NOS. 99-1351, 99-1352, 99-1353
IN THE UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
UNITED STATES OF AMERICA ex rel. JAMES S. STONE,
ROCKWELL INTERNATIONAL CORP. AND
BOEING NORTH AMERICAN, INC.
On Appeal from the United States District Court for the
District of Colorado
The Hon. Richard P. Matsch, District Judge
Case No. 89-M-1154
BRIEF OF THE AMERICAN HOSPITAL ASSOCIATION AND NATIONAL DEFENSE INDUSTRIAL ASSOCIATION AS AMICI CURIAE IN SUPPORT OF APPELLANTS AND IN SUPPORT OF REVERSAL OF THE DISTRICT COURT'S DECISION
Maureen D. Mudron
American Hospital Association
325 Seventh Street, N.W.
Washington, D.C. 20004
|Counsel of Record
Herbert L. Fenster
On The Brief
C. Stanley Dees
Mark R. Troy
McKenna & Cuneo, L.L.P.
370 Seventeenth Street, Suite 4800
Denver, Colorado 80202
Counsel For Amici Curiae
American Hospital Association And
National Defense Industrial Association
CORPORATE DISCLOSURE STATEMENT
Pursuant to 10th Circuit Rule 26.1, counsel for amici curiae American Hospital Association, Electronic Industries Alliance, and National Defense Industrial Association hereby states that none of the amici have a parent company. Furthermore, each of the amici are trade associations, and therefore have no stockholders.
CERTIFICATE OF COMPLIANCE WITH FRAP 32(A)(7)
In compliance with Federal Rule of Appellate Procedure 32(a)(7), counsel for amici curiae American Hospital Association and National Defense Industrial Association hereby certifies that this brief contains __________ words, as calculated by the word processing system used to prepare the brief.
Herbert L. Fenster
TABLE OF CONTENTS
TABLE OF AUTHORITIES *
SUMMARY OF ARGUMENT *
I. THE FCA’S QUI TAM PROVISIONS VIOLATE PRINCIPLES OF SEPARATION OF POWERS *
A. Relators Act In The Capacity Of Officers Of The United States But Are Not Properly Appointed Under The Appointments Clause *
B. The Qui Tam Provisions Deny The Executive Meaningful Control Over The Initiation, Prosecution and Termination Phases Of The Litigation, And Thereby Exceed The Outer Boundary Of Executive Encroachment As Defined In Morrison v. Olson *
C. The Impermissible Delegation To Relators Of The Executive’s Appointment And Execution Power Has Produced Cases That Are Meritless And Adverse To The Government’s Interests *
II. QUI TAM RELATORS LACK THE INDIVIDUATED INJURY IN FACT REQUIRED BY ARTICLE III *
A. Even A Plaintiff Acting As A Private Attorney General Must Have An Individuated Injury In Fact *
B. A Relator’s Potential Bounty Does Not Satisfy The Requirements For Standing *
TABLE OF AUTHORITIES
IN THE UNITED STATES COURT OF APPEALS
FOR THE tenth CIRCUIT
United states of america ex rel. JAMES S. STONE,
ROCKWELL INTERNATIONAL CORP. AND BOEING NORTH AMERICAN, INC., et al.,
Nos. 99-1351, 99-1352,
The undersigned counsel of record certifies the following:
The American Hospital Association ("AHA") is the primary national membership organization for hospitals and health care institutions in this country. The AHA’s mission is to promote high quality health care and health services through leadership and assistance to hospitals in meeting the health care needs of their communities. AHA’s approximately 5,000 members deliver to millions of Americans health care services which are funded in whole or in part by the federal government.
The National Defense Industrial Association ("NDIA") is a national organization consisting of nearly 900 corporations and 26,000 individual members dedicated to maintaining a close working relationship between American industry and the government in pursuit of national security. NDIA’s members provide a wide variety of goods and services to the government and include some of the nation’s largest defense contractors.
Amici have a compelling interest in the resolution of the fundamental issue presented in this case – whether the qui tam provisions of the amended False Claims Act ("FCA"), which allow private non-appointed individuals with no individuated injury to litigate on behalf of the United States, are constitutional.
Counsel for Plaintiffs/Appellees United States of America and James S. Stone, and Defendants/Appellants Rockwell International Corp. and Boeing North American, Inc. have consented to the filing of this brief.
These representations are made in order that the judges of this court may evaluate possible disqualification or recusal.
