U.S. v. Q Intern. Courier, Inc., s. 96-3456

Decision Date22 December 1997
Docket NumberNos. 96-3456,96-3590,s. 96-3456
Citation131 F.3d 770
PartiesUNITED STATES of America, Appellant, v. Q INTERNATIONAL COURIER, INC., sued as Quick International Courier, Inc.; Robert Mitzman; Dominique Brown; Vincent Farella; Precision Mailers, Inc; and Gregg Smith, Appellees. Q INTERNATIONAL COURIER, INC., Counter-Appellant, v. UNITED STATES POSTAL SERVICE, Counter-Appellee.
CourtU.S. Court of Appeals — Eighth Circuit

Jeffrey A. Clair, Washington, DC, argued (Frank W. Hunger, David L. Lillehaug, Douglas N. Letter, on the brief), for appellant.

Peter L. Farkas, Washington, DC, argued (Michael H. Selter, Mary Boney Denison, Robert Lewis Barrows, on the brief), for appellee.

Before FAGG, WOLLMAN and MORRIS SHEPPARD ARNOLD, Circuit Judges.

MORRIS SHEPPARD ARNOLD, Circuit Judge.

Q International Courier ("Quick") is a mail courier firm that arranges for the delivery of large numbers of letters. Robert Mitzman, Dominique Brown, and Vincent Farella were officers or employees of Quick at the time of the disputed activities. According to the government's complaint, Precision Mailers was a corporation engaged in the business of coordinating and brokering mail promotions. The district court noted, however, that Precision Mailers is no longer involved directly in this litigation because it is both insolvent and inactive. Gregg Smith was an officer or employee of Precision Mailers at the time of the disputed activities; although he remains a nominal party to this case, the United States has apparently settled its dispute with him.

At issue in this case is a practice known as "ABA remail." To take advantage of differences between domestic and certain international postage rates, Quick would transfer bulk mail from the United States (A) to Barbados (B) for the purpose of remailing the letters individually back into the United States (A). At the time of the incidents in question here, the United States Postal Service rate for domestic mail was 29cents per ounce, but the record suggests that the Postal Service charged the Barbadian postal service as little as one-tenth of that amount for the same first-class delivery of mail throughout the United States. Accordingly, the Barbadian postal service charged a sum significantly less than 29cents per ounce to deliver mail from Barbados to the United States. By taking the letters to Barbados and mailing them back into the United States, Quick therefore achieved significant postage cost savings for its customers.

The United States, on behalf of the Postal Service, sued Quick and the other defendants on the grounds that the courier had violated the reverse claims provision of the False Claims Act, see 31 U.S.C. § 3729(a)(7). The government asserted that the defendants owed an obligation to the United States for the full domestic postage for each letter and that they attempted to reduce this obligation through fraudulent statements or records. For its part, Quick counterclaimed against the Postal Service, alleging unfair competition in violation of the Lanham Act, see 15 U.S.C. § 1125(a), on the grounds that the Postal Service had provided false or misleading information to a trade publication regarding this dispute. The district court held on summary judgment that the United States had not established that Quick had an obligation to pay postage within the meaning of the False Claims Act. We agree. The district court also held on summary judgment that the doctrine of sovereign immunity barred a suit against the Postal Service based on the Lanham Act. We disagree, vacate that ruling by the district court, and remand for further proceedings consistent with this opinion.

I.

The principal action in this case was brought by the United States to recover under the so-called reverse false claims provision of the False Claims Act, see 31 U.S.C. § 3729(a)(7). That provision gives the United States a means to recover from someone who makes a material misrepresentation to avoid paying some obligation owed to the government. See S.Rep. No. 99-345, at 15, 18 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5280, 5283. The statute provides for a civil penalty and treble damages for using a false statement "to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government." See 31 U.S.C. § 3729(a)(7).

The district court found that the United States failed to demonstrate that Quick or the other defendants owed any obligation to the government, and accordingly entered summary judgment for Quick on the claim against it. We agree. Whether the ABA remailing practice engaged in by Quick constitutes a violation of some other law is a question for another day, but we believe that in this case the United States has not demonstrated that any of the defendants owed an "obligation" to the government within the meaning of the False Claims Act.

To recover under the False Claims Act, we believe that the United States must demonstrate that it was owed a specific, legal obligation at the time that the alleged false record or statement was made, used, or caused to be made or used. The obligation cannot be merely a potential liability: instead, in order to be subject to the penalties of the False Claims Act, a defendant must have had a present duty to pay money or property that was created by a statute, regulation, contract, judgment, or acknowledgment of indebtedness. The duty, in other words, must have been an obligation in the nature of those that gave rise to actions of debt at common law for money or things owed. This interpretation of the term "obligation" is supported by the legislative history of the reverse false claims provision, which refers twice to "money owed," S.Rep. No. 99-345, at 15, 18, reprinted in 1986 U.S.C.C.A.N., at 5280, 5283, as the kind of duty that the reverse claims provision is designed to address. The deliberate use of the certain, indicative, past tense suggests that Congress intended the reverse false claims provision to apply only to existing legal duties to pay or deliver property. Had Congress wished to cover attempts to avoid potential fines or sanctions it would have used language appropriate to that end. Cf. United States ex rel. S. Prawer & Co. v. Verrill & Dana, 946 F.Supp. 87, 93-95 (D.Me.1996).

