CONSTITUTIONAL ASPECTS OF QUI TAM ACTIONS: BACKGROUND AND ANALYSIS OF ISSUES IN VERMONT AGENCY OF NATURAL RESOURCES V. UNITED STATES EX REL. STEVENS
CRS Report for Congress
Constitutional Aspects of Qui Tam Actions:
Background and Analysis of Issues in Vermont
Agency of Natural Resources v. United States ex
rel. Stevens
March 8, 2000
T.J. Halstead
Legislative Attorney
American Law Division
Congressional Research Service ˜ The Library of Congress
ABSTRACT
This report discusses Vermont Agency of Natural Resources v. United States ex rel. Stevens,
where the Court of Appeals for the Second Circuit held that states are persons under the False
Claims Act, and may be sued by private relators in instances where the federal government
chooses not to intervene. The Second Circuit’s decision, while based on historically accepted
legal principles governing qui tam actions, raises significant questions in both the
constitutional and statutory interpretation contexts. Given the importance of these questions
as they relate to state liability under the False Claims Act, the Supreme Court granted
certiorari in Stevens, with a decision expected this term. This report provides an overview of
the Second Circuit’s decision, with an emphasis on factors which are likely to be considered
in the Supreme Court’s analysis.
Constitutional Aspects of Qui Tam Actions: Background and
Analysis of Issues in Vermont Agency of Natural Resources
v. United States ex rel. Stevens
Summary
The False Claims Act (FCA), originally enacted in 1863, serves as an important
mechanism by which fraud against the federal government is combated. The Act
authorizes both the Attorney General and private persons to bring civil actions for its
enforcement. Under the terms of the Act, a private individual, known as a relator, may
bring such an action on behalf of him or herself, and for the United States
Government. These actions are known as qui tam suits, and their use dates back to
the Thirteenth Century in England as well as the earliest days of the United States.
The vast majority of these suits are brought against private entities who are
alleged to have committed acts of fraud upon the federal government through the
submission of false claims, and their validity has been well established. However, qui
tam suits have also been brought against states, raising significant constitutional and
statutory questions regarding the proper scope of the Act. Specifically, it has been
argued that such actions are impermissible, as states do not constitute “persons” who
may be sued under the Act. More substantively, it has also been asserted that suits by
private relators against a state violate the Eleventh Amendment. The Court of Appeals
for the Second Circuit addressed these issues in United States ex rel. Stevens v.
Vermont Agency of Natural Resources, holding that states are indeed within the ambit
of the False Claims Act, and that the United States is the “real party in interest” in a
qui tam action, alleviating any Eleventh Amendment concerns.
Given the significance of these questions as they relate to state qui tam liability,
the Supreme Court granted certiorari in Stevens. While the Second Circuit’s decision
is based on widely accepted principles supporting the historical role of qui tam
actions, it is possible that the Supreme Court will reverse the decision of the Second
Circuit. Depending on the factors found persuasive by the Court, a reversal could
have substantial implications for qui tam litigation in general. Specifically, a ruling by
the Court that states are not persons under the Act would bar any such action against
a state that has committed fraud, irrespective of whether it is brought by the federal
government or a private relator. A reversal on the Eleventh Amendment issue,
however, would only proscribe suits brought by relators where the government
chooses not to intervene. Further complicating matters, the Supreme Court, ten days
prior to oral argument in Stevens, issued an order indicating that it would also
consider whether qui tam suits violate the standing requirements of Article III of the
Constitution.
While the questions being addressed by the Court have the potential to greatly
impact the False Claims Act, it is unclear whether any change will occur. Indeed, in
light of the centuries long history of qui tam actions and the extensive lower court
precedent in its favor, it is questionable whether the Court will radically alter the qui
tam landscape.
Contents
Overview of the False Claims Act...............................1
Case History...............................................3
Appellate Review............................................4
A. Whether States are “Persons” Under the False Claims Act.......4
B. Eleventh Amendment and Sovereign Immunity...............7
Supreme Court Review.......................................8
A. Statutory Construction.................................8
B. Eleventh Amendment..................................10
C. Article III Standing...................................13
Conclusion ................................................ 16
Constitutional Aspects of Qui Tam Actions:
Background and Analysis of Issues in Vermont
Agency of Natural Resources v. United States ex
rel. Stevens
Overview of the False Claims Act
Qui tam actions arose in England in the thirteenth century as a mechanism to
assist in the prosecution of fraud against the government. Specifically, as the English
government lacked the resources to ferret out and prosecute instances of fraud and
other criminal violations against the crown, a system was established whereby a
private citizen could be empowered to sue a transgressor on behalf of the sovereign1
and himself, and retain a share of the fine or penalty imposed upon the offender. This
dynamic is embodied in the Latin phrase “qui tam pro domino rege quam pro se
imposos sequiter,” which means “who brings the action as well for the king as for
himself.”2 The traditional acceptance of English law, coupled with a similar lack of
resources, led to the employment of qui tam suits by the North American colonies,
and, subsequently, the United States itself. Indeed, ten of the first fourteen statutes
enacted by Congress contained qui tam provisions as enforcement mechanisms.3
As the federal government established more efficient law enforcement
mechanisms in the nineteenth century, the need and support for qui tam suits gradually
declined. Further, public support of such actions was low due to the perception that
many relators were settling suits for small amounts, contrary to the interests of the
government. Accordingly, statutory restrictions were imposed that limited the utility4
of qui tam actions.
During the Civil War, however, qui tam actions were widely used to combat
instances of fraud by companies supplying the Union Army. This widespread
corruption lead to the formulation of the qui tam provisions in the False Claims Act
1 James Y. Ho, “State Sovereign Immunity and the False Claims Act: Respecting the
Limitations Created by the Eleventh Amendment Upon the Federal Courts,” 68 Fordham L.
