US ex rel. Newsham v. Lockheed, C 88-20009 RPA.

• Decision Date: 10 July 1989
• Docket Number: No. C 88-20009 RPA.,C 88-20009 RPA.
• Citation: 722 F. Supp. 607
• Parties: UNITED STATES of America, ex rel. Margaret A. NEWSHAM and Martin Overbeek Bloem, Plaintiffs, v. LOCKHEED MISSILES AND SPACE COMPANY, INC., Defendant.
• Court: U.S. District Court — Northern District of California

722 F. Supp. 607

UNITED STATES of America, ex rel. Margaret A. NEWSHAM and Martin Overbeek Bloem, Plaintiffs, v. LOCKHEED MISSILES AND SPACE COMPANY, INC., Defendant.

No. C 88-20009 RPA.

United States District Court, N.D. California.

July 10, 1989.

Guy T. Saperstein, Saperstein & Seligman, Oakland, Cal., Michael F. Hertz and Vincent B. Terlep, Jr., U.S. Dept. of Justice, Washington, D.C., and James M. Spears, Acting Asst. Atty. Gen., and William F. Murphy, Asst. U.S. Atty., San Jose, Cal., for plaintiffs.

James J. Gallagher, Charles Pereyra-Suarez and John G. Stafford, Jr., McKenna, Conner & Cuneo, Los Angeles, Cal., and B. Scott Silverman and Paula S. Downey, Morrison & Foerster, Palo Alto, Cal., for defendant.

OPINION FOR PUBLICATION OF ORDER DENYING MOTION TO DISMISS QUI TAM ACTION AS UNCONSTITUTIONAL^*

AGUILAR, District Judge.

I. INTRODUCTION

Lockheed Missiles and Space Company, Inc. (Lockheed) moves to dismiss this qui tam action as unconstitutional under Article II and Article III of the U.S. Constitution. Specifically, under Article II, defendant argues that the qui tam provisions of the False Claims Act violate the doctrine of separation of powers by improperly delegating prosecutorial functions to private citizens and the Judicial Branch. In addition, the provisions allegedly violate the Appointments clause by appointing private prosecutors who are allowed to act inconsistently with the government's official prosecutors. Finally, the qui tam plaintiffs allegedly lack standing under the case or controversy requirement of Article III of the Constitution.

The Court has received, read and considered all the papers submitted on defendant's motion.¹ In addition, the Court heard the oral argument of counsel. Good cause appearing therefor, the Court HERE- BY DENIES the motion. The qui tam provisions of the False Claims Act are constitutional.

II. FACTUAL BACKGROUND

A. Qui tam pro domino rege quam pro se ipso in hac parte sequitur

In the words of Justice Peckham, "statutes providing for actions by a common informer, who himself had no interest whatever in the controversy other than that given by statute, have been in existence for hundreds of years in England, and in this country ever since the foundation of our Government." Marvin v. Trout, 199 U.S. 212, 225, 26 S.Ct. 31, 34, 50 L.Ed. 157 (1905).

Following an embedded English tradition of relying on qui tam actions to supplement the sovereign legal enforcement mechanisms, the First Congress authorized qui tam suits in at least 10 of the first 14 statutes imposing penalties. See Adams, qui tam v. Woods, 6 U.S. (2 Cranch) 336, 341, 2 L.Ed. 297 (1805) ("almost every fine or forfeiture under a penal statute, may be recovered by an action of debt qui tam as well as by information by the public prosecutor").

Subsequent Congresses continued this pattern, periodically passing new qui tam legislation throughout the Nineteenth Century. A succession of Presidents manifested concurrence in the qui tam practice by signing the legislation into law.

B. The False Claims Act

The Civil False Claims Act was born in 1863 to a nation engulfed in a civil war. The War Department found itself at the hands of unscrupulous and corrupt government contractors. The abuses and damage done to the federal treasury and war effort was, for defense contractors, an opportunity for windfall profit. The contractors were fast becoming "proverbially and notoriously rich." 1 F. Shannon, The Organization and Administration of the Union Army, 1861-1865, at 54-56 (1965) (quoting Tomes, Fortunes of War, 29 Harper's Monthly Mag. 228 (1864)). "For sugar it the government often got sand; for coffee, rye; for leather, something no better than brown paper; for sound horses and mules, spavined beasts and dying donkeys; and for serviceable muskets and pistols, the experimental failures of sanguine inventors, or the refuse of shops and foreign armories" Id. at 58, Tomes, Fortunes of War, 29 Harper's Monthly Mag. 228 (1864).²

Based on the record of widespread fraud by contractors, Congress, at the urging of President Lincoln, enacted the False Claims Act. Act of March 2, 1863, ch. 67, 12 Stat. 696. The Act authorized suits to recover the forfeitures and damages to "be brought and carried on by any person, as well for himself as for the United States; the same shall be at the sole cost and charge of such person, and shall be in the name of the United States." Id., § 4, 12 Stat. 698.

