United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 96-3456

___________ United States of America, * * Appellant, * * v. * Appeals from the United States * District Court for the District Q International Courier, Inc., sued as * of Minnesota. Quick International Courier, Inc.; * Robert Mitzman; Dominique Brown; * Vincent Farella; Precision Mailers, * Inc; and Gregg Smith, * * Appellees.

___________ No. 96-3590

___________ Q International Courier, Inc., * * Counter-Appellant, * * v. * * United States Postal Service, * * Counter-Appellee.-2- ___________ Submitted: October 22, 1997 Filed: December 22, 1997

___________ Before FAGG, WOLLMAN, and MORRIS SHEPPARD ARNOLD, Circuit Judges.

___________ MORRIS SHEPPARD ARNOLD, Circuit Judge. Q I nternational Courier ("Quick") is a mail courier firm that arranges for th e delivery of large numbers of letters. Robert Mitzman, Dominique Brown, and Vincent Farella were officers or employees of Quick at the time of the disputed activities

. According to the government's complaint, Precision Mailers was a corporation engaged in the bus iness of coordinating and brokering mail promotions. The district court n o ted, however, that Precision Mailers is no longer involved directly in this litigation becaus e it is both insolvent and inactive. Gregg Smith was an officer or employee of Precision Mailers at t

he time of the disputed activities; although he remains a nominal party to this case, the United States has apparently settled its dispute with him.
At issue in this case is a practice known as "ABA remail." To take advantage of differenc es between domestic and certain international postage rates, Quick would transferbulk mail from the United States (A) to Barbados (B) for the purpose o f remailing th e letters individually back into the United States (A). At the time of th e incidents in question here, th e United States Postal Service rate for domestic mail was 2 9 ¢ per ounce, but the record suggests that the Postal Service charged the Barbadian postal service as little as one-tenth of that amount for the same first-class delivery of mail throughout the United States. According ly, the Barbadian postal service charged a sum significantly less than 29¢ per ounce to deliver mail from Barbados to the United-3-

States. By taking the let

ters to Barbados and mailing them back into the United States, Quick therefore achieved significant postage cost savings for its customers.
The United States, on behalf of the Postal Service, sued Quick and the othe r defenda nts on the grounds that the courier had violated the reverse claims provision of the Fa lse Claims Act, see 31 U.S.C. § 3729(a)(7). The government asserted that th e defendants owed an obligation to the United States for the full domestic postage for each letter and that they at

tempted to reduce this obligation through fraudulent statements or records. For its part, Quick counterclaimed against the Postal Service, alleging unfair competition in violation of the Lanham Act, see 15 U.S.C. § 1125(a), on t he grounds that the P ostal Service had provided false or misleading information to a trade publicatio n regardin g this dispute. The district court held on summary judgment that the Unite d State s had not established that Quick had an obligation to pay postage within th e meaning of the False Claims Act. We agree. The district court also held on summary judgment that the doctrine of sovereign immunity barred a s uit against the Postal Service based on t he Lanham Act. We disagree, vacate that ruling by the district court, an d remand for further proceedings consistent with this opinion.
I. The principal action in this case was brought by the United States to recov er under the so-called reverse false claims provision of the False Claims Act, see 31 U.S.C

. § 3729(a)(7). That provision gives the United States a means to recover from someone who m akes a material misrepresentation to avoid paying some obligation owed to th e government. See S. Rep. No. 99-345, at 15, 18 (198 6), reprinted in 1986 U.S.C.C.A.N. 5266, 5280, 5283. The statute provide s for a civil penalty and treble damages for using a false statement "to conceal, avo id, or decrease an obligation to pay or transmit money or property to the Government." See 31 U.S.C. § 3729(a)(7).
The district court found that the United St ates failed to demonstrate that Quick or the other defendants owed any obligation to the government, and accordingly entered-4-

summary jud gment for Quick on the claim against it. We agree. Whether the AB A remaili ng practice engaged in by Quick constitutes a violation of some other law is a qu estionfor another day, but we believe that in this case the United States has no t demonstrated that any of the d efendants owed an "obligation" to the government within the meaning of the False Claims Act.
To recover under the False Claims Act, we believe that the United States mus t demonstrate that it was owed a specific, legal obligation at the time that the alleged false record or statement was made, used, or caused to be made or used. The obligatio n cannot be merely a potential liability: instead, in order to be subject to the penalties of the Fals e Claims Act, a defendant must have had a present duty to pay money o r property that was created by a statute, regulation, contract, judgment, o r acknowledgment of indebtedness. The duty, in other words, must have been a n obligationin the nature of those that gave rise to actions of debt at common law fo r money or t

