Opposition Brief — United States ex rel. Totten v. Bombardier Corp.

No. 04-1199 ie

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Seprome Court of the United Sales °°

.

UNITED STATES OF AMERICA, ex rel. EDWARD TOTTEN,

Petitioner,

BOMBARDIER CORPORATION and ENVIROVAC, INC.,

Respondents.

+

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS FOR

THE DISTRICT OF COLUMBIA CIRCUIT

+

JOINT BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

WITH APPENDIX

¢

Philip Le B. Douglas Randall L. Mitchell

Counsel of Record Counsel of Record

Mark R. Hellerer ADDUCI, DORF, LEHNER,

Eric Fishman MITCHELL & BLACKENSHIP, P.C.

Lisa Fried 150 North Michigan Avenue

PILLSBURY WINTHROP Suite 2130

SHAW PITTMAN LLP Chicago, IL 60601

1540 Broadway (312) 781-2800

New York, NY 10036

(212) 858-1000

Counsel for Respondent Counsel for Respondent

Bombardier Corp. Envirovac, Inc.

THE LEX GROUPP€ @ 1750 K Street, NW @ Suite 475 @ Washington, DC 20006

(202) 955-0001 @ (800) 815-3791 @ Fax: (202) 955-0022 @ www.thelexgroupdc.com

ast

QUESTION PRESENTED

The question presented is whether the United

States Court of Appeals for the District of Columbia

Circuit erred in ruling that the False Claims Act, 31

U.S.C. § 3729 et seq., does not apply to allegedly false

claims for payment submitted by contractors to

Amtrak because they were never “presented to an

officer or employee of the United States for payment or

approval,” as required in the statute.

ii

CORPORATE DISCLOSURE STATEMENT

Respondents submit that the Corporate

Disclosure Statement included in the Petition should be

modified to reflect that Evac International Ltd (the

parent company of Envirovac Inc.) is a wholly-owned

subsidiary of Zodiac International SA, which, in turn,

is a wholly-owned subsidiary of Zodiac SA, a French

public limited company. Zodiac SA is listed on the

Paris Stock Exchange.

lil

TABLE OF CONTENTS

Page

CEPR IIE Br MEEIEIIENT B REEF wasnassoscsasncsnsrsnsnbsncseanensseseaesascnessses i

CORPORATE DISCLOSURE STATEMENT .................. ii

EE Enc hacanisasanssnncesiccosensntsonécvessednncannenss iii

IE SO PAG PORES REED cnsarceseneicacessssavevansccossesnsnusnencees Vv

OPPOSITION TO PETITION FOR A

saan ccciendacniésasnencescnnesennninemaconensies 1

OPINIONS BELOW .......... Sdetsva)endbstetinsnnneniensesiuhieisomosdass 1

a2 ca a Sensiassanhinnenanbaaiivespensasanaties 1

MUN EG BIRT PRES scence ccnnssccecveseransssncennscsnaece 2

REASONS FOR DENYING THE WRIT ........ eee +

1. There is No Conflict With Earlier

Decisions of This Court or Any

I te dsncahcanatcesansiaseRdlancpaceonsantbanesi +

2. Amtrak Is Not the Government................ 6

3. The Circuit Court Decision Merely

Applied The Plain Meaning of the

RIG Leica ciel Gdesdsascnsanspeinicienslaniiissnsduinniasate 8

iV

a. The Plain Language of

§3729 Requires Presentment ......... 8

b. Section 3729(a)(2) Also

Requires Presentment .................. 13

4. The Legislative History of the 1986

Amendments Does Not Address

the Presentment Requirement................. 17

Se OR eaieciccnconinndaaananetisncantianasseniedacppaienineiiaiaeic 19

APPENDIX

TABLE OF AUTHORITIES

Page(s)

CASES

Alaska Dept. of Envtl. Conservation v. Envtl. Protection

Agency,

PO? US. GGT CRG) csessisccastscrionndicasteama tae es 15

Duncan v. Walker,

DIS oh BOF CIE isiircidnthdcncsi ace 10,15

Fed. Energy Regulatory Comm’n v. Martin Exploratory

Memt. Co.,

SE US. TG CE ssicinitnscnininricesticctebitdeaanatataean S.

Lamie v. U.S. Trustee,

SO LESS. Bale CD ivincenssaciiametaates ame 11

Lebron v. Nat'l R.R. Passenger Corp.,

PES US. 55S (ie ccccccicolutheu ann oe 7

Murray & Sorrenson v. United States,

fat BAe 139 Gee Cie, TI iii 5

Rainwater 'v. United States,

Oe SR, Sd COE siciaintictceadescegutslcemie meen 7,8

Ratzlaf v. United States,

TRO US. TI0 C i ccncitceutaeeee 17

Stone v. Immigration and Naturalization Serv.,

788 OS, SG GI visti ccensseneeeeee 15

vi

TRW Inc. v. Andrews,

DIE US TF Cae? sssvicisccssscsestehistesnssiensashabelasameate 10

United States ex rel. Aakhus v. Dyncorp, Inc.,

136 F Sk GO CRT Ce, TBD csseuccosnsssicnsinvnsmsenoniah 16

United States ex rel. Harris v. Bernad,

2/3 F. Sapp. B81 (ODA, Bae vnncsenncscsnstintcnnen 16

United States ex rel. Koch v. Koch Indus., Inc.,

No. 91-CV-763-K, 1999 U.S. Dist. LEXIS 16632

(IN.D. Oude. Sept, BB, BGP) vccsicsonessessenresoninnvensconsen 16

Linited States ex rel. Marcus v. Hess,

S17 US. Sav CRG scsniecncemcanedainael 4,5

United States ex rel. Totten v. Bombardier Corp. and

Envirovac, Inc.,

206 F.3d S42 (D.C. Cit, ZUR) ccccacereconsssscsessene passim

United States ex rel. Totten v. Bombardier Corp. and

Envirovac, Inc.,

380 F.3d 488 (D.C. Cir. 2004) o...cccccccssesssseseee passim

United States v. Azzarelli Constr. Co.,

667 F.20 757 (FERGUS, Tae nccinecnanmnanad 17

United States v. Granderson,

DEL US. FP CEFR) civstisiacessenihabindcinsaeaaaneaa 11

United States v. Intrados/Int’l Mgmt. Group,

265 F. Supp. 20 1 (DD.D.C. FRR) .scsversscenscarsssessnnsne 16

Vii

United States v. Lagerbusch,

361 F.2d 449 (3d Cir. 1966)... cccceccccccccceeeeeeeec 5

STATUTES

EG TMI isc nsscseciacecstecosnincsseciceee os 1

31 U.S.C. § 3729 et PO secicnensistisasissiindbibiesnissiisibapsddghacemeammansencc i

ih 2 ORL EN AR Meta erie Bip os 8,18

i ACE ON aici chica alae ae 3

FE DB GTI sesivinsisio eesti passim

31 U.S.C. § 3729(a)(2) coeccccccccceeeeeeeeeecccc 13, 14, 15, 16

Pe Es I asctesnissstsmennnctnchoscn tube hn 9,10, 14

Oe en I I ictshdiniinnashecnitecteg a tno PRES 7

i |, RR ETRE Se ae 6

H.R. Rep. 97-651 (1982),

reprinted at 1982 U.S.C.C.A.N. 1895... 13

S. Rep. No. 99-345 (1986),

reprinted at 1986 U.S.C.C.A.N. 5266................ ROY © 4

RULE

I Me I cecscniniesicncrntainpeedeeied gidcdiclonn is 1

OPPOSITION TO PETITION

FOR A WRIT OF CERTIORARI

Respondents respectfully oppose the petition 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.

OPINIONS BELOW

In addition to Petitioner’s statement of opinions below,

the Court's attention is also directed to the earlier decision in

this case by the United States Court of Appeals for the District

of Columbia Circuit, 286 F.3d 542 (D.C. Cir. 2002), reproduced

at App. A, in which the Circuit Court granted Petitioner leave

to replead. (“Totten I”).

JURISDICTION

Respondents do not contest this Court's jurisdiction to

review this petition under 28 U.S.C. § 1254(a). However,

Respondents assert that Petitioner has misstated the portion of

Supreme Court Rule 10(c) upon which he relies to seek a writ

of certiorari. Contrary to Petitioner’s statement, Supreme

Court Rule 10(c) says nothing about basing certiorari on an

alleged conflict with Congressional intent. Because, as set forth

below, the circuit court’s decision does not conflict with any

decisions of this Court or other circuits, a grant of certiorari is

not appropriate in this case.

STATEMENT OF THE CASE

This case is a gui tam action under the False Claims Act

arising out of two contracts between the National Railroad

Passenger Corporation (“Amtrak”) and Bombardier

Corporation (“Bombardier”) to purchase passenger rail cars.

Petitioner, a discharged employee of Amtrak, filed a complai.it

on March 18, 1998, alleging that Respondents Bombardier and

its subcontractor, Envirovac, Inc. (“Envirovac”), delivered

passenger train toilets that failed to meet contract specifications.

Essentially, Petitioner has alleged that Respondents violated

the False Claims Act (“FCA”) by falsely certifying to Amtrak

that the equipment complied with contract specifications.

This case has a lengthy history. The original complaint

was dismissed at the district court, but the circuit court

reversed and granted leave to replead. United States ex rel.

Totten v. Bombardier Corp. and Envirovac, Inc., 286 F.3d 542 (D.C.

Cir. 2002) (“Totten I”). The amended complaint was also

dismissed by the district court and the dismissal was affirmed

by the circuit court. United States ex rel. Totten v. Bombardier Corp.

and Envirovac, Inc., 380 F.3d 488 (D.C. Cir. 2004) (“Totten II”).

Subsequently, the circuit court denied en banc review. Id.

Although it has appeared in this case as an amicus, the

government has consistently declined to intervene as a party,

leaving the qui tam Petitioner to pursue the action on his own.

The issue in this case is whether liability under the FCA

can be established where no false or fraudulent claim for

payment or approval has knowingly been presented or caused

to be presented to an officer or employee of the United States

Government. 31 U.S.C. § 3729(a).

In all the years this case was pending below, Petitioner

never alleged that Respondents presented, or caused to be

presented, any false claims to any entity other than Amtrak,

much less to an officer or employee of the United States

Government. Instead, Petitioner has merely alleged that

Amtrak opted to use some federal funds to repay principal and

interest on loans obtained to finance purchase of the trains.

Totten Pet., at 3. Petitioner, nevertheless, asks this Court to

ignore the plain language of the FCA requiring federal

presentment, based on a contorted interpretation of the statute

and a misplaced reliance on legislative history.

The circuit court’s ruling refusing to write federal

presentment out of the FCA is fully consistent with the prior

decisions of this Court and of other circuit courts. Moreover, it

simply interprets the statute in accordance with its plain

meaning. Any suggestion that this ruling limits the

applicability of the FCA to federal grantees is unfounded. To

the ext:nt that a federal agency seeks to apply FCA coverage to

a grantee of federal funds, the agency need only incorporate

federal presentment requirements in the grant programs and

contracts.

REASONS FOR DENYING THE WRIT

i, There is No Conflict With Earlier Decisions of This

Court or Any Circuit Court

The District of Columbia Circuit Court’s decision does

not conflict with any precedents of this Court, or with those of

any other circuit court. Recognizing this flaw, Petitioner

instead tries to argue that such a conflict exists because a few

courts interpreted an “earlier version” of the FCA (prior to the

1986 amendments) “broadly to include claims presented to

grantees and intermediaries.” Totten Pet., at 3-9. He then

suggests that Congress must have adopted this construction in

enacting the 1986 amendments. But, in cobbling his argument,

Petitioner pointedly ignores the critical element present in each

of those earlier cases, namely, the claim made upon the grantee

was ultimately presented to the federal government for

payment, approval or reimbursement. Thus, his petition must

fail.

In United States ex rel. Marcus v. Hess, 317 U.S. 537, 543

(1943) (cited at Totten Pet., at 4-8), this Court addressed issues

related to payments by local governments to contractors on

—federal P.W.A. projects. The Marcus Court explicitly

recognized that federal presentment was involved when it

stated it was a prerequisite to payment that estimates be “filed,

transmitted to, and approved by, the P.W.A. authorities.” Id.

As the Marcus Court went on to note, “While payment itself, in

the sense of the direct transferring of checks, was done in the

name of local authorities, monthly estimates for payment were

submitted by the respondents to the local sponsors on [federal

government] forms which showed the government's

participation in the work and called attention to other federal

statutes prohibiting fraudulent claims.” Indeed, “[t]he

government's money would never have been placed in the joint

fund for payment to respondents had its agents known the bids

were collusive.” Id., 317 U.S. at 543.

Underscoring the distinction between Marcus and the

present case, the Totten IJ majority cited Marcus as an example

of how the government could have structured its alleged

funding to Amtrak, in order to place federally-funded

payments to Amtrak within the FCA’s reach. See Totten II, 380

F.3d at 502, n.9 (“[T]he Government is of course free to

structure its grants in such a way as to require presentment and

thereby trigger coverage under the False Claims Act, and often

does so.”) (citing Marcus, internal citation omitted).

Nor do the two Circuit Court decisions cited by

Petitioner conflict with the ruling below. See Murray &

Sorrenson v. United States, 207 F.2d 119, 121 (1st Cir. 1953)

(supplier’s inflated bids were, in turn, submitted by the

contractor “to an officer of the United States Navy” for

approval - and, upon the order being filled by the supplier,

“the Navy Department paid the contractor and the contractor

paid the supplier”); United States v. Lagerbusch, 361 F.2d 449, 449

(Sd Cir. 1966) (private contractor was ope-ating a United States

government installation on a cost plus contract under which

the government paid or reimbursed the contractor for all

operating costs, including the sums fraudulently obtained by

the defendant).

In short, the cited authorities are perfectly consistent

with the ruling below. In each, FCA liability was found where

the federal government paid, approved or reimbursed the

claim after presentment to an officer or employee of the federal

government.

To the extent that Congress should be viewed to have

adopted any court's pre-1986 construction of the FCA when it

passed the 1986 Amendments, Respondents should prevail:

nothing about pre-1986 interpretations of the FCA is

inconsistent with the ruling by the circuit court in this case.

Thus, no basis exists to grant the petition for review.

, a Amtrak Is Not the Government

Petitioner next contends that even if presentment is

required, making a false claim upon Amtrak is tantamount to

making a claim upon an officer or employee of the federal

government. Totten Pet., at 9-13. Petitioner states that before

December 1997, Amtrak was a mixed-ownership government

corporation and that, since that time, it has received substantial

federal subsidies. Therefore, he argues that any claim

presented to Amtrak should be considered a claim to the

United States.

This point has twice been rejected by the Circuit Court

below based on the very statute creating Amtrak. See 49 U.S.C.

§ 24301(a)(3). As stated in Totten I, “[s]ince its inception, the

statutes governing Amtrak have indicated that the railroad

is... not...a department, agency, or instrumentality of the

federal government.” 286 F.3d at 544 (citations and internal

4

quotes omitted). “This status continues to the present day.” Id.

(citing 49 U.S.C. § 24301(a)). Moreover, all the judges on Totten

I] agreed that Amtrak is not “the government” for FCA

purposes. See Totten II, 380 F.3d at 481 and 498 (“We are

apparently in agreement with the dissent thet Amtrak is not

‘the Government’ for False Claims Act purposes.”).

Petitioner’s argument is based on an erroneous reading

of Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374 (1995).

Lebron held only that, for purposes of determining Amtrak’s

status with respect to the constitutional rights of citizens

affected by its actions, the courts may make a_ final

determination as to Amtrak’s status as a governmental entity.

Where, as here, no constitutional rights are implicated, Lebron’s

holding does not apply. In fact, Lebron actually confirms that

the statutes governing Amtrak - which provide that Amtrak is

not a department, agency or instrumentality of the federal

government - are dispositive of statutory claims: “Section 541

is assuredly dispositive of Amtrak’s status as a Government

entity for purposes of matters that are within Congress’s

control.” As Totten II held, Petitioner “offers no reason, and we

can think of none, why False Claims Act coverage is not a

matter “within Congress’s control’.” Totten II, 380 F.3d at 492.

Petitioner’s remaining significant authority, Rainwater v.

United States, 356 US. 590 (1958), is equally inapplicable.

Rainwater held that presentment of a claim to the Commodity

Credit Corporation (the “CCC”) was a claim against the United

States Government. But, the CCC was “an agency and

instrumentality of the United States, within the Department of

Agriculture, subject to the general supervision and direction of

the Secretary of Agriculture” (Id. at 591) (internal quotations

and citations omitted), dispositive facts that Petitioner fails to

mention. Moreover, “[a]ll of its officers and other personnel

[were] employees of the Department of Agriculture.” Id.

Accordingly, the unremarkable holding in Rainwater - that

presentment of a claim to a government agency, which is

comprised entirely of government employees, suffices under

the FCA - has no application here.