Rev. 189, 193-94 (1999).
2 Bass Anglers Sportsman’s Society v. U.S. Plywood Champion Papers, 324 F.Supp. 302,
3 See United States ex rel. Newsham v. Lockheed Missiles & Space Co., 722 F.Supp. 607,
4 Kent D. Strader, “Counter Claims Against Whistleblowers: Should Counter Claims Against
Qui Tam Plaintiffs be Allowed in False Claims Act Cases?,” 62 U. Cin. L. Rev. 713, 727-28
(1993).
of 1863.5 As part of an expansive enforcement scheme, private individuals were able
to file suit under the Act and to share in the damages recovered, as an incentive to
foster the exposure of fraud against the government.6 Under the original terms of the
Act, a citizen was able to file suit irrespective of any substantive role in exposing the
fraudulent practices of a defendant. This liberal standard resulted in the filing of
numerous “parasitic” qui tam actions based upon information which had already been7
made public. In response to these parasitic suits, Congress amended the False Claims
Act in 1943, imposing a strict jurisdictional bar on any qui tam suit predicated on
evidence or information which was “in the possession of the United States, or any8
agency, officer, or employee thereof, at the time such suit was brought.” As a result
of this language, the ability of individuals to bring suit under the False Claims Act was9
severely circumscribed.
The use of qui tam suits declined substantially after the 1943 amendments,
leading Congress to again amend the False Claims Act in 1986, in an effort to
encourage private enforcement suits.10 Since the 1986 amendments, qui tam suits have11
been pursued vigorously, with the recovery of over one billion dollars since 1987.
In its current version, the FCA imposes liability on any “person” who knowingly12
makes a false claim for payment to the United States. To aid in enforcement of this
proscription, the FCA provides that a person may bring a civil action for substantive
violations of the Act “for the person and for the United States Government. The13
Action shall be brought in the name of the Government.” Upon bringing the action,
the relator must serve the government a copy of the complaint and a written
disclosure of the material evidence information he or she possesses. The complaint
must be filed in camera and remains sealed for a minimum of 60 days, to enable the
government to investigate the allegations. However, the government may receive an14
extension upon a showing of good cause. At the end of this investigatory period, the
government must decide whether to intervene and take control of the suit, or to
assume a passive role, “in which case the person bringing the action shall have the15
right to conduct the action.”
5 See United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1496-97 (11th Cir. 1991).
6 Erickson ex re. United States v. American Inst. Of Biological Sciences, 716 F.Supp. 908, 915 (E.D.
Va. 1989).
7 Id. at 916.
8 Id. at 916 (quoting 89 Cong.Rec. 7572 (1943)).
9 Id. at 916.
10 Id. at 917.
11 Anna Burke, “Qui Tam: Blowing the Whistle For Uncle Sam,” 21 NOVA L.Rev. 869, 871
(1997).
12 31 U.S.C. §3729(a)(1)-(7).
13 Id. at §3730(b)(1).
14 Id. at §3730(b)(2), (3).
15 Id. at §3730(b)(4)(A), (B).
If the government intervenes, “it shall have the primary responsibility for
prosecuting the action, and shall not be bound by an act of the person bringing the
action,” with the relator retaining the “right to continue as a party.”16 If the
government opts not to intervene, the relator “shall have the right to conduct the
action.”17 Nonetheless, the relator must provide the government with copies of all
pleadings and depositions. Further, the government may request the court to delay the
relator’s discovery for an extendable 60 day period, upon making a showing that
discovery proceedings “would interfere with the Government’s investigation or18
prosecution of a criminal or civil matter arising out of the same facts.”
In instances where the government initially declines to intervene, a court “may
nevertheless permit the Government to intervene at a later date upon a showing of
good cause.” In the event of such later intervention, the court may not limit the status19
and rights of the relator. Upon the resolution of a successful suit, the Act provides
a range of awards to the relator. In suits where the government has intervened, the
relator is eligible to receive between 15 and 25 percent of the amount recovered. If
it is determined that the relator is not the original source of the information forming
the main basis of the suit, however, the award must be limited to no more than 10
percent. In situations where the government has not intervened, the relator is eligible
to receive between 25 and 30 percent of the amount recovered. In addition to the
award amount, the relator is entitled to reasonable attorneys’ fees.20 In cases where
the government has not intervened, an unsuccessful relator may be ordered to pay
reasonable attorneys’ fees and costs to the defendant, if it is determined that the claim
“was clearly frivolous, clearly vexatious, or brought primarily for purposes of21
harassment.”
Case History
In United States ex rel. Stevens v. Vermont Agency of Natural Resources, an
employee of the State of Vermont Agency of Natural Resources (“Agency” or
“State”) brought suit under the False Claims Act, asserting that the Agency
misrepresented the amount of manpower it invested in federally funded projects,
inducing the Environmental Protection Agency to provide the State with more grant22
money than its actions merited. Specifically, the relator averred that a subdivision
of the Agency exaggerated the amount of time its employees actually spent on certain
projects in federal reports. This practice allowed the Agency to “retain funds to which
16 Id. at §3730(c)(1).
17 Id. at §3730(c)(3).
18 Id. at §3730(c)(4).
19 Id. at §3730(c)(3).
20 Id. at §3730(d)(1), (2).
21 Id. at §3730(d)(4).
22 162 F.3d 195 (2nd Cir. 1998).
it was not entitled for a given year.”23 Further, reporting that all grant funds for a
particular year had been exhausted, the Agency would submit new grant requests
based on the false expenditures, enabling the Agency to “maintain or increase its
funding in each succeeding fiscal year.”
