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Under the False Claims Act (FCA), "[a]ny 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), is liable to the Government for a civil penalty, treble damages, and costs, §3729(a). Although the Attorney General may sue under the FCA, a private person, known as a relator, may also bring a qui tam action "in the name of the Government." §3730(b). The relator must inform the Justice Department of her intentions and keep the pleadings under seal while the Government decides whether to intervene and do its own litigating. §3730(b)(2). If the claim succeeds, the relator's share may be up to 30 percent of the proceeds of the action, plus reasonable expenses, costs, and attorney's fees. §3730(d). This case involves a National Institute of Drug Abuse research grant to Cook County Hospital for a study that was later administered by a nonprofit research institute affiliated with the hospital. Respondent Chandler, who ran the study for the institute, filed this qui tam action, claiming that Cook County (hereinafter County) and the institute had submitted false statements to obtain grant funds in violation of §3729(a)(1). After this Court held in Vermont Agency of Natural Resources v. United States ex rel. Stevens,
Held: Local governments are "persons" amenable to qui tam actions under the FCA. Pp. 4-14.
(a) While §3729 does not define the term "person," its meaning has remained unchanged since the original FCA was passed in 1863. Stevens, supra, at 783, n. 12. There is no doubt that the term then extended to corporations. Indeed, this Court as early as 1826 in United States v. Amedy, 11 Wheat. 392, 412, recognized the presumption that "person" also includes "persons politic and incorporate." Essentially conceding that private corporations were taken to be persons when the FCA was passed in 1863, the County argues that municipal corporations were not so understood until six years later, when the Court decided Cowles v. Mercer County, 7 Wall. 118. Cowles, however, was not an extension of principle but a natural recognition of the common understanding that municipal corporations and private ones were to be treated alike in terms of their legal status as persons capable of suing and being sued. This explains how the Court in Cowles could conclude "automatically and without discussion" that municipal corporations, like private ones, "should be treated as natural persons for virtually all purposes of constitutional and statutory analysis." Monell v. New York City Dept. of Social Servs.,
(b) The False Claims Amendments Act of 1986 did not repeal municipal liability. As part of an effort to modernize the FCA, the 1986 amendments raised the ceiling on damages recoverable under §3729(a) from double to treble. Relying on the common law presumption against punitive damages for municipalities, see Newport v. Fact Concerts, Inc.,
277 F. 3d 969, affirmed.
Souter, J., delivered the opinion for a unanimous Court.
COOK COUNTY, ILLINOIS, PETITIONER v. UNITED
STATES ex rel. JANET CHANDLER
on writ of certiorari to the united states court of appeals for the seventh circuit
[March 10, 2003]
Justice Souter delivered the opinion of the Court.
In Vermont Agency of Natural Resources v. United States ex rel. Stevens,
I
Stevens, supra, at 768-770, explains in some detail how the FCA currently provides for civil penalties against "[a]ny person" who (so far as it concerns us here) "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." §3729(a)(1). Although the Attorney General may sue under the FCA, so may a private person, known as a relator, in a qui tam action brought "in the name of the Government," but with the hope of sharing in any recovery. §3730(b). The relator must inform the Department of Justice of her intentions and keep the pleadings under seal for 60 days while the Government decides whether to intervene and do its own litigating. §3730(b)(2); see also §3730(c). If the claim succeeds, the defendant is liable to the Government for a civil penalty between $5,000 and $10,000 for each violation, treble damages (reducible to double damages for cooperative defendants), and costs. §3729(a).1 The relator's share of the "proceeds of the action or settlement" may be up to 30 percent, depending on whether the Government intervened and, if so, how much the relator contributed to the prosecution of the claim. §3730(d).2 The relator may also get reasonable expenses, costs, and attorney's fees. Ibid.
The fraud in this case allegedly occurred in administering a $5 million grant from the National Institute of Drug Abuse to Cook County Hospital, owned and operated as the name implies, with the object of studying a treatment regimen for pregnant drug addicts. The grant was subject to a variety of conditions, including the terms of a compliance plan meant to assure that the study would jibe with federal regulations for research on human subjects. Administration of the study was later transferred to the Hektoen Institute for Medical Research, a nonprofit research organization affiliated with the hospital. Respondent, Dr. Janet Chandler, ran the study from September 1993 until the institute fired her in January 1995.
