
USCA1 Opinion

	




                            United States Court of Appeals                            United States Court of Appeals                                For the First Circuit                                For the First Circuit                                 ____________________        No. 93-1766                          IN RE:  UNITED STATES OF AMERICA,                        EX REL. S. PRAWER AND COMPANY, ET AL.,                               Plaintiffs, Appellants,                                          v.                             FLEET BANK OF MAINE, ET AL.,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                              FOR THE DISTRICT OF MAINE                       [Hon. Gene Carter, U.S. District Judge]                                          ___________________                                 ____________________                                        Before                                 Breyer, Chief Judge,                                         ___________                         Torruella and Stahl, Circuit Judges.                                              ______________                                 ____________________             Jeffrey  Bennett  with whom  Melinda J.  Caterine and  Herbert H.             ________________             ____________________      __________        Bennett & Assoc., P.A. were on brief for appellants.        ______________________             James E. Kaplan with whom Derek P. Langhauser, James  E. Kaplan &             _______________           ___________________  __________________        Associates,  P.A. and Julianne Cloutier were on brief for appellee Amy        _________________     _________________        Bierbaum.             Thomas  N. O'Connor with whom Donald L.  Cabell and Hale and Dorr             ___________________           _________________     _____________        were on brief for appellees Verrill  & Dana, P. Benjamin Zuckerman and        Anne M. Dufour.             Joseph F. Shea  with whom Paul  R. Gupta and Nutter,  McClennen &             ______________            ______________     ____________________        Fish were on brief for appellee RECOLL Management Corporation.        ____             John  J. Wall,  III with  whom Thomas  F. Monaghan  and Monaghan,             ___________________            ___________________      _________        Leahy,  Hochadel &  Libby were  on brief  for appellee  Fleet Bank  of        _________________________        Maine.             Frank W.  Hunger, Assistant  Attorney General, Jay  P. McCloskey,             ________________                               _________________        United  States Attorney, and Douglas N. Letter and Jonathan R. Siegel,                                     _________________     __________________        Attorneys,  Civil Division,  Department of Justice,  on brief  for the        United States, amicus curiae.                                 ____________________                                     May 5, 1994                                 ____________________                      STAHL, Circuit  Judge.   This appeal arises  out of                      STAHL, Circuit  Judge.                             ______________            the district court's sua sponte dismissal of a qui tam action                                 ___ ______                ___ ___            brought by plaintiffs-appellants S. Prawer & Company, Gilbert            Prawer, and Harvey Prawer (collectively "Prawer") as relators            under  the  False Claims  Act ("FCA"),  31  U.S.C.    3729 et                                                                       __            seq.1   Plaintiffs  primarily2 contend  that the  court erred            ____            in  concluding  that 31  U.S.C.     3730(e)(3),3 a  provision            enacted  as  part  of the  1986  amendments  to  the qui  tam                                                                 ___  ___            provisions of the FCA, bars their claim.  The issue is one of            first  impression, as no other  court has as  yet been called            upon to  interpret the  reach and meaning  of this  ambiguous                                            ____________________            1.  Because  of  the  length   of  the  statutory  provisions            relevant to this appeal, we have attached them in an appendix            to our opinion.            2.  Employing  an extremely  literal reading  of 31  U.S.C.              3730(b)(1) (an action brought under the FCA "may be dismissed            only  if the  court  and the  Attorney  General give  written            consent to the dismissal  and their reasons for consenting"),            plaintiffs also argue that the court erred in proceeding  sua                                                                      ___            sponte and dismissing this action without the approval of the            ______            Attorney General.   Because, as  will be discussed  infra, we                                                                _____            believe the court erred  in determining that this  action was            jurisdictionally  barred, we need not and  do not address the            merits  of this somewhat dubious assertion.  See Fed. R. Civ.                                                         ___            P.  12(h)(3)  ("Whenever  it  appears by  suggestion  of  the            parties or otherwise that the court lacks jurisdiction of the                    __ _________            subject  matter,  the  court   shall  dismiss  the  action.")                                           _____            (emphasis added).            3.  Section 3730(e)(3)  states:   "In no  event may  a person            bring [a qui tam  action] which is based upon  allegations or                     ___ ___            transactions  which are  the subject  of a  civil suit  or an            administrative   money  penalty   proceeding  in   which  the            government is already a party."                                         -2-                                          2            provision.    After careful  consideration  of  the arguments            presented, we reverse.                                          