Court Opinion

ID: 195352
Source: CourtListenerOpinion
Date Created: 2011-02-07 02:38:15+00
Date Added: 2024-06-11T13:14:44.043149
License: Public Domain

United States Court of Appeals
                    For the First Circuit
                                         
No. 93-1766

              IN RE:  UNITED STATES OF AMERICA,
            EX REL. S. PRAWER AND COMPANY, ET AL.,
                   Plaintiffs, Appellants,

                              v.

                 FLEET BANK OF MAINE, ET AL.,
                    Defendants, Appellees.
                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF MAINE

           [Hon. Gene Carter, U.S. District Judge]
                                                 
                                         

                            Before

                     Breyer, Chief Judge,
                                        
             Torruella and Stahl, Circuit Judges.
                                                
                                         

 Jeffrey  Bennett  with whom  Melinda J.  Caterine and  Herbert H.
                                                                  
Bennett & Assoc., P.A. were on brief for appellants.
                  
 James E. Kaplan with whom Derek P. Langhauser, James  E. Kaplan &
                                                                  
Associates,  P.A. and Julianne Cloutier were on brief for appellee Amy
                                   
Bierbaum.
 Thomas  N. O'Connor with whom Donald L.  Cabell and Hale and Dorr
                                                                  
were on brief for appellees Verrill  & Dana, P. Benjamin Zuckerman and
Anne M. Dufour.
 Joseph F. Shea  with whom Paul  R. Gupta and Nutter,  McClennen &
                                                                  
Fish were on brief for appellee RECOLL Management Corporation.

 John  J. Wall,  III with  whom Thomas  F. Monaghan  and Monaghan,
                                                                  
Leahy,  Hochadel &  Libby were  on brief  for appellee  Fleet Bank  of
                     
Maine.
 Frank W.  Hunger, Assistant  Attorney General, Jay  P. McCloskey,
                                                                 
United  States Attorney, and Douglas N. Letter and Jonathan R. Siegel,
                                                                 
Attorneys,  Civil Division,  Department of Justice,  on brief  for the
United States, amicus curiae.
                                         
                         May 5, 1994
                                         

          STAHL, Circuit  Judge.   This appeal arises  out of
          STAHL, Circuit  Judge.
                               

the district court's sua sponte dismissal of a qui tam action
                                                      

brought by plaintiffs-appellants S. Prawer & Company, Gilbert

Prawer, and Harvey Prawer (collectively "Prawer") as relators

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

seq.1   Plaintiffs  primarily2 contend  that the  court erred
    

in  concluding  that 31  U.S.C.     3730(e)(3),3 a  provision

enacted  as  part  of the  1986  amendments  to  the qui  tam
                                                             

provisions of the FCA, bars their claim.  The issue is one of

first  impression, as no other  court has as  yet been called

upon to  interpret the  reach and meaning  of this  ambiguous

                    

1.  Because  of  the  length   of  the  statutory  provisions
relevant to this appeal, we have attached them in an appendix
to our opinion.

2.  Employing  an extremely  literal reading  of 31  U.S.C.  
3730(b)(1) (an action brought under the FCA "may be dismissed
only  if the  court  and the  Attorney  General give  written
consent to the dismissal  and their reasons for consenting"),
plaintiffs also argue that the court erred in proceeding  sua
                                                             
sponte and dismissing this action without the approval of the
      
Attorney General.   Because, as  will be discussed  infra, we
                                                         
believe the court erred  in determining that this  action was
jurisdictionally  barred, we need not and  do not address the
merits  of this somewhat dubious assertion.  See Fed. R. Civ.
                                                
P.  12(h)(3)  ("Whenever  it  appears by  suggestion  of  the
parties or otherwise that the court lacks jurisdiction of the
                    
subject  matter,  the  court   shall  dismiss  the  action.")
                                    
(emphasis added).

3.  Section 3730(e)(3)  states:   "In no  event may  a person
bring [a qui tam  action] which is based upon  allegations or
                
transactions  which are  the subject  of a  civil suit  or an
administrative   money  penalty   proceeding  in   which  the
government is already a party."

                             -2-
                              2

provision.    After careful  consideration  of  the arguments

presented, we reverse.

                              I.
                                

                          BACKGROUND
                                    

A.  Relevant Factual and Procedural History
                                           

          The  relevant facts  and allegations,  recounted in

the  light most favorable to plaintiffs, are as follows.4  In

January 1991,  the Maine  National Bank ("MNB")  was declared

insolvent  and  the  Federal  Deposit  Insurance  Corporation

("FDIC")  was appointed its receiver.  The New Maine National

Bank ("NMNB") was established as  a bridge bank through which

the FDIC would conduct certain MNB-related affairs.