In 1997, Chandler filed this qui tam action, claiming that the County and the institute had submitted false statements to obtain grant funds in violation of §3729(a)(1).3 Chandler said that the defendants had violated the grant's express conditions, had failed to comply with the regulations on human-subject research, and had submitted false reports of what she called "ghost" research subjects. Chandler also alleged that she was fired for reporting the fraud to doctors at the hospital and to the granting agency, rendering her dismissal a violation of both state law and the whistle-blower provision of the FCA, §3730(h).4 The Government declined to intervene in the action.
The County moved to dismiss the claims against it, arguing, among other things, that it was not a "person" subject to liability under the FCA.5 The District Court denied the motion, reading the term "person" in the FCA to include state and local governments. United States ex rel. Chandler v. Hektoen Institute for Medical Research, 35 F. Supp. 2d 1078 (ND Ill. 1999). The Court of Appeals dismissed the County's interlocutory appeal, and we denied certiorari.
II
While §3729 does not define the term "person," we have held that its meaning has remained unchanged since the original FCA was passed in 1863. Stevens, supra, at 783, n. 12. There is no doubt that the term then extended to corporations, the Court in 1826 having expressly recognized the presumption that the statutory term "person" " 'extends as well to persons politic and incorporate, as to natural persons whatsoever.' " United States v. Amedy, 11 Wheat. 392, 412 (1826) (quoting 2 E. Coke, Institutes of the Laws of England 736 (1787 ed.) (reprinted in 5B 2d Historical Writings in Law and Jurisprudence (1986)); see 11 Wheat., at 412 ("That corporations are, in law, for civil purposes, deemed persons, is unquestionable"); accord, Beaston v. Farmers' Bank of Del., 12 Pet. 102, 135 (1838); see also Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, 667 (1819) (opinion of Story, J.) (A corporation "is, in short, an artificial person, existing in contemplation of law, and endowed with certain powers and franchises which, though they must be exercised through the medium of its natural members, are yet considered as subsisting in the corporation itself, as distinctly as if it were a real personage"). This position accorded with the common understanding among contemporary commentators that corporations were "persons" in the general enjoyment of the capacity to sue and be sued. See, e.g., 2 J. Bouvier, A Law Dictionary 332 (6th ed. 1856) (def. 2: The term "person" "is also used to denote a corporation which is an artificial person"); 1 S. Kyd, A Treatise on the Law of Corporations 13 (1793) ("A corporation then, or a body politic, or body incorporate, is a collection of many individuals, united in one body, ... and vested, by the policy of the law, with the capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, and of suing and being sued ..."). While it is true that Chief Justice Marshall's opinion in Bank of United States v. Deveaux, 5 Cranch 61, 86-87 (1809), declined to rely on the presumption when it decided the separate issue whether a corporation was a "citizen" for purposes of federal diversity jurisdiction, by 1844 the Deveaux position had been abandoned and a corporation was understood to have citizenship independent of its constituent members by virtue of its status as "a person, although an artificial person." Louisville, C. & C. R. Co. v. Letson, 2 How. 497, 558 (1844); see 1 A. Burrill, A Law Dictionary and Glossary 383 (2d ed. 1859) ("A corporation has been declared to be not only a person, ... but to be capable of being considered an inhabitant of a state, and even of being treated as a citizen, for all purposes of suing and being sued").
Essentially conceding that private corporations were taken to be persons when the FCA was passed in 1863, the County argues that municipal corporations were not so understood until six years later, when Cowles v. Mercer County, 7 Wall. 118 (1869), applied the Letson rule to them. Cowles, however, was not an extension of principle but a natural recognition of an understanding going back at least to Coke, supra, that municipal corporations and private ones were simply two species of "body politic and corporate," treated alike in terms of their legal status as persons capable of suing and being sued. See, e.g., W. Glover, A Practical Treatise on the Law of Municipal Corporations 41 (1837) (Municipal corporations have, as an attribute "necessarily and inseparably incident to every corporation," the ability "[t]o sue and be sued, ... and do all other acts as natural persons may"); see also 1 J. Dillon, The Law of Municipal Corporations 92 (rev. 2d ed. 1873). Indeed, "[t]he archetypal American corporation of the eighteenth century [was] the municipality"; only in the early nineteenth century did private corporations become widespread. M. Horwitz, The Transformation of American Law, 1780-1860, p. 112 (1977). This history explains how the Court in Cowles could conclude "automatically and without discussion" that municipal corporations, like private ones, "should be treated as natural persons for virtually all purposes of constitutional and statutory analysis." Monell v. New York City Dept. of Social Servs.,
Of course, the meaning of "person" recognized in Cowles is the usual one, but not immutable, see Monell, supra, at 688, and the County asks us to take a cue from the qualification included in the later definition in the Dictionary Act, Act of Feb. 25, 1871, §2, 16 Stat. 431, that "the word 'person' may extend and be applied to bodies politic and corporate ... unless the context shows that [it was] intended to be used in a more limited sense." Cf. J. Angell & S. Ames, A Treatise on the Law of Private Corporations Aggregate 4 (rev. 3d ed. 1846) ("The construction is, that when 'persons' are mentioned in a statute, corporations are included if they fall within the general reason and design of the statute"). The County invokes two points of context that it takes as indicating that in the FCA Congress intended a more limited meaning.
