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112. ALLEN et al v McCURRY

This Court has never directly decided whether the rules of res judicata and collateral estoppelare generally applicable to § 1983 actions. But in Preiser v. Rodriguez, 411 U. S. 475, 497, theCourt noted with implicit approval the view of other federal courts that res judicata principlesfully apply to civil rights suits brought under that statute. See also Huffman v. Pursue, Ltd., 420U. S. 592, 606, n. 18 ; Wolff v. *97 McDonnell, 418 U. S. 539, 554, n. 12 .[9] And the virtuallyunanimous view of the Courts of Appeals since Preiser has been that § 1983 presents nocategorical bar to the application of res judicata and collateral estoppel concepts. [10] Thesefederal appellate court decisions have spoken with little explanation or citation in assuming thecompatibility of § 1983 and rules of preclusion, but the statute and its legislative history clearlysupport the courts' decisions.97Because the requirement of mutuality of estoppel was still alive in the federal courts until wellinto this century, see Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation,supra, at 322-323 , the drafters of the 1871 Civil Rights Act, of which § 1983 is a part, may havehad less reason to concern themselves with rules of preclusion than a modern Congress would.Nevertheless, in 1871 res judicata and collateral estoppel could certainly have applied in federal

suits following state-court litigation between the same parties or their privies, and nothing in thelanguage of § 1983 remotely expresses any congressional intent to contravene the commonlawrules of preclusion or to repeal the express statutory *98 requirements of the predecessor of 28 U. S. C. § 1738, see n. 8, supra. Section 1983 creates a new federal cause of action. [11]It says nothing about the preclusive effect of state-court judgments. [12]98Moreover, the legislative history of § 1983 does not in any clear way suggest that Congressintended to repeal or restrict the traditional doctrines of preclusion. The main goal of the Actwas to override the corrupting influence of the Ku Klux Klan and its sympathizers on thegovernments and law enforcement agencies of the Southern States, see Monroe v. Pape, 365U. S. 167, 174, and of course the debates show that one strong motive behind its enactmentwas grave congressional concern that the state courts had been deficient in *99 protectingfederal rights, Mitchum v. Foster, 407 U. S. 225, 241-242 ; Monroe v. Pape, supra, at 180 .[13]But in the context of the legislative history as a whole, this congressional concern lends onlythe most equivocal support to any argument that, in cases where the state courts haverecognized the constitutional claims asserted and provided fair procedures for determiningthem, Congress intended to override § 1738 or the common-law rules of collateral estoppel andres judicata. Since repeals by implication are disfavored, Radzanower v. Touche Ross & Co.,426 U. S. 148, 154, much clearer support than this would be required to hold that § 1738 andthe traditional rules of preclusion are not applicable to § 1983 suits.

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113. Anderson v. Liberty LobbyAnderson v. Liberty Lobby, Inc.

477, U.S. 242, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)

Fac ts of the C ase:

Liberty Lobby, In c. (Liberty), a nonprofit " citizen's lobby" corpor ation, filed a libel ac tionaga insta magazine published by J ack Anderson et al. Liberty claimed th at one ofAnderson's articlescontained f alse and dero gatory st atements a bout its oper ations. In itsdefense, Anderson claimedthat as a pubic entity Liberty must show with " convin cing clarity"th at Anderson acted withactual malice - somethin g they could not do sin ce the article'sauthor st ated in an affid avit that hethorou ghly rese ar ched and cross- check ed all hisinform ation. Liberty claimed th at Anderson did

act with actual malice sin ce its authordepended on p atently unreli a ble sour ces. Followin g a district court's summ ary jud gmentrulin g f avoring Anderson, an a ppell ate court reversed as it heldthat the lower courterroneously a pplied actual malice standards of proof at the summ ary

judgement ph ase.Anderson a ppealed and the Supreme Court gr anted certior ari.

Question:

Can a court, in the context of a summ ary jud gment request, award summ ary jud gment in alibelaction if the movin g party had no eviden ce that a reasona ble jury mi ght disbelieve itsopponent'sclaim?Con clusion:

No. In a 6-to-3 opinion, the Court held th at the purpose of summ ary jud gments is to determineif the eviden ce is so one-sided th at a party should prev ail as a matter of l aw. Summ aryjud gmentswill not lie if there is a suffi cient li k elihood th at a reasona ble jury would return averdictf avor a ble to the nonmovin g party. In libel cases involvin g public entities, tri al courtsf aced withsumm ary jud gment motions must de cide whether a reasona ble jury couldconclude withconvin cing clarity th at actual malice existed. The mere assertion by a plaintiffth at a defend ant'ssumm ary jud gment motion is defi cient be cause a reasona ble jury mi ghtdisbelieve the defend ant'sdenial of actual malice is insuffi cient to w arr ant a gr ant ofsumm ary jud gment without any offer of evidenti ary proof to th at effe ct. The Court reversed the a ppell ate

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Liberty Lobby w as a neo-N azi or ganization. A m aga zine ca lled "The Investi ga tor" (represented by Anderson), published some articles (written by Berm ant) a bout Liberty Lobby. Liberty Lobbysued for libel, s aying that the articles were f alse and def amatory.

At Tri al, Anderson motioned for summ ary jud gment under Rule 56, on the b asis th at Liberty

Lobby w as required to prove th at the articles were published with " actual malice," whi ch theydidn't do.

That was the st andard est a blished by New Yor k Times v. Sulliv an (376 U.S. 254, 279-280(1964)). It's a pretty hi gh standard.

Berment presented an affid avit claimin g that all of his st atements were b ased on rese ar ch, and he provided sour ces for all of the st atements Liberty Lobby claimed were libelous.

Liberty Lobby countered by claimin g that Berm ant's sour ces were all unreli a ble and that theyhad willfully f ailed to verify their inform ation before publi cation.

The Tri al Court found for Anderson in summ ary jud gment. Liberty Lobby a ppealed.

The Appell ate Court affirmed summ ary jud gment as to some of the allegedly def amatorystatements, but reversed as to others. Anderson a ppealed.

The Appell ate Court found th at the hei ghtened evidenti ary requirements to a pply "proof of actualmalice" did not need to be considered for the purpose of a motion for summ ary jud gment.

The US Supreme Court reversed the Appell ate Court and rem anded the case for tri al.

The US Supreme Court found th at the Appell ate Court did not a pply the correct standard inreviewin g the Tri al Court's gr ant of summ ary jud gment.

When de ciding whether or not summ ary jud gment is a ppropri ate, the jud ge must determinewhether the eviden ce presented is su ch that there is no genuine m aterial issue of f act, and as suchonly an issue of l aw exists. In this case, this issue of l aw is whether or not Anderson's action riseto the evidenti ary st andard of "proof of actual malice." As su ch, the jud ge is required todetermine if a reasona ble jury mi ght find th at that actual malice had been shown with convin cing clarity.

The Appell ate Court erred by only considerin g issues of f act, but not loo k ing at those f acts to seeif they met the proper evidenti ary st andard.

Basica lly, in analyzing summ ary jud gment, one must distin guish between the burden of produ ction and the burden of persu asion ( aka burden of proof). The burden of produ ction is theobligation of a side to come forw ard with eviden ce to support its claim, while the burden of

proof is wh at would be required to win the case. Here, the Court is s aying that if the burden of

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proof is hi gher th an norm al to win a case, then the burden of produ ction required to get summ ary judgment should also in crease.

Since the Appell ate Court f ailed to consider the in creased burden of produ ction, their de cision isoverturned.

Even more b asica lly, if a lawsuit requires th at you prove somethin g is "more li k ely th an not"(51%), then you only h ave to show th at you h ave "some" eviden ce in order to get to a jury.However, if you h ave to prove somethin g "beyond a reasona ble doubt" (~99%), then you h ave toshow th at you h ave "a whole lot" of eviden ce in order to get to a jury, "some" eviden ce won't cutit. If you can't show th at you h ave at least a decent chance of winnin g based on the a ppropri ateevidenti ary st andard, then a judge won't even let you tell it to a jury

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Anderson v. Liberty Lobby , 477 U.S. 242 (1986), is aUnited St ates Supreme Court casearticulating the st andard for a trial court to gr antsumm ary jud gment. Summ ary jud gment will liewhen, t ak ing all f actual inferen ces in the non-mov ant's f avor, there exists no genuine issue as toa material f act su ch that the mov ant deserves jud gment as a matter of l aw. Be cause a ppell atecourts always re cite Liberty Lobby when reviewin g a trial court's gr ant of summ ary jud gment,

Liberty Lobby is the most quoted Supreme Courtcase.http://en .wikiped ia.org / wiki/ Ande rso n_v . _Libe rty_Lobby,_ Inc . - cite_n ote -mos t-0

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114. Anza v Ideal Steel

Appli cation of common-l aw prin ciples of proxim ate causation beyond the dire ctness requirementlik ewise supports a findin g that causation w as suffi ciently ple aded in this case. Thou gh the H olmes Court noted th at dire ctness w as "one of [the] centr al elements" it h ad considered inevaluating causation, it re cognized th at proxim ate causation too k "many sha pes" at common l aw.

Id., at 268, 269. Cf. Prosser & Keeton § 42, at 273 (notin g "two contr asting theories of le ga lcause," one extendin g lia bility to, but not beyond, "the s cope of the `foresee a ble ris k s,'" and theother extendin g lia bility to, but not beyond, all "`dire ctly tr acea ble'" consequen ces *470 andthose indire ct consequen ces that are foresee a ble). [6] The proxim ate cause limit ation serves toensure th at "a defend ant is not answer a ble for anythin g beyond the n atur al, ordin ary andreasona ble consequen ces of his condu ct." Sutherl and 57. "If one's f ault ha ppens to concur withsomethin g extr aordinary, and therefore not li k ely to be foreseen, he will not be answer a ble for

such unexpe cted result." Ibid. Based on this prin ciple, courts h ave histori ca lly found proxim atecausation for injuries from n atur al causes, if a wron gful act "rendered it prob a ble th at such aninjury will o ccur," id., at 62; for injuries where the pl aintiff's reli ance is the immedi ate cause,such as in an action for fr aud, so lon g as the reli ance was "re asona bly indu ced by the prior miscondu ct of the defend ant," id., at 62, 63; and for injuries where an inno cent third p artyintervenes between the tortfe asor and the vi ctim, su ch that the inno cent third p arty is theimmediate cause of the injury, so lon g as the tortfe asor "contributed so effe ctually to [the injury]as to be re garded as the effi cient or at least concurrent and responsible cause," id., at 64, 65(emph asis deleted).

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115. Ashe v SwentonAshe v. Swenson, 397 US 436

The Double Jeop ardy Cl ause is a guar antee "th at the St ate with all its resour ces and power[sh all]

not be allowed to m ak e repe ated attempts to convi ct an individu al for an alleged offense,thereby

subje cting him to emb arr assment, expense and orde al and compellin g him to live in acontinuin g

state of anxiety and inse curity. . . ." G reen v. United States, 355 U. S. 184, 187(1957) . This

guar antee is expressed as a prohibition aga inst multiple prose cutions for the"s ame offen ce."

Althou gh the phr ase "same offen ce" a ppeared in most of the e arly commonl awarticulations of

the double-jeop ardy *451 principle, [1] questions of its pre cise me aning r arelyarose prior to the18th century, and by the time the Bill of Ri ghts w as adopted it h ad not been authorit atively

defined. [2]

451

When the common l aw did fin a lly attempt a definition, in The King v. Vandercomb, 2 Leach708,

720, 168 En g. Rep. 455, 461 (Crown 1796), it adopted the "s ame eviden ce" test, whi chprovided

little prote ction from multiple prose cution:"[U]nless the first indi ctment were su ch as the

prisoner mi ght have been convicted upon by proof of the f acts contained in the se cond

indictment, anacquitt al on the first indi ctment can be no b ar to the se cond."The "s ame eviden ce"

test of "s ame offen ce" was soon followed by a ma jority of Ameri canjurisdi ctions, but its

deficiencies are obvious. It does not enfor ce but virtu ally annuls the constitution al guar antee. For

example, where a single crimin al episode involves sever al victims,under the "s ame eviden ce"

test a separ ate prose cution m ay be brou ght as to e ach. E. g., State v. H oag, 21 N. J. 496, 122 A.

2d 628 (1956), aff'd, 356 U. S. 464 (1958) . The "s ame eviden ce"test permits multiple

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prose cutions where a single tr ansaction is divisible into chronolo gica llydiscrete crimes. E. g.,

Johnson v. Commonwealth, 201 Ky. 314, 256 S. W. 388 (1923) (each of75 po k er hands a

separ ate "offense"). Even a single crimin al act may lead to multipleprose cutions if it is viewed

from the perspe ctives of different st atutes. E. g., *452 State v. Elder, 65 Ind. 282 (1879) . Given

the tenden cy of modern crimin al legislation to divide the ph ases of acrimin al tr ansaction into

numerous sep ar ate crimes, the opportunities for multiple prose cutionsfor an essenti ally unit ary

crimin al episode are fri ghtenin g. And given our tr adition of virtu allyunreview a ble prose cutorial

discretion concernin g the initi ation and scope of a crimin alprose cution, [3] the potenti alities for

a buse inherent in the "s ame eviden ce" test are simplyintoler a ble. [4]

"Coll ater al estoppel" is an awk ward phr ase, but it st ands for an extremely import ant prin ciple

inour advers ary system of justi ce. It me ans simply th at when an issue of ultim ate f act has

oncebeen determined by a valid and fin al judgment, th at issue cannot aga in be liti ga ted between

thesame p arties in any future l awsuit. Althou gh first developed in civil liti gation, collater al

estoppelh as been an est a blished rule of feder al crimin al law at least sin ce this Court's de cision

moreth an 50 ye ars ago in United States v. Oppenheimer, 242 U. S. 85 . As Mr. Justi ce Holmes

putthe m atter in th at case, "It cannot be th at the s afeguards of the person, so often and so

rightlymentioned with solemn reveren ce, are less th an those th at prote ct from a lia bility in debt."

242U. S., at 87 .[7] As a rule of feder al law, therefore, "[i]t is mu ch too l ate to su ggest th at

thisprin ciple is not fully a pplica ble to a former jud gment in a crimin al case, either be cause of

lack of `mutu ality' or be cause the jud gment m ay refle ct only a belief th at the Government h ad

notmet the hi gher burden of proof ex acted in su ch cases for the Government's eviden ce as a

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whole althou gh not ne cessarily as to every lin k in the chain." United States v. Kramer, 289 F. 2d

909,913 .

*444

The feder al decisions h ave m ade clear that the rule of collater al estoppel in crimin al casesis not

to be a pplied with the hyperte chnica l and ar chaic a ppro ach of a 19th century ple ading boo k , but

with re alism and r ationality. Where a previous jud gment of acquitt al was based upon a gener al

verdict, as is usu ally the case, this a ppro ach requires a court to "ex amine the re cordof a prior

pro ceeding, tak ing into account the ple adings, eviden ce, char ge, and other relev antmatter, andconclude whether a r ational jury could h ave grounded its verdi ct upon an issueother th an that

which the defend ant see k s to fore close from consider ation." [8] The inquiry "mustbe set in a

pr actica l fr ame and viewed with an eye to all the cir cumst ances of the pro ceedings."Sealfon v.

United States, 332 U. S. 575, 579 . Any test more te chnica lly restri ctive would, of course, simply

amount to a rejection of the rule of collater al estoppel in crimin a l pro ceedings,at least in every

case where the first jud gment w as based upon a gener al verdi ct of acquitt al.[9]

444

*445

Str aightforw ard a pplication of the feder al rule to the present case can lead to but one conclusion.

For the re cord is utterly devoid of any indi cation th at the first jury could r ationallyhave found

that an armed robbery h ad not o ccurred, or th at Knight had not been a victim of th atrobbery. The

single r ationally conceiva ble issue in dispute before the jury w as whether thepetitioner h ad been

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one of the robbers. And the jury by its verdi ct found th at he had not. Thefeder al rule of l aw,

therefore, would m ak e a second prose cution for the robbery of Robertswholly impressible.

445

The ultim ate question to be determined, then, in the li ght of B enton v. Maryland, supra ,

iswhether this est a blished rule of feder al law is embodied in the Fifth Amendment

guar anteeaga inst double jeop ardy. We do not hesit ate to hold th at it is. [10] For wh atever else th at

*446 constitution al guar antee m ay embr ace, North Carolina v. Pearce, 395 U. S. 711, 717, it

surelyprote cts a man who h as been acquitted from h aving to "run the gantlet" a second time.G reen v. United States, 355 U. S. 184, 190 .

446

The question is not whether Missouri could v alidly char ge the petitioner with six

separ ateoffenses for the robbery of the six po k er players. It is not whether he could h ave re ceived

a totalof six punishments if he h ad been convicted in a single trial of robbin g the six vi ctims. It

issimply whether, after a jury determined by its verdi ct that the petitioner w as not one of

therobbers, the St ate could constitution ally hale him before a new jury to liti gate that issue

aga in.After the first jury h ad acquitted the petitioner of robbin g Knight, Missouri could certainly

nothave brou ght him to tri al aga in upon th at char ge. Once a jury h ad determined upon

conflictingtestimony th at there w as at least a reasona ble doubt th at the petitioner w as one of the

robbers,the St ate could not present the s ame or different identifi cation eviden ce in a

secondprose cution for the robbery of Kni ght in the hope th at a different jury mi ght find th at

eviden cemore convin cing. The situ ation is constitution ally no different here, even thou gh the

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second tri alrelated to another vi ctim of the s ame robbery. For the n ame of the vi ctim, in the

cir cumst ancesof this case, had no be aring whatever upon the issue of whether the petitioner w as

one of therobbers.

*447

In this case the St ate in its brief h as fr ank ly conceded th at followin g the petitioner's acquitt al, it

treated the first tri al as no more th an a dry run for the se cond prose cution: "Nodoubt the

prose cutor felt the st ate had a prova ble case on the first char ge and, when he lost, hedid wh at

every good attorney would do²he refined his present ation in li ght of the turn of events at thefirst tri al." But this is pre cisely wh at the constitution al guar antee forbids.

447

The jud gment is reversed, and the case is rem anded to the Court

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116. BMW v Gore

The Due Pro cess Cl ause of the Fourteenth Amendment prohibits a State from imposin g a

"`grossly ex cessive'" punishment on a tortfe asor. TXO Produ ction Corp. v. Alli ance Resour ces

Corp., 509 U. S. 443, 454 (1993) ( and cases cited). The wron gdoing involved in this case was the

decision by a national distributor of automobiles not to advise its de alers, and hen ce their

customers, of predelivery d amage to new cars when the cost of rep air amounted to less th an 3

per cent of the car's su ggested ret ail price. The question presented is whether a $2 million

punitive d amages award to the pur chaser of one of these cars ex ceeds the constitution al limit.

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117. CELOTEX CORPv CATRETT

Once the movin g party has attack ed wh atever re cord eviden ce -- if any -- the

nonmovin g party purports to rely upon, the burden of produ ction shifts to the nonmovin g

party, who must either

(1) reh a bilit ate the eviden ce attack ed in the movin g party's p a pers,

(2) produ ce addition al eviden ce showin g the existen ce of a genuine issue for tri al

as provided in Rule 56(e), or

(3) submit an affid avit expl aining why further dis covery is ne cessary as provided

in Rule 56(f). See 10A Wri ght § 2727, pp. 138-143.

Summ ary jud gment should be gr anted if the nonmovin g party f ails to respond in

one or more of these w ays, or if, after the nonmovin g party responds, the court

determines th at the movin g party h as met its ultim ate burden of persu ading the court th at

there is no genuine issue of m aterial f act for tri al.See, e.g., First National B ank of Arizona

v. Cities Service Co. 391 U. S. 253 ,391 U. S. 289 (1968).

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118. Corsello v Lin care

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119. G alindo v Precision American

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120. G RAHAM v US ex rel WILSON

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121. Hughes Aircraft v US ex rel Schumer

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122. J ONES v THOMAS

JONES V. THOMAS, 491 U. S. 376 (1989)

Case Preview

Full Text of C ase

U.S. Supreme Court

Jones v. Thom as, 491 U.S. 376 (1989)

Jones v. Thom asNo. 88-420

Ar gued April 26, 1989

Decided June 19, 1989

491 U.S. 376

CERTIORARI TO THE UNITED STATES COURT O F APPEALS FOR

THE EIGHTH CIRCUIT

[491 U. S] P age 396

The Double Jeop ardy Cl ause is and has always been, not a provision desi gned to assure re asonand justi ce in the p articular case, but the embodiment of te chnica l, prophyl actic rules thatrequire the G overnment to turn square corners [paraphrased from Oliver Wendell Holmes1920, see below] . Whenever it is a pplied to rele ase a crimin al deservin g of punishment, itfrustr ates justi ce in the p articular case, but for the greater purpose of assurin g repose in thetotality of crimin al prose cutions and senten ces. There are many ways in whi ch these te chnica lrules mi ght be desi gned. We chose one a ppro ach in B radley -- undoubtedly not the only possiblea ppro ach, but also not one th at can be s aid to be clearly wron g. (The f act that it produ ces a "windf all" sep ar ates it not at all from other a pplica tions of the double jeop ardy guar antee.) With

technica l rules, a bove all others, it is imper ative th at we adhere stri ctly to wh at we h ave st atedthe rules to be. A te chnica l rule with equit a ble ex ceptions is no rule at all. Three stri k es is out.The St ate bro k e the rules here, and must a bide by the result.