          On or about July 12, 1991, the NMNB closed, and the

FDIC sold virtually all of its assets to Fleet Bank  of Maine

("Fleet").  The contract by which this transfer of assets was

effectuated is  known as  the "Assistance Agreement."   Inter
                                                             

alia, the  Assistance Agreement  provided that Fleet  had the
    

right to "put,"  or cause  the FDIC to  repurchase, any  NMNB

loans  acquired by  it pursuant  to the  Assistance Agreement

                    

4.  A few of the following  facts and allegations appear only
in  plaintiffs' brief.  Because  they help shed  light on the
convoluted  factual underpinnings of this litigation and have
no effect on  our resolution  of the question  before us,  we
have  included   them  in   our  recitation  of   the  case's
background.   Our  inclusion of  these facts  and allegations
should not, however, be construed either as an endorsement of
their  veracity  or as  an  indication  that  they are  well-
pleaded.

                             -3-
                              3

(provided  that said  loans  did not  fall  into any  one  of

several  exceptional categories  described in  the Assistance

Agreement).  Included among  the transferred assets were five

promissory notes, totalling approximately $1.1 million, given

by  Prawer to  the NMNB.   The  notes represented  the amount

Prawer had drawn against a $2 million line of credit extended

to it by NMNB.

          On  July  15,  1991,  Prawer  entered  into  a  new

agreement with Fleet for  an unsecured line of credit  (known

as the "Fleet Credit Facility") which permitted it to draw up

to $2  million  by  executing  and/or  renewing  consecutive,

unsecured 90-day term notes on  a note-by-note basis.  Prawer

utilized  this new line of credit from Fleet to satisfy fully

its  obligations  under each  of  the  five outstanding  NMNB

notes.  By May 5, 1992, Prawer had drawn $1.6 million against

its  $2  million  line  of  credit  under  the  Fleet  Credit

Facility.  These borrowings were evidenced by seven unsecured

90-day term notes.

          Meanwhile, on April 30, 1992, Prawer sold virtually

all  of its  then-existing assets  to C&S  Wholesale Grocers,

Inc. ("C&S").  Gilbert  Prawer informed Fleet of the  sale on

May 1,  1992.   On May  6, 1992,  pursuant to  the Assistance

Agreement, Fleet put  certain Prawer notes back  to the FDIC.

                             -4-
                              4

The parties hotly contest, however, whether  any of the notes

were "putable" under the terms of the Assistance Agreement.5

          1.  The Collection Case

          Subsequently, in November  1992, the FDIC commenced

an action  against Prawer,  C&S, and  a number of  individual

defendants  to collect upon the notes put back to it pursuant

to the  Assistance Agreement.   The complaint in  that action

not only sought  enforcement of the  notes, but also  alleged

that  the  April 30,  1992, sale  of  Prawer's assets  to C&S

constituted a fraudulent conveyance and violated Maine's Bulk

Sale Act.  More specifically, the FDIC contended that  Prawer

had become  insolvent, and  had peddled  its assets  for less

than  full value  in order  to satisfy  its debts  to certain

creditors.  Accordingly, the complaint sought  damages beyond

the amount allegedly outstanding on the notes.

          Prawer  responded to  this  complaint with  several

affirmative defenses  and counterclaims, as well  as filing a

third-party complaint  against  Fleet and  Recoll  Management

Corporation  ("Recoll"),   a  Fleet  subsidiary   which  had,

pursuant  to  an agreement  with  the FDIC,  been  seeking to

                    

5.  It  has been and is plaintiffs' position that none of the
                                                      
notes   were  properly  putable;  defendants  apparently  now
concede  that some  of  the notes  were  not putable  because
                  
plaintiffs' obligations thereunder had been  fully satisfied,
but argue that certain other notes were, in fact, putable.

                             -5-
                              5

collect upon  the notes which were  put back to the  FDIC.  A

variety   of   charges   were   made   in   these   defenses,

counterclaims,  and third-party  claims;  among these  was an

assertion  that  the  notes  were  not  putable  to  the FDIC

pursuant to the Assistance Agreement.  But see infra note 6.
                                                    

          At  oral argument,  the  parties represented  that,

since the filing ofthis case, the Collection casehas settled.

          2.  The Qui Tam Case
                         

          On June 21, 1993,  plaintiffs filed the instant qui
                                                             

tam action.   In  their complaint, plaintiffs  contended that
   

the  named defendants --  Fleet, Recoll, Verrill  & Dana (the

law firm that served  as legal counsel to Fleet,  Recoll, and

the FDIC at all  times relevant to this matter),  P. Benjamin

Zuckerman  and Anne  M. Dufour  (the Verrill  & Dana  lawyers

involved in  this matter), and  Amy Bierbaum  (an FDIC  staff

attorney) -- "created and  used, or caused to be  created and

used, false  records and  statements designed to  defraud the

Government  into paying Fleet approximately $1.6 million" for

the Prawer notes pursuant  to the put-back provisions  of the

Assistance Agreement.

          Nine  days later,  on June  30, 1993,  the district

court  sua sponte  dismissed  plaintiffs' complaint.   In  so
                 

doing,  the court relied upon   3730(e)(3), see supra note 3,
                                                     

finding  that  (1)  the  allegations  made  and  transactions

implicated in plaintiffs' complaint already were at issue (as

                             -6-
                              6

defenses) in  the Collection case; and  (2) the "government,"

in the person of  the FDIC, was a party to  that action.  See
                                                             

United States ex rel. S. Prawer & Co. v. Fleet Bank of Maine,
                                                            

825 F. Supp. 339 (D. Me. 1993).

          Plaintiffs moved  the court  to reconsider its  sua
                                                             

sponte order of dismissal, arguing, inter alia, that  (1) the
                                              

"government,"  for purposes of    3730(e)(3), was not a party

to the Collection case;  and (2) the qui  tam action was  not
                                             

"based upon allegations or transactions which are the subject

of" the Collection  case.  In  a comprehensive memorandum  of

decision, the court rejected both of these arguments (as well

as  all other arguments made  in plaintiffs' motion).   In so

doing, however, the court  receded slightly from its original

holding  on the  question of  whether there  was an  identity

between  the  allegations and  transactions  which  were "the

subject  of" the Collection case and those that served as the

basis for the qui tam action.  Instead, the court found:
                     

               To  the  extent that  defenses based
          upon  the  allegations  of  the  qui  tam
                                                   
          complaint  are not pleaded in the related
          civil action, that is entirely the result
          of the conscious decision of  counsel for
          the  defendants   there  (and  Plaintiffs
          here) to abjure  their pleading.  Clearly
          the  factual  predicate  for   the  false
          claims alleged in the qui tam action form
                                       
          the   basis   for  assertion   of  viable
          defenses  to the claims  made against the
          defendant  S. Prawer  &  Company  on  the
          notes in  the related civil  action.   An
          effective defense to  those claims  would
          require  that  those defenses  be pleaded
          there if counsel, in good faith,  believe

                             -7-
                              7

          the facts put  forth here.  . .  .   This
          Court    believes    that   the    proper
          construction  of [   3730(e)(3)] requires
          that  it  be   read  broadly  enough   to
          encompass   not   only  allegations   and
          transactions actually put in issue by the
          litigants in the  related civil suit  but
          any  allegations   or  transactions  that
          could  legitimately  be  made  a  subject
          (e.g., [sic]  be  put in  issue) of  that
               
          suit  in   the  regular  course   of  its
          development.

United States ex rel. S. Prawer & Co. v. Fleet Bank of Maine,
                                                            

Civ. No. 93-165-P-C,  slip op. at 3-4 (D. Me.  July 12, 1993)

(footnote  omitted).6      Accordingly,  the   court   denied

plaintiffs' motion.  Id. at 9.
                        

B.  The Statutory Framework
                           

          Because  our resolution of  the issue  presented in

this appeal  necessarily is informed by  Congress's intent in

enacting the 1986 amendments to the FCA's qui tam provisions,
                                                 

a  brief historical overview of the statute is in order.  The

FCA's  qui  tam7  provisions,   see  generally  31  U.S.C.   
                                              

                    

6.  Our  review  of  the  pleadings in  the  Collection  case
reveals  that  it  is a  close  question  as  to whether  the
illegitimacy of  the put (on  grounds of fraud)  actually was
raised therein  as an affirmative defense.   However, because
                                         
we find that    3730(e)(3) does not  bar this action  even if
the  fraud  claim was  so raised,  we  will assume  this fact
arguendo  and will  not address  the district  court's ruling
        
that  the  statute  also  bars qui  tam  actions  based  upon
                                       
allegations or  transactions that  could have been  raised in
                                             
another   civil  action   or  administrative   money  penalty
proceeding.   

7.  "Qui tam" is an abbreviation for "qui tam pro domino rege
                                                             
quam pro seipso," which  literally means "he who as  much for
               
the  king as for himself."  United States ex rel. Springfield
                                                             
Terminal Ry. Co.  v. Quinn, 14 F.3d  645, 647 n.1  (D.C. Cir.
                          

                             -8-
                              8

3730(b)-(g),  empower private  persons, known  as "relators,"

(1)  to  sue,  on  behalf  of  the  government,  persons  who

knowingly  have  presented  the  government  with  false   or
         

fraudulent claims (as the highlighted terms are defined by 31
                 

U.S.C.   3729); and  (2) to share in any  proceeds ultimately

recovered  as a result of such suits, see generally 31 U.S.C.
                                                   

   3730(d).    Since its  enactment  in  1863,8  the FCA  has

contained several different qui tam provisions.  The original
                                   

provisions    contained    no   significant    jurisdictional

limitations  and did  not  preclude plaintiffs  from bringing

suit  on the basis of information already in the government's

possession.   Quinn, 14 F.3d at 649.  Despite this invitation
                   

for abuse, however, the provisions were used sparingly in the

first fifty  years of  their existence.   Id.  (citing United
                                                             

States ex rel. LaValley v. First Nat'l Bank of Boston, 707 F.
                                                     

Supp. 1351, 1354 (D. Mass. 1988)).

