Source: https://m.openjurist.org/423/us/303
Timestamp: 2020-07-09 06:15:58
Document Index: 490722118

Matched Legal Cases: ['§ 42', '§ 435', '§ 3490', '§ 231', '§ 341', '§ 3490', '§ 287']

423 U.S. 303 - United States v. L Bornstein
423 U.S. 303
Philip L. BORNSTEIN et al.
To equate the number of forfeitures with the number of contracts would in a case such as this result almost always in but a single forfeiture, no matter how many fraudulent acts the subcontractor might have committed. This result would not only be at odds with the statutory language; it would also defeat the statutory purpose.6 Such a limitation would, in the language of the Government's brief, convert "the Act's forfeiture provision into little more than a $2,000 license for subcontractor fraud."
At the other extreme, the Government urges that 35 forfeitures should be assessed, in accord with the position of the District Court, which ruled that "(United's fraudulent) acts caused Model to submit thirty-five false claims, each of which constituted a separate violation justifying a separate forfeiture." 361 F.Supp., at 879. The difficulty with this position is that it fails to distinguish between the acts committed by Model and the acts committed by United.7 The distinction is a critical one, because the statute imposes liability only for the commission of acts which cause false claims to be presented.
A correct application of the statutory language requires, rather, that the focus in each case be upon the specific conduct of the person from whom the Government seeks to collect the statutory forfeitures. In the present case United committed three acts which caused Model to subit false claims to the Government-the three separately invoiced shipments to Model. If United had not shipped any falsely branded tubes to Model, Model could not have incorporated such tubes into its radio kits and would not have had occasion to submit any false claims to the United States. When, however, United dispatched each shipment of flasely marked tubes to Model, it did so knowing that Model would incorporate the tubes into the radio kits it later shipped to the Government, and that it would ask for payment from the Government on account of those tubes. Thus, United's three shipments of falsely branded tubes to Model caused Model to submit false claims to the United States, and United is thus liable for three $2,000 statutory forfeitures representing the three separate shipments that it made to Model.8
The Government argues that both courts were wrong, and that its damages under the Act should be calculated by doubling the amount of its original loss and only then deducting Model's payment from that doubled amount.9 We agree that the Government's damages should be doubled before any compensatory payments are deducted, because that method of computation most faithfully conforms to the language and purpose of the Act.10
First, this method of computation comports with the congressional judgment that double damages are necessary to compensate the Government completely for the costs, delays, and inconveniences occasioned by fraudulent claims.11 Second, the rule that damages should be doubled prior to any deductions fixes the liability of the defrauder without reference to the adventitious actions of other persons. The position adopted by the Court of Appeals would mean that two subcontractors who committed similar acts and caused similar damage could be subjected to widely disparate penalties depending upon whether and to what extent their prime contractors had paid the Government in settlement of the Government's claims against them. Just as fortuitous acts of the prime contractor should not determine the liability of the subcontractor under the forfeiture provision of the Act, so likewise the prime contractor's fortuitous acts should not determine the liability of the subcontractor under the double-damages provision. Third, the reasoning of the Court of Appeals and the District Court would enable the subcontractor to avoid the Act's double-damages provision by tendering the amount of the undoubled damages at any time prior to judgment. This possibility would make the double-damages provision meaningless. Doubling the Government's actual damages before any deduction is made for payments previously received from any source in mitigation of those damages forecloses such a result.12
For these reasons we hold that, in computing the double damages authorized by the Act, the Government's actual damages are to be doubled before any subtractions are made for compensatory payments previously received by the Government from any source.13 This method of computation, which maximizes the deterrent impact of the double-damages provision and fixes the relative rights and liabilities of the respective parties with maximum precision, best comports in our view with the language and purpose of the Act.
The stipulated facts reveal a complex and altogether deliberate scheme to palm off cheaper, surplus tubes to the prime contractor, Model. Model had contracted to build radio kits for use by the Army. The specifications for the component parts reflected the Army's understandable desire that military equipment be long lasting and reliable. The radios were to contain new 4X150G electron tubes bearing markings that, pursuant to the underlying military procurement specifications, showed they were manufactured in a plant whose quality-control standards measured up to certain Government requirements and were "source" inspected and approved by a Government inspector at the plant during manufacturing.1 As far as the military was concerned (as opposed to commercial buyers), Eimac was the only authorized manufacturer. Tubes made by Eimac at its designated plant, accompanied by the proper "source" inspection and stamped accordingly, were the only ones qualified to receive genuine affixations. These stringent requirements were reflected in Eimac's market price of $40 per tube.