hings owed. This interpretation of the term "obligation" is supported by the legislativ e history of the reverse false claims provision, which refers twice to "mone y owed," S. Rep . No. 99-345, at 15, 18, reprinted in 1986 U.S.C.C.A.N. , at 5280, 5283, as the kind of duty that the reverse claims provision is designed to address. Th e deliber ate use of the certain, indicative, past tense suggests that Congress intended the reverse false claims provision to apply only to existing legal duties to pay or delive r property. Had Congress wished to cover attempts to avoid potential fines or sanctions it would have used language appropriate to that end. Cf. Un ited States ex rel. S. Prawer & Co. v. Verrill & Dana , 946 F. Supp. 87, 93-95 (D. Me. 1996).
To prevail in its false claims action against these defendants, then, the Unite d States must demonstrate that there was an existing, specific legal duty in the nature of a debt that Quick or the other defendants owed the United States at the time of thei r ABA remai ling activities. The government does not allege any contract with th e defendants, nor does it cl aim to be the beneficiary of any judgment or acknowledgment of indebtedness. Instead, it relies upon various statutes and regulations to establish that-5-

the defendants owed a duty to pay full domestic postage as to each piece of mail sen t through Barbados. We are satisfied as a legal matter that such a duty would qualify as an "o bligation" under the False Claims Act. As we shall demonstrate, however, th e statutes and regulations that the United States cites might well support a judgment that one or mor e of the defendants engaged in illegal and fraudulent activity, but thos e statu tes and regulations do not create a legal duty for the defendants to pay domesti c postage.
The U nited States first points to the Postal Service's International Mail Manua l §§ 790-793 (June 9, 1997) ("IMM") as the source of the obligation to pay domesti c postage to the Postal Service for each piece of mail sent through Barbados. The most rele vant of these sections informs the reader that payment of domestic postage "i s required to secure delivery of mail" sent by or on behalf of a resident of the Unite d States, if the foreign postage applied to the mail is lower than the comparable Unite d States d omestic postage rate. See IMM § 791. By its terms, however, this provisio n states only tha

t the Postal Service is not obligated to deliver mail sent by United States residen ts from certain foreign locations. Its plain language serves only to release th e Postal Service from an obligation, not to impose an obligati on on anyone to pay postage.

In deed, to read IMM § 791 as creating an obligation to pay postage would b e inconsistent with the authority pursuant to which it was promulgated. The United States argues that IMM §§ 790-793 are authorized by the Universal Postal Convention, art. 23; butt hat article simply provides that a signatory "shall not be bound to forward o r deliver" mail sent by or on behalf of a resident of the signatory country from anothe r coun try if the foreign postage rate is lower than the signatory country's domestic rate

. See Univers al Postal Convention, art. 23, ¶ 1 (1984), reprinted in 2 Acts of th e Universal Postal Union37 (1985). The aim of the article is to relea se the Postal Service from an obligation to deliver mail, not to establish an obligation for others to pay ful l domestic postage.-6-

The Unite d States turns next to the Private Express Statutes, see 39 U.S.C

. §§ 60 1-606, in an effort to locate a legal duty on Quick's part to pay postage. Thes e provisions, and their enabling regulations, see 39 C.F.R. § 310.1 through § 3 10.7, protect the Post al Service's monopoly by forbidding the private carriage of letters. B y transporting letters to Barbados by a means other than the Postal Service, Quick perhaps violated the Priva

te Express Statutes. Nonetheless, this violation is relevant to liability under the False Claims Act only if the Private Express Statutes impose a legal duty on Qu ick to pay postage, and we believe that they do not. The Private Express Statute s themselves merely prohibit the carriage of letters outside the mails and the carriage of letters by a vessel departing the United States if those letters are not either deposited by the Postal Service or pertaining to the cargo of the vessel. See 39 U.S.C. §§ 601-602.
It is true that the regulations implementing the Private Express Statutes provide that the Posta l Service may seek payment of a penalty in "an amount or amounts no t exceeding the total postage" from someone who violates the Private Express Statutes. See 39 C.F.R. § 310.5(a). But this regulation does not oblige the violator to pay th e postage that mig ht have been collected by the Postal Service; it merely sets the limit of apotential penalty against the violator at the amount of postage that might have bee n collected. A potential penalty, on its own, doe s not create a common-law debt. A debt, andthus an obligation under the meaning of the False Claims Act, must be for a fixed sum that is immediately due. This regulation merely provides a range of penalties that might be assessed; it does not create an immediate duty to pay a specific sum.
The crimi nal penalties for violating the Private Express Statutes also do no t impose a duty to pay postage. Anyone who carries letters outside the mails may b e fined, but the fine is not necessarily related to the amount of postage avoided or evaded. See 18 U.S.C. §§ 1694-1697 . Anyone who establishes a private express for conveying letters over postal routes can be fined and imprisoned. See 18 U.S.C. § 1696(a). But, again, the fine is unrelated to the postage due. During the period in-7-