The relator brought suit against the Agency in May 1995, filing the complaint24
in camera and under seal, as required by the FCA. The government filed notice that
it was declining to intervene in the suit in June of 1996. In July of 1996 the complaint
was unsealed and served on the State. In response to the suit, the State moved for
dismissal on the grounds that a state agency is not a person under the FCA, and that
the Eleventh Amendment bars suits against states by private citizens. The district
court denied the motion, rejecting both arguments.
Appellate Review
A. Whether States are “Persons” Under the False Claims Act. Regarding
the question of whether states are “persons” for the purposes of qui tam litigation, the
Second Circuit engaged in an exhaustive textual and historical analysis of the Act,
ultimately concluding that states are indeed covered under the FCA. The court first
noted that treating states as persons under the Act would not violate the “plain
statement” rule, which mandates that a statute not be interpreted in such a fashion as
to substantially alter the federal-state balance of power unless Congress has clearly
conveyed such an intent.25 In making this determination, the court explained that the
plain statement rule applies in instances where the federal statute would have the
effect of intruding on traditional state authority, as opposed to situations where a26
statute simply imposes liability on the states. Given this standard, the court stated
that the FCA does not alter the traditional constitutional balance of federal and state
powers so as “to require application of the plain statement rule.”27 Upon reaching this
conclusion, the court began an inquiry into the proper interpretation of the FCA under
accepted statutory construction standards.
Beginning this analysis, the court noted that while the term “person” does not
generally refer to a sovereign entity, there is no set rule compelling exclusion.28
Specifically, the Second Circuit cited Supreme Court precedent for the proposition
that “whether the term ‘person’ when used in a federal statute includes a State cannot
23 Id. at 198.
24 Id. at 198-199.
25 Id. at 203 (citing United States v. Bass, 404 U.S. 336, 349 (1971)).
26 Id. at 203 (discussing Hilton v. South Carolina Public Railways Commission, 502 U.S.
27 Id. at 203. The court further explained that the Act does not intrude into any area of
traditional state power, as its goal “is simply to remedy and deter procurement of federal funds
by means of fraud.” Id.
28 Id. at 204 (citing United States v. Cooper Corp., 312 U.S. 600, 604-05 (1941)).
be abstractly declared, but depends upon its legislative environment.”29 Further, the
court noted the maxim that “the purpose, the subject matter, the context, the
legislative history, and the executive interpretation of the statute are aids to30
construction,” which may serve to include a state under its terms.
Turning its attention to the language of the FCA, the court determined that the
term “person,” is used to “categorize both those who may sue, and those who may
be sued, whether by the government itself or by a qui tam plaintiff.”31 The court then
noted that several states have acted as qui tam relators under the FCA, indicating that
they viewed themselves as meeting the requirements of §3730(b)(1), which authorizes
“person[s]” to bring a civil action for fraud against the government.32 The court also
found that Congress had clearly favored the ability of states to serve as relators in the
1986 amendments to the Act.33 The court further stated that states are clearly persons
under §3730(b)(1). Next, the court noted that the term “person” was also employed34
in imposing liability under the Act. Given this expansive usage, the court held that
it should be inferred that Congress meant “person” to have the same meaning35
throughout the statute, “absent some indication to the contrary.” In light of these
factors, the court determined that there was no support for the proposition that a state
is a person under the FCA only for the purpose of bringing a qui tam action.36
Turning to the legislative history of the FCA, the court further determined that
Congress intended that states be considered “persons” under the Act. Specifically, the
court explained that the “impetus for enactment of the 1863 Act was ‘stopping the
massive frauds perpetrated by large contractors during the civil war.’”37 Among the
frauds specifically targeted by Congress were misrepresentations by state officers “in
the procurement of military supplies for state troops, the costs of which where
ultimately borne by the United States.”38 In conjunction with this legislative history,
the Second Circuit noted the Supreme Court’s determination in United States v.
Neifert-White Co. that “debates at the time suggest that the Act was intended to reach
all types of fraud, without qualification, that might result in financial loss to the
29 Id. at 204 (citing Sims v. United States, 359 U.S. 108, 112 (1942)).
30 Id. at 204 (citing Cooper, 312 U.S. at 605).
31 Id. at 204.
32 Id. at 204.
33 Id. at 205.
34 Id. at 205. Specifically, the Act provides that any “person” who commits fraud upon the
government is subject to a civil penalty, and that the attorney general may bring a suit against
a “person” who has committed such fraud. 31 U.S.C. §3729(a), §3730(a).
35 Id. at 205 (citing Commissioner v. Lundy, 516 U.S. 235, 250 (1996); Sullivan v.Stroop,
36 Id. at 205.
37 Id. at 205 (citing United States v. Bornstein, 423 U.S. 303, 309 (1976)).
38 Id. at 206. See also, Government Contracts, H.R.Rep. No. 37-2, pt. ii-a (1862).
Government.”39 The Second Circuit then turned to the 1986 amendments, citing a
Senate Report declaring that the FCA “reaches all parties who may submit false
claims. The term ‘person’ is used in its broad sense to include partnerships,
associations, and corporations...as well as States and political subdivisions
thereof...” 40
The court next addressed a portion of the1986 amendments providing for civil
investigative demands (CID), that authorize “the Attorney General to issue written41
discovery demands as part of a ‘false claims law investigation.’” Noting that this
investigative scheme explicitly defined “person” to include states, the court
determined that Congress would probably not have authorized such investigations into42
potential fraud by the states unless they are indeed subject to the FCA. In reaching
this conclusion, the court rejected the argument that the declaration that states are
persons in the civil investigative demands provision indicated that states were not
included previously. The court first explained that this argument was belied by the fact
that the CID provision also explicitly referenced natural persons and other entities
undeniably covered by the Act. Further, the court was unwilling “to impute such a
belief to Congress” in light of the legislative history of the Act. Given this, the court
determined that Congress regarded states as being covered under the FCA43
historically, and would continue to be classified as such after the 1986 amendments.