3. The Circuit Court Decision Merely Applied The Plain

Meaning of the Statute

a. The Plain Language of § 3729 Requires

Presentment

As this Court has repeatedly stated, “[t]he plain

meaning of [a] statute decides the issue presented.” Fed. Energy

Regulatory Comm'n v. Martin Exploratory Mgmt. Co., 486 U.S. 204,

209 (1988). Here, the relevant liability section of the FCA

requires that a person “knowingly present[], or cause[] to be

presented, to an officer or entployee of the United States

Government ...a false or fraudulent claim for payment or

approval.” 31 US. C. § 3729(a)(1) (emphasis added). Petitioner

nowhere alleges in his Amended Complaint that a claim was,

in fact, presented to “an officer or employee of the United

States Government.” Perforce, as the Circuit Court recognized,

he has failed to state a claim.

Instead, Petitioner contends that presentment to a

government officer or employee is not always required. He

premises this contention upon his interpretation of the

definition (rather than the liability) section of the Act, which

provides that a “claim” includes any demand for money made

to a grantee “if the United States Government provides any

portion of the money” or “if the Government will reimburse

such . . . grantee.” 31 U.S.C. § 3729(c) (2005). Since this

definition of the word “claim” “imposes no resubmission

requirement on recipients of federal funds”, he contends that

presentment is unnecessary when a false claim is made upon a

grantee.

This distorted interpretation would write the clear

language of Section 3729(a)(1), the liability section, entirely out of

the Act. Yet, that section’s presentment requirement is

unambiguous:

Liability for certain acts -- Any persin who

knowingly presents, or causes to be presented,

to an officer or employee of the United States

Government...a false or fraudulent claim for

payment...is liable to the United States

Government ....

31 U.S.C. § 3729(a)(1) (2005).

Moreover, the “claim” definition can be construed

harmoniously with the presentment requirement. Even if a

claim is in the first instance presented to a grantee, it is only

actionable if that claim is ultimately presented to a federal

official. This interpretation is fully in accord with the “cardinal

principle of statutory construction that a statute ought, upon

the whole, to be so construed that, if it can be prevented, no

10

clause, sentence, or word shall be superfluous, void or

insignificant.” TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001)

(internal quotations and citations omitted). See also Duncan v.

Walker, 533 U.S. 167, 174 (2001).

The Totten II majority agreed:

It is quite easy to square the language of

Section 3729(c) - including both “if” clauses -

with the presentment requirement in Section

3729(a)(1).....Nothing about the language of

subsection (c) requires ignoring that of

subsection (a)(1) to make sense of the statute.

Indeed, Petitioner and the United States never

connect the dots in their argument based on

subsection (c). Whatever that argument may

show about what constitutes a “claim,” it does

not respond to the plain requirement of

subsection (a)(1) that, to be actionable under

the False Claims Act, any such claim must be

presented to an officer or employee of the

United States Government.

Totten II, 380 F.3d at 493 (footnote omitted). This reasoning

confirms that of Judge Randolph, who stated in his concurring

opinion in Totten I, “[i]t is true that § 3729(c) defines ‘claim’ to

include claims submitted to federal grantees. But it is equally

true that no matter how ‘claim’ is defined, subsection (a)(1)

requires the alleged false claimant to present it (or cause it to be

presented) to a federal officer or employee.” Totten I, 286 F.3d

at 553-554. Simply put, if Congress wanted to eliminate the

11

government presentment requirement, it could easily have

amended § 3729(a)(1) “to provide that claims be presented to

the Government or a grantee or recipient of Government funds.”

Totten II, 380 F.3d at 496 (emphasis in original). Congress did

not do so, and Petitioner’s tortured construction should thus be

rejected. |

Furthermore, any argument that only an unrestricted

reading of the “claim” definition in subsection (c) will protect

government funds from fraud, must be rejected. As this Court

has stated, “It is beyond our province to rescue Congress from

its drafting errors, and to provide for what we might think ... is

the preferred result.” Lamie v. U.S. Trustee, 540 U.S. 526, 542

(2004) (quoting United States v. Granderson, 511 U.S. 39, 68 (1994)

(Kennedy, J., concurring)) (ellipses in Lamie). The Totten II

majority stated that there are good reasons for this rule,

because a court's interpretation can often create new problems.

It then cited three complications that “could flow from the

proposed correction.” Totten II, 380 F.3d at 496.

First, as Judge Randolph had noted previously in Totten

I: “[E]xtending False Claims Act liability here seems to result

in quadruple liability for false claimants: a grantee could

presumably bring suit and obtain a recovery for itself, in

addition to the treble damages the Government and the relator

divvy up under the Act.” Totten II, 380 F.3d at 496.

Second, authorizing suit on behalf of any entity to which a

claim was not presented raises complicated questions in

applying the statute’s scienter requirement: if the claimant has

told the grantee pertinent facts that would, in the absence of

4

,

12

such disclosure, make a claim fraudulent, it seems that the

claimant has not “knowingly” presented a false claim to the

grantee. In such a case, it is unclear how to apply the

"knowingly presents" element when the government or a

relator brings suit for claims made to the grantee, if there is no

longer any requirement of presentment to the government. Id.

This would raise an additional set of issues for court analysis

and interpretation.

Third, a liberalized “effective” presentment approach

that did not require actual presentment would make the

potential reach of the Act almost boundless: for example,

liability could attach for any false claim made to any college or

university, so long as the institution has received federal grants,

as most of them do. Such an imprecise line of demarcation

could be a prescription for more collateral litigation under the

FCA. Id.

The FCA eliminates these potential complications

through the presentment requirement. When presentment

occurs, the government retains an ongoing interest in

controlling the use of the disbursed federal funds. In that case,

it is sensible to conclude that money in the hands of a grantee is

still government property for purposes of the FCA. By contrast,

where no government presentment occurs, the government's

interest in the disbursed funds is not sufficient to merit FCA

protection. Here, absent presentment to the government,

disputes between Amtrak and other private entities properly

should be addressed by ordinary contract and tort law, which

provides ample remedies for any alleged claims.

nil

13

It is not an exaggeration to say that, in the absence of a

presentment requirement, any person or entity involved in any

run-of-the-mill dispute with one of the millions of recipients of

federal funds could find itself facing the onerous damages and

penalties imposed by the FCA. If an FCA claim is viable in

such a circumstance - where there is no claim presentment and

where one need only allege that funds originated with the

federal government - qui tam relators will surely attempt to

capitalize on Petitioner's attempt to “federalize” ordinary

contract and tort disputes.

b. Section 3729(a)(2) Also Requires Presentment

Petitioner further tries to argue that his action can

proceed under § 3729(a)(2), which he interprets not to require

any claim presentation to a federal government. official. This

argument is based on the position adopted by the dissent in

Totten I]. Totten II, 380 F.3d at 504.

Prior to 1982, presentment to the government was

expressly required. In 1982, the statute was amended simply to

divide a single cumbersome sentence in two - §§ 3729(a)(1)

and (a)(2). The legislative history states that the purpose of the

1982 codification was only “to restate in comprehensive form,

without substantive change, certain general and permanent laws

related to money and finance and to enact those laws as Title 31,

United States Code.” H.R. Rep. 97-651 (1982), reprinted at 1982

U.S.C.C.A.N. 1895. Therefore, the separation of what are now

subsections (a)(1) and (a)(2) is of no consequence, and the

presentment requirement of (a)(1) must be read to apply with

equal force to (a)(2).

14

In the 1986 amendments to the statute, when Congress

added the definition of “claim” to subsection (c), it also inserted

the phrase “by the Government” to subsection (a)(2) so that it

read:

Any person who 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...is

liable....

As the circuit court majority held, the addition of this

phrase confirms that (a)(2) also requires presentment.

The intended effect of adding “by the

Government” [to Section 3729(a)(2) in 1986] at

the same time as subsection (c) is fairly obvious:

Congress was referring back to the

presentment requirement of Section 3729(a)(1).

And in so doing, Congress was reinforcing -

rather than abandoning - the distinction

between the Government and its grantees that

might otherwise have been blurred by the

addition of Section 3729(c).

Totten II, 380 F.3d at 499. The Totten II majority reached this

decision after an exhaustive review of the provision’s evolution.

