Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-01-07071/USCOURTS-caDC-01-07071-0/pdf.json

Parties Involved:
Bombardier Corporation
Appellee
Envirovac, Inc.
Appellee
United States of America
Amicus Curiae for Appellant

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 4, 2002 Decided April 16, 2002

No. 01-7071

United States of America, ex rel. Edward L. Totten,

Appellant

v.

Bombardier Corporation and Envirovac, Inc.,

Appellees

Appeal from the United States District Court

for the District of Columbia

(No. 98cv00657)

H. Vincent McKnight Jr. argued the cause for appellant.

With him on the briefs was Peter J. Vangsnes.

Thomas M. Bondy, Attorney, U.S. Department of Justice,

argued the cause as amicus curiae supporting appellant.

With him on the brief were Roscoe C. Howard Jr., United

States Attorney, Douglas N. Letter, Litigation Counsel, UnitUSCA Case #01-7071 Document #671828 Filed: 04/16/2002 Page 1 of 20
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ed States Department of Justice, and Colin C. Carriere,

Counsel, National Railroad Passenger Corporation.

Mark R. Hellerer argued the cause and filed the brief for

appellee Bombardier Corporation. Donald A. Carr entered

an appearance.

Paul E. Lehner and Randall L. Mitchell were on the brief

for appellee Envirovac, Inc. Barbara Van Gelder and Scott

M. McCaleb entered appearances.

Before: Edwards and Randolph, Circuit Judges, and

Williams, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge Edwards.

Concurring opinion filed by Circuit Judge Randolph.

Edwards, Circuit Judge: Suspecting that his employer, the

National Railroad Passenger Corporation ("Amtrak") was

being defrauded by two companies with whom it had contracted to supply new rail cars with improved toilet systems,

Edward Totten brought an action against these companies

under the False Claims Act ("FCA"), 31 U.S.C. ss 3729-3733

(1994). The District Court dismissed his suit, holding that,

pursuant to a recent amendment to Amtrak's governing

statute, the FCA could not be invoked with respect to federal

money invested in the railroad. Totten now appeals this

decision, and in so doing presents us with an issue of first

impression regarding the extent to which doing business with

Amtrak immunizes contractors from FCA liability.

In 1997, Congress enacted legislation which stated, in part,

that Amtrak "shall not be subject to title 31." See Amtrak

Reform and Accountability Act of 1997, Pub. L. No. 105-134,

s 415(d), 111 Stat. 2570 (Dec. 2, 1997) ("the Reform Act"),

codified at 49 U.S.C.A. s 24301(a)(3) (2001). Because the

FCA is included in title 31 of the U.S. Code, the District

Court concluded that a suit by Totten against contractors

doing business with the railroad would impermissibly make

Amtrak "subject to" the FCA. We disagree. Instead, we

hold that the Reform Act erects no per se bar preventing

individuals from bringing FCA actions against those who

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make false or fraudulent claims implicating the federal funds

invested in Amtrak. Neither the text nor the legislative

history of s 24301(a)(3) compels a blanket liability exception

for businesses serving Amtrak.

Accordingly, we reverse the judgment of the District Court

and remand the case for further proceedings. On remand,

Totten may amend his complaint, which presently is inadequate, in order to state a proper claim for relief under the

FCA. The District Court indicated that it would have permitted such an amendment had it not interpreted the Reform

Act as posing an insurmountable obstacle to Totten's suit.

We agree that an opportunity to amend is permissible and

appropriate.

In amending his complaint, Totten must state with particularity the circumstances surrounding the defendants' allegedly false claims, as required by Rule 9(b) of the Federal Rules

of Civil Procedure. He must also aver that the defendants

actually submitted false demands for payment, rather than

merely non-conforming goods. That said, we express no view

on the question left open by this court in United States ex rel.

Yesudian v. Howard University, 153 F.3d 731, 737-39 (D.C.

Cir. 1998), concerning the relationship between subsections

(a)(1) and (c) of 31 U.S.C. s 3729. Instead, we leave it to the

District Court to determine, should the issue arise on remand,

whether an FCA plaintiff may prevail against a defendant

who submits a false "claim" to Amtrak, as that term is

defined in s 3729(c), without evidence that the claim was ever

submitted (or resubmitted) to the federal government. We

will not venture to offer an answer to this difficult legal

question on the record currently before us.

