Appendix — United States ex rel. Garibaldi v. Orleans Parish School Board
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APPENDIX A
United States Court of Appeals
Fifth Circuit
FILED
January 17, 2005
Charles R. Fulbruge III
Clerk
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 03-31010
UNITED STATES OF AMERICA ex rel.
WILLIAM GARIBALDI, CARLOS SAMUEL
Plaintiffs-Appellees
versus
ORLEANS PARISH SCHOOL BOARD
Defendants-Appellants
Appeal from the United States District Court for
the Eastern District of Louisiana
Before REAVLEY, JONES, and DENNIS, Circuit Judges.
DENNIS, Circuit Judge:
2a
In the previous appeal in this qui tam action under the
False Claims Act (FCA), Garibaldi I, we vacated the plain-
tiffs’ judgment on the verdict, and rendered judgment for
the Orleans Parish School Board holding that the board
was not a “person” subject to liability under the FCA. This
court’s judgment in that case became final when the Su-
preme Court denied certiorari.” Subsequently, the Supreme
Court, in Cook County v. United States ex rel. Chandler,
held that local governments are “persons” amenable to qui
tam actions under the FCA. Following the Supreme Court’s
decision in Chandler, the plaintiffs filed a motion in the dis-
trict court for relief under Rule 60(b)(6) from this court’s
final judgment in Garibaldi I. The district court concluded
that Chandler had overruled Garibaldi I, granted plaintiffs’
motion, and re-entered its judgment on the verdict for the
plaintiffs against the school board. The school board ap-
pealed. We reverse. In the absence of “extraordinary cir-
cumstances,” a change in controlling decisional law after
the finality of a judgment does not warrant reopening the
judgment under Rule 60(b)(6). The circumstances here are
not “extraordinary” because this case in not materially dis-
tinguishable from the “ordinary” case in which a subsequent
change in controlling law is not held to justify relief from a
prior final judgment under Rule 60(b)(6).
Background
The relators brought suit against their employer, the
Orleans Parish School Board, on behalf of the United States
for numerous violations of the False Claims Act, 31 U.S.C.
§ 3729, et seg. The jury returned a verdict in favor of the
plaintiffs for $22,800,000, plus $7,850,000 for false claims.
1 United States ex rel. Garibaldi {v. Orleans Parish School Bd.]},
244 F.3d 486 (5th Cir. 2001).
2 United States ex rel. Garibaldi v. Orleans Parish School Bd., 534
U.S. 1078 (2002), rehearing denied, 534 U.S. 1172 (2002).
$538 U.S. 119 (2008).
3a
The district court subsequently issued an Amended Judg-
ment reducing the award to $21,899,856, plus $100,000 for
false claims. The relators were awarded 12.5% of the pro-
ceeds.
The school board appealed, arguing principally that as
a local government unit it is not subject to liability under
the FCA. This court agreed, vacated the judgment against
the board, and rendered judgment against the plaintiffs.‘
The relators filed a petition for rehearing and for rehear-
ing en banc, which was denied by this court.’ The relators
then petitioned for certiorari by the United States Supreme
Court. The Supreme Court denied the petition. There-
upon, the relators filed a petition for rehearing on certiorari,
alerting the Court to the fact that, since their petition had
been filed, a circuit split had developed between the Fifth,
Third, and Seventh Circuits on the issue of whether local
governments are amenable to suit under the FCA, citing
United States ex rel. Chandler v. Cook County,’ and United
States ex rel. Dunleavy v. County of Delaware. The Su-
preme Court denied the [relators’] petition for rehearing on
certiorari and the Garibaldi I judgment in favor of the board
became final on February 25, 2002.°
* Garibaldi I, 244 F.3d 486 (5th Cir. 2001).
5 United States ex rel. Garibaldi v. Orleans Parish School Bd., 264
F.3d 1143 (5th Cir. 2001).
6 United States ex rel. Garibaldi v. Orleans Parish School Bd., 534
U.S. 1078 (2002).
7 277 F.3d 969 (7th Cir. 2002) (holding that a county is subject to
liability under the FCA).
§ 279 F.3d 219 (3d Cir. 2002) (holding that a county is not subject
to liability under the FCA).
® United States ex rel. Garibaldi v. Orleans Parish School Bd., 534
U.S. 1172 (2002).
4a
Four months later, the Supreme Court granted a writ
of certiorari in Chandler, and on March 10, 2003, issued its
decision holding that counties are subject to liability under
the FCA.” In its opinion, the Supreme Court noted that the
Seventh Circuit’s decision in Chandler, of which the high
court approved, conflicted with the opinions of two other
courts of appeals, citing in a footnote the decision by this
circuit in Garibaldi I and the decision by the Third Circuit
in Dunleavy." The Supreme Court’s opinion, however, did
not otherwise mention Garibaldi I. On April 23, 2003, the
Supreme Court granted a writ of certiorari in Dunleavy and
summarily reversed the decision by the Third Circuit and
remanded for further consideration in light of Chandler.”
On May 12, 2003, the relators in the present case filed
a Rule 60(b)(6) motion for relief from the final judgment
entered by this court. The district court granted the mo-
tion and re-entered the plaintiffs’ judgment on the verdict
against the School Board. Specifically, the district court
concluded that the change in decisional law effected by the
Supreme Court’s decision in Chandler created extraordin-
ary circumstances justifying relief from this court’s judg-
ment under Rule 60(b)(6) because, among other reasons,
our decision in Garibaldi I was an “integral part” of the Su-
preme Court’s decision-making process. The School Board
timely appealed.
Discussion
We must decide whether the Supreme Court’s decision
in Chandler combined with the facts of this case gave rise
to “extraordinary circumstances” warranting the district
court’s exercise of its discretion under Rule 60(b)(6) to grant
© Cook County v. United States ex rel. Chandler, 538 U.S. 119
(2003).
1 Td. at 125 n.6.
12 United States ex rel. Dunleavy v. County of Delaware, 538 U.S.
918 (2003).
5a
relief from our final judgment in Garibaldi I. Rule 60(b)(6)
authorizes a court to relieve a party from a final judgment
for “any . . . reason justifying relief” other than a ground
covered by clauses (b)(1) through (b)(5) of the rule. Relief
under this section, however, is appropriate only in an “ex-
traordinary situation”” or “if extraordinary circumstances
are present.”"* Moreover, “[a] change in decisional law after
entry of judgment does not constitute exceptional circum-
stances and is not alone grounds for relief from a final judg-
ment.”"”
In the present case, however, the district court con-
cluded that “extraordinary circumstances” were created
when the Supreme Court, in Chandler, held that local gov-
ernments are “persons” amenable to qui tam actions under
the FCA. As the district court noted, Chandler did more
than simply announce new governing decisional law after
Garibaldi I’s finality. The Supreme Court, in affirming the
decision of the Seventh Circuit, expressly stated that the
Seventh Circuit’s holding conflicted with Garibaldi I and
the Third Circuit’s decision in Dunleavy.” Thus, the district
court reasoned, “[b]ut for Garibaldi [I], there would not have
been the two to one split” giving rise to the Chandler “grant
of writs,” and “the fact that these three cases were all under
18 Picco v. Global Marine Drilling Co., 900 F.2d 846, 849 (5th Cir.
1990) (citing Seven Elves, Inc. v. Eskenazi, 635 F.2d 396, 402 (5th
Cir. 1981)).
14 Hess v. Cockrell, 281 F.3d 212, 215-16 (5th Cir. 2002).
15 Klapprott v. United States, 335 U.S. 601, 613 (1949).
16 Batts v. Tow-Motor Forklift Co., 66 F.3d 743, 747-48 (5th Cir.
1995) (quoting Bailey v. Ryan Stevedoring Co., 894 F.2d 157, 160
(5th Cir. 1990)).
17 Bailey, 894 F.2d at 160.
18 United States ex rel. Garibaldi v. Orleans Parish Sch. Bd., 2003
WL 22174241, *6 n.1(E.D. La. 2003) (citing Chandler, 538 U.S. at
125 n.6).
6a
consideration at substantially the same time . . . played a
role” as “an integral part” in the “[Supreme Court’s] decision
making process.” Consequently, the district court decided,
this case falls within the “extraordinary circumstances”
recognized by this circuit in Batts v. Tow-Motor Forklift
Co.,” as justifying Rule 60(b)(6) relief when “a subsequent
court decision is closely related to the case in question, such
as where the Supreme Court resolves a conflict between an-
other circuit ruling and that case occurs.”™
The present case is not atypical of the many instances
in which the Supreme Court has granted certiorari and ren-
dered a decision resolving a circuit split. Undoubtedly a
large percentage of them involve most of the elements upon
which the district court relied to characterize the Chandler
decision’s impact on Garibaldi I as one involving “extra-
ordinary circumstances.” After almost every resolution of
a circuit conflict there is a losing litigant somewhere who
could argue similarly for reopening his case because it was
decided erroneously in light of the subsequent Supreme
Court decision. The differences between such cases in terms
of the closeness of the relationship between the decision in
the losing litigant's case and the subsequent Supreme Court
decision, diligence in filing for relief from judgment, prox-
imate causation of the circuit conflict and the like would
appear to be marginal in the large majority of split resolu-
tion situations. For these reasons, we do not think the pre-
sent case has any features that cause it to be exceptional to
such a marked extent from other cases involving resolution
of circuit conflicts as to create “extraordinary circumstan-
ces” justifying reopening of the judgment.
19 Td. at *7.
» 66 F.3d 743, 747 (5th Cir. 1995).
*! Garibaldi, 2003 WL 22174241, *5 (quoting Batts, 66 F.3d at 748
n.6).
eect ene
7a
An examination of the details of the arguments for re-
opening the judgment, which are based upon language in
Batts, does not persuade us either. The statement in Batts
that relief from judgment may be appropriate where the
subsequent decision is closely related to the judgment from
which relief is sought, “such as where the Supreme Court
resolves a conflict between another circuit ruling and that
case,”™ was dicta unnecessary to the Batts holding and so
removed from its core that it may not have received the con-
sidered judgment of the whole court.” Furthermore, Batts
cited the Eleventh Circuit’s decision in Ritter v. Smith,” a
case that, even if we were to assume or agree presented “ex-
traordinary circumstances” under Rule 60(b)(6), is clearly
distinguishable and does not persuade us that an exception-
al situation prevails here.
In Ritter, the Supreme Court’s decision in another case
overruled the Eleventh Circuit’s prior holding that the Ala-
bama capital sentencing procedure was unconstitutional.
The Eleventh Circuit in Ritter concluded that several addi-
tional factors in the case made the circumstances sufficient-
ly extraordinary to warrant granting the State of Alabama
relief under Rule 60(b)(6) from the Circuit’s erroneous prior
ruling of unconstitutionality and grant of habeas effectively
requiring a new capital sentence hearing. The additional
factors found by the court were: the circuit’s previous erro-
neous judgment had not been executed, so that the greater
concomitant interest in the finality of an executed judgment
was not involved; the invalidation of the state’s capital sen-
tencing procedure and requirement of a new sentencing
hearing, which had not yet occurred, had prospective effects
2 Batts, 66 F.3d at 748 n.6 (citing Ritter v. Smith, 811 F.2d 1398,
1402-03 [11th Cir. 1987]).
23 See Hess v. Cockrell, 281 F.3d 212, 216 (5th Cir. 2002); cf: Sar-
noff v. American Home Products Corp., 798 F.2d 1075, 1084 (7th
Cir. 1986).
* 811 F.2d 1398 (11th Cir. 1987).
8a
analogous to those of consent decrees and permanent in-
junctions that courts generally recognize may be modified
in the light of subsequent decisional law changes; there was
minimal delay between the finality of the judgment and the
motion for Rule 60(b)(6) relief; the Supreme Court’s super-
vening decision, Baldwin v. Alabama,” was rendered ex-
pressly to resolve a conflict between it and the earlier circuit
decision in Ritter; the situation presented was analogous
to that in which two cases are related, not because the Su-
preme Court’s decision was rendered to resolve a conflict
between them but because they arose out of the same fact-
ual transaction; and there were considerations of comity
which argued for relieving the state from the federal declar-
ation of unconstitutionality and writ of habeas corpus that
upset the finality of a state court’s judgment.”
Almost none of the “additional factors” in Ritter is pres-
ent here. The considerations of comity for state laws and ju-
dicial decisions are not present in this federal question case.
Because of Dunleavy’s conflict with Chandler, Garibaldi I
was not essential to the circuit split, the grant of certiorari,
or the Supreme Court’s resolutory [sic] Chandler decision.
Garibaldi Is final judgment is not apt to have prospective
effects analogous to those of an executory constitutional rul-
ing affecting a state’s capital sentencing procedures, a con-
sent decree, or a permanent injunction. By the same token,
Garibaldi Is final judgment effectively rejecting the plain-
tiffs’ claims with prejudice is more analogous to a fully ex-
ecuted judgment than to Ritter’s “unexecuted” judgment;”’
5 472 U.S. 372 (1985).
% Ritter, 811 F.2d at 1401-03.
*7 Generally speaking, final civil judgments having the effect of res
judicata, even if un-executed, are not voided or affected by a sub-
sequent change in the decisional law on which they were based.
See James B. Beam Distilling Company v. Georgia, 501 U.S. 529
(1990) (“Of course, retroactivity in civil cases must be limited by
(continued...)
9a
and Garibaldi I does not arise from the same factual trans-
action as Chandler’s FCA suit against Cook County, Illinois.
The single factor that Garibaldi I and Ritter have in com-
mon, minimal delay between finality and motion for relief,
denotes the absence of a disqualifying factor rather than the
presence of an affirmative one—and is not truly distinctive
but may be present in many cases which do not call for Rule
60(b)(6) relief because extraordinary circumstances are not
present.
Moreover, an extraordinary situation justifying relief
from judgment is not created every time the Supreme Court
lists a case as one that merely contributed to a split between
circuits. This factor should not be dispositive of a Rule
60(b)(6) motion and was not, in fact, dispositive in Ritter. It
is not extraordinary for the Supreme Court to deny certio-
rari in a court of appeals case that it ultimately overrules in
the review of a later similar case.”
As this court stated in Seven Elves Incorporated,” “the
discretion of the district court is not unbounded, and must
be exercised in light of the balance that is struck by Rule
60(b)(6) between the desideratum of finality and the de-
mands of justice.” We conclude that the great desirability
of preserving the principle of finality of judgments prepon-
derates heavily over any claim of injustice in this case. Dis-
27 (continued)
the need for finality .. . once suit is barred by res judicata or by
statutes of limitation or repose, a new rule cannot reopen the door
already closed.”).
28 See, e.g., Missouri v. Seibert, 124 S. Ct. 2601 (2004) (overturn-
ing, among others, the Ninth Circuit’s decision in United States
v. Orso, 266 F.3d 1030 (9th Cir. 2001), less than two years after
denying a petition for certiorari in that case, United States v. Orso,
537 U.S. 828 (2002)); Garcia v. United States, 469 U.S. 70 (1984)
(overruling, in effect, United States v. Rivera, 513 F.2d 519 (2d
Cir.), cert. denied, 423 U.S. 948 (1975)).
29 635 F.2d 396, 402 (5th Cir. 1981).
10a
turbing the sanctity of the final judgment in this case would
implicate the doctrine of res judicata in many other cases in
which litigants may seek to reap the benefit of a change in
decisional law after the judgments against them have be-
come final. The claim of injustice by plaintiffs is under-
mined by the fact that they have been treated equally with
other litigants whose judgments became final shortly prior
to a change in decisional law that would have benefitted
them had it occurred while their cases were still open on
direct review. No two cases are truly identical; however, we
see no distinguishing features that make this case so ex-
ceptional as to say that it involves “extraordinary circum-
stances” calling for Rule 60(b)(6) relief.
For these reasons, we conclude that: the circumstances
of this case do not justify the district court’s use of its discre-
tion to grant relief under Rule 60(b)(6); the district court’s
judgment is reversed; and the judgment of this court in Gar-
ibaldi I is reinstated.
It Is So Ordered.
lla
APPENDIX B
FILED
U.S. DISTRICT COURT
EASTERN DISTRICT OF LA
2003 SEP 18 AM 10:20
LORETTA G. WHYTE
CLERK
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
UNITED STATES OF AMERICA CIVIL ACTION
ex rel. WILLIAM GARIBALDI
AND CARLOS SAMUEL NO. 96-0464
VERSUS SECTION “K”
ORLEANS PARISH SCHOOL BOARD
ORDER AND REASONS
Before the Court is the Motion of Plaintiffs/Relators
Garibaldi and Samuel on Behalf of the United States of
America for Relief From Judgment under Federal Rule of
Civil Procedure 60(b) (Doc. 280). The Court, having enter-
tained oral argument and having reviewed the pleadings
and relevant law, finds that because of the extraordinary
circumstances surrounding this case, the motion must be
granted.
Background
This matter came to trial before this Court in October
of 1998. In this suit, Garibaldi, who was Director of the
Audit Department of the School Board and Carlos Samuel
12a
(referred to collectively as “Relators”) sued their employer,
the Orleans Parish School Board on behalf of the United
States for numerous violations of the False Claims Act, 31
U.S.C. § 3729, et seg. After trial, a jury found that the
School Board had submitted more than 1500 false claims
to the federal government over the course of 11 years. On
April 27, 1999, this Court entered a judgment on the ver-
dict, with some modifications, against the School Board tot-
aling almost $23 million.
That judgment was appealed to the Fifth Circuit. The
School Board raised several issues in its appeal, including
that a local government such as it may not be held liable
under the False Claims Act. In their appeal, Relators ar-
gued that the district court erred in reducing the civil pen-
alty to be paid by the School Board and that it abused its
discretion in not awarding the Relators the statutory maxi-
mum share of the award payable to the United States. The
United States intervened in the appeal to assert its inter-
pretation of the False Claims Act.