It began by noting that “[t]he parallel structure of (a)(1) and

(a)(2)” is “no accident,” since, prior to 1982, both provisions

“were contained in one unwieldy sentence that had survived,

with only minor modifications, since the Act’s enactment in

Se ee

ee eS ae ae. Sh

io

1863.” Id., at 499-500. After tracking Congress’ revisions of the

statute over the past 100 years, the Court concluded, “The

present Section 3729(a)(2), therefore, is the direct descendant of

a clause that could only be read in conjunction with what is

now Section 3729(a)(1).”. The majority added that “[t]he

proposition that subsection (a)(2) harkens back to (a)(1), and

that the latter requires presentment, is supported in scholarly

commentary on the False Claims Act.” It then observed, “[t]he

dissent’s contrary conclusion - that subsection (a)(2) does not

require any presentment that may be required under

subsection (a)(1) - has tellingly little support.” Id., at 501.

Words added to a statute must be presumed to have

meaning. Stone v. Immigration and Naturalization Serv., 514 US.

386, 397 (1995) Further, a Court must avoid any construction

that renders words in a statute meaningless. Duncan, 533 U.S.

at 174; Alaska Dept. of Envtl. Conservation v. Envtl. Protection

Agency, 540 U.S. 461, 489, n.13 (2004). Here, no construction

favoring removal of the presentment requirement can be

squared with the addition of the phrase “by the Government”

and would render that phrase superfluous.

Furthermore, Petitioner’s reading of subsection (a)(2) to

avoid the presentment requirement would render (a)(1) largely

meaningless. Allowing (a)(2) to swallow (a)(1) is problematic

because it seems clear that (a)(2) is designed to be

complementary to (a)(1) and to prevent those who only make

false records or statements from escaping liability solely on the

grounds that they did not themselves present the claim to the

government. Totten II, 380 F.3d at 501.

16

Courts have uniformly recognized that subsection (a)(2)

requires presentment. In United States ex rel. Aakhus v. Dyncorp,

Inc., 136 F.3d 676 (10th Cir. 1998), for instance, the Tenth Circuit

held that “[t]o establish a claim under (a)(2), a person must

demonstrate that (1) a ‘claim’ was presented to the government by

the defendant, or the defendant ‘caused’ a third party to submit

the ‘claim,’ (2) the claim was ‘false or fraudulent,’ (3) the

defendant presented the claim knowing it was ‘false or

fraudulent, and (4) the defendant made or used a false

statement which the defendant knew to be false, and which

was causally connected to the false claim.” Id. at 682 (emphasis

added).!

In short, as the evolution and language of the FCA

makes clear, the false record provision can only be triggered

where there is presentment of a false claim to the government

for payment or approval.

1 Similarly, district courts have consistently held that a claim under the

false record provision requires government presentment. See United

States ex rel. Harris v. Bernad, 275 F. Supp. 2d 1, 6 (D.D.C. 2003) (holding

that § 3729(a)(2) requires “that the defendant knowingly created a false

record, used this record to create a claim, then submitted the claim (not

the record) to the government”); United States v. Intrados/Int’l Mgmt. Group,

265 F. Supp. 2d 1, 8 (D.D.C. 2002) (holding that liability under (a)(2)

would attach if defendant used false salary information “in a calculation

and then incorporat[ed] [the resulting number] in an invoice, and

subsequently submitt[ed] the invoice to the government for

reimbursement”); See also United States ex rel. Koch v. Koch Indus., Inc., No.

91-CV-763-K, 1999 U.S. Dist. LEXIS 16632, at * 13 (N.D. Okla. Sept. 28,

1999) (quoting the (a)(2) elements set forth in the Aakhus decision).

ae

17

4. The Legislative History of the 1986 Amendments Does

Not Address the Presentment Requirement

Petitioner places great reliance on the legislative history

of the 1986 amendments to the FCA. As the Totten II majority

held, however, “resort to legislative history is not appropriate

in construing plain statutory language. When the statute’s

language is plain, the sole function of the courts - at least

where the disposition required by the text is not absurd - is to

enforce it according to its terms.” Totten II, 380 F.3d at 494

(citations omitted); Ratzlaf v. United States, 510 U.S. 135, 147-8

(1994) (courts should not “resort to legislative history to cloud a

statutory text that is clear”). As the Totten IJ majority held, the

statutory language in this case is plain and resort to the

legislative history unwarranted.

That said, the legislative history, in this instance, does

not significantly advance Petitioner’s cause. His reliance on the

stated legislative intent to “overrule Azzarelli and similar cases

which have limited the ability of the United States to use the act

to reach fraud perpetrated on federal grantees” (quoting S. Rep.

No. 99-345, at 22 (1986), reprinted at 1986 U.S.C.C.A.N. 5266,

9287) is misplaced. In United States v. Azzarelli Constr. Co., 647

F.2d 757 (7th Cir. 1981), the court held that because the federal

funds at issue were part of a “fixed and determined yearly

contribution” rather than an “open-ended federal expenditure

program,” the FCA did not apply. Id. at 761. In amending the

FCA to overrule that decision, Congress sought to ensure that

the fixed nature of a federal grant would be no bar to a

claimant's liability. Nothing about that stated intention is

inconsistent with the presentment requirement. In fact,

Azzarelli itself involved the presentment of false claims to the

18

federal government. The payment program at issue clearly

required the state to present to the government claims for

reimbursement after it paid the contractor’s fraudulent claims.

Totten II 380 F.3d at 495.

Perhaps the most important aspect of the legislative

history of the 1986 amendments, however, is what Congress

did not say. The liability provision of the Act is short and

contains only one basic requirement: presentment of a false

claim to an officer or employee of the federal government. If

Congress intended to rewrite that provision, surely it would

have expressly said so; it did not. The absence of any such

statement undermines the argument that Congress intended to

remove the presentment requirement in § 3729. Indeed,

if the overriding intent of Congress were in fact

to delete the requirement that claims be

presented to a Government officer or employee,

Congress could readily have done just that -

amend subsection (a)(1) to provide that claims

be presented to the Government or a grantee or

recipient of Government funds. But Congress did

not touch (a)(1) at all in 1986. Congress ~

proceeded quite elliptically if its intent were to

eliminate the requirement of presentment to

the Government in the case of claims against

grantees.

Totten II, 380 F.3d at 495-6 (emphasis in original). As noted

above, “the Government is of course free to structure its grants

in such a way as to require presentment and thereby trigger

19

coverage under the False Claims Act, and often does so.” Id., at

502, n.9.

CONCLUSION

For the foregoing reasons, Respondents ask this Court to

deny the Petition for A Writ of Certiorari.

Respectfully submitted,

/s/ Philip Le B. Douglas

Philip Le B. Douglas

Mark R. Hellerer

Eric Fishman

Lisa Fried

Pillsbury Winthrop

Shaw Pittman LLP

1540 Broadway

New York, New York 10036

Telephone: (212) 858-1000

Attorneys for Respondent Bombardier

/s/ Randall L. Mitchell

Randall L. Mitchell

Adduci, Dorf, Lehner,

Mitchell & Blackenship, P.C.

150 North Michigan Avenue

Suite 2130

Chicago, Illinois 60601

Telephone: (312) 781-2800

Attorneys for Respondent Envirovac

APPENDIX

TABLE OF CONTENTS

Appendix to Petition

Page

United States ex rel. Totten v. Bombardier Corp. and

Envirovac, Inc.,

286 F.3d 542 (D.C. Cir. 2002) ....ccccccsssssssssesssssseen Al

Al

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 4, 2002 Decided April 16, 2002

No. 01-7071

United States of America, ex rel. Edward L. Totten,

Appellant

V.

Bombardier Corporation and Envirovac, Inc.,

Appellees

Appeal from the United States District Court

for the District of Columbia

(No. 98cv00657)

H. Vincent McKnight Jr. argued the cause for

appellant. With him on the briefs was Peter J.

Vangsnes.

Thomas M. Bondy, Attorney, U.S. Department of

Justice, argued the cause as amicus curiae supporting

appellant. With him on the brief were Roscoe C.

Howard Jr., United States Attorney, Douglas N. Letter,

Litigation Counsel, United States Department of

Justice, and Colin C. Carriere, Counsel, National

Railroad Passenger Corporation.

A2

Mark R. Hellerer argued the cause and filed the brief

for appellee Bombardier Corporation. Donald A. Carr

entered an appearance.

Paul E. Lehner and Randall L. Mitchell were on the

brief for appellee Envirovac, Inc. Barbara Van Gelder

and Scott M. McCaleb entered appearances.

Before: Edwards and Randolph, Circuit Judges, and

Williams, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge Edwards.

Concurring opinion filed by Circuit Judge Randolph.