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123. K ITZMILLER v DOVER AREA SCHOOL DIST

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124. Matsushita Elec Industrial v Zenith Radio

The "dire ct ev iden ce" on whi ch the court relied w as eviden ce of other combin ations, not of a pred atorypri cing conspir acy. Eviden ce that petitioners conspired to r aise pri ces in J a pan provides

little, if any,support for respondents' [47 5 U.S. 57 4, 596] claims: a conspir acy to in crease

profits in one m ar k etdoes not tend to show a conspir acy to sust ain losses in another. Eviden ce

that petitioners agreed to fixminimum pri ces (throu gh the check -price agreements) for the

Ameri can mar k et actually wor k s inpetitioners' f avor, be cause it su ggests th at petitioners were

seek ing to place a floor under pri ces r atherth an to lower them. The s ame is true of eviden ce that

petitioners agreed to limit the number ofdistributors of their produ cts in the Ameri can mar k et -

the so- called five company rule. Th at pr acticemay have f ac ilitated a horizont al territori al

allocation, see United St ates v . Top co Asso ciates, In c., 405U.S. 596 (197 2), but its n atur al

effe ct would be to r aise m ar k et prices r ather th an redu ce them. 20Eviden ce that tends to support

any of these collater al conspir ac ies thus s ays little, if anythin g, a boutthe existen ce of a

conspir acy to char ge below-m ar k et prices in the Ameri can mar k et over a period oftwo de cades.

That bein g the case, the a bsence of any plausible motive to en gage in the condu ct char ged is

highlyrelev ant to whether a "genuine issue for tri al" exists within the me aning of Rule 56(e).

Lack of motivebe ars on the r ange of permissible conclusions th at might be dr awn from

ambiguous eviden ce: ifpetitioners h ad no r ational economi c motive to conspire, and if their

condu ct is consistent with other,equ ally plausible expl anations, [47 5 U.S. 57 4, 597 ] the

condu ct does not give rise to an inferen ce of conspir acy. See Cities Servi ce, supr a, at 27 8-280.

Here, the condu ct in question consists l ar gely of (i)pri cing at levels th at succeeded in t ak ing

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business away from respondents, and (ii) arr angements th atmay have limited petitioners' a bility

to compete with e ach other ( and thus k ept pri ces from going evenlower). This condu ct suggests

either th at petitioners beh aved competitively, or th at petitioners conspired to r aise pri ces. Neither

possibility is consistent with an agreement among 21 companies topri ce below m ar k et levels.

Moreover, the pred atory pri cing scheme th at this condu ct is s aid to prove isone th at mak es no

pr actica l sense: it ca lls for petitioners to destroy companies lar ger and betterest a blished th an

themselves, a goal that remains f ar dist ant more th an two de cades after the conspir acy's birth.

Even h ad they su cceeded in obt aining their monopoly, there is nothin g in there cord to su ggest

that they could re cover the losses they would need to sust ain along the w ay. In sum,in li ght of thea bsence of any r ational motive to conspire, neither petitioners' pri cing pr actices, northeir condu ct

in the J a panese m ar k et, nor their agreements respe cting prices and distribution in theAmeri can

mar k et, suffi ce to create a "genuine issue for tri al." Fed. Rule Civ. Pro c. 56(e). 21

On rem and, the Court of Appe als is free to consider whether there is other ev iden ce that is

suffi cientlyun ambiguous to permit a trier of f ac t to find th at petitioners conspired to pri ce

pred atorily for twode cades despite the a bsence of any a pparent motive to do so. The ev iden ce

must "ten[d] to ex clude thepossibility" th at petitioners underpri ced respondents to compete for

business r ather th an toimplement an economica lly [47 5 U.S. 57 4, 598] senseless conspir acy.

Mons anto, 465 U.S., at 7 64 . Inthe a bsence of su ch eviden ce, there is no " genuine issue for tri al"

under Rule 56(e), and petitioners areentitled to h ave summ ary jud gment reinst ated .

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125. Morlan v K elly

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126. Mulcahy v HOUSTON COMMUNITY COLLE G E

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127. North American Agricultural v Tusla Screw Products

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128. SIMON v SAN PAOLO

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129. SIMON v San PaoloIn an ac tion arisin g from pl aintiff¶s f ailed attempt to pur chase an offi ce

buildin g from defend ant, the jury found th at the p arties h ad no bindin g and

enfor cea ble agreement but th at defend ant had committed promissory fr aud. Onhis fr aud cause of ac tion, pl aintiff w as awarded $5,000 in e conomi c compens atorydamages and $1.7 million in punitive d amages. Considerin g all the relev antcir cumst ances, we conclude this award of punitive d amages ex ceeds the feder aldue pro cess limit ations outlined in re cent United St ates Supreme Court de cisions.We further conclude the m aximum award constitution ally permissible in thecir cumst ances of this case is $50,000.

[T]h at "few awards" si gnificantlyex ceedin g a [A] sin gle-digit r atio will s atisfy due

pro cess to est a blish a type of presumption: r atios between the punitive d amages award and the plaintiff's actual or potenti al compens atory d amages significantlygreater than nine or 10 to one

are suspe ct.

112. SIMON v S an Paolo, 35 C al. 4th at 1182

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130. SONY v TENNENBAUMhttp:// www.s cribd.com /d oc/ 34122318 / Sony-v-Tenen baum-Damag es-Ruling

MEMORANDUM & ORDER RE:DEFENDANT¶S MOTION FOR NEW TRIAL OR REMITTITUR

July 9, 2010

I. INTRODUCTION

This copyright case r aises the question of whether the Constitution¶s Due Pro cess Cl ause

is viol ated by a jury¶s award of $675,000 in st atutory d amages aga inst an individu al who re a ped

no pe cuniary rew ard from his infrin gement and whose individu al infrin ging acts caused the

plaintiffs minim al harm.

I hold th at it is. «

In Tenenb aum¶s case, the pl aintiffs chose st atutory d amages over actual damages as the

remedy. See 17 U.S.C. § 504( a), (c)(1). ³St atutory d amages´ are damages spe cially authorized

by Con gress th at may be obt ained even in the a bsence of eviden ce of the h arm suffered by the

plaintiff or the profit re a ped by the defend ant. Under the relev ant st atute, the jury¶s award could

be no less th an $750 for e ach wor k that Tenenb aum infrin ged and no more th an $30,000 or

$150,000, dependin g on whether the jury concluded th at Tenenb aum¶s condu ct was willful. Id. §

504( c)(1)-(2). The jury did find th at Tenenb aum willfully infrin ged the pl aintiffs¶ copyrights and

imposed d amages of $22,500 per son g, yieldin g a total award of $675,000 «

Significantly, the common-l aw do ctrine of remittitur would h ave ena bled this Court to

entirely avoid the constitution al challenge, always the better choice. Remittitur permits a court to

review a jury¶s award to determine if it is ³ grossly ex cessive, inordin ate, sho ck ing to the

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conscience of the court, or so hi gh that it would be a denial of justi ce to permit it to st and.´

Correa v. Hosp. S an Fr ancisco, 69 F.3d 1184, 1197 (1st Cir. 1995) (quotin g Sega l v. Gilbert

Color Sys., In c., 746 F.2d 78, 81 (1st Cir. 1984)). If the court so finds, it m ay redu ce the

damages, but only if the pl aintiffs acc ept the redu ced amount ; if they do not, the court is

obliged to grant a new trial . [emph asis added]

The plaintiffs in this case, however, m ade it a bund antly clear that they were, to put it

mildly, going for broke. They st ated in open court th at they li k ely would not accept a remitted

award. And at a retrial on the issue of d amages, I would aga in be presented with the very

constitution al issues th at the remittitur pro cedure w as desi gned to avoid. I am thus obli ged to

deal with Tenenb aum¶s constitution al challenge. «

These de cisions h ave unders cored the f ac t that the Constitution prote cts not only crimin al

defend ants from the imposition of ³ cruel and unusu al punishments,´ U.S. Const. amend. VIII ,

but also civil defendants facing arbitrarily high punitive awards. [emph asis added]

But sin ce constitution al rights are at issue, deferen ce [to le gislative jud gments concerning

a ppropri ate sanctions for´ copyright infrin gement] must not be sl avish and unthin k ing. This is

especially so in this case sin ce there is subst antial eviden ce indi cating that Congress did not

contempl ate that the Copyri ght Act¶s broad statutory d amages provision would be a pplied to

college students li k e Tenenb aum who file-sh ared without any pe cuniary ga in. «

Wei ghing all of these consider ations, I conclude th at the jury¶s award of $675,000 in

statutory d amages for Tenenb aum¶s infrin gement of thirty copyrighted wor k s is

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unconstitution ally ex cessive. This award is f ar greater th an necessary to serve the government¶s

legitimate interests « . In f act, it be ars no me aningful rel ationship to these obje ctives. ..

[T]he award here is simply ³unpre cedented and oppressive.´ C a pitol Re cords In c. v.Thom as, 579 F. Supp. 2d 1210, 1228 (D. Minn. 2008. It cannot withst and scrutiny under the Due

Process Cl ause. « I redu ce the jury¶s award to $2,250 per infrin ged wor k , three times the

statutory minimum, for a total award of $67,500. Si gnificantly, this amount is more th an I mi ght

have awarded in my independent jud gment. But the t ask of determinin g the a ppropri ate d amages

award in this case fell to the jury, not the Court. I h ave merely redu ced the award to the greatest

amount th at the Constitution will permit given the f acts of this case. There is no question th at this

reduced award is still severe, even h arsh. It not only adequately compens ates the pl aintiffs for the

relatively minor h arm th at Tenenb aum caused them; it sends a stron g message that those who

exploit peer-to-peer networ k s to unl awfully downlo ad and distribute copyrighted wor k s run the

risk of in currin g subst antial damages awards. Tenenb aum¶s behavior, after all, w as hardly

exempl ary. The jury found th at he not only viol ated the l aw, but did so willfully.

Redu cing the jury¶s $675,000 award, however, also sends another no less import ant

message: The Due Pro cess Cl ause does not merely prote ct lar ge corpor ations, li k e BMW and

State Farm, from grossly ex cessive punitive awards. It also prote cts ordin ary people li k e Joel

Tenenb aum

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131. STATE FARM v CAMPBELLSTATE FARM MUT. AUTOMOBILE INS. CO.V. CAMPBELL (01-1289)538 U.S. 408 (2003)P.3d, reversed and remanded.

Althou gh investi gators and witnesses concluded th at Curtis C ampbell caused an acc ident

in whi ch one person w as k illed and another perm anently dis a bled, his insurer, petitioner St ate

Farm Mutu al Automobile Insur ance Comp any (St ate Farm), contested li a bility, de clined to settle

the ensuin g claims for the $50,000 poli cy limit, i gnored its own investi gators¶ advice, and too k

the case to tri al, assurin g Campbell and his wife th at they h ad no li a bility for the acc ident, th at

State Farm would represent their interests, and that they did not need sep ar ate counsel. In f act, a

Utah jury returned a judgment for over three times the poli cy limit, and St ate Farm refused to

a ppeal. The Ut ah Supreme Court denied C ampbell¶s own a ppeal, and St ate Farm paid the entire

judgment. The C ampbells then sued St ate Farm for b ad f aith, fr aud, and intention al infli ction of

emotion al distress. The tri al court¶s initi al rulin g gr anting State Farm summ ary jud gment w as

reversed on a ppeal. On rem and, the court denied St ate Farm¶s motion to ex clude eviden ce of

dissimil ar out-of-st ate condu ct. In the first ph ase of a bifur cated tri al, the jury found

unreasona ble St ate Farm¶s decision not to settle. Before the se cond ph ase, this Court refused, in

B MW of North America, Inc. v. G ore, 517 U.S. 559 , to sust ain a $2 million punitive d amages

award whi ch accompanied a $4,000 compens atory d amages award. The tri al court denied St ate

Farm¶s renewed motion to ex clude dissimil ar out-of-st ate condu ct eviden ce. In the se cond ph ase,

which addressed, inter alia, compens atory and punitive d amages, eviden ce was introdu ced that

pert ained to St ate Farm¶s business pr actices in numerous St ates but bore no rel ation to the type

of claims underlyin g the C ampbells¶ complaint. The jury awarded the C ampbells $2.6 million in

compens atory d amages and $145 million in punitive d amages, whi ch the tri al court redu ced to

$1 million and $25 million respe ctively. Applyin g G ore, the Ut ah Supreme Court reinst ated the

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$145 million punitive d amages award. H eld: A punitive d amages award of $145 million, where

full compens atory d amages are $1 million, is ex cessive and viol ates the Due Pro cess Cl ause of

the Fourteenth Amendment . Pp. 5²19

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133. TROP v DULLESTrop v. Dulles , 356 U.S. 86 (1958)

Trop filed suit in feder al courts seek ing declar atory jud gment that he w as a U.S.citizen.

The distri ct court ruled in f avor of the government and the United St ates Court of Appe als for the Se cond Cir cuitupheld the de cision of the distri ct court.

The Supreme Court reversed. In the de cision of the court written by Chief Justice Earl Warren , the Court cited Perez v. B rownell , the Court h ad held th atcitizenship could be divested in the exer cise of the forei gn aff airs power. However,"den ationalization as a punishment is b arred by the Eighth Amendment ," as this is"the tot al destru ction of the individu al's st atus in or ganized so ciety".

In the dissent, Justi ce Felix Fr ank furter noted th at desertion from the milit ary can be punished by the death pen alty, leading him to ask , "Is constitution al dialectic so emptyof re ason th at it can be seriously ur ged th at loss of citizenship is a f ate worse th andeath?"

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134. US v BA J AK AJ IAN

United States v. Bajakajian, 524 US 321 (1998)

We must therefore rely on other consider ations in derivin g a constitution al excessiveness

standard, and there are two th at we find p articularly relev ant. The first, whi ch we h ave

emph asized in our cases interpretin g the Cruel and Unusu al Punishments Cl ause, is th at

judgments a bout the a ppropri ate punishment for an offense belon g in the first inst ance to the

legislature. See, e. g., Solem v. Helm, 463 U.S. 277, 290 (1983) (³Reviewin g courts « should

gr ant subst antial deferen ce to the bro ad authority th at legislatures ne cessarily possess in

determinin g the types and limits of punishments for crimes´); see also Gore v. United St ates, 357

U.S. 386, 393 (1958) (³Wh atever views m ay be entert ained re garding severity of punishment, «

these are peculiarly questions of le gislative poli cy´). The se cond is th at any judi cial

determin ation re garding the gr avity of a particular crimin al offense will be inherently impre cise.

Both of these prin ciples counsel aga inst requirin g strict proportion ality between the amount of a

punitive forfeiture and the gr avity of a crimin al offense, and we therefore adopt the st andard of

gross disproportion ality articulated in our Cruel and Unusu al Punishments Cl ause pre cedents.

See, e. g., Solem v. Helm, supr a, at 288; Rummel v. Estelle, 445 U.S. 263, 271 (1980).

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135. US v CONVALESCENT TRANSPORTS

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136. US v EDELSTEIN

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137. US v GROSSMAN

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138. US v HALPER

United St ates v. H alper, 490 U.S. 435, 448-49 (1989).143

[A] ctions intended to authorize crimin al punishment to vindi cate publi c justice´ « but

not to« ³ civil, remedi al ac tions brou ght prim arily to prote ct the government from fin ancial

loss,´ United States ex rel. Marcus v. H ess, 317 U.S. 537, 548, 549 (1943).

Even in those cases where the le gislature "h as indi cated an intention to est a blish a civil

penalty, we h ave inquired further whether the st atutory s cheme w as so punitive either in purpose

or effe ct," id., at 248-249, as to "tr ansfor[m] wh at was clearly intended as a civil remedy into a

crimin al penalty," Rex Trailer Co. v. United States, 350 U.S. 148, 154 (1956).

Irwin H alper w as convicted of, inter alia, violating the crimin al f alse claims st atute, 18 U.

S. C. § 287, b ased on his submission of 65 infl ated Medi care claims e ach of whi ch over char ged

the Government by $9. He w as senten ced to two ye ars' imprisonment and fined $5,000. The

Government then brou ght an action aga inst H alper under the civil Fa lse Cl aims A ct, 31 U. S. C.

§§ 3729-3731 (1982 ed., Supp. II). The remedi al provisions of the Fa lse Cl aims A ct provided

that a violation of the A ct rendered one "li a ble to the United St ates Government for a civil

penalty of $2,000, an amount equ al to 2 times the amount of d amages the Government sust ains

because of the act of th at person, and costs of the civil ac tion." Id., § 3729. Given H alper's 65

separ ate viol ations of the A ct, he a ppeared to be li a ble for a penalty of $130,000, despite the f act

he actually defr auded the Government of less th an $600. However, the Distri ct Court concluded

that a penalty of this m agnitude would viol ate the Double Jeop ardy Cl ause in li ght of H alper's

previous crimin al conviction. While expli citly re cognizing that the st atutory d amages provision

of the A ct "w as not itself a crimin al punishment," the Distri ct Court nonetheless concluded th at

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a pplication of the full pen alty to H alper would constitute a second "punishment" in viol ation of

the Double Jeop ardy Cl ause. 490 U. S., at 438-439.,´ 142

Whether Con gress, in est a blishin g the pen alizin g mechanism, indi cate[] either expresslyor impliedly a preferen ce for one l a bel or the other. Se cond, where Con gress h as indi ca ted an

intention to est a blish a civil pen alty, [w as] the st atutory s cheme ... so punitive either in purpose

or effe ct as to ne gate that intention. In re gard to this l atter inquiry, we h ave noted th at only the

clearest proof could suffi ce to est a blish the un constitution ality of a statute on su ch a ground.144

The Due Pro cess and Equ al Prote ction Cl auses already prote ct individu als from s anctionswhich are downri ght irr ational. Williamson v. Lee Optical of Okla., Inc., 348 U. S. 483 (1955).

The Ei ghth Amendment prote cts aga inst ex cessive civil fines, in cludin g

forfeitures. Alexander v. United States, 509 U. S. 544 (1993) ; Austin v. United States, 509 U. S.

602 (1993) .

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139. US v K ANELOS* 1 This is a civil False Claims Act case arising

from all eged cond uct by Kane los th at frau dulent ly

ind uced HUD to insur e mor tgages on townh om es

built by De f end ant Kane los a nd his corpora te CoDe f end ant s.

It is be fore us today upon the Plaint iff's

mo t ion for summar y judgment as to the two Fals e

Claims Act caus es of a ct ion in the Complaint . For

the reaso ns stated be low , the Plaint iff's mo t ion is

granted as to liability and den ied as to damag e

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140. US v K rizek

This a ppeal arises from a civil suit brou ght by the government aga inst a psychiatrist and

his wife under the civil Fa lse Cl aims A ct ("FCA"), 31 U.S.C. §§ 3729-3731, and under the

common l aw. The Distri ct Court found defend ants li a ble for k nowingly submittin g f alse claims

and entered jud gment aga inst defend ants for $168,105.39. The government a ppealed, and the

defend ants filed a cross- a ppeal. We hold th at the Distri ct Court erred and rem and for further

pro ceedings.

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141. US v MENDOZA

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142. US v MILLSUnited St ates Court of Appe als,Sixth Cir cuit.

UNITED STATES v. MILLSUNITED STATES of Ameri ca , Plaintiff-Appell ant, v. Alton R ay MILLS and Stephen

D. To armina, Defend ants-Appellees.

No. 97-5085.

Ar gued M ar ch 11, 1998. -- M ar ch 31, 1998

The government also insists th at the s alaries p aid to the n amed co-conspir ators whoobtained deputy sheriff positions could not h ave been bon a fide be cause of the ille ga l nature

of the employment pro curement pro cess. They ar gue that the subse ction ( c) exception

cannot, therefore, be a pplied to these de alings. Unfortun ately for the government, the

indictment does not allege that the jobs in question were unne cessary or th at the individu als

who obt ained those employment positions did not responsibly fulfill the duties associated with

their employment. In the a bsence of su ch allegations, the government h as no support for its

claims th at the s alaries p aid to the deputy sheriffs were not properly e arned ³in the usu al

course of business.´

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143. US v PetersUnited states v Peters 927 Federal Supp 1996

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144. US v PIMENTEL

Defend ant's Crimin al conviction will h ave a preclusiveeffe ct in the inst ant civil liti ga tion if

wefind th at in re aching the guilty verdi ct the jury ne cessarilyand spe cifica lly de cided the

elements th atconstitute a civil Fa lse Cl aims A ct violation.

