Opinion ID: 811165
Heading Depth: 2
Heading Rank: 1

Heading: Whether the Intent was to Impose Punishment

Text: When assessing whether a statutory scheme is civil or criminal, we consider the statute’s text and structure. Smith, 538 U.S. at 92. The manner of codification and the enforcement procedures established by a statutory scheme are also probative of legislative intent, although the location and labels of a statutory provision are not dispositive factors. Id. at 94. Consistent with an intent to establish a civil proceeding, the text of the FCA contains multiple references to “civil actions” and refers to liability for violations of § 3729 as “civil penalt[ies].” See §§ 3729(a), 3730(a),(b). The FCA is codified within title 31 of the United States Code, which is a civil, not criminal, title. See Kansas v. Hendricks, 521 U.S. 346, 361 (1997) (finding state intent to create civil proceeding evidenced by inclusion of statutory provision in question within the probate code instead of the criminal code). By labeling actions brought pursuant to the FCA “civil actions,” Congress has thus expressed a preference for “one label or the other.” Ward, 448 U.S. at 248–49 (finding it significant that Congress “labeled the sanction authorized [in the statutory provision at issue] a ‘civil penalty’” and finding additional significance in label given criminal penalties set forth in preceding subsection). Further, Congress provided that in an action brought under § 3730 of the FCA by the United States, the government shall be held to the burden of proof common in civil litigation by requiring that it “prove all the essential elements of the cause of action . . . by a preponderance of the evidence,” 31 U.S.C. § 3731(d) (2012), and also provided -21- Nos. 10-3818/10-3821 Sanders, et al. v. Allison Engine Co., et al. that FCA actions should be initiated by “[a] summons as required by the Federal Rules of Civil Procedure . . . .” Id. § 3732(a). The Senate Committee on the Judiciary report from the 1986 amendments to the FCA also contains evidence that supports the conclusion that members of Congress have consistently viewed the FCA as providing for civil proceedings. The Senate Report noted that the FCA is a “civil remedy designed to make the Government whole for fraud losses,” that the False Claims Reform Act was intended to “clarif[y] the burden of proof in civil false claims actions,” and that current constructions of the FCA requiring the government to prove that a defendant had the specific intent to submit the false claim in question imposed a “standard . . . inappropriate in a civil remedy and . . . prohibit[ed] the filing of many civil actions to recover taxpayer funds lost to fraud.” S. Rep. No. 99-345, at 2, 6–7 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5267, 5271–72. Against this evidence, the defendants emphasize the statements made by the original FCA sponsor and sponsors of the FCA amendments. The defendants argue that the statements reference an intent to punish and demonstrate that Congress did not intend to establish civil proceedings by passing and amending the FCA. The FCA was enacted in 1863, and its original sponsor has been quoted as stating that the purpose of the law was to punish and prevent fraud. See United States v. Bornstein, 423 U.S. 303, 309 n.5 (1976). In 2009, when the FERA amendments to the FCA were being considered, FERA’s sponsors—senators Patrick Leahy and Chuck Grassley—made several statements that indicated that the FERA amendments would punish those who commit fraud against the government. The district court relied on many of these statements in concluding that FERA was -22- Nos. 10-3818/10-3821 Sanders, et al. v. Allison Engine Co., et al. intended to punish, Sanders, 667 F. Supp. 2d at 754–55, and the defendants argue that these statements “provide clear proof that Congress intended the FCA to impose punishment.” However, many of these statements refer to combating fraud and to the FERA amendments generally. Because FERA included amendments to several criminal statutes as well as the FCA, see FERA § 2 (amending the false statements in mortgage applications statute (18 U.S.C. § 1014), the major fraud against the government statute (18 U.S.C. § 1031), the federal securities fraud statute (18 U.S.C. § 1348), and the federal money laundering statute (18 U.S.C. §§ 1956, 1957)), statements referencing punishing those engaging in fraud may easily be ascribed to the desire to punish under the criminal statutes amended by FERA.12 For example, the district court stated that Senator Leahy “indicated that passage of the FERA would help law enforcement ‘track down and punish’ people.” Sanders, 667 F. Supp. 2d at 754 (quoting 155 Cong. Rec. S4409 (daily ed. Apr. 20, 2009)). However, reading the statement in context reveals that Senator Leahy actually stated that as the economic crisis in 2008 worsened he had “called upon Federal law enforcement to track down and punish those who were responsible for the corporate and mortgage frauds that helped make the economic downturn far worse.” 155 Cong. Rec. S4408-02 (daily ed. Apr. 20, 2009) (statement of Sen. Leahy). This reference to punishing those responsible does not specifically refer to utilizing the FCA to effect 12 This is also true of statements by Senate Majority Leader Harry Reid in support of FERA cited by the defendants. (Appellees’ Br. at 43.) Senator Reid referred to the need to punish those “responsible for the mortgage and corporate frauds,” but he did not use the word “punish” when specifically referring to the strengthening amendments to the FCA, and referred to the FCA as “one of the most important civil tools . . . for rooting out fraud in Government.” 155 Cong. Rec. S472507 (daily ed. Apr. 27, 2009). -23- Nos. 10-3818/10-3821 Sanders, et al. v. Allison Engine Co., et al. punishment. And given the other anti-fraud statutes amended by FERA, which specifically involved mortgages and federal securities laws, the reference to punishment may more naturally be read as describing those criminal statutes instead of the FCA. Similarly, Senator Leahy’s remark that without the FERA amendments Congress would be letting “fraud go[] unprosecuted and unpunished” is not specific to the FCA, and in context, Senator Leahy was referring to “[s]trengthening criminal and civil fraud enforcement.” 155 Cong. Rec. S4604-04, 2009 WL 1098184, at S4630 (daily ed. Apr. 23, 2009) (statement of Sen. Leahy) (emphasis added). There is, however, a statement by Senator Grassley that does refer to the use of the FERA amendments to close legal loopholes created in the FCA, “thus ensuring that no fraud can go unpunished by simply navigating through the legal loopholes.” 155 Cong. Rec. S4735-02 (daily ed. Apr. 27, 2009) (statement of Sen. Grassley). Further, during a 2002 hearing before the Senate Judiciary Committee, Senator Grassley asked then Attorney General John Ashcroft to confirm that he would “continue using the [FCA] to punish wrongdoing to the fullest extent of the law.” 2002 WL 1722725 (F.D.C.H. July 25, 2002). On balance, the sponsor and legislator statements do not indicate a clear intent to use the FCA to punish. While Senator Grassley appears to have referred to punishment in conjunction with references to the FCA, reading other statements in context suggests that any reference to punishment was not specifically made in reference to FERA’s amendments to the FCA, particularly in light of the fact that FERA’s other amendments were to criminal fraud statutes. Although we acknowledge that sponsors’ statements may be relevant in interpreting statutes, the above statements, relied upon -24- Nos. 10-3818/10-3821 Sanders, et al. v. Allison Engine Co., et al. by the district court, are insufficient to outweigh the indicators of legislative intent that the text of the statute and the committee reports provide—indicators that suggest Congress intended to implement civil proceedings for combating fraud and not to impose punishment.