Edwards, Circuit Judge: Suspecting that his

employer, the National Railroad Passenger

Corporation ("Amtrak") was being defrauded by two

companies with whom it had contract-ed to supply

new rail cars with improved toilet systems, Edward

Totten brought an action against these companies

under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-

3733 (1994). The District Court dismissed his suit,

holding that, pursuant to a recent amendment to

Amtrak's governing statute, the FCA could not be

invoked with respect to federal money invested in the

railroad. Totten now appeals this decision, and in so

doing presents us with an issue of first impression

regarding the extent to which doing business with

Amtrak immunizes contractors from FCA liability.

In 1997, Congress enacted legislation which stated,

in part, that Amtrak "shall not be subject to title 31."

See Amtrak Reform and Accountability Act of 1997,

ee ee ee ee ee

A3

Pub. L. No. 105-134, § 415(d), 111 Stat. 2570 (Dec. 2,

1997) ("the Reform Act"), codified at 49 US.C.A. §

24301(a)(3) (2001). Because the FCA is included in title

31 of the U.S. Code, the District Court concluded that a

suit by Totten against contractors doing business with

the railroad would impermissibly make Amtrak

"subject to" the FCA. We disagree. Instead, we hold

that the Reform Act erects no per se bar preventing

individuals from bringing FCA actions against those

who make false or fraudulent claims implicating the

federal funds invested in Amtrak. Neither the text nor

the legislative history of § 24301(a)(3) compels a

blanket liability exception for businesses serving

Amtrak.

Accordingly, we reverse the judgment of the District

Court and remand the case for further proceedings.

On remand, Totten may amend his complaint, which

presently is inadequate, in order to state a proper claim

for relief under the FCA. The District Court indicated

that it would have per-mitted such an amendment had

it not interpreted the Reform Act as posing an

insurmountable obstacle to Totten's suit. We agree that

an opportunity to amend is permissible and

appropriate.

In amending his complaint, Totten must state with

particularity the circumstances surrounding the

defendants' allegediy false claims, as required by Rule

9(b) of the Federal Rules of Civil Procedure. He must

also aver that the defendants actually submitted false

demands for payment, rather than merely non-

conforming goods. That said, we express no view on

the question left open by this court in United States ex

A4

rel. Yesudian v. Howard University, 153 F.3d 731, 737-39

(D.C. Cir. 1998), concerning the relationship between

subsections (a)(1) and (c) of 31 U.S.C. § 3729. instead,

we leave it to the District Court to determine, should

the issue arise on remand, whether an FCA plaintiff

may prevail against a defendant who submits a false

"claim" to Amtrak, as that term is defined in § 3729(c),

without evidence that the claim was ever submitted (or

resubmitted) to the federal government. We will not

venture to offer an answer to this difficult legal

question on the record currently before us.

I. BACKGROUND

Congress created Amtrak in 1971 in order to stave

off the threatened extinction of passenger rail service in

the United States. See Rail Passenger Service Act of

1970, Public Law No. 91-518, 84 Stat. 1327 (Oct. 30,

1970); Nat'l R.R. Passenger Corp. v. Atchison, Topeka &

Santa Fe Ry. Co., 470 U.S. 451, 453-55 (1985). Since its

inception, the statutes governing Amtrak have

indicated that the railroad is to be managed ‘as a for-

profit corporation, and not as a "department, agency, or

instrumentality" of the federal government. See

generally Lebron v. Nat'l R.R. Passenger Corp., 513 US.

374, 383-86 (1994). This status continues to the present

day. See 49 U.S.C.A. § 24301(a). As such, the railroad

is generally exempt from those "statutes that impose

obligations or confer powers upon Government

entities." Lebron, 513 U.S. at 392 (holding that Amtrak

is nevertheless subject to the constraints of the

Constitution).

AS

Until 1997, Amtrak was formally classified as a

"mixed-ownership Government corporation," 31 U.S.C.

§ 9101(2)(A) (1983), and was therefore bound by the

rules that federal law imposes on such entities. See

Government Corporation Control Act, 31 U.S.C. §§

9101-9109 ("GCCA"). That year, concerned that these

and other restrictions were jeopardizing Amtrak's

financial viability, Congress enacted the Reform Act in

order to increase the railroad's managerial flexibility

and improve its economic prospects. See S. Rep. No.

105-85, at 1 (1997) ("In order to achieve operating self-

sufficiency, the bill is designed to enable Amtrak to

increase efficiencies, reduce costs, and operate as much

like a private business as possible."). To these ends,

while Amtrak was provided with an influx of federal

dollars -- appropriations totaling $5.2 billion over the

1998-2002 period -- Congress simultaneously sought to

alter the railroad's legal status as a recipient of that

money.

It did so in two ways that are significant for the

present appeal. First, the Reform Act amended the

GCCA to remove Amtrak from the list of mixed-

ownership corporations. See Pub. L. No. 105-134, §

415(d)(2). This change freed the railroad from the

requirements that bind companies so designated, such

as the submission of budget reports to Congress, 31

U.S.C. § 9103, and annual government audits, 31 U.S.C.

§ 9105. Relatedly, the Act specifically amended 49

U.S.C. § 24301(a)(3) to provide that Amtrak "shall not

be subject to title 31." See Pub. L. No. 105-134, §

415(d)(1). These amendments do not figure

prominently in the legislative history of the Reform

Act. Indeed, the only specific reference to this section

A6é

of the bill notes tersely that it "removes Amtrak from

the Government Corporations Act." H.R. Rep. No. 105

251, at 34 (1997).

Certainly, neither the statutory text nor its history

makes any mention of the False Claims Act. Yet, along

with the rules regarding government corporations, that

statute is housed in title 31. And the present case calls

upon us to decide the extent to which this provision of

the Reform Act narrowed the reach of the FCA as it

relates to Amtrak. This is an issue of first impression.

The dispute giving rise to this case began when

Amtrak contracted with two private companies,

Bombardier Corporation and Envirovac, Inc. ("the

Contractors"), to supply rail cars with new toilet

systems for its trains. Bombardier makes the cars and

Envirovac makes the toilets. Specifications for the

toilet systems were incorporated into Amtrak's

contracts with the Contractors. On March 16, 1998,

Totten, a former Amtrak employee, filed a suit against

the Contractors under the FCA, alleging that they had

supplied unsuitable parts that did not meet the

contractual specifications. Totten's complaint asserted

that these noncompliant toilets were so defective that

they endangered the health of Amtrak's passengers

and employees. Totten further averred that the

Contractors knew of these defects, yet delivered the

cars anyway in order to obtain payment under their

contracts.

In order to advance its purpose of protecting federal

funds from fraud, the False Claims Act allows a private

individual such as Totten (known as the relator) to

—

a

A7

bring a qui tam action "in the name of the

Government," and by that means to share in the

ultimate recovery. See 31 U.S.C. § 3730(b); see generaily

Vermont Agency of Natural Res. v. United States ex rel.

Stevens, 529 U.S. 765, 768-70 (2000). The statute's qui

tam provision is a powerful tool that augments the

government's limited enforcement resources by

creating a strong financial incentive for private citizens

to guard against efforts to defraud the public fisc. See

Yesudian, 153 F.3d at 736. Indeed, an FCA plaintiff can

realize a substantial recovery, as the statute imposes

both treble damages and a civil penalty of up to $10,000

on any person who, inter alia, "knowingly presents, or

causes to be presented, to an officer or employee of the

United States Government ... a false or fraudulent claim

for payment or approval." 31 U.S.C. § 3729(a)(1).

The language of § 3729(a)(1) suggests that the

alleged false claim must have been presented to the

federal government itself. Section 3729(c), however,

defines "claim" quite broadly to include:

any request or demand, whether

under a contract or otherwise, for money

or property which is made to a

contractor, grantee, or other recipient if

the United States Government provides

any portion of the money or property

which is requested or demanded, or if the

Government will reimburse — such

contractor, grantee, or other recipient for

any portion of the money or property

which is requested or demanded.

A8

Neither this court nor the Supreme Court has

definitively explicated the complex relationship

between the definition clause in § 3729(c) and the

presentment clause in § 3729(a)(1). Instead, we have

noted, but declined to answer, the question of whether

an FCA plaintiff can prevail by proving only that a false

claim was submitted to a federal grantee (such as

Amtrak), as defined in subsection (c), without further

demonstrating that the claim was submitted (or

resubmitted) to the federal government, as suggested

by the text of (a)(1). See Yesudian, 153 F.3d at 737-39.

The District Court did not face this question.

Rather, the court relied on different grounds in

rejecting Totten's complaint. See United States ex rel.

