520 U.S. 939 (1997), 95-1340, Hughes Aircraft Co. v. United States ex rel. Schumer

Docket Nº:Case No. 95-1340
Citation:520 U.S. 939, 117 S.Ct. 1871, 138 L.Ed.2d 135, 65 U.S.L.W. 4447
Party Name:HUGHES AIRCRAFT CO. v. UNITED STATES ex rel. SCHUMER
Case Date:June 16, 1997
Court:United States Supreme Court

Page 939

520 U.S. 939 (1997)

117 S.Ct. 1871, 138 L.Ed.2d 135, 65 U.S.L.W. 4447

HUGHES AIRCRAFT CO.

v.

UNITED STATES ex rel. SCHUMER

Case No. 95-1340

United States Supreme Court

June 16, 1997

Argued February 25, 1997

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Syllabus

In 1989, respondent Schumer filed an action against petitioner Hughes Aircraft Company under the qui tam provision of the False Claims Act (FCA), which permits, in certain circumstances, suits by private parties on behalf of the United States against anyone submitting a false claim to the Government. Hughes' allegedly false claims were submitted between 1982 and 1984. Prior to 1986, qui tam suits were barred if the information on which they were based was already in the Government's possession. A 1986 amendment, however, permits qui tam suits based on information in the Government's possession, except where the suit is based on publicly disclosed information and was not brought by an original source of the information. Hughes moved to dismiss, contending, inter alia, that the 1986 amendment was not retroactive, and that the qui tam provision in effect when Hughes engaged in its allegedly wrongful conduct precluded the suit because it was based on information that Hughes had already disclosed to the Government. The District Court denied the motion, but ultimately granted Hughes summary judgment on the merits. Schumer appealed that judgment, and Hughes cross appealed from the denial of the motion to dismiss. The Ninth Circuit rejected the cross-appeal, holding that the 1986 amendment should be applied retroactively to suits based on pre-1986 conduct because the amendment involved only the courts' subject-matter jurisdiction to hear qui tam claims and did not affect qui tam defendants' substantive liability. Finding, further, that the action was not barred under the 1986 amendment, the court reversed in part and remanded for further consideration on the merits.

Held:

Because the 1986 amendment does not apply retroactively to qui tam suits regarding allegedly false claims submitted prior to its enactment, this action should have been dismissed, as required by the pre-1986 version of the FCA. Pp. 945-952.

(a) This Court applies the time-honored presumption against retroactive legislation unless Congress has clearly manifested its intent to the contrary. Landgraf v. USI Film Products, 511 U.S. 244, 268. Nothing in the 1986 amendment evidences a clear intent by Congress that it be applied retroactively. Thus, under Landgraf 's analysis, if the

Page 940

amendment has a retroactive effect, then it will not apply to the conduct alleged here, which occurred before its effective date. P. 946.

(b) Schumer's contention that the 1986 amendment lacks retroactive effect is rejected. His argument that the amendment does not impose new duties with respect to transactions already completed because it has been unlawful to knowingly submit a false claim to the United States since 1863 was made, and rejected, in Landgraf. 511 U.S., at 281-282. He is also mistaken in contending that the amendment does not change the substance of the extant cause of action. By eliminating a defense to a qui tam suit—prior disclosure to the Government—the amendment attaches a new disability in respect to transactions or considerations already past. Id., at 269. Nor is it the case that the amendment does not create a new cause of action. As Schumer himself recognizes, it extended an FCA cause to private parties in circumstances where the action was previously foreclosed. This extension is not insignificant. Qui tam relators are motivated primarily by prospects of monetary reward rather than the public good and, thus, are less likely than is the Government to forgo an action involving a technical violation but no harm to the public fisc. The amendment essentially creates a new cause of action, not just an increased likelihood that an existing cause of action will be pursued. See, e. g., Winfree v. Northern Pacific R. Co., 227 U.S. 296, 302. Before the amendment, Schumer's action was completely barred because of Hughes' disclosure. The amendment would revive that action, subjecting Hughes to previously foreclosed qui tam litigation. Finally, Schumer errs in contending that the amendment is jurisdictional and, hence, an exception to the general Landgraf presumption against retroactivity. Statutes merely addressing where a suit may be brought may not meet the conditions for the Landgraf presumption, for they regulate only the secondary conduct of the litigation and not the underlying primary conduct of the parties. However, the amendment speaks to the parties' substantive rights by creating jurisdiction where none previously existed; it is therefore subject to the presumption against retroactivity. Pp. 946-952.