I.                                          I.                                          __                                      BACKGROUND                                      BACKGROUND                                      __________            A.  Relevant Factual and Procedural History            A.  Relevant Factual and Procedural History            ___________________________________________                      The  relevant facts  and allegations,  recounted in            the  light most favorable to plaintiffs, are as follows.4  In            January 1991,  the Maine  National Bank ("MNB")  was declared            insolvent  and  the  Federal  Deposit  Insurance  Corporation            ("FDIC")  was appointed its receiver.  The New Maine National            Bank ("NMNB") was established as  a bridge bank through which            the FDIC would conduct certain MNB-related affairs.                      On or about July 12, 1991, the NMNB closed, and the            FDIC sold virtually all of its assets to Fleet Bank  of Maine            ("Fleet").  The contract by which this transfer of assets was            effectuated is  known as  the "Assistance Agreement."   Inter                                                                    _____            alia, the  Assistance Agreement  provided that Fleet  had the            ____            right to "put,"  or cause  the FDIC to  repurchase, any  NMNB            loans  acquired by  it pursuant  to the  Assistance Agreement                                            ____________________            4.  A few of the following  facts and allegations appear only            in  plaintiffs' brief.  Because  they help shed  light on the            convoluted  factual underpinnings of this litigation and have            no effect on  our resolution  of the question  before us,  we            have  included   them  in   our  recitation  of   the  case's            background.   Our  inclusion of  these facts  and allegations            should not, however, be construed either as an endorsement of            their  veracity  or as  an  indication  that  they are  well-            pleaded.                                         -3-                                          3            (provided  that said  loans  did not  fall  into any  one  of            several  exceptional categories  described in  the Assistance            Agreement).  Included among  the transferred assets were five            promissory notes, totalling approximately $1.1 million, given            by  Prawer to  the NMNB.   The  notes represented  the amount            Prawer had drawn against a $2 million line of credit extended            to it by NMNB.                      On  July  15,  1991,  Prawer  entered  into  a  new            agreement with Fleet for  an unsecured line of credit  (known            as the "Fleet Credit Facility") which permitted it to draw up            to $2  million  by  executing  and/or  renewing  consecutive,            unsecured 90-day term notes on  a note-by-note basis.  Prawer            utilized  this new line of credit from Fleet to satisfy fully            its  obligations  under each  of  the  five outstanding  NMNB            notes.  By May 5, 1992, Prawer had drawn $1.6 million against                                                                 its  $2  million  line  of  credit  under  the  Fleet  Credit            Facility.  These borrowings were evidenced by seven unsecured            90-day term notes.                      Meanwhile, on April 30, 1992, Prawer sold virtually            all  of its  then-existing assets  to C&S  Wholesale Grocers,            Inc. ("C&S").  Gilbert  Prawer informed Fleet of the  sale on            May 1,  1992.   On May  6, 1992,  pursuant to  the Assistance            Agreement, Fleet put  certain Prawer notes back  to the FDIC.                                         -4-                                          4            The parties hotly contest, however, whether  any of the notes            were "putable" under the terms of the Assistance Agreement.5                      1.  The Collection Case                      1.  The Collection Case                      Subsequently, in November  1992, the FDIC commenced            an action  against Prawer,  C&S, and  a number of  individual            defendants  to collect upon the notes put back to it pursuant            to the  Assistance Agreement.   The complaint in  that action            not only sought  enforcement of the  notes, but also  alleged            that  the  April 30,  1992, sale  of  Prawer's assets  to C&S            constituted a fraudulent conveyance and violated Maine's Bulk            Sale Act.  More specifically, the FDIC contended that  Prawer                                                                         had become  insolvent, and  had peddled  its assets  for less            than  full value  in order  to satisfy  its debts  to certain            creditors.  Accordingly, the complaint sought  damages beyond            the amount allegedly outstanding on the notes.                      Prawer  responded to  this  complaint with  several            affirmative defenses  and counterclaims, as well  as filing a            third-party complaint  against  Fleet and  Recoll  Management            Corporation  ("Recoll"),   a  Fleet  subsidiary   which  had,            pursuant  to  an agreement  with  the FDIC,  been  seeking to                                            ____________________            5.  It  has been and is plaintiffs' position that none of the                                                              ____            notes   were  properly  putable;  defendants  apparently  now            concede  that some  of  the notes  were  not putable  because                          ____            plaintiffs' obligations thereunder had been  fully satisfied,            but argue that certain other notes were, in fact, putable.                                         -5-                                          5            collect upon  the notes which were  put back to the  FDIC.  