U.S. v. Orleans Parish School Board

Full title: UNITED STATES OF AMERICA ex rel. WILLIAM GARIBALDI AND CARLOS SAMUEL…

Court: United States District Court, E.D. Louisiana

Date published: Sep 17, 2003

CIVIL ACTION NO. 96-0464, SECTION "K" (E.D. La. Sep. 17, 2003)

Opinion

CIVIL ACTION NO. 96-0464, SECTION "K"

September 17, 2003

ORDER AND REASONS

STANWOOD DUVAL, District Judge

Before the Court is the Motion of Plaintiffs/Relators Garabaldi and Samuel on Behalf of the United States of America for Relief From Judgment under Federal Rule of Civil Procedure 60(b) (Doc. 280). The Court, having entertained oral argument and having reviewed the pleadings and relevant law, finds that because of the extraordinary circumstances surrounding this case, the motion must be granted.

Background

This matter came to trial before this Court in October of 1998. In this suit, Garibaldi, who was Director of the Audit Department of the School Board and Carlos Samuel (referred to collectively as "Relators") sued their employer, the Orleans Parish School Board on behalf of the United States for numerous violations of the False Claims Act, 31 U.S.C. § 3729, et seq. After trial, a jury found that the School Board had submitted more than 1500 false claims to the federal government over the course of 11 years. On April 27, 1999, this Court entered a judgment on the verdict, with some modifications, against the School Board totaling almost S23 million.

That judgment was appealed to the Fifth Circuit. The School Board raised several issues in its appeal, including that a local government such as it may not be held liable under the False Claims Act. In their appeal, Relators argued that the district court erred in reducing the civil penalty to be paid by the School Board and that it abused its discretion in not awarding the Relators the statutory maximum share of the award payable to the United States. The United States intervened in the appeal to assert its interpretation of the False Claims Act.

The Fifth Circuit reversed this Court's judgment on March 28, 2001. United States of America, ex rel. William Garabaldi and Carlos Samuel v. Orleans Parish School Board., 244 F.3d 486 (5th Cir. 2001). It found that the School Board, as a local government unit, was not a "person" subject to liability under the False Claims Act. In so doing, it relied primarily on the Supreme Court's decision in Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 US. 765, 120 S.Ct. 1858 (2000). In that case, the Supreme Court found that states are not persons for purposes of the False Claims Act. Relying on the analysis found therein concerning punitive damages, the appellate court found:

The False Claims act imposes punitive damages on those who violate it. This is contrary to the well-settled presumption that governments, including local governments, are not subject to punitive damages. Stevens, at 1869; City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 101 S.Ct. 2748, 69 L.Ed.2d 616 (1981). As the Supreme Court has held, imposing punitive damages on local governments is ordinarily contrary to sound public policy. Id. at 263, 101 S.Ct. 2748. Though a local government can properly be made to pay compensation for the wrongful acts of its agents, punishing a local government is pointless. The punishment, in the form of higher taxes or reduced public services, is visited upon the blameless. Neither the taxpayers nor the schoolchildren of Orleans Parish played any role in the conduct giving rise to the School Board's liability. Extracting damages from them — damages that are far more than is needed to compensate the federal government for whatever losses it has suffered — is supported as the Supreme Court has said, by "[n]either reason nor justice." Id . at 267, 101 S.Ct. at 2748.

Garibaldi, 244 F.3d at 491-92.

In the Fifth Circuit's decision, the court noted that it could locate only two decisions (other than this Court's decision in Garibaldi) each of which reached opposite conclusions, those being United States ex rel. Chandler v. Hektoen Inst. for Med. Research, 35 F. Supp.2d (N.D. Ill. 1999) rev'd in part 118 F. Supp.2d 902 (N.D. Ill. 2000) (Cook County, Illinois is a person under the False Claims Act but found county immune as the mandatory treble damage provisions could not be imposed under Stevens); and United States ex rel Graber v. City of New York, 8 F. Supp.2d 343 (S.D.N.Y. 1998) (City of New York, New York is not a person under the False Claims Act). Garibaldi, 244 F.3d at 490 n. 4. Thus, the appellate court was aware that there was no unanimity of opinion as to whether local governments are persons under this Act. Nonetheless, it reversed the district court's decision and vacated the district court judgment.