63 F.3d 1512, vacated and remanded.

Thomas, J., delivered the opinion for a unanimous Court.

Kenneth W. Starr argued the cause for petitioner. With him on the briefs were Christopher Landau, John J. Higgins, John T. Kuelbs, and Daniel R. Allemeier.

Laurence Gold argued the cause for respondent. With him on the brief were David Silberman and Leon Dayan.

Page 941

Deputy Solicitor General Waxman argued the cause for the United States as amicus curiae urging affirmance. On the brief were Acting Solicitor General Dellinger, Assistant Attorney General Hunger, Deputy Assistant Attorney General Preston, Malcolm L. Stewart, Michael F. Hertz, Douglas Letter, and Joan Hartman. [*]

Justice Thomas delivered the opinion of the Court.

The qui tam provision of the False Claims Act (FCA or Act), 31 U.S.C. § 3730(b), permits, in certain circumstances, suits by private parties on behalf of the United States against anyone submitting a false claim to the Government. Prior to 1986, such suits were barred if the information on which they were based was already in the Government's possession. At issue in this case is whether a 1986 amendment to the FCA partially removing that bar applies retroactively to qui tam suits regarding allegedly false claims submitted prior to its enactment and, if so, whether this particular action meets the requirements of the amended Act. We hold

Page 942

that the 1986 amendment does not apply to this action and therefore that this action should have been dismissed, as required by the 1982 version of the Act.

I

In December 1981, the Northrop Corporation awarded petitioner Hughes Aircraft Company a subcontract to design and develop a radar system for the B-2 bomber, which Northrop was then constructing under contract with the Air Force. Both Northrop's subcontract with Hughes and the Air Force's contract with Northrop were "cost-plus" contracts, which provided that the subcontractor and the contractor, respectively, were to be reimbursed for all costs properly incurred plus a reasonable profit. Several months after Hughes was awarded the B-2 subcontract, the McDonnell-Douglas Corporation awarded Hughes a "fixedprice" subcontract to design and develop an upgraded radar system for the F-15 fighter aircraft, which McDonnell-Douglas was then building for the Air Force. (Under the fixed-price contract, Hughes was to receive a set price, regardless of costs.) When it became apparent to Hughes that the projects overlapped in significant respects, Hughes adopted two internal "commonality agreements" allocating between its F-15 and B-2 divisions various costs that were common to the two projects.

After costs in the B-2 program escalated, Northrop requested a Government audit of Hughes' accounting practices to ascertain whether Hughes had improperly shifted costs from the fixed-price F-15 subcontract to the cost-plus B-2 subcontract. The Air Force initially concluded, in a June 1986 preliminary classified audit report, that Hughes had improperly billed the B-2 program for certain development costs that should have been charged solely to the F-15 program. Between October 1986 and September 1988, the Defense Contract Audit Agency prepared a series of unclassified audit reports similarly concluding that Hughes had

Page 943

misallocated costs between the two programs, and also concluding that Hughes had not adequately disclosed the company's commonality accounting practices in a Cost Accounting Standards report it had submitted to the Government in 1984. Based on those audits, the Government directed Northrop to withhold $15.4 million in B-2 contract payments from Hughes.[1]

On January 20, 1989, respondent William J. Schumer, formerly the Division Contracts Manager for Hughes' B-2 Division, commenced this action against Hughes pursuant to 31 U.S.C. § 3730(b), the qui tam provision of the FCA that authorizes private individuals, "relators," to bring claims on behalf of the United States against any person who knowingly presented false or fraudulent claims to the United States in violation of § 3729. Schumer's complaint alleged that Hughes knowingly mischarged Northrop—and through it the United States—for certain radar development costs that should have been allocated to the fixed-price F-15 sub-contract with McDonnell-Douglas instead of to the cost-plus B-2 subcontract with Northrop. App. 72-80. Schumer's amended complaint alleged that Hughes' accounting practices resulted in a $50 million net overcharge, and sought treble damages in the amount of $150 million. Id., at 102.[2]

Hughes moved to dismiss Schumer's action, contending that the 1986 FCA amendment was not retroactive and that

Page 944

the qui tam provision in effect when Hughes engaged in its allegedly wrongful conduct precluded qui tam suits based on information already possessed by the Government. See 31 U.S.C. § 3730(b)(4) (1982 ed.). Hughes argued in the alternative that the suit was barred even under the 1986 version of the Act because it was "based upon the public disclosure of allegations . . . in a[n] . . ....

To continue reading

FREE SIGN UP