I. BACKGROUND

Congress created Amtrak in 1971 in order to stave off the

threatened extinction of passenger rail service in the United

States. See Rail Passenger Service Act of 1970, Public Law

No. 91-518, 84 Stat. 1327 (Oct. 30, 1970); Nat'l R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S.

451, 453-55 (1985). Since its inception, the statutes governing

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Amtrak have indicated that the railroad is to be managed as a

for-profit corporation, and not as a "department, agency, or

instrumentality" of the federal government. See generally

Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374, 383-86

(1994). This status continues to the present day. See 49

U.S.C.A. s 24301(a). As such, the railroad is generally exempt from those "statutes that impose obligations or confer

powers upon Government entities." Lebron, 513 U.S. at 392

(holding that Amtrak is nevertheless subject to the constraints of the Constitution).

Until 1997, Amtrak was formally classified as a "mixedownership Government corporation," 31 U.S.C. s 9101(2)(A)

(1983), and was therefore bound by the rules that federal law

imposes on such entities. See Government Corporation Control Act, 31 U.S.C. ss 9101-9109 ("GCCA"). That year, concerned that these and other restrictions were jeopardizing

Amtrak's financial viability, Congress enacted the Reform Act

in order to increase the railroad's managerial flexibility and

improve its economic prospects. See S. Rep. No. 105-85, at 1

(1997) ("In order to achieve operating self-sufficiency, the bill

is designed to enable Amtrak to increase efficiencies, reduce

costs, and operate as much like a private business as possible."). To these ends, while Amtrak was provided with an

influx of federal dollars -- appropriations totaling $5.2 billion

over the 1998-2002 period -- Congress simultaneously sought

to alter the railroad's legal status as a recipient of that

money.

It did so in two ways that are significant for the present

appeal. First, the Reform Act amended the GCCA to remove

Amtrak from the list of mixed-ownership corporations. See

Pub. L. No. 105-134, s 415(d)(2). This change freed the

railroad from the requirements that bind companies so designated, such as the submission of budget reports to Congress,

31 U.S.C. s 9103, and annual government audits, 31 U.S.C.

s 9105. Relatedly, the Act specifically amended 49 U.S.C.

s 24301(a)(3) to provide that Amtrak "shall not be subject to

title 31." See Pub. L. No. 105-134, s 415(d)(1). These

amendments do not figure prominently in the legislative

history of the Reform Act. Indeed, the only specific reference to this section of the bill notes tersely that it "removes

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Amtrak from the Government Corporations Act." H.R. Rep.

No. 105-251, at 34 (1997).

Certainly, neither the statutory text nor its history makes

any mention of the False Claims Act. Yet, along with the

rules regarding government corporations, that statute is

housed in title 31. And the present case calls upon us to

decide the extent to which this provision of the Reform Act

narrowed the reach of the FCA as it relates to Amtrak. This

is an issue of first impression.

The dispute giving rise to this case began when Amtrak

contracted with two private companies, Bombardier Corporation and Envirovac, Inc. ("the Contractors"), to supply rail

cars with new toilet systems for its trains. Bombardier

makes the cars and Envirovac makes the toilets. Specifications for the toilet systems were incorporated into Amtrak's

contracts with the Contractors. On March 16, 1998, Totten, a

former Amtrak employee, filed a suit against the Contractors

under the FCA, alleging that they had supplied unsuitable

parts that did not meet the contractual specifications. Totten's complaint asserted that these noncompliant toilets were

so defective that they endangered the health of Amtrak's

passengers and employees. Totten further averred that the

Contractors knew of these defects, yet delivered the cars

anyway in order to obtain payment under their contracts.

In order to advance its purpose of protecting federal funds

from fraud, the False Claims Act allows a private individual

such as Totten (known as the relator) to bring a qui tam

action "in the name of the Government," and by that means to

share in the ultimate recovery. See 31 U.S.C. s 3730(b); see

generally Vermont Agency of Natural Res. v. United States

ex rel. Stevens, 529 U.S. 765, 768-70 (2000). The statute's qui

tam provision is a powerful tool that augments the government's limited enforcement resources by creating a strong

financial incentive for private citizens to guard against efforts

to defraud the public fisc. See Yesudian, 153 F.3d at 736.

Indeed, an FCA plaintiff can realize a substantial recovery, as

the statute imposes both treble damages and a civil penalty of

up to $10,000 on any person who, inter alia, "knowingly

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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. s 3729(a)(1).