On September 20, 2001, Relators filed a timely Petition for Writ of Certiorari to the United States Supreme Court which was denied on January 7, 2002. Two weeks later, on January 22, 2002, the United States Court of Appeals for the Seventh Circuit distinguished Stevens ruling that a county was a person for purposes of the False Claims Act and thus reversed the district court finding that the county was not immune from the FCA damages scheme. United States ex rel. Chandler v. Cook County, 211 F.3d 969 (7th Cir. 2002). The Seventh Circuit thus reversed one of the very cases upon which the Fifth Circuit noted in its opinion and created unequivocally a split in the circuits.

Nine days later, on January 31, 2002, Relators filed a timely Petition for Rehearing in the United States Supreme Court demonstrating a conflict in the circuits on the basis of the decision of the Seventh Circuit in Chandler and the decision of the Fifth Circuit in Garibaldi and the Third Circuit in Dunlevy v. County of Delaware, 279 F.3d 213 (3rd Cir. 2002). The Supreme Court refused rehearing on February 25, 2002.

However, less than four months later on June 6, 2002, writs were granted by the Supreme Court in Cook County. Nine months after that, on March 10, 2003, the Supreme Court affirmed the Seventh Circuit ruling noting the split in the circuits, specifically citing the Fifth Circuit's decision in Garibaldi. In a 9 to 0 decision, based on the legislative history and the text of the statute, the Court found that municipalities were not exempted from the False Claims Act. Cook County, Illinois v. United States ex rel. Chandler, ___ U.S. ___, 2003 WL 890268 (March 10, 2003) at *5. Furthermore, it specifically rejected the argument that the punitive nature of the False Claims Act prevented its being used against a municipal corporations. It stated:

Although we did indeed find the punitive character of the treble damages provision a reason not to read "person" in include a State, see [Stevens] at 785, it does not follow that the punitive feature has the force to show congressional intent to repeal implicitly the existing definition of that word, which included municipalities.

Cook County at *6. The Court also noted:

The question in such cases is whether the local taxpayer should make up for an undeserved benefit, or the federal taxpayer be permanently out of pocket, a question that can be answered in any given case, not by an opportunistic qui tam relator, but by a combination of the judge's discretion and the Government's power to intervene and dismiss or settle and action.

Cook County at 7. It continued by noting that "inferring repeal from legislative silence is hazardous at best, and error seems overwhelmingly likely in the notion that the 1986 amendments wordlessly redefined "person" to exclude municipalities." Id at 8.

The Supreme Court then concluded:

The basic purpose of the 1986 amendments [which increased the penalties from double to triple damages] was to make the FCA a "more useful tool against fraud in modern times." S. Rep., at 2. Because Congress was concerned about pervasive fraud in "all Government programs," ibid, it allowed private parties to sue even based on information already in the Government's possession, see Hughes Aircraft Co. v. United States ex rel Schumer, 520 U.S. 939, 946, 117 S.Ct. 1871, 138 L.Ed.2d 135 (1997); increased the Government's measure of recovery; and enhanced the incentives for relators to bring suit. Yet the County urges that in so doing Congress made local governments, which today often administer or receive federal funds, immun not only from treble damages but from any liability whatsoever under the FCA. Congress could have done that, of course, but it makes no sense to suggest Congress did it under its breath. It is simply not plausible that Congress intended to repeal municipal liability sub silencio by the very Act it passed to strengthen the Government's hand in fighting false claims. See Burns v. United States, 501 U.S. 129, 136, 111 S.Ct. 2182, 115 L.Ed.2d 123 (1991).

Id. (footnotes omitted).

On April 23, 2003, the United States Supreme Court granted the writ application in United States ex rel. Dunleavy v. Delaware and reversed the decision of the Third Circuit, 538 U.S. ___, 123 S.Ct. 1619 (Mem) (2003).

On May 12, 2003, the instant motion seeking relief from judgment under Fed.R.Civ.P. 60(b) was filed.

Analysis

Rule 60(b)(6) provides that a court may act to relieve a party from final judgment for "any other reason justifying relief from the operation of the judgment." Fed.R.Civ.P. 60(b)(6). While Rule 60(b) sets out five other specific bases for granting relief from a final judgment, the parties agree that the only provision applicable herein is the sixth which has been described as "a grand reservoir of equitable power to do justice in a particular case when relief is not warranted by the preceding clauses." Harrell v. DCS Equip. Leasing Corp., 951 F.2d 1453, 1458 (5th Cir. 1992). However, the Fifth Circuit has "narrowly circumscribed its availability, holding that Rule 60(b)(6) relief will be granted only if extraordinary circumstances are present." Batts v. Tow-Motor Forklift Company, 66 F.3d 743, 747 (5th Cir. 1995) citing Bailey v. Ryan Stevedoring Co., 894 F.2d 157, 160 (5th Cir.) (affirming order denying Rule 60(b)(6) motion based on change in federal law). Indeed, the Fifth Circuit has specifically held that changes in decisional law do not constitute the "extraordinary circumstances required for granting Rule 60(b)(6) relief." Hees v. Cockrell, 281 F.3d 212 (5th Cir. 2002), citing Baits v. Tow-Motor Forklift Co., 66 F.3d 743, 747 (5th Cir. 1995); Picco v. Global Marine Drilling, 900 F.2d 846, 851 (5th Cir. 1990); Bailey v. Ryan Stevedore Co., Inc., 894 F.2d 157 (5th Cir. 1990).

