Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-98-05150/USCOURTS-caDC-98-05150-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 14, 1999 Decided April 2, 1999

No. 98-5133

United States of America, ex rel. Ronald E. Long,

Appellee/Cross-Appellant,

v.

SCS Business & Technical Institute, Inc., et al.,

Appellees

State of New York,

Appellant/Cross-Appellee

Attorney General of the United States,

Intervenor

Consolidated with

98-5149 & 98-5150

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Appeals from the United States District Court

for the District of Columbia

(92cv02092)

Howard L. Zwickel, Assistant Attorney General, State of

New York, argued the cause for appellant/cross-appellee.

With him on the briefs was Peter H. Schiff, Deputy Solicitor

General.

Ronald A. Shems, Assistant Attorney General, State of

Vermont, argued the cause for amici curiae State of VerUSCA Case #98-5150 Document #426992 Filed: 04/02/1999 Page 1 of 34
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mont, et al. With him on the brief was William H. Sorrell,

Attorney General.

Douglas N. Letter, Appellate Litigation Counsel, United

States Department of Justice, argued the cause for United

States as intervenor. With him on the briefs were Frank W.

Hunger, Assistant Attorney General, and Wilma A. Lewis,

United States Attorney. Richard L. Cys entered an appearance.

Stuart F. Pierson argued the cause and filed the briefs for

appellee/cross-appellant.

Jill A. Dunn was on the notice of joinder in brief for

appellant Joseph P. Frey.

Mark B. Rotenberg was on the brief for amicus curiae The

Regents of the University of Minnesota.

Before: Wald, Silberman, and Sentelle, Circuit Judges.

Opinion for the Court filed by Circuit Judge Silberman.

Silberman, Circuit Judge: The question presented in this

appeal is whether states are defendant persons under the

False Claims Act. Contrary to the decisions of the Second

and Eighth Circuits, see United States ex rel. Stevens v.

Vermont Agency of Natural Resources, 162 F.3d 195 (2d Cir.

1998); United States ex rel. Zissler v. Regents of the Univ. of

Minn., 154 F.3d 870 (8th Cir. 1998), we hold that they are

not.

I.

Ronald Long was the Coordinator of Investigations and

Audit for the Bureau of Proprietary School Supervision of the

New York State Department of Education, the state agency

that regulates proprietary schools. In 1989, he conducted an

investigation of SCS Business and Technical Institute, which

operates five business and technical schools in New York

City, and discovered that SCS allegedly had made false and

fraudulent claims to the federal government in return for

federal funding for students attending SCS schools under

tuition assistance programs. He also determined, according

to his complaint subsequently filed in district court, that

Joseph P. Frey, his supervisor at the Bureau, and other

officials in the State Department of Education, knew about

SCS' fraudulent claims and conspired with SCS to conceal the

fraud in order to secure further federal funding for SCS.

They did so because, after a 1990 change in New York State

law, the Bureau's funding depended in substantial part on

tuition assessments and fines that SCS paid to the Bureau.

Long's theory was that since the Bureau received a share of

the federal funds that SCS fraudulently obtained from the

United States, the Bureau had every incentive to see that

fraud continue. He claims that after he reported the results

of his investigation to state and federal authorities, Frey and

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other state officials took actions to limit and subvert his

investigation.

Long was taken off the investigation and then fired in 1992,

shortly after SCS settled administrative charges brought

against one of SCS' schools by the state education department. According to him, the settlement agreement, which

did not benefit the United States in any way and grossly

understated the extent of SCS' fraudulent practices, was a

sweetheart deal that was but another instance of the state's

conspiracy with SCS to conceal and perpetuate SCS' fraud--a

conspiracy that he alleges continued until SCS filed for

bankruptcy in 1995. He alleges that after the settlement,

New York ignored evidence of SCS' continuing fraud and

falsely represented to the United States that SCS' fraud had

ceased and that it was actively monitoring SCS.

Long filed a complaint in the district court against Frey,

other state officials, the State of New York, SCS, and various

SCS officials. He brought his case as a qui tam relator

under the False Claims Act, 31 U.S.C. ss 3729 et seq. (1994),

suing in the name of the United States for the benefit of the

United States and himself. He contended that the state

defendants violated the Act by conspiring with SCS to have

false claims submitted to the United States and by causing

false claims to be submitted. The state defendants were also

alleged to have violated the whistle-blower provision of the

Act by harassing and wrongfully discharging Long, and to

have been unjustly enriched under state common law. The

United States (the government) subsequently intervened in

the case against the SCS defendants, but declined to intervene against the state defendants. The state defendants

moved to dismiss the complaint on the grounds that states

are not defendant persons under the Act and that, even if

they were, the Eleventh Amendment to the United States

Constitution would bar the suit. It was also asserted that

Long's suit against the state defendants was barred by the

Act because the allegations of fraud had been publicly disclosed and because Long was not an "original source" of the

information.

The district court denied in part the state defendants'

motion to dismiss, concluding that states are defendant persons under the Act and that the Eleventh Amendment does

not bar the suit. See United States ex rel. Long v. SCS Bus.

& Technical Inst., 999 F. Supp. 78 (D.D.C. 1998).1 The state

defendants filed an interlocutory appeal challenging the district court's rejection of their Eleventh Amendment defense,

over which we have jurisdiction under 28 U.S.C. s 1291 (1994)

and the collateral order doctrine. See Puerto Rico Aqueduct

__________

1 The district court granted the motion to dismiss Long's whistleblower and unjust enrichment claims, the former because the

Eleventh Amendment bars private suits brought against the state

(although it does not bar Long's claim for prospective relief against

Frey, a state official), and the latter because Long has no standing

to assert the government's claim of unjust enrichment under state

common law. See Long, 999 F. Supp. at 91-93.

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& Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 144-45

(1993). We exercise pendent appellate jurisdiction over the

"inextricably intertwined" statutory question, Gilda Marx,

Inc. v. Wildwood Exercise, Inc., 85 F.3d 675, 679 (D.C. Cir.

1996) (quoting Swint v. Chambers County Comm'n, 514 U.S.

35, 51 (1995)), of whether states are defendant persons under

the Act.2 Thirty-six states join as amici curiae in support of

appellant New York's statutory and Eleventh Amendment

arguments, and appellee Long, the relator, is joined by the

government as intervenor defending the constitutionality of

the Act.

II.

To persuade us to uphold the decision below, appellees

Long and the government must demonstrate that the district

court correctly interpreted the term "person" (liable for

__________

2 The district court also concluded that Long's suit was not

barred by the public disclosure and original source provisions of the

Act. See Long, 999 F. Supp. at 87-89. Although the parties

challenge aspects of those rulings on appeal, we need not address

them further given our resolution of the case in favor of New York.

We also decline to exercise pendent appellate jurisdiction over the

statutory whistle-blower and constitutional claims against appellant

Frey in his individual capacity. Although these claims are not

foreclosed by anything in our opinion, they are not in any way

related to the Eleventh Amendment and statutory construction

questions that we decide today. And although an inextricable

relation between claims is not a necessary condition for pendent

appellate jurisdiction, see Jungquist v. Sheikh Sultan Bin Khalifa

Al Nahyan, 115 F.3d 1020, 1027 (D.C. Cir. 1997), and efficiency

interests might counsel in favor of resolving these claims now, we

could not possibly terminate the entire case against Frey--even if

we agreed with him--because Long also asserted s 1983 claims

against him that the district court did not dismiss and from which

Frey does not now seek to appeal. That, coupled with the otherwise unappealable nature of the order as to Frey, a separate

appellant, see Gilda Marx, 85 F.3d at 678, and the presence of

factual disputes in the briefs on the "original source" and "public

disclosure" questions, see id. at 679, leads us to reject Frey's

request that we resolve these claims now.

making a false claim) in s 3729(a) of the False Claims Act to

include states.3 In that respect, they have no little burden

because the statute does not define the term "person" and, as

the Supreme Court has remarked before, "in common usage,

the term 'person' does not include the sovereign, [and] statutes employing the [word] are ordinarily construed to exclude

it." Will v. Michigan Dep't of State Police, 491 U.S. 58, 64

(1989) (quoting Wilson v. Omaha Indian Tribe, 442 U.S. 653,

667 (1979) (quoting United States v. Cooper Corp., 312 U.S.

