UNITED STATES v. BORNSTEIN ET AL.
No. 74-712
Supreme Court of the United States
Argued October 8, 1975—Decided January 14, 1976
423 U.S. 303
Deputy Solicitor General Jones argued the cause for the United States. With him on the brief were Solicitor General Bork, Acting Assistant Attorney General Jaffe, and David M. Cohen.
Jack Ballan argued the cause and filed a brief for respondent Bornstein. William Rossmoore argued the cause and filed a brief for respondent Page.
MR. JUSTICE STEWART delivered the opinion of the Court.
The False Claims Act provides that the United States may recover from a person who presents a false claim or causes a false claim to be presented to it a forfeiture of $2,000 plus an amount equal to double the amount of damages that it sustains by reason of the false claim.1 This case presents two interpretative problems
with the costs of suit; and such forfeiture and damages shall be sued for in the same suit.”
§ 5438. “Every person who makes or causes to be made, or presents or causes to be presented, for payment or approval, to or by any person or officer in the civil, military, or naval service of the United States, any claim upon or against the Government of the United States, or any department or officer thereof, knowing such claim to be false, fictitious, or fraudulent, or who, for the purpose of obtaining or aiding to obtain the payment or approval of such claim, makes, uses, or causes to be made or used, any false bill, receipt, voucher, roll, account, claim, certificate, affidavit, or deposition, knowing the same to contain any fraudulent or fictitious statement or entry, or who enters into any agreement, combination, or conspiracy to defraud the Government of the United States, or any department or officer thereof, by obtaining or aiding to obtain the payment or allowance of any false or fraudulent claim, or who, having charge, possession, custody, or control of any money or other public property used or to be used in the military or naval service, who, with intent to defraud the United States or willfully to conceal such money or other property, delivers or causes to be delivered, to any other person having authority to receive the same, any amount of such money or other property less than that for which he received a certificate or took a receipt, and every person authorized to make or deliver any certificate, voucher, receipt, or other paper certifying the receipt of arms, ammunition, provisions, clothing, or other property so used or to be used, who makes or delivers the same to any other person without a full knowledge of the truth of the facts stated therein, and with intent to defraud the United States, and every person who knowingly purchases or receives in pledge for any obligation or indebtedness from any soldier, officer, sailor, or other person called into or employed in the military or naval service any arms, equipments, ammunition, clothes, military stores, or other public property, such soldier, sailor, officer, or other person not having the lawful right to pledge or sell the same, every person so offending in any of the matters set forth in this section shall be imprisoned at hard labor for not less than one nor more
I
In 1962, the United States entered into a $2,100,000 contract with Model Engineering & Manufacturing Corporation, Inc. (Model), for the provision of radio kits. Each kit was to contain electron tubes that met certain specifications. Model subcontracted with United National Labs (United) to supply these tubes at a price of $32 each. The tubes that United sent to Model under this subcontract were not of the required quality, but were falsely marked by United to indicate that they were. United sent at least 21 boxes of these falsely marked tubes to Model, in three separately invoiced shipments. The radio kits that Model in turn shipped to the United States contained 397 of those falsely marked tubes. Model sent 35 invoices to the Government for the radio kits, and each invoice included claims for payment for the falsely marked tubes that had been supplied to Model by United. After the Government discovered the fraud, it recovered $40.72 per tube from Model and also retained the falsely marked tubes.
than five years, or fined not less than one thousand nor more than five thousand dollars.”
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 and1001 .
II
The Number of Statutory Forfeitures
The False Claims Act provides that a person “who
The legislative history of the Act offers little guidance on how properly to determine the number of forfeitures. The Act was originally aimed principally at stopping the massive frauds perpetrated by large contractors during the Civil War.5 There is no indication that Con-
The respondents defend the decision of the Court of Appeals that held them liable for only one forfeiture. In reaching this conclusion the Court of Appeals relied principally on its earlier decision in United States v. Rohleder, 157 F. 2d 126 (CA3), where it found that 16 forfeitures were appropriate because 16 contracts were involved. The Rohleder court had relied in turn on this Court‘s decision in United States ex rel. Marcus v. Hess, supra. The Hess case involved several electrical contractors who had collusively bid on 56 Public Works Administration projects. The District Court in Hess had imposed 56 forfeitures, rejecting the defendants’ claim that only one forfeiture should have been imposed because there had been only one fraudulent scheme. This Court concluded that the District Court was correct because the incidence of fraud on each separate project was clearly individualized. 317 U. S., at 552. No party argued in this Court that more than 56 forfeitures should have been imposed, and no statement in the Hess opinion expressly limited the number of imposable forfeitures to the number of contracts involved in a case. Hess simply approved the result reached by the District Court which had found that “in each project there was a single, false, or fraudulent claim.” 41 F. Supp. 197, 216 (WD Pa.).
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
If United had committed one act which caused Model to file a false claim, it would clearly be liable for a single forfeiture. If, as a result of the same act by United, Model had filed three false claims, United would still have committed only one act that caused the filing of false claims, and thus, under the language of the statute, would again be liable for only one forfeiture. If, on the other hand, United had committed three separate such causative acts, United would be liable for three forfeitures, even if Model had filed only one false claim. The Act, in short, penalizes a person for his own acts, not for the acts of someone else.