It appears that this interpretation of the rule — that is that a change in decisional law alone did not constitute grounds — was apparently first articulated in Bailey as the Fifth Circuit relied upon, McKnight v. United States Steel Corp., 726 F.2d 333, 336 (7th Cir. 1984); Title v. united States, 263 F.2d 28, 31 (9th Cir. 1959). However, in Batts, the Fifth Circuit explained this bald statement.

In Batts, the Fifth Circuit was faced with a case in which a plaintiff was injured when a coworker using a forklift collided with him. The plaintiff brought a diversity action against the manufacturer of the forklift alleging negligence and strict liability based on the defective and unreasonably dangerous product and/or negligent design. Under Mississippi law, the defendants had available as a complete bar to recovery the "open and obvious defense" which defendant argued and the jury believed rendering a verdict for the defendant. Following the denial of his post-verdict motions, plaintiff appealed to the Fifth Circuit and asked the court to stay the appeal pending a decision by the Mississippi Supreme Court in which the viability of this defense was at issue. The stay was denied in June of 1991 and the Fifth Circuit affirmed the lower court ruling in 1992.

On March 25, 1993, subsequent to the issuance of the Fifth Circuit's mandate on January 4, 1993, the Mississippi Supreme Court held that the risk-utility test of products liability (which vitiated the affirmative defense) had been used in Mississippi since 1988. On April 19, 1993, Batts filed in the district court a Rule 60(b)(6) motion, urging the court on the basis of the Mississippi court decision to relieve him from the adverse judgment. The district court granted that motion, vacated the judgment and set the matter for trial based apparently on its belief that it had improperly instructed the jury on Mississippi products liability law. The defendant appealed, and the Fifth Circuit reversed the district court.

The Fifth Circuit in so doing noted that in Picco v. Global Marine, supra, it had held that it was an abuse of discretion for the district court to grant relief where th Supreme Court had changed the applicable rule of law. Id. at 747. It also stated:

Absent some showing of extraordinary circumstances, courts have refused to vacate their prior judgment were they correctly applied federal law, and a subsequent Supreme Court ruling changed the law. See, e.g., Travelers Indem. Co. v. Sarkisian, 794 F.2d 754, 757 (2d Cir.) (denying Rule 60(b)(6) relief where Supreme Court reversed ruling on claims for indemnity under RICO statute after entry of final judgment), cert. denied, 479 U.S.885, 107 S.Ct. 277, 93 L.Ed.2d 253 (1986). A party seeking relief under Rule 60(b) cannot simply cite a new Supreme Court decision to support its motion; it must present proof that enforcement of the judgment would work an injustice. DeFilippis v. United States, 567 F.2d 341, 344 (7th Cir. 1977), overruled in part on other grounds by United States v. Chicago, 663 F.2d 1354 (7th Cir. 1981). The required showing is substantial. See Dowel v. Board of Educ. of Oklahoma City Pub. Sch., 8 f.3d 1501, 1509 (10th Cir. 1993). Even where the judgment provides injunctive relief, and thus has an ongoing effect, courts may refuse a Rule 60(b)(6) motion founded upon the Supreme Court's announcement of a new rule of law. Id.

Batts, 66 F.3d at 748-49.

