the meaning of the FCA and that the FCA's treble damages provision is not
1. The County is a "Person" Under the FCA
The court considers two factors in determining whether the County is a
"person" under the FCA: (1) the text of the statute; and (2) its
legislative history. The statute renders liable "any person who" submits
false claims to the federal government. 31 U.S.C. § 3729(a). The FCA
does not define the term "person" as used in § 3729(a). However, the
civil investigative demand provision of the act includes in its
definition of person "any State or political subdivision of a State."
31 U.S.C. § 3733(1)(4). In addition, courts have interpreted the
statute to include states among the "person[s]" who may file qui tam
actions under § 3730(b). See, e.g., United States ex rel. Stevens v.
State of Vermont Agency of Natural Resources, 162 F.3d 195, 205 (2d Cir.
1998) (holding that in light of the legislative history of §
3730(b), "Congress viewed the States as persons who could be qui tam
plaintiffs"); United States ex rel. Woodard and State of Colorado v.
Country View Care Center, Inc., 797 F.2d 888, 893 (10th Cir. 1986);
United States ex rel. Hartigan and State of Illinois v. Palumbo
Brothers, Inc., 797 F. Supp. 624, 631 (N.D.Ill. 1992) ("We conclude that
the FCA was specifically amended to provide jurisdiction for qui tam
plaintiffs like Illinois.").
The court concludes that Congress intended the word "person" to have
the same meaning in each section in which it is used. See Commissioner
v. Lundy, 516 U.S. 235, 250, 116 S.Ct. 647, 133 L.Ed.2d 611 (1996)
(applying the "normal rule of statutory construction that identical words
used in different parts of the same act are intended to have the same
meaning") (internal citations omitted). The text of the statute and other
federal courts' interpretation thereof suggest that states and their
political subdivisions are "person[s]" under § 3729(a). Accord
Stevens, 162 F.3d at 205; United States ex rel. Zissler v. Regents of the
University of Minnesota, 154 F.3d 870, 875 (8th Cir. 1998).*fn4
The legislative history of the FCA likewise suggests that Congress
intended to include states and other units of local government as
"persons" who can be sued under the act. The Senate Report accompanying
the 1986 amendments to the FCA, in a section describing the history of
the act, states: "The False Claims Act reaches all parties who may submit
false claims. The term `person' is used in its broad sense to include
partnerships, associations, and corporations . . . as well as States and
political subdivisions thereof." S.Rep. No. 99-345, at 8-9 (1986),
reprinted in 1986 U.S.C.C.A.N. 5266, 5273-74. Other courts have held that
this language indicates that Congress interpreted the FCA as applying to
states and other local governments. Stevens, 162 F.3d at 207; Zissler,
154 F.3d at 874-75; United States ex rel. Long v. SCS Business &
Technical Institute, 999 F. Supp. 78, 85 (D.D.C. 1998). The County
Defendants rely heavily on Graber, the one case that has held otherwise.
The district court's decision in that case, however, was issued after
Stevens had been argued but before the Second Circuit issued its
opinion, which effectively overruled Graber by holding that the FCA
applied to states and local governments.*fn5
2. The Damages Imposed by the FCA Are Not Punitive
The County Defendants argue that even if the County is a "person" under
§ 3729, the County is immune from suit under the FCA
because the act imposes punitive damages. The Supreme Court has held that
municipalities are immune from punitive damages in § 1983 suits. See
City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 271, 101 S.Ct.
2748, 69 L.Ed.2d 616 (1981). The Court found that imposing punitive
liability on municipalities does not fulfill the traditional purposes of
punitive damages, deterrence and retribution. Id. 453 U.S. at 267-71, 101
S.Ct. 2748.*fn6 Defendants concede that the Supreme Court has held that
the FCA is not a punitive statute. See, e.g., United States v. Halper,
490 U.S. 435, 449, 109 S.Ct. 1892, 104 L.Ed.2d 487 (1989) (holding that
the FCA's "fixed-penalty-plus-double-damages provisions" does not, in
most cases, constitute punishment for the purposes of double jeopardy),
overruled on other grounds by Hudson v. United States, 522 U.S. 93, 118
S.Ct. 488, 139 L.Ed.2d 450 (1997) (rejecting Halper's definition of
"punishment" in the double jeopardy context because double jeopardy merely
prohibits the imposition of additional criminal sanctions, not of all
additional sanctions that might be termed punishments); United States v.
Bornstein, 423 U.S. 303, 314-15, 96 S.Ct. 523, 46 L.Ed.2d 514 (1976);
United States ex rel. Marcus v. Hess, 317 U.S. 537, 551-52, 63 S.Ct.