The language of s 3729(a)(1) suggests that the alleged false

claim must have been presented to the federal government

itself. Section 3729(c), however, defines "claim" quite broadly

to include:

any request or demand, whether under a contract or

otherwise, for money or property which is made to a

contractor, grantee, or other recipient if the United

States Government provides any portion of the money or

property which is requested or demanded, or if the

Government will reimburse such contractor, grantee, or

other recipient for any portion of the money or property

which is requested or demanded.

Neither this court nor the Supreme Court has definitively

explicated the complex relationship between the definition

clause in s 3729(c) and the presentment clause in

s 3729(a)(1). Instead, we have noted, but declined to answer,

the question of whether an FCA plaintiff can prevail by

proving only that a false claim was submitted to a federal

grantee (such as Amtrak), as defined in subsection (c), without further demonstrating that the claim was submitted (or

resubmitted) to the federal government, as suggested by the

text of (a)(1). See Yesudian, 153 F.3d at 737-39.

The District Court did not face this question. Rather, the

court relied on different grounds in rejecting Totten's complaint. See United States ex rel. Totten v. Bombardier Corp.,

139 F. Supp.2d 50, 52 & n.1 (D.D.C. 2001). First, the District

Court held that, regardless of whether s 3729(a)(1) requires a

showing that claims were presented to the United States

itself, Totten's complaint failed because it did not allege that

the Contractors presented "any request or demand ... for

money or property" to Amtrak. Rather, the complaint merely asserts that defendants delivered goods to the railroad that

did not meet the specifications of its contracts. Second, the

District Court found that the complaint makes no representations regarding Amtrak's status as a recipient of federal

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money, either in general or in connection with the specific

projects at issue in this case. Therefore, even if the Contractors had actually presented demands for payment to Amtrak,

the complaint gives no indication as to how such demands

would be "claim[s]" under the terms of subsection (c). Third,

the District Court pointed out that Totten's complaint does

not state the time, place, and content of defendants' alleged

false statements, as required by Rule 9(b). See Fed. R. Civ.

P. 9(b) ("the circumstances constituting fraud or mistake shall

be stated with particularity").

The District Court noted that ordinarily it would have

allowed a plaintiff to cure such pleading flaws by amendment,

but concluded that such a remedy would have been futile in

Totten's case because his suit was doomed as a matter of law.

See Bombardier, 139 F. Supp.2d at 52 n.1. Specifically, the

court held that Amtrak's special legal status rendered its

contractors totally immune from liability under the FCA,

regardless of how the case was pleaded. According to the

District Court, the purpose of the Reform Act was to "negate

the normal repercussions of government funding" as it related to Amtrak. Id. at 54. Among these repercussions is

potential FCA liability for those entities receiving, through

contracts with Amtrak, a share of the federal money invested

in the railroad. The District Court thus held that the phrase

"not subject to title 31" in 49 U.S.C.A. s 24301(a)(3) was

intended to prevent "Amtrak's receipt of government funds

from bringing Amtrak, and its business dealings, within the

reach of the False Claims Act." Id. at 55.

Totten appeals from this decision. The United States

elected not to intervene in this litigation pursuant to 31

U.S.C. s 3730(b)(5). However, the United States has now

filed an amicus curiae brief on appellant's behalf arguing

against the District Court's expansive construction of the

Reform Act.

II. DISCUSSION

The central issue in this appeal is whether the Reform Act,

in stating that Amtrak "shall not be subject to title 31,"

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exempts those who contract with Amtrak from liability under

the False Claims Act. We believe that it does not. Rejecting

the District Court's construction of the Reform Act leads us

to the question of whether Totten should be allowed to amend

his complaint to correct its various shortcomings. We believe

that he should.

A. The Meaning of "Subject To" in 49 U.S.C.A.

s 24301(a)(3)

The argument that the Reform Act bars Totten's suit,

which the District Court accepted and which the Contractors

echo on appeal, runs as follows: The FCA confers benefits

and imposes burdens on entities who receive government

funding. The statute's stringent penalties deter fraud but

they also may make some businesses reluctant to contract for

fear of liability. Accordingly, if demands for payment presented to Amtrak can be considered "claims" within the

meaning of 31 U.S.C. s 3729(c), the FCA would both protect

and (indirectly) constrain Amtrak in its business transactions.

And this would leave the railroad "subject to," in the sense of

being "affected by," the terms of the statute. Under this

scenario, Totten's cause of action is precluded by

s 24301(a)(3).