          During the New Deal  and World War II, there  was a

notable increase  in the number  of contracts awarded  by the

                    

1994) (citing John T.  Boese, Civil False Claims and  Qui Tam
                                                             
Actions, 1-6 (1993)).  Qui tam provisions, which historically
                              
have  allowed parties  to initiate  suit on  the government's
behalf and to share  in the recovery as bounty,  first gained
popularity in  thirteenth-century England as  a supplement to
ineffective law  enforcement.  Id. (citing  Note, The History
                                                             
and Development  of Qui Tam, 1972 Wash. U. L.Q. 81, 86-87 and
                           
Boese, supra, at 1-6).
            

8.  The  FCA  originally  was  enacted "in  order  to  combat
rampant fraud in Civil  War defense contracts."  See  S. Rep.
                                                    
No.  345,  99th   Cong.,  2d  Sess.  8,  reprinted   in  1986
                                                       
U.S.C.C.A.N. 5266, 5273.  

                             -9-
                              9

government to private individuals  and entities.  Id.   Along
                                                     

with  this increase came a concomitant surge in the number of

qui tam actions  brought by relators under the FCA.   See id.
                                                             

This  litigational surge,  in turn, brought  to the  fore the

fact  that the  qui tam  provisions then  in effect  were too
                       

susceptible to  abuse by "parasitic"  relators.   The era  of

parasitic  qui tam actions reached  its apex in United States
                                                             

ex  rel. Marcus  v.  Hess, 317  U.S.  537 (1943),  where  the
                         

Supreme Court allowed  a relator  to proceed with  a qui  tam
                                                             

suit that was based  solely on the allegations of  a criminal
                           

indictment to  which  defendants  already  had  pleaded  nolo
                                                             

contendere (and as  a result of which  defendants already had
          

paid fines totalling $54,000).  See Quinn, 14 F.3d at 649-50;
                                         

see also S. Rep. No. 562,  99th Cong., 2d Sess. 10, reprinted
                                                             

in 1986 U.S.C.C.A.N. at 5275.  In rejecting  the government's
  

argument that  permitting the action to  proceed would thwart

the spirit of the FCA, the Court stated:

               Even  if   .  .  .   petitioner  has
          contributed nothing to  the discovery  of
          this  crime, he  has contributed  much to
          accomplishing  one  of  the purposes  for
          which  the [FCA]  was passed.   The  suit
          results   in  a   net  recovery   to  the
          government  of  $150,000, three  times as
          much as  fines  imposed in  the  criminal
          proceedings.

Hess,  317 U.S. at 545.  Accordingly, because the Court found
    

neither a  bar to  the suit  in the  text of  the FCA  nor an

intent to impose one in the Act's legislative history, id. at
                                                          

                             -10-
                              10

546,  it  declined to  establish a  judicial  bar on  its own

initiative, Quinn, 14 F.3d at 650.
                 

          In  response   to  public  outcry   over  the  Hess
                                                             

decision, Congress acted quickly  to restrict the universe of

litigants who  could avail  themselves of  the FCA's  qui tam
                                                             

provisions.   Id.  at  650.   The  1943 amendments  to  these
                 

provisions,  signed  into  law   by  President  Roosevelt  on

December  21, 1943, codified  this restriction.   See S. Rep.
                                                     

No.  562,   99th  Cong.,  2d  Sess.  12,  reprinted  in  1986
                                                       

U.S.C.C.A.N. at  5277.  The  amendments reflected  compromise

between the  House  and Senate;  the  House bill  would  have

repealed the qui tam  provisions altogether, while the Senate
                    

bill  would  have  precluded  suits  which  were  based  upon

information already in the government's possession unless the

information  underlying  the suit  was  "original  with [the]

person  [bringing the suit]."  Quinn, 14 F.3d at 650 (quoting
                                    

89  Cong. Rec. 510, 744  (daily ed. December  16, 1943)); see
                                                             

also S. Rep. No.  562, 99th Cong., 2d Sess.  11-12, reprinted
                                                             

in  1986  U.S.C.C.A.N. at  5276-77.    Although the  Senate's
  

approach largely prevailed, the  provision of the Senate bill

expressly permitting the "original  source" of information to

bring a  qui tam action  was dropped  in conference.   See S.
                                                          

Rep.  No. 562,  99th Cong.,  2d Sess.  12, reprinted  in 1986
                                                        

U.S.C.C.A.N.   at  5277.    As  a   result,  the  final  1943

legislation precluded all qui  tam actions "based on evidence
                                  

                             -11-
                              11

or  information  the  Government  had  when  the  action  was

brought."   31 U.S.C.    3730(b)(4) (1982)  (superseded); see
                                                             

also Quinn, 14 F.3d at 650.
          

          Over  the  next   four  decades,  courts   strictly

construed  the  jurisdictional  bar established  in  the 1943

amendments.  See  S. Rep. No. 562,  99th Cong., 2d Sess.  12,
                

reprinted  in 1986  U.S.C.C.A.N.  at  5277.   Unsurprisingly,
             

there was a corresponding  decrease in the use of the qui tam
                                                             

provisions  to  enforce  the  FCA during  this  same  period.