The Fifth Circuit reversed this Court’s judgment on
March 28, 2001. United States of America ex rel. William
Garibaldi and Carlos Samuel v. Orleans Parish School
Board, 244 F.3d 486 (5th Cir. 2001). It found that the
School Board, as a local government unit, was not a “person”
subject to liability under the False Claims Act. In so doing,
it relied primarily on the Supreme Court's decision in Ver-
mont Agency of Natural Resources v. United States ex rel.
Stevens, 529 U.S. 765, 120 S. Ct. 1858 (2000). In that case,
the Supreme Court found that states are not persons for
purposes of the False Claims Act. Relying on the analysis
found therein concerning punitive damages, the appellate
court found:
The False Claims act imposes punitive damages
on those who violate it. This is contrary to the
well-settled presumption that governments,
including local governments, are not subject to
A ARTI A RD I den ab
13a
punitive damages. Stevens, at 1869; City of
Newport v. Fact Concerts, Inc., 453 U.S. 247, 101
S. Ct. 2748, 69 L.Ed.2d 616 (1981). As the Su-
preme Court has held, imposing punitive dam-
ages on local governments is ordinarily contrary
to sound public policy. Id. at 263, 101 S. Ct. at
2748. Though a local government can properly be
made to pay compensation for the wrongful acts
of its agents, punishing a local government is
pointless. The punishment, in the form of higher
taxes or reduced public services, is visited upon
the blameless. Neither the taxpayers nor the
schoolchildren of Orleans Parish played any role
in the conduct giving rise to the School Board’s
liability. Extracting damages from them—dam-
ages that are far more than is needed to com-
pensate the federal government for whatever los-
ses it has suffered—is supported as the Supreme
Court has said, by “neither reason nor justice.”
Id. at 267, 101 S. Ct. at 2748.
Garibaldi, 244 F.3d at 491-92.
In the Fifth Circuit’s decision, the court noted that it
could locate only two decisions (other than this Court’s deci-
sion in Garibaldi) each of which reached opposite conclu-
sions, those being United States ex rel. Chandler v. Hektoen
Inst. for Med. Research, 35 F. Supp. 2d 1078 (N.D. III. 1999),
rev'd in part, 118 F. Supp. 2d 902 (N.D. Ill. 2000) (Cook
County, Illinois is a person under the False Claims Act but
found county immune as the mandatory treble damage pro-
visions could not be imposed under Stevens); and United
States ex rel. Graber v. City of New York, 8 F. Supp. 2d 343
(S.D.N.Y. 1998) (City of New York, New York is not a person
under the False Claims Act). Garibaldi, 244 F.3d at 490
n.4. Thus, the appellate court was aware that there was no
unanimity of opinion as to whether local governments are
persons under this Act. Nonetheless, it reversed the district
court’s decision and vacated the district court judgment.
l4a
On September 20, 2001, Relators filed a timely Petition
for Writ of Certiorari to the United States Supreme Court
which was denied on January 7, 2002. Two weeks later,
on January 22, 2002, the United States Court of Appeals
for the Seventh Circuit distinguished Stevens ruling that a
county was a person for purposes of the False Claims Act
and thus reversed the district court finding that the county
was not immune from the FCA damages scheme. United
States ex rel. Chandler v. Cook County, 277 F.3d 969 (7th
Cir. 2002). The Seventh Circuit thus reversed one of the
very cases upon which the Fifth Circuit noted in its opinion
and created unequivocally a split in the circuits.
Nine days later, on January 31, 2002, Relators filed a
timely Petition for Rehearing in the United States Supreme
Court demonstrating a conflict in the circuits on the basis of
the decision of the Seventh Circuit in Chandler and the de-
cision of the Fifth Circuit in Garibaldi and the Third Circuit
in Dunleavy v. County of Delaware, 279 F.3d 219 (3d Cir.
2002). The Supreme Court refused rehearing on February
25, 2002.
However, less than four months later on June 6, 2002,
writs were granted by the Supreme Court in Cook County.
Nine months after that, on March 10, 2003, the Supreme
Court affirmed the Seventh Circuit ruling noting the split in
the circuits, specifically citing the Fifth Circuit's decision in
Garibaldi. In a 9 to 0 decision, based on the legislative his-
tory and the text of the statute, the Court found that muni-
cipalities were not exempted from the False Claims Act.
Cook County, Illinois v. United States ex rel. Chandler, [538
U.S. 119, 122 (2003)]. Furthermore, it specifically rejected
the argument that the punitive nature of the False Claims
Act prevented its being used against a municipal corpora-
tions. It stated:
Although we did indeed find the punitive
character of the treble damages provision a rea-
son not to read “person” in include a State, see
15a
[Stevens, 529 U.S.] at 785, it does not follow that
the punitive feature has the force to show con-
gressional intent to repeal implicitly the existing
definition of that word, which included munici-
palities.
Cook County[, 538 U.S. at 130]. The Court also noted:
The question in such cases is whether the local
taxpayer should make up for an undeserved ben-
efit, or the federal taxpayer be permanently out of
pocket, a question that can be answered in any
given case, not by an opportunistic qui tam rela-
tor, but by a combination of the judge’s discretion
and the Government’s power to intervene and dis-
miss or settle and action.
(Id. at 132]. It continued by noting that “inferring repeal
from legislative silence is hazardous at best, and error
seems overwhelmingly likely in the notion that the 1986
amendments wordlessly redefined ‘person’ to exclude muni-
cipalities.” [Jd.]
The Supreme Court then concluded:
The basic purpose of the 1986 amendments
[which increased the penalties from double to tri-
ple damages] was to make the FCA a “more useful
tool against fraud in modern times.” S. Rep., at 2.
Because Congress was concerned about pervasive
fraud in “all Government programs,” ibid., it al-
lowed private parties to sue even based on infor-
mation already in the Government’s possession,
see Hughes Aircraft Co. v. United States ex rel.
Schumer, 520 U.S. 939, 946, 117 S. Ct. 1871, 138
L.Ed.2d 135 (1997); increased the Government’s
measure of recovery; and enhanced the incentives
for relators to bring suit. Yet the County urges
that in so doing Congress made local govern-
ments, which today often administer or receive
16a
federal funds, immune not only from treble dam-
ages but from any liability whatsoever under the
FCA. Congress could have done that, of course,
but it makes no sense to suggest Congress did
it under its breath. It is simply not plausible
that Congress intended to repeal municipal
liability sub silentio by the very Act it passed to
strengthen the Government’s hand in fighting
false claims. See Burns v. United States, 501 U.S.
129, 136, 111S. Ct. 2182, 115 L.Ed.2d 123 (1991).
Id. [at 133] (footnotes omitted).
On April 23, 2003, the United States Supreme Court
granted the writ application in United States ex rel. Dun-
leavy v. [County of] Delaware and reversed the decision of
the Third Circuit, 538 U.S. 918, 123 S. Ct. 1619 (2003).
On May 12, 2003, the instant motion seeking relief
from judgment under Fed. R. Civ. P. 60(b) was filed.
Analysis
Rule 60(b)(6) provides that a court may act to relieve a
party from final judgment for “any other reason justifying
relief from the operation of the judgment.” Fed. R. Civ. P.
60(b)(6). While Rule 60(b) sets out five other specific bases
for granting relief from a final judgment, the parties agree
that the only provision applicable herein is the sixth which
has been described as “a grand reservoir of equitable power
to do justice in a particular case when relief is not war-
ranted by the preceding clauses.” Harrell v. DCS Equip.
Leasing Corp., 951 F.2d 1453, 1458 (5th Cir. 1992). How-
ever, the Fifth Circuit has “narrowly circumscribed its avail-
ability, holding that Rule 60(b)(6) relief will be granted only
if extraordinary circumstances are present.” Batts v. Tow-
Motor Forklift Company, 66 F.3d 743, 747 (5th Cir. 1995),
citing Bailey v. Ryan Stevedoring Co., 894 F.2d 157, 160 (5th
Cir. 1990) (affirming order denying Rule 60(b)(6) motion
based on change in federal law). Indeed, the Fifth Circuit
17a
has specifically held that changes in decisional law do not
constitute the “extraordinary circumstances required for
granting Rule 60(b)(6) relief.” Hess v. Cockrell, 281 F.3d 212
(5th Cir. 2002), citing Batts v. Tow-Motor Forklift Co., 66
F.3d 743, 747 (5th Cir. 1995); Picco v. Global Marine Drill-
ing, 900 F.2d 846, 851 (5th Cir. 1990); Bailey v. Ryan Stev-
edoring Co., Inc., 894 F.2d 157 (5th Cir. 1990).
It appears that this interpretation of the rule—that is
that a change in decisional law alone did not constitute
grounds—was apparently first articulated in Bailey, as the
Fifth Circuit relied upon McKnight v. United States Steel
Corp., 726 F.2d 333, 336 (7th Cir. 1984); Title v. United
States, 263 F.2d 28, 31 (9th Cir. 1959). However, in Batts,
the Fifth Circuit explained this bald statement.
In Batts, the Fifth Circuit was faced with a case in
which a plaintiff was injured when a coworker using a fork-
lift collided with him. The plaintiff brought a diversity
action against the manufacturer of the forklift alleging neg-
ligence and strict liability based on the defective and unrea-
sonably dangerous product and/or negligent design. Under
Mississippi law, the defendants had available as a complete
bar to recovery the “open and obvious defense” which de-
fendant argued and the jury believed rendering a verdict for
the defendant. Following the denial of his post-verdict mo-
tions, plaintiff appealed to the Fifth Circuit and asked the
court to stay the appeal pending a decision by the Mississ-
ippi Supreme Court in which the viability of this defense
was at issue. The stay was denied in June of 1991 and the
Fifth Circuit affirmed the lower court ruling in 1992.
On March 25, 1993, subsequent to the issuance of the
Fifth Circuit’s mandate on January 4, 1993, the Mississippi
Supreme Court held that the risk-utility test of products
liability (which vitiated the affirmative defense) had been
used in Mississippi since 1988. On April 19, 1993, Batts
filed in the district court a Rule 60(b)(6) motion, urging the
court on the basis of the Mississippi court decision to relieve
18a
him from the adverse judgment. The district court granted
that motion, vacated the judgment and set the matter for
trial based apparently on its belief that it had improperly
instructed the jury on Mississippi products liability law.
The defendant appealed, and the Fifth Circuit reversed the
district court.
The Fifth Circuit in so doing noted that in Picco v.
Global Marine, supra, it had held that it was an abuse of
discretion for the district court to grant relief where the
Supreme Court had changed the applicable rule of law. Id.
at 747. It also stated:
Absent some showing of extraordinary cir-
cumstances, courts have refused to vacate their
prior judgment were they correctly applied federal
law, and a subsequent Supreme Court ruling
changed the law. See, e.g., Travelers Indem. Co.
v. Sarkisian, 794 F.2d 754, 757 (2d Cir.) (denying
Rule 60(b)(6) relief where Supreme Court rever-
sed ruling on claims for indemnity under RICO
statute after entry of final judgment), cert. denied,
479 U.S.885, 107 S. Ct. 277, 93 L.Ed.2d 253
(1986). A party seeking relief under Rule 60(b)
cannot simply cite a new Supreme Court decision
to support its motion; it must present proof that
enforcement of the judgment would work an
injustice. De Filippis v. United States, 567 F.2d
341, 344 (7th Cir. 1977), overruled in part on
other grounds by United States v. Chicago, 663
F.2d 1354 (7th Cir. 1981). The required showing
is substantial. See Dowell v. Board of Educ. of
Oklahoma City Pub. Sch., 8 F.3d 1501, 1509 (10th
Cir. 1993). Even where the judgment provides
injunctive relief, and thus has an ongoing effect,
courts may refuse a Rule 60(b)(6) motion founded
upon the Supreme Court’s announcement of a
new rule of law. Id.
19a
Batts, 66 F.3d at 748-49.
However, in a footnote, the Fifth Circuit specifically
carved out a caveat to this apparent hard and fast rule:
We do not hold that a change in decisional
law can never be an extraordinary circumstance.
Courts may find a special circumstance warrant-
ing relief where a change in the law affects a peti-
tion for habeas corpus, where notions of finality
have no place. Matarese v. LeFevre, 801 F.2d 98,
106 (2d Cir. 1986) (denying relief where subse-
quent Supreme Court decisions indicated that
change in law had not, in fact, occurred), cert.
denied, 480 U.S. 908, 107 S. Ct. 1353, 94 L.Ed.2d
523 (1987). Relief has also been found appro-
priate where the erroneous judgment has not yet
been executed, where an appeal or remand of the
case is still pending, or the judgment is not final.
See Adams v. Merrill Lynch Pierce Fenner &
Smith, 888 F.2d 696, 702 (10th Cir. 1989) (affirm-
ing district court grant of relief from judgment
where Supreme Court altered law regarding arb-
itration of securities claims while claims were
pending); Wilson v. Al McCord, Inc., 858 F.2d
1469, 1478-79 (10th Cir. 1988) (vacating and re-
manding where change in state law while appeal
was pending made it necessary for parties to
develop more fully the factual record); Overbee v.
Van Waters & Rogers, 765 F.2d 578, 580 (6th Cir.
1985) (holding on the basis of “the unique facts of
this case” that district court abused its discretion
in denying Rule 60(b)(6) relief where, at time
plaintiff filed motion, judgment was not final, and
action of Ohio Supreme Court of reversing itself
within one year was certainly unusual). Rule
60(b)(6) may also warrant relief where the
subsequent court decision is closely related
to the case in question, such as where the
20a
Supreme Court resolves a conflict between
another circuit ruling and that case. See e.z.,
Ritter v. Smith, 811 F.2d 1398, 1402-03 (11th
Cir.), cert. denied, 483 U.S. 1010, 107 S. Ct. 3242,
97 L.Ed.2d 747 (1987). Similarly, where two
cases arising out of the same transaction result in
conflicting judgments, relief has been found to be
warranted. See Pierce v. Cook & Co., 518 F.2d
720, 723 (10th Cir. 1975), cert. denied, 423 U.S.
1079, 96 S. Ct. 866, 47 L.Ed.2d 89 (1976).
Batts, 66 F.3d at 748, n.6 (emphasis added).
In Batts, the Fifth Circuit cited the Ritter case in which
a circuit court granted Rule 60(b)(6) relief from a final
judgment. In that case, Ritter had been sentenced to death
pursuant to the then-operative Alabama death penalty stat-
ute. The Eleventh Circuit held that the statutory scheme
was facially unconstitutional because of its mandatory
death sentence component. After certiorari was denied and
pursuant to the mandate, the district court gave Alabama
180 days to re-sentence Ritter. Shortly after, the Supreme
Court of the United States granted certiorari in Baldwin v.
Alabama, 469 U.S. 1085, 105 S. Ct. 589 (1984), which con-
cerned the identical sentencing statute. Since the state did
not file a Rule 59(e) motion to alter or amend the district
court’s December 3, 1984 judgment in Ritter based on the
grant of certiorari in Baldwin, the judgment was final.
However, on April 14, 1985, within the 180 day period the
district court had allowed for re-sentencing, the State moved
for extension of time to re-sentence Ritter.
The Supreme Court decided Baldwin on June 17, 1985,
holding that the Alabama capital sentencing procedures
were not facially unconstitutional. In that opinion, the Su-
preme Court expressly addressed the conflict between the
Eleventh Circuit opinion in Ritter and the Alabama Su-
preme Court’s Baldwin opinion.
2la
On September 9, 1985, the State filed a Rule 60(b)(6)
motion for relief from the district court’s judgment of De-
cember 3, 1984. The fundamental question before the Court
was whether a supervening change in the law, could ever
present a sufficient basis for Rule 60(b)(6) relief. The Court
discussed the issue extensively and held that mere finality
of judgment is not sufficient to thwart Rule 60(b)(6) relief
under extraordinary circumstances. The court did note that
the judgment was not yet executed and that there was
minimal delay between the finality of the judgment and the
Rule 60(b)(6) motion. The court also emphasized the close
relationship between the two cases, Baldwin and Ritter, and
the fact that the Supreme Court had granted certiorari in
Baldwin to resolve the dispute. Indeed, the Eleventh Cir-
cuit noted a district court of New York decision, Tsakonites
v. Transpacific Carriers Corp., 322 F. Supp. 722 (S.D.N.Y.
1970), which the appellate court described as follows:
[A] supervening Supreme Court decision was the
basis for granting a Rule 60(b)(6) motion more
than five years after the original judgment. As in
the present case, the intervening Supreme Court
decision was rendered expressly to resolve a con-
flict between the earlier decision in Tsakonites
and another case. Because of this close connec-
tion between the two cases, the court found the
circumstances sufficiently extraordinary to justify
disturbing the finality of the judgment.
Ritter v. Smith, 811 F.2d 1398, 1402 (11th Cir. 1987).
Thus, the Fifth Circuit has recognized that there are
exceptions to this hard and fast rule concerning finality of
judgments—specifically where “a subsequent court decision
is closely related to the case in question, such as where the
Supreme Court resolves a conflict between another circuit
ruling and that case” occurs. Batts, 66 F.3d at 748, n.6,
citing Ritter. Certainly, under the facts of this case, this
exception applies.
