American Civil Liberties Union v. Holder

• Citation: 39 Media L. Rep. 1577,673 F.3d 245,32 IER Cases 25
• Decision Date: 28 March 2011
• Docket Number: No. 09–2086.,09–2086.
• Parties: AMERICAN CIVIL LIBERTIES UNION; OMB Watch; Government Accountability Project, Plaintiffs–Appellants, v. Eric H. HOLDER, Jr., in his official capacity as Attorney General of the United States; Fernando Galindo, in his official capacity as Clerk of the Court in the United States District Court, Eastern District of Virginia, Defendants–Appellees.Taxpayers Against Fraud Education Fund, Amicus Supporting Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

32 IER Cases 25

39 Media L. Rep. 1577

673 F.3d 245

AMERICAN CIVIL LIBERTIES UNION; OMB Watch; Government Accountability Project, Plaintiffs–Appellants,

v.Eric H. HOLDER, Jr., in his official capacity as Attorney General of the United States; Fernando Galindo, in his official capacity as Clerk of the Court in the United States District Court, Eastern District of Virginia, Defendants–Appellees.Taxpayers Against Fraud Education Fund, Amicus Supporting Appellees.

No. 09–2086.

United States Court of Appeals, Fourth Circuit.

Argued: Sept. 21, 2010.Decided: March 28, 2011.

ARGUED: Christopher A. Hansen, American Civil Liberties Union, New York, New York, for Appellants. Eric Fleisig–Greene, United States Department of Justice, Washington, D.C., for Appellees. ON BRIEF: Ben Wizner, Benjamin Sahl, American Civil Liberties Union Foundation, New York, New York; Rebecca K. Glenberg, American Civil Liberties Union of Virginia Foundation, Inc., Richmond, Virginia, for Appellants. Tony West, Assistant Attorney General, Douglas N. Letter, United States Department of Justice, Washington, D.C.; Neil H. MacBride, United States Attorney, Alexandria, Virginia, for Appellees. J. Marc Vezina, Vezina & Gattuso, LLC, Gretna, Louisiana; Joseph E.B. White, Cleveland Lawrence, III, Taxpayers Against Fraud Education Fund, Washington, D.C.; Zachary A. Kitts, Cook & Kitts, PLLC, Fairfax, Virginia, for Amicus Supporting Appellees.

Before GREGORY and KEENAN, Circuit Judges, and JAMES C. DEVER III, United States District Judge for the Eastern District of North Carolina, sitting by designation.

Affirmed by published opinion. Judge DEVER wrote the majority opinion, in which Judge KEENAN joined. Judge GREGORY wrote a dissenting opinion.

OPINION

DEVER, District Judge:

From 1860 to 1863, the federal budget grew dramatically due to spending associated with the Civil War. Sadly, some unscrupulous people viewed the growing federal budget as a font to be plundered. Congress held hearings and learned that federal treasure had been spent on decrepit horses and mules, weapons that would not fire, rancid rations, and phantom supplies. In response, in 1863, Congress enacted the False Claims Act (“FCA”). When enacted, the Department of Justice did not exist, and federal law enforcement fell to Attorney General Edward Bates and his staff in Washington, D.C., as well as to the then-independent U.S. Attorneys in each federal judicial district. In enacting the FCA, Congress included qui tam provisions authorizing private citizens (known as qui tam relators) to use the FCA to file suit on behalf of the United States and to share in any recovery from the fraudsters.

Although the FCA proved a somewhat useful tool for returning ill-gotten gains to the United States Treasury, courts issued a number of rulings narrowing the construction of the FCA. Thus, in 1986, Congress amended the FCA in order to revise and strengthen it, particularly the FCA's qui tam provisions. Since the 1986 Amendments, relators have filed a dramatically larger number of qui tam actions, and due in large measure to qui tam actions, the Department of Justice has used the FCA to return over $27 billion to the United States Treasury.