Quinn,  14 F.3d at 650 (citing Boese, supra note 7, at 1-12).
                                           

If the Hess  decision marks  the highpoint of  the regime  of
           

liberal litigation under the  qui tam provisions, the Seventh
                                     

Circuit's  decision  in  United  States,  ex  rel.  State  of
                                                             

Wisconsin  v. Dean, 729 F.2d  1100 (7th Cir.  1984), may well
                  

mark the point of greatest retreat from Hess.  See  Quinn, 14
                                                         

F. 3d at 650.

          In  Dean, the  Seventh Circuit  was faced  with the
                  

question of  whether the State of Wisconsin should be allowed

to act as a qui tam relator in a Medicaid  fraud action where
                   

the  State,  in  accordance  with  federal  regulations,  had

already reported  the fraud to  the federal government.   See
                                                             

Dean, 729  F.2d at 1102-04.   It was undisputed that  (1) the
    

fraud investigation had been conducted  by the State; (2) the

State was an original source of the information provided; and

(3) the State had been required to report the fraud.  See id.
                                                             

                             -12-
                              12

at  1102-03 and  n.2.   Nonetheless,  noting the  unambiguous

language of the FCA, the disappearance of the original source

provision from the 1943  Senate bill, and the absence  of any

basis for finding an exception to the statutory bar where the

relator  was required  to report  the information,  the court

rejected the  contentions of both  the State and  the federal

government,  which had filed an amicus brief on behalf of the
                                      

State, that the FCA's legislative history evinced a "`clearly

expressed legislative  intention'" to allow the  action to go

forward.  See id. at 1104-05 (quoting Consumer Product Safety
                                                             

Comm'n  v. GTE  Sylvania, Inc.,  447  U.S. 102,  108 (1980)).
                              

Accordingly, it reversed the  decision of the district court,

which had found such an intention.  See id. at 1104-06.
                                           

          In  the wake  of the  Seventh Circuit's  opinion in

Dean,  there was  once again  a perception  that the  qui tam
                                                             

provisions were in  need of alteration.  See S. Rep. No. 562,
                                            

99th  Cong., 2d Sess.  13, reprinted in  1986 U.S.C.C.A.N. at
                                       

5278 (recounting that  the National Association  of Attorneys

General adopted  a resolution calling on  Congress to rectify

"the unfortunate result" of  the Dean decision).  Ultimately,
                                     

Congress responded  with the  False Claims Amendments  Act of

1986,  the stated  purpose  of  which  was "`to  enhance  the

Government's ability to recover  losses sustained as a result

of fraud against  the Government.'"   Quinn, 14  F.3d at  650
                                           

(quoting S. Rep. No.  562, 99th Cong., 2d Sess.  1, reprinted
                                                             

                             -13-
                              13

in 1986 U.S.C.C.A.N. at  5266).  Concerned that sophisticated
  

and  widespread fraud  was depleting  the national  fisc, the

drafters  of  the 1986  amendments  concluded  that "`only  a

coordinated effort  of both the Government  and the citizenry

will  decrease   this  wave   of  defrauding  public   funds.

Accordingly, the Senate  bill increases incentives, financial

and  otherwise, for  private  individuals to  bring suits  on

behalf of the Government.'"   Id. at 650-51 (quoting  S. Rep.
                                 

No.  562,  99th  Cong.,  2d  Sess.  1-2,  reprinted  in  1986
                                                       

U.S.C.C.A.N. at 5266-67).

          The 1986  amendments  changed  the  FCA's  qui  tam
                                                             

provisions  in  several respects.    On  the one  hand,  they

contained  several provisions  designed  to  "encourage  more

private  enforcement suits."  See id. at 651 (quoting S. Rep.
                                     

No. 562,  99th  Cong.,  2d  Sess. 23-24,  reprinted  in  1986
                                                       

U.S.C.C.A.N.  at  5288-89).   Among  these  are the  original

source  provision eliminated  from  the 1943  Senate bill,  a

provision increasing  monetary  awards,  a  lower  burden  of

proof,  and  a  provision  allowing  qui  tam  plaintiffs  to
                                             

continue to participate in  the actions after intervention by

the government.   Id. (citing United States  ex rel. Stinson,
                                                             

Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co.,  944
                                                       

F.2d  1149,  1154  (3d. Cir.  1991)).    On  the other  hand,

Congress also enacted new provisions designed, inter alia, to
                                                         

continue the prohibition against strictly parasitic lawsuits.

                             -14-
                              14

See generally 31 U.S.C.   3730(e); see also Quinn, 14 F.3d at
                                                 

651.