22a
The Cook County decision resolved a conflict between
the circuits and noted specifically that this case, Garibaldi,
was one that created the conflict.’ It has been argued by the
Orleans Parish School Board that if the Supreme Court had
wanted to, it could have reversed this decision itself. How-
ever, a clear review of the chronology of this case demon-
strates that:
(1) when it denied certiorari, the conflict on the appellate
level did not exist; it was two weeks later that the
Seventh Circuit created the split with its Cook County
ruling;
(2) when the Supreme Court denied the petition for re-
hearing on February 24, 2002, the Cook County ap-
plication for certiorari had not even been filed; it was
filed on April 19, 2002. Cook County, Illinois v. United
States ex rel. Chandler, 2002 WL 31966999 (Appellate
Brief) (U.S. Pet. Brief Sept. 9, 2002), Brief of Petitioner
(No. 01-1572);
(3) TheSupreme Court specifically cited the Fifth Circuit’s
decision in Garibaldi when describing the conflict be-
tween the circuits with respect to whether a municipal
corporation was a person under the False Claims Act;
(4) The Supreme Court unequivocally rejected the very
basis for the Fifth Circuit’s decision;
(5) The Supreme Court granted the writ application in
Dunleavy on April 23, 2003 and reversed the decision
of the Third Circuit;
‘ Indeed the Supreme Court stated, “The Court of Appeals, in
conflict with two other Circuits, distinguished Stevens and
reversed, 277 F.3d 969 (CA.7 2002). We granted certiorari, 536
U.S. 956 (2002), and now affirm the Court of Appeals.” In this
sentence, the Supreme Court noted the two cases in conflict in
footnote six as United States ex rel. Dunleavy v. County of
Delaware, 279 F.3d 219 (CA3 2002); United States ex rel. Garibaldi
v. Orleans Parish School Bd., 244 F.3d 486 (CA5 2001).
23a
(6) The instant motion was filed on May 12, 2003.
The Orleans Parish School Board argues that had the Su-
preme Court wanted to reverse the Fifth Circuit decision, it
could have done so after the Cook County decision; however,
that ignores the fact that the Supreme Court no longer had
the mandate; it was no longer capable of curing the problem.
Thus, it falls on this Court to determine whether these
circumstances constitute “extraordinary” ones such that it
must grant the relief sought.
While this Court understands that a simple “change in
decisional law” is not enough to trigger Rule 60(b)(6), it
seems unconscionable to ignore the fact that this case was
an integral part in the decision making process. But for
Garibaldi, there would not have been the two to one split
upon which the Supreme Court ultimately based its grant
of writs and found the very basis for the Fifth Circuit’s de-
cision to be devoid of merit. Certainly, the fact that these
three cases were all under consideration at substantially the
same time and played a role in the Supreme Court’s deci-
sion presents proof that enforcement of the judgment would
work an injustice. De Filippis v. United States, 567 F.2d
341, 344 (7th Cir. 1977), overruled in part on other grounds
by United States v. Chicago, 663 F.2d 1354 (7th Cir. 1981).
And further, that injustice is substantial. See Dowell v.
Board of Educ. of Oklahoma City Pub. Sch., 8 F.3d 1501,
1509 (10th Cir. 1993).
As the Supreme Court reasoned and as noted above,
The question in such cases is whether the local
taxpayer should make up for an undeserved ben-
efit, or the federal taxpayer be permanently out of
pocket, a question that can be answered in any
given case, not by an opportunistic qui tam rela-
tor, but by a combination of the judge’s discretion
and the Government’s power to intervene and dis-
miss or settle an action.
24a
Cook County[, 538 U.S. at 132]. In this case, it would be
simple serendipity that determined that the federal tax-
payer was to be permanently out of pocket the funds at
issue herein. This course of action cannot be countenanced
in the meting out of justice. Considering how intertwined
these cases were, how without Garibaldi, the very conflict
which begot the Cook County decision might not have been
taken up. As such, the Court finds that extraordinary
circumstances exist and the motion must be granted. In-
deed, this route is further supported in Polites v. United
States, 364 U.S. 426, 433, 81 S. Ct. 202, 206 (1960), where
the Supreme Court implied that reliefin Rule 60(b) is not to
be inflexibly withheld where there is a clear and author-
itative change in governing law. Indeed, in the case sub
judice, the issues presented were new and the law was ges-
tating. Accordingly,
IT IS ORDERED that Motion of Plaintiffs/Relators
Garibaldi and Samuel on Behalf of the United States of
America for Relief From Judgment under Federal Rule of
Civil Procedure 60(b) (Doc. 280) is GRANTED and the
Amended Judgment of the Court previously entered on
April 27, 1999 shall be reentered.
New Orleans, Louisiana, this 17th day of September,
2003.
Is/
STANWOOD R. DUVAL, JR.
UNITED STATES DISTRICT COURT JUDGE
25a
APPENDIX C
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-30550
United States of America, ex rel. William Garibaldi
and Carlos Samuel,
Plaintiffs/Appellees/Cross-Appellants,
Vv.
Orleans Parish School Board,
Defendant/Appellant/Cross-Appellee.
No. 99-30668
United States of America, ex rel. William Garibaldi
and Carlos Samuel,
Plaintiffs/Appellees,
v.
Orleans Parish School Board,
Defendant/Appellant.
Appeal from the United States District Court
for the Eastern District of Louisiana
March 28, 2001
Before DAVIS AND EMILIO M. GARZA, Circuit Judges,
and POGUE’, Judge.
* Judge, U.S. Court of International Trade, sitting by designation.
26a
W. EUGENE DAVIS, Circuit Judge:
William Garibaldi and Carlos Samuel (whom we some-
times refer to jointly as the Relators) sued their employer,
the Orleans Parish School Board on behalf of the United
States for numerous violations of the False Claims Act,
31 U.S.C. § 3729, et seq. After trial, a jury found that the
School Board had submitted more than 1500 false claims to
the federal government over the course of 11 years. The
district court subsequently entered a judgment on the ver-
dict against the School Board of almost $23 million. The
School Board and the Relators now challenge the district
court's judgment. The United States has intervened in this
appeal to defend its interpretation of the False Claims Act.
Because we find that a local government such as the School
Board is not subject to liability under the False Claims Act,
we vacate the judgment entered by the district court and.
render judgment for the School Board.
I.
In 1995, Garibaldi was Director of the Audit Depart-
ment of the School Board and Samuel was an Auditor work-
ing under Garibaldi’s direction. In that year, Samuel began
an audit cf the Risk Management Department of the School
Board. During the audit, Samuel discovered what he
thought were substantial problems in two of the programs
administered by the Risk Management Department, namely
the School Board’s unemployment compensation insurance
program and its workers' compensation insurance program.
Samuel’s audit of the Risk Management Department
turned up what he concluded were disproportionate alloca-
tions of the costs of unemployment compensation insurance
and workers’ compensation insurance to the portions of the
School Board’s budget financed by the federal government.
In particular, Samuel discovered that the School Board was
charging substantially higher rates per payroll dollar for
unemployment insurance to the School Board’s programs
that were financed by the federal government. Samuel was
27a
unable to find any justification for this disparity and also
found that other generally accepted methods of cost allo-
cation would charge the federal government substantially
less. As for the School Board's workers’ compensation in-
surance program, Samuel discovered that the School Board
had unfairly allocated the savings it had achieved from
switching to self-insurance in the early 1990s. Samuel dis-
covered that federally financed programs paid about 25% of
the cost of the School Board's workers’ compensation insur-
ance before it switched to a self-insurance program. How-
ever, the School Board never reduced the contribution of the
federal government to its workers' compensation insurance
program to account for the large savings it realized by
switching to self-insurance.
Samuel took his findings to his supervisor Garibaldi.
They prepared a report which set forth their conclusions
that the allocation of premiums for the School Board’s un-
employment compensation and workers’ compensation in-
surance programs was seriously flawed. They also alleged
that these flaws constituted a violation of applicable federal
accounting principles and the False Claims Act. The Rela-
tors sent their report to Morris Holmes, then Superinten-
dent of the school system. Concerned with the conclusions
of the report, Holmes asked the chief financial officer of the
school system, James Henderson, to review the findings of
the Relators. Henderson refuted every finding of the Re-
lators and found that the accounting decisions made by the
School Board were fully justified and in line with applicable
federal accounting principles. Holmes then retained KPMG
Peat Marwick, the School Board’s longtime outside auditor,
and another accounting firm, Bruno & Tervalon, to settle
the dispute between the Relators and Henderson and to
pass on the propriety of the School Board’s accounting deci-
sions. The two accounting firms sided with Henderson and
specifically found that the School Board had never violated
applicable federal accounting principles or the False Claims
Act.
28a
As a result of this dispute and the conclusions reached
by the two accounting firms, the School Board fired Samuel,
who was still a probationary employee, and placed Garibaldi
on paid suspension pending a hearing that would allow the
School Board to terminate him.
II.
Less than thirty days after Samuel was fired and Gar-
ibaldi suspended, the two Relators filed this lawsuit. In-
voking the qui tam provisions of the False Claims Act, 31
U.S.C. § 3730, they alleged, on behalf of the United States,
that the School Board had submitted numerous false claims
to the United States over the course of eleven years as a re-
sult of the alleged accounting improprieties recounted
above. They also alleged that they had been retaliated
against for bringing these improprieties to light, in violation
of the protections the False Claims Act gives to whistle-
blowers. See 31 U.S.C. § 3730(h). The United States chose
not to exercise its right granted by 31 U.S.C. § 3730(b)(4)(a)
to intervene in the action and take over its prosecution, and
so the Relators pressed forward on their own.
Following nine days of testimony, the jury returned
its verdict in favor of the Relators. The jury found that the
School Board had submitted 1570 false claims to the federal
government over the course of 11 years. It found that the
federal government had sustained actual damages as a re-
sult of these false claims of $7.6 million, which was the sum
of $4.6 million in damages from the School Board’s unem-
ployment compensation insurance program and $3 million
from the workers’ compensation insurance program. The
jury also found that both Samuel and Garibaldi had suf-
fered illegal retaliation for bringing these allegations to
light. It found that each had suffered damages of $65,000
for pain and suffering connected with the retaliation, and
that Samuel had lost $103,000 in wages as a result of his
termination.
29a
The district court entered judgment on the basis of
the findings made by the jury. It ordered the School Board
to pay treble damages, per the requirements of 31 U.S.C.
§ 3729(a), of $22.8 million and a civil penalty of $7.85 mil-
lion, which was the product of 1570 false claims and the
statutory minimum penalty of $5000 per false claim. See 31
US.C. § 3729(a). It also awarded each of the Relators the
$65,000 in damages for pain and suffering and awarded
Samuel $206,000 in back wages, which was twice the actual
amount of back wages per 31 U.S.C. § 3730(h).’ As their
bounty for successful prosecution of the action, the district
court awarded the Relators 25% of the damages and civil
penalty payable to the United States. Finally, the district
court also awarded the Relators attorney’s fees, expenses,
and costs.
Following entry of judgment by the district court, the
School Board moved for judgment as a matter of law under
Fed. R. Civ. P. 50(b). The Relators moved to amend the
judgment, arguing that the jury had improperly calculated
the damages arising from the School Board's unemployment
compensation insurance program. The Relators also moved
- to have their share of the award payable to the United
States increased to the statutory maximum of 30%.
The district court denied all the motions. United States
ex rel. Garibaldi v. Orleans Parish Sch. Bd., 46 F. Supp. 2d
546 (E.D. La. 1999). However, the district court, acting sua
sponte, did alter the judgment in two respects. Finding that
the jury had miscalculated the amount of damages payable
as a result of the School Board’s workers’ compensation in-
surance program, the district court reduced that portion of
the damage award from $3 million to $2,699,952. This had
the effect of reducing the treble damages to $21,899,856.
1 The portion of the judgment that represents damages payable
directly to the Relators based on their retaliation claim has been
satisfied by the School Board. Only the judgment in favor of the
United States is at issue in this appeal.
30a
The district court, acting on the authority of Peterson v.
Weinberger, 508 F.2d 45 (5th Cir. 1975), also reduced the
civil penalty from $7.85 million to $100,000.
The School Board raises several issues in its appeal,
including that a local government such as it may not be held
liable under the False Claims Act. In their appeal, the
Relators argue that the district court erred in reducing the
civil penalty to be paid by the School Board and that it
abused its discretion in not awarding the Relators the
statutory maximum share of the award payable to the
United States. The United States has intervened in this
appeal to assert its interpretation of the False Claims Act.
Il.
We begin with the issue we find dispositive, namely
whether a local government such as the School Board may
be held liable under the False Claims Act. The answer to
this question requires us to interpret the language of a fed-
eral statute, a question of law which we review de novo.
United States v. Soape, 169 F.3d 257, 262 (5th Cir. 1999),
cert. denied, 527 U.S. 1011, 119S. Ct. 2353, 144 L.Ed.2d 249
(1999).
The issue before us can be simply stated. Does the
School Board qualify as, “Any person” under the False
Claims Act? The False Claims Act makes, “Any person”
who, inter alia, knowingly presents a false claim to the
federal government for payment, liable for treble damages
and a civil penalty of between $5000 and $10,000 per false
claim. 31 U.S.C. § 3729(a). The School Board argues that,
as a local government, it is not a person under the False
Claims Act.? The Relators, and the United States, argue
* The Orleans Parish School Board is a body corporate with the
power to sue and be sued, to make contracts, to purchase and hold
property and to sell property. La. Rev. Stat. Ann. § § 17:51, 17:81,
17:83, 17:87.6 (West 2000). It has the power to levy taxes on prop-
(continued...)
3la
that the School Board is a person under the False Claims
Act. The term person in the liability provisions of the False
Claims Act is not defined in the statute.* 31 U.S.C. § 3729.
The issue is one of first impression for this court, and for the
courts of appeal generally. Those district courts that have
considered the issue are divided. See United States ex rel.
Chandler v. Hektoen Inst. for Med. Research, 118 F. Supp.
2d 902 (N.D. Ill. 2000) (Cook County, Illinois not a person
under the False Claims Act); United States ex rel. Dun-
leavy v. County of Delaware, No. CIV. A. 94-7000, 2000 WL
1522854 (E.D. Pa. Oct. 12, 2000) (Delaware County, Penn-
sylvania not a person under the False Claims Act); United
States ex rel. Giles v. Sardie, No. CV-96-2002 LGB (Rex)
(C.D. Cal. Aug. 1, 2000) (City of Los Angeles, California is
a person under the False Claims Act).
In considering the issue before us, we pause first to
discuss an important development in the law interpreting
2 (...continued)
erty within the City of New Orleans to support its operations. La.
Const., art. 8, § 13. It is not an arm of, and has an identity separ-
ate and distinct from, the State of Louisiana. Minton v. St. Ber-
nard Parish Sch. Bd., 803 F.2d 129, 131-32 (5th Cir. 1986).
3 The Relators point to legislative history from the 1986 amend-
ments to the False Claims Act that concludes, they argue, that
local governments are persons for purposes of the False Claims
Act. See S. REP. NO. 99-345, at 8, reprinted in 1986 U.S.C.C.A.N.
5266, 5273 (stating, on the basis of the holding in Monell v. Dept.
of Social Services of the City of New York, 436 U.S. 658, 98 S. Ct.
2018, 56 L.Ed.2d 611 (1978), that local governments are persons
for purposes of the False Claims Act). The problem with this leg-
islative history is twofold. First, it cites to a case concerned with
an entirely different federal statute, namely 42 U.S.C. § 1983.
Second, the term person has been in the statute since it was first
enacted in 1863. This report is thus post-enactment legislative
history, and, “utterly irrelevant” to determining the meaning of
the term person in the liability portions of the False Claims Act.
Vermont Agency of Natural Res. v. United States ex rel. Stevens,
529 U.S. 765, 120 S. Ct. 1858, 1868 n.12, 146 L.Ed.2d 836 (2000).
32a
the False Claims Act that occurred during the pendency of
this appeal. In May of 2000 the Supreme Court decided Ver-
mont Agency of Natural Res. v. United States ex rel. Stevens,
529 U.S. 765, 120 S. Ct. 1858, 146 L.Ed.2d 836 (2000). In
Stevens, the Supreme Court held that states are not persons
for purposes of the False Claims Act. Though Stevens does
not decide the question presented by this case, the Court’s
reasoning does shed some light on whether local govern-
ments are persons for purposes of the False Claims Act.‘
In Stevens, Jonathan Stevens sued his former employ-
er, the Vermont Agency of Natural Resources, under the
False Claims Act for allegedly overstating the amount of
time some of the Agency’s employees had spent on certain
federally funded environmental projects. This resulted, he
argued, in the federal government paying the Agency more
than it was due under the various projects. The United
States, as in this case, did not intervene in the action. The
Agency moved to dismiss on the grounds that a state agency
is not a person for purposes of the False Claims Act. The
district court denied the motion and the Second Circuit af-
firmed. [529 U.S. at 770].
The Supreme Court began its analysis in Stevens with
the interpretive presumption that the term person does not
include the sovereign. Jd. at [780-81]; see also United States
v. Cooper Corp., 312 U.S. 600, 604, 61 S. Ct. 742, 85 L.Ed.
1071 (1941); United States v. Mine Workers of America, 330
* Prior to the Supreme Court’s decision in Stevens, we have located
only two decisions (other than that by the district court in this
case), both from district courts, that decided whether local govern-
ments are considered persons for purposes of the False Claims Act.
These two decisions reached opposite conclusions. See United
States ex rel. Chandler v. Hektoen Inst. for Med. Research, 35
F. Supp. 2d 1078 (N.D. Ill. 1999), rev’d in part, 118 F. Supp. 2d 902
(N.D. Ill. 2000) (Cook County, Illinois is a person under the False
Claims Act); United States ex rel. Graber v. City of New York, 8 F.
