U.S. ex rel. Weinberger v. Equifax, Inc.

• Decision Date: 12 August 1977
• Docket Number: No. 75-3491,75-3491
• Citation: 557 F.2d 456
• Parties: 25 Cont.Cas.Fed. (CCH) 82,457 UNITED STATES of America ex rel. David P. WEINBERGER, and David P. Weinberger, Esq., Individually, Plaintiffs-Appellants, v. EQUIFAX, INC. (formerly Retail Credit Company), Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 456

557 F.2d 456

25 Cont.Cas.Fed. (CCH) 82,457

UNITED STATES of America ex rel. David P. WEINBERGER, and David P. Weinberger, Esq., Individually Plaintiffs-Appellants, v. EQUIFAX, INC. (formerly Retail Credit Company), Defendant-Appellee.

No. 75-3491.

United States Court of Appeals Fifth Circuit.

Aug. 12, 1977.

David P. Weinberger, pro se.

Robert W. Rust, U. S. Atty., Miami, Fla., Edward H. Levi, Atty. Gen., Dept. of Justice, Washington, D. C., for plaintiffs-appellants.

Paul M. Stokes, Miami, Fla., for defendant-appellee.

On appeal from the United States District Court for the Southern District of Florida.

Before WISDOM and GEE, Circuit Judges, and BOOTLE, ^* District Judge.

GEE, Circuit Judge:

In this appeal we review the district court's dismissal of plaintiff Weinberger's action, pursuant to Federal Rule 12(b)(6), for lack of standing and failure to state a claim. By his suit, Weinberger sought a declaratory judgment that government employment of Equifax, Inc. (formerly Retail Credit Co.) to provide information on prospective government employees violated the Anti-Pinkerton Act, 5 U.S.C. § 3108 (1970). ¹ Weinberger also alleged that Equifax's billing of the United States for services performed violated the False Claims Act, 31 U.S.C. §§ 231-32 (1970), ² asserting that Equifax's billing of the United States for services performed in violation of the Anti-Pinkerton Act was a false claim. The district court dismissed the action, ruling that Weinberger had failed to allege essential facts under both actions and that, in any case, Weinberger lacked standing to bring either. Weinberger appeals these determinations and further asserts that the district judge should have stood recused.

The villain in Weinberger's scenario is Equifax, a corporation in the business of collecting and providing information for business decisions. Equifax's credit-reporting activities qualify it as a consumer reporting agency under the Fair Credit Reporting Act. See 15 U.S.C. § 1681a(f) (1970), but it also furnishes information concerning prospective customers and employees to businesses. On occasion, agencies of the United States have contracted with Equifax to gather information on prospective employees. Weinberger alleges that in collecting information, Equifax does not confine itself to examinations of files and public records; in some cases it uses investigative techniques similar to those employed by detective agencies. These alleged investigative techniques sparked this lawsuit.

In his action seeking a judgment declaratory of 5 U.S.C. § 3108, Weinberger asserts that because Equifax employs detective-like investigative techniques, it is an organization "similar" to the Pinkerton Detective Agency and thus barred from government employment by the Anti-Pinkerton Act. Weinberger lacks standing to assert this claim. To have standing, Weinberger must assert a personal stake in the outcome "warranting his invocation of federal court jurisdiction and to justify exercise of the court's remedial powers on his behalf." Warth v. Seldin, 422 U.S. 490, 498-99, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975). Under Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970), standing turns on "whether the plaintiff alleges that the challenged action has caused him injury in fact, economic or otherwise . . . ,"id. at 152, 90 S.Ct. at 829, and whether "the interest sought to be protected by the complainant is arguably within the zone of interest to be protected or regulated by the statute or constitutional guarantee in question." Weinberger fails to satisfy the first requirement because he has alleged no injury in fact. ³

Weinberger's qui tam action under the False Claims Act, however, fares somewhat better here than it did in the district court. The district court ruled that Weinberger lacked standing to assert his informer's suit, that he had failed to comply with procedural requirements of the Act, and that he had failed to state a claim under the Act. We hold that Weinberger had standing under the False Claims Act and properly pursued the action, but we agree with the district court that he failed to state a claim under the Act.

In 31 U.S.C. § 232 (1970), Congress specifically provides for informer's suits. It grants informers standing to sue and an award for successful action under the statute. See 31 U.S.C. § 232(B) and (E)(2) (1970). To maintain the action the informer is required only to notify the United States of the suit. The United States may then choose whether to join the action. If it elects not to enter an appearance, the informer's suit may continue. See 31 U.S.C. § 232(C) (1970). A jurisdictional requirement of the informer's suit is that it must rest on information not in the possession of the United States prior to filing the action. See 31 U.S.C. § 232(C) (1970). None of these procedural requirements doom Weinberger's action.