600, 604 (1941))) (alteration in original); see also, e.g., Georgia

v. Evans, 316 U.S. 159, 161-62 (1942).4

This "often-expressed understanding," Will, 491 U.S. at 64,

is not a "hard and fast rule of exclusion," Wilson, 442 U.S. at

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667 (quoting Cooper, 312 U.S. at 604-05), and depends in

important part on the "context, the subject matter, legislative

history, and executive interpretation," id.--which sounds like

rather garden variety statutory interpretation. But if the

Will-Wilson rule has any meaning at all, it must create at

minimum a default rule; states are excluded from the term

person absent an affirmative contrary showing. See Interna-

__________

3 The statute provides, in relevant part:

(a) Liability for certain acts. Any person who--

...

(2) knowingly makes, uses, or causes to be made or used, a

false record or statement to get a false or fraudulent claim paid

or approved by the Government;

(3) conspires to defraud the Government by getting a false

claim allowed or paid ...

is liable to the United States Government....

31 U.S.C. s 3729 (1994).

4 As appellees observe, the Eighth Circuit rejected application of

this rule in interpreting the False Claims Act on the ground that

the presumption of sovereign exclusion applies only to the enacting

sovereign. See Zissler, 154 F.3d at 874. However, the Court in

Will applied this rule even though the enacting sovereign (the

United States) was different from the state sovereigns excluded

from the term person, see Will, 491 U.S. at 64, implicitly rejecting

the Eighth Circuit's position as it was then articulated in Justice

Brennan's dissent, see id. at 73 (Brennan, J., dissenting).

tional Primate Protection League v. Administrators of Tulane Educ. Fund, 500 U.S. 72, 83 (1991) (noting that the

"conventional reading" of person to exclude states may be

"disregarded" if there is an affirmative showing of Congress'

intent to include them). This interpretive principle, the Supreme Court tells us, is "particularly applicable" where, as

here, "it is claimed that Congress has subjected the states to

liability to which they had not been subject before." Will, 491

U.S. at 64; see also Wilson, 442 U.S. at 667. We think,

therefore, that the district court had it backwards when it

concluded that it found "no indication that Congress sought to

create an exception for state actors to perpetrate fraud upon

the federal government." Long, 999 F. Supp. at 85.5

Our review of the "legislative environment," Evans, 316

U.S. at 161, leads us to doubt appellees have met their

burden. As we noted, neither the Act as currently written

nor as originally passed in 1863 defines the term person.

Indeed, the original Act distinguished for punishment purposes between fraudulent acts committed by "any person in

the land or naval forces of the United States," Act of March 2,

1863, 37th Cong., 3d Sess., ch. 67, s 1, 12 Stat. 696, and "any

person not in the military or naval forces of the United

States," id. at s 3, 12 Stat. 698. Since states would not have

been thought to fall within either classification, that Act can

hardly be said to supply facially the requisite affirmative

showing that the Will-Wilson default rule requires.6

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__________

5 In reaching this conclusion, the district court was guided by its

assumption that the "clear statement" rule of Will, 491 U.S. at 65,

did not apply--an issue which we take up below. But the district

court incorrectly equated Will's "clear statement" rule with the

traditional rule presuming that the term person does not include

states. Compare Will, 491 U.S. at 65 (clear statement rule), with

id. at 64 (default rule that person does not include states). Even if

the former rule were not implicated here, the latter rule--which all

parties concede applies-dictates a presumption opposite to the one

the district court applied.

6 The Second Circuit explained this problem away by reasoning

that the Congress' undeniable intent to include military contractors

in the Act refuted any attempt to read "persons not in the military"

Appellees nevertheless invoke the broad purposes and legislative history of the Civil War statute. We think that is not

helpful because, as the Supreme Court has said, Congress'

primary concern at the time--admittedly not its exclusive

one--was to put an end to "frauds perpetrated by large

[military] contractors during the Civil War." United States v.

Bornstein, 423 U.S. 303, 309 (1976); see United States ex rel.

Graber v. City of New York, 8 F. Supp. 2d 343, 352 (S.D.N.Y.

1998).7 Appellees point to the Supreme Court's statement

that Congress sought to "reach all types of fraud, without

qualification, that might result in financial loss to the Government." United States v. Neifert-White Co., 390 U.S. 228, 232

(1968) (holding that the term "claim" was not limited to claims

submitted for payments due and owing from the government,

but included claims for favorable action by the government

upon applications for loans). But we think that description is

too general--it was also made in an entirely different context--to answer the serious question whether states were

made potential defendants under the Act. (According to

appellees' reasoning, foreign governments that entered into

commercial dealings with the United States would also be

potential defendants.) Similarly unpersuasive is the policy

proposition put forward by the Eighth Circuit, see Zissler,

154 F.3d at 874, that a truly effective anti-fraud statute would

subject states to liability since states receive substantial

amounts of money from the federal government. See also

John T. Boese, Civil False Claims and Qui Tam Actions, at 2-

__________

as impliedly referring only to natural, as opposed to corporate,

persons. See Stevens, 162 F.3d at 205-06. The default rule of

statutory construction governing corporations as "persons," however, is precisely the opposite of the default rule that we must apply

in this case. See Wilson, 442 U.S. at 666 (stating that the "word

'person' for purposes of statutory construction, unless the context

indicates to the contrary, is normally construed to include" corporations). Since we must look for an affirmative intent to include

states, that contractors, under the default rule for corporations,

could have been thought to be "person[s] not in the military" is

hardly supportive of appellees' case.

7 Of course, Stevens, not Graber, is Second Circuit law.

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91 (1993) (stating that states can be defendant persons because they are "major recipients of federal funds"). A court

looks to legislative purpose under the default rule in order to

locate a congressional intent "to bring state or nation within

the scope of the law," Cooper, 312 U.S. at 605, not to "engraft

on a statute additions which [the court] think[s] the legislature logically might or should have made," id. Even if one

assumes that states commit a good deal of fraud against the

federal government, it cannot seriously be argued that the

very purpose of the Act would be thwarted if states were not

liable under the Act. Compare California v. United States,

320 U.S. 577, 585 (1944).8

That takes us to the legislative history. Appellees point us

first to an 1862 House Committee Report that, in discussing

various frauds committed during the Civil War, referred to

certain state officials that had used war contracts for personal

profit. See H.R. Rep. No. 2, 37th Cong., 2d Sess., at xxxviiixxxix (1862). But the report specifically stated that these

examples of fraud were not committed against the United

States government. See id. at xxxviii. So the prior report is

a rather tenuous link to the Act Congress passed one year

later. But see Stevens, 162 F.3d at 206 (concluding that "it is

difficult to suppose" that Congress "had forgotten the results

of this extensive investigation" when it passed the False

Claims Act) (emphasis added). Even if there were a stronger

tie, the Supreme Court has held that legislative history

__________

8 In Zissler, 154 F.3d at 874, the Eighth Circuit relied on United

States v. California, 297 U.S. 175, 186 (1936), for the proposition

that it would be a mistake to exclude the states from an "act of

Congress, all-embracing in scope and national in its purpose, which

is as capable of being obstructed by state as by individual action,"

id. But the Supreme Court made that statement only after it had

"fairly ... inferred" that the purpose of the Federal Safety Appliance Act, albeit implicit, was to subject state-run railroads to

liability. See id. If the mere use of the term person in a broad

statute with national purposes, which states were equally capable of

violating, were sufficient to bring the states within the statute's

scope, the interpretive rule presuming the opposite would be largely

ineffectual, if not wholly eviscerated.

indicating an intent to impose liability on state officials is not

evidence of an intent to subject the states themselves to

liability. See Will, 491 U.S. at 68-69. The bottom line is that

appellees have not pointed to anything in the legislative

history of the 1863 Act, or in the events leading up to it,

indicating that Congress actually contemplated imposing liability on the states.