We are not persuaded by this argument. We must begin,

of course, with the text of the statute. As the District Court

itself recognized, the words "subject to" leave room for

interpretation. See Bombardier, 139 F. Supp.2d at 53. It is

true that in some contexts "subject to" can mean "affected

by," for example, "Boats in San Francisco Bay are often

subject to fierce winds." However, when the phrase is used

in situations more analogous to the one here, it is typically

given a narrower cast: an entity is "subject to" a particular

legal regime when it is regulated by, or made answerable

under, that regime. See The Random House Thesaurus 696

(giving "bound by" as chief synonym for the phrase in the

sentence, "We are subject to the laws of the country"); see

also, e.g., Texaco, Inc. v. DuhE, 274 F.3d 911, 918-19 (5th Cir.

2001) (natural gas became "subject to an existing contract"

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within the meaning of the Natural Gas Policy Act when it was

"governed by" the terms of that contract).

In National Collegiate Athletic Association v. Smith, for

example, the Supreme Court considered whether "a private

organization that does not receive federal financial assistance

is subject to Title IX because it receives payment from

entities that do." 525 U.S. 459, 465 (1999) (emphasis added).

In holding that the NCAA was not subject to the statute, the

Court did not preclude all applications of Title IX that

indirectly affect the organization. Rather, the Smith decision

mandated merely that the NCAA itself could not be sued

under Title IX. See id. at 470. The organization, in other

words, was not required to conform its own conduct to the

demands of the statute. That said, Title IX suits against the

colleges or universities that fund the NCAA are plainly

permitted after Smith, even though the effect of such litigation might be to limit the number of schools willing to field

athletic teams and thus to pay the Association's dues. Cf.

Pederson v. Louisiana State Univ., 213 F.3d 858 (5th Cir.

2000) (holding that LSU was liable under Title IX for not

adequately accommodating the school's female athletes). The

fact that Title IX continues to have an indirect effect on the

NCAA's business does not, in ordinary usage, render that

organization "subject to" that statute.

Other examples reinforce this common understanding of

the term. Thus, when the Supreme Court noted that a

defendant was "subject to Title VII ... only if, at the time of

the alleged retaliation, it met the statutory definition of

employer," it clearly meant that the defendant could be held

liable under Title VII only if that condition was met. Walters

v. Metro. Educ. Enters., Inc., 519 U.S. 202, 205 (1997); see

also, e.g., Nat'l Cable and Telecomm. Ass'n, Inc. v. Gulf

Power Co., 122 S. Ct. 782, 797 (2002) ("[T]he Commission has

not determined whether Internet access via cable system

facilities should be classified as a 'cable service' subject to

Title VI of the Act, or as a 'telecommunications' or 'information service' subject to Title II.").

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Moreover, this is how the phrase is used in the context of

the False Claims Act itself. In its recent Vermont Agency

decision, the Supreme Court used the phrase "subject to the

false claims law" to describe the category of persons who can

be sued under the FCA. 529 U.S. at 784 n.13; see also, e.g.,

United States ex rel. Long v. SCS Bus. & Tech. Instit., Inc.,

173 F.3d 870, 876 (D.C. Cir. 1999) (speaking of "individuals

subject to the Act" as those who could be made liable under

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

Minnesota, 154 F.3d 870, 872 (8th Cir. 1998) (asking whether

States are "subject to the False Claims Act" in the sense of

whether they can be held legally accountable for making false

claims to the federal government).

Accordingly, where, as here, a plaintiff brings a qui tam

action against a third party who has allegedly defrauded a

federal grantee, common usage would suggest that the third

party, and not the grantee, is being made "subject to" the

FCA. We think this to be the more intuitive understanding

of the Reform Act as well. Construing s 24301(a)(3) in this

light would read it as preventing Amtrak from being directly

regulated by the various provisions in title 31, for example, by

being sued under the False Claims Act. In contrast, as long

as Amtrak is not made to conform its actions to the terms

imposed by such statutes, the railroad is not made "subject

to" those laws. And, if this is the standard, it is clearly not

met in the present case.

Here, Totten seeks to use the FCA not to regulate Amtrak,

but instead to recover for the purported fraud of contractors

hired to serve the railroad. Allowing the United States (or

its relator) to obtain damages from those who contract with

Amtrak imposes no direct legal obligation on the railroad.

Nor does it permit Amtrak's conduct to be measured against

the standards set in the statute. Even if similar suits may

have an incidental effect on Amtrak's future business relationships, Totten's litigation will not compel the railroad to

take any action in order to satisfy the demands of the FCA.

His action therefore does not implicate the Reform Act's

"subject to" provision.

