2002 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-29-2002

Dunleavy v. County of Delaware

Precedential or Non-Precedential:

Docket 0-3691

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2002

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 2002 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Recommended Citation

"Dunleavy v. County of Delaware" (2002). 2002 Decisions. Paper 49.

http://digitalcommons.law.villanova.edu/thirdcircuit_2002/49
Filed January 29, 2002 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 00-3691 

UNITED STATES OF AMERICA EX REL. 

ANTHONY J. DUNLEAVY 

v. 

COUNTY OF DELAWARE, MARIANNE GRACE, 

EXECUTIVE DIRECTOR; THE COUNCIL OF THE COUNTY 

OF DELAWARE, WALLACE H. NUNN, CHAIRMAN; 

MATTHEW J. HAYES JR. AS ADMINISTRATOR OF THE 

ESTATE OF MATTHEW J. HAYES 

 Anthony J. Dunleavy, 

 Appellant 

Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

(D.C. Civ. No. 94-cv-07000) 

District Judge: Honorable Thomas N. O'Neill, Jr. 

Argued December 7, 2001 

Before: MANSMANN, ROTH and FUENTES, Circuit Ju dges. 

(Filed: January 29, 2002) 

 Regina D. Poserina, Esquire 

 (ARGUED) 

 7415 West Chester Pike 

 Upper Darby, PA 19082 

 COUNSEL FOR APPELLANT 
 Francis X. Crowley, Esquire 

 (ARGUED) 

 Elisa Cohen Lacianca, Esquire 

 Blank, Rome, Comisky & McCauley 

 1400 North Providence Road 

 Suite 301 

 Media, PA 19063 

 COUNSEL FOR APPELLEES 

 Stuart E. Schiffer 

 Acting Assistant Attorney General 

 Michael L. Levy 

 United States Attorney 

 Douglas N. Letter, Esquire 

 (ARGUED) 

 United States Department of Justice 

 Civil Division, Appellate Staff 

 Room 9106 

 601 D Street, N.W. 

 Washington, D.C. 20530 

 COUNSEL FOR AMICUS- 

 APPELLANT UNITED STATES OF 

 AMERICA 

 Brian Stuart Koukoutchos, Esquire 

 28 Eagle Trace 

 Mandeville, LA 70471 

 James Moorman, Esquire 

 Amy Wilken, Esquire 

 Taxpayers Against Fraud, 

 The False Claims Act Legal Center 

 1220 19th St., NW, Suite 501 

 Washington, D.C. 20036 

 COUNSEL FOR AMICUS CURIAE 

 TAXPAYERS AGAINST FRAUD, 

 THE FALSE CLAIMS ACT LEGAL 

 CENTER 

 2 
OPINION OF THE COURT 

MANSMANN, Circuit Judge. 

The appellant, Anthony J. Dunleavy, was a consultant to 

appellee, Delaware County. In this capacity, Dunleavy 

advised the County as to the various federal regulatory 

requirements concerning certain Housing and Urban 

Development funding grants. Dunleavy sued the County 

contending that it committed several violations of the False 

Claims Act, 31 U.S.C. S 3729, et seq. The District Court 

dismissed Dunleavy's Second Amended Complaint, holding 

that the County was not amenable to suit under the FCA 

due to its mandatory punitive damages scheme. We agree. 

Therefore, we will affirm the Order of the District Court. 

I. 

This appeal requires us to determine whether a local 

governmental subdivision can be subject to suit under the 

False Claims Act when the Act mandates treble damages. 

We must first determine whether the treble damages 

mandated by the Act are punitive. If so, we must then 

decide whether Congress clearly manifested its intention 

under the FCA to abrogate local governmental common law 

immunity from punitive damage awards. If it did not, we 

must further determine whether a local governmental

subdivision may nevertheless be amenable to suit under 

the Act albeit subject to some lesser quantum of damages. 

Finally, we note in passing that we agree with the District 

Court that an employee of a local governmental unit is not 

subject to suit under the Act when the employee does not 

personally benefit from the transaction constituting a 

violation of the Act; therefore, we conclude that no extended 

discussion is necessary with respect to this issue.

II. 