Finally, the court also rejected the argument that the treble damages and
penalties provided for in the Act were punitive, a characteristic that is usually not
“associated with suits against the States.”44 Specifically, the court explained that the
remedies provided for in the FCA “have been held not to be punitive but remedial,
multiple damages being recoverable in order ‘to make sure that the government would
be made completely whole,’” due to costs and delays associated with the fraud.45
Accordingly, the court determined that there was no reason such a remedial structure
could not be applied to states that commit fraud against the government.
Given all of these factors, the Second Circuit held that the language, history and
intent of the False Claims Act clearly established that states fall within the ambit of the46
Act.
39 390 U.S. 228, 232 (1968).
40 Stevens, 162 F.3d at 207 (quoting Senate Report at 8-9, reprinted in 1986 U.S.C.C.A.N.
at 5273-74).
41 Id. at 207 (quoting 31 U.S.C. §3733(a)(1)).
42 Id. at 207.
43 Id. at 207.
44 Id. at 207.
45 Id. at 207 (quoting United States ex re. Marcus v. Hess, 317 U.S. at 551-52). See also,
Bornstein, 423 U.S. at 315.
46 Id. at 207-208.
B. Eleventh Amendment and Sovereign Immunity. Regarding the question
of whether states are immune from qui tam actions brought by private relators, the
Second Circuit began with an exposition of basic Eleventh Amendment principles.
First, the court noted that “the Eleventh Amendment provides that ‘[t]he Judicial
Power of the United States shall not be construed to extend to any suit in law or
equity, commenced or prosecuted against one of the United States by Citizens of
another State, or Citizens or Subjects of any Foreign State.’”47 By its terms, the
Eleventh Amendment’s recognition of state sovereign immunity applies only to suits
by individuals who are not citizens of a particular state. However, as the court noted,
the Amendment has been interpreted to also bar suits against a state by its own
citizens, foreign nations, and Indian tribes.48 Despite these protections, it is well
established that states do not enjoy sovereign immunity against the United States.49
Specifically, by agreeing to the creation of a federal government, states are deemed
to have permanently waived such immunity, as it would conflict with the primacy of
the United States.50
Given this dynamic, the Second Circuit determined that the question at issue
centered on whether a qui tam suit under the FCA is a private action barred by the
Eleventh Amendment, or a legitimate action brought by the United States. Pointing
to the interests vindicated by the FCA, as well as “the government’s ability to control
the conduct and duration of a qui tam suit,” the court ruled that such actions are not51
barred by the Eleventh Amendment.
The court first explained that the United States is the real party in interest in a
qui tam suit. To support this conclusion, the court explained that all of the actions
triggering liability under the FCA center on “the use of fraud to secure payment from52
the government.” The court distinguished the government’s interest from that of the
relator, declaring that while a qui tam plaintiff has an interest in the outcome of an
action, the “interest is less like that of a party than that of an attorney working for a
contingent fee.” Further, the court stated that “qui tam claims simply do not seek the
vindication of a right belonging to the private plaintiff, and if there has been no injury
to the United States, the qui tam plaintiff cannot recover.”53 As such, the court
47 Id. at 201; U.S. Const. Amend. XI.
48 Id. at 201. See Hans v. Louisiana, 134 U.S. 1, 10-11 (1890); Monaco v. Mississippi, 292
U.S. 313, 330-32 (1934); Blatchford v. Native Village of Noatak, 501 U.S. 775, 782 (1991).
49 Id. at 201. See West Virginia v. United States, 479 U.S. 305, 311 (1987); United States
v. Texas, 143 U.S. 621, 644-46 (1892).
50 Id. at 202.
51 Id. at 202.
52 Id. at 202. Specifically, the court noted that “it is the government that has been injured by
the presentation of such claims; it is in the government’s name that the action must be
brought; it is the government’s injury that provides the measure for the damages that are to
be trebled; and it is the government that must receive the lion’s share–at least 70%– of any
recovery.” Id.
53 Id. at 202.
determined that while private citizens may initiate a qui tam action, the government54
remains the real party in interest.
The court also found it significant that the government has ultimate control over
any qui tam action, possessing the authority to intervene at the outset of any such
action. Also, absent intervention, the government has the right “to be kept abreast of
discovery in the qui tam suit and the right to prevent that discovery from interfering
with its investigation or pursuit of a criminal or civil suit arising out of the same55
facts.” The court also stressed that if the government does intervene, it takes control
of the suit, may limit the relator’s participation, and may not be bound by any act of
the relator. Furthermore, the court noted that the government can prevent a dismissal
sought by the relator, and can have the action terminated upon the showing of a valid
governmental purpose, irrespective of the wishes of the relator.56
Based upon its determination that qui tam actions serve to “remedy only wrongs
done to the United States,” and that the government exercises substantial control over
their progression, the Second Circuit held that such suits are essentially governmental57
actions, and, therefore, do not offend the Eleventh Amendment.
Supreme Court Review
Because of a split among the circuits, the Supreme Court granted certiorari in
Stevens, originally limited to the issues decided by the Second Circuit. However, ten
days prior to oral argument in Stevens, the Court issued an order indicating that it
would also consider whether qui tam suits violate the standing requirements of Article
III of the Constitution. With the addition of the Article III question, the Court
significantly broadened the potential impact of Stevens on traditional qui tam
litigation.