However, in a footnote, the Fifth Circuit specifically carved out a caveat to this apparent hard and fast rule:

We do not hold that a change in decisional law can never be an extraordinary circumstance. Courts may find a special circumstance warranting relief where a change in the law affects a petition for habeas corpus, where notions of finality have no place. Matarese v. LeFevre, 801 F.2d 98, 106 (2d Cir. 1986) (denying relief where subsequent Supreme Court decisions indicated that change in law had not, in fact, occurred), cert. denied, 480 U.S. 908, 107 S.Ct. 1353, 94 L.Ed.2d 523 (1987). Relief has also been found appropriate where the erroneous judgment has not yet been executed, where an appeal or remand of the case is still pending, or the judgment is not final. See Adams v. Merrill Lynch Pierce Fenner Smith, 888 F.2d 696, 702 (10th Cir. 1989) (affirming district court grant of relief from judgment where Supreme Court altered law regarding arbitration of securities claims while claims were pending); Wilson v. Al McCord, Inc., 858 F.2d 1469, 1478-79 (10th Cir. 1988) (vacating and remanding where change in state law while appeal was pending made it necessary for parties to develop more fully the factual record); Overbee v. Van Waters Rogers, 765 F.2d 578, 580 (6th Cir. 1985) (holding on the basis of "the unique facts of this case" that district court abused its discretion in denying Rule 60(b)(6) relief where, at time plaintiff filed motion, judgment was not final, and action of Ohio Supreme Court of reversing itself within one year was certainly unusual). Rule 60(b)(6) may also warrant relief where the subsequent court decision is closely related to the case in question, such as where the Supreme Court resolves a conflict between another circuit ruling and that case. See e.g., Ritter v. Smith, 811 F.2d 1398, 1402-03 (11th Cir. Cir.), cert. denied, 483 U.S. 1010, 107 S.Ct. 3242, 97 L.Ed.2d 747 (1987). Similarly, where two cases arising out of the same transaction results in conflicting judgments, relief has been found to be warranted. See Pierce v. Cook Co., 518 F.2d 720, 723 (10th Cir. 1975), cert. denied, 423 U.S. 1079, 96 S.Ct. 866, 47 L.Ed.2d 89 (1976).

Baits, 66 F.3d at 748, n. 6 (emphasis added).

In Batts, the Fifth Circuit cited the Ritter case in which a circuit court granted Rule 60(b)(6) relief from a final judgment. In that case, Ritter had been sentenced to death pursuant to the then-operative Alabama death penalty statute. The Eleventh Circuit held that the statutory scheme was facially unconstitutional because of its mandatory death sentence component. After certiorari was denied and pursuant to the mandate, the district court gave Alabama 180 days to re-sentence Ritter. Shortly after, the Supreme Court of the United States granted certiorari in Baldwin v. Alabama, 469 U.S. 1085, 105 S.Ct. 589 (1984) which concerned the identical sentencing statute. Since the state did not file a Rule 59(e) motion to alter or amend the district court's December 3, 1984 judgment in Ritter based on the grant of certiorari in Baldwin, the judgment was final. However, on April 14, 1985, within the 180 day period the district court had allowed for re-sentencing, the State moved for extension of time to re-sentence Ritter.

The Supreme Court decided Baldwin on June 17, 1985, holding that the Alabama capital sentencing procedures were not facially unconstitutional. In that opinion, the Supreme Court expressly addressed the conflict between the Eleventh Circuit opinion in Ritter and the Alabama Supreme Court's Baldwin opinion.

On September 9, 1985, the State filed a Rule 60(b)(6) motion for relief from the district court's judgment of December 3, 1984. The fundamental question before the Court was whether a supervening change in the law, could ever present a sufficient basis for Rule 60(b)(6) relief. The Court discussed the issue extensively and held that mere finality of judgment is not sufficient to thwart Rule 60(b)(6) relief under extraordinary circumstances. The court did note that the judgment was not yet executed and that there was minimal delay between the finality of the judgment and the Rule 60(b)(6) motion. The court also emphasized the close relationship between the two cases, Baldwin and Ritter and the fact that the Supreme Court had granted certiorari in Baldwin to resolve the dispute. Indeed, the Eleventh Circuit noted a district court of New York decision, Tsakonites v. Transpacific Carriers Corp., 322 F. Supp. 722 (S.D.N.Y. 1970), which the appellate court described as follows:

[A] supervening Supreme Court decision was the basis for granting a Rule 60(b)(6) motion more than five years after the original judgment. As in the present case, the intervening Supreme Court decision was rendered expressly to resolve a conflict between the earlier decision in Tsakonites and another case. Because of this close connection between the two cases, the court found the circumstances sufficiently extraordinary to justify disturbing the finality of the judgment.

Ritter v. Smith, 811 F.2d 1398, 1402 (11th Cir. 1987).

Thus, the Fifth Circuit has recognized that there are exceptions to this hard and fast rule concerning finality of judgments-specifically where "a subsequent court decision is closely related to the case in question, such as where the Supreme Court resolves a conflict between another circuit ruling and that case" occurs. Batts, 66 F.3d at 748, n. 6 citing Ritter. Certainly, under the facts of this case, this exception applies.