Totten v. Bombardier Corp., 139 F. Supp.2d 50, 52 & n.1

(D.D.C. 2001). First, the District Court held that,

regardless of whether § 3729(a)(1) requires a showing

that claims were presented to the United States itself,

Totten's complaint failed because it did not allege that

the Contractors presented "any request or demand ...

for money or property" to Amtrak. Rather, the

complaint merely asserts that defendants delivered

goods to the railroad that did not meet the

specifications of its contracts. Second, the District

Court found that the complaint makes no

representations regarding Amtrak's status as a

recipient of federal money, either in general or in

connection with the specific projects at issue in this

case. Therefore, even if the Contractors had actually

presented demands for payment to Amtrak, the

complaint gives no indication as to how such demands

would be "claim[s]" under the terms of subsection (c). .

Third, the District Court pointed out that Totten's

AY

complaint does not state the time, place, and content of

defendants’ alleged false statements, as required by

Rule 9(b). See Fed. R. Civ. P. 9(b) ("the circumstances

constituting fraud or mistake shall be stated with

particularity").

The District Court noted that ordinarily it would

have allowed a plaintiff to cure such pleading flaws by

amendment, but concluded that such a remedy would

have been futile in Totten's case because his suit was

doomed as a matter of law. See Bombardier, 139 F.

Supp. 2d at 52 n.1. Specifically, the court held that

Amtrak's special legal status rendered its contractors

totally immune from liability under the FCA,

regardless of how the case was pleaded. According to

the District Court, the purpose of the Reform Act was

to "negate the normal repercussions of government

funding" as it related to Amtrak. Id. at 54. Among

these repercussions is potential FCA liability for those

entities receiving, through contracts with Amtrak, a

share of the federal money invested in the railroad.

The District Court thus held that the phrase "not

subject to title 31" in 49 U.S.C.A. § 24301(a)(3) was

intended to prevent "Amtrak's receipt of government

funds from bringing Amtrak, and its business dealings,

within the reach of the False Claims Act." Id. at 55.

Totten appeals from this decision. The United States

elected not to intervene in this litigation pursuant to 31

U.S.C. § 3730(b)(5). However, the United States has

now filed an amicus curiae brief on appellant's behalf

arguing against the District Court's expansive

construction of the Reform Act.

A10

II. DISCUSSION

The central issue in this appeal is whether the

Reform Act, in stating that Amtrak "shall not be subject

to title 31," exempts those who contract with Amtrak

from liability under the False Claims Act. We believe

that it does not. Rejecting the District Court's

construction of the Reform Act leads us to the question

of whether Totten should be allowed to amend his

complaint to correct its various shortcomings. We

believe that he should.

A. — The Meaning of "Subject To" in 49

U.S.C.A. § 24301(a)(3)

The argument that the Reform Act bars Totten's suit,

which the District Court accepted and which the

Contractors echo on appeal, runs as follows: The FCA

confers benefits and imposes burdens on entities who

receive government funding. The statute's stringent

penalties deter fraud but they also may make some

businesses reluctant to contract for fear of liability.

Accordingly, if demands for payment presented to

Amtrak can be considered "claims" within the meaning

of 31 U.S.C. § 3729(c), the FCA would both protect and

(indirectly) constrain Amtrak in_ its _ business

transactions. And this would leave the railroad

"subject to," in the sense of being "affected by," the

terms of the statute. Under this scenario, Totten's cause

of action is precluded by § 24301(a)(3).

We are not persuaded by this argument. We must

begin, of course, with the text of the statute. As the

All

District Court itself recognized, the words "subject to"

leave room for interpretation. See Bombardier, 139 F.

Supp. 2d at 53. It is true that in some contexts "subject

to" can mean "affected by," for example, "Boats in San

Francisco Bay are often subject to fierce winds."

However, when the phrase is used in situations more

analogous to the one here, it is typically given a

narrower cast: an entity is "subject to" a particular legal

regime when it is regulated by, or made answerable

under, that regime. See The Random House Thesaurus

696 (giving "bound by" as chief synonym for the phrase

in the sentence, "We are subject to the laws of the

country"); see also, e.g.,, Texaco, Inc. v. DuhE, 274 F.3d

911, 918-19 (5th Cir. 2001) (natural gas became "subject

to an existing contract" within the meaning of the

Natural Gas Policy Act when it was "governed by" the

terms of that contract).

In National Collegiate Athletic Association v. Smith, for

example, the Supreme Court considered whether "a

private organization that does not receive federal

financial assistance is subject to Title IX because it

receives payment from entities that do." 525 U.S. 459,

465 (1999) (emphasis added). In holding that the

NCAA was not subject to the statute, the Court did not

preclude all applications of Title IX that indirectly

affect the organization. Rather, the Smith decision

mandated merely that the NCAA itself could not be

sued under Title IX. See Id. at 470. The organization, in

other words, was not required to conform its own

conduct to the demands of the statute. That said, Title

IX suits against the colleges or universities that fund

the NCAA are plainly permitted after Smith, even

though the effect of such litigation might be to limit the

I

Al2

number of schools willing to field athletic teams and

thus to pay the Association's dues. Cf Pederson v.

Louisiana State. Univ., 213 F.3d 858 (5th Cir. 2000)

(holding that LSU was liable under Title IX for not

adequately accommodating the school's female

athletes). The fact that Title IX continues to have an

indirect effect on the NCAA's business does not, in

ordinary usage, render that organization "subject to"

that statute.

Other examples’ reinforce this common

understanding of the term. Thus, when the Supreme

Court noted that a defendant was "subject to Title VII ...

only if, at the time of the alleged retaliation, it met the

statutory definition of employer," it clearly meant that

the defendant could be held liable under Title VII only

if that condition was met. Walters v. Metro. Educ.

Enters., Inc., 519 U.S. 202, 205 (1997); see also, e.g., Nat'l

Cable and Telecomm. Ass'n, Inc. v. Gulf Power Co., 122 S.

Ct. 782, 797 (2002) ("[T]he Commission has not

determined whether Internet access via cable system

facilities should be classified as a 'cable service’ subject

to Title VI of the Act, or as a 'telecommunications' or

‘information service' subject to Title II.").

Moreover, this is how the phrase is used in the

context of the False Claims Act itself. In its recent

Vermont Agency decision, the Supreme Court used the i

phrase "subject to the false claims law" to describe the |

category of persons who can be sued under the FCA.

529 US. at 784 n.13; see also, e.g., United States ex rel.

Long v. SCS Bus. & Tech. Instit., Inc., 173 F.3d 870, 876

(D.C. Cir. 1999) (speaking of "individuals subject to the

Act" as those who could be made liable under it);

Al3

United States ex rel. Zissler v. Regents of the Univ. of

Minnesota, 154 F.3d 870, 872 (8th Cir. 1998) (asking

whether States are "subject to the False Claims Act" in

the sense of whether they can be held legally

accountable for making false claims to the federal

government).

Accordingly, where, as here, a plaintiff brings a qui

tam action against a third party who has allegedly

defrauded a federal grantee, common usage would

suggest that the third party, and not the grantee, is

being made "subject to" the FCA. We think this to be

the more intuitive understanding of the Reform Act as

well. Construing § 24301(a)(3) in this light would read

it as preventing Amtrak from being directly regulated

by the various provisions in title 31, for example, by

being sued under the False Claims Act. In contrast, as

long as Amtrak is not made to conform its actions to

the terms imposed by such statutes, the railroad is not

made "subject to" those laws. And, if this is the

standard, it is clearly not met in the present case.

Here, Totten seeks to use the FCA not to regulate

Amtrak, but instead to recover for the purported fraud

of contractors hired to serve the railroad. Allowing the

United States (or its relator) to obtain damages from

those who contract with Amtrak imposes no direct

legal obligation on the railroad. Nor does it permit

Amtrak's conduct to be measured against the standards

set in the statute. Even if similar suits may have an

incidental effect on Amtrak's future business

relationships, Totten's litigation will not compel the

railroad to take any action in order to satisfy the

demands of the FCA.

Al4

His action therefore’ does not implicate the Reform

Act's "subject to" provision.

At any rate, this result flows from what we believe

to be the most natural and ordinary reading of the

phrase "subject to." Accordingly, we will accept that

conclusion, and allow Totten's suit to go forward,

unless we find evidence that Congress had a different

meaning in mind when it drafted § 24301(a)(3). See,

e.g., Williams v. Taylor, 529 U.S. 420, 431 (2000) ("We

give the words of a statute their ‘ordinary,

contemporary, common meaning;,' absent an indication

Congress intended them to bear some different

import.") (quoting Walters, 519 U.S. at 207). The

Contractors argue that such evidence is to be found in

the legislative history of the Reform Act. Once again,

we disagree.