A. Statutory Construction. While a reversal on the Eleventh Amendment and
Article III standing questions decided in Stevens would require an involved
constitutional analysis, it is conceivable that the Supreme Court may merely reverse
the Second Circuit’s determination that states are persons for the purpose of qui tam
litigation, avoiding the more substantive issues.
Specifically, it is possible that the Court will determine that the legislative history
of the FCA is insufficient to overcome the “often-expressed understanding” that “in
common usage, the term ‘person’ does not include the sovereign, [and] statutes
employing the [word] are ordinarily construed to exclude it.”58 As noted above, the
54 Id. at 202. See also, Minotti v. Lensink, 895 F.2d 100, 104 (2d Cir. 1990); United States
ex rel. Milam v. University of Texas, 961 F.2d 46, 50 (4th Cir. 1992).
55 Stevens, 162 F.3d at 202.
56 Id. at 203.
57 Id. at 203.
58 Will v. Michigan Dept. of State Police, 491 U.S. 58, 64 (1989) (quoting Wilson v. Omaha
Indian Tribe, 442 U.S. 653, 667 (1979)(quoting United States v. Cooper Corp., 312 U.S.
(continued...)
Second Circuit determined that this precept is not a set rule, but, rather, depends
largely on the context and legislative history of the statute in question. It could be
argued though, that the “common usage” distinction requires, at a minimum, that59
states are excluded absent an affirmative declaration by Congress. The Court of
Appeals for the District of Columbia has stressed this argument, noting that this
principle is particularly appropriate where the statute would subject states to liability60
to which they are unaccustomed. From this, it could be argued that the Second
Circuit erred in finding that there was no indication that Congress meant for the term
“person” to have different meanings under different portions of the Act, instead of61
discerning whether the Act affirmatively brought states within its remedial ambit.
Indeed, given that neither the current nor original version of the Act defines “person”
to explicitly include the states, it is possible that the Court will determine that such an
affirmative showing has not been made. Building upon this approach, it could be
argued that the Second Circuit’s determination that the broad usage of “persons” as
including corporations and other entities supported the inclusion of states was
incorrect. The D.C. Circuit, in United States ex rel. Long v. SCS Business & Tech.
Inst. Inc., held as such, stating that the mere fact that corporations could be held liable
under the Act was unpersuasive in regards to the states, given the affirmative intent
requirement. 62
While this argument seems to undercut the Second Circuit’s decision, it is
important to note that there is “no per se rule prohibiting the interpretation of general63
liability language to include the States.” Rather, the practice of excluding States
from such statutes is a rule of statutory construction applicable where statutory intent
is ambiguous. In light of this dynamic, the maxim that a statute “can be unambiguous
without addressing every interpretive theory,” buttresses the textual and historical
analysis of the Second Circuit.64 Furthermore, it should be noted that a determination
that states are not persons under the FCA would preclude not only qui tam actions
brought by relators, but those pursued directly by the United States as well. This is
particularly pertinent, as the Supreme Court has previously rejected the notion that
statutory ambiguity will nullify an action by the United States. Indeed, the Court has
stated that “the Constitution presents no barrier to lawsuits brought by the United
States against a State,” and, that for the purposes of such suits, “States are naturally
just like ‘any non-governmental entity.’”65
58 (...continued)
59 See United States ex rel. Long v. SCS Business & Tech. Inst. Inc., 173 F.3d 870, 874 (D.C.
Cir. 1999).
60 Id. (citing Will, 491 U.S. at 604).
61 See n.34, supra.
62 Long, 173 F.3d at 875.
63 Hilton v. South Carolina Public Rys. Comm., 502 U.S. 197, 205 (1991).
64 Salinas v. United States, 522 U.S. 52, 60 (1997).
65 Pennsylvania v. Union Gas Co., 491 U.S. 1, 11 (1989).
The Second Circuit’s decision is also susceptible to a determination that the
legislative history of the Act is not sufficiently clear to obviate the aforementioned
affirmative intent requirement arguments. Specifically, in Long, the D.C. Circuit found
it significant that examples of fraud cited in the 1863 version of the Act did not
include any state transgressions. Further, the court, in Long, stressed that a legislative
history “indicating an intent to impose liability on state officials is not evidence of an66
intent to subject the states themselves to liability.” From this, the D.C. Circuit
determined that there was no basis to conclude that Congress intended to include67
states under the 1863 version of the Act. Turning to the 1986 amendments, the
Long court pointed to the Supreme Court’s determination that such subsequent
provisions are largely irrelevant, as they do not “reflect any direct focus by Congress68
upon the meaning of the earlier enacted provisions.” Finally, the D.C. Circuit also
disagreed with the Second Circuit’s analysis of the civil investigative demand
provisions enacted in 1986, maintaining that their purpose could be to merely facilitate
collection of information from a state for use in a suit against contractors or other
offenders. 69
In light of these factors, it is evident that there is substantial room for
disagreement regarding the ambiguity of the FCA as it applies to the states. As such,
it is possible that the Supreme Court will ultimately determine that the statutory text
and legislative history of the Act are not sufficiently precise so as to bring states
within the ambit of the FCA. However, it must be remembered that there is no per
se rule prohibiting such inclusion. This factor, in conjunction with the remedial rights
of the United States and the traditional use of the FCA by states acting as relators,
seems to lend substantial support to the decision of the Second Circuit.
B. Eleventh Amendment. As noted above, the Second Circuit determined that
qui tam suits brought by private relators against a state are effectively suits by the
United States, and, therefore, do not violate the strictures of the Eleventh70
Amendment. Several other circuit courts have reached the same conclusion.