          We  think Judge  Wald  summarized rather  well  the

objectives of the 1986 amendments:

               The  history  of  the  FCA  qui  tam
                                                   
          provisions      demonstrates     repeated
          congressional efforts to walk a fine line
          between  encouraging whistle-blowing  and
          discouraging opportunistic behavior.  The
          1986  amendments  inevitably reflect  the
          long  process  of  trial  and  error that
          engendered them.   They must be  analyzed
          in the  context  of these  twin goals  of
          rejecting suits which  the government  is
          capable   of   pursuing   itself,   while
          promoting those which  the government  is
          not equipped to bring on its own.

Id. 
   

                             -15-
                              15

                             II.
                                

                          DISCUSSION
                                    

A.  The Jurisdictional Question
                               

          As they did  before the district  court, plaintiffs

here  argue that  (1) the  FDIC  is not,  for  purposes of   

3730(e)(3), "the  government"; and (2) the  instant action is

not  "based upon  allegations or  transactions which  are the

subject of" the Collection  case.  See supra note 3.  Because
                                            

we  believe  that  the second  of  these  two  contentions is

ultimately  persuasive,  and  that  the statutory  bar  of   

3730(e)(3)  therefore does not  apply, we turn  our sights to

this provision of the statute.

          We start  by noting the obvious:   the breadth with

which we should read  the phrase "allegations or transactions

which  are  the  subject of  a  civil  suit"  is not  readily
                           

apparent from the  text of the statute.  Defendants' argument

that,  because plaintiffs  denied the  legitimacy of  the put

transaction (alleging fraud) in the Collection case, there is

an identity  between the  allegations and transactions  which

were  at least  a  "subject  of"  that  case  and  the  fraud

allegations which serve as "the basis" of this case certainly

strikes us as being anchored upon a plausible construction of

the  phrase  "the  subject of"  in     3730(e)(3).   So  too,

however, does  plaintiffs' argument  that, when viewed  at an

appropriate   level  of  specificity,  the  transactions  and

                             -16-
                              16

allegations which  are "the  subject of" the  Collection case
                           

should and  must be seen only  as Prawer's (1)  making of the

sued-upon  notes, and  (2) alleged  failure to  satisfy them.

Therefore, we regard the statute as ambiguous.

          When  faced  with  a  facially  ambiguous statutory

provision, we look to the statute as  a whole and the history

of  its enactment  in  order to  glean congressional  intent.

See,  e.g.,  Concrete Pipe  &  Prods.,  Inc. v.  Construction
                                                             

Laborers Pension Trust, 113 S. Ct. 2264, 2281 (1993); Gaskell
                                                             

v.  Harvard Coop.  Soc'y, 3  F.3d 495,  499 (1st  Cir. 1993);
                        

United States v. Alky Enters., Inc., 969 F.2d 1309, 1314 (1st
                                   

Cir.  1992).   Here,  we  think  the rather  easily-discerned

purposes underlying the 1986  amendments militate strongly in

favor of plaintiffs' reading of the phrase.

          As Judge  Wald observed in the  Quinn decision (and
                                               

as we have noted  above, see supra at 14-15),  "[t]he history
                                  

of  the   FCA  qui  tam   provisions  demonstrates   repeated
                       

congressional efforts to walk a fine line between encouraging

whistle-blowing  and  discouraging  opportunistic  behavior,"

Quinn, 14 F.3d at 651.  Clearly, the 1986 amendments, insofar
     

as they were responding  to a regime in which  the preclusion

of opportunistic litigation was  too heavily weighted, had as

perhaps  their central purpose  an expansion of opportunities

and incentives  for private citizens with  knowledge of fraud

against the government to come forward with that information.

                             -17-
                              17

See S.  Rep. No. 562,  99th Cong., 2d  Sess. 1,  reprinted in
                                                             

1986  U.S.C.C.A.N.  at  5266   ("The  purpose  of  [the  1986

amendments] is to enhance the Government's ability to recover

losses   sustained  as   a  result   of  fraud   against  the

Government."); id. at 1-2,  reprinted in 1986 U.S.C.C.A.N. at
                                        

5266-67 ("The proposed legislation  seeks not only to provide

the Government's law enforcers with more effective tools, but

to encourage  any individual  knowing of Government  fraud to

bring  that information  forward."); id.  at 2,  reprinted in
                                                             

1986 U.S.C.C.A.N. at 5267 ("[The 1986 amendments]  increase[]

incentives, financial and otherwise, for  private individuals

to bring suits on behalf of the Government.").  Indeed, it is

apparent that a primary objective of the 1986 amendments,  as

revealed in  the above-quoted Senate Report  and in published

hearings on  the proposed  legislation, was to  encourage and

provide incentives for the bringing of qui tam actions in all
                                                             

but the several circumstances delineated  in   3730(e).   See
                                                             

generally  id. at  1-17,  reprinted in  1986 U.S.C.C.A.N.  at
                                      

5266-82; see also generally False Claims Reform Act:  Hearing
                                                             

Before the  Subcomm.  on Admin.  Practice  and Proc.  of  the
                                                             

Senate Comm. on  the Judiciary, 99th Cong.,  1st Sess. (Sept.
                              

