Pequignot v. Solo Cup Company, No. 1:2007cv00897 - Document 105 (E.D. Va. 2009)
Court Description: MEMORANDUM OPINION: For the reasons stated in this Opinion, defendant's Motion to Dismiss for Lack of Jurisdiction will be DENIED. A separate order consistent with this opinion will be issued.Signed by District Judge Leonie M. Brinkema on 03/27/09. (yguy)
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IN THE UNITED STATES DISTRICT COURT FOR EASTERN DISTRICT OF VIRGINIA Alexandria Division MATTHEW A. PEQUIGNOT, Plaintiff, l:07cv897 v. SOLO CUP (LMB/TCB) COMPANY, Defendant. MEMORANDUM OPINION Plaintiff Matthew A. Pequignot {"Pequignot") action for false patent marking under 35 U.S.C. complaint, ("Solo") has filed this § 292. In the Pequignot alleges that defendant Solo Cup Company falsely marked several of its products with expired patent numbers and improperly marked other products with conditional patent markings. Solo has filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction, arguing that Pequignot lacks standing to bring suit under Article III of the United States Constitution.1 Alternatively, Solo argues that if Pequignot is found to have standing to sue under § 292(b) as a qui tarn relator, maintenance of this action would violate the constitutional separation of powers doctrine, specifically the 1 Solo' previously filed a Motion to Dismiss for Failure to State a Claim Pursuant to Fed. R. Civ. P. 12(b)(6), arguing that the alleged violations - marking articles with expired patent numbers or statements that the articles "may be covered" by patents - do not constitute false marking under the statute as a matter of law. In a memorandum opinion, the Court denied that motion. See Peguianot v. Solo Cup Co., 540 F Supp 2d 649 (E D Va. 2008) . Take Care clause of Article II, § 3. The United States has intervened to defend the constitutionality of 35 U.S.C. § 292(b). For the reasons stated in open court and in this memorandum opinion, Solo's motion will be denied. I. Solo, a Delaware corporation with its principal place of business in Illinois, plates, bowls, attorney. Background is a manufacturer of disposable cups, and utensils. lids, Pequignot is a licensed patent In his Second Amended Complaint, Pequignot alleges that Solo has committed numerous violations of 35 U.S.C. which prohibits false patent marking. Specifically, § 292, Pequignot alleges that Solo has marked various products with two patents that have expired, U.S. Patent No. U.S. Patent No. RE28,797, 4,589,569, entitled "Lid," and entitled "Lid for Drinking Cup." Pequignot also alleges that Solo has marked several products with the phrase, "This product may be covered by one or more U.S. or foreign pending or issued patents," when those products were neither protected by any patent nor the subject matter of any pending patent application. The false marking statute provides that whoever falsely marks a product with either a patent number, the words "patent" or "patent pending," or any other words or numbers implying that the product is protected by a current or pending patent when it is not, and does so with the intent of deceiving the public, -2- "[s]hall be fined not more than $500 for every such offense." U.S.C. § 292(a). penalty, It further states, "Any person may sue for the in which event one-half shall go to the person suing and the other to the use of the United States." Although Pequignot does not, and cannot, particularized injury to himself, 35 U.S.C. § 292(b). allege any he asserts standing based on the literal language of the statute, of 35 and seeks the maximum amount the statutory fine for each alleged violation. In its Motion to Dismiss, Solo asserts that Pequignot lacks standing to pursue this action under Article III of the United States Constitution, and alternatively, that allowing him to bring suit would violate the constitutional separation of powers doctrine under Article II.2 Given the United States' interest in enforcing the false marking statute and its stake in half of the plaintiff's recovery should Pequignot prevail, the Court invited the United States to respond to Solo's Motion to Dismiss. The United States subsequently intervened and filed a pleading defending the constitutionality of 35 U.S.C. § 292(b). Both parties have submitted responses to the United States' pleading, and the United States has filed its reply. 2Solo also argues that if Pequignot is found to have standing to pursue this action as an assignee of harm suffered by the United States, he cannot maintain this action as a pro se plaintiff. As Pequignot has since retained counsel, this argument is moot and will not be addressed. -3- II. Standard of Review. A party invoking federal jurisdiction bears establishing its Env't. 523 U.S. existence. 83, 104 Steel Co. (1998). v. Where, the burden of Citizens for a Better as here, the defendant has not disputed any of the facts on which jurisdiction is based, but instead contends that the Complaint fails to allege facts upon which subject matter jurisdiction would be proper, alleged in the Complaint are assumed to be true. 697 F.2d 1213, 1219 {4th Cir. III. A. Adams v. facts Bain, 1982). Discussion. Statutory Language. The statutory provision at issue, terse. all The preceding subsection, 35 U.S.C. 35 U.S.C. § 292(b), § 292(a), is defines the substantive false marking violations and penalty: . . . Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word "patent" or any word or number importing that the same is patented for the purpose of deceiving the public; or Whoever marks upon, or affixes to, or uses in advertising in connection with any article, the words "patent applied for," "patent pending," or any word importing that an application for patent has been made, when no application for patent has been made, or if made, is not pending, for the purpose of deceiving the public Shall be fined not more than $500 for every such offense. -4- 35 U.S.C. § 292(a).3 Section 292(b) scheme at then sets forth the remedial issue here: Any person may sue for the penalty, in which event onehalf shall go to the person suing and the other to the use of the United States. Two salient features of § 292(b) distinguish it from the vast majority of statutes that establish private rights of action for violations of federal law. allowing "any person" First, at least facially,, by to sue for false marking, standing on anyone to sue, recovery by a private party is split, B. Second, any with half going to the and half going to the United States. Whether Pequignot Has Standing to Sue. Solo argues that notwithstanding the apparently broad language of § 292(b), action. confers regardless of whether he or she has been personally affected by the false marking. person bringing suit, § 292(b) Pequignot lacks standing to pursue this Solo first argues that the Court should adopt a statutory construction that limits suits under § competitors. 