First, it says that the statutory text is "inherently inconsistent with local governmental liability," Brief for Petitioner 13, owing to the references of the original enactment to "any person in the land or naval forces of the United States" and "any person not in the military or naval forces of the United States," together with a provision imposing criminal liability, including imprisonment, on defendants in the latter category, see Act of Mar. 2, 1863, ch. 67, §§1, 3, 12 Stat. 696, 697, 698.8 But the old text merely shows that "any person in the land or naval forces" was directed at natural persons. The second phrase, covering all other "persons," could not have been that limited, or even private corporations would be outside the FCA's coverage, a reading that not even the County espouses and one that we seriously doubted in Stevens,
The other contextual evidence cited by the County is the history of the FCA. We recounted in Stevens that Congress's primary concern in 1863 was " 'stopping the massive frauds perpetrated by large [private] contractors during the Civil War.' "
III
Nor is the application of this reading of the statute affected by the County's alternative position, based on the evolution of the FCA's provisions for relief. The County's argument leads off, at least, with a sound premise about the historical tension between municipal liability and damages imposed as punishment. Although it was well established in 1863 "that a municipality, like a private corporation, was to be treated as a natural person subject to suit for a wide range of tortious activity, ... this understanding did not extend to the award of punitive or exemplary damages," Newport v. Fact Concerts, Inc.,
The County relies on this general statement in asking us to infer a remarkable consequence unstated in the 1986 amendments to the FCA. As part of an effort to modernize the FCA, Congress then raised the fine from $2,000 to the current range of $5,000 to $10,000, and raised the ceiling on damages recoverable under §3729(a) from double to treble. False Claims Amendments Act of 1986, Pub. L. 99-562, §2(7), 100 Stat. 3153. In Stevens, we spoke of this change as turning what had been a "remedial" provision into an "essentially punitive" one.
Although we did indeed find the punitive character of the treble damages provision a reason not to read "person" to include a State, see id., at 785, it does not follow that the punitive feature has the force to show congressional intent to repeal implicitly the existing definition of that word, which included municipalities. To begin with it is important to realize that treble damages have a compensatory side, serving remedial purposes in addition to punitive objectives. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
There is no question that some liability beyond the amount of the fraud is usually "necessary to compensate the Government completely for the costs, delays, and inconveniences occasioned by fraudulent claims." Bornstein, supra, at 315; see United States v. Halper,
Thus, although Stevens recognized that the FCA's treble damages remedy is still "punitive" in that recovery will exceed full compensation in a good many cases, the force of this punitive nature in arguing against municipal liability is not as robust as if it were a pure penalty in all cases. Treble damages certainly does not equate with classic punitive damages, which leaves the jury with open-ended discretion over the amount and so raises two concerns specific to municipal defendants. One is that a local government's taxing power makes it an easy target for an unduly generous jury. See Newport, supra, at 270-271. But under the FCA, the jury is open to no such temptation; if it finds liability, its instruction is to return a verdict for actual damages, for which the court alone then determines any multiplier, just as the court alone sets any separate penalty. §3729(a); see 277 F. 3d, at 978. There is mitigation, also, for the second worry, that "blameless or unknowing taxpayers" will be unfairly taxed for the wrongdoing of local officials. Newport,
The presumption against punitive damages thus brings only limited vigor to the County's aid. Working against the County's position, however, is a different presumption, this one at full strength: the "cardinal rule ... that repeals by implication are disfavored." Posadas v. National City Bank,
The basic purpose of the 1986 amendments was to make the FCA a "more useful tool against fraud in modern times." S. Rep., at 2. Because Congress was concerned about pervasive fraud in "all Government programs," ibid., it allowed private parties to sue even based on information already in the Government's possession, see Hughes Aircraft Co. v. United States ex rel. Schumer,
IV
The term "person" in §3729 included local governments in 1863 and nothing in the 1986 amendments redefined it. The judgment of the Court of Appeals is
Affirmed.