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At any rate, this result flows from what we believe to be

the most natural and ordinary reading of the phrase "subject

to." Accordingly, we will accept that conclusion, and allow

Totten's suit to go forward, unless we find evidence that

Congress had a different meaning in mind when it drafted

s 24301(a)(3). See, e.g., Williams v. Taylor, 529 U.S. 420, 431

(2000) ("We give the words of a statute their 'ordinary,

contemporary, common meaning,' absent an indication Congress intended them to bear some different import.") (quoting

Walters, 519 U.S. at 207). The Contractors argue that such

evidence is to be found in the legislative history of the

Reform Act. Once again, we disagree.

If anything, the only specific reference that Congress made

to the "not be subject to title 31" language suggests that this

clause was intended to have a rather limited effect. The

amendment appeared in Section 501 of the House version of

the bill that became the Reform Act. That section, entitled

"Financial Powers," was concerned mostly with restructuring

Amtrak's stock. Subsection (e) contained both the clause

removing Amtrak from the list of mixed-ownership Government corporations in 31 U.S.C. s 9101, and the clause adding

the "subject to" language in 49 U.S.C. s 24301(a)(3). In its

section-by-section analysis of the bill, the House Committee

on Transportation and Infrastructure reported blandly that

this subsection "removes Amtrak from the Government Corporations Act." See H.R. Rep. No. 105-251, at 34.

Insofar as this statement is useful, it clearly does not help

the Contractors' cause. It provides no indication that Congress expected or intended that the phrase "subject to" would

take on a broader agenda than its ordinary meaning connotes.

To be sure, the language of the amended s 24301(a)(3) plainly

does more than to remove Amtrak from the obligations of the

GCCA, and must be construed accordingly. However, the

Committee's narrow understanding of this change certainly

reinforces our decision to reject the expansive interpretation

adopted by the District Court. If anything, the legislative

history's terse analysis indicates that no one in Congress

imagined that the Reform Act would result in a repeal of the

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False Claims Act as it applies to any private company doing

business with Amtrak.

Such an outcome would indeed have been striking. To

accept it, we would have to believe that just as Congress was

committing itself to a significant investment of federal money

in Amtrak, it eliminated a weapon for protecting that money

against fraud. We would have to believe that Congress

placed a significant obstacle in the way of uprooting the

unlawful depletion of that portion of the public fisc used to

develop and support the nation's passenger rail system - the

very system that the legislation in question was aimed at

protecting.

As suggested above, the words that Congress wrote do not

compel (and in their ordinary usage resist) this conclusion.

And the scant extrinsic evidence that exists to cast light on

the meaning of these words suggests that such a dramatic

result was far from the legislative mind. We think it not

unreasonable to suppose that had such a broad rollback of the

FCA in fact been the goal of the Reform Act, some indication

of that intent would appear in the congressional record. Cf.

Am. Hosp. Ass'n v. NLRB, 499 U.S. 606, 613-14 (1991).

There is none. And, without some affirmative indicator, we

are unwilling to place upon the text of that statute an

expansive gloss that would generate this surprising result.

Recognizing the weakness of arguments from specific legislative history, the District Court, and now the Contractors,

have focused on the broader purposes of the Reform Act as a

possible interpretive guide. This effort falls flat as well. As

described above, the District Court concluded that the aim of

the Reform Act was to "negate the normal repercussions of

government funding." Totten, 139 F. Supp.2d at 54. That is,

while Congress would continue (at least in the short-run) to

appropriate significant federal money for Amtrak, its objective was to have the railroad treated as if it was receiving no

such funding. The statute, in other words, legislated the

pretense that Amtrak was self-sufficient. And, as such, FCA

liability would be inappropriate, as that statute applies only

where federal funds are at stake.

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The problem with this view is that there is no actual basis

for it in the legislative history. It is true that, in passing the

Reform Act, Congress sought to end federal "micromanagement of Amtrak's operations," H.R. Rep. No. 105-251, at 13, in

order to allow the railroad to "operate as much like a private

business as possible," S. Rep. No. 105-85, at 1. However, even

if we accept these statements as relevant to determining the

meaning of "subject to," they do not necessarily support the

Contractors' position. In fact, they are entirely consistent

with the position taken by Totten and the United States: that

both the goal and effect of the Reform Act were to ensure

that Amtrak would be treated just like any other private

company that receives federal money. The Act, in other

words, sought to ensure that Amtrak would no longer be

subject to special restrictions that were not similarly imposed

on private-sector transportation firms.