292(b) It then argues that even if § 292(b) by non-competitors, the Constitution, to allows suits Pequignot lacks standing under Article III of either as a traditional plaintiff or as a oui tarn relator. ^Section 292(a) also includes language prohibiting marking a product as protected by a particular patent without the consent of the patentee. Because this action does not concern such a violation, this language is omitted here. -5- 1. Construction of 35 U.S.C. Solo urges construing § § 292(b). the Court to avoid the constitutional question by- 292(b) suit by a plaintiff narrowly. Under this narrow construction, like Pequignot, a who is not a competitor of the company alleged to have engaged in false patent marking, would be barred. Solo supports this argument by citing to several decisions that have restricted false advertising suits under section 43(a) of the Lanham Act, actions by competitors. 15 U.S.C. Cir. 2004) v. 1125(a), to Solo argues that the Court should adopt a similar limiting construction of § 292(b). the USA Found, § Phillips Foods, (holding that 15 U.S.C. Inc.. See, e.g., Made in 365 F.3d 278, § 1125(a) 281 (4th does not authorize suits by consumers). It is a "cardinal principle" that a court should "first ascertain whether a construction of the statute is fairly possible by which the may be avoided." Johnson v. (constitutional) Robison. 415 U.S. question(s) 361, United States v. Thirtv-Seven Photographs. (1971)). However, 367 (1974) 402 U.S. (citing 363, 369 a restrictive construction of § 292(b) is not "fairly possible," because the plain language of § 292(b) states that "any person may sue for the penalty," unlike the Lanham Act, which authorizes a suit for false advertising by "any person who believes that he or she is § 1125(a) {emphasis added). ... damaged bv such act." By its very terms, -6- 15 U.S.C. the Lanham Act limits the scope of those who may sue under limitation is present in § 292(b). includes a clear statement that . to protect persons competition." § Moreover, 1125(a). ... 1127. [the Act] 43{a) of 365 F.3d at 280 New York, 442 F.2d 686, the Lanham Act corresponding language in § (2d Cir. 292, in finding that "without any {quoting Colliaan v. 692 . to competitors have consideration of consumer rights of action." Found.. . The appellate courts narrowly specifically relied on such statutory limitations enacted § is commerce against unfair construing the Lanham Act to limit suits Congress No such the Lanham Act tt[t]he intent of engaged in 15 U.S.C. § 1971)). Made in the USA Activities Club of Solo has cited no or any other evidence, support its argument that when Congress to enacted § 292(b), it meant to do anything other than confer a right to sue upon "any person." To the contrary, the language of § 292(b) grants a right of action to "whomsoever it may please to sue, plaintiff have no special interest in the subject, have sustained any actual injury." 501, 503 (S.D.N.Y. 1884).4 Pentlarge v. and may not Kirbv. 19 F. Because a narrowing construction that 4In its opposition to the United States' brief, recent case, though the Mohawk Industries, Inc. v. Interface, Solo cites a Inc.. No. 4:07-CV-0212-HLM, 2008 WL 5210537 (N.D. Ga. Nov. 6, 2008), for the principle that "some courts have assumed that [§ 292(b)] requires the plaintiff to have suffered a particularized injury- in-fact." However, Def.'s Opp. the court to U.S. Br. 11 (emphasis in original). in Mohawk Industries did not make such an assumption; rather, it found that the plaintiff had suffered an injury in fact, and as a result, explicitly declined to reach the -7- would deviate from the plain language of the statute simply is not "fairly possible," has standing under Article III. 2. the Court must examine whether Pequignot Pequignot's Standing as a Traditional Plaintiff. Under Article III, requirements a traditional plaintiff must meet three to establish standing to sue in federal court: "injury in fact - a harm that is both concrete and actual or imminent, . . . not conjectural or hypothetical," trace[able] connection between the alleged injury in fact and the alleged conduct of a substantial "causation - a fairly the defendant," and "redressability - likelihood that the requested relief will remedy the alleged injury in fact." United States ex rel. Vermont Agency of Natural Res, Stevens. 529 U.S. 765, 771 (2000) v. (internal quotation marks and citations omitted). Although Pequignot has alleged that United States is a potential entrepreneur competitor of SOLO CUP," Compl. capitalization in original), I 61 "every person in the . . . [and] {emphasis added, any harm to Pequignot in this regard would be the epitome of harm that is "conjectural or hypothetical," rather than "concrete and actual." at 771. a potential Moreover, Vermont Aaencv. 529 U.S. to the extent that Pequignot alleges that he has suffered an injury simply as a result of question of whether a plaintiff without an injury in fact would have standing. See Mohawk Indus.. 2008 WL 5210537, at *3 n.4. -8- Solo's failure to follow federal law, "harm to ... it is well-established that every citizen's interest in proper application of the Constitution and laws, and seeking relief that no more directly and tangibly benefits [the plaintiff] than it does the public at large does not state an Article III case or controversy." 573-74 (1992). Luian v. Finally, Defenders of Wildlife. 504 U.S. 555, nowhere in his opposition to Solo's motion does Pequignot even attempt to argue that he has personally suffered an injury in fact; focuses on § 292(b)'s oui tarn features, extensively infra.5 Thus, rather, his opposition which are discussed without the special standing conferred by the crui tarn aspects of § 292 (b) , Pequignot lacks standing to sue Solo because he fails to allege any actual or imminent injury to himself. 