Supp. 2d 343 (S.D.N.Y. 1998) (City of New York, New York is not
a person under the False Claims Act).
33a
U.S. 258, 275, 67 S. Ct. 677, 91 L.Ed. 884 (1947). The Court
then looked at the details of the False Claims Act for lan-
guage that tended to either undermine or reinforce the pre-
sumption that states are not included in the term person.
The Court found that three features of the False Claims Act
served to reinforce the presumption that states are not per-
sons for purposes of the False Claims Act.
First, the Court noted that the civil investigative de-
mand provisions of the False Claims Act, 31 U.S.C. § 3733,
contain a definition of the term person that includes states.
31 U.S.C. § 3733(7)(4). The Court said that, “the presence of
such a definitional provision in § 3733, together with the
absence of such a provision from the definitional provisions
contained in § 3729, . . . suggests that States are not ‘per-
sons’ for purposes of qui tam liability under § 3729.” Ste-
vens, [529 U.S. at 784] (footnote omitted).
Second, the Court held that the treble damages provi-
sions of the False Claims Act were, “essentially punitive in
nature” and so inconsistent with the presumption against
imposition of punitive damages on governmental entities.
Id. at [784-85]. The Court held that while the double dam-
ages regime of the False Claims Act which had been in place
before 1986 might have been characterized as remedial, the
treble damages regime added in 1986 when Congress
amended the False Claims Act is truly punitive. Jd. at [785].
Third, the Court noted that the Program Fraud Civil
Remedies Act of 1986, which is an administrative scheme
very similar to the False Claims Act, contains a definition of
person that does not include states. 31 U.S.C. § 3801(a)(6).
The Court held that it would be anomalous to subject states
to the harsh damages regime of the False Claims Act while
not subjecting them to the relatively light penalties of the
Program Fraud Civil Remedies Act of 1986. Id. at [786].
Because of the presumption that the term person does not
include the sovereign, which was reinforced by the details
of the statutory scheme discussed above, the Court held that
states are not persons for purposes of the False Claims Act.
34a
The holding in Stevens does not resolve the issue pre-
sented to us in this case, nor is much of the reasoning in the
opinion particularly instructive in resolving the issue pre-
sented to us in this case. Local governments do not enjoy
the same sovereign status as states. For example, sovereign
immunity under the Eleventh Amendment does not extend
to governmental entities which are not an arm of a state.
Alden v. Maine, 527 U.S. 706, 756, 119 S. Ct. 2240, 144
L.Ed.2d 636 (1999). Thus, we cannot apply to the School
Board the presumption that the term person does not in-
clude the sovereign. Furthermore, other federal statutes
that impose liability on “persons” cover local governments
but not states. See, for example, Monell v. Dept. of Social
Services of the City of New York, 436 U.S. 658, 683-89, 98
S. Ct. 2018, 56 L.Ed.2d 611 (1978) (City of New York, New
York is a person for the purposes of 42 U.S.C. § 1983); Will
v. Michigan Dept. of State Police, 491 U.S. 58, 71, 109 S. Ct.
2304, 105 L.Ed.2d 45 (1989) (State of Michigan is not a per-
son for the purposes of 42 U.S.C. § 1983). Nor is the Su-
preme Court’s reasoning in Stevens regarding either the
civil investigative demand provisions of the False Claims
Act or the Program Fraud Civil Remedies Act of 1986 help-
ful to us in resolving the issue presented by this case given
the School Board’s organization as a body corporate.
However, one portion of the Supreme Court’s opinion
in Stevens does provide us with some guidance. The False
Claims Act imposes punitive damages on those who violate
it.© This is contrary to the well-settled presumption that
governments, including local governments, are not subject
to punitive damages. Stevens, [529 U.S. at 785]; City of
° Both the Relators and the United States argue that the damages
regime of the False Claims Act is not truly punitive. While deci-
sions prior to the Supreme Court’s decision in Stevens may have
supported such an argument, the Supreme Court’s decision in
Stevens is conclusive on this point. The treble damages imposed
by the False Claims Act are punitive damages. Stevens, [529 U.S.
at 785].
35a
Newport v. Fact Concerts, Inc., 453 U.S. 247, 259-71, 101
S. Ct. 2748, 69 L.Ed.2d 616 (1981). As the Supreme Court
has held, imposing punitive damages on local governments
is ordinarily contrary to sound public policy. Jd. at 263.
Though a local government can properly be made to pay
compensation for the wrongful acts of its agents, punishing
a local government is pointless. The punishment, in the
form of higher taxes or reduced public services, is visited
upon the blameless. Neither the taxpayers nor the school-
children of Orleans Parish played any role in the conduct
giving rise to the School Board’s liability. Extracting dam-
ages from them—damages that are far more than is needed
to compensate the federal government for whatever losses
it has suffered—is supported, as the Supreme Court has
said, by, “[nJeither reason nor justice.” Jd. at 267.
Imposing punitive damages on a local government in
favor of the federal government is especially problematic.
Requiring such a transfer payment would reflect a judgment
by Congress that denying the schoolchildren of Orleans
Parish needed services, or requiring the taxpayers of Or-
leans Parish to pay higher taxes, is justified in light of the
relatively minor benefit to the federal treasury. Though
Congress is free to make that determination if it chooses,
we will not find such a choice absent clear language in the
text of the False Claims Act.
The Relators and the United States argue that the defi-
nition of person in 1 U.S.C. § 1 (often called the Dictionary
Act), which supplies definitions of certain terms when they
are otherwise undefined in the statute, requires us to define
person in the liability provisions of the False Claims Act as
including local governments. They argue that Monell, 436
U.S. at 688-89, holds exactly that. The School Board arg-
ues, on the basis of Ngiraingas v. Sanchez, 495 U.S. 182,
110S. Ct. 1737, 109 L.Ed.2d 163 (1990), and the legislative
history quoted therein, that the definition of person in the
Dictionary Act does not include local governments. We need
not, and do not, choose between these two arguments be-
36a
cause, by its own terms, the definitions in the Dictionary
Act do not apply when the context of a statute indicates that
Congress intends another meaning.
In Rowland v. California Men’s Colony, Unit II Men’s
Advisory Council, 506 U.S. 194, 113 S. Ct. 716, 121 L.Ed.2d
656 (1993), the Supreme Court held that an unincorporated
association of prisoners could not proceed in forma pauperis
under 28 U.S.C. § 1915.° The prisoners’ association argued
that it was a person under the in forma pauperis statute
because the statute did not define the term person and the
Dictionary Act encompasses associations in the term person.
[506 U.S. at 197.] The Court pointed out that certain fea-
tures of the in forma pauperis statute suggested that Con-
gress did not intend to allow anyone except natural persons
to proceed in forma pauperis. The Court then considered
the first sentence of the Dictionary Act, which provides that
its definitions apply, “unless the context indicates other-
wise.” 1U.S.C. § 1. The Court concluded that the context
of the statute indicated that the word person was intended
to be used in a more limited sense than it was used in the
Dictionary Act. The Court said that,
[O]ne can say that “indicates” certainly imposes
less of a burden than, say, “requires” or “necessi-
tates.” One can also say that this exception from
the general rule would be superfluous if the con-
text “indicate[d] otherwise” only when use of the
general definition would be incongruous enough
to invoke the common mandate of statutory con-
struction to avoid absurd results. In fine, a con-
trary “indication” may raise a specter short of in-
anity, and with something less than syllogistic
force.
® The Court explained that the statute, which has since been
amended, provided that, “a qualifying person may ‘commenc[e],
prosecutle], or defen[d] .. . any suit, action or proceeding, civil or
criminal, or appeal therein, without prepayment of fees and costs
or security therefor.’” Rowland, 506 U.S. at 198.
37a
Rowland, 506 U.S. at 200-01 (internal citations and footnote
omitted). Thus, even if we were certain that the definition
of person in the Dictionary Act includes local governments,
we conclude that the punitive damages regime of the False
Claims Act discussed above “indicates” a congressional in-
tent that local governments not be subject to liability under
the False Claims Act.
The United States has argued that we should vacate
the punitive damage award payable by the School Board but
still subject it to liability under the False Claims Act if we
are troubled by the punitive damages of the False Claims
Act.’ This would require us to rewrite the statute, some-
thing we will not do. The False Claims Act already allows
a reduction to double damages from treble damages in those
cases where the defendant provides information to the fed-
eral government before any investigation is underway. 31
U.S.C. § 3729(a). Given that Congress has already provided
for a reduction in damages in certain cases, we will not read
another exception into the statute based on the identity of
the defendant. Any person liable under the False Claims
Act is liable, save for those exceptions enumerated in the
statute, for treble damages. See also Stevens, [529 U.S. at
785] n.16.
We are convinced that the punitive damages regime of
the False Claims Act discussed above reflects a congress-
ional intent that the term “person” in the liability provisions
of the False Claims Act not include local governments.
IV.
Both the Relators and the United States argue that the
Supreme Court’s interpretation of 42 U.S.C. § 1983 and the
7 The Relators’ bounty for successful prosecution of this action is
dependent on the total amount of damages payable by the School
Board. As such, they are not nearly as magnanimous as the
United States and do not argue that we can reduce the damages
payable by the School Board.
38a
antitrust laws suggest the conclusion that local govern-
ments are persons for the liability portions of the False
Claims Act. See Monell v. Dept. of Social Services of the City
of New York, 436 U.S. 658, 98 S. Ct. 2018, 56 L.Ed.2d 611
(1978) (42 U.S.C. § 1983); City of Lafayette v. Louisiana
Power & Light Co., 435 U.S. 389, 98S. Ct. 1123, 55 L.Ed.2d
364 (1978) (antitrust laws). However, our reading of these
cases does not change our conclusion that local governments
are not persons for purposes of the False Claims Act.
In Monell, the Supreme Court held that local govern-
ments are persons for the purposes of 42 U.S.C. § 1983.
Much of the opinion is concerned with the errors in the
Court’s decision in Monroe v. Pape, 365 U.S. 167, 81S. Ct.
473, 5 L.Ed.2d 492 (1961), which had held that local govern-
ments are not persons for the purposes of 42 U.S.C. § 1983.
That discussion is not relevant to the issue presented by
this case. After reviewing why Monroe was wrongly de-
cided, the Court went on to conclude that local governments
are persons for the purposes of 42 U.S.C. § 1983. The
Court’s conclusion was primarily based on the legislative
history of 42 U.S.C. § 1983. Predicated on this legislative
history, the Court concluded that Congress intended to craft
a very broad remedy, available to all citizens whose civil
rights had been violated by those acting under the color of
state law. That is, Congress intended to create a broad rem-
edial statute for violations by those acting under the color of
state law. Monell, 436 U.S. at 685-86. More importantly,
the Court concluded that the framers of 42 U.S.C. § 1983
had been especially concerned with takings of private prop-
erty without just compensation by local governments. The
Court said,
Representative Bingham, for example, in discuss-
ing § 1 of the bill, explained that he had drafted
§ 1 of the Fourteenth Amendment with the case of
Barron v. Mayor of Baltimore, 32 U.S. 243, 7 Pet.
243, 8 L.Ed. 672 (1833), especially in mind. “In
[that] case the city had taken private property for
39a
public use, without compensation ... and there
was no redress for the wrong... .” Globe App. 84
(emphasis added). Bingham’s remarks clearly in-
dicate his view that such takings by cities, as had
occurred in Barron, would be redressable under
§ 1 of the bill.
[436 U.S.] at 686-87. Because 42 U.S.C. § 1983 targeted en-
tities thet acted under color of state law, the Court conclud-
ed that it would have been nonsensical to conclude that local
governments are not persons for the purposes of 42 U.S.C.
§ 1983. Id. at 686-87.
The Court’s holding in Monell is premised upon specific
indications in the legislative history of 42 U.S.C. § 1983 that
Congress intended for local governments to be within the
reach of 42 U.S.C. § 1983. We find no similar indications in
the legislative history of the False Claims Act. Indeed, the
Supreme Court has observed that,
As the historical context makes clear, and as we
have often observed, the FCA was enacted in 1863
with the principal goal of “stopping the massive
frauds perpetrated by large [private] contractors
during the Civil War.” . . . Its liability provision
—the precursor to today’s § 3729(a)—bore no in-
dication that States were subject to its penalties.
Stevens, [529 U.S. at 781-82] (quoting United States v. Born-
stein, 423 U.S. 303, 309, 96 S. Ct. 523, 46 L.Ed.2d 514 (1976)
(bracketed material in original)); see also United States
ex rel. Graber v. City of New York, 8 F. Supp. 2d 348, 352
(S.D.N.Y. 1998). Neither the United States nor the Relators
have supplied us with any authority that would show that
the framers of the False Claims Act contemplated liability
for local governments. Furthermore, the False Claims Act,
unlike 42 U.S.C. § 1983, is not specifically targeted at those
who act under color of state law. Thus, it would not be
absurd, as it would be with 42 U.S.C. § 1983, to hold that
local governments are not liable under the False Claims Act.
40a
We also note that the Supreme Court, relying on the pre-
sumption ‘hat local governments are not liable for punitive
damages, has held that local governments are not liable for
punitive damages under 42 U.S.C. § 1983. City of Newport,
453 U.S. at 271.
In City of Lafayette, the Court was faced with the ques-
tion whether it should read an implied exception into the
antitrust laws for commercial activity by local governments.
The Court concluded that it should not. The Court said,
“The presumption against repeal by implication reflects the
understanding that the antitrust laws establish overarching
and fundamental policies, a principle which argues with
equal force against implied exclusions.” City of Lafayette,
435 U.S. at 399. The Court also noted that, “ ‘Language
more comprehensive is difficult to conceive. On its face it
shows a carefully studied attempt to bring within the Act
every person engaged in business whose activities might
restrain or monopolize commercial intercourse among the
states.’” Id. at 398 (quoting United States v. South-Eastern
Underwriters Assn., 322 U.S. 533, 553, 64 S. Ct. 1162, 88
L.Ed. 1440 (1944)). Given the fact that the antitrust laws
establish such a fundamental and all-encompassing regula-
tory regime for commercial activity, the Court decided that
it could not create an implied exclusion for local govern-
ments that go out into the marketplace and engage in this
type of activity.
The Court’s decision in City of Lafayette that local gov-
ernments were subject to the antitrust laws, including lia-
bility for punitive damages, was premised on the notion that
the antitrust laws were drafted with the clear purpose to
reach all the nation's commercial activity. Exceptions to the
antitrust laws would defeat those clear purposes. The False
Claims Act and the antitrust laws are not analogous in this
regard. Neither the United States nor the Relators have
shown that the False Claims Act has the same broad scope
as the antitrust laws. From the Supreme Court’s decision in
Stevens we know that the False Claims Act does not apply
4la
to states. The False Claims Act was enacted to reach fraud
by private government contractors. We agree with the D.C.
Circuit, which said, “Even if one assumes that states com-
mit a good deal of fraud against the federal government, it
cannot seriously be argued that the very purpose of the
[False Claims] Act would be thwarted if states were not
liable under the [False Claims] Act.” United States ex rel.
Long v. SCS Business & Technical Inst., Inc., 173 F.3d 870,
875 (D.C. Cir. 1999), cert. denied, 530 U.S. 1202, 120 S. Ct.
2194, 147 L.Ed.2d 231 (2000). This conclusion is as applic-
able to local governments as it is to states.
In sum, because of the differences in scope and purpose
between the False Claims Act and the antitrust laws, we are
not persuaded that the Supreme Court’s decision in City of
Lafayette augurs in favor of a conclusion that local govern-
ments are persons for purposes of the False Claims Act.®
V.
The punitive damages regime of the False Claims Act
shows a congressional intent that the False Claims Act
should not be applied to local governments. There is no con-
trary expression of legislative intent and no purpose behind
the False Claims Act that undermine that conclusion. For
these reasons, we conclude that the term person in the lia-
bility provisions of the False Claims Act does not include
local governments like the School Board. Therefore, the
judgment of the district court is VACATED and judgment is
RENDERED in favor of the Appellant, the Orleans Parish
School Board.
JUDGMENT VACATED AND JUDGMENT RENDERED.
* We also note that following the Supreme Court's decision in City
of Lafayette, Congress exempted local governments from all money
damages payable under the antitrust lavs. See The Local Gov-
ernment Antitrust Act of 1984, 15 U.S.C. §§ 34-36.
APPENDIX D
FILED
U.S. DISTRICT COURT
EASTERN DISTRICT OF LA
1999 APR 27 P 2:12
LORETTA G. WHYTE
CLERK
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
UNITED STATES OF AMERICA CIVIL ACTION —
ex rel. WILLIAM GARIBALDI
AND CARLOS SAMUEL
VERSUS NO. 96-0464
ORLEANS PARISH SCHOOL BOARD SECTION “K”
ORDER AND REASONS
This qui tam action was filed by William Garibaldi and
Carlos Samuel (“the relators”) on behalf of the United States
of America (“plaintiff”) against the Orleans Parish School
Board (“OPSB”). The case came before the court on a trial
by jury, and the jury found in favor of the relators and the
United States (collectively, “plaintiffs”). Accordingly, the
court entered judgment for the plaintiffs in the amount of
approximately $31,000,000.
Before the court are several motions, including: (1) a
Motion for Judgment as a Matter of Law, or, Alternatively,
a New Trial, filed by defendant Orleans Parish School Board
43a
(Doc. # 192), (2) a Motion to Dismiss Plaintiffs Complaint
for Lack of Subject Matter Jurisdiction, filed by defend-
ant, OPSB (Doc. # 235); (3) a Motion to Alter or Amend the
Judgment, filed by plaintiff, United States of America (Doc.