Because the enacting Congress' intent is, to be charitable,

rather opaque, appellees turn our attention to the 1986

amendments to the False Claims Act and to a related statute

also passed in 1986. The provision of the 1986 amendments

that changed 31 U.S.C. s 3729(a) from imposing liability on

"[a] person not a member of an armed force of the United

States" to "[a]ny person" did not, however, substantively

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expand the meaning of defendant persons under the Act. See

Stevens, 162 F.3d at 206-07 (holding that states are persons

but conceding that this change was not "envisioned as broadening the class of persons who could be held liable under the

Act"); Graber, 8 F. Supp. 2d at 354-55. It is true that the

amendment expanded the types of individuals subject to the

Act to include those in the military. Still, that change tells

one nothing about the basic meaning of the term person, or

more specifically, whether Congress intended to include

states within that term. The legislative history accompanying the amendment reveals Congress' extremely limited objective. See S. Rep. No. 345, 99th Cong., 2d Sess., at 17-18

(1986), reprinted in U.S.C.C.A.N. 5266, 5282-83 (explaining

that the alteration of s 3729(a) was intended to provide for

monetary recovery against persons in the military and that,

prior to 1986, a court martial was the only available remedy).9

It is understandable, therefore, why appellees do not actually

claim that states were made defendant persons by virtue of

__________

9 The Eighth Circuit thought that this amendment more broadly

"evidenced consideration of whom to hold liable" under the amended Act. Zissler, 154 F.3d at 874. But there is nothing in the text

of the statute or in any of the legislative history indicating that

Congress' consideration of "whom to hold liable" extended beyond

its intent, expressed in the statute, to bring military persons within

the scope of the Act.

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the 1986 amendment to s 3729(a). Instead, their argument is

that states have been defendant persons all along; various

provisions added by the 1986 Congress--which we discuss

below--simply make that clear. In other words, appellees,

by relying on these recent amendments, seek to illuminate

the 1863 Congress' "original intent." We are rather dubious

about such an approach. As the Supreme Court has observed, such subsequent provisions are really "beside the

point" because they do not "reflect any direct focus by

Congress upon the meaning of the earlier enacted provisions." Almendarez-Torres v. United States, 118 S. Ct. 1219,

1227 (1998); Atkinson v. Inter-American Dev. Bank, 156

F.3d 1335, 1342 (D.C. Cir. 1998).

Be that as it may, we are not persuaded that these added

provisions can bear the weight appellees would place on them.

Appellees argue that Congress' decision to define "person" to

include states in the Civil Investigative Demand section of the

Act, see 31 U.S.C. s 3733(1)(4) (1994), indicates (some) Congress' intent to include states as persons throughout the

whole Act,10 even though this provision applies only to the

Civil Investigative Demand section. See 31 U.S.C. s 3733(l )

(For purposes of this section ...) (emphasis added). Appellees question why Congress would create a discovery tool to

be used to gain information possessed by states if the Act did

not already authorize false claims actions against them. See

also Stevens, 162 F.3d at 207. It seems rather obvious,

however, that states could provide useful evidence to establish

that private contractors, for example, made false claims. Nor

do appellees gain very much by pointing to the Program

Fraud Civil Remedies Act, 31 U.S.C. s 3801 et seq. (1994),

which Congress also passed in 1986 to create an alternative

administrative remedy to lawsuits under the False Claims

Act. Unlike the False Claims Act, this Act expressly defined

the persons subjected to administrative liability yet omitted

__________

10 The CID section permits the government to conduct discovery

of persons who "may be in possession, custody, or control of any

documentary material or information relevant to a false claims

investigation." 31 U.S.C. s 3733(a)(1).

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states from the definition. See id. at s 3801(a)(6). Appellees

suggest that the exclusion of states from s 3801(a)(6) compels

an inference that s 3729(a) includes states. We do not agree

because the two provisions are not part of the same legislative enactment (not even the same century). See Halverson

v. Slater, 129 F.3d 180, 186 (D.C. Cir. 1997) (citing Russello v.

United States, 464 U.S. 16, 23 (1983)). We share appellant's

view, moreover, that, since both acts proscribe essentially the

same conduct, compare 31 U.S.C. s 3802(a)(1)-(2) with 31

U.S.C. s 3729(a), it would have been quite bizarre for Congress to exempt states from administrative liability if it had

thought that states already were subject to the more onerous

False Claims Act liability of treble damages and penalties.

In sum, we are inclined to view the omission of states from

the definition of person in the administrative act, to the

extent it is relevant at all, as more supportive of New York's

argument.

Indeed, appellant and its amici, turning the blade, point

out that the 1986 amendments, which increased liability from

double to treble damages and increased the civil penalty, see

31 U.S.C. s 3729(a), created a form of punitive damages that

would be palpably inconsistent with state liability. Congress

is not thought to impose punitive damages on public entities

lightly. Imposition of such a penalty has been held to be

inconsistent with public policy since it gives the plaintiff a

windfall at the expense of the blameless or unknowing taxpayers who must foot the bill for the government's transgressions. See City of Newport v. Fact Concerts, Inc., 453 U.S.

247, 258-71 (1981). It is true that the Supreme Court has

already analyzed the Act in a related context and concluded

that the statute is remedial in nature, see, e.g., Bornstein, 423

U.S. at 314-15, but as appellant rightly points out, it did so

when the statute provided for double damages of which the

government received a one-half share, so that the statute at

that time truly did no more than make the government whole,

see Graber, 8 F. Supp. 2d at 349 n.3. Even assuming that it

is possible to characterize the increased liability imposed by

the 1986 amendments as remedial, that would only indicate at

best that in this respect the 1986 Congress legislated in such

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a way that would have been consistent with state liability.

The 1863 Congress, by contrast, made clear as day that it

intended criminal, and a fortiori punitive, sanctions: the

original statute provided for criminal penalties, including

imprisonment for one to five years, for non-military persons

(the class of persons said to include states) convicted under

the Act, as well as fines. See s 3, 12 Stat. at 698. Those

provisions are surely inconsistent with the concept of state

liability.

Appellees' last sortie into the background of the 1986

amendments uncovered a piece of legislative history that they

regard as the "smoking gun." They point to a Senate Report

issued at the time Congress amended certain provisions of

the Act that includes a section entitled "History of the False

Claims Act and Court Interpretations." See S. Rep. No. 345,

99th Cong., 2d Sess., at 8 (1986), reprinted in U.S.C.C.A.N.

5266, 5273. As part of what purported to be purely descriptive history, see id. ("In its present form, the False Claims

Act.... "), the Report states:

The False Claims Act reaches all parties who may submit

false claims. The term "person" is used in its broad

sense to include partnerships, associations, and corporations ... as well as States and political subdivisions

thereof. Cf. Ohio v. Helvering, 292 U.S. 360, 370 (1934);

Georgia v. Evans, 316 U.S. 153, 161 (1942); Monell v.

Department of Social Services of the City of New York,

436 U.S. 658 (1978).

Id. (emphasis added) (footnote omitted).