3. Pequignot's Standing as a Qui Tam Relator. Although Pequignot lacks Article III traditional plaintiff, 292(b) standing as a he and the United States argue that § confers standing on him to sue on the United States' behalf as a qui tam relator. i. Qui Tam Statutes and Their History. A crui tam statute authorizes a private person, known 5Pequignot notes that w[a]lthough Plaintiff does not concede that he has not been injured, it is Plaintiff's position that any injury to Plaintiff is redundant to the injury to the United States in this crui tam cause of action." PL's Opp. 4. -9- alternatively as behalf of a "relator" or "informer," to bring suit on the government and to share in the financial recovery. The phrase oui tarn is short for the Latin phrase "qui tarn pro domino reae auam pro se ipso in hac parte seouitur," meaning "who pursues this action on our Lord the King's behalf as well as his own." Vermont Agency. Blackstone, 529 U.S. at 768 n.l (citing William 3 Commentaries on the Laws of England * 160). Oui tarn actions have a long tradition in early AngloAmerican legal history, although their use has waned significantly in recent years. See generally id. at 774-78.6 These actions originated in the 13th century as a common law means for getting private claims into royal courts, which ordinarily only entertained matters pertaining to the Crown, at 774. During the 14th century, addressing private wrongs, became less common. statutes that Id. as id. the royal courts began these common law oui tarn actions at 775. "allowed informers However, explicit oui tarn to obtain a portion of the penalty as a bounty for their information, even if they had not suffered an injury themselves," became more prevalent. Id. Given the lack of comprehensive law enforcement systems at the time, qui tarn informers played roles that today are served by police officers, prosecutors, and regulatory officials. See J. 6The Supreme Court in Vermont Agency provides a detailed history of qui tarn laws in England and the United States. opinion provides a brief summary. -10- This Randy Beck, The False Claims Act and the English Eradication of Oui Tarn Legislation, 78 N.C. L. Rev. 539, 566 (2000). Notwithstanding the historical role qui tarn statutes played, they became subject to abuse. Some citizens, promise of a financial windfall, Id. at 575-78 became "professional informers." (noting that such individuals were described by contemporaries as vermin."). "varlets," "lewde," limit their use. However, several and "viperous laws and later 529 U.S. at 775-76. the United States, enacted that the Supreme Court has described as qui Id. at 776-77. many and other statutes were passed Vermont Agency, the Colonies, statutes. "evil," In part as a result of overzealous litigation, "informer statutes" were repealed, to lured by the tarn These included statutes providing private persons with a right to sue and share in the "bounty" offenses such as runaway seamen, failure to file census at 776 n. harboring trading with Indian tribes without a license, violating alcoholic beverage laws, Id. returns, for and receiving stolen goods. 6.7 In recent years, the use of qui has declined dramatically. statutes in 1951. Id. tarn statutes to enforce laws England repealed its last qui tarn at 776. The Supreme Court has identified three qui tarn statutes that remain in force in the United States: 7Other statutes did not provide for a private right of action, but allowed for an informer to share in the recovery of suits brought by the government. Id. at 776 n.7. -11- 35 U.S.C. § 292, 25 U.S.C. the false patent marking statute at issue here; § 201, which authorizes a cause of action and a share in the recovery against a person violating Indian protection laws; and the most well-known and widely-used oui U.S.C. § 3730(b), the False Claims Act ("FCA"), tarn statute, 31 which provides a private right of action and a share in the recovery for private persons who pursue actions alleging that subject to fraudulent claims. identified what appears statute, 17 U.S.C. § Id. the government has been at 768 n. I.8 Pequignot has to be an additional remaining gui tarn 1326, which provides a cause of action and share in the recovery in lawsuits involving the false marking and advertising of vessel hull designs. ii. Standing to Sue in a Qui Tarn Action. Because a crui tarn statute does not require that the relator suffer an injury before he or she pursues an action, the oui tarn 8Vermont Agency identified a fourth oui tam statute, U.S.C. § 81, 25 which provided a cause of action and a share of recovery for contracting with Indians in an unlawful manner. Vermont Agency. 529 U.S. at 768 n.l. This statute, however, since been repealed. has See Indian Tribal Economic Development and Contracts Encouragement Act of 2000, Pub. L. 106-179, 114 Stat. 46 (2000). Vermont Agency also identified two other laws, 18 U.S.C. § 962, which provides informers with forfeitures of shares of vessels privately armed against friendly nations, and 46 U.S.C. § 80103 (listed in Vermont Agency at its former location, 46 U.S.C. § 723), which provides informers with forfeitures of shares of vessels taking undersea treasure from the Florida coast. However, because neither of these laws authorizes a suit by the informer, the Vermont Agency Court did not characterize those statutes as gui tam statues, a distinction that this Court adopts. -12- framework presents a question as standing to sue under to whether a relator has the Constitution. Supreme Court addressed whether a oui has Article III standing, affirmative. damages holding that in fact suffices claim," Vermont Acrencv. id., was 529 U.S. at "the United States' to confer standing on The Court went on to state that tarn actions," w[t]he FCA can effecting a partial assignment of the that as a result of this assignment, . the FCA The Court ruled that a relator has standing under reasonably be regarded as 774. tarn relator under the and decided the question in the the doctrine of assignment, Government's In Vermont Agency, [the relator]," 773, and injury id. at "the long tradition of orui "well nigh conclusive with respect to . . whether oui tarn actions were cases and controversies of the sort traditionally amenable to, process," omitted). id. at 777 On the basis of this reasoning, claim, the judicial (internal quotation marks and citations relator under the FCA, damages and resolved by, the Court held that a as a partial assignee of the government's had standing to sue. iii. Whether 35 U.S.C. § 292(b) is a Qui Tarn Statute. Solo argues that Vermont Agency is distinguishable from the case at bar because § 292 (b) is not truly a crui tarn statute and therefore does not effect a partial