Herbert L. Fenster
SUMMARY OF ARGUMENT
The challenge to the constitutionality of the qui tam provisions of the 1986 Amendments to the False Claims Act ("FCA") implicates a cascading set of constitutional issues which have made their way, in at least two other cases, to the Supreme Court. The constitutional dilemma begins with the lack of standing of those who would bring such actions, purportedly on behalf of the government; proceeds to their self-appointment to Executive Branch authority; continues through their nexus with that Branch, implicates a myriad of issues relating to the inability of the Executive Branch to control their conduct and comes - ultimately - to rest on the Judiciary which is cast in the role of supervising a cacophony of diverse interests emanating from a supposedly unitary Executive.
No matter what the justification for such a diversion of Executive Branch authority, the public interest has not been served by renegade prosecutors. We outline the following constitutional law concepts, all of which sit under the umbrella of separation of powers and therefore cannot be isolated from each other:
Standing – Relators cannot be cloaked with the interests, i.e., the injury, of the government. To hold otherwise would be to invite persons entirely outside the government to share the Article II powers and duties.
Appointments Clause – Concededly, there has been no appointment, notwithstanding that such appointment is the first line of control over the execution function of the Article II branch.
Execution ("Take Care" Clause) – The Constitution precludes ceding the execution function in someone not only totally outside the Article II branch but also not in any manner subject to its control.
Separation of Powers Doctrine – Were the Court to allow relators to push aside the lack of individuated injury, the lack of appointment, the lack of control by the Executive branch, there would remain the overriding consideration that the Court had thereby permitted virtually every separation violation conceivable on the part of the Article I and Article II branches acting in seeming concert. We define these as the "sins" of: (a) arrogation of power by Congress in taking an execution power out of the hands of the Executive branch and vesting it in someone more certain to act in the expressly stated interests of Congress; (b) delegation by Congress of a power of execution to someone entirely outside the government, and (c) cession or consent by the Executive branch to the compromise and dilution of its own execution powers. The qui tam provisions are a textbook on violations of the separation of powers.
This Court has not yet considered the constitutionality of the qui tam provisions of the 1986 FCA Amendments. A panel of the Fifth Circuit recently held that the qui tam provisions violate the "Take Care" Clause and the separation of powers doctrine. Riley v. St. Lukes Episcopal Hospital, 196 F.3d 514, 531, reh’g en banc granted, 196 F.3d 561 (5th Cir. 1999). The Supreme Court has pending before it the question of qui tam relator "standing" in Vermont Agency of Natural Resources v. United States ex rel. Stevens, No. 98-1828, though it may not reach that question. To date, three other circuits have upheld the constitutionality of the 1986 Amendments to the FCA’s qui tam provisions, but their decisions are remarkably diverse, inconsistent and untenable when considered against constitutional law principles.
While all of these case involved qui tam actions in which the government never intervened, the same issues are equally relevant here where the government, after initially declining, intervened in part of the case. Indeed, the particular events which have transpired in this action highlight the constitutional flaws in the FCA’s statutory scheme. As discussed herein, the government’s control even over the claims on which it intervened is severely limited under 31 U.S.C. § 3730(c)(3), the provision under which the court allowed intervention. Additionally, the issues pursued solely by Stone present the same constitutional and practical problems as in any qui tam case declined by the government; i.e., meritless claims pursued by an uninjured party and unsupported by the government in whose name they are brought, causing undue burden on the defendant, the court, the government and ultimately the taxpayers.
I. THE FCA'S QUI TAM PROVISIONS VIOLATE PRINCIPLES OF SEPARATION OF POWERS
The FCA’s qui tam provisions constitute an impermissible attempt by Congress to arrogate the authority of the Executive branch by passing legislation that delegates to private non-appointed and uninjured individuals the Executive’s power to initiate, conduct and meaningfully control litigation on behalf of the United States. Apart from the Executive’s willingness to cede its power, the Constitution reserves this power exclusively to the Executive branch and its appointees by the Appointments Clause (Article II, § 2, cl. 2), and the Take Care Clause (Article II, § 3). As the Supreme Court noted in Printz v. United States, 521 U.S. 898, 923 (1997), these two clauses form the basis of the separation of powers doctrine.
Arrogation by Congress of the Executive’s authority was rejected in Buckley v. Valeo, 424 U.S. 1, 122 (1976), in which the Court observed that separation of powers is a "safeguard against the encroachment or aggrandizement of one branch at the expense of the other." In Buckley, the Court held that only the Executive, not Congress, was empowered to appoint members of the Federal Election Commission. Id. at 143. See also, Metropolitan Washington Airports Authority v. Citizens for Abatement of Aircraft Noise, Inc., 501 U.S. 252, 276 (1991) (because management of a federally owned airport is an Executive power, Congress was not empowered to create a congressional board of review with veto authority over managerial decisions); Bowsher v. Synar, 478 U.S. 714, 726 (1986) ("To permit the execution of the laws to be vested in an officer [the Comptroller General] answerable only to Congress would, in practical terms, reserve in Congress control over the execution of laws").