According to appellees, the Report confirms that the Congress of 1863, over a hundred years before, intended to

include states as defendant persons--an argument that two of

our sister circuits and the district court below accepted. See

Stevens, 162 F.3d at 206-07; Zissler, 154 F.3d at 874-75;

Long, 999 F. Supp. at 84-85. This portion of the Report, it

should be understood, is not linked with any of the substantive amendments made by the 1986 Congress. It is instead a

legislative observation about what s 3729(a), enacted by an

earlier Congress, means. Courts sensibly accord such "postenactment legislative history," arguably an outright "contradiction in terms," Sullivan v. Finklestein, 496 U.S. 617, 631

(1990) (Scalia, J., concurring), only marginal, if any, value, see

Wright v. West, 505 U.S. 277, 295 n.9 (1992) ("[T]he views of a

subsequent Congress form a hazardous basis for inferring the

intent of an earlier one.") (quoting Consumer Product Safety

Comm'n v, GTE Sylvania, Inc., 447 U.S. 102, 117 (1980)

(quoting United States v. Price, 361 U.S. 304, 313 (1960))).11

Post-enactment legislative history--perhaps better referred

to as "legislative future"--becomes of absolutely no significance when the subsequent Congress (or more precisely, a

committee of one House) takes on the role of a court and in

its reports asserts the meaning of a prior statute. See Pierce

v. Underwood, 487 U.S. 552, 566 (1988); In re North, 50 F.3d

42, 45-46 (D.C. Cir. 1995). The Senate Report actually was

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more modest; it appeared only to describe the way in which

the Supreme Court had interpreted the Act. Still, its author

either did not read the cited cases very carefully, or perhaps

more likely, made an unforgivably misleading use of the "cf."

signal. None of the cases interpreted the term "person"

under the False Claims Act, and all three stand for the

unremarkable proposition that governmental entities can be

included in the term person when Congress so intends.12 In

__________

11 It is unclear what appellees think they add by pointing to a

1981 General Accounting Office Report that documented recent

instances of state officials defrauding the United States government--of which the Senate apparently was aware when amending

the statute in 1986. See S. Rep. No. 345, 99th Cong., 2d Sess., at 2

& n.1 (1986) (citing GAO Report to Congress, Fraud in Government

Programs: How Extensive Is It? How Can It Be Controlled?

(1981)). Not only is evidence of an intent to impose liability on

state officials (which itself would be a tenuous inference from this

report) distinct from an intent to impose liability on the states

themselves, see Will, 491 U.S. at 68-69, but a report documenting

contemporary instances of state fraud could hardly be thought to

illuminate the intent of the enacting Congress in 1863.

12 The Report's resort to these inapposite cases is unsurprising

since, at the time of the 1986 amendments, only one decision

involved a qui tam suit against the state, and that decision held that

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short, the Report is of no legal significance. Accord United

States ex rel Graber, 8 F. Supp.2d at 354-55.13

Nevertheless, appellees contend that we have asked the

wrong question in searching the legislative materials for

affirmative indications that Congress intended to include

states as defendant persons in s 3729(a). Instead, they

would have us start with the presumption that states are

defendant persons and look only for some indication that

Congress intended to exclude states. They justify this approach by arguing that states can be plaintiffs under

s 3730(b)(1) (providing that "[a] person may bring a civil

action for a violation of section 3729 for the person and for

the United States Government"), and that the same statutory

term, person, is used to describe the eligible class of plaintiffs.14 The word person is presumed to have the same

meaning in different sections of the same statute. See, e.g.,

Commissioner v. Lundy, 516 U.S. 235, 250 (1996). Appellees,

then, would use the canon of consistent meaning (following

the Second and Eighth Circuits) to trump the Will-Wilson

__________

states were not persons under the Act. See United States ex rel.

Weinberger v. Florida, 615 F.2d 1370, 1371 (5th Cir. 1980) (describing district court's decision to that effect and vacating on the

ground that, under an older and since modified version of the

present 31 U.S.C. s 3730, the district court lacked subject matter

jurisdiction because the federal government had knowledge of the

facts underlying the relator's suit).

13 The Eighth Circuit thought that 1986 amendments to s 3729(a)

warranted giving the 1986 Report greater interpretive weight, even

on the assumption that the Report's understanding of the pre-1986

caselaw was incorrect. See Zissler, 154 F.3d at 874. Again, the

change to s 3729(a) had nothing to do with the meaning of the term

person. The portion of the Report in question, moreover, makes no

reference whatsoever to the slight alteration actually made to

s 3729(a). It is merely a commentary on the past.

14 Although New York seemed insistent that it can have it both

ways--that it can be a plaintiff but not a defendant--the states,

appearing as amici, seemed quite prepared to abandon any claim

that they could sue as plaintiffs; the threat of being a qui tam

defendant apparently "concentrated their minds."

default rule. See Stevens, 162 F.3d at 205; Zissler, 154 F.3d

at 875; see also Boese, supra, at 2-92 (reasoning that states

are defendant persons under the Act because they are proper

qui tam plaintiffs).

The consistent meaning canon is brandished as if the

question whether states could be qui tam relators were a

statutory given. But it is not. We recognize that other

courts have assumed that states can be qui tam relators, see,

e.g., United States ex rel. Woodard v. Country View Care

Ctr., Inc, 797 F.2d 888 (10th Cir. 1986); United States ex rel.

Wisconsin v. Dean, 729 F.2d 1100 (7th Cir. 1984), even

though the term person under s 3730(b)(1) is no more clearly

defined than it is under s 3729(a). The argument that states

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are plaintiffs is based on a provision passed in 1986 conferring

jurisdiction on the district courts "over any action brought

under the laws of any State for the recovery of funds paid by

a State or local government if the action arises from the same

transaction or occurrences as [a qui tam suit] brought under

Section 3730." 31 U.S.C. s 3732(b). If states are the only

parties who could bring a state law suit to recover state

funds, the argument goes, and if a state is forbidden by

s 3730(b)(5) from intervening in another party's qui tam suit,

see id. at s 3730(b)(5) (providing that "[w]hen a person brings

an action under this subsection no person other than the

Government may intervene or bring a related action based on

the facts underlying the pending action"), it seems to follow

that the Congress which enacted s 3732(b) intended states to

be qui tam relators under the Act. Otherwise, it is argued,

the provision conferring jurisdiction over the state's claim

under state law has little meaning. The legislative history

lends some support to this reasoning. See S. Rep. No. 345,

99th Cong., 2d Sess., at 16 (1986), reprinted in 1986

U.S.C.C.A.N. 5266, 5281 (explaining that the provision was

enacted in response to comments from the National Association of Attorneys General and was intended to allow "State

and local governments to join State law actions with False

Claims Act actions brought in Federal district court if such

actions grow out of the same transaction or occurrence"); see

also id. at 12-13, reprinted in 1986 U.S.C.C.A.N. at 5277-78

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(disapproving of Dean decision on unrelated jurisdictional

grounds but not questioning the State of Wisconsin's ability

to be a qui tam plaintiff); Stevens, 162 F.3d at 204-05

(discussing Senate Report).

The more obvious reading of s 3732(b), however, is that it

authorizes permissive intervention by states for recovery of

state funds (creating what is in effect an exception to

s 3730(b)(5)'s apparent general bar on intervention by all

other parties except for the United States). See Boese,

supra, at 4-13 (explaining that s 3732(b) "does not require

the state to be a relator for jurisdiction to exist," noting the

possibility that it permits intervention by states, but making

no reference to s 3730(b)(5)). Or Congress might even have

meant s 3732(b) to provide supplemental jurisdiction for a

non-state relator to join a federal false claim action with an

action to recover state funds under a state qui tam statute,

which several states have enacted. See, e.g., Cal. Gov't Code

s 12650 et seq. (West 1998); Fla. Stat Ann. s 68.081-092

(West 1998).

In any event, the argument that states are relators under

s 3730(b)(1) is rather strained. To the extent it relies on the

Senate Report author's knowledge of one suit by a state

relator, it is no more persuasive than the analogous argument

based on the Report's "recognition" of prior suits against

state defendants. The argument, moreover, depends on the

proposition that s 3730(b)(5) prevents all parties, except for

the United States, from intervening in another relator's qui

tam action. Yet it is not at all clear that this provision

precludes all forms of party joinder, which would effectively

limit qui tam actions to single relators. See United States ex

rel. Precision Co. v. Koch Indus., Inc., 31 F.3d 1015, 1017

(10th Cir. 1994) (holding that s 3730(b)(5) does not prohibit

all forms of joinder but only prevents permissive intervention

in a relator's suit by unrelated parties under Fed. R. Civ. P.

24(b)(2)). If states could join as co-plaintiffs with private

relators or the federal government, then s 3732(b) could be

given full meaning without reading s 3730(b)(1) to include

states as relators.