1993 WL 287991, at *5.

Mag istr ate Jud ge Fox's Report of September 24,1997 re commended th at we gr ant plaintiff's

motionfor p artial summ ary jud gment as to li a bility for theshipment p ayments. Our adoption of

that report, combined with our findin g of lia bility for the pro gressp ayments in 1993, left only the

issue of actualdamages open for resolution at trial.

Thus, the combin ation of our 1993 opinion and our adoption of the m ag istr ate jud ge's report

indicatethat we h ave found th at the crimin al conviction collater allyestops defend ants on the

ma jor issues ofthis case. Defend ant, pointin g out th at this is³offensive´ use of collater al estoppel,

refers to anopinion by Jud ge Brie ant whi ch, citing Parklane H osiery v. Shore (1979) 439 U.S.

322, observedth at we h ave dis cretion not to a pply su ch affirm ativeuse. However, we believe th at

the Parklane opinion clearly indi ca tes th at we should not usesu ch discretion in this case.

Speak ing of the r ather compli cated set of f acts in the case before it, the Parklane court observed

(at pp. 331-32):

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In the present case, however, none of the cir cumst ancesthat might justify relu ctance to allow the

offensiveuse of collater al estoppel is present. The a pplicationof offensive collater al estoppel will

nothere rew ard a private plaintiff who could h avejoined in the previous action, sin ce the

respondentprob a bly could not h ave joined in the injun ctive actionbrou ght by the SEC even h ad

he so desired.Simil arly, there is no unf airness in this case. First,in li ght of the serious allegations

made in the SEC's complaint aga inst the petitioners, as well as theforesee a bility of subsequent

private suits th at typica llyfollow a successful Government jud gment, thepetitioners h ad every

inventive to liti ga te the SECl awsuit fully and vigorously. Se cond, the jud gmentin the SEC action

was not in consistent with anyprevious de cision. Finally, there will in the respondent's action beno pro cedur al opportunities availa ble to the petitioners th at were un availa ble inthe first action of

a k ind th at might be li k ely to cause a different result.

*2 It seems to me th at all the consider ations mentionedby the Court are here present.

As for the positions st ated in the defend ants' ³T a bleof Contents,´ the fore going disposes of

points (3) and (4). With re gard to point (7), ³Motion to Ex cludeµCertificate of Current Cost or

Pricing Data,´¶ the defend ants' ar gument in support of th at positionboils down to the assertion

that it w as error forthe crimin al trial court to h ave re ceive in eviden cethat certificate. Th at

ar gument h as been disposed ofby our rulin g as to collater al estoppel.Defend ant's point (9) refers

to a demand for a jurytri al. Defend ant concedes th at the dem and wasmade six d ays late, in

violation of Fed.R.Civ.P.38(b) ; we find th at he has stated no pl ausible ex cusefor su ch viol ation.

That request is denied.

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The rem aining points r aise the s ame questions asthose presented by the pl aintiff's motion, whi ch

weshall now consider. Pl aintiff's proposed calculationof d amages is as follows: The cost the

governmentwould h ave p aid had the contr act been honestly bidby defend ant is to be subtr acted

from the government's actual cost of enterin g into the contr act withthe fr audulent costs in cluded.

While the le gislativehistory of the Fa lse Cl aims A ct suggests th at weh ave consider a ble dis cretion

in f ashionin g a mechanismfor determinin g actual damages, the Se condCir cuit gives us little

guidance on the subje ct.Loo k ing outside the Cir cuit, we find two caseswhi ch employed the

method outlined a bove in cir cumst ancesanalogous to the case at bar. See UnitedStates ex rel.

Taxpayers Against Fraud v. SingerCo. (4 th Cir.1989) 889 F.2d 1327 and In re B icoastalCorporation (Bank r.M.D. Fla.1991) 124B.R. 598 . We find the d amages ca lculation

used inthose cases to be an a ppropri ate remedy for the inst antcase.

Having chosen th at method, we find defend ant's ac tualcost experien ce to be irrelev ant. As a

result, attrial defend ant will not be permitted to introdu ceany eviden ce relating to: (1) whether or

not he lostmoney on these contr acts; (2) whether he did or didnot use he at treatment; (3) or

whether he in f ac tbought aluminum from the supplier indi cated on his cost estim ates. Simil arly,

defend ant will not be permittedto introdu ce eviden ce regarding his so- ca lled³set-off´ claims.

Turnin g then to the elements of proof left for tri al,we h ave three categories of d amages at issue:

(1)he at treatment; (2) wheel a br ation; and (3) aluminum.With re gard to he at treatment and

aluminumpri cing, the government need only demonstr atewh at it actually paid for su ch elements

as well aswhat it would h ave paid in the a bsence of fr aud.This is be cause the jury at defend ant's

crimin al trialconclusively determined th at the defend ant intention allysubmitted f alse claims for

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heat treatment and aluminum pri cing. With re gard to wheel a br ation,the government must prove

that defend ant intention allysubmitted f alse claims for wheel a br ating(i.e., li a bility) before we can

move to the d amagesinquiry. The government cannot t ak e advantage ofoffensive collater al

estoppel on the wheel a br ationclaims be cause they were not in cluded in the indi ctment.

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145. US v Ro gan

http://c ase law.fi nd law. com / us-7 th -circuit/ 1471827. ht ml

Un ited State s Cour t of Appe als ,Seventh Circuit .Reset AAFont size: Print ShareTh is

UNITED STATESv. ROGANUNITED STATES of Ame rica, Plaint iff-Appe llee, v. Pete r G. ROGAN, De f end ant -Appe llant .

No. 06-4144.

Argued Sept . 21 , 2007. -- F ebruar y 20 , 2008

³pen alties under the False Cl aims A ct are not crimin al punishment for the purposeofthe Double Jeop ardy Cl ause in the Fifth Amendment.201D

It is far from clear that the Excessive Fines Clause applies to civil actions under the False Claims Act.Browning-Ferris Industries of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 109 S.Ct. 2909, 106L.Ed.2d 219 (1989), holds that punitive damages are not ³fines´ under the Eighth Amendment, and trebledamages are often grouped with punitive damages. We know from Hudson v. United States, 522 U.S.93, 118 S.Ct. 488, 139 L.Ed.2d 450 (1997), overruling United States v. Halper, 490 U.S. 435, 109 S.Ct.1892, 104 L.Ed.2d 487 (1989), that penalties under the False Claims Act are not criminal punishment forthe purpose of the Double Jeopardy Clause in the Fifth Amendment. Perhaps this means that theExcessive Fines Clause also is inapplicable, though Browning-Ferris does qualify its holding by saying thatpenalties paid to the sovereign can be ³fines´ under the Eighth Amendment. 492 U.S. at 265, 109 S.Ct.2909. The False Claims Act has a penal component, no doubt, see Cook County v. United States ex rel.Chandler, 538 U.S. 119, 130, 123 S.Ct. 1239, 155 L.Ed.2d 247 (2003), but ³penal´ does not mean³excessive,́ for ³judgments about the appropriate punishment for an offense belong in the first instanceto the legislature.´ United States v. Bajakajian, 524 U.S. 321, 336, 118 S.Ct. 2028, 141 L.Ed.2d 314(1998).

All of this leaves the law unsettled.

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GET ME

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146. US v SAIC

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147. US v SAZAMA A. Factual B ackground This case involves a civil action, filed by the United St ates subsequent to a crimin al ac tion

arisin g out of the s ame oper ative f acts, aga inst G ary P. S azama individu ally, and Gary P.Sazama, Ph.D., the profession al corpor ation (here after collectively referred to as "Sazama")through which Sazama condu cted business as a Licensed Clini ca l Psycholo gist in Lo gan, Ut ah.From a pproxim ately June 1992 to Au gust 1995, S azama submitted 79 f alse insur ance billin gs toMedi ca id and 31 su ch claims to Civili an Health and Medi ca l Pro gr am of the Unifonned Servi ce("CHAMPUS"), a feder ally funded medi ca l benefits pro gr am est a blished to provide fin ancialhealthcare assist ance to unifonned servi ce personnel and their f amilies. In order to f ac ilitate thefr audulent billin g, Sazama hired unli censed psy cholo gists and unli censed clinica l social wor k erswho followed S azama's instru ction and proto cols. In September 1996, S azama was indi cted by a Gr and Jury on 66 counts of m ail fr aud (18 U.S. c. § 1341), f alse, fi ctitious and fr audulent claims(18 U.s. c. § 287), and aiding and a bettin g (18 U.s. c. § 2). In September 1997, S azama enteredinto a Plea and Cooper ation A greement (the "A greement") wherein he pled guilty to the firstcount of the pendin g Indictment whi ch stated: False Cl aims under Title 18, Se ction 287 of theUnited St ates Code, char ging that he m ade and presented to Medi ca id, an agency of the UnitedStates, a claim, k nowin g such claim to be f alse, on or a bout June 10, 1992. The A greement alsostated, inter alia, that "[t]he ple a agreement, also, does not b ar or compromise any civil or administr ative claim pendin g or that may be m ade aga inst the S azama." In addition, S azama agreed to m ak e payments of $10,802.00 ($50.00 assessment + $7,000.00 fine + $3,752.00restitution). In return, the prose cuting attorney su ccessfully moved to dismiss the rem aining 65

counts aga inst S azama.On M ar ch 23, 1998, the United St ates initi ated a civil lawsuit aga inst S azama alleging violations

under the Fa lse Cl aims A ct, 31 U.s. c. §§ 3729-3733 (" FCA") and common l aw fr aud, based onthe ex act oper ative f acts that gave rise to the e arlier crimin al char ges aga inst S azama. In itsrequest for relief, the United St ates sou ght treble d amages in the amount of $34,137 (three timesthe $11,379 p aid by Medi ca id ($4,424) and CHAMPUS ($6,955» and civil * 1272 pen alties inthe amount of $550,000 to $1,100,000 (b ased on common l aw fr aud).

On O ctober 1, 1998, pl aintiff United St ates moved for p artial summ ary jud gment on the issues of lia bility and damages, ar guing that no genuine issue of m aterial f act existed as to civil li a bility as

a result of S azama 's crimin al plea. The issue of civil pen alties w as not p art of the Motion for Partial Summ ary Jud gment ("Motion").

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149. US v SHELBOURNE

The FCA¶s statute of limit ations is six ye ars from the d ate of filin g a f alseclaim. 31 U.S.C.A. § 3731(b).

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150. US v ST LU K ES SUZBACUTE HOSPITAL

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151. US v SZILVA G YLWest law , 398 F.Su pp .2d 842(Cite as : 398 F.Su pp .2d 842)

Un ited State s District Court,

E.D. Mich igan, Southe rn Division .

UNITED STATES of Ame rica, Plaint iff~

v.

Elen a SZlLVAGYI, David 1. Szilvagyi, Pate rno M. Dor eza, Manue la Doreza, Prime Care Se rvice s, Inc ., and SU-PRA Ente rprises, Inc ., et al. De f end ant s.

No. Civ.04-72197.

Oct . 25 , 2005.

Backgrou nd: United State s broug ht False Claims Act (FCA) suit agai nst hom e he alth care com pany and itsowne r and employee who had pled guilty to conspiracy to commi t he alth care frau d and mail frau d, see king treble damag es and civil pen alt ies. Gove rnment mo ved for summar y judgment .

Hold ings: The District Court, Zatkoff , J., he ld th at:

( 1) de f end ant 's guil ty pleas did not prevent app licat ion of FCA statute collate rally estopp ing de f end -ant sfrom deny ing essent ial e lement s of u nde rlying convict ions;

(2) pendency of appe als from th ose criminal con-vict ions d id not prevent app licat ion of collate ral

estoppe l;(3) de f end ant s we re collate rally estopped from deny ing liability unde r FCA for conspiracy to present afalse claim;

(4) de f end ant s we re collate rally estopped from deny ing liability unde r FCA for present ing false claim;and

(5) de f end ant s we re collate rally estopped from deny ing liability unde r FCA for making false state -ment .

Mo tion for summar y judgment gra nted in par t .

West Headn ote s

II} Judgment 228 :=648

Page I

228 Ju dgment 228XIV Conc lusivene ss of Ad jud ication 228XIV(A) Judgment s Conc lusive in Gene r-al228k643 Na ture of Act ion or Othe r Pro- ceed ing

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228k648 k. Ci vil or Criminal Pro ceed -ings. Mos t Cited Cases Statute estopp ing de f end ant s convicted of off en ses involving frau d or fals e state ment s from deny ing essent ial e lement s of the ir off en ses in subs eq uent False Claims Act (FCA) suit app lied to ope ra tors of hom e he alth care se rvice s com pany whose convic-t ions we re ob tained th roug h guilty pleas ra the r th an jury trial. 31 U.S.C.A. § 3731( d).

121 Ju dgment 228 :=648

228 Ju dgment 228XIV Conc lusivene ss of Ad jud ication 228XIV(A) Judgment s Conc lusive in Gene r-al228k643 Na ture of Act ion or Othe r Pro- ceed ing 228k648 k. Ci vil or Criminal Pro ceed -ings. Mos t Cited Cases

Judgment 228 :=663

228 Ju dgment 228XIV Conc lusivene ss of Ad jud ication 228XIV(A) Judgment s Conc lusive in Gene r-al

228k663 k. P endency of Appe al. Mos t Cited Cases Criminal conv ict ions ret ained the ir prec lusive e f-f ect wh ile on appe al unde r statute collate rally es-topp ing de f end ant s in False Claims Act (FCA) suit fromdeny ing essent ial e lement s of r e lated conv ic-tions involving frau d or fals e state ment s. 31

U.S.C.A. § 3731(d).

131 Ju dgment 228 :=648

228 Ju dgment

228XlV Conc lusivene ss of Ad judicat ion 228XlV(A) Judgment s Conc lusive in Gene r-al 228k643 Na ture of Act ion or Othe r Pro- ceed ing 228k648 k. Ci vil or Criminal Pro ceed -ings. Mos t Cited Cases

Judgment 228 (;; =663

228 Ju dgment 228XIV Conc lusivene ss of Ad judication 228XIV(A) Judgment s Conc lusive in Gene r-al

228k663 k. P endency of Appe al. Mos t Cited Cases Risk th at criminal conv ict ions, which we re ent it led tostatutory collate ral estoppe l e ff ect in False Claims Act (FCA) suit broug ht by gove rnment, woul d be reve rsed on appe al did not mak e app lica-tion of statute unfair , whe re de f end ant s could see k re lie f from judgment in event the ir conv ict ions we re reve rsed . 31 U.S.CA. § 373l( d); Fed .Rules Civ.Pro c.Rule 60(b)(5) , 28 U.S.CA.

[41 Conspiracy 91 (;;=33(2.1)

91 Consp iracy

91 II Crim inal Responsibility

91 I1(A) Off en ses

91 k33 Co nsp iracy to De frau d Gove rn-ment

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91 k33(2) Par t icular Off en ses and Acts

9Ik33(2.l) k. In Gene ral. Mos t Cited Cases To establish a consp iracy to present false claim in violation of False Claims Act (FCA), the plaint iff mus t show th at the de f end ant conspired with one or mor e pe rsonsto get a fals e claim paid, and an ove rt act was pe rform ed in fur the rance of the consp iracy. 31 U.S.CA. §

3729(a)(3).

(5) Judgment 228 (;; =648

228 Ju dgment 228XlV Conc lusivene ss of Ad judicat ion

228XlV(A) Judgment s Conc lusive in Gene r-al 228k643 Na ture of Act ion or Othe r Pro- ceed ing

228k648 k. Ci vil or Criminal Pro ceed -ings. Mos t Cited Cases De f end ant s' guil ty pleas to conspiracy tocommi t he alth care frau d and mail frau d statutorily es-topped from deny ing liability for consp iracy topresent a fals e claim in False Claims Act (FCA) suit, as e lement s of the ir criminal off en se enc om- pass ed e lement s of conspiracy unde r FCA, with in meaning of FCA statute colla te rally estopp ing de -f end ant sfrom deny ing essent ial e lement s of off en se to which they p led guilty . 31 USC.A. ~ 3729(a)(3) ,373l(d).

161 Ju dgment 228 (;; =648

228 Ju dgment 228XIV Conc lusivene ss of Ad judication 228XlV(A) Judgment s Conc lusive in Gene r-al228k643 Na ture of Act ion or Othe r Pro- ceed ing

228k648 k. Ci vil or Criminal Pro ceed -ings. Mos t Cited Cases De f end ant s we re statutorily collate rally estopped trom deny ing charg e th at they presented false claim in viola t ion of False Claims Act (FCA), whe re they admitted as par t of factual basis of the ir guilty pleas to conspiracy to commi t he alth care frau d and mail frau d, th at they knowingly caus ed a fals e claim to be presented, which enc om pass ed e lement s of FCAcharg e . 31 U.S.CA. § 3729(a)(I) , 373l( d).

171 Ju dgment 228 (;; =648

228 Ju dgment 228XlV Conc lusivene ss of Ad judicat ion 228XlV(A) Judgment s Conc lusive in Gene r-al228k643 Na ture of Act ion or Othe r Pro- ceed ing 228k648 k. Ci vil or Criminal Pro cccd -ings. Mos t Cited Cases

De f end ant s we re colla te rally estopped, unde r sec -t ion of False Claims Act (FCA)prevent ing FCAde -f end ant s from deny ing essent ial e lement s of u nde r-lying criminal conv ict ions, from deny ing liability

for maki ng false record in viola t ion of FCA, by reaso n of the ir guilty pleas to conspiracy to commi t he alth care frau d and mail frau d for submi tt ing false payroll record for he alth se rvice s com pany for M ed icare re imburs ement, wh ich inc luded pay for ind ividuals pe rformi ng pe rsonal se rvice s for con-struct ion of the ir hom e . 31 U.S.C.A. § 3729(a)(2) , 3731 ( d).

18) United State s 393 <C=122

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393 U nited State s 393VIll Claims Against Un ited State s 393k 120 Maki ng or Pr esent ation of False Claimsand Othe r Off en ses Re lat ing to Claims

393k122 k. P en alties and Act ions The re -for. Mos t Cited Cases Gove rnment was ent it led to treble damag es in amou nt of $2 ,508 ,972 i n False Claims Act (FCA) suit, bas ed on unde rlying total loss to

Med icare of $836 ,324 , as established by amou nt of restitution th at de f end ant s we re orde red to pay in re lated crim-inal pros ecut ion for consp iracy to commi t he alth care frau d and mail frau d . 31 U.S.C.A. §3729(a)(7) .

[9) United State s 393 <C=122

393 U nited State s 393VIII Claims Against United State s 393k120 Maki ng or Pr esent ation of False Claimsand Othe r Off en ses Re lat ing to Claims

393k122 k. P en alties and Act ions The re -for. Mos t Cited Cases Gove rnment woul d be awar ded civilpen alty in False Claims Act (FCA) suit for each of four fals e state ment s th at de f end ant s ma de to rece ive

payment from M ed icare program bu t, abs ent showing of w hy statutory maximum of $10 ,000 s hould be awar ded, amou nt of $5 ,000 woul d be awar ded for each false state ment . 31 U.S.C.A. § 3729 et seq . * 843James A. Mitze lf e ld, Leslie Wizne r, United State s Att orney 's Office, Det roit, MI, for Plai nt iff.

* 844 Jam es W. Bur dick, Bloomfie ld Hills, MI, Tony F. Diponio, Wa de J. Spurlin, Calhoun, Dipon-io, Bingham Farms , MI, for De f end ant s.

OPINION AND ORDER

ZATKOFF, District Judge .

I. INTRODUCTION

This ma tte r is be fore the Court on Plaint iffs Mo tion for Summar y Judgment filed on July 8, 2005 [No.108]. De f end ant s have responded to Plaint iffs motion, and Plaint iff has rep lied to the response . The Court find s th at the fact s and legal argum ent s ar e adeq ua te ly presented in the par ties' pape rs a nd the dec ision proce ss woul d not be significant ly aided by oral argum ent . The re fore, pursua nt to E.D. MICH. LR7.I(e )(2), it is he reby ORDEREDth at the mo tion be resolved on the brie fs submi tted . For the reaso ns set for th be low , Plaint iffs Mo tion for Summar y Judgment is GRANTED IN PART.

II. BACKGROUND

De f end ant Elen a Szilvagyi is the sole owne r, pres-ident and ch ie f executive office r of De f end ant company Prime Care Se rvice s. De f end ant David Szil-vagyi, Elen a's husba nd, works for Prim e Care . Prim e Care provide s hom e he alth care se rvice s; e li-gible cos ts are re imburs ed by Med icare . In 1994 the Szilvagyis arra nged to have a pe rso nal residence built at 5544 Elizab eth Court, Clarkston, Mich igan.Plaint iff claims th at the builde r, Karl Lundq uist, and othe rs asso ciated with the project we re placed on Prime Care 's payroll, and the ir wag es we re wro ngfully submi tted to Blue Cross/ Blue Sh ie ld and Med icare for r e imburs ement in the years 1995 th roug h 1998.