A            variety   of   charges   were   made   in   these   defenses,            counterclaims,  and third-party  claims;  among these  was an            assertion  that  the  notes  were  not  putable  to  the FDIC            pursuant to the Assistance Agreement.  But see infra note 6.                                                   ___ ___ _____                      At  oral argument,  the  parties represented  that,            since the filing ofthis case, the Collection casehas settled.                      2.  The Qui Tam Case                      2.  The Qui Tam Case                              ___ ___                      On June 21, 1993,  plaintiffs filed the instant qui                                                                      ___            tam action.   In  their complaint, plaintiffs  contended that            ___            the  named defendants --  Fleet, Recoll, Verrill  & Dana (the            law firm that served  as legal counsel to Fleet,  Recoll, and            the FDIC at all  times relevant to this matter),  P. Benjamin            Zuckerman  and Anne  M. Dufour  (the Verrill  & Dana  lawyers            involved in  this matter), and  Amy Bierbaum  (an FDIC  staff            attorney) -- "created and  used, or caused to be  created and            used, false  records and  statements designed to  defraud the            Government  into paying Fleet approximately $1.6 million" for            the Prawer notes pursuant  to the put-back provisions  of the            Assistance Agreement.                      Nine  days later,  on June  30, 1993,  the district            court  sua sponte  dismissed  plaintiffs' complaint.   In  so                   ___ ______            doing,  the court relied upon   3730(e)(3), see supra note 3,                                                        ___ _____            finding  that  (1)  the  allegations  made  and  transactions            implicated in plaintiffs' complaint already were at issue (as                                         -6-                                          6            defenses) in  the Collection case; and  (2) the "government,"            in the person of  the FDIC, was a party to  that action.  See                                                                      ___            United States ex rel. S. Prawer & Co. v. Fleet Bank of Maine,            _____________________________________    ___________________            825 F. Supp. 339 (D. Me. 1993).                      Plaintiffs moved  the court  to reconsider its  sua                                                                      ___            sponte order of dismissal, arguing, inter alia, that  (1) the            ______                              _____ ____            "government,"  for purposes of    3730(e)(3), was not a party            to the Collection case;  and (2) the qui  tam action was  not                                                 ___  ___            "based upon allegations or transactions which are the subject            of" the Collection  case.  In  a comprehensive memorandum  of            decision, the court rejected both of these arguments (as well            as  all other arguments made  in plaintiffs' motion).   In so            doing, however, the court  receded slightly from its original            holding  on the  question of  whether there  was an  identity            between  the  allegations and  transactions  which  were "the            subject  of" the Collection case and those that served as the            basis for the qui tam action.  Instead, the court found:                          ___ ___                           To  the  extent that  defenses based                      upon  the  allegations  of  the  qui  tam                                                       ___  ___                      complaint  are not pleaded in the related                      civil action, that is entirely the result                      of the conscious decision of  counsel for                      the  defendants   there  (and  Plaintiffs                      here) to abjure  their pleading.  Clearly                      the  factual  predicate  for   the  false                      claims alleged in the qui tam action form                                            ___ ___                      the   basis   for  assertion   of  viable                      defenses  to the claims  made against the                      defendant  S. Prawer  &  Company  on  the                      notes in  the related civil  action.   An                      effective defense to  those claims  would                      require  that  those defenses  be pleaded                      there if counsel, in good faith,  believe                                         -7-                                          7                      the facts put  forth here.  . .  .   This                      Court    believes    that   the    proper                      construction  of [   3730(e)(3)] requires                      that  it  be   read  broadly  enough   to                      encompass   not   only  allegations   and                      transactions actually put in issue by the                      litigants in the  related civil suit  but                      any  allegations   or  transactions  that                      could  legitimately  be  made  a  subject                      (e.g., [sic]  be  put in  issue) of  that                       ____                      suit  in   the  regular  course   of  its                      development.            United States ex rel. S. Prawer & Co. v. Fleet Bank of Maine,            _____________________________________    ___________________            Civ. No. 93-165-P-C,  slip op. at 3-4 (D. Me.  July 12, 1993)            (footnote  omitted).6      Accordingly,  the   court   denied            plaintiffs' motion.  Id. at 9.                                 ___            B.  The Statutory Framework            B.  The Statutory Framework            ___________________________                      Because  our resolution of  the issue  presented in            this appeal  necessarily is informed by  Congress's intent in            enacting the 1986 amendments to the FCA's qui tam provisions,                                                      ___ ___            a  brief historical overview of the statute is in order.  