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It should be apparent, then, that whether states can be qui

tam relators presents an extraordinarily difficult question of

statutory interpretation in its own right. Although appellees

do not acknowledge it, their argument would require us to

puzzle through that question--not squarely presented to us--

in order to resolve the actual question before us (itself no

easy one) in their favor. The consistent meaning canon does

not have much usefulness if in order to apply it a court has to

struggle that hard to determine the second meaning, against

which the first is to be compared. Given the uncertainty

governing the question whether states can be relators, we

think the proper course is to decide only the issue before us.15

__________

15 Even assuming arguendo that states can be relators, we doubt

that the consistent meaning canon is appropriately applied in this

case. The canon itself has an important exception "[w]here the

subject-matter to which the words refer is not the same in the

several places where they are used." Atlantic Cleaners & Dyers,

Inc. v. United States, 286 U.S. 427, 433 (1932). Imposing liability is

quite different from conferring a right to sue, and as we noted

above, the Will-Wilson default rule has added force when the

question is whether states are subject to liability as persons. See

Will, 491 U.S. at 64. The canon also encounters potentially insurmountable difficulties when the "meanings" are enacted by two

different Congresses--which is an obvious flaw in appellees' effort

to use the 1986 amendments' effect on the term person in

s 3730(b)(1) to give consistent meaning to the term person in

s 3729(a), which was enacted by the 1863 Congress.

It might be argued that the 1986 amendments merely clarified

that Congress has intended states to be relators since 1863, and

that the consistent meaning canon really applies to the 1863 Congress alone. But this theory would require us, quite illogically, to

interpret the 1986 legislative action as a declaration of what a

Congress over a century earlier intended. The action of the 1986

Congress tells us, at most, what the 1986 Congress thought about

states as qui tam relators (and as we noted above, it does not tell us

very much); it does not purport to tell us, nor could it, what the

1863 Congress intended. See Rainwater v. United States, 356 U.S.

590, 593 (1958) (stating that 1918 amendment to the criminal

provisions of the False Claims Act was at most "merely an expression of how the 1918 Congress interpreted a statute passed by

III.

Appellees have not persuasively demonstrated a congressional intent to include states as defendant persons under the

False Claims Act. That being so, the default rule would seem

to dictate that they are not. We hesitate in resting solely on

this ground, however, since the Supreme Court has never

explained just how much of a showing suffices to overcome

the presumption against interpreting persons to include

states, and indeed on occasion has employed the rule in a

somewhat diluted fashion. See, e.g., Sims v. United States,

359 U.S. 108, 111-12 (1959); United States v. California, 297

U.S. 175, 186 (1936); Ohio v. Helvering, 292 U.S. at 370-71.

We think there are additional considerations, however, that

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resolve all doubts in New York's favor.

__________

another Congress more than a half century before" and had "very

little, if any, significance" in interpreting the original Act's civil

provisions). Although the Supreme Court occasionally says that

"[s]ubsequent legislation which declares the intent of an earlier law

is entitled to great weight in statutory construction," Loving v.

United States, 517 U.S. 748, 770 (1996) (quoting Consumer Product

Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 118 n.3 (1980)

(quoting Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 380-81

(1969))), the Supreme Court's application of that principle has been

rather inconsistent, see Paramount Health Sys., Inc. v. Wright, 138

F.3d 706, 709-11 (7th Cir. 1998) (comparing this rule with the

competing rule that the views of a subsequent Congress in legislative history form a hazardous basis for inferring the intent of an

earlier one). And we are unaware of any Supreme Court holding in

which a subsequent declaration has been used, not to discern the

current meaning of a statute post-declaration, see, e.g., Seatrain

Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 595-96 (1980);

Red Lion Broadcasting, 395 U.S. at 380-81, but instead to interpret

the meaning of a statute prior to the declaration. Appellees'

attempt to apply the consistent meaning canon to the 1863 Congress depends on precisely such a "retroactive clarification."

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A.

Were we to agree with appellees that states can be defendants under the False Claims Act, we would be obliged to

decide whether, as appellant New York contends, the Eleventh Amendment bars a qui tam suit by a private relator

against a state in federal court. The Amendment states that

"[t]he Judicial Power of the United States shall not be

construed to extend to any suit in law or equity, commenced

or prosecuted against one of the United States by Citizens of

another State, or by Citizens or Subjects of any Foreign

State." U.S. Const. amend. XI. Although it has been read to

bar suits by plaintiffs not identified in the text of the amendment itself, such as citizens of the state being sued, see Hans

v. Louisiana, 134 U.S. 1, 10-11 (1890), and foreign sovereigns, see Principality of Monaco v. Mississippi, 290 U.S.

313, 330-32 (1934), it is well settled that it poses no bar to a

suit by the United States against a state in federal court.

The states' consent to such suits is thought to be inherent in

the constitutional plan and necessary to the very permanence

of the Union. See, e.g., West Virginia v. United States, 479

U.S. 305, 311 (1987); Monaco, 292 U.S. at 329; United States

v. Texas, 143 U.S. 621, 641-46 (1892). Reasoning from this

unobjectionable proposition, three of our sister circuits have

held that, since a qui tam suit against a state is essentially a

suit by and for the United States, the Eleventh Amendment

does not preclude a qui tam suit in federal court. See

Stevens, 162 F.3d at 201-03; United States ex rel. Rodgers v.

Arkansas, 154 F.3d 865, 868 (8th Cir. 1998); United States ex

rel. Milam v. University of Texas M.D. Anderson Cancer

Ctr., 961 F.2d 46, 50 (4th Cir. 1992); see also United States ex

rel. Fine v. Chevron, U.S.A., Inc., 39 F.3d 957, 962-63 (9th

Cir. 1994), vacated on other grounds, 72 F.3d 740 (9th Cir.

1995) (en banc).

We think our sister circuits have paid insufficient attention

to the Supreme Court's decision in Blatchford v. Native

Village of Noatak, 501 U.S. 775 (1991). In Blatchford, the

Court held that a statute giving federal district courts original

jurisdiction of suits brought by an Indian tribe involving

federal law did not constitute a delegation to the tribes of the

United States' ability, free from the Eleventh Amendment

bar, to sue the states as the tribes' trustee. See id. at 785-86.

Although the Court held that Congress intended no delegation in the jurisdictional statute, the Court was dubious that

such a delegation would have been constitutionally permissible:

We doubt ... that that sovereign exemption can be

delegated-even if one limits the permissibility of delegation ... to persons on whose behalf the United States

itself might sue. The consent, "inherent in the convention," to suit by the United States--at the instance and

under the control of responsible federal officers--is not

consent to suit by anyone whom the United States might

select; and even consent to suit by the United States for

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a particular persons's benefit is not consent to suit by

that person himself.

Id. at 785 (emphasis added).

It seems to us that permitting a qui tam relator to sue a

state in federal court based on the government's exemption

from the Eleventh Amendment bar involves just the kind of

delegation that Blatchford so plainly questioned. See Rodgers, 154 F.3d at 869 (Panner, J., dissenting). Nor are we

persuaded by the argument that the Court in Blatchford was

concerned about a possible delegation of the United States'

Eleventh Amendment exemption just because the injury to be

remedied was the tribe's and not the United States'. See

Stevens, 162 F.3d at 203. The problems inherent in expanding the states' consent to suit by the United States to suits

"by anyone whom the United States might select," Blatchford, 501 U.S. at 785, are no less troublesome where, as here,

the injury on which the suit is premised is a pecuniary injury

to the United States. One should bear in mind that the

United States' ability to sue is broad; it is not limited to suits

to protect the federal fisc. See, e.g., In re Debs, 158 U.S. 564,

584 (1895), disapproved of on other grounds Bloom v. Illinois,

391 U.S. 194, 208 (1968). Indeed, the United States' very

ability to sue as the tribes' trustee, which was unquestioned in

Blatchford, depended on an injury to the United States as

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sovereign when injury was inflicted on the tribes. See United

States v. Minnesota, 270 U.S. 181, 194 (1926). It does not

seem reasonable, therefore, to distinguish Blatchford as an

anti-delegation principle applicable only where the "injury" is

an injury to someone other than the United States. The

problem in either case is whether, consistent with the constitutional plan, the United States can delegate its own exemption from the Eleventh Amendment bar to another party.