On this view, allowing Amtrak's contractors to be sued

under the FCA makes perfect sense, as the contractors of any

private business would likewise be subject to liability if they

submitted false claims in connection with a project to be

reimbursed with federal money. See, e.g., United States v.

Lagerbusch, 361 F.2d 449 (3d Cir. 1966); Murray & Sorenson, Inc. v. United States, 207 F.2d 119, 123 (1st Cir. 1953)

("The fact that the claims in this case were not presented

directly to the government, but were made to it indirectly

through the contractors, does not prevent recovery under the

False Claims Statute."); cf. United States v. Bornstein, 423

U.S. 303 (1976) (FCA used to sue a subcontractor whose

fraud caused a private company that had contracted with the

government to submit false invoices to the United States).

Thus, contrary to the Contractors' contention, even the general goals expressed by the drafters of the Reform Act

appear to support Totten's attempt to bring suit under the

FCA.

In sum, the most natural reading of 49 U.S.C.A.

s 24301(a)(3) would not withdraw FCA protection against

alleged false claims made by third parties on the extensive

sums of federal money invested in Amtrak. Neither is this

result mandated, or even suggested, by the scant legislative

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history of that provision, nor by the larger purposes and aims

of the Reform Act as a whole. We therefore reverse the

District Court's conclusion that s 24301(a)(3) erects a per se

barrier preventing Totten from imposing FCA liability on the

Contractors.

B. Allowing Totten to Amend his Complaint

1. Flaws In Totten's Unamended Complaint

This legal conclusion does not, however, mean that Totten's

complaint, at least in its current form, actually states a valid

claim under the False Claims Act. Indeed, as suggested

above, there are several ways in which his present complaint

is deficient. First, Totten has alleged merely that the Contractors "knowingly presented or caused to be presented

equipment to an officer or employees of the National Railroad

Passenger Corporation, that was knowingly substandard or

noncompliant with engineering specifications for the Superliner II Contract to obtain payments from the National Railroad

Passenger Corporation ..." Complaint, at p 22; see also id.

at p p 27, 57. However, the bare assertion that defendants

delivered goods that did not conform to contractual specifications is not enough to state a violation of the FCA. Instead,

in the sections relevant here, the statute proscribes only false

"claims" -- that is, actual demands for money or property, see

31 U.S.C. ss 3729(a)(1), (a)(3); s 3729(c) -- and "false records or statements" used to induce such claims, see

s 3729(a)(2). The FCA, in other words, "attaches liability,

not to underlying fraudulent activity, but to the 'claim for

payment.' " United States ex rel. Hopper v. Anton, 91 F.3d

1261, 1266 (9th Cir. 1996) (quoting United States v. Rivera, 55

F.3d 703, 709 (1st Cir. 1995)). And, to date, Totten has

simply made no allegation that the Contractors actually made

false demands or submitted false records, whether to Amtrak

or to anyone else.

The second problem with the present complaint is that

Totten has provided no basis for concluding that, even if the

defendants did present claims to Amtrak, those would be

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"claims" within the meaning of s 3729(c). This provision

defines claim to include a request for payment made to:

a contractor, grantee, or other recipient if the United

States Government provides any portion of the money or

property which is requested or demanded, or if the

Government will reimburse such contractor, grantee, or

other recipient for any portion of the money or property

which is requested or demanded.

Thus, in order to satisfy Rule 12(b)(6), Totten would at least

have to plead that the federal government provided some

portion of the money requested by the Contractors, or that

the government reimbursed Amtrak for what it paid out to

improve the toilet systems on its trains. Though he has not

yet done so, it appears that Totten is aware of this requirement, and that he informed the District Court that he was

prepared to amend his complaint to allege that federal money

was implicated in the specific projects at issue. See Br. for

the United States of America as Amicus Curiae Supporting

Appellant 14.

A third difficulty with the complaint as it stands is that it

does not appear to satisfy Rule 9(b) of the Federal Rules of

Civil Procedure. This rule requires that "[i]n all averments

of fraud or mistake, the circumstances constituting fraud or

mistake shall be stated with particularity." Totten does not

argue that his complaint satisfies this standard, but instead

that the rule does not apply to him because he has not alleged

that defendants made "fraudulent" claims, but merely "false"

ones. He suggests that because false claims are actionable

under the FCA even without "proof of specific intent to

defraud," s 3729(b)(3), there is no "averment of fraud" within

the meaning of Rule 9(b). We disagree.