The            FCA's  qui  tam7  provisions,   see  generally  31  U.S.C.                      ___  ___                 ___  _________                                            ____________________            6.  Our  review  of  the  pleadings in  the  Collection  case            reveals  that  it  is a  close  question  as  to whether  the            illegitimacy of  the put (on  grounds of fraud)  actually was            raised therein  as an affirmative defense.   However, because                            __ __ ___________ _______            we find that    3730(e)(3) does not  bar this action  even if            the  fraud  claim was  so raised,  we  will assume  this fact            arguendo  and will  not address  the district  court's ruling            ________            that  the  statute  also  bars qui  tam  actions  based  upon                                           ___  ___            allegations or  transactions that  could have been  raised in                                               _____ ____            another   civil  action   or  administrative   money  penalty            proceeding.               7.  "Qui tam" is an abbreviation for "qui tam pro domino rege                 ___ ___                          ___ ___ ___ ______ ____            quam pro seipso," which  literally means "he who as  much for            ____ ___ ______            the  king as for himself."  United States ex rel. Springfield                                        _________________________________            Terminal Ry. Co.  v. Quinn, 14 F.3d  645, 647 n.1  (D.C. Cir.            ________________     _____                                         -8-                                          8            3730(b)-(g),  empower private  persons, known  as "relators,"            (1)  to  sue,  on  behalf  of  the  government,  persons  who            knowingly  have  presented  the  government  with  false   or            _________            fraudulent claims (as the highlighted terms are defined by 31                       ______            U.S.C.   3729); and  (2) to share in any  proceeds ultimately            recovered  as a result of such suits, see generally 31 U.S.C.                                                  ___ _________               3730(d).    Since its  enactment  in  1863,8  the FCA  has            contained several different qui tam provisions.  The original                                        ___ ___            provisions    contained    no   significant    jurisdictional            limitations  and did  not  preclude plaintiffs  from bringing            suit  on the basis of information already in the government's            possession.   Quinn, 14 F.3d at 649.  Despite this invitation                          _____            for abuse, however, the provisions were used sparingly in the            first fifty  years of  their existence.   Id.  (citing United                                                      ___          ______            States ex rel. LaValley v. First Nat'l Bank of Boston, 707 F.            _______________________    __________________________            Supp. 1351, 1354 (D. Mass. 1988)).                      During the New Deal  and World War II, there  was a            notable increase  in the number  of contracts awarded  by the                                            ____________________            1994) (citing John T.  Boese, Civil False Claims and  Qui Tam                                          _______________________________            Actions, 1-6 (1993)).  Qui tam provisions, which historically            _______                ___ ___            have  allowed parties  to initiate  suit on  the government's            behalf and to share  in the recovery as bounty,  first gained            popularity in  thirteenth-century England as  a supplement to            ineffective law  enforcement.  Id. (citing  Note, The History                                           ___                ___________            and Development  of Qui Tam, 1972 Wash. U. L.Q. 81, 86-87 and            ___________________________            Boese, supra, at 1-6).                   _____            8.  The  FCA  originally  was  enacted "in  order  to  combat            rampant fraud in Civil  War defense contracts."  See  S. Rep.                                                             ___            No.  345,  99th   Cong.,  2d  Sess.  8,  reprinted   in  1986                                                     _________   __            U.S.C.C.A.N. 5266, 5273.                                           -9-                                          9            government to private individuals  and entities.  Id.   Along                                                              ___            with  this increase came a concomitant surge in the number of            qui tam actions  brought by relators under the FCA.   See id.            ___ ___                                               ___ ___            This  litigational surge,  in turn, brought  to the  fore the            fact  that the  qui tam  provisions then  in effect  were too                            ___ ___            susceptible to  abuse by "parasitic"  relators.   The era  of            parasitic  qui tam actions reached  its apex in United States                       ___ ___                              _____________            ex  rel. Marcus  v.  Hess, 317  U.S.  537 (1943),  where  the            _______________      ____            Supreme Court allowed  a relator  to proceed with  a qui  tam                                                                 ___  ___            suit that was based  solely on the allegations of  a criminal                                 ______            indictment to  which  defendants  already  had  pleaded  nolo                                                                     ____            contendere (and as  a result of which  defendants already had            __________            paid fines totalling $54,000).  