The sponsor explained that the availability of qui tam actions would "hold out to a confederate a strong temptation to betray his coconspirator, and bring him to justice. ... I have based ... the bill upon the old-fashioned idea of holding out a temptation, and `setting a rogue to catch a rogue,'..." Cong. Globe, 37th Cong., 3d Sess. 955-56 (1863) (remarks of Sen. Howard).

The False Claims Act was amended in 1943 to preclude parasitic suits brought upon information already in the Government's possession.³ After codification in 1982, the Act was again amended in 1986.⁴

Although the Act is codified at 31 U.S.C. § 3730, et seq., it is interesting to compare the parties' descriptions of its provisions. Defendant notes that the amended FCA (1) allows the relator to initiate a suit without concurrence of the United States; (2) permits the relator to continue to prosecute a case even after the United States elects not to participate, as the government has done here; (3) conditions the ability of the United States to intervene after the earliest stage of the litigation upon court approval; and (4) allows the relator and the court to interfere with decisions by the United States to settle or dismiss an action.

Plaintiffs describe the 1986 Amendments as a careful balance, reflecting the legitimate concerns and preeminent role of the Department of Justice (DOJ) as the government's principal agent against fraud, on the one hand, and the desire to strengthen the contribution of the qui tam provisions to expose government fraud, on the other.

The Amendments require that qui tam actions be filed under seal for the initial sixty-day period, and for any extensions "for good cause shown," for the Government to determine whether to appear. If the government elects to intervene, the DOJ has primary responsibility for prosecuting the action, although the relator may continue as a party subject to restrictions.

The DOJ may dismiss or settle the action, notwithstanding the objections of the relator, upon notice and court approval. The DOJ may also seek a court order restricting a relator's participation in an action. Additionally, the DOJ may move to stay a qui tam plaintiff's discovery if it "would interfere with the Government's investigation or prosecution of a criminal or civil matter arising out of the same facts." § 3730(c)(4).

In the case before the Court, the DOJ sought several extensions of time. A year after the complaint was filed, the government opted not to intervene in the matter. The government is not required to give a reason for its decision, and in this case it did not explain its decision. Whether the government's decision reflects a belief that plaintiffs' claim lacks merit, as defendant asserts, or reflects the government's belief that plaintiffs and their attorneys can adequately represent the government's interest, as plaintiffs assert, is pure speculation.

III. DISCUSSION

Defendant asks the Court to invalidate as unconstitutional the qui tam provisions of the False Claims Act. Defendant asserts that these provisions violate Articles II and III of the United States Constitution.

A. Do the qui tam provisions violate the Separation of Powers Doctrine?

Defendant argues that the qui tam provisions improperly place prosecutorial functions in the hands of private individuals, thereby constituting an impermissible intrusion into the functions of the Executive Branch.

Article II vests all executive power in the President and obliges the executive to faithfully execute the Laws. U.S. Const. art. II, §§ 1, 3. Although not clearly stated in the Constitution, the separation of powers doctrine flows naturally from the tripartite division of government.

Defendant asserts that the Courts have devised a two part test to determine whether the doctrine of separated powers has been violated: (1) whether the matter at issue is a function committed exclusively to one branch of Government, and (2) whether that branch has been divested of its exclusive control to accomplish its constitutionally assigned function. Buckley v. Valeo, 424 U.S. 1, 138, 96 S.Ct. 612, 691, 46 L.Ed.2d 659⁵; Immigration & Naturalization Service v. Chadha, 462 U.S. 919, 944-46, 103 S.Ct. 2764, 2780-82, 77 L.Ed.2d 317 (1983).

Plaintiffs take issue with defendant's emphasis on the exclusivity of the separate branches' functions. "As Madison admonished at the founding, that while our Constitution mandates that `each of the three general departments of government must remain entirely free from the control or coercive influence, direct or indirect of either of the others,' the Framers did not require — and indeed rejected — the notion that the three Branches must be entirely separate and distinct." Mistretta v. U.S., ___ U.S. ___, 109 S.Ct. 647, 659, 102 L.Ed.2d 714 (1989) citations omitted.

Mistretta advised a flexible approach to determine whether an unconstitutional encroachment on the independence of one of the branches has occurred.⁶ In addition, a statutory provision confronting a vexing national problem, approved by both Houses of Congress and signed into Law by the President should only be invalidated for the "most compelling constitutional reasons." Mistretta, 109 S.Ct. at 661. Mistretta upheld the constitutionality of the Sentencing Guidelines on the basis that the sentencing had long been peculiarly shared among the Branches of government. The Sentencing Commission did not prevent the Executive branch from accomplishing its constitutionally...