Recently, the Supreme Court confirmed that our branches of government do not have the constitutional authority even to consent to cede their authority:
To say the political branches have a somewhat free hand to reallocate their own authority would seem to require acceptance of two premises: first, that the public good demands it, and second, that liberty is not at risk. The former premise is inadmissible. The Constitution’s structure requires a stability which transcends the convenience of the moment. The latter premise, too, is flawed. Liberty is always at stake when one or more of the branches seek to transgress the separation of powers.
Clinton v. New York, 118 S. Ct. 2091, 2108-09 (1998) (Kennedy, J. concurring) (citations omitted). Accordingly, the current Administration’s official acquiescence to the FCA’s infringement of its authority cannot overcome the strictures of the separation of powers. See also INS v. Chadha, 462 U.S. 919, 942 n.13 (1983) ("The assent of the Executive to a bill which contains a provision contrary to the Constitution does not shield it from judicial review").
Notwithstanding that Congress perceived a need to delegate the Executive’s prosecutorial function – a perception which we maintain herein has proved to be sorely misguided – the Supreme Court has made it quite clear that the Constitution rests the prosecutorial function solely with the Executive who is obligated to "take care that the Laws be faithfully executed . . . ." Article II, § 3. See Buckley v. Valeo, 424 U.S. at 138; United States v. Nixon, 418 U.S. 683, 693 (1974) ("the Executive Branch has exclusive authority and absolute discretion to decide whether to prosecute a case"). Central to our tricameral form of government and, in particular, to the carrying out the Executive’s prosecutorial function is the Appointments Clause, which specifies that the President "[s]hall nominate, and . . . appoint . . . officers of the United States . . . ." Article II, § 2, cl. 2. It is only by control of appointments that the Executive can assure the fealty which the Constitution intends. The Take Care Clause and the Appointments Clause, operating together, enable the separation of the powers of lawmaking and execution.
As the Supreme Court noted in Mistretta v. United States, 488 U.S. 361, 374 n.7 (1989), decisions which have permitted the delegation of authority outside the branch to which the authority is assigned have done so on the narrowest of grounds. See, e.g., United States ex rel. Accardi v. Shaughnessy, 347 U.S. 260 (1954) (Attorney General’s own regulation delegating his discretionary powers to the Board of Immigration Appeals was permitted because he could reassert his power by amending the regulation); United States v. Nixon, 418 U.S. at 696 (Attorney General retained power to revoke regulation authorizing special prosecutor to obtain discovery and to oppose the Executive’s invocation of Executive privilege); Mistretta, 488 U.S. at 371-79 (1989) (Congress’ delegation of power to an independent Sentencing Commission to promulgate sentencing guidelines was not an excessive delegation of legislative discretion because of the specific guidelines and constraints imposed by Congress on the Commission); but see Panama Refining Co. v. Ryan, 293 U.S. 388 (1935) (improper delegation where Congress, under the depression era National Industrial Recovery Act, delegated certain law-making authority to the Executive branch but without articulating specific standards or "an intelligible principle" for the exercise of discretion by the Executive). See also Morrison v. Olson, discussed in more detail below. Here, of course, Congress delegated the Executive’s prosecutorial discretion to relators with no standards governing the conduct of the relators and no effective control by the Executive.
The FCA commits all three separation of powers sins by turning over prosecutorial controls to qui tam relators with no fealty to the Executive and no duty or interest in assuring faithful execution of the law. A qui tam relator is a government prosecutor who is not subject to Executive appointment or discharge control, and not subject to either the political or the prudential considerations that are encompassed by the notion of prosecutorial discretion. As the Supreme Court has recognized, relators are "motivated primarily by prospects of monetary reward rather than the public good," and therefore the "relator’s interests and the government’s do not necessarily coincide." Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 949 (1997). This conflicting interest between relators, who claim to represent the government, and the government, which is often in an adversarial position with respect to the relator, is perhaps the most apparent flaw that has emerged from Congress’ tampering with the constitutional framework.
A. Relators Act In The Capacity Of Officers Of The United States But Are Not Properly Appointed Under The Appointments Clause
Any individual "exercising significant authority pursuant to the laws of the United States is an ‘Officer of the United States,’ and must, therefore, be appointed in the manner prescribed by [the Appointments Clause]." Buckley v. Valeo, 424 U.S. at 126. See also Edmond v. United States, 520 U.S. 651, 662 (1997) ("The exercise of ‘significant authority pursuant to the laws of the United States’ marks . . . the line between officer and non-officer"). Only a properly appointed officer may conduct litigation on behalf of the United States. Buckley, 424 U.S. at 138. The qui tam provisions permit relators to appoint themselves as prosecutors for the United States – the same significant prosecutorial power which Buckley held was precluded.