The Cook County decision resolved a conflict between the circuits and noted specifically that this case, Garibaldi, was one that created the conflict.¹ It has been argued by the Orleans Parish School Board that if the Supreme Court had wanted to, it could have reversed this decision itself. However, a clear review of the chronology of this case demonstrates that:

1 Indeed the Supreme Court stated, "The Court of Appeals, in conflict with two other Circuits, distinguished Stevens and reversed, 277 F.3d 969 (C.A. 7 2002). We granted certiorari, 536 U.S. 956 (2002), and now affirm the Court of Appeals." In this sentence, the Supreme Court noted the two cases in conflict in footnote six as United States ex rel. Dunleavy v. County of Delaware, 279 F.3d 219 (C.A. 3 2002); United States ex rel. Garibaldi v. Orleans Parish School Bd. 244 F.3d 486 (C.A. 5 2001).

(1) when it denied certiorari, the conflict on the appellate level did not exist; it was two weeks later that the Seventh Circuit created the split with its Cook County ruling;

(2) when the Supreme Court denied the petition for rehearing on February 24, 2002, the Cook County application for certiorari had not even been filed; it was filed on April 19, 2002. Cook County, Illinois v. U.S. ex rel. Chandler, 2002 WL 31966999 (Appellate Brief) (U.S.Pet. Brief Sep. 09, 2002) Brief of Petitioner (NO. 01-1572);

(3) The Supreme Court specifically cited the Fifth Circuit's decision in Garibaldi when describing the conflict between the circuits with respect to whether a municipal corporation was a person under the False Claims Act;

(4) The Supreme Court unequivocally rejected the very basis for the Fifth Circuit's decision;

(5) The Supreme Court granted the writ application in Dunleavy on April 23, 2003 and reversed the decision of the Third Circuit;

(6) The instant motion was filed on May 12, 2003.

The Orleans Parish School Board argues that had the Supreme Court wanted to reverse the Fifth Circuit decision, it could have done so after the Cook County decision; however, that ignores the fact that the Supreme Court no longer had the mandate; it was no longer capable of curing the problem. Thus, it falls on this Court to determine whether these circumstances constitute "extraordinary" ones such that it must grant the relief sought.

While this Court understands that a simple "change in decisional law" is not enough to trigger Rule 60(b)(6), it seems unconscionable to ignore the fact that this case was an integral part in the decision making process. But for Garibaldi, there would not have been the two to one split upon which the Supreme Court ultimately based its grant of writs and found the very basis for the Fifth Circuit's decision to be devoid of merit. Certainly, the fact that these three cases were all under consideration at substantially the same time and played a role in the Supreme Court's decision presents proof that enforcement of the judgment would work an injustice. DeFilippis v. United States, 567 F.2d 341, 344 (7th Cir. 1977), overruled in part on other grounds by United States v. Chicago, 663 F.2d 1354 (7th Cir. 1981). And further, that injustice is substantial. See Dowel v. Board of Educ. of Oklahoma City Pub. Sch., 8 F.3d 1501, 1509 (10th Cir. 1993).

As the Supreme Court reasoned and as noted above,

The question in such cases is whether the local taxpayer should make up for an undeserved benefit, or the federal taxpayer be permanently out of pocket, a question that can be answered in any given case, not by an opportunistic qui tam relator, but by a combination of the judge's discretion and the Government's power to intervene and dismiss or settle an action.

Cook County at *7. In this case, it would be simple serendipity that determined that the federal taxpayer was to be permanently out of pocket the funds at issue herein, This course of action cannot be countenanced in the meeting out of justice. Considering how intertwined these cases were, how without Garibaldi, the very conflict which begot the Cook County decision might not have been taken up. As such, the Court finds that extraordinary circumstances exist and the motion must be granted. Indeed, this route is further supported in Polites v. United States, 364 U.S. 426, 433, 81 S.Ct. 202, 206 (1960) where the Supreme Court implied that relief in Rule 60(b) is not to be inflexibly withheld where there is a clear and authoritative change in governing law. Indeed, in the case subjudice, the issues presented were new and the law was gestating. Accordingly,

IT IS ORDERED that Motion of Plaintiffs/Relators Garabaldi and Samuel on Behalf of the United States of America for Relief From Judgment under Federal Rule of Civil Procedure 60(b) (Doc. 280) is GRANTED and the Amended Judgment of the Court previously entered on April 27, 1999 shall be reentered.