In United States ex rel. Foulds v. Texas Tech University, however, the Fifth
Circuit stated that it was “as plain as the sun” that a private relator does in fact
commence and prosecute qui tam actions in which the government does not intervene,71
contravening the express terms of the Eleventh Amendment. In reaching this
conclusion, the Fifth Circuit criticized the approaches of other courts that have
considered the issue, proclaiming that the “real party in interest” analysis was
inappropriate. Specifically, the Foulds court determined that such an approach
66 Long, 173 F.3d at 876 (citing Will, 491 U.S. at 68-69).
67 Long, 173 F.3d at 876.
68 Id. at 877.
69 Id. at 877.
70 See United States ex rel. Rodgers v. Arkansas, 154 F.3d 965, 868 (8th Cir. 1998); United
States ex rel. Fine v. Chevron, 39 F.3d 957, 963 (9th Cir. 1994), vacated on other grounds,th
Cancer Ctr., 961 F.2d 6, 48 (4 Cir. 1992).
71 171 F.3d 279, 289 (5th Cir. 1999).
provided no basis for equating a real party in interest “with the party who72
‘commences or prosecutes’ the suit” for Eleventh Amendment purposes. Thus, the
Fifth Circuit determined that a more in-depth inquiry was required to ascertain the real
actor in qui tam suits. The court determined that the question was more complex than
other circuits had found, noting that Congress has not “specified the contours of the
relationship between the qui tam plaintiff and the United States.”73 Indeed, the Fifth
Circuit observed that the relationship could be characterized at one extreme as the
government yielding complete control of the suit to the plaintiff, or, on the opposite
end of the spectrum, as the deputization of each individual plaintiff to act in the74
government’s interests.
The court found that neither of these characterizations was sufficient in
explaining the relationship between the relator and the government, stating that “the
government retains some control over the qui tam suit commenced by the75
plaintiffs...but does not exercise authoritative control over the case.” Building upon
this dynamic, the court stated that even though the government is a relevant party in
suits where it has chosen to remain passive, it is not the acting party of record,
limiting its ability to challenge judicial actions. Given this, the court stated that it
would be contradictory to classify a passive party as commencing or prosecuting a76
suit under the Eleventh Amendment.
The Fifth Circuit further rejected the argument that relators are effectively
deputized in suits where the government assumes a passive role. First, the court
declared that “Congress cannot delegate to private citizens the United States’
sovereign exemption from Eleventh Amendment restrictions.” In support of this
statement, the court noted the Supreme Court’s admonition in Blatchford v. Native
Village of Noatak that “the consent ‘inherent in the convention,’to suit by the United
States–at the insistence and under the control of responsible federal officers–is not
consent to suit by anyone whom the United States might select.”77 From this
statement, the Fifth Circuit explained that the federalist principles at play in the
Eleventh Amendment context dictate “that state sovereignty is surrendered only to
another sovereign, the United States, which, of course, acts through ‘responsible78
federal officers.’”
Given this maxim, the court maintained that the historical conception of qui tam
relators as “motivated primarily by prospects of monetary reward rather than the
public good,” undermines the possibility that they are deputized “to stand in for the
‘responsible federal officers’ to whom the states have surrendered their sovereign
72 Id. at 289.
73 Id. at 289.
74 Id. at 290.
75 Id. at 290.
76 Id. at 291.
77 Id. at 292 (quoting Blatchford v. Native Village of Noatak, 501 U.S. 775 (1991).
78 Id. at 293.
rights.”79 The court also ruled that a relator is “no mere opportunistic bystander” in
qui tam litigation, but, in fact, possesses significant control over the litigation process.
Coupled with the “chimerical presence of the United States” in cases where it remains
passive, the Fifth Circuit determined that the control enjoyed by the relator constitutes
commencement and prosecution by a private citizen, in violation of the Eleventh
Amendment’s guarantee of sovereign immunity.80
This interpretation by the Fifth Circuit obviously conflicts with the Second
Circuit’s holding in Stevens, and the ultimate holding of the Supreme Court will hinge
on which analysis it deems dispositive. Comparing these differing approaches, it seems
that while the Fifth Circuit analysis is tenable, certain unique aspects of the False
Claims Act support the Second Circuit’s holding in Stevens.
Specifically, the Fifth Circuit’s decision, in rejecting the “real party in interest”
analysis applied by the other circuits, ignores the principle that the United States’
status as a party to a controversy is not determined by the “nominal party on the81
record,” but, rather, by the effect of the potential judgment or decree. In relying on
dicta in Blatchford for the proposition that the United States cannot remain passive
in a qui tam action against a state, it does not seem that the Fifth Circuit gave
sufficient weight to the fact that the decision was limited to the question of whether
the United States had delegated to Indian tribes the right to sue the states to vindicate
its interests. Specifically, the Court in Blatchford held that while the government may
bring suit to benefit particular private parties when sovereign or quasi-sovereign
interests are implicated, there was no support for the argument that the United States82
had delegated this authority. Given this application to actions by the United States
to essentially vindicate the rights of private parties, it does not seem that Blatchford
is of any real significance in the qui tam context, since such suits vindicate an injury83
only to the United States.
Also, it seems that the Fifth Circuit’s approach minimizes the actual level of
control the government possesses over passive qui tam suits. As noted by the Second
Circuit, relators are required to disclose all material evidence and information at the
outset of the suit, and the government retains the right to track the case and impose
restrictions on discovery, prevent dismissal, and seek termination upon showing of a
valid governmental purpose.84
Furthermore, the Foulds approach largely ignores the historical role of qui tam
actions in vindicating the rights of the federal government. In particular, the Fifth
Circuit’s approach incorrectly assumes that the present federal law enforcement
79 Id. at 293.
80 Id. at 293.
81 Kansas v. United States, 204 U.S. 331, 341 (1907).
82 Blatchford, 501 U.S. at 782; see also, Pennsylvania v. New Jersey, 426 U.S. 660, 665
(1976) (per curiam).