# 191); (4) a Motion to Alter or Amend the Judgment, filed
by the relators, William Garibaldi and Carlos Samuel (Doc.
# 185); (5) Objections to Order Granting Motion for Exten-
sion of Time and Report and Recommendation, filed by de-
fendant, OPSB (Doc. # 231); and (6) Objections to Proposed
Findings, Conclusions, and Recommendation of Magistrate,
filed by the relators (Doc. # 230). The court will address
each motion in turn.
III. DEFENDANT ORLEANS PARISH SCHOOL
BOARD’S MOTION FOR JUDGMENT AS A MATTER
OF LAW, OR ALTERNATIVELY, A NEW TRIAL
A. APPLICABLE LEGAL STANDARDS
1. STANDARD FOR JUDGMENT AS A MATTER
OF LAW
Under Rule 50 of the Federal Rules of Civil Procedure,
the court must determine whether there is sufficient evi-
dence to support the jury's verdict and in so doing all evi-
dentiary issues are to be resolved in favor of the successful
party and that party is to be given the benefit of all reason-
able inferences.
As stated in the seminal case Boeing Co. v. Shipman,
411 F.2d 365, 374-75 (5th Cir. 1969), in considering a mo-
tion for judgment as a matter of law, the court should con-
sider all of the evidence—not just that evidence which sup-
ports the non-mover's case—but in the light and with all
reasonable inferences most favorable to the party opposed
to the motion. If the facts and inferences point so strongly
and overwhelmingly in favor of one party that the Court be-
lieves that reasonable persons could not arrive at a contrary
verdict, granting of the motion is proper. On the other hand,
if there is substantial evidence opposed to the motions, that
44a
is, evidence of such quality and weight that reasonable and
fair-minded persons in exercise of impartial judgment might
reach different conclusions, the motion should be denied.
See Branch v. Chevron Intl Oil Co., 681 F.2d 426, 428-29
(5th Cir. 1982).
2. STANDARD FOR MOTION FOR NEW TRIAL
The standard provided under Rule 59 of the Federal
Rules of Civil Procedure to determine whether a new trial
or remittitur is required is different from that of Rule 50.
The rule does not specify what grounds are necessary to
support such a decision; however, case law demonstrates
that a new trial may be granted if the district court finds
that the verdict is against the great weight of the evidence,
the damages awarded are excessive, the trial was unfair, or
prejudicial error was committed in its course. Smith v.
Transworld Drilling, 773 F.2d 610, 613 (5th Cir.1985). In
making its determination, the lodestar is whether the ver-
dict is against the great weight of the evidence or would
result in the miscarriage of justice. Unlike a Rule 50 mo-
tion, there is no need to view the evidence in the light most
favorable to the nonmoving party. C. Wright & A. Miller,
Federal Practice and Procedure, § 2806 (2d ed.1995).
B. NO NEW EVIDENCE WAS PRESENTED AT
TRIAL THAT WOULD MOVE THIS COURT TO
RECONSIDER ITS RULING ON THE ISSUES
RAISED BY DEFENDANT’S MOTION FOR
SUMMARY JUDGMENT
On September 22, 1998, this court issued a ruling de-
nying the defendant’s Motion for Summary Judgment.’ Of
its many findings, the following are relevant to the argu-
ments raised by OPSB in its post-trial motions:
1 United States of America ex. rel. William Garibaldi and Carlos
Samuel v. Orleans Parish Sch. Bd., 21 F. Supp. 2d 607 (E.D. La.
1998).
45a
¢ The court has subject matter jurisdiction over this qui
tam action, because the information on which the
action is based was not publicly disclosed prior to the
relator's disclosure of it;
¢ Even if the information were publicly disclosed, the
court still has subject matter jurisdiction over the
claim, because the relators were the original source of
the information;
¢ The relators plead the necessary elements, including
scienter, to show fraud under the FCA; and
¢ The relators need not have actually filed their qui tam
action before being terminated or suspended from their
jobs in order to bring a retaliation claim under section
3730(h).
OPSB has reiterated the arguments it made in its Motion
for Summary Judgment in its post-trial motions, and the
court remains unpersuaded.” Having heard the evidence at
trial, the court finds that it need not revisit the legal conclu-
sions of its September 1998 Order and Reasons. The rest
of OPSB’s argument on these subjects is essentially an at-
tempt to try its case before the judge instead of before the
jury. The jury, and not the judge, is responsible for finding
the facts in this case. This court finds that a reasonable
jury could conclude that OPSB acted with fraudulent intent
as defined by the FCA.
* OPSB does add one new legal argument: it claims that the court
should have applied a “clear and convincing” standard rather than
a “preponderance of the evidence” stendard, despite its own fail-
ure to urge this standard at trial and its own admission that the
Fifth Circuit has applied a preponderance of the evidence stand-
ard in FCA cases. United States v. Thomas, 709 F.2d 968, 971-72
(5th Cir. 1983). The court finds that the proper standard is the
“preponderance of the evidence” standard and that the court ap-
plied it correctly.
46a
C. THE COURT DID NOT ABUSE ITS DISCRETION
IN MAKING ITS EVIDENTIARY RULINGS
1. THE COURT PROPERLY ADMITTED
DEFENDANT’S JUDICIAL ADMISSION AS
TO THE NUMBER OF CLAIMS
Early on in this case, plaintiffs asked defendant,
through a written interrogatory, to “state the total number
of claims submitted to any federal or state agency for the
special revenue fund and child nutrition fund for unem-
ployment compensation and workers compensation for each
quarter from January 1, 1986 through June 30, 1997 for the
purpose of obtaining reimbursement.”
In his answer to the interrogatory, Anthony Stolz, the
OPSB Comptroller and the party representative at trial,
provided computer print-outs of revenue postings for the
time period requested, and answered that the “number of
claims is equal to the number of posting designated with a
‘Rev.’ code.” The plaintiffs used this information to create
an exhibit that listed the number of receipts of federal funds
for each year. Plaintiffs Exhibit 62. There were 1570 reve-
nue postings in the exhibit. Mr. Stolz testified that he drew
up this answer with his attorney. Defendant apparently
later realized that, because the FCA penalizes each individ-
ual claim, the actual number of claims matters almost as
much as the total monetary amount of those claims. At tri-
al, defendant tried to exclude its prior interrogatory answer,
and plaintiff moved for the court to consider the response a
judicial admission. The court held that the response was a
judicial admission under White v. Arco/ Polymers, Inc., 720
F.2d 1391 (5th Cir. 1983) (factual assertions in pleadings
and pretrial orders are considered to be judicial admissions
conclusively binding on the party who made them), citing
Myers v. Manchester Insurance & Indemnity Co., 572 F.2d
134 (5th Cir. 1978). OPSB argues that this holding was an
abuse of discretion, because the claims to which it admitted
were not claims under the definition of “claim” in the False
Claims Act. The court disagrees.
ae
47a
Only deliberate, clear, and unequivocal statements can
be judicial admissions. Matter of Corland Corp., 967 F.2d
1069, 1074 (5th Cir. 1992) (citing Backar v. Western States
Producing Co., 547 F.2d 876, 880 n.4 (5th Cir. 1977)). OPSB
cites Backar for the principle that if the person making the
admission is unaware that he is admitting liability, the
admission is not a “judicial admission,” and argues that,
here, Stolz was unaware that he was admitting liability.
The court finds Backar inapplicable. Stolz’s admission was
not the uninformed statement of a low-level employee. As
the Controller of OPSB, Stolz drafted the admission with
the help of his attorney. Furthermore, the statement does
not admit liability: Stolz did not state that OPSB made 1570
“false claims,” just that it made 1570 “claims” for worker’s
compensation and unemployment compensation costs. If
the court were to allow the defendant to equivocate on its
answers to interrogatories, the doctrine of judicial admis-
sions would lose its meaning and effectiveness.
Defendants further argue that the response of Mr.
Stolz could not be properly considered by the jury, as the
substance of the response contradicts the definition of
“claim” in the statute and in the federal regulations. The
False Claims Act defines the term “claim” as follows:
For the purpose of this section, a “claim” includes
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.
31 U.S.C. § 3729(c). In other words, the School Board made
a “claim” every time it requested money from the govern-
ment. It is the number of applications for funds, and not
the number of coded items on each application, or the num-
|
48a
ber of invoices generated by the applications, or *he number
of contracts the applications represent, that determines the
number of claims made. United States v. Bornstein, 423
U.S. 303, 96 S. Ct. 523, 46 L.Ed.2d 514 (1976) (where sub-
contractor who made three shipments of falsely branded
electron tubes to prime contractor which caused prime con-
tractor to submit false claims to the U.S. government, using
35 separate invoices, three false claims were made); Miller
v. United States, 213 Ct. Cl. 59, 550 F.2d 17, 23 (1977) (con-
tractor who submitted five monthly billings to the govern-
ment in which eleven invoices were enclosed made five false
claims, one for each occasion on which the contractor made
a request for payment); United States v. Woodbury, 359 F.2d
370, 378 (9th Cir. 1966) (ten false applications for reim-
bursement included many more false invoices, but court
assessed statutory penalty based on ten claims).
The court recognizes that the FCA’s method of deter-
mining the number of claims can seem somewhat arbitrary.
Here, the scienter may have been established, or renewed,
each time the School Board decided to renew its contract
with UCCS, or when it decided to handle its worker’s com-
pensation program internally, knowing that this would cre-
ate a surplus and that the surplus would be used solely to
help the general fund. However, under the FCA, the jury
was obligated to assess the number of claims using the
number of times the School Board made claims, and not
based on the number of times the School Board decided to
make these claims. In a similar case, the United States
brought an FCA action against a builder of subsidized hous-
ing. The district court assessed 76 forfeitures, one for each
monthly voucher. The defendant argued that the number
of forfeitures should be limited to the number of acts he
committed which caused false claims to be filed. Asserting
that he did but one act, inflating construction costs, that
caused false claims to be filed, the builder concluded that he
was liable for only one forfeiture. The court held that be-
cause the builder knowingly caused a specific number of
faise claims to be filed, he was liable for that number of for-
|
49a
feitures. United States v. Ehrlich, 643 F.2d 634 (9th Cir.
1981). Here, the School Board is liable, not for the number
of contracts it entered into with UCCS, or the number of
times it agreed to participate in the three-tiered rate sys-
tem, or the number of times it decided to implement an in-
ternal worker's compensation plan, but the number of times
it made claims to the government that were false.
On the other hand, OPSB is not liable for each and
every code on its requests to the government. For example,
OPSB often filed requests for reimbursement that included
codes for both worker’s compensation and unemployment
compensation on the same page. OPSB is liable for only one
false claim per application, even if more than one account
was listed on the page. As one court considering the issue
explained:
The government contends that fairness or uni-
formity concerns support treating each CPT code
as a separate claim, arguing that “to count wood-
enly the number of HCFA 1500 forms submitted
by the Krizeks would cede to medical practition-
ers full authority to control exposure to [the FCA]
simply by structuring their billings in a particular
manner.” Precisely so. It is conduct of the medi-
cal practitioner, not the disposition of the claims
by the government, that creates FCA liability.
United States v. Krizek, 111 F.3d 934, 940 (D.C. Cir. 1997).
The FCA punishes those who defraud the government not
by the number of contracts or coded items they submit, but
by the number of actual fraudulent claims made. While
this system may create somewhat arbitrary results, it is the
scheme mandated by the FCA, and the court did not abuse
its discretion in instructing the jury to apply the statute as
written.
OPSB further argues that the jury improperly reached
its determination that the 1570 claims were false because
OPSB did not make each claim with the knowledge that it
50a
was false. OPSB misunderstands the reasoning behind the
FCA. The FCA does not require that the low-level account-
ing employee who processes accounts to have the requisite
scienter when each claim is processed. It requires the en-
tity, the OPSB, to have the requisite intent. If the OPSB
knew that its actions would result in a number of false
claims, the FCA penalizes it for each false claim. See United
States v. Ehrlich, 643 F.2d 634 (9th Cir. 1981) (claimant
liable for each false claim filed, even where one act of inflat-
ing construction costs created all false claims).
2. THE COURT PROPERLY EXCLUDED THE
TESTIMONY OF DEFENDANT’S EXPERTS
OPSB claims that the court abused its discretion in ex-
cluding the expert testimony of four accountants: Albert J.
Richard, Alcede Tervalon, Frank T. McKune, and Christo-
pher Polischuck. The court struck these witnesses because
defendant never submitted expert reports for any of them.
OPSB claims that the November 7, 1995 “External Auditor’s
Report” constituted the expert report of all four accountants,
and that its failure to formally designate it as an “expert re-
port” was a mere formality that did not unfairly prejudice
the plaintiffs. Mr. McKune and Mr. Polischuck were not
even signatories to this report, and OPSB never designated
it as an expert report.
Messrs. Polischuck and McKune were designated only
as expert witnesses, not as fact witnesses, and because
OPSB never submitted an expert report for either of them,
the court struck their testimony entirely. Messrs. Richard
and Tervalon, however, were listed as both expert and fact
witnesses. In an attempt to ensure that defendant, despite
its laxity toward the rules and deadlines of this court, was
able to put on its case, this court allowed defendant to call
Richard and Tervalon as fact witnesses, and to question
them about the 1995 report.
5la
Defendant now claims that this court abused its dis-
cretion in striking Poleschuck and McKune and in limiting
Richard and Tervalon’s testimony to facts, because this ex-
clusion of expert testimony “struck at the heart of the case.”
Specifically, defendant argues that, had it been allowed to
call its expert witnesses, they would have testified that
OMB Circular A-87 did not require that an actuarial report
be conducted every year, as claimed by plaintiffs’ experts.
Defendant is correct in its observation that expert testimony
was important in this trial. For this reason, counsel for de-
fendant should have followed the rules of this court, and
submitted expert reports, or designated documents revealed
in discovery as expert reports, by the deadline set forth by
this court. Defendant was fully aware of the deadline for
submission of expert reports, because defendant moved on
June 10, 1998 for an extension of the deadline, which the
court granted (Doc. # 53). Defendant, however, then chose
to ignore the new deadline. The court takes its pre-trial
deadlines seriously. These deadlines are imposed so that
each party will be treated fairly. The court is not respon-
sible for defendant's lack of care in adhering to the dead-
lines ordered by the court.
That said, the court notes that it might reconsider its
decision if defendant could show it had suffered unfair pre-
judice as a result of the court's action. Defendant, however,
has failed to show that it was prejudiced in any way. The
court allowed Mr. Tervalon and Mr. Richard to testify as
fact witnesses about the November 1995 auditor’s report
that they authored, and about any opinions they rendered
in that report. The defense chose not to put Mr. Tervalon on
the stand. The court is astonished that defendant did not
take the opportunity to question Mr. Tervalon as a fact wit-
ness, when, as a co-author of the report, Tervalon could
have testified to the details of the report, the factual inquiry
behind it, and the reasons behind its conclusions. Defend-
ant certainly had the opportunity to question Mr. Tervalon
about whether it was his understanding, when he wrote the
ee ee ee ee eee ee
a
52a
report, that OMB Circular A-87 did not require yearly actu-
arial reports.
Contrary to the allegations in defendant’s post-trial
motion, Mr. Richard was allowed to testify as to whether
OMB Circular A-87 required yearly reports. The court was
remarkably lenient with Mr. Richard's “fact” testimony, al-
lowing him much latitude to give opinions about his report
even though he had not been certified as an expert witness.
Defendant suffered no prejudice from its failure to follow
this court’s rules and certify Richard as an expert, because
the court assisted it by construing “fact” testimony very
loosely.
Defendants contend that the court should have con-
tinued the trial rather than refusing to allow the defense’s
expert witnesses to testify. A continuance would have been
grossly unfair to the plaintiffs, especially since it would
have been caused solely by a lack of care and attention paid
by defendant to deadlines and court rules.
D. THE RELATORS DID NOT EXERCISE THEIR
PEREMPTORY CHALLENGES IN VIOLATION
OF BATSON
A party to a civil suit may challenge another party’s
use of a peremptory strike that excludes a prospective juror
on the basis of that juror’s race. Edmonson v. Leesville
Concrete Co., 500 U.S. 614, 111S. Ct. 2077, 114 L.Ed.2d 660
(1991); Batson v. Kentucky, 476 U.S. 79, 106 S. Ct. 1712, 90
L.Ed.2d 69 (1986). A party may challenge another’s per-
emptory strike regardless of the race of the challenging
party since the objection asserts the juror’s equal protection
rights. Powers v. Ohio, 499 U.S. 400, 111 S. Ct. 13864, 113
L.Ed.2d 411 (1991).
The Fifth Circuit has developed a three-step process for
evaluating Batson claims. First, the complaining party
must make a prima facie showing that opposing counsel has
exercised a peremptory challenge on the basis of race. Once
53a
this showing has been made, the burden shifts to the strik-
ing party to articulate a race-neutral explanation for the
strike. Thereafter, the court must determine whether the
Batson claimant has proven purposeful discrimination.
United States v. Bentley-Smith, 2 F.3d 1368, 1373 (5th Cir.
1993). The district court has the discretion to fashion the
procedure necessary to evaluate counsel’s race-neutral ex-
planation. United States v. Clemons, 941 F.2d 321 (5th Cir.
1991). The trial court’s decision on the ultimate question of
discriminatory intent is a finding of fact usually accorded
great deference on appea! because of the inherent credibil-
ity assessment. Hernandez v. New York, 500 U.S. 352, 111
S. Ct. 1859, 114 L.Ed.2d 395 (1991) (plurality) (citing Bat-
son); United States v. Valley, 928 F.2d 130 (5th Cir. 1991)
(citing United States v. Moreno, 878 F.2d 817 (5th Cir.),
cert. denied, 493 U.S. 979, 110 S. Ct. 508, 107 L.Ed.2d 510
(1989)).