In 1976, Delaware County purchased the Penza tract in 

a condemnation action using HUD funds. The intended use 

of the Penza tract was to expand a pre-existing park. In 

 3 
1979, however, the County entered into an agreement with 

the Pennsylvania Department of Transportation (Penn DOT) 

whereby Penn DOT purchased 26.3 acres of the Penza 

tract. Penn DOT made additional purchases from the tract 

through the years until its final purchase from the County 

in 1988. Penn DOT intended to use the land for highway 

construction. After consulting with Dunleavy, the County 

decided that it would put the proceeds from the sales of 

Penza tract land into an interest-bearing account under the 

assumption that if Penn DOT was unable to use its newly 

acquired lands for highway construction the County would 

repurchase the land. On the other hand, if Penn DOT

completed its highway construction, the County would 

return the proceeds from the land sales, plus interest to 

HUD. After numerous delays, Penn DOT completed its 

highway construction project in 1991. 

During the interim, the County occasionally used funds 

from the Penza tract account for general County purposes. 

Dunleavy contends that this was improper, because, in his 

view, the funds in the account were HUD program funds 

subject to various reporting requirements with which the 

County failed to comply. Further, Dunleavy contends that 

once the County knew that it would not be repurchasing 

the tract, the County knowingly failed to return the 

principal and interest earned on the account to HUD. 

Dunleavy's final contention is that the County fraudulently 

received additional monies from HUD in fiscal years`92, 

`93, `94, and `95 because the County took these monies 

knowing that it committed the previously alleged violations 

of HUD regulations with respect to Penza Tract funds. 

Dunleavy filed this action in 1994 seeking treble damages 

as required by the False Claims Act. In 1995, the 

Government declined to intervene, concluding that no fraud 

had been committed. HUD, however, after a Limited Review 

Audit, demanded that the County pay it 1.7 million dollars 

plus interest. In 1996, HUD and the County settled the 

dispute between them without including Dunleavy in the 

settlement process.1 

_________________________________________________________________ 

1. The False Claims Act permits the Government to settle with the 

Defendant notwithstanding the objections of the person initiating the 

 4 
The District Court dismissed Dunleavy's Second 

Amended Complaint for lack of subject matter jurisdiction, 

a Judgment that we reversed and remanded to the District 

Court. The County then filed motions to dismiss for failure 

to state a claim and failure to plead with particularity, 

which were denied by the District Court. On May 23, 2000, 

the District Court, on its own motion, directed the parties 

to brief the question of whether this action should proceed 

in light of the United States Supreme Court's decision in 

Vermont Agency of Natural Resources v. United States ex rel. 

Stevens, 529 U.S. 765 (2000). The District Court concluded 

that Dunleavy's claim could not proceed in light of Stevens. 

See United States ex rel. Dunleavy v. County of Delaware, 

2000 WL 1522854 (E.D.P.A. 2000). This timely appeal 

followed.2 

We begin our analysis with a brief discussion of the legal 

framework controlling the resolution of this appeal. 

III. 

Unless Congress clearly provides otherwise, a local

governmental entity is immune from punitive damages

awards. See City of Newport v. Fact Concerts, Inc., 453 U.S. 

247 (1981) (holding that a municipality was immune from 

punitive damages awards under 42 U.S.C. S 1983 because 

at common law a municipality was absolutely immune from 

punitive damages and in enacting section 1983 Congress 

_________________________________________________________________ 

action if the court determines, after a hearing, that the proposed 

settlement is fair, adequate, and reasonable under all the circumstances. 

See 31 U.S.C. S 3730(c)(2)(B) (1994). Therefore, in this case, Dunleavy as 

relator is prosecuting a qui tam civil action in the name of the Federal 

Government after the Government has determined that, in its view, no 

fraud has been committed. Accordingly, we do not consider the question 

of whether the United States may maintain a suit against a local 

government under the FCA. 

2. The District Court had jurisdiction under 28 U.S.C. S 1331, and the 

appeal was taken in accordance with Rule 4(a), Fed. R. App. P. We have 

jurisdiction under 28 U.S.C. S 1291. The questions of law before us are 

subject to our plenary review. Bowen v. Monus , 172 F.3d 270, 273 (3d 

Cir. 1999). 

