US v. Hercules, Inc.

Decision Date24 May 1996
Docket NumberNo. 89-C-954 B.,89-C-954 B.
Citation929 F. Supp. 1418
PartiesUNITED STATES of America, and Katherine A. Colunga, Plaintiffs, v. HERCULES, INC., et al., Defendants.
CourtU.S. District Court — District of Utah

Lon D. Packard, Ronald D. Packard, Craig H. Johnson, Packard, Packard, & Johnson, Salt Lake City, UT, Michael T. Thorsnes, Daral B. Mazzarella, Thorsnes, Bartolotta, McGuire & Padilla, San Diego, CA, Brian W. Steffensen, Salt Lake City, UT, Rick J. Sutherland, Sutherland & England, Salt Lake City, UT, for Plaintiffs.

Gordon L. Roberts, Randy L. Dryer, Spencer E. Austin, James T. Blanch, Parsons, Behle & Latimer, Clark Nielsen, Henriod & Nielsen, Carlie Christensen, U.S. Attorney's Office, Salt Lake City, UT, Dennis C. Egan, Commercial Litigation Dept., U.S. Dept. of JusticeCivil Division, Clarence T. Kipps, Jr., Miller & Chevalier, Washington, DC, for Defendants.

MEMORANDUM AND ORDER

BOYCE, United States Magistrate Judge.

The plaintiff, Katherine A. Colunga, brought this action ex rel the United States (qui tam) and individually against Hercules Inc., United Precision Machine & Engineering Company and T.J. Products, Inc., claiming violations by the defendants of the Federal False Claims Act (FCA), 31 U.S.C. § 3729. The plaintiff has alleged various forms of falsification and concealment by defendant Hercules and others from October 1981 to April 1992 in connection with nine missile systems for which Hercules had contracted with the United States. The complaint was first filed in October 1989 and first and second amended complaints were filed. The period of time for which plaintiff makes claim in this case is important because on October 27, 1986 Congress significantly amended the False Claims Act.

In the course of this litigation, the court requested the parties to attempt to narrow the issues and invited the filing of motions to summarily adjudicate matters that could possibly narrow the legal and factual issues for trial. As a consequence, Hercules has made several motions for summary adjudication of various contested issues. Among the strenuously contested issues is whether certain provisions of the FCA adopted in 1986 are retroactive. The court has ruled on several of these matters but reserved two questions for more thorough consideration.

The first issue is whether the mens rea standard of the 1986 amendments to the FCA, establishing the requirement that defendants' conduct be done "knowing" or "knowingly", as those terms are defined in 31 U.S.C. § 3729(b), is to be retroactively applied. Second is whether the so called qui tam jurisdictional bar provisions of 31 U.S.C. § 3730(e)(4)(A) which were modified by the 1986 amendments to FCA, have retroactive application.

It is Hercules' position that under applicable standards of retroactivity analysis that in neither situation should the amendment be applied retroactively or retrospectively. Plaintiff contends both provisions should have retrospective application.

Retroactivity Analysis

Congress first enacted a false claims statute in 1863 during the Civil War to deal with fraud by contractors supplying the Government's military effort. Act of March 2, 1863, Ch. 67, 12 Stat. 696-98, reenacted Rev.Stat. §§ 3490-94 and 5438. See Boese, Civil False Claims and Qui Tam Actions, pp. 1-5.1 The FCA essentially remained in its original form until 1943 when Congress made significant amendments. 31 U.S.C. §§ 232-235. These amendments established a so called, "jurisdiction bar" to a private qui tam action by requiring that the Government have no prior knowledge or information in its possession of the false claim and allowed the Justice Department to take over a qui tam case. The 1943 FCA also continued the same mental state for culpability of a defendant. It spoke in terms of defendant acting "knowingly," 31 U.S.C. § 3729 or "without completely knowing" that information was true with regard to a delivery of a certifying document. 31 U.S.C. § 3729(5). The relief was civil, United States ex rel Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943), although 18 U.S.C. § 287 also makes criminal the conduct of knowing presentation of a false claim.