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On Novemb e r 4, 2003 , the Szilvagyis and Prime Care we re ind icted by a f ede ral gra nd jury and charg ed with Conspiracy to Commi t Health Care Frau d and Mail Frau d (18 U.s. c. § 371) , Health Care Frau d (18U.S.c. § 1347) , and Mail Frau d (18 U.s. c. § 1347). O n Fe bruar y 10 , 2004 , the Szil-vagyis and Prime Care p led guilty to Conspiracy to Commi t Health Care Fraud and Mail Frau d . The othe r count s we re dropped .At sentenc ing, the Szil-vagyis soug ht to withd raw the ir guilty p leas , ar-gui ng th at they we re pressur ed

int o plead ing by the ir att orney s. The district cour t did not allow the m to withd raw the ir pleas; Elen a wassentenced to 48 mo nth s and David was s entenced to 30 mo nth s. They we re also or de red to pay restitution of $865 ,645 : $29 ,321 to Blue Cross Blue/ Blue Sh ie ld and 836 ,324 to Med icare . They have ap-pe aled the ir convict ions.

On June 14 , 2004 , Plaint iff filed the present suit for tre ble damag es and civil pen alt ies unde r the False Claims Act ("FCA"), 31 U.s. c. §§ 3729-33. Plai nt iff see ks treble damag es of $2 ,508 ,972 (bas ed on the judgment of 836 ,324) , and a $10 ,000 pen alty for each false claim , for a total of $2 ,548 ,972.

III. LEGAL STANDARD

Summar y judgment is app ropriate only if the an-swe rs to the inte rroga tories, dep osit ions, admis-sio ns, and plead ings combi ned with the affidavits in supp or t show th at no gen uine issue as to any ma te r-ialfact remains and the mo ving par ty is ent itled to judgment as a ma tte r of law. S ee FED. R. CIY. P. 56(c). Agen uine issue of ma te rial fa ct exists when the re is "suffi cient ev idence favoring the non-mo ving par ty for a jur y to ret urn a ve rd ict for th at par ty ." Ande rso n v. Libe rty Lobby, inc ., 477 U.S. 242 , 249 , 106 S ,Ct .2505 , 91 L.Ed .2d 202 (1986) ( cita tions omi tted ). In app licat ion of th is summar y judgment stand ard, the Court mus t view all ma te ri-als su pp lied, inc luding all p leadings, in the * 845 light mos t favorabl e to the non-mo ving par ty . See Ma tsushita £lee . Ind us. Co , Ltd . v. Zen ith Radio Corp., 475 U.S. 574 , 587 , 106 S.Ct .1348 , 89 L.Ed .2d 538 (1986) , "If the ev idence is me re ly col-orabl e or is not significant ly proba t ive, summar y judgment ma y be granted ." Ande rson, 477 U.S. a t 249-50 , 106 S.Ct . 2505 ( citations omi tted ).

The mo ving par ty bears the initial responsibility of informi ng the Court of the basis for i ts mo tion and ident if ying th ose por tions of the rec ord th at estab-lish the abs ence of a g en uine issue of ma te rial fa ct .See Ce lote x CO/p o v. Catrett, 477 U.S. 317 , 323 , 106 S.D. 2548 , 91 L.Ed .2d 265 (1986). O nce the mo vingpar ty has m et its bur den, the nonmo ving par ty mus t go beyond the p leadings and com e for-war d with spec ific facts to de mo nstra te th at the re is a gen uine issue for trial. See FED. R. CIY. P. 56(e ); Ce lote x. 477U.S. at 324 , 106 S.Ct . 2548. T he non-mo ving par ty mus t do mor e th an show th at the re is som e met aphy sical doub t as to the ma te rial fa cts. It mus t present significant proba tive ev idence in sup-por t of its opp osition to the mo tion for summar y judgment in orde r to de f eat the mo t ion for summar y judgment . See Moor e v. Philip lovlorris Com panies, 8 F.3 d 335 , 339-40 (6 th Cir.1993).

IV. ANALYSIS

Plaint iff see ks summar y judgment agai nst the Szil-vagyis and Prime Care for Cou nt s I, II, and III. Count Iconce rns the present ing of fals e claims , Count II conce rns the making of fals e rec ords in supp or t of fals e claims , and Count IIIconce rns con-spiracy to present false claims. The Szilvagyis have responded toPlaint iffs Mo t ion. Prim e Care has not, bu t the argum ent s rais ed by the Szilvagyis larg ely app ly to Prim e Care as w e ll.

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A. Liability unde r the False Claims Act

Plaint iff claims th at the Szilvagyis and Prime Care are statutorily estopped from conte sting the ir liabil-ity for the se Count s, since they p led guilty to Con-spiracy to Commi t Health Care Frau d and Mail Frau d. The FCAprovide s th at:

Notwith stand ing any othe r provision of law , the Fede ral Rules of Criminal Pro ced ure, or the Fed -e ralRules of Evidence, a final judgment rende red in favor of the United State s in any criminal pro-ceed ingcharging frau d or fals e state ment s, whethe r upon a ve rd ict af te r trial or u pon a plea of guil ty or nolocontende re, shall estop the de -f end ant from deny ing the essent ial e lement s of the off en se in any act ion wh ich involve s the sam e transact ion as in the criminal proceed ing and wh ich is broug ht unde rsubs ect ion (a) or (b) of s ect ion 3730.

31 U.s. c. § 373I( d).

The Szilvagyis rais e two mam argum ent s m re -sponse .

I. The App licability o/ Collate ral Estoppe l

[I] The Szilvagyis first argu e th at since they p led guilty, they had no mo t ivat ion to fully and fairly lit-igate the issues, and th us colla te ral estoppe l should not app ly. Th is argum ent is with ou t me rit . Collate r-alestoppe l app lies "whethe r the convict ion is ob- tained by jury ve rdict or th roug h a guil ty p lea."

U.S. v. Cripp s, 460 F.Su pp . 969 , 975 (E.D.Mich .1978). I n add ition, the languag e of § 3731( d) spec ifically provide s for estoppe l in the case of a guil ty p lea.

[2] The Szilvagyis also argu e th at the app lication of colla te ral estoppe l in th is case woul d be unfair , since they atte mpted to withd raw the ir guilty p leas a nd are appe aling the ir convict ions. Cour ts have * 846taken d iff e rent app roa che s to statutory estop-pe l provisions when the unde rlying conv ict ion has b een appe aled . In Us. v. Coas tal Gen . Constr. Se rv, 299 F.Su pp .2d 483 (D.Vi.2004) , the d istrict cour t stayed the proceed ings of the civil case wh ile the unde rlying criminal convict ion was a ppe aled . Id. a t 486 n . 3.

In cont ras t, in US v. SI. Luke 's Suba cute Hosp ., No. 00-1976 , 2004 WL 2905237 , 2004 U.S. Dis t . LEXIS25380 (N.D.Ca1.2004) , the district cour t re -jected the de f end ant 's argum ent th at it was u nfair to app ly collate ral estoppe l wh ile the unde rlying con-vict ion was a ppe aled . The cour t he ld th at: While it ma y be true th at an issue of fair ne ss is a n impor tant conside ra t ion in dete rmin ing wheth -e r to app ly the commo n law doctrine of collate ral estoppe l off en sive ly agai nst a de f end ant ... su ch conce rns ar e for the mos t par t inapp osite to the app licat ion of the statutor y estoppe l provision of the FCA. Becaus e sect ion 3731 ( d) expressly state s th at its prec lusive e ff ect app lies "notwith stand ing any othe r provision of law ,"the prudent ial limitat ions on the commo n law doc-trine do not app ly. Thus , abs ent a de gree of un-fairne ss th at rises to the leve l of a due proce ss vi-olat ion-wh ich de f end ant s cann ot cred ibly asse rt he re -the cour t mus t inte rpret sect ion 3731( d) to m ean what it says: nam e ly, th at a final judgment in any criminal proceed ing "shall estop ... de -f end ant [ s] from deny ing the essent ial e lement s" of a ny off en se in a subs eq uent civil proceed ing broug ht unde r the FCA and arising ou t of the sam e transact ion oroccurr ence .

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Id ., 2004 WL 2905237 , * 4, 2004 U.S. Dis t . LEXIS 25380, at * 12-13. The cour t granted summar y judg-ment for the Gove rnment bas ed on collate ral estop-pe l. Likewise, in Leone Ind us tries v. Associated Packaging.Inc, 795 F.Su pp . 117 (D.N.1.1992) , the district cour t den ied the de f end ant 's mo tion to stay the civilproceed ings wh ile he appe aled his criminal conv ict ion, and gra nted summar y judgment for the p laint iff.Jd. a t 118.

The Sixth Circuit has not add ressed the issue of how cour ts should hand le the statutory estoppe lprovision of the FCA when the unde rlying conv ic-tion is be ing appe aled . The Sixth Circuit has taken d iff e rent app roa che s towar ds appe als in the conte xt of commo n law colla te ral estoppe l.

In Isibor v. City oj' Fra nklin, 97-5729 , 1998 WL 344078 , 1998 U.S.App . LEXIS 10766 (6th Cir.1998) , the p laint iff was convicted of resisting arr est . The plaint iff appe aled his conv ict ion, and also filed a § 1983act ion agai nst the office rs who arr ested him. The de f end ant s argu ed th at they we re ent it led to summar y judgment becaus e of the pre -clusive e ff ect s of the conv ict ion . The Court noted th at "a final judgment ret ains its issu e -prec lusive e ff ect s pend ing dec ision of the appe al." Id. 1998 WL 344078 , * 5, 1998U.S.App . LEXIS 10766, at

* 15. How eve r, the Court he ld th a t:

In th is case we be lieve th at the prudent cours e of a ct ion is for the d istrict cour t to ret ain jurisdic-tion pend ing dec ision by the state appe llate cour t becaus e it is we ll established th at "whe re the pri-or judgment, or a ny par t the reof , re lied upon by a subs eq uent cour t has b een reve rsed, the de f en se of collate ral estoppe l evapora te s." Conseq uent ly, on remand, the district cour t should ret ain juris-dict ion of the case pend ing dec ision by the Ten -ne ssee appe llate cour ts. Howeve r, we emph asize our conc lusion th at if the state appe llate cour ts affirm Isibor's conv ict ion, the d istrict cour t should ente r summar y judgment in favor of the de f end ant s on Isibor's exce ssive force claim.

* 847 l d., 1998 WL 344078 , ** 5-6, 1998 U.S.App . LEXIS 10766, at * 16-17 ( cita tion omi tted ).

In Smith v. SEC. 129 F.3d 356 (6 th Cir.1997) , the plaint iff broug ht a dec lara tory judgment act ion agai nst the SEC regard ing the use of ce rtain ev id-ence . The SEC subseq uent ly broug ht a civil act ion agai nst p laint iff , and criminal proceed ings we re ini-tiated as we ll. The p laint iff was conv icted of the criminalcharg es, and appe aled h is convict ion. The Sixth Circuit vacated an in junct ion agai nst the civilproceed ings, not ing th at "[i]n orde r to prevail in the civil act ion, the SECnow need s on ly to mo ve forsummar y judgment on the basis of the collate ral es-toppe l e ff ect of th a t conv ict ion ." ld. a t 362. The Court fur the r he ld th a t "The fact th a t [the plaint iff] has a n appe al of th a t judgment pend ing does not de -prive the judgment of res jud icata e ff ect ." ld. a t 362

n .7.

In the curr ent case, the Court find s th at the Szil-vagyis' criminal convict ion should be given full prec lusive e ff ect . 31 U.S.c. § 3731 ( d) uneq uivoc-ally state s th at "a plea of guil ty ... shall estop the de f end ant fromdeny ing the essent ial e lement s of the off en se in any act ion wh ich involve s the sam e transact ion as in the criminal proceed ing."

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The Szilvagyis argu e th at a cour t should not invoke collate ral estoppe l in "pec uliar circums tance s."Sz-ilvagyis' Brie f at 2 (quo ting Toro v. Gaine r, 370 F.Su pp .2d 736 , 739 (N.D.I11.2005». How eve r, the case cited by the Szilvagyis re f e rs to the I1linois commo n law of collate ral estoppe l. The ma nd atory languag e of the FCAdoes not give the Court simil-ar d iscret ion.

[3] The Szilvagyis also argu e th at it woul d be a "bi tte r p ill" if the Court granted judgment for Plai nt iff , and the Szilvagyis' convict ions we re sub-s eq uent ly overturned by the Sixth Circuit, leaving the Szilvagyiswith an unde se rved mul ti-million dollar liabili ty. Szilvagyis' Brie f at 13. How eve r, th is woul d not be the case . The Sixth Circuit has noted th at "[a] ju dgment th at has b een vacated, re -ve rsed, or set aside on appe al is the reby dep rived of all conc lusive e ff ect, bo th as r es jud icata a nd as collate ral estoppe l."Erebia v. Chrysle r Plas tic Prod~. Corp ., 891 F.2 d 1212 , 1214 (6 th Cir.1989). T he Fede ral Rules of CivilProced ure spec ifically provide for r e lie f from a ju dgment when "a prior ju dgment upon wh ich it is bas ed has b een reve rsed or o the rwise vacated ." Fed .R.Civ.P. 60(b)(5). T hus , if the Sixth Circuit does reve rse the Szilvagyis' con-vict ions, they can mo ve for r e lie f unde r Rule 60.

Howeve r, in the inte rim Plai nt iff is ent it led to the collate ral estoppe l e ff ect s of the judgment . The Su-preme Court has noted th at the trial cour t should be the "mai n event " inste ad of a " tryou t on the roa d." Ande rso n I'. Besseme r City . 470 U.S. 564 , 575 , 105 S.Ct . 1504 , 84 L.Ed .2d 518 (1985) ( quo t ingWai n-wright v. Sykes, 433 U.S. 72 , 90 , 97 S.Ct . 2497 , 53 L.Ed.2d 594 (1977». T he winne r at the trial cour t leve l should not have to wai t in limbo w h ile the case mak es its wa y th roug h the appe llate proce ss. Th is isespec ially true in th is case, whe re the amou nt s in question are subs tant ial. The judge in the Szilvagyis'criminal case, af te r he aring the ir te stimo ny, found th at the ir guilty p leas w e re "free ly and volunt arily ente red ." Plaint iffs Exh. I at 17,

29. Af te r he aring fur the r te st imony, the judge den ied the Szilvagyis' req uests to withd raw the ir guilty p leas. Plai nt iff is ent itled to the fulI prec lus-ive e ff ect of th at judgment .

2. The Extent a/ Collate ral &·toppe l

The Szilvagyis also argu e th at "a plea of guil ty in a conspiracy to commi t an off en se or to de frau d the Un ited State s does not amou nt to a guil ty p lea as to all subs tant ial allega tions incorpora ted in th at ac-count, bu t on ly establishe s liability for consp iracy." * 848 Szilvagyis' Brie f at 5. The argum ent is not de -ve loped fur the r, bu t presumabl y the Szilvagyis are claiming th at the ir guilty pleas to conspiracy donot estop the m from deny ing present ing false claims (Cou nt I) and making false records (Count II). The Court find s th is argum ent unpe rsuasi ve .

It is true cour ts have he ld th at "the ent ry of a p lea of guil ty on a count for consp iracy does not dete rm-ine which of the par t icular m eans charg ed in the in-dictment we re used to e ff ect ua te the consp iracy." US. v. Guzzone, 273 F.2 d 121 , 123 (2 d Cir.1959). I n add it ion, "a consp iracy to commi t acrime is a distinct off en se from the commissio n of the crime . Th is is so even if commissio n of the crime islisted as a n ove rt act in the conspiracy count ." US v. Frazie r. 880 F.2 d 878 , 884 (6 th Cir.1989). How eve r, it is also true th at "[a] plea of guil ty and the en suing convict ion com prehend all of the fact u-al a nd legale lement s nece ssar y to sus tain a bind -ing, final judgment of guil t ." US. v. Broce, 488

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U.S. 563 , 569 , 109 S.Ct . 757 , 102 L.Ed .2d 927 (1989). T his princ iple is re flected in the languag e of §3731( d), which estops the de f end ant from " deny ing the essent ial e lement s of the off en se" to wh ich he p led guilty. The quest ion, then, is whethe r the essent ial e lement s of the crime to which the Sz-ilvagyisp led guilty are sufficient to establish liabil-ity for each of the th ree count s curr ent ly at issue .

The Szilvagyis pled guilty to the charg e of Conspir-acy to Commi t Health Care Frau d and Mail Frau d in violat ion of 18 us c. §§ 371 , 1341 , and 1347. T he essent ial e lement s of conspiracy unde r § 371 ar e:

(I) the consp iracy de scribed in the ind ictment was wilfull y form ed, and was existing at or abou t the time alleged ; (2) th at the accused willfully be -cam e a m embe r of the conspiracy; (3) th at one of the consp ira tors the reaf te r knowingly commi tted at leas t one ove rt act charg ed in the ind ictment at orabou t the time and place alleged ; and (4) th at such ove rt act was k nowingly done in fur the rance of som e object or purpose of the conspiracy as charg ed . US. v. Kraig, 99 F.3 d 1361 , 1368 (6 th Cir.1996).

[4][ 5] Count III of the curr ent suit charg es the Szil-vagyis and Prime Care with consp iracy to present afalse claim , in viola tion of 31 U.S. c. § 3729(a)(3). To establish a conspiracy unde r § 3729(a) the p laint iff mus t show th at the de f end ant consp ired with one or mor e pe rsons to get a fals e claim paid, and an ove rt act was pe rform ed in fur the rance of the conspiracy. US. ex re f. Sande rs v. Allison En-gine Co., 364F.Supp .2d 713 , 714 (S.D.Oh .2003) ( cit ing US v. Mur phy, 937 F.2 d 1032 (6 th Cir.1991». Cl early, the e lement s of the off en se th at the Szilvagyis and Prime Care pled guilty to, Con-sp iracy to Commi t Health Care Frau d and Mail Frau d, enc om pass the e lement s of consp iracy unde r § 3729(a)(3). T hus , the Szilvagyis are estopped from deny ing liability for Cou nt Ill.

[6] Count I charg es the Szilvagyis and Prime Care with present ing a fals e claim in violation of §3729(a)(1). § 3729(a)( I) prescribes liability for a nyone who "knowingly present s, or caus es to be presented, to a n office r or employee of the United Sta te s Gove rnment or a m emb e r of the Armed

Force s of the United State s a fals e or frau dulent claim for payment or a pp rovaL" As discussed abo ve, the consp iracy charg e the Szilvagyis pled guilty to req uires an ove rt act pe rform ed in fur the r-ance of the consp iracy. Rule II req uires the cour t to dete rmine the factual basis of a guil ty plea be fore accept ing it .Fed KCrim.P. II (b)(3). The re fore, we mus t look a t the p lea proceed ings to dete rmine a * 849 the ove rt acts admitted by the Szilvagyis to su pp or t the ir guilty pleas.

The following exchange took p lace during the plea proceed ing of David Szilvagyi:

THE COURT: But you intended -I'm not trying to put wor ds in your mou th . I'm jus t trying to get th is th ingou t . It 's harde r th an I th oug ht it woul d be . You kne w th at the cos t rep or ts for th is pe riod of constru ct ion we re not accura te of the cos t of ru nn ing the busi ne ss, th at they also inc luded the cos t of maki ng th ishom e, corr ect?

DEFENDANT DAVID SZIL V AGYI: Yes, Your Honor.

THE COURT: Did you intend th at?

DEFENDANT DAVID SZIL V AGYI: That was bas ed on ou t account ant 's prep aring the cos t re -por t, ye s, Your Honor.

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THE COURT: We ll, it 's not your a ccou nt ant th at 's he re . It 's you th at 's he re, and th at 's why I'm aski ng. Did you intend th at to be the case?

DEFENDANT [DAVID] SZILVAGYI: Yes, Your Honor.

Plaint iffs Exh . 1 a t 15.

The following exchange took p lace during the plea proceed ing of Elen a Szilvagyi:

THE COURT: Did you intend -th is is the ultima te quest ion he re . Did you intend to pass the se cos ts of construct ion of your r esidence on th roug h Prime Care to ult ima te ly Blue Cross/ Blue Shie ld and Med icare?

DEFENDANT ELENA SZILVAGYI: Yes, Your Honor.

THE COURT: I'm sorr y?


THE COURT: Did you pass the m o n in such a ma nne r th at they we re cont ained in the cos t re -por ts of th at corpora t ion?


Plaint iffs Exh . 1 a t 2S.

Both David and Elen a Szilvagyi admitted, as par t of the factual basis of the ir guilty pleas , th at they in-tended for the cos t rep or ts submi tted to Med icare to cont ain illegit ima te cos ts for the construct ion of the ir hom e . Since they intended the false claims to be submi tted, they knowingly caus ed a fals e claim tobe presented in viola tion of 31 U.s. c. § 3729(a)( I). T hey are th us estopped from deny ing li-ability forCount I.