 5 
did not clearly manifest an intention to abrogate this 

common law immunity). Similarly, in Genty v. Resolution 

Trust Corp., 937 F.2d 899 (3d Cir. 1991), we held that 

municipalities were immune from civil punitive damage 

awards under the Racketeer Influenced and Corrupt 

Organizations Act, 18 U.S.C. SS 1961-1968. In reaching our 

holding in Genty, we cited Fact Concerts and commented 

that in order to subject municipalities to punitive damage 

awards, a statute must expressly provide for such an award 

against a municipality. See Genty, 937 F.2d at 910.

Furthermore, we noted that the rationale for exempting a 

municipal entity from punitive damages awards is firmly 

grounded in public policy because "assessing punitive 

damages against a public entity serves neither the 

retributive nor the deterrent purposes of . . . civil 

punishment and contravenes public policy by punishing 

the taxpayers and citizens who constitute the very persons 

who `are to benefit from the public example which the 

granting of such damages is supposed to make of the

wrongdoer.' " Id. at 910 (citation omitted). Simply stated, we 

concluded that a local government is presumptively 

immune from the imposition of punitive damages unless 

the statutory scheme which creates liability clearly 

indicates that Congress intended to abrogate the wellsettled notion of local governmental common law immunity 

from punitive damages. See also Doe v. County of Centre, 

242 F.3d 437, 456 (3d Cir. 2001) (holding that overcoming 

common law immunity requires a clear expression of 

congressional intent). 

We now turn to the threshold question on this appeal: 

whether the damages imposed by the Act are punitive. If 

the damages are properly characterized as punitive, we 

must next determine whether Congress expressly intended 

to abrogate local governmental immunity under the FCA. 

For the reasons that follow, we believe that the mandatory 

treble damages imposed by the Act are punitive and that 

Congress did not expressly abrogate local governmental 

immunity under the FCA. 

A. 

When first enacted in 1863, the FCA provided for suits to 

be brought in the name of the Government by private

 6 
individuals in a qui tam (in the name of the King) action. 

The Act imposes liability on any person who knowingly 

presents a false claim to the Federal Government for 

payment. 31 U.S.C. S 3729(a) (1994). The current version of 

the Act imposes a civil penalty between five and ten 

thousand dollars per false claim plus three times the 

amount of damages which the Government sustains. 31

U.S.C. S 3729(a) (1994). Recently, in Vermont Agency of 

Natural Resources v. United States ex rel. Stevens , 529 U.S. 

765 (2000), the United States Supreme Court examined the 

issue of whether a State or State agency is a "person" for 

purposes of the Act. In reaching its conclusion that a State 

is not within the meaning of "person" as used in the Act 

and therefore not amenable to suit under the Act by a qui 

tam realtor, the Court held that the Act imposes treble 

damages that are "punitive in nature." Id. at 784. Thus, the 

Court has answered the first prong of our inquiry: the 

FCA's treble damages provision is punitive. Accord United 

States ex rel. Garibaldi v. Orleans Parish Sch. Bd. , 244 F.3d 

486, 491 n.5 (5th Cir. 2001) ("The treble damages imposed 

by the False Claims Act are punitive damages.") (citing 

Stevens, 529 U.S. at 784). 

Nonetheless, Dunleavy contends that the Supreme 

Court's characterization of the Act's damages provision is 

obiter dictum. We do not agree. The Stevens majority stated 

that "[s]everal features of the current statutory scheme 

further support the conclusion that States are not subject 

to qui tam liability," and that one of those features is that 

"the current version of the FCA imposes damages that are 

essentially punitive in nature." Stevens, at 783, 784. 

Clearly, the Court relied on the Act's treble damages 

scheme in reaching its holding and thus its declaration that 

the damages scheme is punitive is not dictum. We therefore 

agree with the Garibaldi court and conclude that the treble 

damages mandated by the FCA are punitive. See also 

Genty, 937 F.2d at 914 (holding that the mandatory treble 

damages scheme of civil RICO statute is punitive in

character). 

B. 