In 1986 Congress again amended the FCA. It provided for a more precise and expanded definition of the statutory mens rea of knowing or knowingly, 31 U.S.C. § 3729(b), and the Government knowledge standard of the jurisdictional bar was changed. 31 U.S.C. § 3730(e)(4). The retrospective application of these two provisions is what Hercules' motion is directed at and it seeks to have the court conclude the amendments are not retroactive and not to be retrospectively applied.

In DeVargas v. Mason and Hanger-Silas Mason Co., Inc., 911 F.2d 1377 (10th Cir. 1990) the court articulated the retroactively problem with regard to the construction of federal statutes. The dispute arose in a civil rights case as to whether amendments to the Rehabilitation Act, 29 U.S.C. §§ 794-94a were to be applied retroactively. The court said where the congressional intent is clear that legislation was to be applied retroactively, that that intent governs. Id. p. 1384. Citing Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 837-838, 110 S.Ct. 1570, 1576-1577, 108 L.Ed.2d 842 (1990). In Kaiser the Supreme Court noted apparent tension in the retroactively analysis between its decision in Bradley v. Richmond School Bd., 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476 (1974) (court is to apply the law in effect at the time of its decision) and the court's decision in Bowen v. Georgetown University Hospital, 488 U.S. 204, 109 S.Ct. 468, 102 L.Ed.2d 493 (1988) (retroactively not favored). See 494 U.S. at 837-838, 110 S.Ct. at 1576-1577. The court found it unnecessary in Kaiser to resolve the issue because the congressional intent against retroactive application was clear in that case. In DeVargas, supra, the court said the first point of reference was the statute. 911 F.2d at 1384. The court said the intent for retroactive application must be clear. Id. p. 1385. The court in DeVargas observed:

We also find that the expressed congressional intent in the Senate report to "restore" section 504 to its pre-Grove City College interpretation reflects unambiguously only Congress's purpose to reverse the Supreme Court's program-specific reading of federal prohibitions on discrimination by programs or activities receiving federal financial assistance. Because we must find clear congressional intent to invoke retroactivity, we cannot read "restore" to mean "retroactively restore," particularly where the effect of such a reading would be to impose substantive liability for actions committed in reliance on Grove City College and its progeny prior to the passage of the Restoration Act in 1988.

911 F.2d p. 1385.

The court said where the retroactivity issue was not clear from the statute it would not be resolved on the basis of floor statements of individual legislators. Id. p. 1386-87. The court therefore examined the Bradley/Bowen line of Supreme Court decisions. The court in DeVargas concluded they were in "irreconcilable contradiction." Id. p. 1390. The court said that forced to choose between the lines of authority it chose Bowen as the proper standard and the amendments to the Rehabilitation Act were not to be applied retroactivity. With the obvious problems raised in DeVargas and Kaiser, as well as other cases, in the interpretation of Supreme Court decisions, the Supreme Court had to resolve the conflict and addressed the problem in Landgraf v. USI Film Products, 511 U.S. 244, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994).

In Landgraf, supra, the Supreme Court considered the retroactive application of the 1991 Amendments to Title VII of the Civil Rights Act of 1964. 42 U.S.C. § 2000e et. seq. The court found Congress did not intend to put into the legislation a specific or explicit provision addressing the retroactivity of the legislation. 511 U.S. p. ___, 114 S.Ct. p. 1492. The court observed the doubts as to the applicable standards under its prior decisions. Id. pp. ___, ___, 114 S.Ct. pp. 1494, 1496. The court did reaffirm the presumption against retroactive application, Id. pp. ___, ___ - ___, 114 S.Ct. pp. 1497, 1500-01, and said that Congress must make clear its intention for retroactive application of new legislation. Id. pp. ___, ___, 114 S.Ct. pp. 1498, 1499. The court also said that in making a determination of retroactivity in other than clear circumstances, a "court must ask whether the new provision attaches new legal consequences to events completed before the enactment." Id. p. ___, 114 S.Ct. p. 1499. The court observed, citing Ex parte Collett, 337 U.S. 55, 69 S.Ct. 944, 93 L.Ed. 1207 (1949) that procedural rules may often be applied in suits without concerns about retroactivity. Id. p. ___, 114 S.Ct. p. 1502. The court in Landgraf said Bradley, supra, was not inconsistent with the presumption against retroactivity. The court in Landgraf then stated the process for determining retroactive application of legislation:

When a case implicates a federal statute enacted after the events in suit, the court's first task is to determine whether Congress has expressly prescribed the statute's proper reach. If Congress has done so, of course, there is no need to resort to judicial default rules. When, however, the statute contains no such express command, the court must determine whether the new statute would have retroactive effect, i.e., whether it would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed. If the statute would operate retroactively, our traditional presumption teaches that it does not govern absent clear congressional intent favoring such a result.
511 U.S. p. ___, 114 S.Ct. p. 1505.

It is this standard that must be used in this case in assessing Hercules' contention for the non-retroactive...

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    • United States
    • California Court of Appeals Court of Appeals
    • March 27, 2003
    ...Law, was enacted in 1863. (Minnesota Ass'n of Nurse Anesthetists v. Allina (8th Cir.2002) 276 F.3d 1032, 1040; United States v. Hercules, Inc. (D.Utah 1996) 929 F.Supp. 1418, 1420.) The legislative development of title 31 of the United States Code sections 3730(e)(4)(A) and 3730(e)(4)(B) wa......
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    • United States
    • U.S. District Court — District of Puerto Rico
    • June 23, 2000
    ...fraud no longer required); United States v. Oakwood Downriver Medical Center, 687 F.Supp. 302 (E.D.Mich.1988); United States v. Hercules, Inc., 929 F.Supp. 1418 (D.Utah 1996). An employer will not be able to escape liability by proving its ignorance of an employee's false statement. The emp......
  • In re Sharp
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    • U.S. Bankruptcy Court — Northern District of Ohio
    • January 4, 2007
    ...this is opposed to constructive fraud which arises by operation of law irrespective of intent, Accord United States v. Hercules, Inc., 929 F.Supp. 1418, 1426 (D.Utah 1996). Human nature, however, being what it is, actual intent is only rarely ascertainable by direct evidence as a debtor is ......
4 books & journal articles
  • False statements and false claims.
    • United States
    • American Criminal Law Review Vol. 44 No. 2, March 2007
    • March 22, 2007
    ...are stated in the disjunctive, three kinds of claims may be submitted in violation of [section] 287); United States v. Hercules, Inc., 929 F. Supp. 1418, 1426 (D. Utah 1996) ("The juxtaposition of the three adjectives 'false, fictitious, or fraudulent' probably resulted from a draftsman's d......
  • False statements and false claims.
    • United States
    • American Criminal Law Review Vol. 46 No. 2, March 2009
    • March 22, 2009
    ...are stated in the disjunctive, three kinds of claims may be submitted in violation of [section] 287); United States v. Hercules, Inc., 929 F. Supp. 1418, 1426 (D. Utah 1996) ("The juxtaposition of the three adjectives 'false, fictitious, or fraudulent' probably resulted from a draftsman's d......
  • False statements and false claims.
    • United States
    • American Criminal Law Review Vol. 45 No. 2, March 2008
    • March 22, 2008
    ...are stated in the disjunctive, three kinds of claims may be submitted in violation of [section] 287); United States v. Hercules, Inc., 929 F. Supp. 1418, 1426 (D. Utah 1996) ("The juxtaposition of the three adjectives 'false, fictitious, or fraudulent' probably resulted from a draftsman's d......
  • False statements and false claims.
    • United States
    • American Criminal Law Review Vol. 43 No. 2, March 2006
    • March 22, 2006
    ...are stated in the disjunctive, three kinds of claims may be submitted in violation of [section] 287); United States v. Hercules, Inc., 929 F. Supp. 1418, 1426 (D. Utah 1996) ("The juxtaposition of the three adjectives 'false, fictitious, or fraudulent' probably resulted from a draftsman's d......

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