In Batson, the Supreme Court held that determining
whether a prima facie case of discrimination has been estab-
lished requires consideration of all relevant circumstances,
including whether there has been a pattern of strikes
against members of a particular race. [476 U.S. at 94-97]
Here, defendants claim that plaintiffs used their peremp-
tory challenges to exclude African-American residents of
Orleans Parish. Batson does not prohibit peremptory chal-
lenges based on residency in a particular county or city,
unless the peremptory challenges are a proxy for race.
Orleans Parish has a diverse citizenship, and residency in
Orleans Parish is not a proxy for race. In this case, which
required jurors to consider ruling against the Orleans Par-
ish School Board, and thus potentially influencing the taxes
on residents of Orleans Parish, residents of Orleans Parish
might well have been excluded for permissible and strate-
gically prudent reasons. The court finds that defendant
cannot make out a prima facie case of discrimination based
upon plaintiffs’ decision to strike residents of Orleans Par-
ish.
54a
Defendant has, however, made out a prima facie case
of discrimination based upon plaintiffs’ striking of black jur-
ors in general. Plaintiffs used their peremptory challenges
to strike Toyoka Rowel, Dora Matthews, and Arthemise
Williams, all black women, during voir dire. The dearth of
black women on the final jury was not entirely the result of
plaintiffs’ peremptory strikes: the court excluded Sethany
Johnson, a black resident of Orleans Parish, because of her
educational commitments, and Lois Johnson, a black juror
from Orleans Parish, was seated but then excused by the
court because she thought she knew one of the relators,
Carlos Samuel. However, plaintiffs clearly exhibited a pat-
tern of striking black women from the jury, and the final
jury panel consisted of eleven whites and one black man.
Once counsel has offered a race-neutral explanation
and the trial court has ruled on the ultimate issue of inten-
tional discrimination, the court considers only the suffici-
ency of the race-neutral reasons articulated by counsel.
Hernandez v. New York, [500 U.S. at 359]. A race-neutral
explanation is one “based upon something other than the
race of the juror.” Clemons, 941 F.2d at 324-25 (citing Her-
nandez). Here, the plaintiffs offer strong reasons for ex-
cluding two of the jurors: Dora Matthews was excluded be-
cause she was an employee of the Orleans Parish School
Board, and Arthemise Williams was excluded because she
was a friend of Everett Williams, who was Superintendent
of OPSB during some of the years under investigation. The
court looks more critically at the plaintiffs’ striking of Toy-
oka Rowel, a community college student whom the plaintiffs
chose to strike because of her “inexperience and youth.” The
Fifth Circuit, however, has previously found age and ap-
pearance to be legitimate reasons for the exercise of peremp-
tory challenges. An explanation “need not be quantifiable”
provic ‘ that the intent is not race-based. Clemons, 941
F.2d at 325. This circuit has also found “disinterested de-
meanor” and “inattentiveness” to be valid, race-neutral rea-
sons for peremptory strikes. See United States v. Roberts,
55a
913 F.2d 211 (5th Cir.1990), cert. denied, 500 U.S. 955, 111
S. Ct. 2264, 114 L.Ed.2d 716 (1991); see also United States
v. Melton, 883 F.2d 336 (5th Cir.1989); see also United
States v. Lance, 853 F.2d 1177 (5th Cir.1988). The court
finds that plaintiffs’ have met their burden to articulate
race-neutral reasons for their strikes, as required by Batson.
E. THE FALSE CLAIMS ACT APPLIES TO PUBLIC
ENTITIES
The False Claims Act provides that “any person” who
causes false claims and reports to be presented to the Unit-
ed 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. 31 U.S.C. § 3729. Gen-
erally, a municipality is not deemed to be a “person” when
punitive and exemplary damages are at stake. City of New-
port v. Fact Concerts, Inc., 453 U.S. 247, 101 S. Ct. 2748, 69
L.Ed.2d 616 (1981). However, if a statute makes clear that
such an interpretation is contemplated, then such damages
are permissible.
Here, the legislative history of the False Claims Act
as amended in 1986 makes clear that Congress intended
states and municipalities to be included in the definition of
“person”:
The False Claims Act reaches all parties who may
submit false claims. The term “person” is used in
its broadest sense to include partnerships, as-
sociations, and corporations . . . as well as States
and political subdivisions thereof.
S. Rep. No. 99-345, at 8 (citations omitted). The Fifth Cir-
cuit has not ruled on the question of whether the term
“person” includes states or municipalities. See, e.g., United
States ex rel. Foulds v. Texas Tech University, 171 F.3d 279
(5th Cir. 1999) (declining to address the “person” issue).
The Eighth Circuit has held that the False Claims Act con-
templates claims against states, in part because of the use
56a
of the word “person” to include states throughout differ-
ent provisions of the Act. United States of America ex. rel.
Zissler v. Regents of the University of Minnesota, 154 F.3d
870, 875 (8th Cir. 1998); see also United States ex rel. Ste-
vens v. Vermont Agency of Natural Resources, 162 F.3d 195
(2d Cir. 1998).° Zissler noted that states themselves have
filed gui tam actions, even though the Act authorizes only
“private persons” to enforce it. Consequently, if states be-
lieve they are “private persons” when bringing an FCA ac-
tion, they should also be deemed “persons” when they are
sued. Zissler also notes that section 3733(/)(4) of the FCA
includes states in its definition of “person.” Id. “Person,”
then, should be read to include states, and subdivisions
thereof, throughout the Act.‘
* One district court came to a contradictory conclusion in which it
held that a state or municipality could not be sued under the False
Claims Act. United States ex rel. Graber v. City of New York, 8
F. Supp. 2d 343 (S.D.N.Y. 1998). The court held that because
municipalities cannot be sued for punitive damages, the FCA can-
not apply to municipalities. The Supreme Court, however, has
held that damages under the FCA are not punitive. United States
v. Halper, 490 U.S. 435, 446, 109 S. Ct. 1892, 104 L.Ed.2d 487
(1989) (damages under the FCA are not punitive in double jeop-
ardy context, but remedial). While holding municipalities liable
for punitive damages is contrary to public policy, see City of New-
port v. Fact Concerts, Inc., 453 U.S. 247, 267 (1981), McGary v.
City of Lafayette, 12 Rob. 668, 677 (La. 1846), the False Claims Act
was intended to be remedial, not punitive. Moreover, Graber may
have been effectively overruled by Stevens.
* The District of Columbia Circuit recently held, contrary to Zissler
and Stevens, that states are not “persons” within the meaning of
the act. United States ex rel. Long v. SCS Business & Technical
Institute Inc., [173 F.3d 890 (D.C. Cir. 1999), cert. denied, 530 U.S.
1202 (2000)]. The court, however, did not reach the question of
whether municipalities were also non-persons under the act, and,
as the court’s analysis was based in large part on its concern the
FCA might fail under the Eleventh Amendment if “persons” were
read to include states, the analysis is not applicable here, where
no such concerns exist. See Section I(F)(2), infra.
57a
F. THE FALSE CLAIMS ACT DOES NOT VIOLATE
THE UNITED STATES CONSTITUTION
1. THE FALSE CLAIMS ACT DOES NOT
VIOLATE THE TENTH AMENDMENT
Under the Tenth Amendment, “The powers not de-
legated to the United States by the Constitution, nor pro-
hibited by it to the States, are reserved to the States
respectively, or to the people.” U.S. Const. amendment X.
In the leading case interpreting the Tenth Amendment, the
Supreme Court outlined a test for determining when the
federal government impermissibly encroaches on state sov-
ereignty. Printz v. United States, 521 U.S. 898, 117 S. Ct.
2365, 138 L.Ed.2d 914 (1997). Printz held that provisions of
the Brady Act which temporarily required the Chief Law
Enforcement Officer of each local jurisdiction +o conduct
background checks on prospective handgun purchases vio-
lated the Tenth Amendment because the provisions com-
pelled the states to enact a federal law. This ruling turned
on the coercive nature of the government's behavior. [521
U.S. at 933] (“[t]he Federal Government may not compel
the States to enact or administer a federal regulatory pro-
gram”). The Printz court declined to hold unconstitutional
those provisions of federal regulations which require states
to participate in specific activities once they have voluntar-
ily participated in a general scheme.
Here, defendant subjected itself to regulation by the
federal government when it accepted federal funds. No co-
ercion exists where the United States subjects states to the
same conditions for federal funding as other grant recipi-
ents. Zissler, 154 F.3d 870 (8th Cir. 1998). As the Zissler
court explained:
States may avoid these requirements simply by
declining to apply for and to accept these funds.
But if they take the King’s shilling, they take it
cum onere.... Here [under the FCA], the only
cooperation asked of States is honesty, a mild re-
eT ee ee ee, a ee eS ae
58a
quirement in light of the fact that the Tenth
Amendment allows even the indirect achievement
of objectives which Congress is not empowered to
achieve directly, through conditional federal fund-
ing ...a False Claims Act action against a State
falls within the usual constitutional balance be-
tween the States and the Federal Government.
The United States’ requirement that recipients of federal
funds refrain from defrauding the government does not vio-
late the Tenth Amendment.
2. THE OPSB IS NOT ENTITLED TO
ELEVENTH AMENDMENT IMMUNITY
Under the Eleventh Amendment to the United States
Constitution:
The Judicial power of the United States shall not
be construed to extend to any suit in law or equi-
ty, 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. Const. amend. XI. A citizen, then, cannot sue a state
in federal court. OPSB argues that it is entitled to Eleventh
Amendment immunity because the relators, and not the
United States, are the real parties in interest, and are
therefore “citizens,” and because the OPSB is an arm of the
state.
a. Are the claims brought by “citizens”?
The Fifth Circuit has held that the Eleventh Amend-
ment bars a qui tam relator's claim arising under 31 U.S.C.
§ 3729 et seq. against states and state agencies, when the
United States does not intervene. United States ex rel.
Foulds v. Texas Tech University, 171 F.3d 279 (5th Cir.
1999). The court reasoned that, where the United States
declines to intervene, “it is as plain as the sun” that the
“suit was not commenced by the United States and that the
United States has not intervened to prosecute” the case. Id.
59a
at [289]. The court also held that a qui tam relator’s retali-
atory discharge claim under 31 U.S.C. § 3730(h) was like-
wise barred. Id.
Here, the suit was brought by relators William Gari-
baldi and Carlos Samuel on behalf of the United States.
The United States chose not to intervene in the action, and
the relators nonetheless succeeded on both their retaliation
claims and their False Claims Act claims. Under Foulds,
the Eleventh Amendment clearly would have barred rela-
tors from bringing this suit if the entity they were suing was
the state, because the relators are “citizens” of a state.
b. Is the Orleans Parish School Board the
“state”?
The bar of the Eleventh Amendment to suit in federal
courts extends to States and state officials in appropriate
circumstances, but does not extend to counties and similar
municipal corporations. Edelman v. Jordan, 415 US. 651,
667 n.12, 94 S. Ct. 1347, 39 L.Ed.2d 662 (1974); see also
Lincoln County v. Luning, 133 U.S. 529, 530, 10 S. Ct. 363,
33 L.Ed. 766 (1890); Moor v. County of Alameda, 411 U.S.
693, 717-21, 93 S. Ct. 1785, 1799-1801, 36 L.Ed.2d 596
(1973). The court must therefore determine whether the
OPSB is more like a state or more like a county.
The Supreme Court has held that the issue of whether
a politi-al subdivision it to be treated as an “arm of the
State” partaking of the State's Eleventh Amendment
immunity or instead as a political subdivision or municipal
corporation to which Eleventh Amendment immunity does
not extend depends, “at least in part, upon the nature of the
entity created by state law.” Mt. Healthy School District
Board of Education v. Doyle, 429 U.S. 274, 280, 97 S. Ct.
568, 572, 50 L.Ed.2d 471 (1977). In Mt. Healthy, the Court
determined that the Mt. Healthy Department of Education
was not entitled to Eleventh Amendment immunity. Al-
though the school board was subject to some guidance from
the State Board of Education, and received a significant
ia aa la RS ee FU eel rile Rhian bee Fats hin sie alent s ai +S
Pir ties
60a
amount of money from the State, the school boards had ex-
tensive powers to issue bonds, and to levy taxes within cer-
tain restrictions of state law. 429 U.S. at 280, 97S. Ct. at
573. The Court therefore concluded that “a local school
board such as petitioner is more like a county or city than it
is like an arm of the State.” Id.
In Minton v. St. Bernard Parish School District, 803
F.2d 129 (5th Cir. 1986), the Fifth Circuit set out a six-
factor test for determining whether a political subdivision is
an "arm of the state" or merely a local independent entity:
(1) whether state statutes and case law characterize
the agency as an arm of the state;
(2) the source of funds for the entity;
(3) the degree of local autonomy the entity enjoys;
(4) whether the entity is concerned primarily with
local, as opposed to statewide, problems;
(5) whether the entity has authority to sue and be
sued in its own name; and
(6) whether the entity has the right to hold and use
property.
Id. The Minton court determined that, based on these fac-
tors, parish school boards are “local independent agents not
shielded by the state's Eleventh Amendment immunity.”
Id. With respect to prong one of the test, the court held
that, while Louisiana courts had referred to school boards
as “agencies” of the state, that this characterization did not
amount to an assertion that the boards were arms of the
state within the meaning of the Eleventh Amendment. The
court determined that the other five factors clearly indicated
that the school board was not an arm of the state: the school
board had an ability to generate funds for the operation of
the school district through local ad valorem taxation, the
board exercised discretion in performing its functions, the
board’s nature was innately local, the board had authority
6la
to sue or be sued in its own name, and the board could hold,
use, or sell property as it determined necessary to fulfill its
obligation to the public. Id. The court concluded that,
based on these findings, Louisiana school boards are not
“mere arms of the state” and that monetary judgments
against them would not “represent indirect impositions
on the state treasury interfering with the state’s fiscal
autonomy.” Id. The St. Bernard Parish School Board was
therefore not entitled to Eleventh Amendment immunity.
Id. See also Smith v. Concordia Parish School Board, 387
F. Supp. 887, 891 (W.D. La. 1975) (school boards and similar
autonomous political subdivisions are not the alter ego of
the State, but are distinct from the standpoint of sovereign
immunity); Morgan Dallas Corp. v. Orleans Parish School
Board, 302 F. Supp. 1208 (E.D. La. 1969); Board of Comm’rs
of New Orleans v. Splendour S & E Co., 273 So. 2d 19 (La.
1973); Orleans Parish School Board v. Williams, 300 So. 2d
848 (La. Ct. App.1974).
Defendant urges that in the thirteen years since the
Fifth Circuit decided Minton, the nature of school boards in
Louisiana has changed. Specifically, OPSB argues that it
now receives 60% of its funding from state sources. The
Minton court did not set out a standard for determining how
much of a school board’s funding had to be locally generat-
ed. The Minton test requires the court consider whether the
school board can generate money through local property
taxes, not whether the revenue so generated is sufficient to
fund the quality of education the school board deems neces-
sary.
The other factors in the analysis mandated by Minton
similarly remain unchanged. Louisiana school boards, in-
cluding this defendant, are bodies corporate with the power
to sue and be sued (L.S.A. R.S. 17:51), to make contracts
(L.S.A. R.S. 17:81, 17:83), to purchase and hold property
(L.S.A. R.S. 17:81), and to sell property (L.S.A. B.S. 17.87 6).
The members of the board are elected from districts within
the Parish. OPSB argues that because state law curtails
62a
some activities of school board members, such as prohibit-
ing them from endorsing other school board candidates, and
setting out tenure requirements for teachers and employees,
that the school board has somehow become “the state” for
Eleventh Amendment purposes. But the state has always
regulated political subdivisions such as local school boards
in many ways. This fact does not make the school boards
mere creatures of the state. The court finds that school
boards in Louisiana have not so changed since Minton that
their Eleventh Amendment status has changed. The Or-
leans Parish School Board is not entitled to immunity from
suit under the Eleventh Amendment.
G. A PART OF THE JURY AWARD WAS
INADEQUATELY SUPPORTED
OPSB argues that the jury award was inadequately
supported by the evidence in two ways. First, it argues that
the $4.6 million unemployment compensation award could
only be based upon “speculation and guesswork.” Second, it
argues that the $3 million worker’s compensation award
was incorrect because the evidence it was based on was in-
accurately calculated.
1. STANDARD FOR REMITTITUR
A Rule 59 motion, as has been filed here, is an appro-
priate means to challenge the size of a verdict. Dunn v.
Consolidated Rail Corp., 890 F. Supp. 1262 (M.D. La. 1995).
A jury’s assessment of damages is entitled to great defer-
ence by a reviewing court and is not to be disturbed unless
it is entirely disproportionate to the injury sustained. Id.
The extent of distortion that warrants intervention is an
award so large as to shock the judicial conscience, so gross
or inordinately large as to be contrary to right reason, so
exaggerated as to indicate bias, passion or other improper
motive, or so clearly exceeding the amount that any reason-
able person could feel the claimant is entitled to recover. Id.
(citing In re Air Crash Disaster Near New Orleans, La., 767
F.2d 1151, 1155 (5th Cir.1985)). Where the evidence at trial
63a
shows a range of possible damages, the jury “enjoys sub-
stantial discretion in awarding damages within the range
shown by the evidence.” Neiman-Marcus Group, Inc. v.
