United States v. Bornstein

Decision Date14 January 1976
Docket NumberNo. 74-712,74-712
Citation46 L.Ed.2d 514,423 U.S. 303,96 S.Ct. 523
PartiesUNITED STATES, Petitioner, v. Philip L. BORNSTEIN et al
CourtU.S. Supreme Court
Syllabus

A prime contractor (Model) had a contract with the Government to provide radio kits containing electron tubes meeting certain specifications. A subcontractor (United), which was to supply the tubes, sent to Model in three separately invoiced shipments tubes that were not of the required quality but were falsely marked to indicate that they were. The radio kits that Model in turn shipped to the Government contained 397 of these falsely marked tubes. Model then sent 35 invoices to the Government for the kits, each invoice including claims for payment for the falsely marked tubes. After the Government discovered the fraud, it recovered in settlement from Model $40.72 per tube or a total of $16,165.84. Subsequently the Government sued United and two of its owner-officers (respondents) under the False Claims Act (Act), which provides that the Government may recover from a person who presents a false claim or causes a false claim to be presented to it a forfeiture of $2,000 plus an amount equal to double the amount of damages that it sustains by reason of the false claim. The Government alleged that United was liable for 35 $2,000 forfeitures, one for each invoice that it "caused" Model to submit, and also claimed damages of $16,205.54, consisting of a replacement cost of $40.82 per tube for 397 tubes. The District Court agreed that there had been 35 forfeitures, but ruled that before the Government's damages could be doubled, they had to be reduced by the amount of Model's payment to the Government, and accordingly computed double damages at only $79.40 (double the 10-cent difference per tube between its replacement cost and the payment already received from Model). On cross-appeals, the Court of Appeals agreed with the District Court on the double-damages issue, but held that since there had been only one subcontract involved there should be only one forfeiture. Held:

1. A correct application of the Act's language requires that the focus in each case be upon the specific conduct of the person from whom the Government seeks to collect the forfeiture. Thus here United committed three acts that caused Model to submit false claims to the Government the three separately invoiced shipments of falsely branded tubes to Model and hence is liable for three $2,000 forfeitures representing those three shipments. Pp. 308-313.

(a) The number of $2,000 forfeitures is not to be measured by the number of contracts involved, since such an automatic measurement, which would almost always result in only a single forfeiture no matter how many fraudulent acts the subcontractor might have committed, would not only contravene the Act's plain language, which focuses on false claims not on contracts, but would defeat the statutory purpose of punishing and preventing frauds. Pp. 310-311.

(b) Nor is the number of forfeitures to be measured by the 35 false claims presented by Model to the Government, since this method fails to distinguish between the acts committed by Model and those committed by United, a critical distinction since the Act imposes liability only for the conduct that causes false claims to be presented. Thus here the statute does not penalize United for what Model did but penalizes United for what it did. Pp. 311-313.

2. In computing the double damages authorized by the Act, the Government's actual damages are to be doubled before any subtractions are made for compensatory payments previously received from any source. This computation method best conforms to the Act's language and reflects the congressional judgment that double damages are necessary to compensate the Government completely for the costs, delays, and inconveniences occasioned by fraudulent claims; fixes the defrauder's liability without reference to the adventitious actions of other persons (such as the prime contractor here); and forecloses the subcontractor from avoiding the double-damages provision by tendering the amount of the undoubled damages at any time before judgment. Pp. 313-317.

504 F.2d 368, reversed and remanded.

Argued by Keith A. Jones, Washington, D.C., for petitioner.

William Rossmoore, Newark, N.J., for respondent Gerald Page.

Jack Ballan, Fairlawn, N.J., for respondent Philip L. Bornstein.

Mr. Justice STEWART delivered the opinion of the Court.

The False Claims Act provides that the United States may recover from a person who presents a false claim or causes a false claim to be presented to it a forfeiture of $2,000 plus an amount equal to double the amount of damages that it sustains by reason of the false claim.1 This case presents two interpretative problems that arise when the United States sues a subcontractor under the Act on the ground that the subcontractor has caused the prime contractor to present false claims: First how should the number of $2,000 forfeitures be counted? Second, when the United States has already recovered damages from the prime contractor because of the subcontractor's fraud, what effect does that recovery have upon the Government's right to recover double damages from the subcontractor?