Every circuit to consider the issue has held that, because

the False Claims Act is self-evidently an anti-fraud statute,

complaints brought under it must comply with Rule 9(b). See

Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir. 2001);

United States ex rel. Thompson v. Columbia/HCA Healthcare

Corp., 125 F.3d 899, 903 (5th Cir. 1997); Gold v. MorrisonKnudsen Co., 68 F.3d 1475, 1476-77 (2d Cir. 1995). Totten

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cites no authority whatsoever for the hairsplitting distinction

he seeks to draw between fraudulent and false claims under

9(b). And we can see no reason to recognize such a distinction.

The difference between the two categories of claims is

simply the degree of scienter involved. See United States v.

TDC Mgmt. Corp., 24 F.3d 292, 297 (D.C. Cir. 1994) (distinction turns on "whether the defendant acted with an intent to

deceive"). But this difference is entirely insignificant in the

context of Rule 9(b)'s pleading requirements. Indeed, the

rule specifically allows allegations of "intent, knowledge, and

other condition of mind" to be averred generally. See Gold,

24 F.3d at 1477. In contrast, the "circumstances" that must

be pleaded with specificity are matters such as the "time,

place, and contents of the false representations," such representations being the element of fraud about which the rule is

chiefly concerned. See 5 Charles Alan Wright & Arthur R.

Miller, Federal Practice and Procedure s 1297 (2d ed.

1990) (emphasis added). Therefore, in order to satisfy Rule

9(b), Totten must set forth an adequate factual basis for his

allegations that the Contractors submitted false claims (or

false statements in order to get false claims paid), including a

more detailed description of the specific falsehoods that are

the basis for his suit. See Bly-Magee, 236 F.3d at 1018-19;

Columbia/HCA, 125 F.3d at 903.

2. Waiver of the Right to Amend

The Contractors argue that the flaws in the complaint are

fatal, because Totten waived his right to amend his complaint

by not seeking leave to do so pursuant to Rule 15(a). Instead, they point out, Totten merely indicated in his Opposition to defendants' motion to dismiss that he stood ready to

amend his complaint if the District Court identified any

pleading deficiencies. As authority for their position, the

Contractors cite Government of Guam v. American President

Lines, 28 F.3d 142, 149-51 (D.C. Cir. 1994), in which we held

that plaintiffs whose complaint had been dismissed (for lack

of subject matter jurisdiction) had waived their right to

amend by failing to make a Rule 15(a) motion, either before

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or after the District Court granted their opponent's dismissal

motion.

The present case, however, is quite different. In President

Lines, we denied plaintiffs an opportunity to amend only after

upholding the trial court's decision to dismiss the complaint.

In other words, that litigation was over unless we allowed the

plaintiffs to reopen it, and we found that their interest in

doing so did not outweigh the "general rules favoring the

finality of judgments and the expeditious resolution of litigation." Id. at 151. Totten's situation presents no such countervailing finality concerns, in light of our conclusion that the

District Court was wrong to dismiss the complaint on the only

ground it actually gave for doing so. The waiver rule relied

upon in President Lines is therefore not similarly applicable

where the court of appeals reverses the trial court's dismissal

order. See The Dartmouth Review v. Dartmouth College, 889

F.2d 13, 23 (1st Cir. 1989) (stating the general rule that

where "the pleader has stood upon his pleading and appealed

from a judgment of dismissal, amendment will not ordinarily

be permitted ... if the order of dismissal is affirmed")

(emphasis added) (quoting Rivera-Gomez v. de Castro, 843

F.2d 631, 635-36 (1st Cir. 1988) (allowing amendment, even

after affirming dismissal, where it is "in the interest of

justice")).

As for Totten's failure to seek leave to amend his complaint

after the Contractors' Motion to Dismiss was granted, a

factor on which President Lines relied in finding a waiver, see

28 F.3d at 151, the District Court made clear in the present

case that such a request would have been futile. See Bombardier, 139 F. Supp.2d at 52 n.1 ("In other circumstances

Totten would be permitted an opportunity to amend his

complaint, but, as the remainder of this Opinion demonstrates, such an opportunity is not warranted in this case.").

Given that the District Court expressly indicated that it

would have allowed Totten to amend had it not viewed the

Reform Act as posing an insurmountable obstacle to his

suit -- regardless of how that suit was packaged -- we see no

reason, having reversed the court's legal mistake, to forbid

what would have been permitted in the absence of that error.