In this case, the American Civil Liberties Union (“ACLU”), OMB Watch, and Government Accountability Project (“GAP”) (collectively “appellants”) filed a complaint seeking declaratory and injunctive relief against the Attorney General of the United States and the Clerk of Court for the United States District Court of the Eastern District of Virginia (collectively “appellees”). Appellants make a facial constitutional challenge to the seal provisions in 31 U.S.C. § 3730(b)(2)-(3) of the FCA, alleging that the seal provisions violate the public's First Amendment right of access to judicial proceedings, violate the First Amendment by gagging qui tam relators from speaking about their qui tam complaints, and infringe on a court's inherent authority to decide on a case-by-case basis whether a particular qui tam complaint should be sealed and thereby violate the separation of powers. Congress added the FCA's seal provisions in 1986, and the seal provisions require a qui tam relator to file the qui tam complaint under seal and mandate that the complaint remain sealed for 60 days. Accordingly, when a qui tam relator files a qui tam action, the Clerk of Court seals the qui tam complaint and the docket sheet reflecting the sealed complaint. During this 60–day period, the United States investigates the fraud allegations and decides whether to intervene in the action. At the end of the 60–day period, the United States either intervenes, declines to intervene, or seeks additional time from the federal court to investigate the allegations. If it intervenes or declines to intervene, the qui tam complaint and docket sheet are unsealed. If the United States needs more time to investigate the allegations to decide whether to intervene, the FCA permits the United States to demonstrate good cause in camera to a federal court for continuing the seal beyond 60 days.

The district court rejected appellants' facial constitutional challenge to the FCA's seal provisions and granted appellees' motion to dismiss pursuant to Rule 12(b)(1) and Rule 12(b)(6) of the Federal Rules of Civil Procedure. Because the FCA's seal provisions do not violate the First Amendment or the separation of powers, we affirm.

I.

In 1863, Congress enacted legislation for the civil recovery of false claims. See Act of March 2, 1863, ch. 67, 12 Stat. 696 (1863); S.Rep. No. 99–345, at 8–13 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5273–78. Congress targeted the law at contractors who fraudulently obtained money from the War Department during the Civil War. See United States v. McNinch, 356 U.S. 595, 599, 78 S.Ct. 950, 2 L.Ed.2d 1001 (1958). “Testimony before the Congress painted a sordid picture of how the United States had been billed for nonexistent or worthless goods, charged exorbitant prices for goods delivered, and generally robbed in purchasing the necessities of war. Congress wanted to stop this plundering of the public treasury.” Id. (footnotes omitted). Initially, the act included both criminal and civil penalties. See Act of March 2, 1863, ch. 67, 12 Stat. 696–98 §§ 1–3 (1863).

Congress eventually split the legislation concerning false claims into separate civil and criminal false claims statutes. See United States v. Bornstein, 423 U.S. 303, 305 n. 1, 96 S.Ct. 523, 46 L.Ed.2d 514 (1976). From its inception, the FCA contained provisions permitting a party known as a qui tam relator to bring suit in the name of the United States. See United States ex rel. Marcus v. Hess, 317 U.S. 537, 540, 63 S.Ct. 379, 87 L.Ed. 443 (1943).¹ If the qui tam relator prevailed in the suit, the qui tam relator recovered a portion of the proceeds. See id. Statutory qui tam provisions create a financial incentive for relators to protect the federal treasury from fraud. See id. As Judge Hall once wrote for this court: such provisions “let loose a posse of ad hoc deputies to uncover and prosecute frauds against the government” and thereby supplement the government's “regular troops.” United States ex rel. Milam v. Univ. of Tex. M.D. Anderson Cancer Ctr., 961 F.2d 46, 49 (4th Cir.1992).

In 1986, following congressional hearings concerning fraud in government contracting, Congress enacted the False Claims Amendment Act of 1986 (“1986 Amendments”). See Mann v. Heckler & Koch Def., Inc., 630 F.3d 338, 342–43 (4th Cir.2010); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784–86 (4th Cir.1999). The 1986 Amendments expanded the FCA's scope, increased the penalties, lowered the requisite standard of knowledge and intent, revised the process for a qui tam relator to file suit, and expanded the number of qui tam relators permitted to sue. See United States ex rel. Owens v. First Kuwaiti Gen. Trading & Contracting Co., 612 F.3d 724, 728–29, 734 (4th Cir.2010); United States ex rel. Sanders v. N. Am. Bus Indus., Inc., 546 F.3d 288, 292 (4th Cir.2008).

The FCA provides that any person who:

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);

(D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;

(E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;

(F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or

(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government,

violates the FCA. 31 U.S.C. § 3729(a)(1); United States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 349 (4th Cir.2009). In order to recover under the FCA, the United States must prove by a preponderance of the evidence that the person knowingly violated the FCA. 31 U.S.C. § 3731(d). The FCA defines knowingly and expressly rejects that a person have a specific intent to defraud. Id. § 3729(b). A person who violates the FCA is liable to the United States for a civil penalty of not less than $5,000, but no more than $10,000 per false claim, regardless of whether the United...