379, 87 L.Ed. 443 (1943) ("[T]he chief purpose of the statute here 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."). Defendants argue, however, that the foregoing cases are no
longer apt, because they were decided before the 1986 amendments to the
FCA. According to the County Defendants, Congress transformed the FCA
into a punitive statute by revising its damages provisions to allow for
treble damages rather than a fixed penalty plus double damages.
Although the Seventh Circuit has yet to address the issue, a number of
other circuit and district courts have held that the FCA's treble damages
provision is not punitive. See, e.g., Stevens, 162 F.3d at 207; United
States v. Brekke, 97 F.3d 1043, 1048 (8th Cir. 1996); United States v.
Barnette, 10 F.3d 1553, 1559-60 (11th Cir. 1994); Long, 999 F. Supp. at
85-86. But see Graber, 8 F. Supp.2d at 349. The Supreme Court has held
that the federal government "is entitled to rough remedial justice."
Halper, 490 U.S. at 446, 109 S.Ct. 1892. Halper reasoned that the
multiple recovery allowed under the FCA was compensatory, not punitive,
because it was rationally related to the government's loss. Id. 490 U.S.
at 449, 109 S.Ct. 1892.
Under Halper, "proportionality is the key." Barnette, 10 F.3d at 1560.
The compensation the government requested in Halper was vastly
disproportionate to its losses: Although the government had suffered only
$16,000 in actual damages, it requested an additional fine of $130,000, a
ratio of 8 to 1. See Barnette, 10 F.3d at 1560 (discussing Halper, 490
U.S. at 452, 109 S.Ct. 1892). In the present case, plaintiff claims $5
million in actual damages to the government and seeks $15 million in
compensation, plus between $5,000 and $10,000 per false claim, far less
than the ratio in Halper. Raising the stakes from double to treble
damages does not render the relationship between loss and recovery
irrational in the present case. See Brekke, 97 F.3d at 1048 (holding that
a post-amendment FCA case was compensatory and not punitive) ("We do not
see how the treble damages provision of the False Claims Act is different
from the `ordinary case' discussed in Halper," the case in which the
damages were a fixed penalty plus double damages); Barnette, 10 F.3d at
1560 (holding that a 3.2 to 1 ratio of compensation to actual damages is
In an attempt to argue that the FCA's treble damages provisions are
penal, the County Defendants analogize the statute to the civil Racketeer
Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961
et seq. Both RICO and the antitrust laws authorize treble damages. The
Seventh Circuit has held that "a treble damage antitrust
suit is most appropriately characterized as an action for a penalty," and
has likewise held that "[b]ecause a civil RICO claim is best
characterized as an action for treble damages, . . . such an action is
penal in nature." Tellis v. United States Fidelity & Guaranty Co.,
805 F.2d 741, 746 (7th Cir. 1986), vacated Agency Holding Corp. v.
Malley—Duff & Associates, Inc., 483 U.S. 143, 107 S.Ct. 2759, 97
L.Ed.2d 121 (1987). However, the Seventh Circuit has addressed the nature
of treble damages in antitrust and RICO actions for the narrow purpose of
electing the state statute of limitations to apply to such actions. See,
e.g., id. (holding that because civil RICO is penal in nature, Illinois'
two-year statute of limitations for actions based on a statutory penalty
applies to civil RICO claims); Schiffman Bros. v. Texas Co., 196 F.2d 695,
696 (7th Cir. 1952) ("[T]he real question facing us, therefore, was not
whether the action was one to recover a statutory penalty within the
meaning of any federal statute but whether actions such as this are
limited to a period of two years under the Illinois statutes. . . . We
are not concerned at all, then, with anything other than the question of
what statute of limitations of Illinois is applicable to actions to
recover treble damages.").
The Seventh Circuit has never held that treble damages are, by
definition, punitive. See, e.g., Adler v. Northern Hotel Co., 175 F.2d 619
(7th Cir. 1949) (holding that treble damages under the Housing and Rent
Act are remedial in nature). The reach of Tellis' holding is further
undermined by language in Agency Holding Corp., which held that the
Clayton Act's four-year statute of limitations applies to RICO claims as
well, overruling Tellis and other cases that had applied state law
statutes of limitations to RICO claims. See Agency Holding Corp.,
483 U.S. 143, 107 S.Ct. 2759, 97 L.Ed.2d 121. Agency Holding Corp. described
RICO and the Clayton Act as "designed to remedy economic injury by
providing for the recovery of treble damages, costs, and attorney's fees,"
and explained that "both statutes aim to compensate the same type of
injury." Id. 483 U.S. at 151, 107 S.Ct. 2759 (emphasis added). The
Court's use of compensatory, rather than punitive, language to discuss
the purpose of civil RICO and the antitrust laws suggests that the two
statutes' treble damages provisions are not wholly punitive in nature.