If anything, the only specific reference that Congress

made to the "not be subject to title 31" language

suggests that this clause was intended to have a rather

limited effect. The amendment appeared in Section 501

of the House version of the bill that became the Reform

Act. That section, entitled "Financial Powers," was

concerned mostly with restructuring Amtrak's stock.

Subsection (e) contained both the clause removing

Amtrak from the list of mixed-ownership Government

corporations in 31 U.S.C. § 9101, and the clause adding

the "subject to" language in 49 U.S.C. § 24301(a)(3). In

its section-by-section analysis of the bill, the House

Committee on Transportation and _ Infrastructure

reported blandly that this subsection "removes Amtrak

from the Government Corporations Act." See H.R. Rep.

No. 105-251, at 34.

Al15

Insofar as this statement is useful, it clearly does not

help the Contractors' cause. It provides no indication

that Congress expected or intended that the phrase

"subject to" would take on a broader agenda than its

ordinary meaning connotes. To be sure, the language

of the amended § 24301(a)(3) plainly does more than to

remove Amtrak from the obligations of the GCCA, and

must be construed accordingly. | However, the

Committee's narrow understanding of this change

certainly reinforces our decision to reject the expansive

interpretation adopted by the District Court. If

anything, the legislative history's terse analysis

indicates that no one in Congress imagined that the

Reform Act would result in a repeal of the False Claims

Act as it applies to any private company doing

-business with Amtrak.

Such an outcome would indeed have been striking.

To accept it, we would have to believe that just as

Congress was committing itself to a significant

investment of federal money in Amtrak, it eliminated a

weapon for protecting that money against fraud. We

would have to believe that Congress placed a

significant obstacle in the way of uprooting the

unlawful depletion of that portion of the public fisc

used to develop and support the nation's passenger rail

system - the very system that the legislation in question

was aimed at protecting.

As suggested above, the words that Congress wrote

do not compel (and in their ordinary usage resist) this

conclusion. And the scant extrinsic evidence that exists

to cast light on the meaning of these words suggests

that such a dramatic result was far from the legislative

Al6

mind. We think it not unreasonable to suppose that

had such a broad rollback of the FCA in fact been the

goal of the Reform Act, some indication of that intent

would appear in the congressional record. Cf Am.

Hosp. Ass'n v. NLRB, 499 US. 606, 613-14 (1991). There

is none. And, without some affirmative indicator, we

are unwilling to place upon the text of that statute an

expansive gloss that would generate this surprising

result.

Recognizing the weakness of arguments from

specific legislative history, the District Court, and now

the Contractors, have focused on the broader purposes

of the Reform Act as a possible interpretive guide. This

effort falls flat as well. As described above, the District

Court concluded that the aim of the Reform Act was to

"negate the normal repercussions of government

funding." Totten, 139 F. Supp. 2d at 54. That is, while

Congress would continue (at least in the short-run) to

appropriate significant federal money for Amtrak, its

objective was to have the railroad treated as if it was

receiving no such funding. The statute, in other words,

legislated the pretense that Amtrak was self-sufficient.

And, as such, FCA liability would be inappropriate, as

that statute applies only where federal funds are at

stake.

The problem with this view is that there is no actual

basis for it in the legislative history. It is true that, in

passing the Reform Act, Congress sought to end

federal "micromanagement of Amtrak's operations,"

H.R. Rep. No. 105-251, at 13, in order to allow the

railroad to "operate as much like a private business as

possible," S. Rep. No. 105-85, at 1. However, even if we

Al7

accept these statements as relevant to determining the

meaning of "subject to," they do not necessarily support

the Contractors’ position. In fact, they are entirely

consistent with the position taken by Totten and the

United States: that both the goal and effect of the

Reform Act were to ensure that Amtrak would be

treated just like any other private company that

receives federal money. The Act, in other words,

sought to ensure that Amtrak would no longer be

subject to special restrictions that were not similarly

imposed on private-sector transportation firms.

On this view, allowing Amtrak's contractors to be

sued under the FCA makes perfect sense, as the

contractors of any private business would likewise be

subject to liability if they submitted false claims in

connection with a project to be reimbursed with federal

money. See, e.g., United States v. Lagerbusch, 361 F.2d

449 (3d Cir. 1966); Murray & Sorenson, Inc. v. United

States, 207 F.2d 119, 123 (1st Cir. 1953) ("The fact that

the claims in this case were not presented directly to

the government, but were made to it indirectly through

the contractors, does not prevent recovery under the

False Claims Statute."); cf United States v. Bornstein, 423

U.S. 303 (1976) (FCA used to sue a subcontractor whose

fraud caused a private company that had contracted

with the government to submit false invoices to the

United States). Thus, contrary to the Contractors’

contention, even the general goals expressed by the

drafters of the Reform Act appear to support Totten's

attempt to bring suit under the

FCA.

A18

In sum, the most natural reading of 49 US.C.A. §

24301(a)(3) would not withdraw FCA protection

against alleged false claims made by third parties on

the extensive sums of federal money invested in

Amtrak. Neither is this result mandated, or even

suggested, by the scant legislative history of that

provision, nor by the larger purposes and aims of the

Reform Act as a whole. We therefore reverse the

District Court's conclusion that § 24301(a)(3) erects a

per se barrier preventing Totten from imposing FCA

liability on the Contractors.

B. Allowing Totten to Amend his Complaint

1. Flaws In Totten's

Unamended Complaint

This legal conclusion does not, however, mean that

Totten's complaint, at least in its current form, actually

states a valid claim under the False Claims Act.

Indeed, as suggested above, there are several ways in

which his present complaint is deficient. First, Totten

has alleged merely that the Con-tractors "knowingly

presented or caused to be presented equipment to an

officer or employees of the National Railroad

Passenger Corporation, that was knowingly

substandard or noncompliant with engineering

specifications for the Superliner II Contract to obtain

payments from the National Railroad Passenger

Corporation ..." Complaint, at p 22; see also Id. at pp 27,

57. However, the bare assertion that defendants

delivered goods that did not conform to contractual

specifications is not enough to state a violation of the

FCA. Instead, in the sections relevant here, the statute

Al19

proscribes only false "claims" -- that is, actual demands

for money or property, see 31 U.S.C. §§ 3729(a)(1),

(a)(3); § 3729(c) -- and "false records or statements"

used to induce such claims, see § 3729(a)(2). The FCA,

in other words, "attaches liability, not to underlying

fraudulent activity, but to the 'claim for payment.' "

United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266

(9th Cir. 1996) (quoting United States v. Rivera, 55 F.3d

703, 709 (1st Cir. 1995)). And, to date, Totten has

simply made no allegation that the Contractors actually

made false demands or submitted false records,

whether to Amtrak or to anyone else.

The second problem with the present complaint is

that Totten has provided no basis for concluding that,

even if the defendants did present claims to Amtrak,

those would be "claims" within the meaning of §

3729(c). This provision defines claim to include a

request for payment made to:

a contractor, grantee, or other recipient if

the United States Government provides

any portion of the money or property

which is requested or demanded, or if the

Government will reimburse such

contractor, grantee, or other recipient for

any portion of the money or property

which is requested or demanded.

Thus, in order to satisfy Rule 12(b)(6), Totten would at

least have to plead that the federal government

provided some portion of the money requested by the

Contractors, or that the government reimbursed

Amtrak for what it paid out to improve the toilet

A20

systems on its trains. Though he has not yet done so, it

appears that Totten is aware of this requirement, and

that he informed the District Court that he was

prepared to amend his complaint to allege that federal

money was implicated in the specific projects at issue.

See Br. for the United States of America as Amicus

Curiae Supporting Appellant 14.

A third difficulty with the complaint as it stands is

that it does not appear to satisfy Rule 9(b) of the

Federal Rules of Civil Procedure. This rule requires

that "[iJn all averments of fraud or mistake, the

circumstances constituting fraud or mistake shall be

stated with particularity." Totten does not argue that

his complaint satisfies this standard, but instead that

the rule does not apply to him because he has not

alleged that defendants made "fraudulent" claims, but

merely "false" ones. He suggests that because false

claims are actionable under the FCA even without

"proof of specific intent to defraud," § 3729(b)(3), there

is no "averment of fraud" within the meaning of Rule

9(b). We disagree.

Every circuit to consider the issue has held that,

because the False Claims Act is self-evidently an anti-

fraud statute, complaints brought under it must

comply with Rule 9(b). See Bly-Magee v. California, 236

F.3d 1014, 1018 (9th Cir. 2001); United States ex rel.

Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d

899, 903 (5th Cir. 1997); Gold v. Morrison-Knudsen Co., 68

F.3d 1475, 1476-77 (2d Cir. 1995). Totten cites no

authority whatsoever for the hairsplitting distinction

he seeks to draw between fraudulent and false claims

0 nl a Nae Dobe

under 9(b). And we can see no reason to recognize

such a distinction.