After Weinberger filed his informer's action, he notified the United States of his suit. And though the United States elected not to join, his action was not affected by this. See 31 U.S.C. § 232(C) (1970). The statute clearly accords him standing to bring the action so long as he predicates his claim on information not in the possession of the United States at the time of his suit. Id. At no time has Equifax suggested that the information essential to Weinberger's suit was already in the possession of the government. The district court erred in holding that Weinberger lacked standing and had failed to meet procedural requirements.

Nevertheless, Weinberger still fails to state a claim under the False Claims Act. That Act prohibits false or fraudulent claims to government payment. The penal nature of the statute requires careful scrutiny to see if the alleged misconduct violates the statute. See United States ex rel. Marcus v. Hess, 317 U.S. 537, 542, 63 S.Ct. 379, 87 L.Ed. 443 (1943). The False Claims Act "was not designed to reach every kind of fraud practiced on the Government." United States v. McNinch, 356 U.S. 595, 599, 78 S.Ct. 950, 2 L.Ed.2d 1001 (1958). The statute is primarily directed against government contractors' billing for nonexistent or worthless goods or charging exorbitant prices for delivered goods. Id. Equifax plainly did not submit a false claim under this reading of the statute: no one has suggested that Equifax's reporting activities for the government were not properly carried out. Weinberger has alleged no false claim in this sense.

The statute also interdicts material misrepresentations made to qualify for government privileges or services. See, e. g., Alperstein v. United States, 291 F.2d 455, 456 (5th Cir. 1961) (per curiam) (veteran violated False Claims Act when, to qualify for federal benefits, he falsely swore that he was financially unable to bear medical expenses); United States v. Johnson, 138 F.Supp. 525, 527-28 (W.D.Okla.1956) (physician misrepresented competency and general qualifications to gain employment with Air Force). The principal thrust of Weinberger's allegations fall into this category: that Equifax misrepresented its qualification for government employment and thus made a false claim. But to establish that Equifax committed fraud in this manner, Weinberger first must demonstrate that the government was misled by Equifax's application for the reporting business. Unless the government made it clear that it would not employ detective agencies when it contracted for the work, Equifax's application did not make a material misrepresentation, did not mislead the government, and did not defraud the government within the meaning of the False Claims Act. Weinberger does not allege that the government required applicants to represent that they were not detective agencies; no misrepresentation is alleged. In this case the False Claims Act is not an enforcement device for the Anti-Pinkerton Act. Weinberger has failed to allege a claim under the False Claims Act.

Even had Weinberger alleged, however, that the government did make nondetective agency status a prerequisite to a reporting contract, Weinberger would still have failed to state a claim because we conclude that he has not alleged facts bringing Equifax under the proscriptions of the Anti-Pinkerton Act. Weinberger has not alleged facts indicating that Equifax operates like the Pinkerton Detective Agency did in 1892 i. e., that it is a general detective agency, that it provides watchmen for plants and buildings, and that it offers for hire a mercenary, quasi-military armed force.

The Anti-Pinkerton Act is an expression of legislative frustration. In the 1890's, the nascent labor movement was increasingly involved in sometimes violent confrontations with factory owners over wages and working conditions. When the owners' resort to legal remedies proved fruitless or when the local police force was ineffectual in handling strikes, owners frequently engaged the Pinkerton Agency to supply large bodies of armed men to discourage strikers from interfering with the orderly operation of business. One particularly violent and bloody confrontation occurred in Homestead, Pennsylvania, when the Amalgamated Association of Iron and Steel Workers struck a Carnegie Steel Mill. Managers of the mill employed an armed force of 300 Pinkertons to protect the mill. As the Pinkertons approached the mill, floating on barges down the Monongahela River, a firefight ensued between them and strikers on the banks. Numerous injuries and some deaths resulted from this struggle. The Homestead incident prompted congressional investigations on ways to prevent employers' reliance on Pinkertons to solve labor disputes. See S. Rep. No. 1280, 52d Cong., 2d Sess. (1893); H. Rep. No. 2447, 52d Cong., 2d Sess. (1893). Although Congress wished to ban the employment of Pinkertons as a private mercenary force, it concluded that it lacked the power to enact such a ban and...