The statutory penalties are adjusted upward for inflation under the Federal Civil Penalties Inflation Adjustment Act of 1990, Pub. L. 101-410, §5, 104 Stat. 891, note following 28 U. S. C. §2461. The penalty is currently $5,500 to $11,000. 28 CFR §85.3(a)(9) (2002).
If the Government does not intervene, the relator is entitled to 25 to 30 percent of the proceeds. §3730(d)(2). If the Government chooses to intervene, the relator "shall ... receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action." §3730(d)(1). If, however, the court determines that the action was "based primarily on disclosures of specific information (other than information provided by the person bringing the action) relating to allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government [sic] Accounting Office report, hearing, audit, or investigation, or from the news media, the court may award such sums as it considers appropriate, but in no case more than 10 percent of the proceeds ... ." Ibid. (footnote omitted).
The hospital was originally a defendant as well but was dismissed from the case as having no identity independent of the County. 277 F. 3d 969, 971, n. 2 (CA7 2002).
Chandler's retaliation claims against the County were dismissed because the institute, not the County, was her employer. United States ex rel. Chandler v. Hektoen Institute for Medical Research, 35 F. Supp. 2d 1078, 1087 (ND Ill. 1999).
The institute also moved to dismiss, on different grounds; the denial of that motion is not before us. 277 F. 3d, at 969, n. 1.
United States ex rel. Dunleavy v. County of Delaware, 279 F. 3d 219 (CA3 2002); United States ex rel. Garibaldi v. Orleans Parish School Bd., 244 F. 3d 486 (CA5 2001).
The County and some of its supporting amici urge a further distinction between full-fledged municipal corporations such as towns and cities, which were incorporated at the request of their inhabitants, and "quasi corporations" such as counties, which were unilateral creations of the State. See Barnes v. District of Columbia,
The FCA's civil and criminal provisions were bifurcated in 1878, see Rainwater v. United States,
The treble damages provision was, in a way, adopted by Congress as a substitute for consequential damages. The Senate version of the bill proposed consequential damages on top of treble damages, while the House version proposed consequential damages plus double damages. See S. Rep. No. 99-345, p. 39 (1986) (hereinafter S. Rep.); H. R. Rep. No. 99-660, p. 20 (1986). Ultimately, the Senate's treble figure was adopted and the consequential damages provision dropped.
Indeed, there is some evidence that Congress affirmatively endorsed municipal liability when it passed the 1986 amendments. See S. Rep., at 8 (noting that "[t]he term 'person' is used in its broad sense to include partnerships, associations, and corporations ... as well as States and political subdivisions thereof" (citing, inter alia, Monell v. New York City Dept. of Social Servs.,
The presumption against implied repeal also explains why two of the County's subsidiary arguments cannot succeed here, despite the fact that we gave them credence in Stevens. First, the County contrasts §3729 with the Civil Investigative Demand provision enacted as part of the 1986 amendments, §3733, which expressly includes both States and local governments in the definition of "person." In Stevens, supra, at 783-784, we read that express reference in the later §3733 to confirm the reading of the earlier §3729, which was based on a common understanding in 1863 that "person" did not include a State; but "person" did presumptively include a municipality in 1863.
The County also argues it is not sensible to expose local governments to FCA liability but not to liability under the Program Fraud Civil Remedies Act of 1986 (PFCRA), Pub. L. 99-509, 100 Stat. 1934 (codified at 31 U. S. C. §3801 et seq.), a statute enacted just before the FCA amendments and "designed to operate in tandem with the FCA." Stevens, supra, at 786, n. 17. The PFCRA prohibits the same conduct as the FCA and specifically defines a "person" subject to liability as "any individual, partnership, corporation, association, or private organization." §3801(a)(6). Even assuming the County is correct that local governments are not covered by the PFCRA despite the term "corporation," this is hardly a weighty argument for an implied repeal of municipal liability under the FCA, a separately enacted statute.
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Citation: 538 U.S. 119
No. 01-1572
Argued: January 14, 2003
Decided: March 10, 2003
Court: United States Supreme Court
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