United States ex rel. Marcus et al. v. Hess et al.
317 U.S. 537 (1943)
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Rule of Law:
The False Claims Act applies to fraudulent claims that cause the U.S. government to pay out funds, even if the claims are submitted indirectly through an intermediary like a local government and no direct contractual relationship exists. A subsequent civil action for remedial damages after a criminal conviction for the same conduct does not violate the Fifth Amendment's Double Jeopardy Clause.
Facts:
- A group of electrical contractors were employed to work on Public Works Administration (P.W.A.) projects in the Pittsburgh area.
- The contractors' contracts were with local municipalities and school districts, not directly with the United States government.
- A substantial portion of the money used to pay the contractors originated from federal grants provided by the Federal Public Works Administrator.
- The contractors conspired to rig the bidding on these projects by privately averaging prospective bids, having one contractor submit the averaged bid while others submitted higher, non-competitive bids.
- This collusive bidding scheme removed all competition, causing the government to pay more for the electrical work than it would have in a free market.
- Competitive bidding was a federal requirement, and the contractors had to certify that their bids were 'genuine and not sham or collusive.'
- Contractors submitted monthly payment estimates on P.W.A. forms to the local project sponsors, which required approval from federal P.W.A. authorities before payment could be made.
- Payments were disbursed from a joint construction bank account containing both federal and local funds after federal approval was secured.
Procedural Posture:
- The United States government criminally indicted several electrical contractors for conspiracy to defraud the government.
- The contractors pleaded 'nolo contendere' to the criminal charges and were fined.
- While the criminal case was ongoing, petitioner Marcus filed a civil 'qui tam' action against the contractors in U.S. District Court under the False Claims Act.
- A jury in the District Court found for Marcus and entered a judgment of $315,000 against the contractors.
- The contractors, as appellants, appealed to the Circuit Court of Appeals.
- The Circuit Court of Appeals reversed the judgment, holding that the contractors' actions were not covered by the statute because their claims were against local municipalities, not directly against the United States.
- Marcus, the petitioner, successfully sought a writ of certiorari from the U.S. Supreme Court to review the appellate court's decision.
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Issue:
Does causing local government entities to submit claims for payment to the U.S. government, based on contracts obtained through collusive bidding on federally-funded projects, constitute presenting a fraudulent 'claim upon or against the Government of the United States' under the False Claims Act?
Opinions:
Majority - Justice Black
Yes. This conduct constitutes presenting a fraudulent claim against the U.S. government under the False Claims Act. The Act is violated when fraudulent conduct causes the government to pay out money, regardless of whether the claim is submitted directly or through an intermediary. The Court reasoned that the statute's purpose is to protect government funds from fraud, and its language, 'causes to be presented,' is broad enough to cover this indirect scheme. The Court also held that a 'qui tam' suit is permissible even if based on information in a prior public indictment, as the statute's text allows 'any person' to sue without qualification. Finally, the Court concluded that the subsequent civil action did not constitute double jeopardy because the statute imposes a civil, remedial sanction intended to make the government whole, not a second criminal punishment.
Dissenting - Justice Jackson
No. While concurring with other parts of the opinion, Justice Jackson dissented on the point of allowing a 'qui tam' suit based on a prior government indictment. He argued that a literal interpretation of the statute leads to absurd results by rewarding a 'mere busybody' who contributes nothing new to the discovery of the fraud. This practice allows private parties to interfere with government law enforcement and profit from information already uncovered by the government at public expense. He asserted the statute's spirit is to reward those who actually disclose concealed fraud, not to create windfalls from public records.
Concurring - Justice Frankfurter
Yes. Justice Frankfurter agreed with the Court's judgment but rejected its reasoning on the double jeopardy issue. He argued that distinguishing between 'remedial' and 'punitive' sanctions is an overly subtle and speculative basis for a constitutional guarantee. The proper rationale, he contended, is that when Congress prescribes multiple sanctions for the same misconduct to be enforced in separate proceedings (one civil, one criminal), it is not imposing multiple punishments. Rather, it is merely enforcing a single, comprehensive penalty through different procedural routes, a legislative practice common when the Fifth Amendment was adopted and thus not prohibited by the Double Jeopardy Clause.
Analysis:
This landmark decision broadly interpreted the scope of the False Claims Act (FCA), establishing that liability does not require a direct contractual relationship or direct submission of a claim to the U.S. government. By focusing on the ultimate source of the funds and the act of 'causing' a fraudulent payment, the Court significantly expanded the government's ability to combat fraud in programs involving federal grants. The ruling also affirmed the broad standing of 'qui tam' relators, even those relying on publicly disclosed information, though Congress later amended the FCA to create the 'public disclosure bar' partly in response to the concerns raised in Justice Jackson's dissent. The Court's double jeopardy analysis reinforced the longstanding principle that parallel civil and criminal sanctions for the same wrongful act are constitutionally permissible.