Whatever the ultimate resolution of the question, we think

it presents a serious constitutional issue. It is quite a stretch

to claim that such a delegation was part of the inherent

constitutional design, or that the permanence of the union

somehow depends on giving the United States broad latitude

to permit private parties to sue the states in the federal

courts on the United States' behalf. Compare United States

v. Texas, 143 U.S. at 644-45. To assume that the United

States possesses plenary power to do what it will with its

Eleventh Amendment exemption is to acknowledge that Congress can make an end-run around the limits that that

Amendment imposes on its legislative choices. Imagine that

Congress is contemplating a new statute, to be enacted

pursuant to its Article I powers, which would create a private

cause of action against the states in federal court. Since the

Court's decision in Seminole Tribe of Florida v. Florida, 517

U.S. 44 (1996), Congress would not be able to enact such a

statute, irrespective of its clarity in imposing liability against

the states, because Congress is without constitutional power

to abrogate the states' Eleventh Amendment immunity under

its Article I powers. See id. at 57-73. Yet if Congress is

permitted to use the qui tam device to create a private cause

of action against the states brought on behalf and in the name

of the United States, it can reach precisely the same end

without constitutional impediment. See Jonathan R. Siegel,

The Hidden Source of Congress's Power to Abrogate State

Sovereign Immunity, 73 Tex. L. Rev. 539, 556-64 (1995)

(approving of this outcome); see also Blatchford, 501 U.S. at

785-86 (noting that the tribe's "delegation theory" was designed to avoid the constraints on congressional abrogation of

the states' Eleventh Amendment immunity). Admittedly,

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Congress could have imposed liability against the states if it

chose to put enforcement of the statute "at the instance and

under the control of responsible federal officers." Blatchford,

501 U.S. at 785; see also Seminole Tribe, 517 U.S. at 71 n.14.

But the quite different legislative choice of authorizing private parties to haul sovereign states into federal court against

their will, ordinarily foreclosed unless Congress successfully

abrogates the states' immunity, suddenly becomes an all too

easy legislative option.

Long and the government would avoid the Blatchford

delegation difficulty by asserting that in qui tam suits the

United States is the real party in interest; a qui tam suit is

therefore essentially a suit by and for the United States.

See, e.g., Stevens, 162 F.3d at 202; Milam, 961 F.2d at 49

(concluding that the United States is the real party in interest

because of "the structure of the qui tam procedure, the

extensive benefit flowing to the government from any recovery, and the extensive power the government has to control

the litigation"). This argument appears to us merely to

sidestep the core problem because it ignores the relator's

undisputed role as a party with a cause of action under the

Act. The "real party in interest" rule ordinarily requires that

the suit be brought by the "person who, according to the

governing substantive law, is entitled to enforce the right."

6A Charles Alan Wright et al., Federal Practice & Procedure s 1543, at 334 (2d ed. 1990); see Fed R. Civ. P. 17(a)

(stating that "every action shall be prosecuted in the name of

the real party in interest"). There is no question that the

False Claims Act gives such a right to the relator, see 31

U.S.C. s 3730(b) ("A person may bring a civil action for a

violation of section 3729 for the person and for the United

States Government.") (emphasis added), and the statutory

right to bring suit is sufficient to satisfy the real party in

interest requirement, even if the suit is brought for the

benefit of some other party, see Fed. R. Civ. P. 17(a) (second

sentence); Wright et al., s 1550, at 384. In any event,

contrary to the suggestion of the district court, see Long, 999

F. Supp. at 83-84, a qui tam action is brought for the benefit

of both the relator and the United States, not for the benefit

of the United States alone. See 31 U.S.C. s 3730(b) (authoUSCA Case #98-5150 Document #426992 Filed: 04/02/1999 Page 23 of 34
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rizing qui tam suit "for the person and for the United States

Government"). Nor does it make any difference that the

False Claims Act requires the relator to sue "in the name of

the Government," 31 U.S.C. s 3730(b), because the procedural question of in whose name the suit must be brought is

distinct from the substantive legal question whether the

plaintiff has a cause of action. See Wright Et Al. s 1544, at

340.16

Accordingly, we do not think the relator's technical status

as a "real party in interest" is inconsistent with the conclusion

of our sister circuits that the United States is a "real party in

interest" as well. See, e.g., Stevens, 162 F.3d at 202; Rodgers, 154 F.3d at 868; United States ex rel. Hyatt v. Northrop

Corp., 91 F.3d 1211, 1217 n.8 (9th Cir. 1996); Milam, 961

F.2d at 49. It is, after all, not unheard of for there to be two

real parties in interest to a cause of action. See Wright et al.,

s 1545, at 351-53 (in cases of partial assignments, the assignor and assignee are both real parties in interest); id. s 1546,

at 360 (same for partial subrogation). More important, although we are aware of a variant of the doctrine used in a

related Eleventh Amendment context, see, e.g., Ford Motor

Co. v. Department of Treasury, 323 U.S. 459, 464 (1945)

(analyzing whether a state defendant is the "real party in

interest" such that a suit against a state entity, though not

nominally against the state, would be barred by the Eleventh

Amendment), we do not see how the doctrine can be used to

convert a party with a statutory cause of action into a

"nonparty-party."17 In short, we think the real party in

__________

16 The district court concluded that Long's claim under the whistle-blower provision of the False Claims Act, 31 U.S.C. s 3730(h),

was barred by the Eleventh Amendment because, unlike a qui tam

suit under s 3730(b) brought in the name of the United States, a

claim under s 3730(h) is a true "private right of action." Long, 999

F. Supp. at 92. We disagree; a qui tam suit under s 3730(b) is no

less a cause of action, and the relator is no less a party prosecuting

that action, because the action is brought in the name of the United

States.

17 One of the principal concerns motivating the Eleventh Amendment inquiry into whether the state is the "real party in interest"

interest doctrine is plainly irrelevant to the Eleventh Amendment question presented in this case. See Rodgers, 154 F.3d

at 869 (Panner, J., dissenting).

Nor do we think, as appellees suggest, that the government's control over a relator's suit alters the result. We

acknowledge that the government takes the greater share of

any recovery, see 31 U.S.C. s 3730(d)(1),(2), and that the

statute gives the United States considerable control over the

relator's suit, see, e.g., id. at s 3730(b)(2)(providing that the

government can intervene in the suit as of right within sixty

days after receiving the relator's complaint, evidence, and

information); id. at s 3730(b)(1) (relator cannot dismiss his

own suit without written consent of the court and the Attorney General); id. at s 3730(c)(3)-(4) (even if the government

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does not intervene, it may monitor the proceedings and stay

discovery in certain situations); id. at 3730(c)(3) (government

can intervene at any time upon a showing of good cause); id.

s at 3730(c)(2)(A) (government may dismiss the suit after

notice to the relator and a hearing); id. at s 3730(c)(2)(B)

(government may settle the suit with the defendant over the

relator's objection if the court approves after a hearing).18

Still, we simply do not see how the government's potential

exercise of its power renders the relator any less a party.

Whatever the degree of control the United States exercises,

we think it is telling that, although there are some intimations

to that effect, no court has actually held that the relator is not

a party to the qui tam suit merely because of the United

States' potential ability to control the prosecution of the suit.

__________

defendant (or in other words that the actual defendant is an "arm of

the state") is that an individual plaintiff's recovery will be paid out

of the state treasury. See Regents of the University of California

v. Doe, 117 S. Ct. 900, 904 (1997). That is the precise concern

presented by a private relator recovering against a state defendant

in a qui tam suit.

