Argument Preview: US ex rel. Eistenstein v. City of New York

LA Akin Gump associate Scott Street previews tomorrow’s second argument.

Tomorrow in U.S. ex rel. Eisenstein v. City of New York, No. 08-660, the Supreme Court will decide how long a private False Claims Act plaintiff has to file a notice of appeal when the government declines to intervene in the case.

Eisenstein arose out of New York City’s decision to require government employees who do not live in the City to pay a fee equivalent to the municipal income taxes paid by employees who do live there. Eisenstein and four other city employees who do not live in New York sued the city, pro se, alleging that the policy violated – among other things – the federal False Claims Act, which imposes civil liability on any person who “knowingly presents, or causes to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval.” The False Claims Act is unique because, while the federal government is always the real party in interest (as the one allegedly being defrauded), the statute allows a private plaintiff to sue qui tam (on the government’s behalf). The United States does not even need to participate in the litigation—the government can choose to intervene and take over the litigation if it wishes but, even if it decides not to do so, it has a right to be involved in the action and receives the bulk of any monetary recovery. The government also has a right to intervene later, if it can show good cause for doing so.

The district court dismissed Eisenstein’s claim for failure to state a claim and entered final judgment in favor of the City. Eisenstein filed his notice of appeal from that judgment 54 days later. Six months after Eisenstein filed his notice of appeal, the Second Circuit ordered the parties to brief the issue of what time limit for filing the notice of appeal applied in this case, where the action was conducted in the name of the United States but the government had declined to intervene. Rule 4(a)(1)(A) of the Federal Rules of Appellate Procedure gives a party thirty days to appeal in a civil case but Rule 4(a)(1)(B) gives “any party” sixty days to appeal when the United States is a party to the action. A month later, the City filed a motion to dismiss the appeal as untimely.

The Second Circuit ultimately decided that, because the United States was not a “party” to the action, the special sixty-day time limit did not apply. Therefore, it dismissed the appeal as untimely.

The Second Circuit appointed pro bono counsel for Eisenstein to address the timeliness issue, and the same attorneys filed a petition for certiorari with the Supreme Court.

The petition argued that: (1) the Second Circuit’s decision violated the principle that procedural rules should be given their plain meaning to avoid confusing litigants (especially those proceeding pro se); and (2) the Second Circuit’s decision created a circuit conflict requiring Supreme Court review, especially because of the importance that jurisdictional rules like time limits have in federal court litigation. On this latter point, the petition noted that three of the four other circuits that had considered the question at the time (the Fifth, Seventh, and Ninth Circuits) had found that the sixty-day rule applied even when the government chose not to intervene in the action (in 2008, the Third Circuit reached the same conclusion). Only the Tenth Circuit – in a divided opinion that pre-dated the most recent amendments to the FCA – had found that the thirty-day rule applied.

The City opposed the petition, but it did not dispute the existence of a circuit conflict. Instead, it argued that the Second Circuit reached the right result in the case, and it attacked the reasoning of the Fifth, Seventh, and Ninth Circuits in applying the sixty-day time limit.

The Court granted the petition for certiorari in January 2009.

The parties have always agreed that the United States is the “real party in interest” in a qui tam FCA action, even when it declines to intervene in the action. But they disagree about whether the United States qualifies as a “party” under Rule 4(a) of the FRAP in such a case, and the Supreme Court briefing focuses on that dispute.

Eisenstein argues that the only condition for obtaining “party” status is compliance with Federal Rule of Civil Procedure 17(a), which requires that the action be brought “in the name of the United States.” According to Eisenstein, the combination of the naming requirement and the government’s status as the real party in interest ensures that the United States will be bound by the judgment and protects the defendant from subsequent litigation.

