U.S. ex rel. Totten v. Bombardier Corp.

Decision Date16 April 2002
Docket NumberNo. 01-7071.,01-7071.
Citation286 F.3d 542
PartiesUNITED STATES of America, ex rel. Edward L. TOTTEN, Appellant, v. BOMBARDIER CORPORATION AND ENVIROVAC, INC., Appellees.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (No. 98cv00657).

H. Vincent McKnight Jr. argued the cause for appellant. With him on the briefs was Peter J. Vangsnes.

Thomas M. Bondy, Attorney, U.S. Department of Justice, argued the cause as amicus curiae supporting appellant. With him on the brief were Roscoe C. Howard Jr., United States Attorney, Douglas N. Letter, Litigation Counsel, United States Department of Justice, Colin C. Carriere, Counsel to the Inspector General, Office of the Inspector General, National Railroad Passenger Corporation, and D. Hamilton Peterson, Deputy Counsel to the Inspector General.

Mark R. Hellerer argued the cause and filed the brief for appellee Bombardier Corporation. Donald A. Carr entered an appearance.

Paul E. Lehner and Randall L. Mitchell were on the brief for appellee Envirovac, Inc. Barbara Van Gelder and Scott M. McCaleb entered appearances.

Before: EDWARDS and RANDOLPH, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge EDWARDS.

Concurring opinion filed by Circuit Judge RANDOLPH.

EDWARDS, Circuit Judge:

Suspecting that his employer, the National Railroad Passenger Corporation ("Amtrak") was being defrauded by two companies with whom it had contracted to supply new rail cars with improved toilet systems, Edward Totten brought an action against these companies under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733 (1994). The District Court dismissed his suit, holding that, pursuant to a recent amendment to Amtrak's governing statute, the FCA could not be invoked with respect to federal money invested in the railroad. Totten now appeals this decision, and in so doing presents us with an issue of first impression regarding the extent to which doing business with Amtrak immunizes contractors from FCA liability.

In 1997, Congress enacted legislation which stated, in part, that Amtrak "shall not be subject to title 31." See Amtrak Reform and Accountability Act of 1997, Pub.L. No. 105-134, § 415(d), 111 Stat. 2570 (Dec. 2, 1997) ("the Reform Act"), codified at 49 U.S.C.A. § 24301(a)(3) (2001). Because the FCA is included in title 31 of the U.S.Code, the District Court concluded that a suit by Totten against contractors doing business with the railroad would impermissibly make Amtrak "subject to" the FCA. We disagree. Instead, we hold that the Reform Act erects no per se bar preventing individuals from bringing FCA actions against those who make false or fraudulent claims implicating the federal funds invested in Amtrak. Neither the text nor the legislative history of § 24301(a)(3) compels a blanket liability exception for businesses serving Amtrak.

Accordingly, we reverse the judgment of the District Court and remand the case for further proceedings. On remand, Totten may amend his complaint, which presently is inadequate, in order to state a proper claim for relief under the FCA. The District Court indicated that it would have permitted such an amendment had it not interpreted the Reform Act as posing an insurmountable obstacle to Totten's suit. We agree that an opportunity to amend is permissible and appropriate.

In amending his complaint, Totten must state with particularity the circumstances surrounding the defendants' allegedly false claims, as required by Rule 9(b) of the Federal Rules of Civil Procedure. He must also aver that the defendants actually submitted false demands for payment, rather than merely non-conforming goods. That said, we express no view on the question left open by this court in United States ex rel. Yesudian v. Howard University, 153 F.3d 731, 737-39 (D.C.Cir.1998), concerning the relationship between subsections (a)(1) and (c) of 31 U.S.C. § 3729. Instead, we leave it to the District Court to determine, should the issue arise on remand, whether an FCA plaintiff may prevail against a defendant who submits a false "claim" to Amtrak, as that term is defined in § 3729(c), without evidence that the claim was ever submitted (or resubmitted) to the federal government. We will not venture to offer an answer to this difficult legal question on the record currently before us.