The Supreme Court addressed this concept more recently in Printz v. United States, 521 U.S. 898 (1997), where it held that Congress could not properly delegate to state officials the authority to enforce the Brady Act’s rules concerning gun purchasers’ background checks.
The insistence of the Framers upon unity in the Federal Executive – to insure both vigor and accountability – is well known. That unity would be shattered, and the power of the President would be subject to reduction, if Congress could act as effectively without the President as with him, by simply requiring state officers to execute its laws.
Id. at 922 (citations omitted). If the Constitution does not permit such delegation to state officials, it is quite a stretch to suggest that it would permit such delegation to qui tam relators.
DOJ may argue here, as it did in Riley, that relators are not officers of the United States, and therefore do not fall within the purview of the Appointments Clause. If this were true, it would seem that 28 U.S.C. §§ 515 and 543 are unnecessary. This is circular reasoning because if they are not appointed they cannot prosecute. No case holds that non-officers may conduct litigation on behalf of the United States because Buckley requires that litigation on behalf of the United States "may be discharged only by persons who are ‘Officers of the United States.’" 424 U.S. at 140. Notwithstanding the array of statutes which give private rights of action to persons termed "private attorneys general," in all of those cases, there must be an individuated injury (as required by Article III), that is being requited. The rights of the United States that are addressed are ancillary to those private rights. See, e.g., National Helium Corp. v. Morton, 455 F.2d 650, 654-55 (10th Cir. 1971) (where plaintiffs relied upon environmental statutes to enjoin the Secretary of Interior from terminating their contract, the court held that plaintiffs’ "asserted representation of the public interest . . . is admittedly less important than their private financial stake – which in final analysis justifies their seeking judicial review"). Accordingly, unlike qui tam relators, litigants pursuing redress of their own injuries are not acting as government officers and therefore need not be appointed.
B. The Qui Tam Provisions Deny The Executive Meaningful Control Over The Initiation, Prosecution and Termination Phases Of The Litigation, And Thereby Exceed The Outer Boundary Of Executive Encroachment As Defined In Morrison v. Olson
As the majority in Riley correctly observed, Morrison v. Olson "express[es] the outer boundary of executive encroachment." 196 F.3d at 525, n.32. The Morrison Court identified the criteria for determining whether the statute in that case (the independent counsel law), encroached on the Executive’s constitutionally assigned duty to "take care" that the laws be faithfully executed; i.e., whether the statute sufficiently enabled Executive appointment and control. Morrison, 487 U.S. at 696. In Morrison, the Executive had the power to appoint. While a judicial body actually appointed Ms. Morrison, the Attorney General (who recommended appointees) could block any appointment by the simple expedient of not ever requesting one. In that regard, the Attorney General prescribed the scope of the appointee’s charter; Morrison was not free to address any subject she pleased. Further, the Attorney General retained the power to remove the appointee for good cause – perhaps the ultimate indicia of control. And finally, the Special Counsel was required to adhere to the policies of DOJ.
The qui tam provisions afford none of these controls. Relators are self-appointed with no input whatsoever from the Executive branch. This is unlike other citizen-suit statutes that require the plaintiff to notify the government of the matter before filing suit and provide the Executive branch with a right of first refusal to bring the action itself. See, e.g., National Resources Defense Council, Inc. v. Outboard Marine Corp., 692 F. Supp. 801, 816-17 (N.D. Ill. 1988) (discussing Executive authority under the citizen-suit procedures of the Clean Water Act).
Recently, three Supreme Court justices raised a concern over the constitutional propriety of citizen suit enforcement of public laws like the Clean Water Act which afford the Executive more control over the litigation than does the False Claims Act. In Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 120 S. Ct. 693 (2000), Justice Kennedy, in his concurrence, expressed concern that the delegation of law enforcement authority to citizens may run afoul of separation of powers principles.
Difficult and fundamental questions are raised when we ask whether exactions of public fines by private litigants, and the delegation of Executive power which might be inferable from the authorization, are permissible in view of the responsibilities committed to the Executive by Article II of the Constitution of the United States.
120 S. Ct. at 713. Justice Scalia’s dissent in Laidlaw (joined in by Justice Thomas), agreed with that concern and went even further in suggesting that private enforcement of the Clean Water Act, in particular the right of a citizen to initiate an enforcement suit, encroaches on the Executive’s authority.
Elected officials are entirely deprived of their discretion to decide that a given violation should not be the object of suit at all, or that the enforcement decision should be postponed.