18 There are, however, substantial restrictions on the United

States' power incorporated within these provisions. See Stevens,

162 F.3d at 223-24 (Weinstein, J., dissenting).

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The relator appears to remain a party whether or not the

United States intervenes. In either situation, the relator's

rights must be protected under the statute. See 31 U.S.C.

s 3730(c)(3) (providing that the court may permit the United

States to intervene for good cause but must not "limit[ ] the

status and rights of the person initiating the action"); id. at

s 3730(c)(1) (providing that the relator "shall have the right

to continue as a party to the action," subject to certain

limitations, even after the United States intervenes). This is

important because the Eleventh Amendment must be satisfied for every claim in the suit, see Pennhurst State Sch. &

Hosp. v. Halderman, 465 U.S. 89, 121 (1984), and the presence of the United States as a co-plaintiff does not ordinarily

remove the Eleventh Amendment bar for claims by other

plaintiffs, see id. at 103 n.12; but see Rodgers, 154 F.3d at 870

(Panner, J., dissenting) (distinguishing for Eleventh Amendment purposes between cases in which the United States

intervenes from those in which it does not). But assuming

arguendo that the Eleventh Amendment would not pose a

problem in cases in which the United States actually intervenes in a suit against a state, the government did not do so

in the present case. That fact, coupled with the government's

intervention limited to the claim against the private defendants, suggests that the government does not lightly take on

the task of probing into the internal operations of the sovereign states, and may well think it better to leave such

politically unpalatable tasks for the qui tam relators of the

world. Yet, the government wishes the option to sit back

while the relator brings an action against a state, thus

removing itself from direct accountability and from the subtle

political pressures that might have precluded the lawsuit in

the first place had the United States been more actively

involved from the start. See Stevens, 162 F.3d at 225-29

(Weinstein, J., dissenting). That seems quite at odds with the

obvious purpose of the Eleventh Amendment since such a suit

is emphatically not one brought "at the instance and under

the control of responsible federal officers." Blatchford, 501

U.S. at 785. We seriously doubt that the government, under

the Eleventh Amendment, is entitled to transfer all of the

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benefits that accrue to it as a plaintiff in the federal courts

when it chooses to watch from the sidelines. That could be

described as allowing the government to have its constitutional cake and eat it too.

It has also been contended that, despite the clear statutory

language giving relators a cause of action and treating them

as parties vested with rights and protections, relators should

be seen instead as self-appointed government counsel. See

Stevens, 162 F.3d at 202; Milam, 961 F.2d at 49 ("Congress

has let loose a posse of ad hoc deputies to uncover and

prosecute frauds against the government."); Siegel, supra, 73

Tex. L. Rev. at 556-57; Evan Caminker, The Constitutionality of Qui Tam Actions, 99 Yale L. J. 341, 353 (1989). It has

even been suggested that the relator's economic interest in

the lawsuit makes him more like a contingency fee lawyer

than a party. See Stevens, 162 F.3d at 202 (acknowledging

that the qui tam plaintiff has an interest in the action's

outcome, but stating that "his interest is less like that of a

party than that of an attorney working for a contingent fee"

and citing cases noting that relators' primary motivation is a

monetary reward and not the public good). We simply do not

understand the analogy; typically both the client and the

attorney have an economic interest in litigation. In this

sense, a relator looks no different to us than, let us say, an

applicant for a broadcast license. It is therefore not possible

to contend that the False Claims Act is an open-ended letter

of engagement from the government as client to a posse of

prospective attorneys. See United States ex rel. Farrell v.

SKF, USA, Inc., 32 F. Supp. 2d 617, 617-18 (W.D.N.Y. 1999)

(rejecting contention by qui tam defendant that, since the

relator is only the United States' lawyer and the United

States always remains a party litigant, the defendant was

entitled to discovery from the United States even though the

United States had not intervened in the suit). To accept the

"private Attorneys General" characterization as anything

more than an inapt convention would run headlong into the

problems of how a party with a statutory right to sue on his

own behalf can be thought to be acting in a representational

capacity, see 31 U.S.C. s 3730(b), why the client would need

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the court's permission to intervene in his own suit, see id. at

s 3730(c)(3), or to dismiss the lawyer's "suit," see id. at

s 3730(c)(2)(A), and why the lawyer's "status and rights"

would be worthy of statutory protection in the event the

client chooses to intervene in the lawyer's action, see id. at

s 3730(c)(3).19

B.

Although, as we have indicated, we have profound doubts

that the Eleventh Amendment permits this lawsuit against

New York even if Congress implicitly authorized relators to

bring suits against the states, we do not rest our decision on

an interpretation of the Constitution. Instead, bearing in

mind that we must decide this difficult constitutional issue

only if the term person in the Act is interpreted as including

states, and that it seems quite dubious that Congress intended that result, the appropriate course seems to us to interpret

"person" as not including states.

The venerable doctrine of construing statutes in such a way

as to avoid serious constitutional questions has two important

prerequisites. First, the "statute must be genuinely susceptible to two constructions," and this determination must be

made "after, and not before, [the statute's] complexities are

unraveled." Almendarez-Torres, 118 S. Ct. at 1228; see also

United States v. Espy, 145 F.3d 1369, 1372 (D.C. Cir. 1998);

Association of Am. Physicians & Surgeons, Inc. v. Clinton,

997 F.2d 898, 906, 910-11 (D.C. Cir. 1993). Furthermore, the

constitutional question must be one that presents a "serious

likelihood that the statute will be held unconstitutional."

Almendarez-Torres, 118 S.Ct. at 1228; see also Association of

Am. Physicians & Surgeons, 997 F.2d at 906 (constitutional

question must be a "grave" one); Espy, 145 F.3d at 1372.

__________

19 Of course, if the government actually hired a lawyer to bring its

own cause of action, the Blatchford delegation problem would not

arise. But as we have explained at length, that is not what the

False Claims Act does.

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It is obvious from what we have said already that these

requirements are satisfied in this case. As we have just

explained at length, the Eleventh Amendment question is, at

bare minimum, a serious one. It could not be suggested,

moreover, that we are distorting the language of the statute

in order to avoid a constitutional question. The more obvious

reading is to exclude states from "person." The more difficult task is to demonstrate that the inclusion of states as

defendant persons is a fair reading of the statute. There can

be no objection to avoiding a constitutional question that is

implicated only by a rather strained reading of the statute.

We think it relevant--if not decisive--to observe that the

avoidance canon coincides in this case with two additional

related canons of construction that impose upon Congress an

obligation of specificity. When "Congress intends to alter the

'usual constitutional balance between the States and the

Federal Government,' " federal courts insist that Congress

"make its intention to do so 'unmistakably clear in the

language of the statute.' " Will, 491 U.S. at 65 (quoting

Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 242 (1985));

see also Gregory v. Ashcroft, 501 U.S. 452, 464 (1991) (linking

clear statement rule with constitutional avoidance canon).

The Court in Will derived this "clear statement" rule from

the Eleventh Amendment cases requiring an explicit textual

intent to abrogate a state's Eleventh Amendment immunity,

but noted its applicability in a range of contexts in which

Congress alters the federal-state balance of power. See Will,

491 U.S. at 65.20 In Gregory, the Court applied this "plain

statement" principle where Congress' imposition of liability

under the Age Discrimination in Employment Act would

"upset the usual constitutional balance" by interfering with

the states' fundamental role in defining the qualifications of

their state judges. Id. at 460-61; see id. at 464-67 (holding

that Congress did not make a sufficiently clear statement in

__________

20 Indeed, in Will itself the Eleventh Amendment was not a

concern because the question whether states were persons under

s 1983 arose in the context of a state court case, and the Eleventh

Amendment does not apply in state courts. See Will, 491 U.S. at

63-64.

the ADEA that state judges are within the Act's coverage).

It cannot seriously be disputed that if Congress were required to make its intentions "clear and manifest," Will, 491

U.S. at 65, in order to impose False Claims Act liability on

the states, it has failed to do so.

Appellees contend that there is no justification for applying

this clear statement rule of Will or Gregory because treating

states as defendant persons would not actually alter the

constitutional balance of powers between the federal and

state governments. Such an alteration occurs, for example,

when Congress seeks to remove the states' sovereign immunity in their own courts, as in Will, 491 U.S. at 67, or when

Congress attempts to interfere with an essential governmental function, as in Gregory, 501 U.S. at 460. Since this case

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arose in federal court and because the fraudulent conduct

proscribed cannot be thought an essential governmental function, appellees argue that neither Will nor Gregory apply.