See Quinn, 14 F.3d at 649-50;                                            ___ _____            see also S. Rep. No. 562,  99th Cong., 2d Sess. 10, reprinted            ___ ____                                            _________            in 1986 U.S.C.C.A.N. at 5275.  In rejecting  the government's            __            argument that  permitting the action to  proceed would thwart            the spirit of the FCA, the Court stated:                           Even  if   .  .  .   petitioner  has                      contributed nothing to  the discovery  of                      this  crime, he  has contributed  much to                      accomplishing  one  of  the purposes  for                      which  the [FCA]  was passed.   The  suit                      results   in  a   net  recovery   to  the                      government  of  $150,000, three  times as                      much as  fines  imposed in  the  criminal                      proceedings.            Hess,  317 U.S. at 545.  Accordingly, because the Court found            ____            neither a  bar to  the suit  in the  text of  the FCA  nor an            intent to impose one in the Act's legislative history, id. at                                                                   ___                                         -10-                                          10            546,  it  declined to  establish a  judicial  bar on  its own            initiative, Quinn, 14 F.3d at 650.                        _____                      In  response   to  public  outcry   over  the  Hess                                                                     ____            decision, Congress acted quickly  to restrict the universe of            litigants who  could avail  themselves of  the FCA's  qui tam                                                                  ___ ___            provisions.   Id.  at  650.   The  1943 amendments  to  these                          ___            provisions,  signed  into  law   by  President  Roosevelt  on            December  21, 1943, codified  this restriction.   See S. Rep.                                                              ___            No.  562,   99th  Cong.,  2d  Sess.  12,  reprinted  in  1986                                                      _________  __            U.S.C.C.A.N. at  5277.  The  amendments reflected  compromise            between the  House  and Senate;  the  House bill  would  have            repealed the qui tam  provisions altogether, while the Senate                         ___ ___            bill  would  have  precluded  suits  which  were  based  upon            information already in the government's possession unless the            information  underlying  the suit  was  "original  with [the]            person  [bringing the suit]."  Quinn, 14 F.3d at 650 (quoting                                           _____            89  Cong. Rec. 510, 744  (daily ed. December  16, 1943)); see                                                                      ___            also S. Rep. No.  562, 99th Cong., 2d Sess.  11-12, reprinted            ____                                                _________            in  1986  U.S.C.C.A.N. at  5276-77.    Although the  Senate's            __            approach largely prevailed, the  provision of the Senate bill            expressly permitting the "original  source" of information to            bring a  qui tam action  was dropped  in conference.   See S.                     ___ ___                                       ___            Rep.  No. 562,  99th Cong.,  2d Sess.  12, reprinted  in 1986                                                       _________  __            U.S.C.C.A.N.   at  5277.    As  a   result,  the  final  1943            legislation precluded all qui  tam actions "based on evidence                                      ___  ___                                         -11-                                          11            or  information  the  Government  had  when  the  action  was            brought."   31 U.S.C.    3730(b)(4) (1982)  (superseded); see                                                                      ___            also Quinn, 14 F.3d at 650.            ____ _____                      Over  the  next   four  decades,  courts   strictly            construed  the  jurisdictional  bar established  in  the 1943            amendments.  See  S. Rep. No. 562,  99th Cong., 2d Sess.  12,                         ___            reprinted  in 1986  U.S.C.C.A.N.  at  5277.   Unsurprisingly,            _________  __            there was a corresponding  decrease in the use of the qui tam                                                                  ___ ___            provisions  to  enforce  the  FCA during  this  same  period.            Quinn,  14 F.3d at 650 (citing Boese, supra note 7, at 1-12).            _____                                 _____            If the Hess  decision marks  the highpoint of  the regime  of                   ____            liberal litigation under the  qui tam provisions, the Seventh                                          ___ ___            Circuit's  decision  in  United  States,  ex  rel.  State  of                                     ____________________________________            Wisconsin  v. Dean, 729 F.2d  1100 (7th Cir.  1984), may well            _________     ____            mark the point of greatest retreat from Hess.  See  Quinn, 14                                                    ____   ___  _____            F. 3d at 650.                      In  Dean, the  Seventh Circuit  was faced  with the                          ____            question of  whether the State of Wisconsin should be allowed            to act as a qui tam relator in a Medicaid  fraud action where                        ___ ___            the  State,  in  accordance  with  federal  regulations,  had            already reported  the fraud to  the federal government.   See                                                                      ___            Dean, 729  F.2d at 1102-04.   It was undisputed that  (1) the            ____            fraud investigation had been conducted  by the State; (2) the            State was an original source of the information provided; and            (3) the State had been required to report the fraud.  