[7] Count II charg es the Szilvagyis and Prime care with making a fals e rec ord . 31 U.S.c. § 3729(a)(2)prescribes liability for a nyone who "knowingly mak es, uses, or caus es to be ma de or us ed, a fals e record or s tate ment to get a fals e or frau dulent claim paid or a pp roved by the Gove rnment ." The false record in th is case is the Prime Care payroll th at inc luded ind ividuals w ho we re pe rformi ng pe r-so nal se rvice s forthe Szilvagyis. Since, as dis-cussed abo ve, the Szilvagyis intended to pass the cos ts of the construct ion of the ir hom e on to Med i-care, they nece ssarily caus ed the false record to be ma de . Thus , they are estopped from deny ing liabil-ity for Cou nt II.

B. Damag es unde r the False Claims Act

[S] The False Claims Act provide s th at pe rso ns vi-olating the Act are "liable to the Un ited State sGov-e rnment for a civil pen alty of not less th an $5,000 a nd not mor e th an $10 ,000 , p lus 3 t imes the amou nt of damag es wh ich the Gove rnment sus tains bec aus e of the act of th a t pe rson ." 31 U.s. c. §3729(a)(7). Af te r the ir conv ict ions, the Szilvagyis and Prime Care we re orde red to pay restitution . ISU.S.c. § 3664 r eq uires the cour t to dete rmine the total amou nt of the vict im's loss w hen orde ring* 850

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restitution . The cour t found the total loss suff e red by Med icare to be $836 ,324. Thus , in the curr ent case Plaint iff is ent it led to treble damag es of $2 ,508 ,972.

[9] Plaint iff also r eq uests $10 ,000 for each of the four fals e state ment s, for a total of $40 ,000. The Court find s th at the Szilvagyis admitted to mak e four fals e state ment s in the ir plea proceed ings. Plaint iffs Exh .

1 a t 16 , 25-26. How eve r, Plaint iff has provided no reaso ns as to why the sta tutory maximum of $10 ,000pe r false state ment should be awar ded . See Us. ex re I. Augustine v. Cent ury Health Se rvs., 136F.Supp .2d 876 , 895 (M.D.Tenn .2000). T he re fore, the Court will awar d Plaint iff $5 ,000 for each false state ment, for a total of $20 ,000. Plai nt iff is awar ded a total amou nt of $2 ,528 ,972 ($2 ,508 ,972 +$20 ,000).

V. CONCLUSION

Accordingly, for the reaso ns set for th abo ve, Plaint iffs Mo tion for Summar y Judgment is he reby GRANTED IN PART The Court find s th at the Sz-ilvagyis and Prime Care are liable unde r Count s I, II, and III.Plaint iff is ent it led to $2 ,528 ,972 i n damag es; the Szilvagyis and Prime Care are joint ly and seve rally liable for th at amou nt .

IT IS SO ORDERED.

E.D.Mich .,2005.

U.S. v. Szilvagyi 398 F.Su pp .2d 842

END OF DOCUMENT

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152. US v URLACHER

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153. US ex rel ALLISON EN G INE on REMAND to the 6thCircuit

(1) when Congress enacted the FCA and its amendments, it sought to imposepunishment on FCA violators, and

(2) the Supreme Court and numerous other courts have consistently recognizedthe FCA--particularly its treble damages provision--as a punitive statute. ibid

Accordingly, the court found that a retroactive application of FERA's amendments to §3729(a)(2) would punish acts that were not punishable prior to enactment of theamendments, thus effectuating a threshold violation of the Ex Post Facto Clause. Ibid. Thecourt further stated that even if Congress did not intend to punish FCA violators,retroactive application of FERA's amendment to § 3729(a)(2) would violate the Ex PostFacto Clause because the FCA is punitive in purpose and effects. Ibid.

[EXTRACTS]

ENTRY AND ORDER G RANTIN G DEFENDANTS¶ MOTION TO PRECLUDERETROACTIVE APPLICATION OF 31 U.S.C. § 3729(a)(1)(B) OR TO DECLAREUNCONSTITUTIONAL FRAUD ENFORCEMENT AND RECOVERY ACT OF 2009,PUB. L. NO. 111-21, § 4(f) (Doc. # 716) AND LIFTIN G THE STAY OF BRIEFIN G ONTHE ISSUE OF WHETHER THE RECORD ON THE QUALITY CASE SHOULD BEREOPENED AND WHAT SHOULD BE DONE IF THE RECORD IS NOT REOPENED

The Supreme Court v aca ted the Sixth Cir cuit's de cision and rem anded the case "for further pro ceedings consistent with this opinion." Allison Engine Co., Inc. v. U.S. ex rel. Sanders , 128 S.Ct. 2123, 2131 (2008). In doin g so, the Supreme Court held:

Contr ary to the de cision of the Court of Appe als below, we hold th at it is insuffi cient for a plaintiff assertin g a [31 U.S.C] § 3729( a)(2) claim to show merely th at "[t]he f alsestatement¶s use« result[ed] in obt aining or gettin g payment or a pprov al of the claim," or that "government money w as used to p ay the f alse or fr audulent claim." Inste ad, a

plaintiff assertin g a § 3729( a)(2) claim must prove th at the defend ant intended th at thef alse re cord or st atement be m aterial to the Government's de cision to p ay or a pprove the

f alse claim. Simil arly, a plaintiff assertin g a claim under § 3729( a)(3) must show th at theconspir ators agreed to m ak e use of the f alse re cord or st atement to achieve thisend.

Id. at 2126(quotin g United States ex rel. Sanders , 471 F.3d at 621).

The Supreme Court opinion w as issued on June 9, 2008. On M ar ch 9, 2009, the Sixth Cir cuit

remanded the case to this Court. (Do c. #709.) On April 24, 2009, this Court condu cted a status

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conferen ce. As a result of the st atus conferen ce, a trial date of M ay 3, 2010, w as set and a

briefin g scheduled on whether the re cord on the Qu ality C ase should be reopened and wh at

should be done if the re cord is not reopened. The Defend ants filed their Memor andum on M ay

26, 2009. (Do c. #710.) Further briefin g on the issue w as then st ayed (do c. #713) due to the

passage and signing into law of the Fr aud Enfor cement and Re covery A ct of 2009 (" FERA").

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FERA w as signed into l aw on M ay 20, 2009. Amon g other thin gs, FERA in cludes

amendments to the FCA. Prior to these amendments, any person w as lia ble under 31 U.S.C. §

3729( a)(2) who " k nowin gly mak es, uses or causes to be m ade or used, a f alse re cord or

statement to get a f alse or fr audulent claim paid or a pproved by the Government." This

subse ction of the FCA w as amended by the FERA to provide th at any person who " k nowingly

mak es, uses or causes to be m ade or used, a f alse re cord or st atement m aterial to a f alse or

fr audulent claim" is li a ble. 31 U.S.C. § 3729( a)(1)(B). Thus, the FERA amendments to the FCA

elimin ate the "to get" language and elimin ate the words "p aid or a pproved by the Government."

Althou gh enacted on M ay 20, 2009, the FERA in cludes a retro activity clause whi ch provides th at

the amendments to the FCA identified a bove "sh all tak e effe ct on the d ate of en actment and sh all

a pply to conduct on or after the d ate of en actment, ex cept th at" the amendments identified a bove"shall tak e effe ct as if en acted on June 7, 2008, and a pply to all claims under the Fa lse Cl aims

Act (31 U.S.C. § 3729 et seq.) th at are pendin g on or after th at date´ (the ³retro activity clause´).

On July 21, 2009, the Defend ants, s ans GM, filed their Motion To Pre clude Retro active

Appli cation of 31 U.S.C. § 3729( a)(1)(B) or Altern atively To De clare FERA Un constitution al.

(Do c. #716.) The Government h as filed a Statement of Interest (do c. #718) and the Rel ators h ave

responded in opposition (do c. #719). The Defend ants have Replied. (Do c. #726.) Thus, the

Defend ants¶ Motion To Pre clude Retro active Appli cation of 31 U.S.C. § 3729( a)(1)(B) or,Altern atively To De clare FERA Un constitution al is fully briefed and ripe for de cision.

The Defend ants now ar gue that a reading of the pl ain language indi ca tes th at the amendments

identified a bove do not a pply to this case and that a pplication of the retro activity clause to them

would viol ate the Ex Post Fac to Clause and the Due Pro cess Cl ause of the U.S. Constitution.

Both the Government and the Rel ators ar gue otherwise.

Defend ants' ar guments re garding a reading of the pl ain language of the amendments andregarding violation of the Ex Post Fac to Clause have merit and will be further addressed.

Defend ants' Due Pro cess Cl ause ar gument need not be and is not addressed herein.

The Plain Language

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The Defend ants ar gue that the pl ain language of the retro activity clause does not m ak e the

amendments to the FCA retro active to their case. However, Con gress m ay enact laws with

retrospe ctive effe ct so lon g as the laws are within constitution al limits. Immi gr ation and

Natur alization Servi ce v. St. Cyr, 533 U.S. 289, 316 (2001)( citing Bowen v. Geor getown

Hospit al, 488 U.S. 204, 208 (1988)).

A statute m ay not be a pplied retro actively a bsent a clear indi cation from Con gress th at it

intended su ch a result. Id. When re ading the plain language, st atutory definitions norm ally

control the me aning of st atutory words. L awson v. Suw annee Fruit & S.S. Co., 336 U.S. 198,

201 (1949). Finally, st atutory l anguage has meaning only in context. Gr aham County Soil &

Water Conserv ation Distri ct v. United St ates, 545 U.S. 409, 415 (2005).

The st andard for findin g such a clear indi cation is a demanding one. Id. The retro activity

language must be so clear that it can sust ain only one interpret ation. Id.

The analysis turns then to the FCA retro activity clause placed in FERA by Con gress. The

retro activity l anguage that is relev ant here is found in se ction 4(f)(1) of FERA whi ch provides

that:

The Amendments m ade by this se ction sh all tak e effe ct on the d ate of en ac tment of this

Act and shall a pply to condu ct on or after the d ate of en actment, ex cept th at - - (1)

subp ar agr a ph (B) of se ction 3927( a)(1) of title 31, United St ates Code, as added by

subse ction ( a)(1), sh all tak e effe ct as if en acted on June 7, 2008, and a pply to all claims

under the Fa lse Cl aims A ct (31 U.S.C. 3729 et seq.) th at are pendin g on or after th an

date«

Pub. L. No. 111-21, se ction 4(f).

Subpar agr a ph (B) of se ction 3927( a)(1) of title 31 is one of the FCA provisions whi ch was

changed by FERA and now provides th at any person who k nowin gly mak es, uses, or causes to

be made or used, a f alse re cord or st atement m aterial to a f alse or fr audulent claim is li a ble under

the FCA. Thus, Subp ar agr a ph (B) of se ction 3927( a)(1) of title 31 purportedly t ak es effe ct on all

FCA claims pendin g on or after June 7, 2008.

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The Supreme Court issued its order in this case on June 9, 2008. Thus, this case was pendin g on

June 7, 2008, the retro activity d ate provided in FERA. However, the retro activity d ate in FERA

a pplies to " claims" pendin g on June 7, 2008. So the issue be comes whether Con gress intended

the retro activity l anguage to a pply to ³ cases´ pendin g on June 7, 2009, or to ³ claims´ pendin g on

June 7, 2009.

The Rel ators ar gue that the retro activity l anguage a pplies to ³ cases´ pendin g and the Defend ants

ar gue that the retro activity l anguage only a pplies, if it is constitution ally firm, to ³ claims´

pendin g on June 7, 2009. While the Defend ants ar gua bly had a ³ case´ pendin g on June 7, 2008,

the Defend ants ar gue that they h ad no ³ claims´ pendin g on June 7, 2008 and there is no eviden ce

otherwise. This ³ case´ claimin g violation of the FCA h as been pendin g since 1995, but the

³ claims´ upon whi ch this ³ case´ is b ased were p aid in the l ate 1980s and early 1990s and wereno lon ger pendin g on June 7, 2008.

A ³ claim´ is defined in the amendments to the FCA set forth in the FERA as ³ any request or

demand, whether under a contr act or otherwise, for money or property and whether or not the

United St ates has title to the money or property«.´ 31 U.S.C. § 3729(b)(2)(A). Neither the

amendments to the FCA set forth in the FERA nor the prior FCA in clude a definition of ³ case.´

Thus, a plain reading of the retro activity l anguage reve als that the relev ant change is a pplica ble

to ³ claims´ and not to ³ cases.´ The new FCA retro activity clause is not a pplica ble to theDefend ants in this case.

This conclusion is supported by the FERA¶s le gislative history. United St ates v. S cience

Appli cations Intern ational Corp., No. 04-1543(RWR), 2009 WL 2929250 at *14 (D.D.C. Sept.

14, 2009). The Sen ate Report¶s expl anation of FERA¶s amendments to the FCA uses ³ claims´ to

refer to a defend ant¶s request for p ayment and ³ cases´ when dis cussing civil ac tions for FCA

violations. S cience Appli cations, 2009 WL 2929250 at *14; see S. Rep. No. 111-10 (2009).

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The text of FERA se ction 4(f) also supports the conclusion th at Congress did not intend ³ claims´

in subse ction 4(f)(1) to me an ³ cases.´ See S cience Appli cations, 2009 WL 2929250 at *14.

Subse ction 4(f)(2) immedi ately followin g subse ction 4(f)(1) re ads, ³se ction 3731(b) of title 31,

as amended« sh all a pply to cases pendin g on the d ate of en actment.´ Pub. L. No. 111-21,

section 4(f)(2). ³Surely, h ad Con gress intended the retro activity of subse ction 4(f)(1) to be

measured by µcases,¶ it would h ave said so as it did in subse ction 4(f)(2). Id.

Therefore, the clear indi cation from Con gress is th at the revised l anguage at issue here is

a pplica ble to ³ claims´ pendin g on June 7, 2008, and not to ³ cases´ pendin g on June 7, 2008.

Since the Defend ants in this case had no ³ claims´ pendin g on June 7, 2008, the retro activity

clause does not a pply to them. Thus, the prior version of the FCA a pplies.

The Ex Post Fac to Clause

Even if the retro activity clause en ac ted as part FERA w as to be found by a reading of its pl ain

language to a pply to the ³ claims´ pendin g in this case, a pplication of this retro activity l anguage

to these Defend ants would viol ate the Ex Post Fac to Clause of the U.S. Constitution. The

Relators spe cifica lly ar gue that Congress dis agreed with the Supreme Court's interpret ation of

the FCA provisions initi ally at issue in this case and amended the FCA to m ak e its intent clear.

Congress is, of course, free to en act new le gislation th at changes the w ay its previous le gislation

has been interpreted by the Supreme Court. Pe arson v. C allahan, 129 S. Ct. 808, 816¬17 (2009).

However, there are some limit ations on wh at Congress m ay do, p articularly retro actively.

For example, the Ex Post Fac to Clause of the U. S. Constitution forbids the m ak ing of ex post

f acto laws. U.S. CONST. Art. I, § 9, cl. 3. Usin g the Ex Post Fac to Clause, the fr amers of the

U.S. Constitution ³sou ght to assure th at legislative acts give f air warning of their effe ct and

permit individu als to rely on their me aning until expli citly changed.´ We aver v. Gr aham, 450

U.S. 24, 28 (1981).

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³An ex post f acto law is one whi ch renders an act punish a ble in a manner in whi ch it w as not

punish a ble when it w as committed.´ Fletcher v. Pe ck , 10 U.S. 87, 139 (1810). S aid another w ay,

ex post f acto laws are laws whi ch impose punishment for p ast acts. De Ve au v. Br aisted 363 U.S.

144, 160 (1960).

An ex post f acto law may infli ct penalties on a person or it m ay infli ct pe cuniary pen alties. Id.

Tr aditionally, crimin a l statutes h ave been ex amined for viol ation of the Ex Post Fac to Clause.

However, civil st atutes m ay also viol ate the Ex Post Fac to Clause. L andgr af v. USI Film

Produ cts, 511 U.S. 244, 281 (1994); Louis Vuitton S.A. v. Spen cer H andbags Corp., 765 F.2d

966, 9717-2 (2d Cir. 1985)(the punitive n ature of the treble d amages provision in the Tr ademar k

Counterfeitin g Act of 1984 could impli ca te ex post f ac to concerns).

The threshold question in an ex-post-f acto analysis is whether the le gislature intended to impose

punishment when it en acted the l aw. Smith v. Doe, 538 U.S. 84, 92 (2003). If the le gislature

intended to impose punishment, the inquiry ends and the l aw viol ates the Ex Post Fac to Clause.

Id. However, if the le gislature¶s intention w as to en act a civil and nonpunitive re gulatory

scheme, a court must further ex amine whether the st atutory s cheme is ³so punitive either in

purpose or effe ct as to ne ga te [the St ate¶s] intention to deem it µ civil.¶´ Id. (quotin g K ansas v.

Hendri ck s, 521 U.S. 346, 361 (1997)).

The Intention of Congress

The first question in the ex-post-f acto analysis of this case is whether Con gress intended to

impose punishment when it en acted the FCA. If so, retro active a pplica tion of the amendments to

the FCA viol ates the Ex Post Fac to Clause be cause retro active a pplication of the amendments to

the FCA would impose punishment for acts that were not punish a ble prior to en actment of the

amendments.

The FCA is codified under a civil title of the United St ates Code and not under a crimin al title.

The amendments to the FCA found in FERA provide for a civil pen alty of not less th an $5,000

and not more th an $10,000« plus 3 times the amount of d amages whi ch the Government

sust ains be cause of the act of th at person. Pub. L. No. 111-21, se ction 4( a)(1)( a)(1)(G)(emph asis

added).

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The Sen ate Committee on the Judi ciary, when reportin g on the Fa lse Claims Amendment A ct of

1986 upon p assage out of committee, s aid, "[t]he purpose of S. 1562, the Fa lse Cl aims Reforms

Act, is to enh ance the Government's a bility to re cover losses sust ained as a result of fr aud aga inst

the Government." S. Rep. No. 345, 1986 U.S.C.C.A.N. 6266. This Sen ate Committee also said

that FCA pro ceedings are "civil and remedi al in nature and are brou ght to re cover compens ating

damages«." 1986 U.S.C.C.A.N. 5296.

This would seem to indi ca te that Congress did not intend for FCA sanctions to be punitive.

However, individu al Sen ators thou ght otherwise a bout the FCA.

According to its sponsor, the FCA w as adopted ³for the purpose of punishin g and preventin g«

fr auds.´ United St ates v. Bornstein, 423 U.S. 303, n.5 (1976)( citing Cong. Globe, 37th Con g., 3d

Sess., 952, rem ar k s of Sen ator How ard)(emph asis added). Further, st atements m ade by Sen ators

debating the FERA, whi ch includes amendments to the FCA, indi cate that they intend for the

FCA to be punitive.

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On April 20, 2009, FERA co-sponsor Sen ator P atrick Leahy indi cated th at passage of the FERA

would help l aw enfor cement ³tr ack down and punish´ people. 155 Con g. Rec. S4409 (d aily ed.

Apr. 20, 2009)(³As the e conomi c crisis worsened l ast f all, I ca lled upon Feder al law enfor cement

to tr ack down and punish those who were responsible for the corpor ate and mort gage fr auds th at

helped m ak e the e conomi c downturn f ar worse th an anyone predi cted. This ye ar, as Con gress

reconvened, I joined with Sen ator Gr assley to dr aft and introdu ce [FERA], the le gislation we

consider tod ay, whi ch will provide the new tools and resour ces needed by l aw enfor cement to

carry out this effort.´)(emph asis added). On April 23, 2009, Sen ator Le ahy aga in indi cated th at

his amendments were me ant to punish. Con gression al Record: April 23, 2009 (Sen ate) at S4630

(³If fr aud goes unprose cuted and unpunished, then vi ctims across Ameri ca lose

money.´)(emph asis added). On April 27, 2009, Sen ator Ch arles Gr assley, author of the modern

FCA, ar gued th at the FCA amendments he sponsored would ensure punishment. 155 Con g. Rec.S4737 (d aily ed. Apr. 27, 2009)(³This le gislation fixes this, thus ensurin g that no fr aud can go

unpunished by simply n aviga ting throu gh the le ga l loopholes.´)(emph asis added). On April 27,

2009, Sen ate M a jority Le ader H arry Reid added his voi ce to the ca ll for punishment. 155 Con g.

Rec. S4725-S4726 (d aily ed. Apr. 27, 2009)(³[ FERA] provides critica l fundin g and new tools to

let law enfor cement prose cute and punish those responsible for the mort gag e and corpor ate

fr auds th at have hurt countless h ard-wor k ing Ameri cans and led to the worst fin ancial crisis in

decades.´)(emph asis added).

Senator Le ahy has also pr aised the punitive use of and effe ct of the FCA. 2008 WL 511861

(F.D.C.H. Feb. 27, 2008)(³Tod ay aga in in the midst of w ar and f ac ing reports of billions lost to

fr aud and waste in Ir aq and Af ghanistan, we are considerin g import ant new improvements to the

[FCA] - not only to punish and deter those who see k to defr aud our n ation, but also to re cover

billions in t axpayer doll ars stolen from the publi c trust« [The FCA] h as been used to punish

contr actors sellin g defective body armor to our poli ce« to punish he alth care and dru g

companies for defr auding billions from Medi ca id and Medi care«.´)(emph asis added).