Respondents, however, with full awareness of what was required under Model's contract, got themselves caught between that market price and their own promise to deliver some 1,000 tubes at $32 each. Model had already rejected United's first shipment of 120 surplus tubes; with none of them bearing the requisite markings, nonconformity was obvious. The only way respondents were going to profit under their contract with Model was to ship electron tubes that had the appearance of being new and genuine JAN-type2 electron tubes, bearing markings as if they had been produced by Eimac under the strictures of the Government inspection process. To that end, they bought several hundred surplus tubes, at $17.50 each, from a distributor of Eimac and affixed, on each one, the JAN stamp, a "Manufacturer's Qualification Code"3 (Eimac's) and an "acceptance" date, all of which markings were palpably false and designed to deceive Model. To complete the illusion, respondents sent the falsely stamped tubes to a testing laboratory where, after inspection, 21 packing lists (referencing the serial numbers) were prepared, each stamped, falsely, with a facsimile of a Government inspector's "Eagle" stamp.4 The 21 boxes were then combined in three separate shipments, respondents certifying with each shipment that the tubes conformed to the contract. Duped into accepting the tubes as genuine, Model paid each of the three invoices and incorporated the fraudulent tubes into the radio kits. Model was paid, of course, on 35 separate invoices.
Applying its construction of the statutory language to this multifaceted shell game, the Court concludes that the only "acts" which "caused" the submission of false claims were the three separately invoiced shipments, reasoning that but for the shipment of "falsely branded" tubes the radio kits, and in turn Model's claims to the Government, would have been genuine. However, the three invoiced shipments were among a host of fraudulent acts, with respect to each of which it could be said that "but for" that act Model's claims to the Government would have been genuine. Had respondents not falsely marked each of the 300-odd tubes which were actually shipped to Model, or had the 21 packing lists covering them not been falsely stamped, it could equally well be said that Model would have submitted no false claims to the Government respecting the tubes supplied by respondents.5 Thus, on the basis of "but for" causation, which is all the Court's justification really amounts to, there is no support whatever for picking the number 3 in preference to the number 21, or for picking either of those numbers in preference to the total number of tubes each of which was falsely marked. The only way these various "acts" can be distinguished from one another, so far as causation is concerned, is their proximity in time to the submission of the false claims by Model.
There is nothing on the face of the statute, however, to indicate congressional intent to treat deceitful prime contractors and subcontractors according to the mechanics of the underlying fraud. Instead, the verbal linkage of "acts," "causes," and "false claim" is couched in general terms pointing to a uniform construction: the number of imposable forfeitures in each case under the first clause is keyed to the number of false claims submitted.6 The language further suggests an interpretation in terms of traditional concepts of causation. Such concepts, whether denominated "proximate cause" or "legal" cause, frequently result in the imposition of liability even upon a negligent actor for consequences of which he could not have been absolutely certain at the time he acted, so long as those consequences might reasonably have been foreseen. See W. Prosser, The Law of Torts §§ 42, 43 (4th ed. 1971); Restatement (Second) of Torts § 435 (1965). I would remand this case to the District Court for assessment of forfeiture liability under this standard.
The False Claims Act was adopted in 1863. Act of Mar. 2, 1863, c. 67, 12 Stat. 696. It was re-enacted as Rev.Stat. §§ 3490-3494, 5438. The part of the Act dealing with civil prohibitions is now codified in 31 U.S.C. § 231 et seq. The language used in Title 31 differs in some important respects from that contained in the revised Statutes. Since Title 31 has not been enacted into positive law, the official text of the statute is that which appears in the Revised Statutes. See United States v. Neifert-White Co., 390 U.S. 228, 228-229, n. 1, 88 S.Ct. 959, 19 L.Ed.2d 1061; United States ex rel. Marcus v. Hess, 317 U.S. 537, 539-540, and n. 2, 63 S.Ct. 40, 87 L.Ed. 498.
Section 5438 was repealed in 1909. Act of Mar. 4, 1909, c. 321, § 341, 35 Stat. 1153. It has continued vitality only insofar as it specifies the acts giving rise to civil liability under § 3490. See United States v. Neifert-White Co., supra. The criminal prohibitions were subsequently altered and codified in 18 U.S.C. §§ 287 and 1001.