Finally, according to the legislative history, the purpose of the 1986
amendments was "to enhance the Government's ability to recover losses
sustained as a result of fraud against the Government" and "to make the
statute a more useful tool against fraud in modern times." S.Rep. No.
99-345, at 1, reprinted in 1986 U.S.C.C.A.N 5266; see also Zissler, 154
F.3d at 874. These broad goals suggest that Congress did not intend to
place beyond the reach of the statute a large class of potential
wrongdoers—municipalities, counties, and other units of local
government. Taking the allegations of the complaint as true for the
purposes of the present motion to dismiss, the County defendants fall
within this class of wrongdoers.
The court finds that: (1) the County is a "person" for the purposes of
the FCA; and (2) the FCA's treble damages provision is more compensatory
than punitive. See Stevens, 162 F.3d at 207; Zissler, 154 F.3d at 875;
Taxpayers Against Fraud, 999 F. Supp. at 78; see also Brekke, 97 F.3d at
1048 ("A multiple recovery of this type is compensatory rather than
punitive, even though it contains a penalty element. . . ."). The FCA
applies to the County.
B. Motion to Dismiss CCH
The County Defendants move to dismiss CCH from the complaint because
the hospital does not have a legal existence separate from that of Cook
County. See Payne v. Cook County Hosp., 719 F. Supp. 730, 734 (N.D.Ill.
1989). Because Cook County is the appropriate defendant in this action,
the court grants the motion to dismiss the hospital as a separate
C. Motion to Dismiss FCA Retaliatory Discharge Claim (Count II)
The County Defendants move to dismiss Count II, arguing that it does
not state a claim against them. The FCA's retaliatory discharge provision
Any employee who is discharged, demoted, suspended,
threatened, harassed, or in any
other manner discriminated against in the terms and
conditions of employment by his or her employer
because of lawful acts done by the employee on behalf
of the employee or others in furtherance of an action
under this section, including investigation for,
initiation of, testimony for, or assistance in an
action filed or to be filed under this section, shall
be entitled to all relief necessary to make the
31 U.S.C. § 3730(h). The County Defendants argue that plaintiff
cannot state a claim under § 3730(h) because she does not allege that
she was employed by the County.
Plaintiff does not allege sufficient facts from which the court can
infer that the County Defendants were her employers. Plaintiff alleges
that Hektoen hired her as the New Start project director on October 1,
1993, that she was employed by Hektoen, and that Prochaska, Hektoen's
administrator, ultimately fired her. Although plaintiff alleges that Dr.
Mason, an employee of CCH, removed medical and childcare matters from
plaintiffs responsibilities as project director, these allegations do not
prove that CCH was plaintiffs employer.
At best, plaintiff alleges that Dr. Mason conspired with Hektoen to
retaliate against plaintiff. The County Defendants cite a well-reasoned
district court case holding that § 3730(h) liability cannot be
extended to nonemployers on the basis of a conspiracy. See Mraz v.
Caring, Inc., 991 F. Supp. 701, 709 (D.N.J. 1998). The court agrees that
the plain language of § 3730(h) "reflects a legislative intent to
operate exclusively in the area of the `employment relationship.'" Id. at
708. Although plaintiff argues that Cook County should be liable for the
acts of its employees whether or not they are key decisionmakers, she
does not establish as an initial matter that Cook County or any of its
employees were her "employer" under the plain language of the statute.
The County Defendants' motion to dismiss Count II is granted.
D. Motion to Dismiss State Law Retaliation Claim (Count III)
The County Defendants move to dismiss Count III of plaintiffs
complaint, arguing that plaintiff cannot state a claim for retaliatory
discharge under Illinois law. The County Defendants also move to strike
from Count III plaintiffs request for punitive damages against them.
Because the court has found that plaintiff cannot state a retaliatory
discharge claim and that she does not allege that the County Defendants
employed her, the County Defendants' motions are granted.
The court denies Hektoen's and the County Defendants' motions to
dismiss Count I on the ground that the FCA's qui tam provisions are
unconstitutional. The court likewise denies the County Defendants'
supplemental motion to dismiss Count I against them on the ground that
they are not suable "persons" under the FCA.
The court grants the County Defendants' motion to dismiss CCH because
Cook County is the appropriate defendant in this action. Because
plaintiff does not allege that she was employed by the County, the court
grants the County Defendants' motion to dismiss Count II against them.
Finally, the Court grants Hektoen's and the County Defendants' motions to
dismiss Count III because plaintiff does not allege that her discharge
violated clearly established Illinois public policy.
The court declines to stay discovery pending Cook County's appeal of
the court's immunity decision. This case is already two years old.
Moreover, this case will proceed against Hektoen regardless of the
outcome of an appeal by the County. Even if the County were not a party
to this suit, the documents plaintiff requests would be subject to
subpoena, and as a non-party the County would have no claim of immunity.