Dworkin, 919 F.2d 368, 372 (5th Cir. 1990); see also City of
Houston v. Harris County Outdoor Advertising Ass’n, 879
S.W.2d 322, 334 (Tex. App.1994), cert. denied, 516 U.S. 822,
116 S. Ct. 85, 133 L.Ed.2d 42 (1995) (“the trier of fact has
the discretion to award damages within the range of the evi-
dence presented at trial”). With this standard in mind, the
court turns to the issues at hand.
2. UNEMPLOYMENT COMPENSATION AWARD
The jury calculated the United States’ damages at $4.6
million dollars for amounts overcharged to the special reve-
nue and child nutrition funds for unemployment compensa-
tion insurance. At trial, thejury was presented with several
conflicting versions of how much was overcharged to these
funds. For example, Plaintiff's Exhibit 45-C showed a total
of $4,292,968 charged to the Special Revenue Programs for
the years 1988-1994. Plaintiff's Exhibit 45-D showed a total
of $1,176,647 overcharged to the Food Service Programs for
the years 1987 through 1994. These numbers were obtained
assuming that the special revenue programs made up an
average of 8.4% of the total salaries for those years, and
that the child nutrition programs made up an average of
4.3%. If the jurors were to have added these figures to-
gether, they would have come to a total of $5,469,615 over-
charged for those years. There would have been two obvious
problems with this figure, however. First, the figure would
not have included special revenue charges for the year 1987,
as these were not included in the calculations. And second,
the average percentages of total salaries were merely aver-
ages, and not accurate year by year.
The jurors could have used this figure and added it to
the figures shown in Plaintiff's Exhibits 40-A and 40-B,
which showed the amounts overcharged by the school board
for unemployment compensation for the years 1995-1997.
64a
Exhibit 40-A shows overcharges to the special revenue pro-
grams of $1,042,508, and Exhibit 40-B shows overcharges to
the child nutrition programs of $223,821. Together, then,
overcharges to the federal programs for the years 1995-1997
totaled $1,266,329. If the jury had added this figure to the
$5,469,615 overcharged during the other years according to
Plaintiffs Exhibits 45C and 45D, it would have come up
with a final figure of $6,735,944.
A second method the jurors could have used in arriving
at their verdict was to look to the figures in Plaintiff's Ex-
hibit 45-E, which purports to be a composite of all of Exhibit
45. The total difference listed by plaintiffs on that piece of
evidence is $4,854,388, anumber which includes $1,016,826
overcharged to the food service fund and $3,837,562 over-
charged to the special revenue funds. Apparently, the con-
clu__--~ reached on this table differ from those on the other
components of Exhibit 45 because this table calculates the
salary percentage year by year rather than by using an av-
erage for the entire period of years, and because this table
included special revenue charges for the year 1987. If the
jury had chosen to use this figure and added the $1,266,329
from Exhibits 40A and 40B, it would have come up with a
final figure of $6,120,717.
A third document shown to the jury was the United
States Department of Education Office of the Inspector
General Final Audit Report, completed in January of 1998
(Plaintiffs Exhibit 30). This report included a table, show-
ing the “amount actually charged,” “reasonable charges,”
and “excess amount charged to the Education Department”
for each year 1992 through 1996. The report concluded that
the OPSB overcharged th Department of Education by
$2,265,212 in unemployment compensation costs from 1992
through 1996. The report does not cover the years 1987
through 1991. OPSB has alleged that the jury merely mul-
tiplied this number by two and rounded it (as the number
covered five out of ten of the years in question). The num-
ber doubled would be $4,530,424. While this calculation
65a
may have factored into the jury deliberations, the court
notes that 4,530,424 rounds to 4.5 million, not 4.6 million.
The jury, then, had at least three figures to choose
from in calculating its award, once it had determined that
false claims were made and that these claims were made
with the necessary level of scienter. One set of exhibits
showed losses of $6,735,944, another showed losses of
$6,120,717, and yet another showed losses of $2,265,212 for
only half of the years in question. An award of $4.6 million
is clearly within a reasonable range based upon the evi-
dence presented by the jury. It is possible that the jury felt
that the government's lower figure was more reliable than
those prepared by the relators themselves. The court need
not speculate as to why the jury chose the figure of $4.6
million, as the award was clearly “within the range shown
by the evidence” and not “entirely disproportionate to the
injury sustained.” Neiman-Marcus, 919 F.2d at 372; Dunn
v. Consolidated Rail Corp., 890 F. Supp. at 1287.
3. WORKER'S COMPENSATION
a. Arithmetic Error
The jury awarded plaintiffs $3 million in worker’s com-
pensation overcharges. At trial, plaintiffs presented a chart
(Exhibit 30), which outlined the overcharges for each year
and provided] a total of the overcharges. The total shown
by plaintiffs chart was $3,098,730. This calculation, how-
ever, was erroneous. If one were to add across the columns
the amounts in the “total federal refund due” row, the total
would only come to $2,699,952. The evidence presented by
plaintiffs, then, actually supported a verdict of $398,778
less than what they claimed it did.
While the jury did not render a verdict exactly
commensurate with the figure presented by plaintiffs
($3,098,730), the number it did decide upon ($3,000,000)
was still higher than anything supported by the evidence.
Accordingly, the court must remit the award to the amount
actually supported by the evidence. The award for work-
66a
er’s compensation is thereby reduced from $3,000,000 to
$2,699,952. Because the damages in this case were trebled
as is statutorily required, this reduction will decrease [the]
total verdict by $300,048 times three, for a total of $900,144.
b. Savings Due to Self-Insurance
Defendant also claims that the only year in which the
general fund did not contribute to worker’s compensation
insurance was 1993-1994, so there was no evidence of fraud
in the other fiscal years. OPSB misunderstands the jury’s
verdict. A finding that the worker’s compensation was un-
derfunded by the general fund does not require the plaintiffs
to show that the general fund made no contribution at all;
rather, it requires plaintiffs to show that the money saved
by self-insuring was not properly allocated to all three
funds. The plaintiffs put on evidence that when worker’s
compensation insurance was out-sourced, OPSB contributed
approximately $4 million per year to pay for it, but once it
took the operations in-house, the cost dropped dramatically,
by around $1.4 million per year. This $1.4 million, then,
was saved by OPSB every year that it self-insured, not just
the first year. Mr. Samuel testified that the $1.4 million
was automatically calculated after the first year. The jury
apparently felt that OPSB had an obligation under the law
to allocate this savings proportionally between the three
funds, and that OPSB failed to do so. The jury could have
reached this conclusion by either crediting the testimony of
Mr. Samuel or by carefully studying the OPSB accounting
documents presented by plaintiffs.
c. Risk Management Salary Add-Backs
OPSB’s third objection to the jury’s verdict regarding
the worker’s compensation insurance is that relators did not
justify why salaries paid to risk management employees
were added back into their calculation of how much OPSB
saved by self-insuring. Plaintiffs Exhibit 28 shows the
amount paid in risk management salaries each year, and
this exhibit was constructed using the labor statistics in
67a
Plaintiffs Exhibit 2, which were obtained directly from the
OPSB in discovery.
It is arguable that, because the risk management em-
ployees worked on behalf of the entire OPSB and not just on
behalf of the General Fund, only a percentage of their sal-
aries should have been added back into the surplus calcu-
lation. But OPSB made no attempt at trial to provide the
jury with an alternative means of calculating the correct
amounts. OPSB presented no evidence of alternative cal-
culations, and, in fact, never even objected to the calcula-
tions or cross-examined the witnesses who had prepared the
calculations about how they had reached them. Once the
jury determined that salaries should be added back into the
calculation, it looked to the evidence before it and reached
a reasonable conclusion based upon that evidence. It is
even possible that the jury did take this issue into consider-
ation, as its $3,000,000 verdict was less than the $3,098,730
figure presented by plaintiffs in Exhibit 28.
H. THIS COURT HAS DISCRETION TO REDUCE
THE TOTAL PENALTY FOR FILING THE
FALSE CLAIMS
The Fifth Circuit has held that, under the FCA:
[T]he court may exercise discretion where the im-
position of forfeitures might prove excessive and
out of proportion to the damages sustained by the
Government. The forfeiture should reflect a fair
ratio to damages to insure that the Government
completely recoups its losses.
Peterson v. Weinberger, 508 F.2d 45, 55 (5th Cir. 1975). The
Peterson case was decided when the penalty under the FCA
was still $2,000 for each false claim filed. Other circuits
held, contrary to Peterson, that the trial judge had no dis-
cretion to reduce the $2,000 penalty per claim. See United
States v. Hughes, 585 F.2d 284 (7th Cir. 1978) (“the forfei-
ture provision is mandatory; it leaves the trial court without
discretion to alter the statutory amount”); see also United
68a
States v. Killough, 848 F.2d 1523 (11th Cir. 1988) (applying
pre-1986 statutory limits).
In 1986, the FCA was amended, and the penalty was
changed to $5,000 to $10,000 per false claim, leaving the
determination of where within those figures the penalty
should fall to the district judge. The legislative history in-
dicates that Congress was concerned with preventing courts
from using their discretion to impose only “nominal” dam-
ages on liable defendants:
[The law has been amended] to raise the fixed
statutory penalty for submitting a false claim
from $2,000 to $10,000 .... The Committee
reaffirms the apparent belief of the Act’s initial
drafters that defrauding the Government is ser-
ious enough to warrant an automatic forfeiture
rather than leaving final determinations with dis-
trict courts, possibly resulting in discretionary
nominal payments.
S. Rep. 99-345, 99th Cong., 2d Sess. The amendment may
have been an attempt to remove any discretion from the
trial court judge, with the exception of deciding where with-
in the $5,000 to $10,000 range the penalty should fall. The
actual language of the statutory penalty portion of the FCA,
however, did not change at all, except for the amount of the
penalty, and, as is shown by the quotation above, the Com-
mittee apparently believed that it was merely “reaffirming”
the rationale behind the original Act.
The Fifth Circuit has not had an opportunity to revisit
its Peterson ruling since the 1986 amendment was passed.
This court does not believe that the amendments of the FCA
would change the Peterson court's reasoning. While it is
arguable that Congress’s intent was to leave no discretion
to the trial judge, the Fifth Circuit has read the statute
differently, and until the Fifth Circuit revisits the issue,
this court considers the Peterson case good law in this cir-
cuit and will apply its standards to the case at hand.
69a
Under Peterson, the court may exercise its discretion to
insure that the penalties assessed “reflect a fair ratio to
damages” and that the “Government completely recoups its
losses.” Peterson, 508 F.2d at 55. The damages should not
be “excessive and out of proportion.”
Here, the damages rendered by the jury on the false
claims portion of the verdict totaled $7.4 million dollars.
Under the False Claims Act, the court was required to
award the plaintiffs treble damages, which increased the
judgment to $22,800,000. In addition, after assessing 1570
claims at $5,000 each, the court added another $7,850,000,
for a total of $30,650,000. The judgment, against a public
school district responsible for educating children, many of
them poor, is for over four times the losses actually incurred
by the federal government. The court finds that this judg-
ment, especially in light of importance of protecting the real
victims of the School Board's actions—the public school chil-
dren of New Orleans—is excessive. A penalty of $100,000
is an adequate forfeiture, as the automatic trebling of the
verdict as prescribed in the statute has already resulted in
a judgment for $15.8 million more than was actually falsely
claimed by the OPSB. The court therefore reduces the
amount of the statutory penalty from $7,850,000 to
$100,000.
IV. MOTION TO DISMISS PLAINTIFF'S COMPLAINT
FOR LACK OF SUBJECT MATTER JURISDICTION
Defendant alleges that under the recently decided
Foulds case, this action is barred under the Eleventh
Amendment because the United States did not intervene in
the cases. Foulds, 171 F.3d 279. As is explained in the
court’s ruling on the Defendant’s post-trial motions, supra
at I(F)(2)(b), the Foulds case is inapplicable to this case
because the OPSB is not “the state.” Accordingly, the mo-
tion is denied.
a
70a
V. MOTION TO ALTER OR AMEND THE JUDGMENT,
FILED BY PLAINTIFF, UNITED STATES OF
AMERICA
Plaintiff United States has moved this court pursuant
to Rule 59 of the Federal Rules of Civil Procedure to in-
crease the jury’s verdict of $4.6million for unemployment
compensation insurances overcharges to $6,734,000. Ifthe
jury were to have added certain columns of Plaintiffs Ex-
hibits 40A, 40B, 45C, and 45D, it could have reached this
number. But as the court held in its ruling on defendant’s
motion, supra at I(G)(2), these were not the sole pieces of
evidence before the jury, and this was certainly not the sole
number the jury could have chosen. The jury decided upon
a figure within the range of evidence presented to it, and the
court does not find that figure unreasonable. Plaintiffs mo-
tion is accordingly denied.
VI. MOTION TO ALTER OR AMEND THE JUDGMENT,
FILED BY RELATORS, WILLIAM GARIBALDI AND
CARLOS SAMUEL
The relators have filed a separate motion pursuant to
Rule 59, asking that the court increase their percentage of
the award from 25% to 30%. The relators argue that they
had to litigate this case entirely on their own, with no help
from the government, and that significant stumbling blocks
were thrown in their path by defendants, such as respond-
ing to discovery requests by providing boxes that contained
a “hodgepodge of meaningless documents.” While this lit-
igation may have been difficult for the relators, it was no 4
more difficult than most large-scale litigations where the
subject is accounting fraud. And while it is true that the
plaintiffs were unaided by the government, the 25%-30%
range applied by the court already takes into account the
fact that the government did not intervene (had the govern-
ment intervened, the range would have been 15-25%). 31
U.S.C. § 3730. The verdict in this case was exceedingly
large, and the relators were further compensated in that
they were awarded additional damages and injunctive relief
Tla
for their retaliation claims against the school board. The
court finds that 25% of the jury verdict of the false claims
action is sufficient to compensate the relators for their ef-
forts. Accordingly, the motion is denied.
VII. DEFENDANT'S OBJECTIONS TO ORDER
GRANTING MOTION FOR EXTENSION OF TIME
AND REPORT AND RECOMMENDATION
The relators filed their motion for attorney’s fees after
the expiration of the fourteen-day deadline set by Fed. R.
Civ. P. 54(d)(2)(B) for filing such motions, but within the
thirty-day deadline set by this Court’s Local Rule 54.3 for
filing an application for costs. After filing their motion, the
relators moved for an extension for the filing deadline nunc
pro tunc. The defendant opposed the extension, arguing
that the original motion was untimely. The Magistrate
Judge granted the extension, and held that the relator’s
motion was timely filed under Jones v. Central Bank, 161
F.3d 311 (5th Cir. 1998) (holding that Local Rule 54.3 is a
court order satisfying the “unless” clause of Federal Rule
54(d)(2)(B), so motion for attorney fees need not be filed
within 14 day limit). He held in the alternative that the
motion was timely under Romaguera v. Gegenheimer, 162
F.3d 893, 895-96 (5th Cir. 1998), where this circuit held
that, because a “key function” of-Rule 54(d)(2) is to ensure
that parties properly notify their opponents of attorney fee
requests, and the court had already acknowledged the re:
quest in its Order and Reasons accompanying the judgment,
the notice requirement was satisfied and plaintiff need not
file a motion for attorney fees.
Defendant, Orleans Parish School Board (“OPSB”), has
objected to the Magistrate’s decision to grant plaintiffs an
extension of time in which to file [their] motion for attor-
ney’s fees. The Magistrate’s Order is based upon clear Fifth
Circuit precedent, explained above, which the court is bound
to follow. The court therefore upholds the Magistrate’s Or-
der granting the Motion for an Extension of Time.
72a
VIII. OBJECTIONS TO PROPOSED FINDINGS,
CONCLUSIONS, AND RECOMMENDATION OF
MAGISTRATE BY PLAINTIFFS
Following the trial, and pursuant to F.R.C.P. 54(d)(2),
this court referred the plaintiffs’ Motion for Attorney Fees
to the Magistrate Judge assigned to this case, for adjudica-
tion pursuant to F.R.C.P. 72(b), and referred the plaintiffs’
Notice of Application to Have Costs Taxed to the Clerk of
Court, pursuant to Local Rule 54.3. The Magistrate Judge
accordingly issued a Report and Recommendation, to which
the plaintiffs have objected, and which the court now re-
views.
A. “REASONABLE EXPENSES”
Plaintiffs argue that while the Magistrate Judge as-
sessed attorney fees, he failed to consider “reasonable ex-
penses” in his Report and Recommendation. Federal law
provides for the Clerk of Court to determine the taxation of
costs for the following expenses:
A judge or clerk of any court of the United States
may tax as costs the following:
(1) Fees of the clerk and marshal;
(2) Fees of the court reporter for all or any
part of the stenographic transcript necessarily ob-
tained for use in the case;
(3) Fees and disbursements for printing
and witnesses;
(4) Fees for exemplification and copies of
papers necessarily obtained for use in the case;
(5) Docket fees under section 1923 of this
title;
(6) Compensation of court appointed ex-
perts, compensation of interpreters, and salaries,
fees, expenses, and costs of special interpretation
services under section 1828 of this title.
c
73a
A bill of costs shall be filed in the case and, upon
allowance, included in the judgment or decree.
28 U.S.C. § 1920. In this case, this court referred court
costs to the Clerk of Court for determination, and the issue
of attorney fees to the Magistrate Judge. To the degree that
the “expenses” claimed by relators fall within the categories
enumerated in § 1920, then, the Magistrate Judge was cor-
rect that the Clerk of Court, and not the Magistrate, should
evaluate the costs. For example, the costs of depositions
taken (even those taken outside this state), the transporta-
tion costs of witnesses attending out-of-state depositions,
copying charges for discovery documents, and process server
fees are all costs to be taxed by the Clerk of Court.