83 see United States v. Niefert-White Co., 390 U.S. 228, 231 (1968).
84 See n.54, and accompanying text, supra.
dynamic mirrors that of the eighteenth century. It is unlikely that, at the time of the
Constitutional Convention, the Framers viewed the involvement of government
attorneys as essential to a suit by the United States. Rather, it is important to note
that, at the time of the Convention, qui tam relators played a substantially larger role
than “responsible federal officers” in the propagation of such suits. This practice
relates back to the thirteenth century, when the English Crown delegated qui tam
authority to private relators due in part to the fact that the monarchy lacked a
sufficient number of prosecutors to pursue all instances of fraud. This dynamic
adhered to the early American experience as well, given that the Justice Departmentth85
was not created until the latter part of the 19 century.
Thus, while the Fifth Circuit’s approach is tenable, the structure of the FCA,
coupled with the historical aspects of qui tam litigation seem to support the Second
Circuit’s holding in Stevens.
C. Article III Standing. Shortly before hearing oral argument in Stevens, the
Supreme Court issued an order expanding the scope of its inquiry to include the
question of whether a private individual has standing under Article III to litigate
claims of fraud upon the government. Whereas the original issues in Stevens were
limited to a small subset of qui tam claims, namely suits against states, the standing
issue raised by the Court has broad implications for the constitutionality of the False
Claims Act as a whole.
Article III of the Constitution defines and limits the jurisdiction of the federal
courts to adjudication of “cases and controversies”86 The Supreme Court has
established that, to satisfy the requirements of Article III, a party bringing suit must
(1) establish an “injury in fact” (2) caused by the actions of the defendant (3) that is
redressable via a judicial decision.87
Under this standard, the standing of qui tam relators is susceptible to attack
under a variety of rationales. First, the “injury in fact” test requires not just an injury
to some inchoate interest, but, rather, that “the party seeking review be himself among
the injured.”88 As noted above a qui tam relator is not generally viewed as having
suffered any particularized, personal injury from the alleged fraud, since the only89
harmed party is the United States itself. Given this, it may be argued that the relator
is merely bringing suit to vindicate a general injury to his interests as a citizen of the
United States, which the Supreme Court has deemed an insufficient basis for90
standing.
85 See n.3 and accompanying text, supra.
86 See Flast v. Cohen, 392 U.S. 83, 94 (1968).
87 See, Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992); Steel Co. v. Citizens
for a Better Environment, 523 U.S. 83, 102-103 (1998).
88 Lujan, 504 U.S. at 63; Sierra Club v. Morton, 405 U.S. 727, 734-35 (1972).
89 Minotti v. Lensink, 895 F.2d 100, 104 (2nd Cir. 1990).
90 Lujan, 504 U.S. at 575-77.
Building upon this lack of personal injury, it could also be asserted that Congress
cannot confer standing on a relator by creating a financial interest in the suit, as
“motivation is not a substitute for the actual injury” required for a finding of91
standing. Furthermore, the aforementioned principles could buttress an argument
that, in light of the lack of a real, personal injury, Congress cannot skirt Article III
requirements by “assigning” the United States’ claim to the relator for enforcement.92
In Lujan v. Defenders of Wildlife, the Supreme Court rejected the argument that
Congress may confer standing by granting a procedural right to a private party who
has suffered no injury, as such an assignment would interfere with the authority of the
Executive Branch. Specifically, the Court explained that “to permit Congress to
convert the undifferentiated public interest in executive officers’ compliance with the
law into an ‘individual right’ vindicable in the courts is to permit Congress to transfer
from the President to the courts the Chief Executive’s most important constitutional93
duty, to ‘take care that the laws be faithfully executed.” The Court of Appeals for
the Fifth Circuit found this reasoning applicable in the qui tam context, determining94
that the False Claims Act violated the Take Care Clause of Article II.
In Riley v. St. Luke’s Episcopal Hospital, the Court of Appeals for the Fifth
Circuit held that “FCA qui tam actions in which the government does not intervene
encroach on two aspects of the Executive’s authority: (1) the discretion to decide
whether to prosecute a claim and (2) the control of litigation brought to protect the95
government’s interests.” The court stressed that “when the sole injury–the only
ticket to court–belongs to the government, the Executive’s prosecutorial discretion
must include the power to decide whether to bring suit.” Given this requirement, the
court found that qui tam suits in which the government remains passive encroach on
executive authority. Further, the court determined that the FCA limits the ability of
the Executive Branch to control the litigation, as the government may not freely
dismiss or settle the action, and cannot remove the relator under any circumstances.96
Having made this determination, the Fifth Circuit proceeded to compare the
encroachment of the FCA with the “loss of executive authority occasioned by the
independent counsel provisions at issue in Morrison v. Olson.” The court opined that
this approach was proper under its view that the Supreme Court had provided a
“thorough analysis of the Take Care Clause and its relationship to the separation of97
powers doctrine” in Morrison. In conducting this comparison, the Fifth Circuit
91 Schlesinger v. Reservists to Stop the War, 418 U.S. 208, 226 (1974).
92 See United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 748 (9th Cir. 1993).
93 Lujan, 504 U.S. at 577.
94 Riley v. St. Luke’s Episcopal Hospital, 1999 WL 1034213 (5th Cir. 1999). While the Fifth
Circuit in Riley determined that relators do indeed possess Article III standing, the court
nonetheless held that the FCA violated Article II.
