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United States v. Boeing Co.

filed: September 7, 1993.

UNITED STATES OF AMERICA, EX REL. KEVIN G. KELLY, PLAINTIFF-APPELLEE,
v.
THE BOEING COMPANY, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Western District of Washington. D.C. No. CV-89-1732-R. Barbara J. Rothstein, District Judge, Presiding.

Before: Cynthia Holcomb Hall, Charles Wiggins and Edward Leavy, Circuit Judges. Opinion by Judge Hall.

Author: Hall

HALL, Circuit Judge:

This appeal presents several constitutional challenges to the qui tam provisions of the False Claims Act, 31 U.S.C. §§ 3729 et seq. The question of the constitutionality of the qui tam provisions is one of first impression in this circuit. We hold that these provisions do not exceed the limitations of Article III of the Constitution, nor do they violate the constitutional principle of separation of powers, the Appointments Clause of Article II, or the Due Process Clause of the Fifth Amendment.

I. OVERVIEW AND BACKGROUND

The Boeing Company ("Boeing") appeals the district court's denial of its motion to dismiss a qui tam action under the False Claims Act ("FCA" or "the Act"). Qui tam plaintiff Kevin G. Kelly filed the action against Boeing on behalf of the United States to recover damages and penalties for allegedly fraudulent charges to the United States. Boeing claimed in its motion to dismiss that the district court lacked jurisdiction over Kelly's suit because the provisions of the FCA which authorize qui tam actions are unconstitutional.

The district court rejected Boeing's four constitutional challenges to the FCA, but certified an interlocutory appeal of its rulings on the constitutional issues. We granted permission to appeal pursuant to 28 U.S.C. § 1292(b). We have considered and likewise rejected Boeing's arguments. Therefore, we affirm.

A. Facts and Proceedings Below.

In November 1989, Kelly, a former Boeing employee, filed a complaint under seal alleging that Boeing committed various violations of the False Claims Act related to its work as a subcontractor on the government's B-2 Bomber and Advanced Tactical Fighter programs. Kelly claimed that Boeing improperly charged to the government certain facilities lease costs. Kelly served his complaint on the government, as required under the Act, after which the government investigated his allegations for over three years. Upon completing its investigation, the government elected not to intervene in the case. The district court then unsealed the case, and Kelly served on Boeing an amended complaint. Boeing then moved to dismiss, raising the four constitutional challenges that it pursues in this appeal. The district court denied Boeing's motion,*fn1 and certified the constitutional issues for immediate appeal to this court.

B. The Qui Tam Provisions of the FCA.

The FCA, which Congress originally enacted in 1863, is the government's "primary litigative tool for combatting fraud" against the federal government. Senate Judiciary Committee, False Claims Amendments Act of 1986, S. Rep. No. 345, 99th Cong., 2d Sess. 2 (1986), reprinted in 1986 U.S.C.C.A.N. 5266. The Act authorizes both the Attorney General and private persons to bring civil actions to enforce the Act. 31 U.S.C. § 3730 (1988). Congress amended the FCA in 1986 to increase the financial and other incentives for private individuals to bring suits under the Act and thereby to enlist the aid of the citizenry in combatting the rising problem of "sophisticated and widespread fraud."*fn2 S. Rep. No. 345 at 2, 23-24, reprinted in 1986 U.S.C.C.A.N. at 5267, 5288-89.

Section 3730(b) of the FCA as now constituted provides that a person may bring a civil action for a violation of the substantive provisions of the Act "for the person and for the United States Government. The action shall be brought in the name of the Government." 31 U.S.C. § 3730(b)(1). An action under this provision is termed a "qui tam"*fn3 suit, and the person who brings such an action is referred to as a "relator" or "informer". If the government files an action to enforce the FCA, a would-be relator may not later bring any action based on the same underlying facts. 31 U.S.C. § 3730(e)(3). Nor may a private party litigate a qui tam suit based on the public findings of a government investigation or on disclosures in the news media, unless that party is an original and independent source of the information on which the complaint is based. Id. § 3730(e)(4)(A)-(B).