120 S. Ct. at 719. Justice Scalia found little solace in the statute’s provision permitting the government to intervene, stating that such power "is meager substitute for the power to decide whether prosecution will occur." Id. at n.2.
Under the FCA’s qui tam provisions, the Executive branch usually does not even learn of the existence of a qui tam suit until after it has been filed. Then it must utilize its resources to investigate the relator’s allegations prior to notifying the court whether it will intervene. The statute affords the Executive branch sixty days to conduct its investigation and make its election, a period which can be extended by the court only "for good cause shown." 31 U.S.C. § 3730(b)(3). While such extensions are frequently granted, the timing and the scope of the Executive branch’s investigation is clearly beyond its control. See, e.g., United States ex rel. Costa v. Baker & Taylor, 955 F. Supp. 1188, 1191 (N.D. Cal. 1997) (court rejected DOJ’s claims that it needed more time to make its decision and that commencement of the civil litigation might interfere with DOJ’s ongoing criminal investigation and DOJ’s efforts to obtain a global settlement).
If the government intervenes at the outset of the action, as it can as a matter of right under 31 U.S.C. § 3730(b)(4)(A), the FCA purports to afford DOJ "primary control" over the litigation (§ 3730(c)(1)), but even then, DOJ may not freely dismiss or settle the action. Rather, the DOJ must notify the relator and file a motion to be heard by the court (§ 3730(c)(2)(A),(B)). Unlike the independent counsel in Morrison, the Attorney General has absolutely no authority or power to remove a relator. 31 U.S.C. § 3730(c)(1) (3).
Once the Executive branch declines, as it did at the outset of the instant case, it has lost the ability to dismiss the action, even if the action is meritless or would compromise the policy or judgment of the Executive. Section 3730(c)(3) provides:
If the Government elects not to proceed with the action, the person who initiated the action shall have the right to conduct the action. If the Government so requests, it shall be served with copies of all pleadings filed in the action and shall be supplied with copies of all deposition transcripts (at the Government’s expense). When a person proceeds with the action, the court, without limiting the status and rights of the person initiating the action, may nevertheless permit the Government to intervene at a later date upon a showing of good cause. [Emphasis added.]
Under this provision, the government cannot intervene as a matter of right and can never attain "primary responsibility." Rather, the relator has and retains the "right to conduct the action." This right never changes under the language of § 3730(c)(3), because that provision expressly keeps in place the "status and rights" of the relator. Accordingly, once the government has declined, it does not have the right to intervene in the case and move for dismissal. Such a move would certainly be inconsistent with the "status and rights" provision of § 3730(c)(3). In that regard, the FCA represents a greater encroachment on the Executive’s authority than the law at issue in Morrison which provided for the Attorney General to remove the independent counsel for good cause. 487 U.S. at 692.
In the instant case, once the government declined its initial opportunity to intervene, it lost forever the opportunity to have "primary responsibility" to conduct the action under § 3730(c)(1). When the government sought to intervene in this action, it did not have an automatic right to do so; rather it had to file a motion attempting to show "good cause." The effect of seeking to intervene under § 3730(c)(3), rather than under § 3730(b)(4)(A) was to limit the government’s control of the case.
In considering that motion, the court was extremely mindful of the effect such intervention would have on the relator’s rights. United States ex rel. Stone v. Rockwell International Corp., 950 F. Supp. 1046, 1049 (D. Colo. 1996) (holding that § 3730(c)(3) was intended to protect the financial interests of a relator who expended substantial resources to advance the case), aff’d, 124 F.3d 1194 (10th Cir. 1997). In particular, the court expressed concern that if the government, having initially decided not to intervene, later saw that the relator had developed a fruitful case, the government might seek to intervene for the purpose reducing the relator’s recovery from 30% (the maximum in non-intervention cases) to 15-20% (the range recoverable by the relator when the government intervenes). Id. See 31 U.S.C. § 3730(d)(1),(2). The court further suggested that in order to show "good cause," the government would have to meet an even higher burden of showing that it acquired new evidence, gained independently of the relator. Id. Ultimately, the court permitted the government’s intervention, largely because Stone was "fully supportive of the government’s motion to intervene." Id. Clearly, the government’s ability to intervene in this case brought purportedly on its behalf was limited by the statute and by the court which put the government at the mercy of the relator. Such lack of control strays far from the standards articulated in Morrison.
What is remarkable in the instant case is the fact that upon intervention, the government was entirely impotent to dismiss – or otherwise affect – allegations in the relators complaint that the government had found meritless. The relator simply proceeded with those claims on his own, but still in the government’s name.