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These de clar ations of le gislative intent re garding FERA, in cluding the FCA amendments, are

consistent with Con gress¶s previous view th at the FCA is intended to be punitive. For example,

when Attorney Gener al John Ash croft a ppeared before Con gress in 2002, Sen ator Gr assley

demanded th at Ash croft pled ge to continue to use the FCA to punish wron gdoing. 2002 WL

1722725 ( F.D.C.H.)(July 25, 2002)(³[The FCA] is the government¶s most potent we a pon in w ar

on fr aud and a buse, and I would a ppre ciate your assur ances here tod ay, hen ce my first question,

that you would intend to continue usin g the [FCA] to punish wron gdoing to the fullest extent of

the law« I thin k your letter s aid that, but I still would li k e to ask you.´)(emph asis added). Then

Attorney Gener al Ash croft responded, ³Yes sir, the letter refle cts the commitment of the

Department.´ Id. Current Attorney Gener al and then Deputy Attorney Gener al Eric Holder

stated: ³Those amendments [to the 1986 FCA] h ave m ade the [ FCA] our most powerful and

effe ctive tool in rootin g out and punishin g fr aud in government pro gr ams.´ Rem ar k s of Eri c H.Holder, Deputy Attorney Gener al, announ cement of Crimin al Pleas and Civil Settlements,

United St ates v. Fresenius (N ational Medi ca l Care), Boston, M assachusetts, J anuary 19, 2000

(http://www.usdoj. gov/ar chive/d ag/spee ches/2000/nmi chaelhealthrem ar k s.htm)(emph asis

added).

The Rel ators h ave identified Government Reports indi cating that the FCA is remedi al in n ature.

However, these "reports" are not persu asive be cause they do not in clude actual quotes of

Congressmen and be cause a statute may be both punitive and remedi al. See United St ates v.

Halper, 490 U.S. 435, 447 (1989)

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In addition to the repe ated and clear manifest ations of Con gression al intent re garding the

punitive purpose of the FCA and the FERA amendments, Courts h ave consistently re cognized

that the FCA punishes those who viol ate it, with p articular attention bein g paid to the FCA¶s

treble d amages clause. The Supreme Court h as found th at FCA¶s damages multiplier h as a

compens atory fun ction as well as a punitive one. Coo k County, Ill. v. U.S. ex rel. Ch andler, 538

U. S. 119, 130 (2003). 1 The Supreme Court h as also re cognized th at the treble d amages found in

the FCA are ³essenti ally punitive in n ature.´ P acifiC are He alth Systems, In c. v. Boo k , 538 U.S.

401, 405 (2003); Vermont A gency of N atur al Resour ces v. U.S. ex rel. Stevens, 529 U.S. 765,

784-85 (2000); 2 United St ates ex rel. M ar cus v. Hess, 317 U.S. 537, 550 (1943). ³The very ide a

of treble d amages reve als an intent to punish p ast, and to deter future, unl awful condu ct, not to

amelior ate the li a bility of wron gdoers.´ Tex as Industries, In c. v. R adcliff M aterials, In c., 451

630, 639 (1981)(emph asis added).

1The Rel ators assert th at, in Ch andler, the Supreme Court expl ains why the FCA rem ains a remedi al statute followin g the 1986 amendments thereto. While this m ay or m ay not be accur ate,the Ch andler Court nevertheless found th at the FCA's treble d amages provision h as a punitivefunction.

2The Rel ators assert th at the Stevens Court w as not undert ak ing a detailed analysis of the FCAfor Constitution al purposes as it did in M ar cus. However, both the M ar cus and Stevens Courtsindicate that the FCA h as punitive aspects.

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In addition to the Supreme Court, Cir cuit and Distri ct Courts h ave also re cognized the punitive

nature of FCA d amages. See i.e. United St ates ex rel. A+ Home care, Inc. v. Medsh ares

Management Group, In c., 400 F.3d 428, 445 (6th Cir. 2005), cert. denied, 546 U.S. 1063 (2005);

United St ates ex rel. Roby v. Boein g Co., 302 F.3d 637, 641(6th Cir. 2002), cert. denied, 539

U.S. 969 (2003); United St ates v. B ank of Farmin gton, 166 F.3d 853, 857 (7th Cir. 1999); United

States v. Bourse au, 531 F.3d 1159, 1164 (9th Cir. 2008); United St ates v. M ack by, 261 F.3d 821,

830 (9th Cir. 2001); United St ates ex rel. At k ins v. M cInteer, 470 F.3d 1350, 1360 (11th Cir.

2006); United St ates v. Killou gh, 848 F.2d 1523, 1533 (11th Cir. 1988); United St ates ex rel.

Pogue v. Di a betes Tre atment Centers of Ameri ca, 474 F. Supp.2d 75, 87 (D.D.C. 2007); U.S. ex

rel. B ane v. Bre athe E asy Pulmon ary Servi ces, Inc., No. 8:06-CV-40-T-24MAP, 2007 WL

4885468 at *7 (M.D. Fla. Nov. 30, 2007); United St ates ex rel. Brinlee v. AECOM Government

Servi ces, In c., No. 2:04 CV 310, 2007 WL 496623 at *4 (W.D. L a. Feb. 8, 2007); United St atesex rel. Oliver v. The P arsons Corp., 498 F. Supp.2d 1260, 1289 n.30 (C.D. C al. 2006).

Thus, Con gress intended to impose punishment when it en ac ted the FCA and the amendments

thereto. The Supreme Courts and lower courts h ave also re gularly determined th at the FCA

imposes punishment. In addition, the Rel ators h ave presented no cases su ggesting that retro active

a pplication of the amendments to the FCA, p articularly with the treble d amages provision, would

be Constitution al. Therefore, retro active a pplica tion of the amendments to the FCA viol ates the

Ex Post Fac to Clause be cause retro active a pplication of the amendments to the FCA would

impose punishment for acts that were not punish a ble prior to en actment of the amendments.

Punitive In Purpose or Effe ct

However, even if Con gress h ad not clearly intended for the FCA to punish those who viol ate it,

the FERA amendments to the FCA would still be un constitution al pursu ant to the Ex Post Fac to

Clause. The FERA amendments would be un constitution al because retro active le gislation must

clear a second hurdle, a hurdle th at is not cleared by the FERA amendments to the FCA.

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If the intent of the le gislation w as to en act a regulatory s cheme th at is civil and nonpunitive, a

court must further ex amine whether the st atutory s cheme is ³so punitive either in purpose or

effe ct as to ne gate [the St ate¶s] intention´ to deem it ³ civil.´ Smith, 538 U.S. at 92(K ansas, 521

U.S. at 361, quotin g United St ates v. W ard, 448 U.S. 242, 248-49 (1980)). When conducting this

examination, only the ³ clearest proof´ will be enou gh to override le gislative intent and tr ansform

a civil remedy into a crimin al penalty. Id.

When ex aminin g the effe cts of the FCA st atutory s cheme, courts use the seven f actors noted in

Kennedy v. Mendoz a-Martinez, 372 U.S. 144 (1963). Id. at 97. The seven f actors are: (1)whether

the sanction involves an affirm ative dis a bility or restr aint; (2) whether the s anction h as

histori ca lly been re garded as a punishment; (3) whether the s anction comes into pl ay only on a

findin g of scienter; (4) whether oper ation of the s anction will promote the tr adition al aims of punishment-retribution and deterren ce; (5) whether the beh avior to whi ch the s anction a pplies is

already a crime; (6) whether an alternative purpose to whi ch it m ay r ationally be connected is

assigned to the s anction; and (7) whether the s anction a ppears excessive in rel ation to the

alternative purpose assigned. Kennedy, 372 U.S. at 168-69. While these f actors are not

exhaustive nor dispositive, they provide a fr amewor k for the analysis. Smith, 538 U.S. at 97.

1. Affirm ative Dis a bility or Restr aint?

An affirm ative dis a bility or restr aint is norm ally understood to be a sanction a ppro aching

imprisonment. Cutsh all v. Sundquist, 193 F.3d 466, 474 (6th Cir. 1999)( citing Herbert v. Billy,

160 F.3d 1131, 1137 (6th Cir. 1998)), cert. denied, 529 U.S. 1053 (2000). S anctions provided

under the civil FCA, whi ch is at issue here, do not a ppro ach imprisonment. This f actor wei ghs in

f avor of a findin g of civil purpose or effe ct.

2. Histori ca lly Re garded As Punishment?

As determined a bove, FCA sanctions h ave histori ca lly been re garded, at least in p art, as punitive.

This f actor wei ghs in f avor of a findin g that the FCA s anctions are punitive in n ature and effe ct.

3. S cienter Required?

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An FCA viol ation requires s cienter. H agood v. Sonom a County W ater Agency, 81 F.3d 1465,

1477 (9th Cir. 1996)( citing United St ates ex rel. Anderson v. Northern Tele com, In c., 52 F.3d

810, 815 (9th Cir. 1995)(³ For a qui t am action to survive summ ary jud gment, the rel ator must

produ ce suffi cient eviden ce to support an inferen ce of k nowin g fr aud.´), cert. denied, 516

U.S. 1043 (1996)), cert. denied, 519 U.S. 865 (1996); United St ates ex rel. Farmer v. City of

Houston, 523 F.3d 333, 337 (5th Cir. 2008). This f actor wei ghs in f avor of a findin g that the

FCA sanctions are punitive in n ature and effe ct.

4. Punishment-Retribution and Deterren ce Promoted?

Sanctions provided in the civil version of the FCA are intended to deter condu ct. United St ates

ex rel. Roby, 302 F.3d at 645. However, the f act th at deterren ce is one purpose of FCA sanctionsdoes not render FCA sanctions punitive for purposes of Ex-Post- Fac to-Clause analysis. Doe v.

Bredesen, 507 F.3d 998, 1005 (6th Cir. 2007), cert. denied, 129 S. Ct. 287 (2008). Yet, FCA

sanctions also, as set forth a bove, h ave a stron g punitive purpose and deterren ce is one purpose

of punishment. Therefore, this f actor wei ghs in f avor of a findin g that the FCA sanctions are

punitive in n ature and effe ct.

5. Beh avior Alre ady a Crime?

The submission of f alse claims to the Government h as been a crime sin ce the in ception of the

FCA. However, in 1982 Con gress sep ar ated the crimin al version of the FCA from the civil

version. United St ates ex rel. Si kk enga v. Re gence Bule cross Blueshield of Ut ah, 472 F.3d 702,

734 (10th Cir. 2006). But courts continue to loo k to caselaw interpretin g the civil version of the

FCA to construe the crimin al version of the FCA. See United St ates v. M cBride, 362 F.3d 360,

371 (6th Cir. 2004). Further, the s ame conduct may be punish a ble under both the crimin al and

civil versions of the FCA. Yet, be cause beh avior pros cribed by the civil version of the FCA m ay

also be s anctioned as a crime under the crimin al version of the FCA, this f actor wei ghs in f avor

of a findin g of civil purpose or effe ct for the civil version of the FCA.

6. Altern ative Purpose Assi gned?

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In this case, there is an alternative purpose assigned. The Supreme Court h as found th at FCA¶s

damages multiplier h as both a compens atory fun ction as well as a punitive one. Coo k County,

Ill., 538 U.S. at 130. Thus, a purpose of the FCA¶s sanctions alternative to bein g punitive is to

compens ate for loss. Therefore, this f actor wei ghs in f avor of a findin g of civil purpose or effe ct

for the civil version of the FCA.

7. Excessive In Rel ation To Altern ative Purpose?

The alternative purpose identified for the FCA is to compens ate for loss. However, the s anctions

recover a ble under the FCA can f ar exceed those ne cessary to compens ate the Government for

fr aud. More spe cifica lly, the FCA provides for a ³ civil pen alty of not less th an $5,000 and not

more th an $10,000« plus three times the amount of d amages whi ch the Government

sust ains«.´ 31 U.S.C. § 3729( a)(1)(G); see e. g. Halper, 490 U.S. at 499(pen alties of $130,000

for an actual loss of $585 bore ³no r ational relation to the goal of compens ating the

Government for its loss, but r ather a ppears to qu alify as punishment in the pl ain me aning of the

word«´). Sin ce the s anctions re cover a ble under the FCA can f ar exceed those ne cessary to

compens ate the Government for its loss, this f actor wei ghs in of a findin g that the FCA

sanctions, p articularly the treble d amages provision, are punitive in n ature and effe ct.

In sum, four of the seven Kennedy f actors wei gh in f avor of findin g that the civil FCA s anctions

are punitive in n ature and effe ct. Further, the ³ alternative purpose assigned´ f actor, whi ch weighs

in f avor of a findin g of civil purpose or effe ct, is more th an over come by the determin ation under

the ³ex cessive in rel ation to alternative purpose´ f ac tor th at the s anctions re cover a ble can f ar

exceed the s anctions ne cessary to compens ate the Government for its loss. Finally, the Rel ators

agree th at the FCA's treble d amages provision h as some punitive aspects. (Rel ator's Mem. In

Opp'n pp. 15, 26 (do c. #719)). As a result, the civil version of the FCA is punitive in purpose and

effe ct.

CONCLUSION

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The FCA as amended by FERA m ay not be a pplied to the Defend ants in this case. A pl ain

reading of the retro activity clause results in the conclusion th at the FCA as amended by FERA

does not a pply to this case. Also, retro active a pplica tion of the new FCA l anguage to these

Defend ants viol ates the Ex Post Fac to Clause. Retro active a pplication viol ates the Ex Post Fac to

Clause be cause Con gress intended for the FCA to be punitive and be cause FCA sanctions are

punitive in purpose and effe ct.

DONE and ORDERED in Dayton, Ohio this Twenty-Seventh d ay of O ctober, 2008.

s/Thomas M. Rose

_______________________________

THOMAS M. ROSE

UNITED STATES DISTRICT JUDGE

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667 F.Supp.2d 747 Page 1 667 F.Supp.2d 747 (Cite as: 667 F.Supp.2d 747)

Unit ed S tates D istrict Cou rt, S.D. Oh io,

Wes tern Division, UNITE D S TATE S of Am erica ex r el. Roge r L.

SAN DERS , et al., Rela tor s,

v. ALL ISO N ENGINE COMP ANY, INC. , et al., D e-fendants.

Case Nos. 1:95-cv-970, 1:99-cv-923.

Oct. 27 , 2009.

Background: Rela tor s b r ough t sepa r ate qu i tam ac-tions aga inst sub contr actor s u nder False Cla im s Act (FC A), alleg ing f r aud in nego tiation and exe cution of sub contr acts fo r com po nents of ele ctric al sys tems in Navy des tr oye r s. The Unit ed S tates D istrict Cou rt for the Sou thern District of Oh io, Thomas M. Rose , J.,

2005 WL 713569 , enter ed su mm ar y judg ment for sub contr actor s o n pricin g nego tiation claim, and la ter gr anted judg ment as matter of law fo r sub contr actor sat close of r elator's case o n execution claims, 364F.Supp.2d 710. The S ixth C ircuit Cou rt of A ppeals , 471 F.3d 610 , aff irm ed the d istrict cou rt's g r ant of summ ar y judg ment on the p ricin g claim and r ever sedthe d istrict cou rt's de cision on the qual ity claim . O n r emand, sub contr actor s f iled a motion to p r ecluder etr oactiv e appl ication of the F r aud En forcement andRecover y Act (FE R A), or to de clar e F ER A unconst i-tutional.

Holding: The D istrict Cou rt, Thomas M. Rose , J., held tha t r etr oactiv e appl ication of a mendments toFCA set forth in FER A viola ted the Ex Pos t FactoClause. Mo tion gr anted.

Wes t Head notes

[1] Statutes 278.3 361k278.3 Mos t Cited Cases Co ngr ess may e nact laws w ith r etr ospe ctiv e effe ct solong as the laws a r e w ithin constituti onal limit s.

[2] Statutes 278.7 361k278.7 Mos t Cited Cases A statute may not be appl ied r etr oactiv ely abse nt a

clear indication f r om Congr ess tha t it intended su ch ar esul t.

[3] United States 120.1 393k120.1 Mos t Cited Cases Am endment to False Cla im s Act (FC A) set forth in Fr aud En forcement and Re cover y Act (FER A) ap-

pl ied r etr oactiv ely to " claims" pe nding o n effe ctiv eda te, r ather than to " cases" pe nding o n effe ctiv e da te.31 U.S.C.A. § 3729 (a)(1)(B ).

[4] Constitutional Law 2790 92k2790 Mos t Cited Cases An "ex pos t facto law" is o ne wh ich r ender s an act

pu nishable in a manner in wh ich it was not punishable whe n it was committ ed. U .S.C. A . Co nst. Art . 1 , §9, cl. 3 .

[5] Constitutional Law 2789 92k2789 Mos t Cited Cases An ex pos t facto law may inflict penalties o n a pe r son or it may inflict pecuniar y pe nalties. U .S.C. A . Co nst.Art . 1 , § 9 , cl. 3 .

[6] Constitutional Law 2789 92k2789 Mos t Cited Cases

[6] Constitutional Law 2790 92k2790 Mos t Cited Cases Thr eshold ques tion in an ex-pos t-facto analys is iswhe ther the leg isla tur e intended to im pose pu nis h-ment whe n it enacted the law; if the leg isla tur e i n-tended to im pose pu nishment, the inqu ir y ends a ndthe law viola tes the Ex Pos t Facto Clause , howe ver, if the leg islatur e's intention was to enact a civi l andnon punitiv e r egula tor y scheme, a cou rt must further examin e whe ther the s tatutor y s cheme is so pu nitiv eeither in pu r pose o r effe ct as to nega te s tate's inte n-tion to dee m it civi l. U .S.C. A . Co nst . Art . 1 , § 9 , cl.3.

[7] Constitutional Law 2800 92k2800 Mos t Cited Cases

[7] United States 120.1 393k120.1 Mos t Cited Cases Re tr oactiv e appl ication of a mendments to False

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154. US ex rel ALLISON EN G INE Supreme Court of theUnited States

ALLISON ENGINE CO., INC., ET AL . v . UNITED STATES EX REL . SANDERS ET AL

ALLISON ENGINE CO. v. UNITED STATES ex rel.SANDERS (No. 07-214) 471 F. 3d 610, vacated andremanded.

a defend ant is not answer a ble for anythin g beyond the n atur al, ordin ary, and re asona bleconsequen ces of his condu ct.´

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155. US ex rel ANTIDISCRIMINATION CENTER vWESTCHESTER COUNTY

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156. US ex rel ARANDA v COMMUNITY PSYCH

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157. US ex rel FELDMAN v VAN G ORP

*2 The T32 tr aining gr ant is not a standard pro curement contr act for spe cific goods or servi ces.Moreover, its end produ ct did not be come the property of the government. R ather, the T32

pro gr am's purpose w as to ³develop or enh ance rese ar ch tr aining opportunities for individu als,

selected by the institution, who are tr aining for careers in spe cified areas of biomedi ca l and behavior al rese ar ch.´ (De clar ation of Tr acey A. Tis ka In Support of Defend ants' Joint Motion for Summ ary Jud gment d ated Jan. 9, 2009, Ex. L: NIH Guide NOT-97-007 NI H National ResearchService Award Institutional Research Training G rants dated M ay 16, 1997.) In analogouscir cumst ances, courts h ave found th at the ³benefit of the b ar ga in´ to the government is providin g funds to re cipients who best fit its spe cified criteria and that this benefit is lost when funds arediverted to less eli gible re cipients. See Longhi, 575 F.3d at 462, 473 (findin g the government lostthe ³benefit of the b ar ga in´ when gr ant funds went to a recipient with ³dubious qu alifications,éven thou gh that recipient performed the intended rese ar ch); see also United States v. Rogan,517 F.3d 449, 453 (7th Cir.2008) (reje cting ar gument th at value of medi ca l servi ces renderedshould be dedu cted from tot al amount of funds p aid be cause ³[w]hen the conditions are not

satisfied, nothin g is due´); United States ex rel. Purcell v. MWI Corp., 520 F.Supp.2d 158, 178-79 (D.D.C.2007) (³[C] ausation is met where f alse st atements are critica l to eli gibility for a loanor be ar upon the li k elihood of an a pplicant's meetin g loan payments. When these conditions are

present, it is li k ely th at the entire amount of feder al funds expended on a progr am would nothave been spent.... The m ath may be tri ck y, but the case law is simple: fr audulently indu cedgovernment lo ans (even if eventu ally rep aid in full) are part of the ori ginal loss to thegovernment.´) (intern al citation omitted).

Thus, if the f ac t-finder concludes th at the government would not h ave awarded the gr ant a bsentthe f alse claims, it m ay properly conclude th at the me asure of d amages is the tot al amount thegovernment p aid. Longhi, 575 F.3d at 462, 473; Rogan, 517 F .3d at 453; Purcell, 520 F.Supp.2dat 179.