assignment of the United States' false marking claims to Pequignot. -13- The overwhelming evidence, however, tain statute, this supports the conclusion that § 292(b) and as such, is a oui that Pequignot has standing to maintain action. Although it engaged in a long discussion of various qui tarn actions throughout history, the Supreme Court in Vermont Agency did not precisely articulate the criteria for a crui tarn statute. However, scholarly literature on the subject has identified six elements of a oui tarn statute: (1) The statute defines an offense against the sovereign or proscribes conduct contrary to the interests of the public; (2) A penalty or forfeiture is imposed for violation of the statute; (3) The statute permits a civil or criminal enforcement action pursued by a private party; (4) The private informer need not be aggrieved and may initiate the action in the absence of any distinct, personal injury arising from the challenged conduct; (5) A successful informer is entitled to a private benefit consisting of part or all of the penalty exacted from the defendant; and (6) The outcome of the private informer's enforcement action is binding on the government. Beck, supra, at 552-53 (citing Blackstone, 3 Commentaries. at *161-62). Based on these factors, § 292 (b) is a crui tarn statute. It defines a wrong to the government as the false patent marking in violation of § 292(a). $500 per violation. penalty," It imposes a statutory penalty of up to It provides that "any person may sue for the regardless of whether or not such a person is personally harmed. Finally, it allows the suing person to -14- receive half of the recovery from the suit, with the remainder going to the government.9 In addition, the Supreme Court and those courts that have adjudicated cases under § 292 have explicitly termed § 292(b) oui tarn statute. See Vermont Agency. (listing § 292 (b) as one of [that] 79 (2d. enforceable by a crui 455 F.2d 763, 292 (b) 508 765 1884) Bovd v. 1991) "crui 1972) Brose v. § 292 Sears, "is Roebuck & Co., (describing an action under § tarn informer"); Winne v. Snow. (describing the suit before it as action to recover a penalty under In addition, Schildkraut Giftware Corp.. (noting that tarn remedy"); (5th Cir. as one by a (S.D.N.Y. Cir. at 768 n.l the few remaining "crui tarn statutes remain on the books"); 936 F.2d 76, 529 U.S. a 19 F. 507, "a crui tarn [the false marking statute]"). the Senate Report issued with the statute's revision in 1952 described the portion of the statute that provides for a private suit as an "informer action," a term synonymous with a aui tarn law. 2394, 2403. S.R. 82-1979 (1952), reprinted in 1952 U.S.C.C.A.N. Solo has cited to no authority holding that § 292(b) is not a aui tarn statute, and this Court has found none. Notwithstanding this highly persuasive authority, Solo 9It is unclear whether § 292(b) meets the sixth element outlined by Beck, the binding nature of the enforcement action on the government. The parties in this action dispute whether or not a crui tarn relator's suit would have a res iudicata effect on future actions. This issue need not be decided because the absence of this element alone is insufficient to defeat the crui tarn nature of § 292(b). -15- advances a number of arguments statute. First, Solo argues that § 292(b) that § 292(b) is not a qui tarn does not sufficiently clearly assign the rights of the United States because it does not explicitly require a relator to sue "in the name of" United States. However, the it is well-established that specific terms of art are not required for an assignment of rights, ex rel. Kelly v. Moreover, Boeing Co.. 9 F.3d 743, 748 (9th Cir. although the other two remaining crui identified by the Supreme Court, u.s. 1993). tarn statutes the FCA and 25 U.S.C. § 201, both include language stating that a suit by a private citizen is "in the name of the United States," many of the earlier statutes identified by the courts and scholars as oui tarn laws did not include such language, 292(b). Stat. See, 131, e.g.. 133 runaway seamen, but instead included language similar to § Act of July 20, 1790, ch. 29, §§ 1, 4, 1 (authorizing an informer suit for harboring with the recovery split the person prosecuting for the same, "one half to the use of the other half to the use of the United States," without requiring that the suit be "in the name of the United States"). Similarly, 17 U.S.C. § 1326, which provides a crui tarn remedy for the false marking of vessel hull designs, does not require the suit to be "in the name of the United States." Solo also argues that § 292 (b) because, unlike the FCA, is not a crui tarn statute the plaintiff is not paid out of the -16- United States' recovery; rather, half of any recovery goes directly to the relator and the other half goes to the United States. that § This 292 (b) formalistic distinction is not a basis is not a gui tarn statute, for holding as other past and present statutes that the Supreme Court has identified as gui tarn have provisions similar to § 292(b). See, e.g.. 25 U.S.C. § 201 (providing "one half to the use of the informer and the other half to the use of the United States"); 2000) {requiring that (repealed There is no authority supporting the argument under that statute must then to the relator. the recovery available first go to the United States, Rather, at *161 to the poor, and only it is the sharing of the bounty that is a defining feature of a crui tam statute. king, 81 and the other half shall be paid into that to qualify as a gui tam statute, 3 Commentaries. § "one-half thereof shall be paid to the person suing for the same, the Treasury"). 25 U.S.C. See Blacks tone, ("Sometimes one part is given to the or to some public use, the informer or prosecutor; and the other part to and then the suit is called a gui tam action.") Solo also argues because "the U.S. that § 292(b) cannot be a gui tam statute is not the only party that is able to demonstrate a proprietary injury." Def.'s Opp. This argument is also unavailing. must suffer some injury for a gui to U.S. Br. 8. Although the United States tam action to arise, -17- no authority holds injury. Indeed, that it must be the only party to suffer an 25 U.S.C. § 201, identified in Vermont Agency, protection of Indians; one of the oui tarn statutes provides a right to sue for the this statute clearly contemplates a proprietary injury to a party other than the government. addition, many of the historical caii tarn statutes cited in Vermont Agency addressed conduct proprietary interests, that affected non-governmental such as horse-stealing, receipt of stolen goods. 