Some courts interpret the qui tam provisions to deny the government the unilateral authority to settle a qui tam suit. In at least one published decision, a relator successfully blocked a proposed settlement between DOJ and the defendant. See Gravitt v. General Elec. Co., 680 F. Supp. 1162 (S.D. Ohio 1988). As a practical matter, in the instant case, Stone’s status in the case interferes with the government’s ability to settle. As Appellants point out (at p. 18), this litigation went on for several years only to result in: (a) nearly all of Stone’s own allegations being dropped; (b) a jury verdict in favor of Appellants on the government’s breach of contract claim and as to seven of the ten claims for payment that plaintiffs alleged violated the FCA, and (c) a jury verdict finding Appellants liable for single damages of $1,390,775 instead of $164,000,000 which the plaintiffs asked the jury to award. Appellants’ Opening Brief at 3-4. Notwithstanding Stone’s overall lack of success in the case, under the FCA (at 31 U.S.C. § 3730(d)(1)), any settlement would require the Appellants to pay Stone’s reasonable attorneys’ fees, which, given the lengthy history of the case, would no doubt be claimed in an amount far exceeding the amount of single damages awarded by the jury, making settlement virtually unachievable.
In the absence of a right to control the initiation of a qui tam action, to dismiss or settle the action as it sees fit, or to control the conduct of the litigation by a relator, and in the absence of any right whatsoever to remove a relator, the Executive branch does not have the control required by Morrison. In the absence of such control, the amended qui tam provisions do not survive constitutional scrutiny.
C. The Impermissible Delegation To Relators Of The Executive’s Appointment And Execution Power Has Produced Cases That Are Meritless And Adverse To The Government’s Interests
As a practical matter, the past thirteen years of qui tam litigation have been detrimental not only to government contractors which have been forced to confront an onslaught of frivolous actions, but also to the government, which is frequently at odds with relators purporting to act on its behalf. The onslaught of litigation also has been detrimental to the courts, which must devote resources to resolving matters brought by uninjured plaintiffs, and to the taxpayers who ultimately bear the cost of nearly all of this litigation.
The fruits of the constitutional havoc wreaked by Congress are most evident in the anomalous situation where a relator brings a case "on behalf of the United States" even though the government views the case as meritless or even directly adverse to government’s interests. For example, in Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939 (1997), the relator filed suit based on allegations of cost mischarging that were contained in a government audit report. Id. at 942-44. But during the course of the litigation, the government ultimately reversed its initial findings and concluded that the defendant did not mischarge costs but actually saved the government money. Id. at 943, n. 1. The relator proceeded unsuccessfully with the case, in a futile attempt to dispute the government’s findings. See also, United States ex rel. Lindenthal v. General Dynamics Corp., 61 F.3d 1402, 1411-12 (9th Cir. 1995), cert. denied, 517 U.S. 1104 (1996) (relator’s contention about the quality of drawings defendant sold to the government was undercut by the testimony of a dozen government officials that the drawings were compliant with the contract and did not give rise to any false claims); United States ex rel. Butler v. Hughes Helicopters, Inc., 71 F.3d 321, 326 (9th Cir. 1995) (allegations of defective product and failure to perform product testing were disproved by evidence that the government’s "knowledge of and accession at every turn to the subsystems’ testing modifications as well as to the subsystems’ limitations . . . ").
Indeed, meritless qui tam litigation has become an unmanageable problem. In 1992, then Assistant Attorney General Stuart Gerson observed:
[b]ecause so many meritless qui tams [sic] are filed, at least one large Inspector General’s office has warned us that it may have to decline to investigate certain qui tam suits. Quite apart from our time and our investigators’ time, these suits also waste defendants’ and the courts’ resources.
Gerson Statement, Addendum A at p. 20. According to statistics recently released by DOJ, over 3,000 qui tam cases have been filed since the FCA was amended in 1986, resulting in the government’s recovery of over $2.9 billion. But only a very small fraction of that recovery (approximately $200 million) was from cases pursued by relators after DOJ had declined to intervene. DOJ declined to intervene in 78% of the cases filed, and 94% of those cases resulted in the matter ultimately being dismissed with no recovery. These statistics demonstrate that placing prosecutorial discretion in the hands of private litigants does not serve the public. The same conclusion can be derived from Stone’s years of pursuing numerous claims which the government did not join and which he ultimately abandoned. See Appellants’ Opening Brief at 13-14.