We turn to the second prong of our inquiry: Did Congress 

express a clear indication to abrogate local governmental 

 7 
immunity under the FCA? We note here that the parties' 

arguments focus on whether the term "person" as used in 

the Act encompasses local governments. This argument is 

simply the other side of the coin with respect to the 

question before us, namely whether Congress clearly

abrogated local governmental immunity under the FCA. If 

Congress clearly expressed its intention to encompass local 

governments within the ambit of FCA liability as a"person," 

then it must also have intended to abrogate the common 

law immunity of local governments against punitive 

damages under the FCA. In our view, consistent with our 

reasoning in Genty, the question is whether Congress 

intended to disturb local governmental immunity from 

punitive damages by subjecting local governments to FCA 

suits. See Genty, 937 F.2d at 914 (noting that the RICO 

statute expresses no specific intention that municipalities 

be liable for treble damages); see also Will v. Michigan Dep't 

of State Police, 491 U.S. 58, 67 (1989) (holding that 

Congress did not intend to override well-established 

common law immunities in passing civil rights act).

Dunleavy's assertions that Congress intended to subject 

municipalities to the FCA's coverage are unpersuasive in 

light of the fact that the statute offers no clear indication 

that Congress intended to abrogate local governmental 

immunity from punitive damages. Indeed, the relevant 

portion of the Act does not even define the term"person." 

In Genty, we observed that the civil RICO Act defined the 

word "person" as "any individual or entity capable of 

holding a legal or beneficial interest in property." Genty, 

937 F.2d at 907 (quoting 18 U.S.C. S 1961(3)). Clearly, this 

definition of the term "person" is a broad one. Yet we 

nevertheless found that despite this broad definition of the 

term "person", Congress did not clearly abrogate local 

governmental immunity from punitive damages in the 

context of civil RICO. Moreover, we observed that had 

Congress intended to subject local governments to punitive 

damages under RICO, it could have easily so stated, as it 

has done in other statutes imposing civil liability on local 

governments. See Genty, 937 F.2d at 914 (citing 15 U.S.C. 

S 77b(2)) (noting that Congress specifically provided for 

subjecting local governments to civil damage awards under 

the securities laws). Other statutes specifically define the 

 8 
term "person" to include local governments or 

municipalities, such as the Clean Water Act, 33 U.S.C. 

S 1362(5); the Resource Conservation and Recovery Act, 42 

U.S.C. S 6903(15); the Wild Bird Conservation Act of 1992, 

16 U.S.C. S 4903(4); and the Oil Pollution Act of 1990, 33 

U.S.C. S 2701(27). Our Genty analysis is equally applicable 

here. We find nothing on the face of the relevant portions 

of the FCA as originally enacted in 1863 or in its current 

form which evidences a clear indication on the part of 

Congress to subject local governments to punitive damages 

under the Act. The Act is utterly devoid of any specific 

intention to subject local governments to its strictures. This 

lack of clarity in the text of the Act is insufficient indicia of 

congressional intent to abrogate local governmental

immunity from punitive damages under the FCA. 

Dunleavy and amicus Taxpayers Against Fraud (False 

Claims Act Legal Center) argue that the original drafters' 

intent is immaterial to a determination of Congress' intent 

to subject local governmental subdivisions to liability under 

the FCA. He contends the intent of the Congress that 

enacted the treble damages scheme should control whether 

or not Congress intended to subject local governments to 

the FCA. His argument is premised on the notion that if in 

1863, Congress intended to encompass local governments 

within the meaning of the term "person" under the FCA, the 

subsequent amendment in 1986 to provide treble damages 

under the FCA is evidence of Congress' intent to subject 

local governments to punitive damages. 

Even if we were persuaded that the intent of the 1986 

Congress amending the Act controlled the resolution of this 

matter, Dunleavy's argument must fail. The 1986 

amendments added nothing to the meaning of the term

"person" that remotely approaches a clear expression of 

Congress' intent to abrogate local governmental immunity. 

See Stevens, 529 U.S. at 783 n.12 (observing that the term 

"person" in the FCA has not been altered since the FCA's 

initial passage in 1863). Moreover, in Genty, we found that 

Congress' imposition of treble damages in the RICO statute 

evinced its intent to exclude local governments from the 

civil RICO statute's coverage. See Genty, 937 F.2d at 914 

(Courts will not interpret statutes to overturn well- 

 9 
established common law principles unless Congress so 

authorizes"); County of Centre, 242 F.3d at 456 (3d Cir. 