777 n.6. In See Vermont Agency. over-charging, 529 U.S. and at 775, Solo has provided no authority for the principle that a oui tarn statute must involve an injury that only affects the government. Additionally, Solo argues that the United States' ability to control a relator's litigation under § undermines the oui tarn nature of the statute. lack of 292(b) A number of federal appellate courts have held that the government's ability to exert control over the litigation is evidence of a crui tarn statute, and have noted that such control. 918 (6th Cir. See Stallev v. 2008), Healthcare Svs., Inc. United Seniors Ass'n. n.8 (1st Cir. F.3d 517, 522 the FCA provides 2007), the government with Methodist Healthcare. Stallev ex rel. U.S. v. 524 F.3d 1229, 1234 (11th Cir. Inc. v. (8th Cir. 2007). Orlando Reg'l Philip Morris USA. Stallev v. 517 F.3d 911, 2008); 500 F.3d 19, Catholic Health Initiatives. Solo is correct that -18- § 292(b) 25 509 lacks the FCA's "procedural safeguards," which include mandatory- notice to the government of a oui tam lawsuit, an express provision allowing the government to intervene and take over the litigation if it wishes, and clearly defined settlement and dismissal rights for the government. However, the Supreme Court See 31 U.S.C. § 3730. in Vermont Agency did not suggest that a lack of government control precludes a law's status as a gui tam statute.10 tam statutes, To the contrary, none of the other American oui have contained procedural safeguards akin to the FCA's. See, e.g., U.S.C. Moreover, § 81 past or present, {repealed 2000)." 25 U.S.C. § 201; 25 the FCA itself contained only minimal procedural safeguards when it was first enacted, with additional ones added over time. at 556-65.12 In addition, See Beck, supra, even the appellate courts that have "Safeguards are more relevant to the analysis of whether a qui tam statute violates the Take Care Clause of Article II, discussed infra. "Although the First Circuit called procedural safeguards as "typical of oui tam statutes," United Seniors, 500 F.3d at 25, failed to identify any other oui tam statutes containing procedural it safeguards. 12The original FCA, enacted in 1863, contained only one safeguard: once the suit was filed, it could "not be withdrawn or discontinued without the consent, in writing, of the judge of the court and district attorney, first filed in the case, setting forth their reasons for such consent." Act of Mar. 2, 1863, ch. 67, § 4, 12 Stat. 696, 698 (1863). After the act became subject to abuse by informers who prosecuted cases based on evidence the government already had, Congress amended the FCA to require an informer, upon filing the case, to provide notice to the government and disclose all of his evidence, and to allow the government sixty days to investigate and decide whether to -19- called procedural safeguards relevant have not called this factor dispositive. F.3d at 25 (merely stating that safeguards "suggest[s] that is relevant, tarn analysis See United Seniors, 500 the absence of procedural Even if is meant to be the presence of procedural their absence from § insufficient to outweigh the factors crui the oui the private plaintiff the real party in interest"). safeguards to 292(b) that support is its status as a tarn statute. Solo's down to a argument that theory that features of the FCA, § 292 (b) is not a crui if a statute does not it cannot be a crui tarn statute boils contain all tam statute.13 of the This intervene and take control of the suit. See Beck, supra, at 560; Act of Dec. 23, 1943, ch. 377, 57 Stat. 608 {1943). The 1943 revisions also allowed a court to dismiss a oui tam FCA suit if the suit was based on evidence that the government already possessed. See Beck, supra. at 560; 57 Stat. at 609. In 1986, following several scandals in government procurement, the FCA was amended to increase the financial incentives for oui tam relators to bring suits. See Beck, supra. at 561. The 1986 amendments also allowed the government to dismiss or settle the action notwithstanding the objections of the relator, but only after the relator received a hearing.. See False Claims Amendments Act, Pub. L. 99-562, 100 Stat. 3153 (1986). The 1986 amendments also added the requirement that the relator's complaint had to be served on the government under seal, and allowed the government to move for extensions of time in choosing whether or not to intervene. Id. "Along these lines, Solo also argues that § 292(b) is more analogous to a provision of the Medicare Secondary Payer statute, 42 Medicare to responsible establishes courts have U.S.C. § 1395y(b)(3)(A). ("MSP") The MSP statute empowers seek reimbursement from primary insurers who are for paying for certain health care costs, and a private right of action for damages. Four circuit held that the MSP statute is not a crui tam statute and that only plaintiffs who suffer an injury in -20- fact may sue. argument cannot be reconciled with the numerous including § 292(b) itself - that the Supreme Court has oui tarn despite lacking many of the FCA's 292(b) contains many, statutes though not all, features.14 labeled Section of the FCA's salient features, including a wrong to the government, standing, and a shared recovery. authority explicitly describing § universal Together with the overwhelming 292 (b) as a crui tain statute, these factors are more than sufficient to conclude that § is indeed a oui tarn statute, Article III standing, claims, and therefore, 517 292(b) that Pequignot has as a partial assignee of the government's to sue Solo for violations of See Stallev. - F.3d at 913, Stallev. § 292.15 524 F.3d at 1231; United Seniors, 500 F.3d at 26, Stallev. 509 F.3d at 519. However, the MSP statute is distinguishable from § 292(b). First, the MSP statute in no way indicates that it provides a universal right to sue but merely "establish[es] ... a private cause of action for damages." 