What Mr. Gerson did not mention is the cost borne by the taxpayers stemming from unsuccessful qui tam litigation. First, because the action alleges false claims against the government, government witnesses and documents are alleged to be relevant, and DOJ attorneys and agency personnel must participate in lengthy motions practice and burdensome third-party discovery, as exemplified by the foregoing cases. In the instant case, although the government declined to intervene in one of the FCA counts, the district court ordered a separate trial on that count which will, no doubt, impose a substantial burden on the government notwithstanding its declination. Second, the substantial legal fees incurred by government contractors in successfully defending a qui tam action declined by the government are passed on to the government. See 48 C.F.R. §§ 31.205-47. One scholarly study noted that "DOD ultimately expends significantly greater sums on reimbursing the contractor for defense costs than the Treasury receives in [Civil] FCA recoveries" in cases declined by DOJ. William E. Kovacic, The Civil False Claims Act As A Deterrent To Participation In Government Procurement Markets, 6 Sup. Ct. Econ. Rev. 201, 226 (1998).
In sum, because the qui tam provisions empower relators who lack fealty to the Executive, they leave open the possibility for uneven application of the law. They cause the broader legal, political and practical considerations of litigation on behalf of the government to go completely ignored. They bring before the judiciary meritless actions that the Executive previously has investigated and decided not to pursue, and they frustrate DOJ’s goal of efficient and effective prosecution.
II. QUI TAM RELATORS LACK THE INDIVIDUATED INJURY IN FACT REQUIRED BY ARTICLE III
The principle is well established that a plaintiff must have suffered an "injury in fact" which is "concrete and particularized" as to the "invasion of a legally-protected interest." Lujan v. Defenders of Wildlife, 504 U.S. 555, 558-61 (1992). The Court defined "particularized" as injury which "must affect the plaintiff in a personal and individual way;" id. at 561, n.1, in their words an "individuated injury." The Supreme Court recently reaffirmed this principle in Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 120 S. Ct. 693, 704-05 (2000) (standing of environmental group to bring citizen suit under Clean Water Act was premised upon sworn statements of group members attesting to their particular injury in fact stemming from their use of the affected area).
The Second, Sixth and Ninth Circuits have upheld standing on the theory that Congress, through the enactment of the FCA, provided for the "assignment" of the government’s claim to the relator. See supra, n.1. The Ninth Circuit also found in Kelly that the relator’s stake in the outcome (the monetary bounty) is sufficient to ensure that the case is presented in an adversarial context. 9 F.3d at 749. These theories do not rise to the equivalent of, or substitute for, the required individuated injury by a plaintiff asserting his/her own legal rights and interests.
A. Even A Plaintiff Acting As A Private Attorney General Must Have An Individuated Injury In Fact
Notwithstanding the array of federal statutes permitting "citizen-suits" to redress harm which may be suffered by a community and its members, the Supreme Court, as it did in Laidlaw, has upheld the standing of so-called "private attorneys general" only where the plaintiff was able to allege that he, in particular, suffered some form of injury. The Supreme Court often has said that while Congress may, by legislation, expand standing to one who otherwise would be barred, Congress cannot eliminate the injury in fact requirement gleaned from Article III. Raines v. Byrd, 521 U.S. 811, 820 n.3 (1997) ("Congress cannot erase Article III’s standing requirements by statutorily granting the right to sue to a plaintiff who would not otherwise have standing"); Middlesex County Sewerage Authority v. National Sea Clammers Association, 453 U.S. 1, 17 (1981) ("private attorneys general" differ from other plaintiffs not because they need not show injury but because their "injuries are ‘noneconomic’ and probably noncompensable").
Congress has expanded citizen standing in statutes dealing with civil rights, consumer interests and environmental interests. Notwithstanding that the alleged injuries affected a large group of people, in each instance in which citizen standing was upheld, the court noted that the plaintiff had alleged some individuated interest as distinguished from the polity as a whole. See, e.g., Laidlaw, 120 S. Ct. at 704; United States v. SCRAP, 412 U.S. 669 (1973); but see also Natural Resources Defense Council, Inc. v. EPA, 507 F.2d 905, 908 (9th Cir. 1974) (despite Congress’ grant of standing to "any citizen" to enforce the Clean Air Act, plaintiff organization could not show individuated injury in fact to itself or to its members). As we discussed above, a statute authorizing private attorneys general who lack an individuated injury gives rise to violations of Article II principles as well.
The theory that the qui tam provisions, in effect, assign the government’s "claims" to relators can be rejected without delving into the question of what constitutes a valid assignment. It can be rejected simply because it is not the "injury" which Congress assigned. Therefore, the assignment theory cannot satisfy Lujan‘s holding that an individuated injury is part of the "irreducible constitutional minimum of standing." Lujan, 504 U.S. at 560; see also Riley, 196 F.3d at 540 (concurrence).