We are unpersuaded by various crabbed analyses of the

Court's "clear statement" jurisprudence that we have seen.

To characterize the relevant state function at issue, as the

Second Circuit did, as fraudulent conduct, see, e.g., Stevens,

162 F.3d at 204 ("The States have no right or authority,

traditional or otherwise, to engage in [fraudulent] conduct."),

is to assume the conclusion that the function is not an

essential one. Using that logic, the Court in Gregory would

have declined to apply a clear statement rule because it is not

essential for the state to discriminate against elderly judges.

Appellees, for their part, describe the governmental function

at issue in this case as the process by which a state receives

federal funding-which they argue cannot possibly be described as an essential state function. The state, in other

words, is simply a supplicant coming to the federal sovereign.

That characterization, in our view, is still too narrow because

the Act's imposition of liability necessarily interferes with a

state's sovereign performance of a range of indisputably

essential functions, such as the administration of a state

education department involved in the present case. See

Ambach v. Norwick, 441 U.S. 68, 76 (1979) ("Public education,

like the police function, 'fulfills a most fundamental obligation

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of government to its constituency.' ") (quoting Foley v. Connelie, 435 U.S. 291, 297 (1978)); Brown v. Board of Educ., 347

U.S. 483, 493 (1954) ("[E]ducation is perhaps the most important function of state and local governments."). That the

federal government funds in part that function does not

destroy its essentiality to the state. To accept that hypothesis, given present tax and spending mechanisms, would go a

long way toward burying federalism.

The Supreme Court has applied Gregory as we do, focusing

on the state functions necessarily affected by operation of the

statute, and not exclusively on the actual conduct proscribed

by Congress. See Gregory, 501 U.S. at 463 (essential state

function with which ADEA liability would interfere was the

"authority of the people of the States to determine the

qualifications of their most important government officials" in

their state Constitutions); see also Pennsylvania Dep't of

Corrections v. Yeskey, 118 S. Ct. 1952, 1953-54 (1998) (assuming that imposition of ADA liability against state prisons

would interfere with the essential state function of "exercising

ultimate control over the management of state prisons");

BFP v. Resolution Trust Corp., 511 U.S. 531, 544 & n.8 (1994)

(applying Gregory to Bankruptcy Code provisions governing

constructively fraudulent transfers, and explaining that the

state function was not general authority over debtor-creditor

law, but the "essential sovereign interest in the security and

stability of title to land" necessarily affected by application of

the Bankruptcy Code to foreclosure sales). We thus do not

think it is appropriate to look myopically only to the state's

formal submission of the claim to the government and to

ignore the underlying governmental functions to which the

claim relates.21

__________

21 It could be argued, we suppose, that because False Claims Act

liability is only triggered when the state requests money from the

federal government, it brings any interference with its essential

functions on itself. But we do not see any basis in Gregory for

eliminating the need for a clear statement simply because the

liability imposed is conditioned on a voluntary act by the state. The

clear statement rule of Pennhurst State School and Hospital v.

Halderman, 451 U.S. 1, 17 (1981)--which requires a clear statement

Appellees similarly give an overly restrictive reading of

Will. It is true that the Court in Will pointed to the states'

sovereign immunity in their own courts as a supporting

reason for concluding that Congress did not intend to make

states persons under 42 U.S.C. s 1983. See Will, 491 U.S. at

66-67. But the Court nowhere even suggested that abrogation of state sovereign immunity was the only alteration of

the constitutional balance that justified use of the clear

statement rule, nor did it rely on the idea of essential state

functions implicit in the later decision in Gregory. Will could

be read to suggest--although we are uncertain of this--that it

was the very imposition of a new liability against the state

that would have altered the constitutional balance of powers.

Whether or not Will or Gregory can be taken as far as we

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have suggested,22 there is a second related clear statement

__________

when Congress imposes conditions on grants of federal money--

seems flatly inconsistent with such an argument.

22 The government would have us instead limit the Court's clear

statement rules because of the significant reliance interests created

by Congress' and the federal agencies' assumption that states, to

whom they entrusted large sums of money, are covered by the Act.

For the proposition that reliance interests can trump clear statement rules, the government relies on Hilton v. South Carolina

Public Railways Comm'n, 502 U.S. 197, 205-07 (1991) (holding that

Will is a rule of statutory construction, not of constitutional law,

and that the reliance interests created by the Court's prior decision

interpreting the Federal Employers' Liability Act to include stateowned railroads warranted adherence to stare decisis rather than to

the clear statement rule). That the Court feels obliged to disregard

the clear statement rule because of reliance interests that it created

through its own precedent is of course quite different from the

government's contention. Any reliance interests in this case are

not the judiciary's doing, but rather stem from the legislature's and

the federal agencies' assumption, based on weak post-enactment

legislative history, that states were, or ought to be, covered by the

Act. Since Congress easily could have included states within the

definition of person if it so intended, the government can hardly be

heard to complain now (on behalf of Congress) that Congress, in

effect, wrote the states a blank check.

canon that bears on our case. In cases involving congressional abrogation of a state's Eleventh Amendment immunity, the

applicability of the clear statement rule is well-established

and the uncertainties in defining the scope of the Will and

Gregory versions of that rule disappear. See Dellmuth v.

Muth, 491 U.S. 223, 230 (1989). Appellees contend that that

rule does not apply, however, because they conclude that the

Eleventh Amendment is not a bar to a qui tam suit (and thus

that no abrogation is necessary). But it seems highly artificial to conclude that Congress labors under an obligation of

utmost textual specificity when it seeks to abrogate the

states' Eleventh Amendment immunity when that immunity is

otherwise certain, but that liability against the states--potentially implicating the Eleventh Amendment--can be imposed

willy-nilly, using as imprecise a term as "person." We think

there is significant conceptual overlap--though admittedly

not an identity--between the abrogation inquiry and the

statutory construction question whether Congress intended to

include states as defendant persons. The Supreme Court's

conclusion that Congress has failed to abrogate with the

requisite specificity is often based on Congress' failure explicitly to provide for suits against the states in federal court--

the precise failing of the False Claims Act that raises the

question in this appeal. See, e.g., Dellmuth, 491 U.S. at 231-

32; Atascadero State Hosp., 473 U.S. at 245-46. So although

we recognize that the Eleventh Amendment's clear statement

rule has always been applied to an abrogation inquiry--rather

than to a threshold question as to whether the Eleventh

Amendment applies--we do not think it wholly irrelevant to

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the latter.

Appellees' argument against using the Eleventh Amendment's clear statement rule follows from their prior conclusion that the Eleventh Amendment does not apply to this

case. Appellees therefore assume that states are persons for

the purpose of rejecting New York's Eleventh Amendment

defense, and then proceed to reject the Eleventh Amendment's clear statement rule when actually interpreting the

statute previously assumed to include states--sort of a divide

and conquer strategy. The statutory construction issue is,

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however, inextricably linked with the jurisdictional one, which

is precisely why we decline to assume that states are persons

in order to conduct an Eleventh Amendment inquiry that

could be avoided if the assumption were not made in the first

place. We think the correct resolution is to read the Act in

such a way that avoids the serious constitutional question

whether the Eleventh Amendment bars qui tam suits against

the state in federal court. In so doing, we rely on the

constitutional avoidance canon buttressed by the family of

"clear statement" rules applicable when Congress attempts to

legislate in the way that appellees contend it has legislated.23

* * * *

In the end it comes to this: if we must decide whether

states constitutionally can be defendants in federal court

under the Act, Congress must make its intent clear. The

decision of the district court is therefore reversed.

So ordered.

__________

23 New York would also have us apply the clear statement rule of

Pennhurst, 451 U.S. at 17, under which Congress must unambiguously set forth conditions it imposes on the grant of federal money

when it exercises its spending power. Because we have enough--

more than enough--clear statement rules to resolve this case, we

need not decide whether False Claims Act liability can be seen as a

condition imposed on a grant of federal money.

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