42 U.S.C. § 1395y(b)(3)(A). The MSP statute also provides no provision for a recovery shared by the relator and the government. Finally, unlike § 292(b), the MSP statute was not described by the Supreme Court in Vermont Agency as a q-ui tarn statute. "indeed, the logical corollary to Solo's argument that § 292(b) is not a oui tarn statute is that none of the purported oui tarn statutes the Court cited are truly crui 15In a supplemental brief, tarn laws. Solo argues that the assignment rationale under which crui tarn standing was allowed in Vermont Aaencv should not apply to § 292(b) because § 292(b) purports to assign to relators a governmental interest that is only sovereign in nature - an interest arising from a violation of law - rather than proprietary, as in the case of the FCA, where the government suffers a concrete financial injury. Although some scholars have argued that the government can assign only proprietary, and not purely sovereign, interests, Representational Standing: see Myriam E. U.S. ex rel. -21- Gilles, Stevens and the Future of C. Whether § 292 Violates the Constitutional Separation of Powers. Solo next argues that allowing Pequignot to sue on behalf of the United States as a oui tarn relator violates the constitutional separation of powers, Clause of Article II, specifically the "Take Care" which requires that the President "shall take Care that the Laws be faithfully executed." Art. II § 3. This provision, which grants the power to enforce federal law, separation of powers, Rilev v. (5th Cir. St. 2001) Const. the Executive Branch is part of the scheme of in which Congress passes laws, President enforces them, e.g., U.S. the and the judiciary interprets them. Luke's Episcopal Hospital. See. 252 F.3d 749, 760 (calling the Take Care Clause "a crucial bulwark to the separation of powers"). The separation of powers can be violated in two basic ways. One involves the "aggrandizement of one branch at the expense of the other," Buckley v. Valeo, 424 U.S. 1, 122 (1976), such as when Congress impermissibly retains the power to control the removal of Executive Branch officials. States, 272 U.S. 52 (1925). See Myers v. Another occurs when a law, no inter-branch aggrandizement, 89 Cal. despite "disrupts the proper balance between the coordinate branches" by "prevent[ing] Public Law Litigation. United L. Rev. 315, 342-44 [one of the (2001), Supreme Court made no such distinction in its discussion of assignment in Vermont Agency, this distinction. the and this Court declines to adopt -22- branches] from accomplishing its constitutionally assigned functions." (1977). Nixon v. Adm'r Gen. Servs.. 433 U.S. 425, 443 This second category has also been described as "impermissibly underminfing]" the role of one of the branches. Commodity Futures Trading Comm'n v. Schor 478 U.S. 833, 856 (1986). Solo argues that § 292(b) impermissibly undermines Executive Branch because it assigns government's claims the the ability to enforce the for false patent marking to qui tarn relators without providing the Executive Branch with the ability to control a relator's litigation. Specifically, Solo argues that Article II is violated because the Executive Branch does not retain "sufficient control" over a § 292 gui tarn suit. source for the "sufficient control" Olson. 487 U.S. 1 majority, 654 (1988), The standard is Morrison v. in which the Supreme Court, by a 7 to rejected an Article II challenge to a law establishing an independent counsel to investigate wrongdoing by certain Executive Branch officials. constitutionality, In upholding the statute's the majority held that the statute.provided the Executive with "sufficient control ... to ensure that the President is able to perform his constitutionally assigned duties." Morrison. 487 U.S. at 696. In particular, the Morrison Court found that the Executive Branch retained the power to appoint the independent counsel as well as to remove him or her -23- for good cause, to define the independent counsel's jurisdiction, and to set Justice Department policies by which the independent counsel had to abide. See id. As in the standing analysis, case law discussing the False Claims Act is relevant to an evaluation of § 292(b). Agency, In Vermont the Court explicitly declined to decide the question of whether the oui tam provisions of the FCA violate Article II. See Vermont Agency, 529 U.S. at 778 n. 8 ("[W]e express no view on the question whether oui tam suits violate Article II, particular the Appointments Clause of § 2 and the Clause of § 3."). that Two justices, however, in 'take Care' expressed their view "[t]he historical evidence summarized by the Court . . . together with the evidence that private prosecutions were commonplace in the 19th century . the Article II question." Id. . is also sufficient to resolve at 801 (Stevens and Souter, JJ., dissenting). A number of circuit courts, however, Article II challenges to the FCA. constitutionality, have squarely addressed All have affirmed the law's although based on differing rationales. Fifth Circuit's holding was the most sweeping. Stevens and Souter, the Fifth Circuit found it The Like Justices "logically inescapable that the same history that was conclusive on the Article III question in [Vermont Agency1 with respect to gui tam lawsuits initiated under the FCA is similarly conclusive with -24- respect to the Article II question concerning this statute." Rilev. 252 F.3d at 752. The court also distinguished the Morrison "sufficient control" not dispositive" test, holding that it was of a challenge to the FCA because the FCA presented fewer Article II problems statute, given that (1) independent counsel, whereas a oui tarn plaintiff, and (2) at 755-56. unlike the a gui tarn suit is merely a civil the independent counsel in Morrison had the power to initiate criminal prosecutions, Id. than the independent counsel does not actually act as the United States but only in its name, action, "simply Additionally, a central executive function. the court noted that the Executive Branch maintains control over FCA oui tarn actions because of the law's provisions that require that the United States receive notice of the lawsuit; allow it to take over the case within 60 days of notification or intervene after the 60-day period upon a showing of good cause; dismiss or settle a case over the objections of the relator; and stay discovery if it learns that the action could interfere with a government investigation or prosecution. Id. The Second, at 753-54. Sixth, and Ninth Circuits have also found that the FCA does not violate Article II. However, they rested their holdings more directly on the control mechanisms available to the -25- government, ex. rel. rather than on historical Kellv. 