17, 1985); False Claims Act Amendments:  Hearings Before  the
                                                             

Subcomm.  on Admin.  Law  and Governmental  Relations of  the
                                                             

Comm. on the Judiciary  House of Representatives, 99th Cong.,
                                                

2d Sess. (February 5 and 6, 1986).

                             -18-
                              18

          Obviously,   then,  the  question  becomes:    What

circumstances  does    3730(e)(3) seek  to  avoid?   It seems

clear  that  the answer  to  this  question is  circumstances

involving "parasitic" qui tam actions which are not otherwise
                             

barred  by    3730(e).   Cf.,  e.g., Quinn,  14  F.3d at  651
                                          

(interpreting   the  1986   amendments   as  "still   another

congressional effort to reconcile avoidance of parasitism and

encouragement  of  legitimate citizen  enforcement actions").

Thus, when  it is not clear  whether or not a  qui tam action
                                                      

should be  barred by  the ambiguous provision  precluding the

action if it is "based upon transactions or allegations which

are the subject of"  another suit or proceeding in  which the

government  is a  party, we  think that  a court  should look

first  to whether  the two  cases can  properly be  viewed as

having  the qualities  of a  host/parasite relationship.   In

answering  this question, we think it would be useful for the

court  to be guided by the definition of the word "parasite,"

and  ask whether  the  qui tam  case  is receiving  "support,
                              

advantage,  or the like" from  the "host" case  (in which the

government is a  party) "without giving any useful  or proper

return" to the  government (or at least  having the potential

to  do so).    See Random  House  Dictionary of  the  English
                                                             

Language  1409 (2d ed. unabridged 1987).  If this question is
        

answered in the affirmative,  the court may properly conclude

that there is an identity between  "the basis" of the qui tam
                                                             

                             -19-
                              19

action  and "the subject of" the other suit or proceeding; if

this  question  is  answered   in  the  negative,  the  court

similarly may gather that such an identity is lacking.

          Of  course, because Congress's intuition as to what

constitutes  "potential useful  and  proper  return"  to  the

government  clearly changed  with the  enactment of  the 1986

amendments,  our endorsement  of this  inquiry would  beg the

question  entirely without  two  further points.   While  the

question of  what now constitutes potential  useful or proper

return to the government  will not always be  easily answered

and must necessarily be addressed on a case-by-case basis, we

believe it important to  note that one of the  most important

perceptions   precipitating  the  1986  amendments  was  that

actions which had the potential of providing such return were

being precluded  by the  then-existing statutory regime.   In

light of  this, we  feel courts  should proceed with  caution

before  applying  the  statutory   bar  of     3730(e)(3)  in

ambiguous circumstances.

          On the other hand, we think it clear that a qui tam
                                                             

suit's  potential  for  adding   funds  to  the  government's

coffers, without more, should not be regarded as constituting
                     

useful or proper return  to the government.  In  enacting the

1943  amendments to  the FCA's  qui tam  provisions, Congress
                                       

clearly rejected the view (espoused in Hess, 317 U.S. at 545)
                                           

that this  potentiality alone  was sufficient to  render non-
                             

                             -20-
                              20

parasitic (and therefore  viable) a qui  tam action which  is
                                            

completely derivative of another case in which the government
          

is  a party.  And, while the 1986 amendments certainly reveal

an  intent to recharacterize as "non-parasitic" actions which

would have  been considered  "parasitic" under the  1943-1986

regime  (which regarded  as "parasitic"  all qui  tam actions
                                                     

based upon  evidence or  information the government  had when

the action was brought), nothing in these amendments suggests

a congressional  desire to return to  the 1863-1943, pre-Hess
                                                             

regime.

          Turning to  the instant  appeal, we think  that two

facts combine to compel the conclusion that this case has the

potential  of  providing "useful  or  proper  return" to  the

government,  and   therefore  is   not  "parasitic"   of  the

Collection  case.   First,  the FDIC  (which we  shall assume

arguendo  to  be "the  government"  within the  meaning  of  
        

3730(e)(3)) was not proceeding against the defendants to this
                   

action,  for fraud  or  otherwise, in  the Collection  case.9

Therefore, because this case is seeking  to remedy fraud that

the government has not yet  attempted to remedy, it is, as  a

threshold matter,  wholly unlike  the one  the drafters  of  

3730(e)(3)  almost  certainly  had  in  mind  and  sought  to

                    

9.  Of the defendants named here, only  Fleet and Recoll were
parties  to the Collection case.   Moreover, Fleet and Recoll
were only parties  to that  case because Prawer  had filed  a
                                               
series of third-party claims against them.

                             -21-
                              21

preclude (i.e., a  qui tam action  based upon allegations  or
                          

transactions  pleaded  by the  government  in  an attempt  to
                                         

recover for fraud committed against it).