2001) (noting that Newport instructs us to assume that 

Congress intended to retain common law immunity absent 

a clear expression of congressional intent to the contrary). 

As a result, we cannot say that the imposition of the 

current treble damages scheme in and of itself evidences 

Congress' clear intent to abrogate common law immunity 

and subject local governments to punitive damages awards. 

We conclude that Congress' imposition of treble damages is 

powerful evidence that Congress did not intend to subject 

local governments to punitive damages under the FCA. 

Accord Garibaldi, 244 F.3d at 493 (stating that the punitive 

damages regime of the FCA reflects Congress' intent to 

exclude local governments from liability under the FCA). 

Second, Dunleavy points to the legislative history of the 

1986 amendments to support his theory that Congress

intended to subject local governments to suit under the 

FCA by qui tam relators. We reiterate that even if we 

believed that the intent of the 1986 Congress controlled our 

determination, a question we do not decide here, 

Dunleavy's argument cannot pass muster in light of the 

Stevens Court's express rejection of the pertinent 1986 

legislative history as erroneous and of questionable value. 

See Stevens, 529 U.S. at 783 n.12 (noting that the 

legislative history contained the Senate's erroneous 

understanding of the meaning of the term "person" as used 

in the Act). At best, after considering the text of the statute 

and its legislative history, we find only ambiguity as to 

whether Congress intended to disturb the well-settled 

doctrine of local governmental immunity from punitive 

damages under the FCA. Ambiguity, however, is not enough 

for Dunleavy to carry the day. There is simply nothing in 

the FCA's text remotely manifesting a clear expression of 

Congress' intent to abrogate local governmental immunity 

against punitive damages under the Act. As a result, we 

hold that Congress did not intend to disturb local 

governmental immunity from punitive damages under the 

FCA by clearly including local governments within the 

meaning of the term "person." It necessarily follows that the 

County is immune from claims under the FCA by a qui tam 

relator due to the mandatory nature of the treble damages 

 10 
provision. See Genty, 937 F.2d at 911-12 (treble damages 

awards under RICO are mandatory and therefore 

municipalities may not be liable under RICO if those 

damages are punitive). 

C. 

Dunleavy and the United States, as amicus, invite us to 

subject the County to "some liability", however, by reading 

into the statute an exception to the mandatory treble 

damages scheme. In essence, Dunleavy and the United

States argue that we should reduce any treble damages 

award against a local government to a level that would be 

deemed compensatory rather than punitive. We decline to 

create such an exception under the FCA, just as we 

declined in Genty with the RICO statute. Genty, 937 F.2d at 

914. The FCA provides for mandatory treble damages 

subject to a narrow exception that is not applicable to the 

case sub judice. See 31 U.S.C. S 3729(a) (providing a 

reduction from treble damages to double damages when a 

defendant supplies information concerning the violation 

prior to their knowledge of governmental investigation). As 

a result, creating an exception for local governments from 

the existing damages scheme would require us to rewrite 

the FCA. Of course, while Congress is free to do this if it 

chooses, such redrafting is outside the traditional province 

of the courts. Accord Garibaldi, 244 F.3d at 493. Therefore, 

we will not disturb the existing statutory damages 

provisions by reading into the Act an exception from treble 

damages for local governments. The result, in the end, is 

that a local government such as Delaware County cannot 

be subject to liability under the FCA in a qui tam action. 

IV. 

We conclude that the mandatory treble damages scheme 

imposed by the FCA is punitive and that local governments 

are exempt from FCA damages because Congress did not 

clearly express its intention under the Act to abrogate local 

governmental common law immunity against punitive 

damages. As a result, since the FCA does not, as written, 

permit a court to reduce treble damages awards, we 

 11 
conclude that a local government cannot be subject to suit 

by a qui tam relator under the Act. For all these reasons, 

we will affirm the Order of the District Court dismissing 

Dunleavy's Second Amended Complaint. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 12