9. F.3d at 755 justifications.16 (finding that See U.S. "the Executive Branch exercises at least an equivalent amount of control over oui tarn relators as it does over independent counsels"); rel. Taxpayers Against Fraud v. 1041 (6th Cir. 1994) Gen. (finding that Elec. Co.. 41 U.S. ex. F.3d 1032, "the aui tarn provisions . . . do not contradict the constitutional principle of separation of powers [because] . . . [t]hey have been crafted with particular care to maintain the primacy of the Executive Branch in prosecuting false-claims actions"); United Techs.. the oui 985 F.2d 1148, tarn provisions 1155 U.S. (2d. ex rel. Cir. Kreindler v. 1993) (holding that "do not usurp the executive litigating function because the statute gives the executive branch substantial control over the litigation"). Finally, the Tenth Circuit took a fact-specific approach to an Article II challenge to the FCA, the government intervenes, and held that "at least where the gui tarn provisions of the FCA do not violate the separation of powers by transgression of the Take Care Clause." F.3d 787, 806 U.S. ex. (10th Cir. rel. Stone v. 2002). Rockwell In Stone, Int'l Corp.. 282 the government initially declined to intervene in the oui tarn action, but later "These three decisions all predated Vermont Agency, in which the Court announced that the long history of crui tarn laws was "well nigh conclusive" on the issue of Article III standing, and in which two justices held that this history was similarly conclusive on the Article II question. -26- did so. Given that the government intervened and was "a full and active participant in the litigation as it jointly prosecuted, the case," the court was "unconvinced . . . that the presence of a qui tam relator ... so hindered the Government's prosecutorial discretion as to deprive the Government of its ability to perform its constitutionally assigned responsibilities." Solo argues that § 292(b) unlike the FCA, § 292(b) at 806. cannot be constitutional because, fails to provide the Executive Branch with sufficient control over the litigation. 292(b) Id. Unlike the FCA, § does not require that the government receive notice of the litigation. Moreover, § 292(b) does not provide the government with the ability to "take over" the litigation from the relator, or to settle or dismiss it over the relator's objection. Nonetheless, this case, First, Circuit, this Court finds that as applied to the facts of § 292(b) does not violate Article II. like Justices Souter and Stevens and the Fifth the Court finds the long history of oui tarn statutes, including many passed by the First Congress soon after the signing of the Constitution, see, e.g., 1 Stat. persuasive as to their constitutionality. 131, 133, highly Oui tarn statutes were part of a long-accepted practice dating back centuries. It is unlikely that the framers would have written a Constitution that outlawed this practice, and then immediately passed several qui tarn laws that unconstitutionally encroached on Executive Branch -27- power before the ink on the Constitution was even dry. course, passage by the First Congress the constitutionality of a law. (1 Cranch) Act of 137 1789, 1 (1803) Stat. is not dispositive as to See Marburv v. {striking down provisions 80). However, legislation Madison. Pelican Ins. Co.. 127 U.S. many of whose ... is true meaning." 265, 297 (1888), overruled in part on other grounds bv Milwaukee County v. White Co. , 296 U.S. 268 (1935). U.S. "passed by the members had taken part in framing that instrument contemporaneous and weighty evidence of its 5. of the Judiciary First Congress assembled under the Constitution, Wisconsin v. Of M.E. The long history of crui tarn actions strongly supports a finding of their constitutionality. Second, it is not necessary for § 292(b) to meet the demanding standard applied by the Supreme Court in Morrison to withstand an Article II challenge, given that the intrusion of § 292(b) into Executive Branch power is minor in comparison. Rilev. 252 F.3d at 755 . . (holding that is simply not dispositive of See "the Morrison control test [a challenge to the FCA], . as it involves an entirely different lawsuit and requires entirely different control mechanisms."). 292(b) pursues a civil action, A crui tarn relator under § not a criminal one.17 Because 17There is, concededly, some confusion as to whether § 292 is criminal or. civil. The Federal Circuit has described § 292 as "supplfying] a civil fine," Clontech Labs.. Inc. v. Invitroaen Corp.. 406 F.3d 1347, 1352 (Fed. Cir. 2005), and other courts entertaining actions by private parties under § 292(b) -28- have civil actions do not wcut[] to the heart of the Executive's constitutional duty to take care that the laws are faithfully executed," the Executive Branch need not wield the control over civil Rilev. level same litigation as over criminal prosecutions 252 F.3d at 755. of See This principle is particularly compelling in the area of patent law, where private parties routinely litigate matters concerning the validity, enforceability, and infringement of patents. Quite si nply, enforcement of the substantive provisions of § 292 is ::iot the type of executive function whose delegation to an auth jrity not controlled by the Executive Branch would presumptively raise serious Article II questions. Moreover, the actual power by a relator under § 292(b) pales in comparison to thaj:: to the independent prosecutor in Morrison. wielded granted The i independent counsel was given "full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice." stark contrast, Morrison. 487 U.S. a oui tarn relator under § 292(b) at 662. In can medntain stated that it is not a criminal statute. See Filmon I rocess Corp. v. Spell-Right Corp., 404 F.2d 1351, 1355 (D.C. C ir. 1968); Sippit Cups. Inc. v. Michael's Creations. Inc.. 180 F. Supp. 58, 61 (E.D.N.Y. 1960). In contrast, the Second Circuit hds stated that patent mismarking under § 292 is a "criminal offerjse Bovd. 936 F. 2d at 79. This Court understands § 292(a) as defining a criminal offense, with § 292(b), the gui tan portion of the statute, providing a civil remedy. This mterpr etat ion is consistent with a 1952 Senate Report stating that the statute is "an ordinary criminal action as well as an informer action." S.R. 82-1979 (1952), reprinted in 1952 U.S.C.C.A.N. 2394, 2403. -29- only one type of suit - an action for false patent marking - and must do so at his own expense. the government Finally, § 292(b) from initiating its own action, does not bar crimina 1 or civil, to enforce the substantive false marking provisions of By comparison, in Morrison, independent counsel, once a matter