question here, 18 U.S.C. § 1696(a) authorized a fine of not more than $500 and up to six
mon ths in jail for establishing a private express. In any case, the statutes are designed to punish one who violates the Private Express Statutes, not to create an obligation t o pay postage.
Nor can an obligation to pay postage be located in the regulatory suspension of the Private Express Statutes. The Postal Service may suspend the Private Expres s Statutes where required by the public interest, see 3 9 U.S.C. § 601(b), and it has chosen to do so fo r mail collected in the United States, transferred to another country, an d mailed from that second country to a location outside the United States ("ABC remail"). See 39 C.F.R. § 320.8(a). This suspension, by its own terms, does not apply to AB A remail. Se e 39 C.F.R. § 320.8(b). It does not make ABA remail illegal, nor does i t impose any new prohibition or duty relating to ABA remail b eyond that already imposed by the Private Express Statutes. The Postal Service argues, finally, that Quick owes postage because ABA remail is actuall y domestic mail rather than international mail. Even if ABA remail wer e considered d omestic, a question that we need not reach, the government has failed t o es tablisha duty for Quick to pay postage in the circumstances presented in this case

. The United States does not point us to any source imposing a duty on Quick's part to pay postage on any mail other than those already rejected above. In order to recover under the reverse claims provision of the Fa lse Claims Act, the Un itedStates must demonstrate that Quick had some duty to the government to pay money or pr operty that it sought to evade by using false statements or records. Th e government has failed to establish that such a duty existed here. We therefore affirm the district court's grant of summary judgment to the defendants with respect to the Fals e Claims Act.-8- II. As a counterclaim to the Postal Service's suit against Quick under the Fals e Claims Act, Quick, as we have said, su ed the Postal Service alleging unfair competition in violation of the Lanham Act, see 15 U.S .C. § 1125(a). The Postal Service moved for summary judgmen

t on the grounds that it was protected from suit under the doctrine of sovereign immunity, and the district court granted the motion.
Pr ior to the Postal Reorganization Act, the Postal Service operated as a department of the United States government, and was thus protected from suit under the doctrine of sovereign immunity except as otherwise provided bylaw. In 1971, however, the Postal Service was transformed from a department of the United States into a n "indep endent

establishment of the executive branch." See 39 U.S.C. § 201. Mor e important for present purposes, Congress at that time authorized the Postal Service t o "sue and be sued in its official name. " See 39 U.S.C. § 401(1). That language operates to waive the government's traditional sovereign immunity to suit. Loeffler v. Frank , 486 U.S. 549, 556 (1988). This waiver "must be liberally construed and ... the Postal Service's liability must be presumed to be the same as that of any other business." Id.
The Postal Reorganization Act also provided, however, that the provisions o f 28 U.S.C. re lating to tort claims (which include the Federal Tort Claims Act) "shal l apply to tort claims arising out of activities of the Postal Service." See 39 U.S.C

. § 409(c). The Postal Service argues that this section contracts the general waiver o f immunity provided by § 401(1) and that it can be sued in tort only pursuant to th e Federal Tort Claims Act. Since, the argument runs, the Federal Tort Claims Act deals solely with actions against the government brought under state law, the Postal Service contends that it is immune to suit under the Lanham Act.
We disagre e. A more logical reading of 39 U.S.C. § 409(c) is that the Federa l Tort Claim s Act provides the only remedy against the Postal Service for torts to which-9-

the Federal

Tort Claims Act by its terms applies in the first place. Nothing in § 409(c) suggests that it intended to forbid recovery agai nst the Postal Service for tort claims that are beyond the reach of the Federal Tort Claims Act. It would be strange if Congress had resolved to give with one hand and then take aw ay with the other. Our construction of the statute gives effect to both § 401(1) and § 409(c) in a way that we think makes more internal sense than the Postal Service's proposed reading. Cf. FDIC v. Meyer , 510 U.S. 471, 480-83 (1994). Finally, the Postal Service argues that, as an entity of the federal government, it is immune from a Lanham Act claim under our holding in Preferred Risk Mutua l Insurance Co . v. United States , 86 F.3d 789 (8th Cir. 1996), cert. denied , 117 S. Ct

. 1245 (1997). We held there that the Lanham Act does not, on its own or in conjunction with the Administrative Procedure Act, provide an express waiver of the federa l governm ent's traditional sovereign immunity. Id. at 795. Unlike the federal entity at issue in Preferred Risk , however, the Postal Service is outfitted with a sue-and-be-sued clause waiving its traditional sovereign immunity. Quick does not - - and could not under Preferred Risk

-- rely upon the Lanham Act to waive the Postal Service's sovereig n immunity. As we have discussed above, h owever, that immunity is properly waived for these purposes under 39 U.S.C. § 401(1). We therefore vacate the district court's grant of summary judgment to the Postal Service with respect to the Lanham Act co unterclaim.

III. For the forego ing reasons we affirm the trial court's summary judgment as to the False Claims Act, vacate its summary judgment as to the Lanham Act counterclaim, and remand for further proceedings consistent with this opinion.-10-

A true copy.
Attest: CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.