The Government‘s claim that United “caused” Model to submit 35 false claims is simply not accurate. While United committed certain acts which caused Model to submit false claims, it did not cause Model to submit any particular number of false claims. The fact that Model chose to submit 35 false claims instead of some other number was, so far as United was concerned, wholly irrelevant—completely fortuitous and beyond United‘s knowledge or control. The Government suggests that United assumed the risk that Model might send 35 invoices when United sent the falsely branded tubes to Model. The statute, however, does not penalize United for what Model did. It penalizes United for what it did. The construction given to the statutory
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 submit 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 falsely 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
III
Computation of Double Damages
In the District Court “[t]he Government ... established that the per unit cost to replace the [falsely
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
Although there is nothing in the legislative history that specifically bears on the question of how to calculate double damages, past decisions of this Court have reflected a clear understanding that Congress intended the double-damages provision to play an important role in compensating the United States in cases where it has been defrauded. “We think the chief purpose of the [Act‘s civil penalties] was to provide for restitution to the government of money taken from it by fraud, and that the device of double damages plus a specific sum was chosen to make sure that the government would be made completely whole.” United States ex rel. Marcus v. Hess, 317 U. S., at 551-552. For
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 com-
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
The judgment is reversed, and the case is remanded to the Court of Appeals for further proceedings consistent with this opinion.
It is so ordered.
MR. JUSTICE STEVENS took no part in the consideration or decision of this case.
MR. JUSTICE REHNQUIST, with whom THE CHIEF JUSTICE and MR. JUSTICE WHITE join, concurring in part and dissenting in part.
I join the opinion of the Court with respect to Part III‘s treatment of the double-damages issue. But the narrow construction of the False Claims Act adopted by the Court in Part II of the opinion, while not repugnant to the face of the statute itself, is by no means the only permissible construction of that language. Because that construction, as applied to the facts of this case, leads to an arbitrary result providing a windfall for those who would seek to defraud the Government, I would construe the statute somewhat differently than does the Court. Instead of concentrating in isolation on the “conduct of the person from whom the Government seeks to collect the statutory
Revised Stat. § 3490 provides that any nonmilitary person “who shall do or commit any of the acts prohibited by any” of the provisions of Rev. Stat. § 5438 “shall forfeit and pay” $2,000 to the United States. The “act” which is prohibited by the first clause of § 5438, at issue here, is the “mak[ing] or caus[ing] to be made, or present[ing] or caus[ing] to be presented, for payment ... any claim ... against the Government ... knowing such claim to be false, fictitious, or fraudulent....” That which is proscribed, then, is the causing to be presented a false claim against the Government with knowledge of the falsity of the claim.
Reading the pertinent portion of the above to impose liability only for the “commission of acts which cause false claims to be presented” (emphasis added), the Court construes this language to require the trier of fact to “focus in each case ... upon the specific conduct of the person from whom the Government seeks to collect the statutory forfeitures.” It then goes on to hold, apparently as a matter of law, that “the three separately invoiced shipments to Model” were the causative “acts” to which forfeiture liability attaches. As may be more readily seen from an examination of the facts of this case, this extremely narrow construction and application produce a result which bears little relationship to the congressional purpose.
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
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 al-
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,
The Court‘s construction of the statute, as applied to these facts, leads to a result which is not only arbitrary but has the effect of allowing those who would defraud the Government to minimize their potential penalties by shipping all of their rotten eggs in one basket. I believe that a somewhat different construction is at least equally consistent with the language and would produce a result far more consistent with the congressional purpose to penalize those who would defraud the Government.
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
There may well be room for inference on the part of the trier of fact in this case, if not on the present record, on such additional record as could be compiled on remand, that respondent subcontractor knew or had reason to believe that the prime contractor would assemble and forward finished products to the Government at routine and regular intervals. Nor would it be unforeseeable under such a set of circumstances that the prime contractor would regularly invoice the Government for the customary progress payments. I am unwilling to accept the flat conclusion that it was “wholly beyond” the subcontractor‘s ability to foresee that 35 false claims would be generated by his fraud. Evidence such as the terms of the prime contract, and the subcontract, the sub-
Notes
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
The relevant statutory provisions are as follows:
§ 3490. “Any person not in the military or naval forces of the United States, or in the militia called into or actually employed in the service of the United States, who shall do or commit any of the acts prohibited by any of the provisions of section fifty-four hundred and thirty-eight, Title ‘CRIMES,’ shall forfeit and pay to the United States the sum of two thousand dollars, and, in addition, double the amount of damages which the United States may have sustained by reason of the doing or committing such act, together
One such required marking is the “JAN” prefix, which stands for Joint Army Navy qualification standard. This brand, registered by the Patent Office, is to be used by the manufacturer only after the tubes have passed Government inspection at the place of manufacture during the manufacturing process. 361 F. Supp. 869, 872 n. 3 (NJ 1973). In addition, following the JAN prefix is the Manufacturer‘s Qualification Code, which shall be used only by the manufacturer to whom it has been assigned and only as a part of the designation on tubes manufactured at the plant to which qualification approval was granted. Id., at 871 n. 2. Only manufacturers whose plants have passed rigorous qualifying tests are issued this Code. The Code for the sole authorized maker of these tubes was “CIM,” which identified Eitel McCullough, Inc. (Eimac), a California corporation. In addition to the JAN-CIM brand on tubes that passed all of the tests, Eimac would imprint a four-figure number indicating the year and week of acceptance. Id., at 872.This argument would have some force if the only enforcement mechanism provided in the Act were the qui tam action. However, the Act clearly envisioned that the Government could sue on its own behalf, § 4, and it specifically exhorted United States attorneys to enforce the Act diligently. § 5. Moreover, in 1943 Congress placed restrictions on the possibility of bringing a qui tam action and limited a private person‘s recovery to a maximum of one quarter of the damages awarded the United States, Act of Dec. 23, 1943, c. 377, 57 Stat. 608. In adopting these changes, Congress did not make any adjustment in the double-damages provision, again suggesting that it thought that double damages are necessary to make the United States whole in fraudulent-claim cases.