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158. US ex rel HOPPER v ANTON

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159. US ex rel RESNIC K v WEILL MEDICAL COLLE GE

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160. US ex rel J ohnson v Univ of Rochester Med

I. Plaintiffs¶ Fraud Claims

Defend ants ar gue that the pl aintiffs h ave presented only gener al allegations and have f ailed todetail any f alse claims allegedly submitted by defend ants, and therefore h ave f ailed to ple ad their fr aud claims with suffi cient spe cificity to s atisfy Fed. R. Civ. Pro c. 9(b). After a careful re ading of the compl aint, and affordin g all f avor a ble inferen ces to the pl aintiffs, I agree.

The compl aint alleges a quotidi an pattern wherein the Hospit al compelled or permitted viol ationsof the hospit al¶s policy and Medi care/Medi ca id re gulations whi ch require the presen ce or supervision of a teaching or attendin g physi cian (collectively, ³TP´) when certain pro cedures are

performed by residents. Pl aintiffs allege that the pertinent Medi care/Medi ca id regulations m ak ereimbursement for su ch pro cedures by residents contin gent upon TP supervision.

The compl aint identifies the gener al time period and frequen cy of the alleged f ailures to

provide a supervisin g TP, some of the medi ca l pro cedures for whi ch TPs were not provided, andthe names of v arious Stron g f aculty physi cians who actively p articipated in, or else condoned,the pr actice. Plaintiff Johnson estim ates th at he performed sever al hundred epidur als and wellover onethous and extub ations or emer gence pro cedures without the supervision of a TP, and thatTPs r arely,if ever, filled out post-oper ative reports as required by st atute. Both pl aintiffs des cribea number ofex amples of anestheti c procedures in whi ch TPs were a bsent or un availa ble tosupervise residentsperformin g procedures for whi ch supervision w as required, and st ate that theyobserved, or wereinstru cted by TPs to author, f alsified re cords indi cating TP supervision in caseswhere there h ad beennone.

The centr al question under the Fa lse Cl aims A ct is whether the defend ant actually presented a ³f alse or fr audulent claim´ to the government. See H arrison v. Westinghouse Savannah River Co., 176 F.3d 776, 785 (4th Cir. 1999) (quotin g United States v. Rivera, 55 F.3d 703, 709 (1stCir. 1995)).³The st atute attaches li a bility, not to the underlyin g fr audulent activity or to thegovernment¶swron gful p ayment, but to the µ claim for p ayment.¶´ United States ex rel. Polanskyv. Pfizer, Inc. ,2009 U.S. Dist. LEXIS 43438 at *12 (E.D.N.Y. 2009), quoting Rivera , 55 F.3d703 at 709. Thus,³[s]t anding alone, allega tions of viol ations of feder al regulations or l aws areinsuffi cient if a plaintiff cannot identify with p articularity any actual f alse claims submitted bydefend ant to the government.´ U.S. ex re. Smith v. Yale Univ. , 415 F. Supp. 2d 58, 85 (D. Conn.2006).

Nonetheless, pl aintiffs a ppear not to h ave seen the proverbi al forest for the trees. Thepl aintiffs¶claims are set forth in a behemoth fifty-five p age, 183-p ar agr a ph complaint (D k t. #2),thema jority of whi ch is devoted to len gthy des criptions of the hospit al¶s repeated f ailure to

provide TPsupervision, and its efforts to f alsely indi cate TP supervision on p atient re cords. Nowhere in theirlen gthy ple ading do the pl aintiffs allege or des cribe how, or even if , any bills for pro ceduresinvolvin g f alsified re cords were ever presented to Medi care or Medi ca id for p ayment.

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Indeed,pl aintiffs do not even allege that any of the f alsified re cords rel ated to Medi ca id or Medi care patients.

As su ch, the pl aintiffs¶ fr aud claims do not st ate a claim, but merely speculate that a claim mi ghtexist. See United States ex rel. Smith v. N.Y. Presbyterian H ospital , 2007 U.S. Dist. LEXIS

53826 at *20-*21 (S.D.N.Y. 2007) ; Smith , 415 F. Supp. 2d 58 at 86.

Althou gh the spe cificity requirements of Rule 9(b) must be met, I note th at courts h averelaxedthe st andards of th at rule under certain cir cumst ances. For example, when the ne cessaryeviden ceof the essenti al elements of the claim is within the ex clusive control of the defend ant, some courtshave allowed pl aintiffs to ple ad ³on inform ation and belief.´ Nonetheless, a plaintiff muststill setforth the f actual basis for th at belief, and that basis must arise from the pl aintiff¶sdirect,independent, firsth and k nowled ge. See Wexner v. First Manhattan Co. , 902 F.2d 169, 172(2d Cir.1990); DiVittorio v. Equidyne Extractive Indus., Inc. , 822 F. 2d 1242, 1247 (2d Cir.1987); Smith ,415 F. Supp. 2d 58 at 79-81; Vallejo v. Investronica, 2 F.Supp.2d 330, 336(W.D.N.Y. 1998).

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161. US ex rel K irk v Schindler

US EX REL. KIRKv. SCHINDLER ELEVATOR 601 F. 3d 94 (2 d Cir. 2010)

Mikes extensively addressed the "legally false certification theory" of liability under the FCA, as distinctfrom a "factually false" claim. Id. at 696-97. Legally false certification occurs "where a party certifiescompliance with a statute or regulation as a condition to governmental payment." Id. at 697. In somecases, there will be an "express false certification," where "a claim... falsely certifies compliance with aparticular statute, regulation or contractual term, where compliance is a prerequisite to payment." Id. at698. In other cases, however, where no express certification is required, there may still be liability under an "implied certification theory":

implied false certification is appropriately applied... when the underlying statute or regulation uponwhich the plaintiff relies expressly states the provider must comply in order to be paid.... Liabilityunder the Act may properly be found therefore when a defendant submits a claim for [payment]while knowing... that payment expressly is precluded because of some noncompliance by thedefendant.

Id. at 700. In other words, the contractor itself need not certify compliance for a legally falsecertification to have occurred, although when it does so there will be an express falsecertification. An implied false certification takes place where a statute expressly conditionspayment on compliance with a given statute or regulation, and the contractor, while failing tocomply with the statute or regulation (and while knowing that compliance is required), submitsa claim for payment.

Title 31, Section 1354(a)(1) of the United States Code provides that "no agency may obligate or expend funds appropriated for the agency for a fiscal year to enter into a contract [covered byVEVRAA] with a contractor from which a [VETS-100] report was required... with respect to thepreceding fiscal year if such contractor did not submit such report." In addition, 48 C.F.R. §52.222-38 provides that "[b]y submission of its offer, the offeror represents that, if it is subjectto the reporting requirements of [VEVRAA], it has submitted the most recent VETS-100 Reportrequired by that [Act]." This regulation was adopted in October 2001 and became effectiveDecember 21, 2001. S ee 66 Fed. Reg. 53,487 (Oct. 22, 2001). The district court found that Kirkstated a valid claim under the FCA when he alleged that Schindler submitted bids covered by48 C.F.R. § 52.222-38 without having submitted a VETS-100 report for the preceding fiscal year and then won a contract. We agree. The effect of the regulation is that any contractor coveredby VEVRAA certifies that it has submitted its most recent VETS-100 report when it makes abid for government business. If it has not submitted the report, such a certification would befalse. In the terms of the Mikes analysis, then, such a contractor would have made an expressfalse certification (albeit by operation of the regulation rather than by making the certificationdirectly).The district court also, however, dismissed those of Kirk's claims based on contracts awarded

before the regulation's effective date, implicitly holding that liability cannot be predicated on 31U.S.C. § 1354(a) alone. We respectfully disagree with this aspect of the district court's holding.

As Mikes explained, implied false certification takes place "when the underlying statute or regulation upon which the plaintiff relies expressly states the provider must comply in order tobe paid" and the defendant, while not in compliance, submits a claim for payment. 274 F.3d at700 . Our discussion, in Mikes, of a provision of the Medicare statute offers a useful illustration:Section 1395y(a)(1)(A) of the Medicare statute states that "no payment may bemade under the Medicare statute for any expenses incurred for items or serviceswhich... are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member." 42

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U.S.C. § 1395y(a)(1)(A) (emphasis added). Because this section contains anexpress condition of payment ² that is, "no payment may be made" ² itexplicitly links each Medicare payment to the requirement that the particular itemor service be "reasonable and necessary."... Since § 1395y(a)(1)(A) expressly prohibits payment if a provider fails to comply with its terms, defendants'submission of the claim forms implicitly certifies compliance with its provision.Id. at 700-01 (brackets omitted). Similarly, 31 U.S.C. § 1354(a)(1) provides that "no agencymay obligate or expend funds" to enter a contract covered by VEVRAA when the contractor has not submitted the requisite VETS-100 report. Because the statute expressly states thatthe contractor must have submitted the report in order to be paid, a contractor that requestspayment under such a contract "implicitly certifies compliance" with the VETS-100 reportingrequirement. Kirk therefore states a valid claim under the FCA when he alleges that Schindler submitted bids and won contracts without having filed the requisite report, even before 48C.F.R. § 52.222-38 became effective.Next, we address the validity of Kirk's claims based on Schindler's filing of allegedly falseVETS-100 reports. Here, the district court, relying on former §§ 3729(a)(1) and (2) as construedby Mikes, found that there could be no liability for filing allegedly false VETS-100 reportsbecause none of the applicable statutes or regulations makes filing an accurate report a8/10/2010 US EX REL. KIRK v. SCHINDLER ELEVAT«http://scholar.google.com/scholar_case« 12/16precondition to payment or provides that a contractor, by submitting a bid or a request for payment, certifies the accuracy, as opposed to the submission, of its reports. We need notdetermine whether this analysis is correct, however, because we find that Kirk states a validclaim under the new § 3729(a)(1)(B). [16]The new provision establishes liability when a party "knowingly makes, uses, or causes to bemade or used, a false record or statement material to a false or fraudulent claim." 31 U.S.C. §3729(a)(1)(B). Accepting as true all of the factual allegations set forth in the complaint anddrawing all inferences in the light most favorable to plaintiff, see Gregory 243 F.3d at 691, in2002, 2004, 2005, and 2006 Schindler filed false VETS-100 reports, necessarily knowing thatthey were false because Schindler in fact had no mechanism in place to identify coveredveterans. It did so in order to procure contracts or obtain payment under existing contracts, asit could do neither without filing the reports. S ee 31 U.S.C. § 1354(a)(1); 48 C.F.R. § 52.222-38.

Accordingly, it knowingly used a false record in order to obtain payment from the government.

S ee S. Rep. No. 99-345 at 9, as reprinted in 1986 U.S.C.C.A.N. at 5274 ("[A] false claim maytake many forms, [including] a claim for goods or services... provided in violation of contractterms, specification, statute, or regulation.... [C]laims may be false even though the servicesare provided as claimed if, for example, the claimant is ineligible to participate in the program.")Schindler argues that the materiality requirement of § 3729(a)(1)(B) is not met here. It notesthat the government does not require, before entering into a contract or making payment under an existing contract, that some threshold number of Vietnam veterans be employed by anygiven contractor. Because the government's funding decisions are not predicated on the contentof the reports, Schindler reasons, the allegedly false statements in the reports were not"material" as defined by § 3729(b)(4) ² i.e., "having a natural tendency to influence, or becapable of influencing, the payment or receipt of money or property." Schindler maintains that itdoes not take the position that the government is entirely indifferent to the accuracy of VETS-100 reports; rather, Congress simply did not contemplate using the FCA to ensure the

accuracy of the reports. Instead, according to Schindler, their accuracy is best monitoredthrough existing administrative mechanisms. [17]We are not persuaded by Schindler's arguments. While it is clear that the statute imposes amateriality requirement, we find that that requirement is met under the circumstances alleged inthe complaint. Kirk does not merely allege that Schindler filed inaccurate reports, he allegesthat Schindler failed to take any steps whatsoever to monitor the number of covered veterans inits workforce and instead fabricated the numbers it supplied in its VETS-100 reports,essentially plucking them out of thin air. [18] We need not now define the precise contours of themateriality requirement in order to hold that in such a case, the VETS-100 reports constitute"false... statement[s] material to a false... claim." 31 U.S.C. § 3729(a)(1)(B). The reporting

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requirements of VEVRAA are sufficiently important to Congress that it made fulfillment of thema precondition to payment. S ee id. § 1354(a)(1). Schindler allegedly submitted VETS-100reports that gave the impression that it was complying with these requirements while in fact itwas entirely disregarding them. Such a false statement would certainly have a tendency to"influence, or be capable of influencing, the payment or receipt of money or property." [19] Id. §3729(b)(4). [20] Cf. United S tates ex rel. Longhi v. Lithium Power Technologies, Inc., 575 F.3d458, 470 (5th Cir. 2009) (construing the materiality requirement, as defined in § 3739(b)(4), as"requir[ing] only that the false or fraudulent statements either (1) make the government prone toa particular impression, thereby producing some sort of effect, or (2) have the ability to [a]ffectthe government's actions, even if this is a result of indirect or intangible actions on the part of the Defendants"). Kirk's FCA claims based on Schindler's filing of allegedly false reports arethus valid.

CONCL USI ON We have considered the other arguments made by Schindler and find them to be without merit.We hold that whether documents produced in response to a FOIA request are enumeratedsources under 31 U.S.C. § 3730(e)(4)(A) is to be determined by assessing the nature of the

8/10/2010 US EX REL. KIRK v. SCHINDLER ELEVAT«http://scholar.google.com/scholar_case« 13/16documents themselves; they are not "administrative... report[s]... or investigation[s]" simply byvirtue of having been gathered by an agency responding to a FOIA request. We further hold thatKirk stated valid claims under the FCA when he asserted (1) that Schindler had failed to fileVETS-100 reports in certain years, and (2) that Schindler had filed false VETS-100 reports incertain years because it had filed reports that purported to detail the number of coveredveterans in its workforce while in fact the company no measures to identify such veterans. Wetherefore VACATE the judgment of the district court and REMAND the case for further proceedings consistent with this opinion.

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162. US ex rel LON G HI v LITHIUM MS J SDTx

U.S. ex rel. Lon ghi v. Lithium Power Te chs. In c.,

513 F.Supp.2d 866 (S.D. Tex. 2007), 2008 WL 62207(S.D. Tex. J an. 3, 2008),

II. STANDARD

Summar y judgment is prope r if the plead ings, dep osit ions, answe rs to inte rroga tories, and admissio nson file, togethe r with the affidavits, if any, show th a t the re is no gen uine issue as to any ma te rial fa ct and th at the mo ving par ty is ent it led to a ju dgment as a ma tte r of law. FED. R. CIV. P.56( c); see alsoChristophe r Village, L.P. v. Ret sinas , 190 F.3 d 310 , 314 (5 th Cir. 1999). T he me re existence of som e alleged factual dispute bet ween the par ties will not de f eat an othe rwise prope rly supp or ted mo tion for

summar y judgment, the re mus t be an abs ence of a ny gen uine issue of ma te rial fa ct . Ande rso n v. Libe rty Lobby, Inc ., 477 U.S. 242 , 247-248 (1986). A n issue is mate rial if its resolu t ion could aff ect the ou tcom e of the act ion . Danie ls v. City of Arlington, Tex., 246 F.3 d 500 , 502 (5 th Cir. 2001) , ce rt . den ied, 122 S.Ct . 347 (2001). [A] nd a fact is gen uine ly in d ispute on ly if a reaso nable jury could ret urn a ve rd ict for the non-mo ving par ty . Fordoche, Inc . v. Texaco , Inc ., 463 F.3 d 388 , 392 (5 th Cir. 2006).

The mo ving par ty bears the initial bur den of informi ng the cour t of all ev idence de mo nstra t ing the abs ence of a g en uine issue of ma te rial fa ct . Ce lote x Corp. v. Catrett, 477 U.S. 317 , 323 (1986). O n ly when the mo ving par ty has discharg ed th is initial bur den does the bur den sh if t to the non-mo ving par ty tode mo nstra te th at the re is a gen uine issue of ma te rial fa ct . Id. a t 322. If the mo ving par ty fails to m eet th is bur den, then they are not ent itled to a summar y judgment and no de f en se to the mo tion isreq uired . Id.

For any ma tte r on wh ich the non-mo vant woul d bear the bur den of proof a t trial . . . , the mo vant ma y me re ly point to the abs ence of ev idence and the reby sh if t to the non-mo vant the bur den of de mo nstra t ing by com petent summar y judgment proof th at the re is an issue of ma te rial fa ct warra nt ingtrial. Transam e rica Ins. Co. v. Avene ll, 66 F.3 d 715 , 718-19 (5 th Cir. 1995); s ee also Ce lote x Corp. v.Catrett, 477 U.S. 317 , 323-25 (1986). To prevent summar y judgment, the non-mo ving par ty mus t com e forwar d with spec ific facts showing th at the re is a gen uine issue for trial. Matsush ita Elec . Ind us. Co. , Ltd . v. Zen ith Radio Corp., 475 U.S. 574 , 587 , 106 S. Ct . 1348 (1986) ( quo ting FED. R. CIV. P. 56(e )).

When conside ring a mo t ion for summar y judgment, the Court mus t view the ev idence in the light mos t favorabl e to the non-mo vant and draw all r easo nable inf e rence s in favor of the non-mo vant . Adams v.Trave le rs Inde m. Co. of Co nn ., 465 F.3 d 156 , 163-64 (5 th Cir. 2006). T he cour t mus t rev iew all of the ev idence in the record, bu t mak e no cred ibility dete rminations or w e igh any ev idence, d isregard allev idence favorabl e to the mo ving par ty th at the jury is not req uired to b e lieve, and give credence to the ev idence favoring the nonmo ving par ty as w e ll as to the ev idence supp or t ing the mo ving par ty th at isuncont rad icted and unimpe ached . Jone s v. Robinson Prope rty Grou p, L.P., 427 F.3 d 987 , 993 (5 th Cir.

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2005). How eve r, the nonmo vant cann ot avoid summar y judgment simp ly by present ing conc lusor y allega tions and den ials, spec ula t ion, improbabl e inf e rence s, unsubs tant iated asse rt ions, and legalistic argum ent ation . See TIG Ins. Co. v. Sed gwick James of Was h ., 276 F.3 d 754 , 759 (5 th Cir. 2002); s ee alsoLitt le v. Liquid Air Corp., 37 F.3 d 1069 , 1075 (5 th Cir.1994) ( en ba nc). By the sam e token, the mo vingpar ty will not meet its bur den of proof bas ed on conc lusor y bald asse rt ions of ul t ima te facts. Gossett v. Du-Ra-Ke l Corp., 569 F.2 d 869 , 872 (5 th Cir. 1978); s ee also Galind o v. Prec ision Ame r. Cor p ., 754 F.2 d 1212 , 1221 (5 th Cir. 1985).

A Claim for Pa yment

The Supreme Court has de fined a claim as all frau dulent atte mpt s to caus e the Gove rnment to pay ou t sums of mo ney . United State s v. Ne if e rt-White Co., 390 U.S. 228 , 233 , 88 S. Ct . 959 (1968). T he re see ms to be litt le d ispute he re as to whethe r LPTpresented invoice s bas ed on the cont ra cts at issue, and th ose invoice s we re paid . Accord ingly, since a call has b een ma de on the f ede ral fisc, the first pronghas b een sa tisfied . 7 See Un ited State s v. Inc . Village of Island Park , 888 F.Su pp . 419 , 440 (E.D.N.Y. 1995)( Fraudulent cond uct and false state ment s remain inch oa te unt il a claim for payment causi ng the gove rnment to d isburs e fund s is ma de . ) (citing United State s v. McNinch, 356 U.S. 595 , 599 , 78 S. Ct .950 (1958)).

B. That Was Fals e or Frau dulent and Made With The Req uisite Sciente r

1. False

Much de ba te surrou nd s the meaning of the ph ras e false or frau dulent claim. See e .g., Harriso n, 176F.3d at 785. How eve r, in the civil ve rsion of the False Claims Act, the ph ras e is construed broa dly. Id.

[T]he Court has consistent ly re fused to accept a rigid, restrict ive reading....