I

In 1962, the United States entered into a $2,100,000 contract with Model Engineering & Manufacturing Corporation, Inc. (Model), for the provision of radio kits. Each kit was to contain electron tubes that met certain specifications. Model subcontracted with United National Labs (United) to supply these tubes at a price of $32 each. The tubes that United sent to Model under this subcontract were not of the required quality, but were falsely marked by United to indicate that they were. United sent at least 21 boxes of these falsely marked tubes to Model, in three separately invoiced shipments. The radio kits that Model in turn shipped to the United States contained 397 of those falsely marked tubes. Model sent 35 invoices to the Government for the radio kits, and each invoice included claims for payment for the falsely marked tubes that had been supplied to Model by United. After the Government discovered the fraud, it recovered $40.72 per tube from Model and also retained the falsely marked tubes.

Subsequently, the Government brought this civil action in a Federal District Court under the False Claims Act against United and two of its owner-officers, the respondents Philip L. Bornstein and Gerald Page.2 The complaint alleged that United was liable for 35 $2,000 forfeitures one forfeiture for each invoice that it had "caused" Model to submit,3 and also claimed damages of $16,205.54, consisting of $40.82 per tube for 397 tubes. The trial court agreed that there had been 35 forfeitures, but ruled that before the Government's damages could be doubled, they were to be reduced by the amount of Model's payment to the United States. The court accordingly computed double damages at only $79.40 and awarded the Government a total of $70,079.40. 361 F.Supp. 869 (NJ). On cross-appeals the Court of Appeals agreed with the trial court on the double-damages issue, but concluded that since there had been only one subcontract involved, there should be only one statutory forfeiture. Accordingly, the appellate court held that United was liable for only $2,079.40. 504 F.2d 368 (CA3). We granted the Government's petition for certiorari to consider the statutory questions presented. 420 U.S. 906, 95 S.Ct. 823, 42 L.Ed.2d 835.

II The Number of Statutory Forfeitures

The False Claims Act provides that a person "who shall do or commit any of the acts prohibited by" Rev.Stat. § 5438 "shall forfeit and pay to the United States the sum of two thousand dollars . . . ." Rev.Stat. § 3490. Section 5438 makes it illegal for a person to present or cause to be presented "for payment or approval . . . any claim upon or against the Government of the United States . . . knowing such claim to be false, fictitious, or fraudulent." It is settled that the Act permits recovery of multiple forfeitures and that it gives the United States a cause of action against a subcontractor who causes a prime contractor to submit a false claim to the Government. See United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443. The precise issue presented here is whether the subcontractor should be liable for each claim submitted by its prime contractor or whether it should be liable only for certain identifiable acts that it itself committed.4

The legislative history of the Act offers little guidance on how properly to determine the number of forfeitures. The Act was originally aimed principally at stopping the massive frauds perpetrated by large contractors during the Civil War.5 There is no indication that Con- gress gave any thought to the question of how the number of forfeitures should be determined in cases involving subcontractor fraud. But the absence of specific legislative history in no way modifies the conventional judicial duty to give faithful meaning to the language Congress adopted in the light of the evident legislative purpose in enacting the law in question.

The respondents defend the decision of the Court of Appeals that held them liable for only one forfeiture. In reaching this conclusion the Court of Appeals relied principally on its earlier decision in United States v. Rohleder, 157 F.2d 126 (CA3), where it found that 16 forfeitures were appropriate because 16 contracts were involved. The Rohleder court had relied in turn on this Court's decision in United States ex rel. Marcus v. Hess, supra. The Hess case involved several electrical contractors who had collusively bid on 56 Public Works Administration projects. The District Court in Hess had imposed 56 forfeitures, rejecting the defendants' claim that only one forfeiture should have been imposed because there had been only one fraudulent scheme. This Court concluded that the District Court was correct because...

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