95 Id. at 8.
96 Id. at 9.
97 Id. at 8,9. See also, Morrison v. Olson, 487 U.S. 654 (1988). It should be noted, however,
(continued...)
found, contrary to the determinations of other courts, that the FCA lacks four features
of the Ethics In Government Act that preserved executive control of prosecutions by
the independent counsel to sufficiently alleviate separation of powers concerns.98 First,
the court asserted that, unlike an independent counsel, the Attorney General may not
remove a relator for good cause. Second, the Attorney General has no control over
the decision whether to initiate a qui tam suit. Third, the Attorney General, according
to the Fifth Circuit, has no control over the breadth of a relator’s suit. Fourth, a
relator, unlike an independent counsel, “does not have to adhere to the rules and99
policies of the Department of Justice.” As such, the Fifth Circuit deemed such qui
tam actions unconstitutional.
In light of these factors, there is a possibility that the Supreme Court will
determine that private relators lack Article III standing. However, the aforementioned
arguments again seem to ignore the unique characteristics of qui tam litigation that
prevent the imposition of such arbitrary precedential templates.
Specifically, it should be noted that the three-part test established by the
Supreme Court for analyzing standing issues is not necessarily dispositive. Rather, the
substantive inquiry remains “whether a plaintiff” personally would benefit in a tangible100
way from the court’s intervention.’” This substantive inquiry seems to be the
appropriate analysis in the qui tam context, given that the standard delineated in Lujan
and related cases adheres to suits where parties are seeking prospective relief,
necessitating an inquiry into whether the requisite interest exists on behalf of the
plaintiff. This concern is absent in qui tam suits, however, which the Supreme Court
has recognized as “the unusual case in which Congress has created a concrete private
interest in the outcome of a suit against a private party for the government’s benefit,
by providing a cash bounty for the victorious plaintiff.”101 This conception of qui tam
litigation also comports with the historical conception of judicial power, as such
97 (...continued)
that the factors deemed dispositive by the Supreme Court in Morrison centered on an analysis
of the Appointments Clause of Article II, not the Take Care Clause, as asserted by the Fifth
Circuit in Riley. Also, in Morrison, the Supreme Court determined that the for “good cause”
removal requirement of the Ethics In Government Act did not offend the separation of powers
doctrine, as such a requirement “provides the Executive with substantial ability to enure that
the laws are ‘faithfully executed.’” Id. at 696. Furthermore, in Edmond v. United States, 520
U.S. 651, 661 (1997), the Supreme Court stated that “Morrison did not purport to set forth
a definitive test” for such constitutional inquiries. These factors, viewed in light of the
significant control the FCA gives the Attorney General over all stages of a qui tam action,
seem to belie the validity of the Fifth Circuit’s approach in Riley. See n.103 and
accompanying text, infra.
98 See Kelly, 9 F.3d at 753.
99 1999 WL 1034213 at 9-10.
100 Steel Co., 523 U.S. at 103, n.5 (quoting Warth v. Seldin, 422 U.S. 490, 508 (1975).
101 Lujan, 504 U.S. at 572-73.
statutes have been in existence since the thirteenth century in England, and have been102
employed by the United States since its inception.
Regarding separation of powers concerns, it does not seem that the FCA
encroaches upon the power of the Executive Branch in such a fashion as to render it
unconstitutional. While the Fifth Circuit’s handling of the issue is logically based, it
should be noted that, under the FCA, the Department of Justice does retain a fair
amount of control in suits in which it chooses not to intervene, through its ability to
seek dismissal, to control certain aspects of discovery, and to seek alternative103
remedies. Based upon these various factors, the Court of Appeals for the Ninth
Circuit, in United States ex rel. Kelly v. Boeing Co., determined that the “FCA gives
the Attorney General sufficient means of controlling or supervising relators to satisfy
separation of powers concerns.”104
Furthermore, it should be noted that the FCA does not appear to impermissibly
strip the Executive Branch of prosecutorial discretion, as the Fifth Circuit contends.
Rather, it would seem that a decision not to intervene in fact constitutes a delegation
of prosecutorial authority to the relator, as opposed to the elimination of such
discretion.105 This nuance stems from the fact that mere non-intervention does not
constitute an objection to the qui tam suit. Indeed, as noted by the dissent in Riley,
“the government only stands to benefit from the suit’s progress.”106 Finally, it must
be stressed that, in addition to the aforementioned controls, the Department of Justice
may prevent a relator from voluntarily dismissing a suit brought under the FCA. This
fact establishes that the government possesses discretion over a suit from its inception
to its resolution. Given this dynamic, it does not seem that the FCA is, as the Fifth
Circuit held, an impermissible encroachment on executive power. In light of these
factors it seems that the government does indeed retain substantial control over qui107
tam suits, obviating any separation of powers concerns.
Conclusion
From the above analysis, it seems that the Second Circuit correctly determined
that qui tam actions by private relators against a state comport with constitutional
requirements and accepted principles of statutory interpretation. Further, the historical
tradition of qui tam suits, coupled with the unique dynamics of relator standing under
the FCA, seems to overcome any Article III or separation of powers concerns. At the
same time, however, it is possible that the Supreme Court will circumscribe the
potential liability of the states under either the statutory or Eleventh Amendment
arguments discussed above, altering the traditional understanding and application of
qui tam litigation.
102 Marvin v. Trout, 199 U.S. 212, 225 (1905).
103 See Kelly, 9 F.3d at 753.
104 Id. at 755.
105 1999 WL 1034213 at 35 (Stewart, J., dissenting).
106 Id. at 36.
107 Id. at 36; Kelly, 9 F.3d at 755.