Under the False Claims Act, 31 U.S.C. §§ 3729, et seq.,
however, fees, expenses, and costs are three distinct cate-
gories. United States ex. rel. Lindenthal v. General Dynam-
ics Corp., 61 F.3d 1402 (9th Cir. 1995). There may be some
litigation expenses other than attorney fees for which the
Clerk of Court cannot award costs. Expenses such as expert
fees, attorney travel costs, and copies of charts used in trial
fall into this category. Because “reasonable expenses” is
listed in the FCA as compensable, the calculation of these
expenses should be addressed by the Magistrate Judge in a
Report and Recommendation, to be reviewed by this court.°
When this court rendered judgment for the relators, the
judgment included their “costs, reasonable expenses, and
attorney’s fees,” but this court did not expressly refer the
issue of reasonable expenses to the Magistrate Judge when
it referred to him the issue of attorney fees. Accordingly,
5 Paralegal costs may also fall into the category of attorney's fees
if the work done by the paralegal was legal work and not clerical
work. See Corman v. Lifecare Acquisitions Corp., 1998 U.S. Dist.
LEXIS 5423, 1998 WL 185517 (N.D. Tex. 1998), citing In re Mul-
lins, 84 F.3d 459, 469 (D.C. Cir. 1996). If plaintiffs demonstrated
such work and it was not taken into consideration in the hearing
before the Magistrate Judge, it should be considered when the
Magistrate Judge considers the “reasonable expenses” of plaintiffs.
ena
74a
the court hereby expressly refers the matter of litigation
expenses to the Magistrate Judge for further hearing under
F.R.C.P. 72(b).
B. DOCUMENTATION OF HOURS SPENT
1. INVOICE OF VICTORIA L. BARTELS
The Magistrate Judge neglected to consider an invoice
for the services of Victoria L. Bartels, a contract attorney.
Ms. Bartels’ bill was for $8,137.50, for 46.50 hours of work.
The court therefore holds that an additional 46.50 hours at
Ms. Bartel’s lodestar rate must be factored into the calcula-
tion of attorney fees.
2. PERCENTAGE REDUCTION IN TOTAL
HOURS
Plaintiffs have objected to the Magistrate Judge’s
reduction of their counsels’ total hours by 20%. The Mag-
istrate imposed a 10% reduction for “inadequate docu-
mentation” and another 10% reduction for lack of “billing
judgment.” The Magistrate did not impose these reductions
based on a finding that plaintiffs had overbilled for a speci-
fic number of hours; the reductions were simply generalized
penalties. The court will address each reduction in turn.
a. Inadequate Documentation.
The Magistrate reduced the relators’ hours, in part,
because counsel did not specify with precision the subject
matter of documents they were reviewing. Given the nature
of this case, and the disorganized fashion in which docu-
ments were produced to the relators, the court finds that it
would be very difficult for the relators to have been more
specific. Almost all of the documents were accounting re-
ports from the school board or from their auditors, and these
documents were presented to relators (and to the court) in
avery disorganized manner. The task of reading these doc-
uments to figure out what they were was a job in itself, and
counsels’ bill should not be reduced merely because the de-
75a
fendant’s responses to discovery requests were so disorgan-
ized.
The Magistrate furthermore found that many of coun-
sel’s reasons for billing were too vague to be compensable.
For example, “drafting memorandum” is not as clear as
describing the particular memorandum that was being
drafted. However, the court finds that while additional
clarity might have been helpful, it was not necessary for
relators to recover attorney fees. This was not a case with
a multitude of lawyers, where costs could have been ex-
ported from other cases in an attempt by the plaintiffs to
recover more than was actually necessary. Throughout this
litigation, the court was impressed by the streamlined man-
ner in which counsel for relators managed their case. The
court finds that a 10% decrease in hours is not justifiable
under the circumstances.
b. Billing Judgment
The Magistrate Judge also reduced the number of
hours because he found some of the billings to be duplica-
tive. For example, he noticed that both Mr. Wessel and Mr.
Egan sometimes attended the same depositions, and held
that billing for both attorneys would be double-counting.
These depositions, however, were of the upper-management
of the school board. The school board produced voluminous
documents in this case, often immediately before a deposi-
tion was to be taken, and it was necessary for plaintiffs to
have two lawyers present at the depositions: one to conduct
the questioning, and another to handle the documents.
Similarly, the Magistrate found that Mr. Wessel’s deci-
sion to bill a two-hour settlement lunch had to be discounted
for the amount of time it took Wessel to eat his food. The
court, however, does not think that billing this time was an
abuse on the part of counsel.
The court does find merit in the Magistrate’s decision
to reduce the number of hours billed for work that was non-
i.
76a
legal, such as filing pleadings, faxing documents, and serv-
ing subpoenas. These hours are not compensable as attor-
ney time. Abrams v. Baylor College of Medicine, 805 F.2d
528, 535-36 (5th Cir. 1986). These hours, however, do not
amount to a 10% reduction in total hours based on lack of
“billing judgment.” Accordingly, the court holds that the
total hours should be reduced by 2% (which comes to
approximately $5,000) to account for these non-legal acti-
vities.
C. CALCULATION OF REASONABLE HOURL
RATES
The Magistrate Judge chose to apply hourly rates
within the range normally charged by the plaintiffs’ [coun-
sel]. The court finds that these rates should be increased.
Because the court is required when applying the Johnson
factors to adjust the lodestar to presume that these factors
were taken into account when determining an hourly rate
it is crucial that the hourly rate accurately reflect the level
of work required by the case. Setting the hourly rates of
these attorneys in the middle of their usual range does not
take into account the particular difficulty of this case. It
also does not take into account the lucrative and less risky
business these attorneys were precluded from accepting be-
cause of the intense and time-consuming nature of this case.
The court finds that the hourly rates that should be applied
to the attorneys in this case should be at the higher end of
their usual ranges. Accordingly, it applies an hourly rate of
$250 for the work of Mr. Wessel, $150 for the work of Mr.
Egan, $150 for the work of Ms. Lagarde, and $175 for the
work of Ms. Bartels.
D. THE LODESTAR
1. CALCULATION
The “lodestar” is the product obtained by multiplying
the total hours worked times the reasonable hourly rates for
the participating attorneys. Louisiana Power & Light Co.
v. Kellstrom, 50 F.3d 319, 324 (5th Cir. 1995), citing Hensley
77a
v. Eckerhart, 461 U.S. 424, 433, 103 S. Ct. 1933, 76 L.Ed.2d
40 (1983). Based on the rulings made above, the court calc-
ulates the lodestar as follows:
753.67 hours of work by Mr. Wessel, times $250
per hour = $188,417.50
243.25 hours of work by Mr. Egan, times $150 per
hour = $36,487.50
6.65 hours of work by Ms. Lagarde, times $150
per hour = $997.50
81.5 hours of work by Ms. Bartels, times $175 per
hour = $14,262.50
The total amount, then, is $240,165.00. After reducing this
amount by 2% to account for the minor excesses in the bill-
ing, the amount comes to $235,361.70.
2. LODESTAR REDUCTION OR INCREASE
With respect to whether the lodestar should be reduced
or increased, the court disagrees with some of the Mag-
istrate Judge’s findings. Once the lodestar is calculated,
the district court may accept it as is or adjust it upward or
downward, depending on the circumstances of the case. Id.
Due to the district court’s superior knowledge of the facts
and the desire to avoid appellate review of factual matters,
the district court has broad discretion in setting the appro-
priate award of attorneys’ fees. Hensley, 461 US. at 436-37,
103 S. Ct. at 1941. The lodestar, however, is presumptively
reasonable and should not be modified unless the case is
exceptional. See City of Burlington v. Dague, 505 U.S. 557,
562, 112 S. Ct. 2638, 2641, 120 L.Ed.2d 449 (1992); Watkins
v. Fordice, 7 F.3d 453, 459 (5th Cir. 1993). The district court
should not enhance the lodestar unless the prevailing party
shows that enhancement is necessary to make the award of
attorneys’ fees reasonable. Blum v. Stenson, 465 U.S. 886,
897-98, 104 S. Ct. 1541, 1548, 79 L.Ed.2d 891 (1984). In
adjusting the lodestar, the Court considers the twelve fac-
tors set out in Johnson v. Georgia Hwy. Express, Inc., 488
78a
F.2d 714, 717-19 (5th Cir. 1974): (1) the time and labor re-
quired; (2) the novelty and difficulty of the questions; (3) the
skill requisite to perform the legal service properly; (4) the
preclusion of other employment by the attorney due to the
acceptance of the case; (5) the customary fee; (6) whether
the fee is fixed or contingent; (7) time limitations imposed
by the client or circumstances; (8) the amount involved and
the results obtained; (9) the experience, reputation, and
ability of the attorneys; (10) the “undesirability” of the case;
(11) the nature and length of the professional relationship
with the client; and (12) awards in similar cases.
Since the Johnson holding, this analysis has been
somewhat augmented and amended. For example, the
Supreme Court has “barred any use of the sixth factor.”
Walker v. U.S. Dept. of Housing and Urban Dev., 99 F.3d
761, 772 (5th Cir. 1996) (citing Burlington, 505 U.S. at 567);
see also Shipes v. Trinity Indus., 987 F.2d 311, 323 (5th Cir.
1993) (the contingent nature of a case cannot serve as a
basis for enhancement of attorneys’ fee). In addition, the
court’s application of the Johnson factors is limited to those
factors that have not already been addressed through the
court’s calculation of the number of reasonable hours and
the rate per attorney. Migis v. Pearle Vision, Inc., 135 F.3d
1041, 1047 (5th Cir. 1998); Watkins, 7 F.3d at 459. The Fifth
Circuit has warned courts that the first and seventh factors
are especially susceptible to “double-counting.” Walker, 99
F.3d at 771, 772. More recently, this circuit has held that
the novelty and complexity of the issues (factor two), the
special skill and experience of counsel (factor three), the
quality of representation (factor nine), and the results ob-
tained from the litigation (factor eight) are presumably fully
reflected in the lodestar amount. Shipes, 987 F.2d at 322.
Finally, certain factors are especially important: the time
“and labor involved (factor one), the customary fee (factor
five), the amount involved and result obtained (factor eight),
and the experience, reputation, and ability of counsel (factor
nine). Migis, 135 F.3d at 1047. As a result, the very factors
that have been held the most important in some cases have
OO eV
EEE EEE ee
79a
been held presumptively a part of the lodestar in others.
“Although upward adjustments of the lodestar figure are
still permissible, such modifications are proper only in cer-
tain “rare” and “exceptional” cases, supported by both “spe-
cific evidence” on the record and detailed findings by the
lower courts. Pennsylvania v. Delaware Valley Citizens’
Council for Clean Air, 478 U.S. 546, 565, 106 S. Ct. 3088,
3098, 92 L.Ed.2d 439 (1986) (citations omitted). The court
finds, contrary to the Magistrate Judge’s Report and Re-
commendation, that this is one of those “rare” and “excep-
tional” cases that merits an increase in the lodestar.
a. Time and Labor Required, the Skill
Requisite to Perform the Legal Service,
the Preclusion of Other Employment by
the Attorney due to Acceptance of the
Case, Whether the Fees Charged were
Customary, and the Experience, Repu-
tation, and Ability of the Attorneys
The court agrees with the Magistrate Judge that the
several Johnson factors listed above have already been con-
sidered in calculating the lodestar. The court therefore
holds that no reduction or increase in the lodestar is war-
ranted based on these factors. See, e.g., Terra-Drill Partner-
ships Securities Litigation, 733 F. Supp. 1127, 1130 (S.D.
Tex. 1990).
b. The Novelty and Difficulty of the
Questions
The Magistrate Judge held that “the legal questions in-
volved in prosecuting this qui tam action were neither novel
nor difficult.” Having dealt with the legal substance of this
case extensively, the court disagrees. The legal questions
involved in this case were novel and challenging. The chal-
lenges were not merely the result of obstreperous counsel or
complex and technical details. See Shipes v. Trinity Indus-
tries, 987 F.2d 311 (5th Cir. 1993) (novelty and difficulty of
Title VII suit involving over 300 plaintiffs and entire spec-
80a
trum of employment decisions did not make case “rare” or
“exceptional”). Here, there was a paucity of Fifth Circuit
precedent on many issues, because so few qui tam actions
are successfully litigated past the early stages. There were
many issues that were issues of first impression in this cir-
cuit. The parties and the court frequently had to look to the
law of other circuits and districts, and this law was often
confused and divided. This case was anything but routine
and demanded the attorneys to craft arguments that invited
this court, and the Fifth Circuit on appeal, to “make new
law.” As the Johnson court explained:
Although this greater expenditure of time in re-
search and preparation is an investment by coun-
sel in obtaining knowledge which can be used in
similar later cases, he should not be penalized for
undertaking a case which may “make new law.”
Instead, he should be compensated for accepting
the challenge.
Johnson, 488 F.2d at 718. The court did not fully compen-
sate counsel in this case for the novelty of the issues in calc-
ulating the hourly rates for the attorneys. Accordingly, the
court holds that the lodestar should be increased based on
the second Johnson factor.
c. Whether the Fee is Fixed or Contingent
Use of this factor has been expressly disallowed by the
Supreme Court. Burlington, 505 U.S. at 567. Accordingly,
this court does not consider it.
d. Time Limitations Imposed by the Client
or by the Circumstances
The court finds that the time limits in this case were
not unusual. This is not a unique situation where counsel
is called in at the last minute to prosecute an appeal or han-
dle matters at a late stage. See Johnson, 488 F.2d at 718.
The court holds that this factor does not require an increase
in the lodestar.
8la
e. The Amount Involved and Results
Obtained
The Magistrate Judge acknowledged that the amount
involved in this case was extraordinary and the results
obtained were successful. He held, however, that this factor
is generally applied when there is partial or limited success
to reduce, not to enhance, a fee award. Hensley v. Ecker-
hart, 461 U.S. 424, 103 S. Ct. 1933, 76 L.Ed.2d 40 (1983).
The Hensley case, however, does not mandate using
this factor only in response to an attempt to reduce an
award. It merely emphasizes that the factor should be used
only in extraordinary circumstances. Here, such extraord-
inary circumstances exist. Not only did the relators’ law-
yers achieve an extremely successful result for their clients,
obtaining a verdict of several million dollars and injunctive
relief, the relators' claim accounted for only 25% of the en-
tire verdict (exclusive of the retaliation portion). In essence,
the relators’ lawyers earned an enormous, multi-million
dollar verdict for the United States government, for which
the United States paid not one penny. The relators’ attor-
neys will not be compensated by the United States, who
chose not to intervene in the suit, and the relators will
therefore bear the entire burden of paying their attorneys
even though they will receive only a small portion of the
judgment and will have to pay their attorneys out of this
portion. The court also notes that a major piece of the re-
lators’ verdict was injunctive relief (reinstatement), a classic
example of the kind of relief that mandates increasing the
lodestar under factor eight. Accordingly, the court finds
that factor eight requires an increase in the lodestar due to
the extraordinary nature of the results achieved here.
f. The Desirability of the Case
The court agrees with the Magistrate that this case
was not undesirable. To the degree that it could be con-
sidered undesirable, due to its novel and time-consuming
nature, these considerations have already been covered
under factor two and in the hourly rates assigned.
82a
g. The Nature and Length of the
Professional Relationship with the Client
The court agrees with the Magistrate Judge that this
factor is not applicable here.
h. Awards in Similar Cases
The court has no information regarding awards in sim-
ilar cases.
~ Based on the discussion of the twelve factors above, the
court finds that the lodestar of $235,361.70 should be in-
creased due to Johnson factors two and eight by a factor
of 1.5. Accordingly, the court increases the lodestar from
$235,361.70 to $353,042.55.
———. Based upon the foregoing analysis,
IT IS ORDERED that the defendant’s Motion for
Judgment as a Matter of Law, or, Alternatively, a New Trial
is hereby GRANTED in part and DENIED in part: the
court remits the jury’s verdict awarding $3,000,000 in dam-
ages for overcharges to the worker's compensation fund to
$2,699,952; in addition, the court reduces the statutory for-
feitures assessed in this case from $7,850,000 to $100,000.
The final judgment for the False Claims Act portion of the
case, excluding the Retaliation claims, then, will be reduced
from $30,650,000 to $22,899,856.
IT IS FURTHER ORDERED that defendant’s Motion
to Dismiss is hereby DENIED.
IT IS FURTHER ORDERED that the Motion to Alter
or Amend the Judgment, filed by plaintiff, United States of
America is hereby DENIED.
IT IS FURTHER ORDERED that the Motion to Alter
or Amend the Judgment, filed by the relators, William Gar-
ibaldi and Carlos Samuel, is hereby DENIED.
IT IS FURTHER ORDERED that defendant’s
Objections to Order Granting Motion for Extension of Time
and Report and Recommendation are hereby DENIED.
83a
IT IS FURTHER ORDERED that upon review of the
Magistrate’s Report and Recommendation and the relators’
Objections to Proposed Findings, Conclusions, and Recom-
mendation of Magistrate, relators’ Motion for Attorney’s
Fees is hereby GRANTED and that judgment be entered in
favor of relators William Garibaldi and Carlos Samuel for
attorney’s fees in the amount of $353,042.55; and to the ex-
tent that “reasonable expenses” are not included in costs to
be taxed by the Clerk of Court, the calculation of these ex-
penses is hereby REFERRED to the Magistrate for adjud-
ication under F.R.C.P. 72(b).
New Orleans, Louisiana, this twenty-seventh day of
April, 1999.
/s/_
STANWOOD R. DUVAL, JR.
UNITED STATES DISTRICT JUDGE
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.