Upon bringing a qui tam action, a relator must serve on the government a copy of the complaint and written disclosure of substantially all material evidence and information the relator possesses. The complaint must be filed in camera and remain under seal for at least 60 days so that the government may investigate the relator's allegations, though upon a showing of "good cause" the government may move the court for extensions of the 60 day period. Id. § 3730(b)(2), (3). By the end of the period provided for the government's investigation, the government must decide whether to intervene and proceed with the action, "in which case the action shall be conducted by the Government," id. § 3730(b)(4)(A), or whether to decline to take over the action, "in which case the person bringing the action shall have the right to conduct the action." Id. § 3730(b)(4)(B).

The Act explicitly provides that if the government takes over the qui tam action from the start, "it shall have the primary responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action." Id. § 3730(c)(1). Though the relator "shall have the right to continue as a party," id., the government may end the litigation or limit the participation of the relator in several ways. First, the government may dismiss the action "notwithstanding the objections of the person initiating the action" once the relator has received notice and an opportunity for a hearing on the dismissal motion. Id. § 3730(c)(2)(A). Second, the government may settle with the defendant "notwithstanding the objections of the person initiating the action," but only if the court determines after a hearing "that the proposed settlement is fair, adequate, and reasonable under all the circumstances." Id. § 3730(c)(2)(B). Third, the government may request that the court impose appropriate limitations on the relator's participation if it shows that unrestricted participation "would interfere with or unduly delay the Government's prosecution of the case, or would be repetitious, irrelevant, or for purposes of harassment." Id. § 3730(c)(2)(C). The Act also provides the defendant an opportunity to request that the court limit the relator's participation, upon a showing that unrestricted participation "would be for purposes of harassment or would cause the defendant undue burden or unnecessary expense." Id. § 3730(c)(2)(D).

When the government chooses not to take over a qui tam action, the relator "shall have the right to conduct the action." Id. § 3730(c)(3). Upon the government's request, however, the relator must serve the government with copies of all pleadings and deposition transcripts. Whether or not the government takes over the action from the outset, it may ask the court to stay the relator's discovery for an extendable 60-day period, upon a showing that the relator's discovery "would interfere with the Government's investigation or prosecution of a criminal or civil matter arising out of the same facts." Id. § 3730(c)(4).

In cases where the government initially elects not to take over the action, the court "may nevertheless permit the Government to intervene at a later date upon a showing of good cause." Id. § 3730(c)(3). In permitting late intervention, the court may not limit "the status and rights" of the relator. Id. The parties and amici in this appeal raise two questions concerning this particular aspect of the qui tam provisions. First, they dispute the height of the "good cause" hurdle. Second, they dispute the meaning of the proviso that the court may not limit the relator's "status and rights." Boeing claims that this proviso means the relator retains primary authority to conduct the action, whereas Kelly claims that this simply means the relator retains the right to participate as a party to the litigation.*fn4 Both questions relate to the broader issue, addressed in the Discussion section of this opinion, concerning the extent of the government's ability to exert control over a qui tam suit.

The Act provides for a range of possible awards to successful qui tam plaintiffs. In actions which the government has taken over, the relator receives between 15 and 25 percent of the proceeds of the action or settlement of the claim. But if the court finds that the action is based primarily on information of which the relator is not the original source, the relator's award must be limited to no more than 10 percent of the proceeds or settlement. In actions in which the government has not intervened, the relator receives between 25 and 30 percent of the proceeds or settlement. In any of the above situations, the relator also receives an amount for reasonable expenses, attorneys' fees and costs, awarded against the defendant rather than taken out of the proceeds or settlement. Id. § 3730(d)(1), (2). On the other hand, an unsuccessful relator in a case in which the government has not intervened may be ordered to pay the defendant its reasonable attorneys' fees and expenses if the court finds that the relator's claim "was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment." Id. § 3730(d)(4).

II. STANDARD OF REVIEW

We review de novo the purely legal question whether a statute is constitutional. Gray v. First Winthrop Corp., 989 F.2d 1564, 1567 (9th Cir. 1993). We are mindful that we should invalidate an act of Congress only "for the most compelling constitutional reasons." Mistretta v. United States, 488 U.S. 361, 384 (1989) (quoting Bowsher v. Synar, 478 U.S. 714, 736 (1986) (Stevens, Concurring in judgment)). Furthermore, we recognize that we are obliged whenever "fairly possible" to interpret a statute in a manner that renders it constitutionally valid. Communications Workers of America v. Beck, 487 U.S. 735, 762 (1988). Our adherence to this principle of presumptive constitutionality is guided by our understanding that "when we are required to pass on the constitutionality of an Act of Congress, we assume 'the gravest and most delicate duty that this Court is called on to perform.'" Fullilove v. Klutznick, 448 U.S. 448, 472 (1980) (citation omitted).