Ne if e rt-White Co., 390 U.S. a t 232 (i nte rnal citation and foo tn ote s omi tted ). Thus , any t ime a fals e state ment is ma de in a transact ion involving a call on the U.S. fisc, False Claims Act liability ma y att ach .Harriso n, 176 F.3 d a t 785. I n the simplest te rms a fals e claim is [a]n asse rt ion or s tate ment th at isunt rue . BLACK S LAW DICTIONARY 636 (8th ed . 2004). So , unde r th is prong of the te st, the quest ion becom es whethe r the claims or s tate ment s are lite rally true . The par t ies do not d ispute he re whethe rthe invoice s the mse lve s we re factually corr ect . Inste ad the gove rnment argu es th at the invoice s are tainted becaus e they arise from a cont ract procured by false or frau dulent claims. Cour ts have rec ognized liability unde r the False Claims Act bas ed on a frau dulent ind ucement the ory. 8 See Un ited State s ex re l. Thom pson v. Columbia / HCA Healthc are Corp., 125 F.3 d 899 , 902 8 I n 1999 , the Four th Circuit wro te an op in ion regarding two wa ys th at de f end ant s could be he ld liable unde r the FCAde sp ite having submi tted accura te invoice s: false ce rt ification and frau dulent ind ucement . Harriso n v.West inghous e Savann ah River Co., 176 F.3 d 776 , 787-88 (4 th Cir. 1999). Fals e ce rtification claimsinvolve sche mes whe re the rece ipt of f ede ral fu nd s is pred icated on com pliance with ce rtain statute s.Id . For example in United State s v. Incorpora ted Village of Island Park , the de f end ant s we re req uired toce rtif y amo ng othe r th ings th at they had se lected housi ng par t icipant s on a firs t-com e, first-se rved basis. 888 F. Su pp . 419 , 440 (E.D.N.Y. 1995); s ee also P ete rson v. We inbe rge r, 508 F.2 d 45, 52 (5 th Cir.1975) (fi nd ing FCA liability for fals e ce rtification when Med icare forms r eq uired the signature of the

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attend ing phy sician th at he had pe rsonally attended or su pe rvised the ir care, bu t we re inste ad signed by anothe r doct or). The Fif th Circuit rec ognizes false ce rtification FCA liability provided the gove rnment has cond it ioned payment of a claim u pon a claima nt sce rt ificat ion of com pliance . Un ited State s ex re l.Thom pson v. Columbia / HCA Healthc are Corp., 125 F.3 d 899 , 902 (5 th Cir. 1997). I n a frau dulent ind ucement claim , cour ts, inc luding the Supreme Court, [have ] found False Claims Act liability for each claim submi tted to the gove rnment unde r a cont ract, when the cont ract or exten sion of go ve rnment bene fit was ob tained originally th roug h false state ment s or frau dulent cond uct . Harrison, 176 F.3 d a t 787 ( citing United State s ex re l. Mar cus v. Hess, 317 U.S. 537 , 63 S. Ct . 379 (1943)). T he se cases ar e freq uent ly seen in a bid-rigging situa t ion . Id.; Hess, 317 U.S. a t 542-43. I n Hess, the Supreme Court uphe ld FCA liability for a grou p of e lect rical cont ra ctors w ho conspired on the ir bids for work o n Public Works A dministra tion project s. Hess, 317 U.S. a t 539. Th is frau d d id not spend itse lf with the execu tion of the cont ract . Its taint ente red int o eve ry swollen estima te which was the basi c caus e for payment of eve ry dollar paid by the P.W.A. i nt o the joint fund for the bene fit of respondent s. The in it ial frau dulent

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163. US ex rel LON G HI v LITHIUM Do J Opposing Writ Cert

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164. US ex rel LUC K LEY v BAXTER

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165. US ex Rel Mikes v Straus

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166. US ex rel MILLER v HARBERT INTERNATIONAL

MEMORANDUM OPINION & ORDER

ROYCE C. LAMBERTH , United St ates Distri ct Jud ge.

*1 Before the Court is Pl aintiffs' Motion [562] to Pre clude Defend ant E. Roy Anderson From Contestin g Lia bility,which is in essen ce the mirror im age of Anderson's Motion [560] in Limine Prohibitin g Introdu ction of Convi ctionand Pre cludin g Him From Puttin g on a Complete Defense. As expl ained below, both Motions [562 & 560] areGRANTED in p art and DENIED in p art. Anderson's Motion [563] in Limine Prohibitin g Introdu ction of EleventhCir cuit De cision Affirmin g Anderson's Convi ction is GRANTED, as discussed below. Also before the Court is

plaintiffs' Motion [558] to Pre clude Defend ant Bilh ar Intern ational Esta blishment f/ k /a Harbert Intern ationalEsta blishment From Contestin g Lia bility, whi ch is GRANTED.

First, pl aintiffs' Motion [562] avers th at Anderson's crimin al convi ction pre cludes him from contestin g lia bility inthis case, on the b asis of gener al issue pre clusion prin ciples and 31 U.S.C. § 3731(d) , whi ch provides th at ³ a final

judgment rendered in f avor of the United St ates in any crimin al proceedin g char ging fr aud or f alse st atements,whether upon a verdict after tri al or upon a plea of guilty or nolo contendere, sh all estop the defend ant from denyin g the essenti al elements of the offense in any [Fa lse Cl aims A ct] action whi ch involves the s ame tr ansaction as in thecrimin al proceedin g.´ Anderson's Motion [560] simply see k s a declar ation th at he can contest his case.

Anderson w as convicted of two counts- conspir acy under the Sherm an A ct, and conspir acy to defr aud thegovernment under 18 U.S.C. § 371 . In his M ar ch 9, 2006 Report & Re commend ation [231], M ag istr ate Jud geFacc iola recommended p artial summ ary jud gment aga inst Anderson, allowin g him to contest causation anddamages. As the M agistr ate Jud ge expl ained, collater al estoppel m ay be a pplied when ³the s ame issue w as contested

by the p arties and submitted for judi cial review in the prior case; th at issue w as necessarily determined in the prior case, and pre clusion in the se cond case would not wor k a basic unf airness to the p arty to be bound.´ Miller v. H oltzmann, 2006 WL 568722 at*13 (D.D.C.2006) . The M agistr ate Jud ge concurred with the Eleventh Cir cuit'sopinion affirmin g Anderson's conviction, tre ating it as a conviction for ³p articipat[ion] in a conspir acy to ri g the bidson the three contr acts at issue here.´ Id

.

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167. US ex rel RESNIC K v WEILL

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168. US ex rel Totten v BOMBARDIER ROBERTS, Cir cuit Jud ge: Rel ator Edw ard Totten brou ght a qui t am action aga inst Bomb ardier

Corpor ation and Envirov ac, Inc., alleging that those companies viol ated the Fa lse Claims A ct,

31 U.S.C. §3729, by deliverin g allegedly defe ctive r ail cars to the N ational R ailro ad Passenger

Corpor ation (Amtr ak ) and submittin g invoices to Amtr ak for p ayment from an account th at

included feder al funds. The pertinent provision of the A ct imposes li a bility for civil pen alties and

treble d amages on anyone who µµk nowin gly presents, or causes to be presented, to an offi cer or

employee of the United St ates Government TTT a f alse or fr audulent claim for p ayment or

a pprov al.¶¶ Id. § 3729( a)(1). Amtr ak is not the Government, 49 U.S.C. § 24301( a)(3), and

Totten alleged only th at the funds Amtr ak used to p ay Bomb ardier and Envirov ac came in p art

from the Government ² not th at those companies presented their claims to an offi cer or

employee of the Government. The distri ct court accordin gly dismissed Totten¶s compl aint. We

agree th at under the pl ain language of Se ction 3729( a)(1), claims must be presented to an offi cer

or employee of the Government before li a bility can attach.

We therefore affirm

[***]

Nothin g in the le gislative history of the 1986 amendments su ggests th at the present Fa lse Cl aims

Act is, to borrow a phr ase from another context, µµ the product of monomaniacs.¶¶ Student Loan

Mktg. Ass¶n , 104 F.3d at 408.

What is more, if the overridin g intent of Con gress were in f act to delete the requirement th at

claims be presented to a Government offi cer or employee, Con gress could re adily h ave done just

that ² amend subse ction ( a)(1) to provide th at claims be presented to the Government or a

grantee or recipient of G overnment funds . But Con gress did not tou ch (a)(1) at all in 1986.

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Congress pro ceeded quite ellipti ca lly if its intent were to elimin ate the requirement of

presentment to the Government in the case of claims aga inst gr antees. In the fin al analysis, we

can rem ain agnostic on the question whether Con gress intention ally left the presentment

requirement in Se ction 3729( a)(1) or simply for got to t ak e it out. The su ggestion th at Con gress

may have µµ dropped a stitch,¶¶ Yesudian , 153 F.3d at 738, is not enou gh to permit us to i gnore

the st atutory text. The Supreme Court reminded us in the Term just ended th at µµ µ[i]t is beyond

our provin ce to res cue Con gress from its dr afting errors, and to provide for wh at we mi ght thin k

TTT is the preferred result.¶ ¶¶ Lamie , 124 S. Ct. at 1034 (quotin g United States v. G randerson ,

511 U.S. 39, 68 (1994) (Kennedy, J., concurring)) (ellipsis in Lamie ); see also Consolidated Rail Corp. v. United States , 896 F.2d 574, 579 (D.C. Cir. 1990) ( courts are gener ally not µµfree

to µcorrect¶ what they believe to be congression al oversi ghts by construin g unambiguous st atutes

to the contr ary of their pl ain me aning¶¶).

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.

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169. US ex rel WESTRIC K v SECOND CHANCE BODYARMOR

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170. US ex rel SANCHEZ v LYMPHATXhttp:// scholar.googl e .com / scholar _case?c ase=12097999776762606609& hl=en &as _sdt= 2&as _vis=1&oi=scholarr

UNITED STATES of Ameri ca , ex rel. L aika SANCHEZ, Pl aintiff,

Laika Sanchez, Plaintiff-Appell ant,

v.

LYMPHATX, INC., P amela Cohen, J acob Cohen, Defend ants-Appellees,

Lymph atics Plus of Bo ca R aton, In c., etc., Defend ant.

No. 09-14275 Non-Ar gument C alendar.

United St ates Court of Appe als, Eleventh Cir cuit.

February 18, 2010.

1301*1301 Philip M. Burlin gton, Ni chole J. Se ga l, Burlin gton & Ro ck enbach, P.A., West P almBeach, FL, for Pl aintiff-Appell ant.

Harry Dohn Willi ams, Jr., Bo ca R aton, FL, for Defend ants-Appellees.

Before CARNES, MARCUS and KRAVITCH, Cir cuit Jud ges.

PER CURIAM:

Laika Sanchez a ppeals from the distri ct court's order dismissin g her qui t am complaint on beh alf

of the United St ates aga inst Lymph atx and its owners for viol ations of the Fa lse Claims A ct, 31

U.S.C. §§ 3729-30.[1] The distri ct court concluded th at Sanchez had f ailed to ple ad her

allegations of fr aud with the p articularity required by Feder al Rule of Civil Pro cedure 9(b) and

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that she h ad f ailed to st ate a claim for ret aliation under 31 U.S.C. 1302*1302 § 3730(h). S anchez

ar gues th at the distri ct court erred in dismissin g her compl aint for f ailure to st ate a claim, see

Fed. R.Civ.P. 12(b)(6), and in closing her case without gr anting her le ave to amend. H aving

carefully reviewed the re cord in this case, we affirm in p art, reverse in p art, and rem and.

After the United St ates de clined to intervene in her qui t am action, S anchez served an amended

complaint on Lymph atx, her former employer, and its owners. The compl aint asserted five

claims for relief under the Fa lse Cl aims A ct. Four of the claims depended on S anchez's

allegations of the defend ants' fr audulent Medi care-billin g pr actices under § 3729. The fifth

claim, under § 3730(h), w as that Sanchez had been fired in ret aliation for her complaints to

Lymph atx's owners a bout the ille ga lity of those pr actices. We review the distri ct court's

dismiss al of these claims de novo. Corsello v. Lin care, In c., 428 F.3d 1008, 1012 (11th

Cir.2005).

I. Fr audulent Billin g Claims

To st ate a claim premised on fr aud, S anchez needed to "st ate with p articularity the cir cumst ances

constitutin g [the] fr aud." Fed.R.Civ.P. 9(b); see also United St ates ex rel. Cl ausen v. L a b. Corp.

of Am., 290 F.3d 1301, 1308 (11th Cir.2002) ("Rule 9(b) does a pply to actions under the Fa lse

Claims A ct."). In her complaint, S anchez alleged that the defend ants had k nowin gly submitted

f alse claims to Medi care for lymphedem a treatments performed by m assage ther a pists.[2]

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Sanchez further alleged that the defend ants had intention ally billed Medi care for servi ces they

did not provide and that she h ad ga ined person al k nowled ge of these billin g pr actices throu gh her

employment as Lymph atx's offi ce manager.[3]

In addition to her gener al accusations of f alse billin g, Sanchez needed to ple ad "f ac ts as to time,

place, and subst ance of the defend ants' alleged fr aud, spe cifica lly, the det ails of the defend ants'

allegedly fr audulent acts, when they o ccurred, and who en gaged in them." Cl ausen, 290 F.3d at

1310 (quot ation m ar k s and citation omitted). Despite her assertion th at she h ad dire ct k nowled ge

of the defend ants' billin g and patient re cords, however, S anchez f ailed to provide any spe cific

details re gardin g either the d ates on or the frequen cy with whi ch the defend ants submitted f alse

claims, the amounts of those claims, or the p atients whose tre atment served as the b asis for the

claims. Without these or simil ar det ails, S anchez's complaint lack s the "indi cia of reli a bility"

necessary under Rule 9(b) to support her conclusory allegations of wron gdoing. See Cl ausen,

290 F.3d at 1311-12. In other words, be cause she f ailed "to allege at least some ex amples of

actual f alse claims," S anchez could not "l ay a complete 1303*1303 found ation for the rest of

[her] allegations." Id. at 1314 n. 25. The distri ct court therefore a ppropri ately dismissed the four

claims alleging fr audulent billin g.[4]

We reje ct Sanchez's ar gument th at the distri ct court should h ave allowed her to amend her

complaint before dismissin g these claims. "A distri ct court is not required to gr ant a plaintiff

leave to amend his complaint su a sponte when the pl aintiff, who is represented by counsel, never

filed a motion to amend [ ]or requested le ave to amend before the distri ct court." W agner v.

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Daewoo He avy Indus. Am. Corp., 314 F.3d 541, 542 (11th Cir. 2002) (en b anc). Sanchez w as

represented by counsel but did not move for le ave to amend, and we cannot conclude th at the

district court a bused its dis cretion by f ailing to gr ant le ave that was never requested. Bur ger Kin g

Corp. v. We aver, 169 F.3d 1310, 1318 (11th Cir.1999).

II. Ret aliatory Dis char ge Claim

With respe ct to S anchez's claim for ret aliatory dis char ge, at the time of her termin ation the Fa lse

Claims A ct provided relief to any employee dis char ged be cause of l awful acts tak en "in

further ance of an action under this se ction, in cluding investi ga tion for, initi ation of, testimony

for, or assist ance in an action filed or to be filed under this se ction." 31 U.S.C. § 3730(h) (2006),

amended by Pub.L. No. 111-21, § 4(d), 123 St at. 1617, 1624-25 (2009).[5] S anchez ar gues th at

she en gag ed in condu ct prote cted by § 3730(h) be cause, as alleged in her complaint, she

"compl ained aga in and aga in a bout the unl awful ac tions of the Defend ants" and "told them th at

they were all in currin g significant crimin al and civil li a bility." In Childree v. UAP/GA AG

Chem., In c., we held th at § 3730(h) only prote cted an employee from ret aliation when there w as

at least "a distin ct possibility" of liti ga tion under the Fa lse Cl aims A ct at the time of the

employee's actions. 92 F.3d 1140, 1146 (11th Cir.1996).[6] The question here, then, is whether

Sanchez's complaints of ille ga l activity o ccurred when there w as a distin ct possibility th at she or

the government 1304*1304 would sue the defend ants under the Fa lse Cl aims A ct. See id.

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The defend ants comp are Sanchez's condu ct to the sort of intern al reportin g that some of our

sister cir cuits h ave held f alls outside the s cope of § 3730(h). See, e. g., McKenzie v. BellSouth

Tele comms., In c., 219 F.3d 508, 516 (6th Cir.2000) ("[Se ction § 3730(h)'s] ìn further ance of'

language requires more th an merely reportin g wrongdoing to supervisors."); Z ahodni ck v. IBM

Corp., 135 F.3d 911, 914 (4th Cir.1997) ("Simply reportin g his concern of a mischar ging to the

government to his supervisor does not suffi ce to est a blish th at Zahodni ck was acting ìn

further ance of' a qui t am action."). But those courts h ave also re cognized th at an employee m ay

put her employer on noti ce of possible Fa lse Cl aims A ct litigation by m ak ing internal reports th at

alert the employer to fr audulent or ille ga l conduct. M cKenzie, 219 F.3d at 516 ("Althou ghintern al reportin g may constitute prote cted activity, the intern al reports must allege fr aud on the

government."); Eberh ardt v. Inte gr ated Desi gn & Constr., In c., 167 F.3d 861, 868 (4th Cir.1999)

("[C]h ar acterizin g the employer's condu ct as ille ga l or fr audulent ... let[s] the employer k now,

regardless of whether the employee's job duties in clude investi ga ting potenti al fr aud, th at

litigation is a reasona ble possibility."). If an employee's actions, as alleged in the complaint, are

suffi cient to support a reasona ble conclusion th at the employer could h ave fe ared bein g reported

to the government for fr aud or sued in a qui t am ac tion by the employee, then the compl aint

states a claim for ret aliatory dis char ge under § 3730(h). Cf. M ann v. Olsten Certified He althcare

Corp., 49 F.Supp.2d 1307, 1314 (M.D.Al a.1999) (usin g a simil ar standard on consider ation of a

motion for summ ary jud gment).

Sanchez's allegations th at she compl ained a bout the defend ants' "unl awful actions" and warned

them th at they were "in currin g significant crimin al and civil li a bility" would h ave been

suffi cient, if proven, to support a reasona ble conclusion th at the defend ants were aware of the

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possibility of liti gation under the Fa lse Cl aims A ct. Because her ret aliation claim did not depend

on allegations of fr aud, S anchez's complaint only needed " a short and plain st atement of the

claim showin g that [she w as] entitled to relief." Fed.R.Civ.P. 8( a). We conclude th at she s atisfied

this requirement and that the distri ct court therefore erred in dismissin g her claim for ret aliatory

dischar ge.

III. Con clusion

In light of our conclusion th at Sanchez f ailed to st ate claims premised on fr audulent billin g but

successfully st ated a claim for ret aliatory dis char ge under § 3730(h), we A FFIRM the distri ct

court's order in p art, REVERSE in p art, and REMAND for further pro ceedings consistent with

this opinion.

[1] Title 31, Se ction 3730(b) of the U.S. Code empowers priv ate persons ("rel ators") to sue in the

name of the government when it h as suffered fr aud.

[2] Lymphedem a is swellin g caused by imp airments in the body's lymph atic system. One

treatment for the condition involves li ght massage to en cour age the dr ainage of ex cess fluid.

Medi care will not p ay for this tre atment if it is provided by a massage ther a pist. See 69 Fed.Re g.

66236, 66351 (Nov. 15, 2004) ("Medi care does not, for ex ample, [ cover] ther a py servi ces

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performed by m assage ther a pists...."); Medi care Cl aims Pro cessin g Manual ch. 5 p. 31 (Apr. 24,

2009) (definin g manual lymph atic dr ainage (CPT code 97140) as a "ther a py servi ce").

[3] The defend ants dispute whether S anchez w as, in f ac t, an offi ce manager, but on our de novo

review of an order dismissin g a complaint for f ailure to st ate a claim, we assume the truth of all

f acts alleged in the complaint. Corsello, 428 F.3d at 1012.

[4] We distin guish this case from United St ates ex rel. W alk er v. R& F Properties of L ak e

County, In c., 433 F.3d 1349, 1360 (11th Cir.2005), in whi ch we affirmed the deni al of a motion

to dismiss a qui t am plaintiff's complaint. The pl aintiff in th at case was a nurse pr actitioner who

alleged a pr actice of fr audulent Medi care billin g by her former employer. Spe cifica lly, she

alleged that the defend ant's offi ce administr ator had told her th at the defend ant billed Medi care at

ar gua bly infl ated r ates. S anchez's v ague allega tions th at she "found [unspe cified]

document ation" and "dis covered" or "le arned" th at the defend ants had submitted f alse claims, by

contr ast, le aves us "wonderin g whether [she] h as offered mere conje cture or a specifica lly

pleaded allegation on an essenti al element of the l awsuit," Cl ausen, 290 F.3d at 1313. In any

event, to the extent th at Walk er conflicts with the spe cificity requirements of Cl ausen, our prior-

panel-pre cedent rule requires us to follow Cl ausen. See W alk er v. Morth am, 158 F.3d 1177,

1188-89 (11th Cir.1998).

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[5] Con gress's re cent amendment provides relief to any employee dis char ged for acting "in

further ance of other efforts to stop 1 or more viol ations of this sub cha pter." Pub.L. No. 111-21, §

4(d), 123 St at. 1617, 1624-25 (2009) (emph asis added). We need not consider the effe ct of this

change on the vi a bility of S anchez's claim be cause the amendment only a pplies to condu ct on or

after M ay 20, 2009. See id. § 4(f), 123 St at. at 1625. Lymph atx fired S anchez in 2007.

[6] Our de cision in Childree does not require th at this liti ga tion would h ave ended with the

government re coverin g from the defend ant. Se ction 3730(h) "prote cts an employee's condu ct

even if the t ar get of an investi gation or action to be filed w as inno cent." Gr aham County Soil &

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