Sanders v. Allison Engine Co.

703 F.3d 930

Roger L. SANDERS and Roger L. Thacker (10–3821); United States of America (10–3818), Plaintiffs–Appellants,

v.ALLISON ENGINE COMPANY, INC., General Tool Co., Southern Ohio Fabricators, Inc., General Motors Corporation, Defendants–Appellees.

Nos. 10–3818, 10–3821.

United States Court of Appeals, Sixth Circuit.

Argued: June 5, 2012.

Decided and Filed: Nov. 2, 2012 ^*.

Rehearing and Rehearing En Banc^** Denied Dec. 5, 2012.

Negative Treatment Reconsidered

31 U.S.C.A. § 3729(a)(1)(B)

ARGUED:Thomas M. Bondy, United States Department of Justice, Washington, D.C., for Appellant in 10–3818. James B. Helmer, Jr., Helmer Martins, Rice & Popham, Co., L.P.A., Cincinnati, Ohio, for Appellants in 10–3821. Glenn V. Whitaker, Vorys, Sater, Seymour & Pease, LLP, Cincinnati, Ohio, for Appellees in 10–3818 and 10–3821. ON BRIEF:Douglas N. Letter, Irene M. Solet, United States Department of Justice, Washington, D.C., for Appellant in 10–3818. James B. Helmer, Jr., Paul B. Martins, Robert M. Rice, Erin M. Campbell, Helmer, Martins, Rice & Popham, Co., L.P.A., Cincinnati, Ohio, for Appellants in 10–3821. Glenn V. Whitaker, Victor A. Walton, Jr., Michael J. Bronson, Mary C. Henkel, Vorys, Sater, Seymour & Pease, LLP, Cincinnati, Ohio, Gregory A. Harrison, Dinsmore & Shohl, L.L.P., Cincinnati, Ohio, William A. Posey, Keating, Muething & Klekamp, PLL, Cincinnati, Ohio, for Appellees in 10–3818 and 10–3821.

Before: BATCHELDER, Chief Judge; GIBBONS, and COOK, Circuit Judges.

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

This case arises out of a qui tam action pursuant to the False Claims Act (“FCA”). Following this panel's prior decision in this case—finding that liability under the FCA did not require presentment of a false claim to the government—the defendant contractors and subcontractors appealed to the Supreme Court. The Supreme Court reversed, finding that 31 U.S.C. § 3729(a)(2) liability required presentment of the claim to the government. Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 668–69, 128 S.Ct. 2123, 170 L.Ed.2d 1030 (2008). In May 2009, Congress passed the Fraud Enforcement and Recovery Act of 2009 (“FERA”), which amended several anti-fraud statutes, including the FCA. Congress specifically amended the liability standards then set forth in § 3729(a)(2) of the FCA in order to remove the presentment requirement imposed by the Supreme Court's decision. It also included specific retroactivity languagein § 4(f)(1) of FERA indicating that the changes to § 3729(a)(2), now codified at § 3729(a)(1)(B), “shall take effect as if enacted on June 7, 2008, and apply to all claims under the False Claims Act ... that are pending on or after that date.” Fraud Enforcement and Recovery Act of 2009, Pub.L. No. 111–21, § 4(f)(1), 123 Stat. 1617, 1625 (emphasis added). After FERA was passed, the defendants in this case filed a motion to preclude retroactive application of the amended provisions in § 3729, which the district court granted, finding that the retroactive language in FERA did not apply to this action, because no claim was pending in June 2008 and further that retroactive application of the amendments was prohibited under the Ex Post Facto Clause. The question of retroactive application of the amendments to § 3729(a)(2) was then certified for interlocutory appeal. For the reasons that follow, we reverse the district court's order precluding retroactive application of 31 U.S.C. § 3729(a)(1)(B) and remand for further proceedings.

I.

In 1995, Roger L. Sanders and Roger L. Thacker, relators, brought a qui tam action pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq., alleging that several defendant subcontractors engaged in fraud in connection with the construction of generator sets used in United States Navy Arleigh–Burke–class Guided Missile Destroyers. Allison Engine Co., 553 U.S. at 665–67, 128 S.Ct. 2123. The case was then consolidated with a separate FCA suit brought by the relators regarding the same alleged fraudulent conduct. The first action, referred to as the “Quality Case,” alleged that the defendants submitted claims for payment related to the construction of the generator sets despite knowing that the generator sets failed to conform to contract specifications and Navy regulations. The second action, referred to as the “Pricing Case,” involved allegations that the defendants withheld cost and pricing data during their negotiations with the government's agent in violation of the Truth in Negotiations Act and the FCA. Only the Quality Case is at issue in this appeal. The Quality Case was tried before a jury, and at the close of the relators' case, the defendants filed a motion for judgment as a matter of law on the grounds that the relators failed to produce evidence of a false claim presented to the Navy—and that without proof of presentment no reasonable jury could find a violation of the FCA. Id. at 667, 128 S.Ct. 2123. The district court granted the motion on the grounds that proof of a false claim presented to the government was required to find a violation under § 3729 of the FCA. United States ex rel. Sanders v. Allison Engine Co., No. 1–:95–CV–970, 2005 WL 713569, at *10–12 (S.D.Ohio Mar. 11, 2005).