The difference between the two categories of claims

is simply the degree of scienter involved. See United

States v. TDC Mgmt. Corp., 24 F.3d 292, 297 (D.C. Cir.

1994) (distinction turns on "whether the defendant

acted with an intent to deceive"). But this difference is

entirely insignificant in the context of Rule 9(b)'s

pleading requirements. Indeed, the rule specifically

allows allegations of "intent, knowledge, and other

condition of mind" to be averred generally. See Gold, 24

F.3d at 1477. In contrast, the "circumstances" that must

be pleaded with specificity are matters such as the

"time, place, and contents of the false representations,"

such representations being the element of fraud about

which the rule is chiefly concerned. See 5 Charles Alan

Wright & Arthur R. Miller, Federal Practice and

Procedure § 1297 (2d ed. 1990) (emphasis added).

Therefore, in order to satisfy Rule 9(b), Totten must set

forth an adequate factual basis for his allegations that

the Contractors submitted false claims (or false

statements in order to get false claims paid), including

a more detailed description of the specific falsehoods

that are the basis for his suit. See Bly-Magee, 236 F.3d at

1018-19; Columbia/HCA, 125 F.3d at 903.

y I Waiver of the Right to Amend

The Contractors argue that the flaws in the

complaint are fatal, because Totten waived his right to

amend his complaint by not seeking leave to do so

pursuant to Rule 15(a). Instead, they point out, Totten

merely indicated in his Opposition to defendants'

A22

motion to dismiss that he stood ready to amend his

complaint if the District Court identified any pleading

deficiencies. As authority for their position, the

Contractors cite Government of Guam v. American

President Lines, 28 F.3d 142, 149-51 (D.C. Cir. 1994), in

which we held that plaintiffs whose complaint had

been dismissed (for lack of subject matter jurisdiction)

had waived their right to amend by failing to make a

Rule 15(a) motion, either before or after the District

Court granted their opponent's dismissal motion.

The present case, however, is quite different. In

President Lines, we denied plaintiffs an opportunity to

amend only after upholding the trial court's decision to

dismiss the complaint. In other words, that litigation

was over unless we allowed the plaintiffs to reopen it,

and we found that their interest in doing so did not

outweigh the "general rules favoring the finality of

judgments and the expeditious resolution of litigation."

Id. at 151. Totten's situation presents no such

countervailing finality concerns, in light of our

conclusion that the District Court was wrong to

dismiss the complaint on the only ground it actually

gave for doing so. The waiver rule relied upon in

President Lines is therefore not similarly applicable

where the court of appeals reverses the trial court's

dismissal order. See The Dartmouth Review v. Dartmouth

College, 889 F.2d 13, 23 (1st Cir. 1989) (stating the

general rule that where "the pleader has stood upon his

pleading and appealed from a judgment of dismissal,

amendment will not ordinarily be permitted ... if the

order of dismissal is affirmed") (emphasis added)

(quoting Rivera-Gomez v. de Castro, 843 F.2d 631, 635-36

(1st Cir. 1988) (allowing amendment, even after

SSS Sasha 8 ae os SG Net aa

NE iy Ba

A23

affirming dismissal, where it is "in the interest of

justice")).

As for Totten's failure to seek leave to amend his

complaint after the Contractors' Motion to Dismiss was

granted, a factor on which President Lines relied in

finding a waiver, see 28 F.3d at 151, the District Court

made clear in the present case that such a request

would have been futile. See Bombardier, 139 F. Supp.2d

at 52 n.1 ("In other circumstances Totten would be

permitted an opportunity to amend his complaint, but,

as the remainder of this Opinion demonstrates, such an

opportunity is not warranted in this case."). Given that

the District Court expressly indicated that it would

have allowed Totten to amend had it not viewed the

Reform Act as posing an insurmountable obstacle to

his suit -- regardless of how that suit was packaged --

we see no reason, having reversed the court's legal

mistake, to forbid what would have been permitted in

the absence of that error. Therefore, we will remand

the case with instructions that Totten be granted leave

to amend his complaint.

In so doing, however, we express no opinion on the

question left open by this court's decision in Yesudian:

whether an FCA plaintiff may prevail against a

defendant who submits a false "claim" to a federal

grantee (such as Amtrak), without presenting evidence

that the claim was ever actually submitted to the US.

government. See 153 F.3d at 737-39. Depending on

how Totten crafts his amended complaint, this issue of

statutory interpretation may be avoided altogether.

We therefore leave it for another day.

A24

III. CONCLUSION

For the reasons given above, the judgment of the

District Court is reversed and the case is remanded for

further proceedings consistent with this opinion.

It is so ordered.

Randolph, Circuit Judge, concurring: I agree with

all the court has written in its thorough opinion, but I

believe a bit more is needed to highlight the problem

we leave to the district court - namely, "whether [a

False Claims Act] plaintiff can prevail by proving only

that a false claim was submitted to a federal grantee

(such as Amtrak), as defined in [31 U.S.C. § 3729(c)],

without further demonstrating that the claim was

submitted (or resubmitted) to the federal government,

as suggested by the text of [31 U.S.C. § 3729(a)(1)]."

Maj. op. at 6. Dicta in United States ex rel. Yesudian v.

Howard Univ., 153 F.3d 731, 737-39 (D.C. Cir. 1998),

intimates that presenting a claim to any federal grantee

is the equivalent to presenting a claim to the federal

government. If the reasons given in Yesudian are all

that can be said for this far-reaching conclusion, I

would have much difficulty in accepting it.

Those liable under the False Claims Act include any

person who "knowingly presents, or causes to be

presented" - and here is the key language - "to an

officer or employee of the United States government" a

false claim. 31 U.S.C. § 3729(a)(1). Without more, this

language would not seem to cover instances in which

the false claim is presented to a federal grantee, at least

ih nc A AIR i al iN hcl base lB ND SUAS en sitet

A25

in instances when the grantee did not turn over the

claim for reimbursement by the federal government.

That may describe the alleged situation here, although

we cannot be sure until the plaintiff amends his

complaint. It is true that § 3729(c) defines "claim" to

include claims submitted to federal grantees.’ But it is

equally true that no matter how "claim" is defined,

subsection (a)(1) requires the alleged false claimant to

present it (or cause it to be presented) to a federal

officer or employee.

Two points, neither of which Yesudian highlighted,

seem to me of critical importance in construing § 3729.

The Attorney General is authorized to sue under the

Statute in the first instance, or to take over suits

brought by private parties on behalf of the federal

government (qui tam actions), or to allow the private

party to prosecute the action on its own. See Vermont

Agency of Natural Resources v. United States ex rel.

Stevens, 529 U.S. 765, 769 (2000). If a judgment is

rendered against the defendant - and this is the first

point - the award of damages is paid to the federal

treasury (less a percentage if a private party initiated

the action). The second point is that the Act authorizes

treble damages plus a civil penalty. If the Act allows

suits on claims presented to federal grantees but not

* A "claim" includes any "request or demand ... for money ... made

to a contractor, grantee, or other recipient if the United States

Government provides any portion of the money or property

which is requested or demanded, or if the Government will

reimburse such contractor, grantee, or other recipient for any

portion of the money or property which is requested or

demanded." 31 U.S.C. § 3729(c).

A26

presented for payment to the federal government,

these two features of the Act lead to a glaring

incongruity. To illustrate, suppose the plaintiff in this

case prevailed. The recovery would go to the plaintiff

and the federal government. Amtrak would recover

nothing. Yet the theory of plaintiff's case, as far as we

can make out at the moment, is that Amtrak suffered

the loss. Presumably, Amtrak would therefore be able

to sue the defendants on its own and if its suit were as

meritorious as the relator's, it too would recover

damages. The effect would be a quadruple damage

award - Amtrak's recovery pius the treble damages

awarded under the False Claims Act.

This is the consequence of the construction

suggested in Yesudian and, at the moment, it seems to

me at odds with the structure of the Act. On the other

hand, requiring that the United States have suffered

losses by paying false claims presented to it by the

federal grantee avoids this interpretative difficulty,

remains faithful to the language of § 3729(a)(1) & (c)

and is entirely consistent with the provision in the Act

measuring damages not in terms of a grantee's losses,

but by "the amount of damages which the Government

sustains....". 31 U.S.C. § 3729(a). I hesitate to reach a

firm conclusion, however, because we have not had

sufficient briefing and argument on the issue and

because it may turn out not to be an issue in the case

when it is reformulated in the district court.