I. BACKGROUND

Congress created Amtrak in 1971 in order to stave off the threatened extinction of passenger rail service in the United States. See Rail Passenger Service Act of 1970, Public Law No. 91-518, 84 Stat. 1327 (Oct. 30, 1970); Nat'l R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 453-55, 105 S.Ct. 1441, 1445-57, 84 L.Ed.2d 432 (1985). Since its inception, the statutes governing Amtrak have indicated that the railroad is to be managed as a for-profit corporation, and not as a "department, agency, or instrumentality" of the federal government. See generally Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374, 383-86, 115 S.Ct. 961, 966-68, 130 L.Ed.2d 902 (1994). This status continues to the present day. See 49 U.S.C.A. § 24301(a). As such, the railroad is generally exempt from those "statutes that impose obligations or confer powers upon Government entities." Lebron, 513 U.S. at 392, 115 S.Ct. at 971 (holding that Amtrak is nevertheless subject to the constraints of the Constitution).

Until 1997, Amtrak was formally classified as a "mixed-ownership Government corporation," 31 U.S.C. § 9101(2)(A) (1983), and was therefore bound by the rules that federal law imposes on such entities. See Government Corporation Control Act, 31 U.S.C. §§ 9101-9109 ("GCCA"). That year, concerned that these and other restrictions were jeopardizing Amtrak's financial viability, Congress enacted the Reform Act in order to increase the railroad's managerial flexibility and improve its economic prospects. See S.REP. No. 105-85, at 1 (1997), U.S.Code Cong. & Admin.News 1997, 3055 ("in order to achieve operating self-sufficiency, the bill is designed to enable Amtrak to increase efficiencies, reduce costs, and operate as much like a private business as possible."). To these ends, while Amtrak was provided with an influx of federal dollars — appropriations totaling $5.2 billion over the 1998-2002 period — Congress simultaneously sought to alter the railroad's legal status as a recipient of that money.

It did so in two ways that are significant for the present appeal. First, the Reform Act amended the GCCA to remove Amtrak from the list of mixed-ownership corporations. See Pub.L. No. 105-134, § 415(d)(2). This change freed the railroad from the requirements that bind companies so designated, such as the submission of budget reports to Congress, 31 U.S.C. § 9103, and annual government audits, 31 U.S.C. § 9105. Relatedly, the Act specifically amended 49 U.S.C. § 24301(a)(3) to provide that Amtrak "shall not be subject to title 31." See Pub.L. No. 105-134, § 415(d)(1). These amendments do not figure prominently in the legislative history of the Reform Act. Indeed, the only specific reference to this section of the bill notes tersely that it "removes Amtrak from the Government Corporations Act." H.R.REP. No. 105-251, at 34 (1997).

Certainly, neither the statutory text nor its history makes any mention of the False Claims Act. Yet, along with the rules regarding government corporations, that statute is housed in title 31. And the present case calls upon us to decide the extent to which this provision of the Reform Act narrowed the reach of the FCA as it relates to Amtrak. This is an issue of first impression.

The dispute giving rise to this case began when Amtrak contracted with two private companies, Bombardier Corporation and Envirovac, Inc. ("the Contractors"), to supply rail cars with new toilet systems for its trains. Bombardier makes the cars and Envirovac makes the toilets. Specifications for the toilet systems were incorporated into Amtrak's contracts with the Contractors. On March 16, 1998, Totten, a former Amtrak employee, filed a suit against the Contractors under the FCA, alleging that they had supplied unsuitable parts that did not meet the contractual specifications. Totten's complaint asserted that these noncompliant toilets were so defective that they endangered the health of Amtrak's passengers and employees. Totten further averred that the Contractors knew of these defects, yet delivered the cars anyway in order to obtain payment under their contracts.

In order to advance its purpose of protecting federal funds from fraud, the False Claims Act allows a private individual such as Totten (known as the relator) to bring a qui tam action "in the name of the Government," and by that means to share in the ultimate recovery. See 31 U.S.C. § 3730(b); see generally Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 768-70, 120 S.Ct. 1858, 1860-61, 146 L.Ed.2d 836 (2000). The statute's qui tam provision is a powerful tool that augments the government's limited enforcement resources by creating a strong financial incentive for private citizens to guard against efforts to defraud the public fisc. See Yesudian, 153 F.3d at 736. Indeed, an FCA plaintiff can realize a substantial recovery, as the statute imposes both treble damages and a civil penalty of up to $10,000 on any person who, inter alia, "knowingly presents, or causes to be presented, to an officer or employee of the United States Government ... a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729(a)(1).

The language of § 3729(a)(1) suggests that the alleged false claim must have been presented to the federal government itself. Section 3729(c), however, defines "claim" quite broadly to include:

any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor,...

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