III. DISCUSSION

A. Standing.

1. Article III Requirements.

We first address the threshold question of justiciability - whether a qui tam plaintiff has standing to sue under the FCA. Article III, section 2 of the Constitution limits the judicial power of the United States to the resolution of cases and controversies. The doctrine of standing is used to determine whether a conflict qualifies as a case or controversy and is therefore capable of judicial resolution. Lujan v. Defenders of Wildlife, 112 S. Ct. 2130, 2136 (1992). Standing, in turn, is dependent on three conditions. First, the plaintiff must have suffered an "injury in fact." This consists of an invasion of a legally-protected interest which is (a) concrete and particularized and (b) actual or imminent. Second, there must be a causal connection between the injury and the conduct serving as the basis of the lawsuit. In other words, the injury has to be traceable to the challenged action of the defendant and not the result of the conduct of a third party not before the court. Third, it must be likely that the injury will be redressed by a favorable decision. Id.

Boeing and amici curiae argue that the only injuries implicated in qui tam suits are injuries to the federal treasury resulting from false claims against the United States. Qui tam relators do not suffer harm, and are therefore unable to establish the constitutional elements of standing. It follows that by granting standing to private parties, the FCA's qui tam provisions run afoul of Article III and are unconstitutional.

We disagree. As an initial matter, we think it is possible for a qui tam plaintiff to suffer sufficient harm to satisfy the injury in fact requirement of Article III. In many cases, qui tam plaintiffs will be unwilling participants in the alleged fraud. Under these circumstances, they are denied the benefit of working for an honest business. As the court in United States ex rel. Robinson v. Northrop Corp., 1993 WL 216540 (N.D. Ill. June 16, 1993), explained, this is not an insignificant injury. The embarrassment and discomfort of working for a company that has allegedly perpetrated a fraud on the government can be quite substantial. Id. at 5.

In addition, qui tam plaintiffs are faced with the difficult choice of either remaining silent and being subject to potential liability or reporting the fraud to a superior and suffering repercussions as severe as dismissal. We recognize that the potential harm flowing from this choice is too speculative to qualify as injury in fact.*fn5 However, we are convinced that the decision making process that an individual exposed to fraud is forced to engage in causes significant present harm. The stress, anxiety, and mental anguish caused by this dilemma satisfies the injury in fact requirement. The Supreme Court has long recognized that noneconomic and intangible injuries fulfill the injury in fact requirement. Sierra Club v. Morton, 405 U.S. 727, 734 (1972). Indeed, the Court has gone so far as to state that an "identifiable trifle" is enough to establish standing. United States v. Students Challenging Regulatory Agency Procedures (SCRAP), 412 U.S. 669, 689 n.14 (1973). "Accordingly, a showing of slight, non-economic injury is sufficient to confer standing." Murphy v. Bilbray, 782 F. Supp. 1420, 1425 n.16 (S.D. Cal. 1991), aff'd, Ellis v. City of La Mesa, 990 F.2d 1518 (9th Cir. 1993). We hold that the injuries suffered by a qui tam plaintiff satisfy this standard.

Our Conclusion is not undermined by the Supreme Court's statement in Valley Forge Christian College v. Americans United for the Separation of Church and State, Inc., 454 U.S. 464, 485 (1982), that the psychological consequence of observing conduct with which one disagrees is not an injury sufficient to confer standing under Article III. See also Asarco v. Kadish, 490 U.S. 605, 616 (1989). The Supreme Court's observation in Valley Forge does not foreclose the possibility of basing standing on psychological or mental harm. See e.g. Fund for Animals, Inc. v. Lujan, 962 F.2d 1391, 1396-97 (9th Cir. 1992) (members of an environmental group had standing to sue based on psychological injury suffered from viewing the killing of buffalo in Montana). Instead, the Court's language is properly understood to mean that the simple ...


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