The Second Circuit rejected that argument, concluding instead that a “party” could only be the person who participated in the proceedings and controlled the litigation. Eisenstein offers a number of reasons for the Court to disregard that finding. First, he notes that the qui tam action must be brought in the government’s name and may not be dismissed without the Attorney General’s consent. The AG also has a special right to review the complaint, under seal, for sixty days before deciding how to proceed. If it declines to take over the proceedings, the government may still request service of the pleadings and deposition transcripts, and it may intervene later if it can show good cause for doing so. The government may seek a stay of discovery if it would interfere with certain government investigations. And, most notably, the government receives at least seventy percent of any monetary recovery, only slightly less than the minimum of seventy-five percent it would receive if it conducts the action on its own. Eisenstein also notes that the Court has found that the Article III injury underlying a FCA claim always belongs to the federal government—thus, it has recognized plaintiffs who sue qui tam as partial assignees of the government’s claim rather than individuals with their own standing to sue.

Eisenstein also challenges the Second Circuit’s “participation” test as unworkable, querying to what extent the government must be involved before it can be considered a party under FRAP 4(a). He attacks the Second Circuit’s reliance on government intervention as a measure of party status. And he challenges the court’s use of legislative history suggesting that the sixty-day window to appeal was included because of the extra time it takes to make decisions within the federal bureaucracy.

But Eisenstein’s best argument—and the one on which the courts that have applied the sixty-day rule in this context have relied—urges the Court to adopt a literal reading of FRAP 4(a) to avoid confusing litigants and setting “traps for the wary,” especially pro se litigants who will just read the rules to figure out how long they have to file an appeal. Because the United States must be named as the plaintiff in the caption of a qui tam action, Eisenstein contends that applying the sixty-day rule will simplify matters without causing any prejudice to the opposing party, who would have to wait sixty days if the government had taken over the proceedings anyway.

Two amicus briefs have been filed in support of Eisenstein.

Patricia Haight and In Defense of Animals filed an amicus brief to argue that, first, in light of the clear language of Rule 4(a)(1)(b), applying the thirty-day time period would confuse unwary litigants and therefore violate the principle that procedural rules be easy to understand. Second, Haight argues that if the Court did adopt the thirty-day rule, it should only apply it prospectively.

The Taxpayers Against Fraud Education Fund also filed an amicus brief in which they argue (1) that the United States has a unique role in FCA claims, regardless of whether it actively participates in the case, and always remains the real party in interest; and (2) applying the sixty-day rule serves the purposes of both the FCA (by protecting the government’s interest in the action) and the Federal Rules of Civil Procedure (by preventing the confusion of litigants). Moreover, they argue that “[a]pplying the sixty-day rule, as most appellate courts have done . . . causes no harm to other parties because all parties receive the benefit of the sixty-day rule.”

The City of New York’s merits brief tracks the arguments made in its opposition to the cert. petition.

In sum, the City believes that the meaning of Rule 4(a) turns on a technical interpretation of the term “party,” which should be read narrowly. In the City’s view, only individuals or entities that actually participate in and control the litigation can qualify as “parties” to an action. Here, the Government neither intervened nor participated in the qui tam action, and it could not have appealed the decision without first seeking leave to do so. Thus, the City sees no reason to apply the time-period for appealing when the Government is a party, a view it says is supported by the history of the 60-day provision, which Congress drafted to accommodate the Government’s slow, institutional decision-making process.

Furthermore, the City rejects Eisenstein’s argument that the Court should apply the 60-day time period here to make it easier for litigants to calculate their time to appeal, arguing that “[f]ederal court jurisdiction should not be based upon the convenience of the litigants.”

The United States makes similar arguments in its amicus brief supporting the City. Moreover, the Government views intervention, rather than its status as the real party in interest or the presence of its name in the caption, as the key to determining whether it is a party to a qui tam action. Like the City, the Government also argues that it can become a party, even without formally intervening in the action, “by asserting particular rights” or by “actively participat[ing]” in the action. However, it explains, such circumstances are “rare” and should be limited to situations in which the Government “assert[s] its rights under the FCA to direct the disposition of the lawsuit,” such as dismissing a qui tam action and vetoing a proposed settlement and voluntary dismissal of the lawsuit, circumstances where the Government takes a position adverse to the relator who is asserting its interests.

Finally the Solicitor General sees no reason to construe Rule 4(a) in the broadest terms possible “simply because some litigants might misunderstand the law.”