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Therefore, we will remand the case with instructions that

Totten be granted leave to amend his complaint.

In so doing, however, we express no opinion on the question left open by this court's decision in Yesudian: whether

an FCA plaintiff may prevail against a defendant who submits a false "claim" to a federal grantee (such as Amtrak),

without presenting evidence that the claim was ever actually

submitted to the U.S. government. See 153 F.3d at 737-39.

Depending on how Totten crafts his amended complaint, this

issue of statutory interpretation may be avoided altogether.

We therefore leave it for another day.

III. CONCLUSION

For the reasons given above, the judgment of the District

Court is reversed and the case is remanded for further

proceedings consistent with this opinion.

It is so ordered.

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Randolph, Circuit Judge, concurring: I agree with all the

court has written in its thorough opinion, but I believe a bit

more is needed to highlight the problem we leave to the

district court - namely, "whether [a False Claims Act] plaintiff can prevail by proving only that a false claim was submitted to a federal grantee (such as Amtrak), as defined in [31

U.S.C. s 3729(c)], without further demonstrating that the

claim was submitted (or resubmitted) to the federal government, as suggested by the text of [31 U.S.C. s 3729(a)(1)]."

Maj. op. at 6. Dicta in United States ex rel. Yesudian v.

Howard Univ., 153 F.3d 731, 737-39 (D.C. Cir. 1998), intimates that presenting a claim to any federal grantee is the

equivalent to presenting a claim to the federal government.

If the reasons given in Yesudian are all that can be said for

this far-reaching conclusion, I would have much difficulty in

accepting it.

Those liable under the False Claims Act include any person

who "knowingly presents, or causes to be presented" - and

here is the key language - "to an officer or employee of the

United States government" a false claim. 31 U.S.C.

s 3729(a)(1). Without more, this language would not seem to

cover instances in which the false claim is presented to a

federal grantee, at least in instances when the grantee did not

turn over the claim for reimbursement by the federal government. That may describe the alleged situation here, although

we cannot be sure until the plaintiff amends his complaint. It

is true that s 3729(c) defines "claim" to include claims submitted to federal grantees.* But it is equally true that no

matter how "claim" is defined, subsection (a)(1) requires the

alleged false claimant to present it (or cause it to be presented) to a federal officer or employee.

Two points, neither of which Yesudian highlighted, seem to

me of critical importance in construing s 3729. The Attorney

__________

* A "claim" includes any "request or demand ... for money ...

made to a contractor, grantee, or other recipient if the United

States Government provides any portion of the money or property which is requested or demanded, or if the Government will

reimburse such contractor, grantee, or other recipient for any

portion of the money or property which is requested or demanded." 31 U.S.C. s 3729(c).

General is authorized to sue under the statute in the first

instance, or to take over suits brought by private parties on

behalf of the federal government (qui tam actions), or to

allow the private party to prosecute the action on its own.

See Vermont Agency of Natural Resources v. United States

ex rel. Stevens, 529 U.S. 765, 769 (2000). If a judgment is

rendered against the defendant - and this is the first point -

the award of damages is paid to the federal treasury (less a

percentage if a private party initiated the action). The

second point is that the Act authorizes treble damages plus a

civil penalty. If the Act allows suits on claims presented to

federal grantees but not presented for payment to the federal

government, these two features of the Act lead to a glaring

incongruity. To illustrate, suppose the plaintiff in this case

prevailed. The recovery would go to the plaintiff and the

federal government. Amtrak would recover nothing. Yet

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the theory of plaintiff's case, as far as we can make out at the

moment, is that Amtrak suffered the loss. Presumably,

Amtrak would therefore be able to sue the defendants on its

own and if its suit were as meritorious as the relator's, it too

would recover damages. The effect would be a quadruple

damage award - Amtrak's recovery plus the treble damages

awarded under the False Claims Act.

This is the consequence of the construction suggested in

Yesudian and, at the moment, it seems to me at odds with the

structure of the Act. On the other hand, requiring that the

United States have suffered losses by paying false claims

presented to it by the federal grantee avoids this interpretative difficulty, remains faithful to the language of s 3729(a)(1)

& (c) and is entirely consistent with the provision in the Act

measuring damages not in terms of a grantee's losses, but by

"the amount of damages which the Government sustains...."

31 U.S.C. s 3729(a). I hesitate to reach a firm conclusion,

however, because we have not had sufficient briefing and

argument on the issue and because it may turn out not to be

an issue in the case when it is reformulated in the district

court.

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