On appeal, this court held that there was no presentment requirement for liability to attach under § 3729(a)(2) or (3) and reversed the district court's grant of judgment as a matter of law in the Quality Case. United States ex rel. Sanders v. Allison Engine Co., 471 F.3d 610, 613 (6th Cir.2006). The defendants appealed the decision to the Supreme Court, which vacated this court's decision and remanded. Allison Engine Co., 553 U.S. at 673, 128 S.Ct. 2123.

The Supreme Court found that for § 3729(a)(2) liability to attach, “a defendant must intend that the Government itself pay the claim.” Id. at 669, 128 S.Ct. 2123. The Court noted that this intent requirement did not mean that “proof that the defendant caused a false record or statement to be presented or submitted to the Government” was required; rather, liability could be established if it was proven that the “defendant made a false record or statement for the purpose of getting ‘a false or fraudulent claim paid or approved by the Government.’ ” Id. at 671, 128 S.Ct. 2123.

On February 27, 2009, we remanded the case to the district court for further proceedings consistent with the Supreme Court's opinion. On May 20, 2009, Congress passed FERA, Pub.L. No. 111–21, 123 Stat. 1617 (2009), which amended portions of the FCA and other anti-fraud statutes. Included among the amendments was a change to the standard of liability imposed under the FCA. Pub.L. No. 111–21, § 4, 123 Stat. 1617, 1621–25. Section 4 of FERA is titled “Clarifications to the False Claims Act to Reflect the Original Intent of the Law.” Id. Although the FCA previously imposed liability for “knowingly mak[ing] ... a false record or statement to get a false or fraudulent claim paid or approved by the Government,” 31 U.S.C. § 3729(a)(2) (2006), the amended liability standard imposes liability for “knowingly mak[ing] ... a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(B) (2012). This section of FERA was intended to “clarify and correct erroneous interpretations of the law that were decided in Allison Engine Co. ....” S.Rep. No. 111–10, at 10, 2009 U.S.C.C.A.N. 430, 438.

Section 4 of FERA provides that the FCA amendments apply to conduct occurring on or after the date of enactment (May 20, 2009).¹ FERA § 4(f). FERA contains, however, two exceptions where a different effective date applies to the FCA amendments. Pursuant to § 4(f)(1), the amended liability provision “shall take effect as if enacted on June 7, 2008,² and apply to all claims under the False Claims Act ... that are pending on or after that date.” FERA § 4(f)(1) (emphasis added). Under the second exception, provisions governing how new allegations filed by the United States as intervenor relate back to the date of the relator's complaint as well as other amendments to various provisions of the FCA, “apply to cases pending on the date of enactment.” FERA § 4(f)(2) (emphasis added).

On July 21, 2009, the defendants filed a motion to preclude the retroactive application of the amended FCA liability standard set forth in 31 U.S.C. § 3729(a)(1)(B) or, in the alternative, to declare unconstitutional FERA § 4(f). The defendants noted that in contrast to the majority of FCA amendments, which apply prospectively, FERA's expansion of liability under § 3729(a)(1) was made retroactive to two days before the Supreme Court's decision in Allison Engine and suggested that Congress intended to overturn the decision and to create liability for conduct not forbidden under the prior version of the FCA. The defendants argued that the Ex Post Facto Clause and their Fifth Amendment due process rights would be violated by retroactive application of § 3729(a)(1)(B).

The relators filed a memorandum in opposition to defendants' motion to preclude and argued that the retroactive application of 31 U.S.C. § 3729(a)(1)(B) would not violate the Ex Post Facto Clause. The United States filed a statement of interest in response to the motion to preclude and made three primary arguments: (1) the district court should observe the principle of constitutional avoidance and avoid reaching the constitutional challenges raised by defendants by finding that the amended liability provision would not change the outcome of the case, (2) application of the new liability provision would not affect the defendants' expectations and would not be retroactive in the relevant sense because the Supreme Court's Allison Engine decision did not exist when the defendants acted, and (3) application of § 3729(a)(1)(B) would not violate the Ex Post Facto Clause or the Due Process Clause because the FCA is a remedial statute and because the congressional decision to make amendments to the FCA liability...