Notwithstanding that the injury itself is not subject to this fictionalized assignment, Congress, as we discussed above, lacks the authority, under the separation of powers doctrine, to assign to the citizenry the Executive’s prosecutorial right. In that regard, even if the courts could tailor a brand new theory of standing for qui tam relators which overcomes the lack of an individuated injury, the statutory scheme would still run afoul of the other constitutional principles at issue here. As the concurring opinion in Riley correctly stated: "Congress cannot assign something that it does not ‘own.’" Riley, 196 F.3d at 540 (concurrence); accord Bowsher v. Synar, 478 U.S. 714, 726 (1986).
B. A Relator’s Potential Bounty Does Not Satisfy The Requirements For Standing
A bounty plainly is not an injury. Nor can it take the place of an injury under the Supreme Court’s articulation of the standing doctrine. Putting aside the counterintuitive characterization of the potential receipt of a bounty as an "injury," a relator’s claim to the statutory bounty does not satisfy the injury in fact requirement because relators can demonstrate no "invasion" of a "legally protected interest." See Lujan, 112 S. Ct. at 2136. If Congress could confer standing on a citizen simply by creating an economic interest in the outcome, Congress would also, in essence, be empowered to establish a prosecutorial system entirely outside of the Executive branch—yet another aspect of standing which merges with the overwhelming Article II issues.
Moreover, the statutory bounty created by the FCA does not constitute a "legally protected interest" because a relator cannot, with any degree of certainty, claim an entitlement to such an award. In this respect, it is significant that, even if a relator wins the action, his recovery may be limited or even precluded entirely by the court. 31 U.S.C. § 3730(d)(3). In essence, a relator’s claim amounts to no more than an indeterminable contingent interest. Such a speculative interest does not constitute "a legally protected interest," as contemplated by Article III. Accord United States ex rel. Truong v. Northrop Corp., 728 F. Supp. 615, 619 n.5 (C.D. Cal. 1989).
Even if the bounty did constitute a "legally protected interest," which it does not, there has been no "invasion" of that interest by the challenged conduct of an alleged false claim being submitted to the government. A relator cannot establish an invasion of a legally protected interest simply by filing suit and claiming a stake in the outcome. "[T]he essence of standing ‘is not a question of motivation but of possession of the requisite . . . interest that is, or is threatened to be, injured by the . . . conduct’" of the defendant. Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208, 225-226 (1974) (citations omitted). A relator who files suit and anticipates a bounty is no different than any other "person bringing a suit at law [who] has the hope of receiving money." United States ex rel. Burch v. Piqua Eng’g, Inc., 803 F. Supp. 115, 118 (S.D. Ohio 1992). In this respect, merely possessing an interest in the outcome of litigation is insufficient; there must be an invasion of a legally protected interest – a condition lacking here.
All that Stone has ever alleged is the right to recover the government’s damages, fines, and penalties. He has never had injuries of his own stemming from the alleged submission of false claims to the government. Therefore, he lacks standing to litigate this case.
Qui tam relators seek to enforce a law made to requite an injury to the United States and not to themselves. This fact distinguishes the qui tam provisions from all other citizen suit provisions and from all private attorney general actions. But at its heart, the issue is really one of separation of powers. Overlapping the issue of standing is the question of whether Congress can "confer" standing, and overlapping that issue is whether Congress can delegate out of the Executive branch the constitutional power to enforce the law. The Supreme Court has made it clear that the Constitution prohibits this kind of delegation. The chaos we have experienced in the prosecution of the qui tam actions during the past thirteen years demonstrates the sound basis for applying these constitutional principles to overturn this law.
Herbert L. Fenster
C. Stanley Dees
Mark R. Troy
McKenna & Cuneo, L.L.P.
370 Seventeenth Street, Suite 4800
Denver, Colorado 80202
Maureen D. Mudron
American Hospital Association
325 Seventh Street, N.W.
Washington, D.C. 20004
CERTIFICATE OF SERVICE
I hereby certify that on February 14, 2000, true and correct copies of the foregoing BRIEF Of the American Hospital Association and National Defense Industrial Association As Amici Curiae In Support Of Appellants and in support of reversal of the district court’s decision were sent via Federal express addressed to the following:
Marie T. Vullo, Esq. Douglas M. Letter, Esq.
Bruce Birenboim, Esq. Peter R. Maier, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison Civil Division, Appellate Staff
1285 Avenue of the Americas United States Department of Justice
New York, NY 10019 601 D Street, N.W.
Washington, DC 20530-001
and deposited in the U.S. Mail, postage prepaid, addressed to:
Hartley David Alley, Esq. Michael A. Williams, Esq.
4251 Kipling Street, #130 Christopher J. Koenigs, Esq.
Wheat Ridge, CO 80033 Michael B. Carroll, Esq.
Williams, Youle & Koenigs, P.C