To prevail in its false claims action against these defendants, then, the United States must demonstrate that there was an existing, specific legal duty in the nature of a debt that Quick or the other defendants owed the United States at the time of their ABA remailing activities. The government does not allege any contract with the defendants, nor does it claim to be the beneficiary of any judgment or acknowledgment of indebtedness. Instead, it relies upon various statutes and regulations to establish that the defendants owed a duty to pay full domestic postage as to each piece of mail sent through Barbados. We are satisfied as a legal matter that such a duty would qualify as an "obligation" under the False Claims Act. As we shall demonstrate, however, the statutes and regulations that the United States cites might well support a judgment that one or more of the defendants engaged in illegal and fraudulent activity, but those statutes and regulations do not create a legal duty for the defendants to pay domestic postage.

The United States first points to the Postal Service's International Mail Manual §§ 790-793 (June 9, 1997) ("IMM") as the source of the obligation to pay domestic postage to the Postal Service for each piece of mail sent through Barbados. The most relevant of these sections informs the reader that payment of domestic postage "is required to secure delivery of mail" sent by or on behalf of a resident of the United States, if the foreign postage applied to the mail is lower than the comparable United States domestic postage rate. See IMM § 791. By its terms, however, this provision states only that the Postal Service is not obligated to deliver mail sent by United States residents from certain foreign locations. Its plain language serves only to release the Postal Service from an obligation, not to impose an obligation on anyone to pay postage.

Indeed, to read IMM § 791 as creating an obligation to pay postage would be inconsistent with the authority pursuant to which it was promulgated. The United States argues that IMM §§ 790-793 are authorized by the Universal Postal Convention, art. 23; but that article simply provides that a signatory "shall not be bound to forward or deliver" mail sent by or on behalf of a resident of the signatory country from another country if the foreign postage rate is lower than the signatory country's domestic rate. See Universal Postal Convention, art. 23, p 1 (1984), reprinted in 2 Acts of the Universal Postal Union 37 (1985). The aim of the article is to release the Postal Service from an obligation to deliver mail, not to establish an obligation for others to pay full domestic postage.

The United States turns next to the Private Express Statutes, see 39 U.S.C. §§ 601-606, in an effort to locate a legal duty on Quick's part to pay postage. These provisions, and their enabling regulations, see 39 C.F.R. § 310.1 through § 310.7, protect the Postal Service's monopoly by forbidding the private carriage of letters. By transporting letters to Barbados by a means other than the Postal Service, Quick perhaps violated the Private Express Statutes. Nonetheless, this violation is relevant to liability under the False Claims Act only if the Private Express Statutes impose a legal duty on Quick to pay postage, and we believe that they do not. The Private Express Statutes themselves merely prohibit the carriage of letters outside the mails and the carriage of letters by a vessel departing the United States if those letters are not either deposited by the Postal Service or pertaining to the cargo of the vessel. See 39 U.S.C. §§ 601-602.

It is true that the regulations...

To continue reading

Request your trial
68 cases
  • U.S., ex rel. Ramadoss v. Caremark Inc.
    • United States
    • United States District Courts. 5th Circuit. Western District of Texas
    • August 27, 2008
    ...Cir.1999); Am. Textile Mfrs. Inst., Inc. v. The Limited, Inc., 190 F.3d 729, 736 (6th Cir.1999); United States v. Q Int'l Courier, Inc., 131 F.3d 770, 773 (8th Cir.1997). In interpreting the "obligation" element under Section 3729(a) (7), courts have held somewhat different standards for wh......
  • United States ex rel. Dr. John John A. Millin v. Krause, 1:17-CV-01019-CBK
    • United States
    • United States District Courts. 8th Circuit. United States District Courts. 8th Circuit. District of South Dakota
    • April 14, 2018
    ......KRAUSE, an individual; and KRAUSE-ALLBEE TRUCKING, INC., a South Dakota Corporation, Defendants. 1:17-CV-01019-CBK ...§§ 3729(a)(1)(G); see also U.S. v. O Intern. Courier, Inc. , 131 F.3d 770, 773 (8th Cir. 1997) (holding ......
  • United States ex rel. Nissman v. Southland Gaming of the Virgin Islands, Inc., Civil Action No. 2011-0010
    • United States
    • United States District Courts. 3th Circuit. District of the Virgin Islands
    • March 31, 2016
    ...are not obligations under the reverse false claim[s] provision[ ] of the FCA." (Dkt. No. 37 at 19 (citing United States v. Q Int'l Courier, Inc. , 131 F.3d 770, 773 (8th Cir.1997) ). Defendants, on the other hand, argue that the relevant language in the definition is "established duty," and......
  • U.S. v. Bourseau, 06-56741.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • July 14, 2008
    ...deliver property. Am. Textile Mfrs. Inst., Inc. v. The Ltd., Inc., 190 F.3d 729, 735 (6th Cir.1999) (quoting United States v. Q Int'l Courier, Inc., 131 F.3d 770, 773 (8th Cir.1997)). This definition is consistent with the language and intent of the FCA, see S.Rep. No. 99-345, at 9("A false......
  • Request a trial to view additional results
1 books & journal articles
  • Introducing the Kansas False Claims Act: a Primer
    • United States
    • Kansas Bar Association KBA Bar Journal No. 79-9, October 2010
    • Invalid date
    ...and damages under these statutes. Id. at 732. See also supra note 99. [103] Id. [104] United States v. Q International Courier Inc., 131 F.3d 770, 773 (8th Cir. 1997). In this case, the defendant engaged in a mail re-routing scheme to reduce its postage costs. The federal government brought......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT