction over
plaintiff’s qui tam action and prohibits
private plaintiff suits based upon the public dis-
closure of allegations or transactions in a criminal,
civil, or administrative hearing, in a congressional,
administrative, or Government Accounting Office
report, hearing, audit, or investigation, or from the
news media, unless the action is brought by the
Attorney General or the person bringing the action
is an original source of the information.
31 U.S.C. § 3730(e)(4)(A) (emphasis added). The statute
defines an “original source” as
an individual who has direct and independent
knowledge of the information on which the allega-
tions are based and has voluntarily provided the
information to the Government before filing an
action under this section which is based on the infor-
mation.
$1 U.S.C. § 3730(e)(4)(B) (emphasis added).
Thus, the Court must first determine if the allega-
tions raised in this suit were publicly disclosed under
the meaning of the statute. If the allegations were
publicly disclosed, the Court may only assert subject
78a
matter jurisdiction over this qui tam action if plaintiff
was an original source of the information.
1. Public Disclosure Inquiry -
Although both Long and New York agree that the
allegations of fraud against SCS were publicly disclosed
under the FCA as part of New York’s 1992 admini-
strative proceedings against SCS, the parties disagree
as to whether New York’s alleged fraud was publicly
disclosed.
New York argues that because the allegations
against SCS and New York are inextricably linked,
Long can not “parse out” each claim and treat the
allegations separately for purposes of determining
whether public disclosure has occurred. In support of
its position, New York cites a Tenth Circuit case which
held that when a “qui tam action is based in any part
upon publicly disclosed allegations or transactions,” the
court must then proceed to the “original source”
inquiry. See United States ex rel. Precision Co. v. Koch
Industries, 971 F.2d 548 (10th Cir. 1992).
Long first asserts that even though the allegations
against SCS were publicly disclosed, the allegations
against New York and Frey were not publicly dis-
closed, and therefore Long is not jurisdictionally barred
from raising this claim. See United States ex rel.
Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645,
657 (D.C. Cir. 1994) (holding public disclosure under
§ 3730(e)(4)(A) occurs “only when specific allegations of
fraud or the vital ingredients to a fraudulent trans-
action exist in the public eye”) Here, only two of the
many components of the alleged conspiracy by New
York were publicly disclosed: that the SCS had acted
79a
fraudulently and that New York had settled with SCS.
These two details, however, do not constitute the “vital
ingredients” of the allegations against New York.
Further, this circuit stated that “Congress sought to
limit qui tam actions ‘to those in which the relator has
contributed significant independent information [that is
not already in the public domain].’” United States ex
rel. D.J. Findley v. FPC Boron Employees’ Club, 105
F.3d 675, 682 (D.C. Cir. 1977) (citing Quinn, 14 F.3d at
653). In his claim, Long demonstrates that he has
knowledge of substantive information concerning the
allegations of fraud against New York and Frey, sepa-
rate from what has already been disclosed concerning
SCS. In reviewing Long’s allegations, the Court con-
cludes that the allegations against New York and Frey
are separate and distinct from those against SCS.
New York next argues that even if the allegations
against SCS are found to be separate from those
against New York, Long’s disclosures to federal
authorities and to the United States Department of
Education (“DOE”) constitute a public disclosure be-
cause they took place within the course of his admini-
strative investigation. See United States ex rel. Fine v.
Advanced Sciences, Inc., 99 F.3d 1000, 1004 (10th Cir.
1996) (holding relator publicly disclosed when he
provided information regarding contractor fraud to his
to age discrimination representative); United States ex
rel. Doe v. John Doe Corp., 960 F.2d 318, 323 (2d Cir.
1992) (holding public disclosure occurred when fraud
disclosed to defendant’s employees during investiga-
tion).
Long asserts that disclosure to federal authorities
and to the DOE is not within the statute’s meaning of
80a
“public disclosure.” Specifically, Long argues that dis-
closure of the results of the investigation conducted by
three year a state administrative agency to federal
authorities does not fit within the meaning of the
“public disclosure” provision of the FCA.
Allegations of fraud are publicly disclosed “when
they are placed in the public domain.” United States ex
rel. Dick v. Long Island Lighting Co., 912 F.2d 13, 18
(2d Cir. 1990). In this case, the results of Long’s
administrative investigation were disclosed to federal
authorities. Courts have recognized that this is suf-
ficient to place the government on the trail of the
alleged wrongdoing:
In deciding whether the information conveyed to
the court is “based upon a publicly disclosed alle-
gation or transaction,” the question is whether the
information in the public domain “... could at least
have alerted law enforcement authorities to the
likelihood of wrongdoing. . .”
United States ex rel. Alexander v. Dyncorp, Inc., 924 F.
Supp. 292, 299 (D.D.C. 1996) (quoting Quinn, 14 F.3d at
654). Here, because Long alerted federal authorities,
making them aware of the purported fraudulent con-
duct, the allegations became “publicly disclosed” within
the meaning of the FCA. This leads the Court to the
“original source” inquiry.
2. Original Source Inquiry
It is well established that the purpose of the 1986
amendments to the FCA was to allow a relator’s claim
where disclosure to federal authorities has taken place,
but where the relator is an original source. Hughes
8la
Aircraft Co. v. United States ex rel. Schumer, 520 U.S.
939, 117 S. Ct. 1871, 188 L.Ed.2d 185 (1997). Under
§ 3730(e)(4)(B), Long must demonstrate that he has
“direct and independent knowledge” of the information
on which the allegations are based, and that he
“voluntarily provided [such] information” to the
government prior to filing suit. See also United States
ex rel. D.J. Findley v. FPC-Boron Employees’ Club,
105 F.3d at 690 (“To qualify as an ‘original source,’ the
relator must also have ‘voluntarily provided the infor-
mation to the government’ before filing a qui tam suit
which is ‘based on the information.’”).
First, New York argues that Long did not have
“direct” knowledge because as coordinator of the in-
vestigation, Long received his information from other
people. “Direct” signifies “marked by absence of an
intervening agency.” Quinn, 14 F.3d at 656. New York
further argues that Long did not have independent
knowledge because it was his job to obtain this
information. Quinn elucidates that the original source
provision requires the “relator to possess direct and
independent knowledge of the ‘information’ supporting
any essential element of the underlying fraud trans-
action,” but “does not require that the qui tam relator
possess direct and independent knowledge of all of the
vital ingredients to a fraudulent transaction.” Quinn,
14 F.3d at 657. Long more than satisfies the “direct
knowledge” aspect of the FCA provision because,
through his own labor, he gained first hand knowledge
of defendant’s fraudulent conduct. See Cooper ex rel.
United States v. Blue Cross & Blue Shield of Fla., Inc.,
19 F.3d 562, 568 (11th Cir. 1994) (per curiam) (finding
“direct knowledge” when relator acquired information
82a
through three years of his own research prior to public
disclosure).
Moreover, Long’s knowledge of the allegations is
“independent” because it is “knowledge that is not itself
dependant on public disclosure to federal authorities.”
See Quinn, 14 F.3d at 656. In fact, the reverse occurred
in that Long was the one to notify the federal
authorities. To find that Long is barred from bringing
this qui tam action would undermine the purpose
behind the 1986 amendments: to discourage “parasitic
suits” while encouraging parties to reveal fraudulent
conduct to the government.
Finally, New York argues that Long does not satisfy
the “voluntarily provided” element of § 3730(e)(4)(B)
because reporting such information to his employer and
the federal government was his job. The Court finds
this argument without merit because Long was
employed by a state agency and therefore, Long had no
duty to report the results of his investigation to federal
authorities.
The Court concludes that Long is an “original source”
of the allegations against New York and Frey within
the meaning of the FCA. Thus, this Court properly
invokes subject matter jurisdiction over this action
under § 3730(e)(4) of the FCA because, even though
there was public disclosure, Long meets the statutory
requirement for an original source.
E. Whether Long has Pled Fraud with Particularity
as to Count I
A failure to plead fraud with particularity is a ground
for dismissal for failure to state a claim upon which
83a
relief can be granted. Fed. R. Civ. P. 9(b); see United
States ex rel. Alexander v. Dyncorp, Inc., 924 F. Supp.
292, 302 (D.D.C. 1996) (citing Shushany v. Allwaste,
Inc., 992 F.2d 517, 520 (5th Cir. 1993)).
Count I of the complaint alleges that New York and
defendant Frey engaged in a conspiracy in violation of
31 U.S.C. § 3729(a)(3). In support of this allegation,
Long alleges that New York officials agreed among
themselves and with SCS to conceal and protect
pervasive fraud in which the New York officials knew
SCS was engaging, thereby allowing the fraud to
continue. New York argues that Long has not pled the
fraud he has alleged against them with particularity
because he has not specified the material elements of
the conspiracy, and because he has not “demonstrated”
that the New York officials and SCS reached an agree-
ment in order to get a false claim paid.
Section 3729(a)(3) of the FCA makes liable any
person who “conspires to defraud the Government by
getting a false or fraudulent claim allowed or paid.”
Under this section, the relator must show:
(1) that defendant conspired with one or more
persons to have a fraudulent claim paid by the
United States,
(2) that one or more of the conspirators performed
any act to have such a claim paid by the United
States, and
(3) that the United States suffered damages as a
result of the claim.
84a
United States v. Bouchey, 860 F.Supp. 890, 893 (D.D.C.
1994) (citing cases). Since the first criterion of §
3729(a)(3) involves an allegation of fraud, under Rule
9(b) of the Federal Rules of Civil Procedure, “the cir-
cumstances constituting fraud [must] . . . be stated
with particularity.” See Quinn, 14 F.3d at 655 n. 10.
This requires that the Long describe the fraudulent
conduct rather than merely make conclusory allegations
of fraud. See United States ex rel. Stinson v. Provident
Life & Accident Ins. Co., 721 F. Supp. 1247, 1258 (S.D.
Fla. 1989) (citing Lincoln Nat'l Bank v. Lampe, 414
F.Supp. 1270, 1278-79 (N.D. Ill. 1976)). To survive a
motion to dismiss, the complaint must contain the fol-
owing particulars: the time, place and content of the
false misrepresentations, the fact misrepresented, what
was given up or retained as a result of the fraud, and
the individual who made the misrepresentation. See
Bouchey, 860 F. Supp. at 893. However, an exception
to these requirements exists when this information is
exclusively within the knowledge and control of the
moving party. See Wilkins ex rel. United States v.
Ohio, 885 F. Supp. 1055, 1061 (S.D. Ohio 1995). Long is,
however, only required to allege this information, not
“demonstrate” it, as defendants contend. See Blusal
Meats, Inc. v. United States, 688 F. Supp. 824, 828
(S.D.N.Y. 1986).
To satisfy the first criterion of § 3729(a)(3), that
defendant conspired to have a false claim paid, Long
alleges that New York officials conspired with SCS “to
conceal and to protect” the pervasive fraud of the SCS
defendants in order to have the United States pay false
claims. Long does not, as New York contends, however,
stop here. Rather, in support of this allegation, Long
alleges that t
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.