was the Attorney General and Justice Department regarding that matter. See id. the Court concludes, proper use of patent markings, that the Executive Branch executed" control at 662-63. For all of the above as applied to that proceedings the enforcement of the constitutional mandate "take care that the laws be than the Supreme Court required in Morrison. itself, despite the lack of control mechanisjns in § the Executive Branch is not without assert its interests in a § 292(b) the ability to oui tarn action. Th 3 clerks of federal courts are required to notify the Director of States Patent and Trademark Office of any patent month of their filing. See 35 U.S.C. may intervene in a oui tarn action, R. Civ. Civ. P. faithfully can be satisfied with a significantly lesser degree of In addition, 292(b) 292(a). referred to an were required to suspend all investigations and reasons, § P. 24(a)(2), 24(b). relator attempts § 290. suits within one The Unit <>d States either as of right, or with a court's permission, the case, it without a court order if the United States does not -30- see Fed. see Fed R. If the United States intervenes and to voluntarily dismiss :he United oui cannot consent. tarn do so See Fed. R. Civ. P. 41(a)(1)(A)(ii) court order only if (allowing dismissal wi thout a "all parties who have appeared" stipulation of dismissal). Finally, sign a the United States may apply for a protective order if the relator's action interfe res with a government investigation or prosecution. 26(c). See Fed. R. P, Although these mechanisms concededly do not ri se to the same level of government control provided by the FCA, strict safeguards are not required because, 292(b) iv. represents a minimal :he FCA's as discuss sd supra. § intrusion onto Executive B anch power. Finally, it is preferable that constitutional cha lenges be adjudicated as applied. (1960) (cautioning that See U.S. v. Raines. 362 U.S. 7, 22 B[t]he delicate power of pronouncing an Act of Congress unconstitutional is not to be exercised with reference to hypothetical cases"); 541 U.S. 509, 531 (2004) see also Tennessee Lane. (holding that because a statute constitutional as applied to the "class of cases" the matter before it, . the Court ttneed[ed to] was impl: cated by go no further Although Solo has raised concerns regarding separation- of-powers issues that might arise if the government desired to Id tigate a 292(b) the action in a different manner than the oui tarn relator,, Court need not decide whether such a fact pattern would constitutional problems, pose because that is not the case here, Although the United States has not intervened as -31- "a ful1 and § active participant in the litigation," Stone, 282 F.3d at 806, has intervened to defend the constitutionality of Pequignot's ability to sue Solo. § 292(b) it and That the Executive Bjranch, the very entity Solo alleges has been "impermissibly undermined," has intervened and expressed no objection to the manner in which Pequignot has prosecuted his suit - and has actually supported Pequignot's action in all respects - is additional perjsuasive evidence that separation-of-powers principles have not been violated here. It is unnecessary to decide whether, facts, Article II might be violated. Court, o.i different there is no constitutional violation.18 IV. It is as one of On the record before the Conelusion. likely an accident of history that only a few remaining gui § tarn statutes 292(b) survives in Ame rican law, given that the overwhelming majority of these statutes have been repealed. Unlike false claims against the government, misuse of a patent marking does not involve a proprietary injury to the United States that must be vindicated through the actions of private prosecutors; rather, only to its sovereignty. the injury to the United States is To the extent that there is injury caused by false marking, "Likewise, it is to competitors o it is unnecessary to decide whether real the constitutional issues might arise if, as Solo hypothesd zes, multiple relators brought multiple § 292(b) actions for the same underlying violations. -32- entity abusing patent markings. Congress could easily provide such competitors with a private right of action withou t enacting a aui tarn statute.19 The only practical impact of the gui tam provisions of § 292(b) individuals, appears to be its potential to benefit such as the plaintiff in the case at bar, chosen to research expired or invalid patent markings lawsuits in the hope of actions, and to file financial gain. To the extent that Solo, 292(b) who have and other potential defeidants in § believe that the law is unwise, without recourse to seek its revision. and oui tarn actions in general, they a ¢e not The history of the FCA, indicates that when th sse actions have been subject to abuse by profit-seekers with litt e public motivation, legislatures, have reacted. Indeed, both in the United States and England, in the aftermath of a Supreme Court decision broadly interpreting the FCA, U.S. ex rel. Ma cus Hess. 317 U.S. 537 (1943), Congress swiftly revised th|> limit crui tam actions substantially. However, are any arguments against § See Beck, 292(b) "addressed to the wrong forum." Id. supra. FCA 547. As to at 556-61. based on policy at v. concerns tike Fourth Circuit stated regarding the FCA, [P]erhaps Congress should have taken note of the "Indeed, the vast majority of actions brought und< ;r throughout its long history appear to have been brought § 292 by competitors or others who could allege an injury to themselves as a result of the false marking. See, e.g.. Mohawk Indus 2008 WL 5210537, at *3. -33- possibility that [defendants] would be harassed fcy vexatious oui tarn suits in federal courts. Perhaps it did, but decided that the benefits of the gui tan scheme outweighed its defects. In any event, we have no inclination or power to delve into the wisdom of the balance Congress struck . . . Congress has let loose a posse of ad hoc deputies . . . [Defendants] may pjrefer the dignity of being chased only by the regular troops; if so, they must seek relief from Congress. U.S. 961 ex rel. F.2d 46, Milam v. 49 Univ. (4th Cir. by an Order Entered this Alexandria, dL ' M.D. Anderson Cancer Ctr.. 1992). For the above reasons, will be denied, of Tex. the defendant's Motion to [Dismiss to be issued with this day of March, opinion. 2009. Virginia Leonle M. Brinkema United States District Judge -34-
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