          Second, it does not appear that the FDIC could have
                                                             

sued Fleet for fraud as part  of the Collection case as  that
                                                             

case was constituted.   Had it attempted  to do so, the  FDIC
                    

not  only would have been asserting, as a plaintiff, both the

validity and  the invalidity  of the sued-upon  notes against

separate  defendants  in  the   same  lawsuit,  but  it  also

seemingly  would   have  been  claiming   under  an  entirely

different  "transaction or occurrence" (i.e., the put-back of

the notes pursuant to the  Assistance Agreement) than the one

(Prawer's making of the notes and alleged failure to  satisfy

them) which  was the subject  matter of the  Collection case.

This scenario  is not, of  course, allowed under  the Federal

Rules of Civil  Procedure.  See Fed.  R. Civ. P.  14(a) ("The
                               

plaintiff  may  assert  any  claim  against  the  third-party

defendant arising  out of the transaction  or occurrence that
                                                             

is the subject  matter of the  plaintiff's claim against  the
                                                             

third-party plaintiff . . . .") (emphasis supplied); see also
                                                             

C.  Wright, A.  Miller,  and M.  Kane,  Federal Practice  and
                                                             

Procedure,    1459  at 449 n.4  (1990) ("Plaintiff  cannot in
         

effect  substitute,  as  against  the  third-party defendant,

another  cause of  action  for that  originally commenced  by

                             -22-
                              22

him.")  (citing  Welder v.  Washington  Temperance  Ass'n, 16
                                                         

F.R.D. 18, 20 (D. Minn. 1954)).

          Another  way  to  look   at  this  question  is  to

determine  whether defendants' construction of this ambiguous

statutory provision would further the purposes underlying the

1986  amendments.   At  oral argument,  when pressed  on this

point, defendants' attorneys acknowledged that their position

necessarily was predicated upon the view that qui tam actions
                                                     

were  to be  avoided once  the government  had notice  of the

transactions  or allegations  giving  rise to  the actions.10

However, such a  view must be rejected for two  reasons:  (1)

Congress has explicitly deemed a "notice" regime insufficient

to protect  the government  against false claims  (indeed, it

was precisely such  a regime that Congress  sought to abandon
                            

in  enacting the 1986 amendments); and  (2) Congress, when it

wants to establish a notice regime, knows how to do so in far

less ambiguous terms than those utilized in   3730(e)(3), see
                                                             

31 U.S.C.   3730(e)(2)(A) (precluding qui tam actions brought
                                             

against  members of  Congress, members  of the  judiciary, or

senior  executive branch  officials "if  the action  is based

upon evidence or information known to the Government when the

action  was  brought");   31  U.S.C.      3730(b)(4)   (1982)

                    

10.  After all, given  the facts noted  in the preceding  two
paragraphs, the  most defendants here  can argue is  that the
government was, in the  Collection case, provided with notice
of the allegedly fraudulent nature of put-back transaction.  

                             -23-
                              23

(superseded)  (precluding  all  qui  tam  actions  "based  on
                                        

evidence or  information the  Government had when  the action

was brought").

          To  sum  up, the  instant  qui tam  action  has the
                                            

potential  for providing  "useful  or proper  return" to  the

government  in at least two  significant ways:   (1) it seeks

recovery from alleged defrauders  of the government for fraud

that  has  not  yet been  the  subject  of  a  claim  by  the

government;  and (2) it has the potential to restore money to

the  public fisc  that  would not  and  could not  have  been

restored in  the Collection case.   As such, we do  not think

that it can  be characterized as "parasitic."   Therefore, we

believe that  it would  undermine  the purposes  of the  1986

amendments  to  construe this  action  as  being "based  upon

allegations  or transactions  which are  the subject  of" the

Collection case.

B.  Other Matters
                 

          We  recognize  that  defendants have  made  several

alternative  arguments for  affirmance  in  their  respective

briefs.   We  also recognize  that  plaintiffs have  moved to

dismiss Fleet and Recoll from this action.  Given the nascent

state  of this  litigation  (and  all  that this  implies  --

including an undeveloped record, an inadequate period of time

for plaintiffs to have cured any defects in  their pleadings,

and the lack of a full opportunity for the government to have

                             -24-
                              24

reviewed the pleadings, see 31 U.S.C.   3730(b)), however, we
                           

decline either  to delve into defendants'  other arguments or

to  grant  plaintiffs'  motion   to  dismiss  at  this  time.

Instead,  we leave  these matters for  the district  court to

decide after the government determines whether or not it will
            

intervene.  So  too do  we leave  to the  district court  all

requests  for costs arising out of claims that this action is

frivolous  and  has been  undertaken in  bad  faith.   To the

extent that any such request may be predicated on an argument

that this appeal was frivolous, it is rejected.

                             III.
                                 

                          CONCLUSION
                                    

          For the  reasons explained  above, we do  not think

that the instant qui tam action "is based upon allegations or
                        

transactions which  are the subject of"  the Collection case.

Accordingly,  the  district  court  erred  in dismissing  sua
                                                             

sponte plaintiffs'  complaint  on the  basis of  31 U.S.C.   
      

3730(e)(3).   The judgment of the district court therefore is

vacated.

          Vacated and remanded.  No costs.
                                          

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                              25