See id.                                                                  ___ ___                                         -12-                                          12            at  1102-03 and  n.2.   Nonetheless,  noting the  unambiguous            language of the FCA, the disappearance of the original source            provision from the 1943  Senate bill, and the absence  of any            basis for finding an exception to the statutory bar where the            relator  was required  to report  the information,  the court            rejected the  contentions of both  the State and  the federal            government,  which had filed an amicus brief on behalf of the                                            ______            State, that the FCA's legislative history evinced a "`clearly            expressed legislative  intention'" to allow the  action to go            forward.  See id. at 1104-05 (quoting Consumer Product Safety                      ___ ___                     _______________________            Comm'n  v. GTE  Sylvania, Inc.,  447  U.S. 102,  108 (1980)).            ______     ___________________            Accordingly, it reversed the  decision of the district court,            which had found such an intention.  See id. at 1104-06.                                                ___ ___                      In  the wake  of the  Seventh Circuit's  opinion in            Dean,  there was  once again  a perception  that the  qui tam            ____                                                  ___ ___            provisions were in  need of alteration.  See S. Rep. No. 562,                                                     ___            99th  Cong., 2d Sess.  13, reprinted in  1986 U.S.C.C.A.N. at                                       _________ __            5278 (recounting that  the National Association  of Attorneys            General adopted  a resolution calling on  Congress to rectify            "the unfortunate result" of  the Dean decision).  Ultimately,                                             ____            Congress responded  with the  False Claims Amendments  Act of            1986,  the stated  purpose  of  which  was "`to  enhance  the            Government's ability to recover  losses sustained as a result            of fraud against  the Government.'"   Quinn, 14  F.3d at  650                                                  _____            (quoting S. Rep. No.  562, 99th Cong., 2d Sess.  1, reprinted                                                                _________                                         -13-                                          13            in 1986 U.S.C.C.A.N. at  5266).  Concerned that sophisticated            __            and  widespread fraud  was depleting  the national  fisc, the            drafters  of  the 1986  amendments  concluded  that "`only  a            coordinated effort  of both the Government  and the citizenry            will  decrease   this  wave   of  defrauding  public   funds.            Accordingly, the Senate  bill increases incentives, financial            and  otherwise, for  private  individuals to  bring suits  on            behalf of the Government.'"   Id. at 650-51 (quoting  S. Rep.                                          ___            No.  562,  99th  Cong.,  2d  Sess.  1-2,  reprinted  in  1986                                                      _________  __            U.S.C.C.A.N. at 5266-67).                      The 1986  amendments  changed  the  FCA's  qui  tam                                                                 ___  ___            provisions  in  several respects.    On  the one  hand,  they            contained  several provisions  designed  to  "encourage  more            private  enforcement suits."  See id. at 651 (quoting S. Rep.                                          ___ ___            No. 562,  99th  Cong.,  2d  Sess. 23-24,  reprinted  in  1986                                                      _________  __            U.S.C.C.A.N.  at  5288-89).   Among  these  are the  original            source  provision eliminated  from  the 1943  Senate bill,  a            provision increasing  monetary  awards,  a  lower  burden  of            proof,  and  a  provision  allowing  qui  tam  plaintiffs  to                                                 ___  ___            continue to participate in  the actions after intervention by            the government.   Id. (citing United States  ex rel. Stinson,                              ___         _______________________________            Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co.,  944            ________________________________    ___________________            F.2d  1149,  1154  (3d. Cir.  1991)).    On  the other  hand,            Congress also enacted new provisions designed, inter alia, to                                                           _____ ____            continue the prohibition against strictly parasitic lawsuits.                                         -14-                                          14            See generally 31 U.S.C.   3730(e); see also Quinn, 14 F.3d at            ___ _________                      ___ ____ _____            651.                      We  think Judge  Wald  summarized rather  well  the            objectives of the 1986 amendments:                           The  history  of  the  FCA  qui  tam                                                       ___  ___                      provisions      demonstrates     repeated                      congressional efforts to walk a fine line                      between  encouraging whistle-blowing  and                      discouraging opportunistic behavior.  The                      1986  amendments  inevitably reflect  the                      long  process  of  trial  and  error that                      engendered them.   They must be  analyzed                      in the  context  of these  twin goals  of                      rejecting suits which  the government  is                      capable   of   pursuing   itself,   while                      promoting those which  the government  is                      not equipped to bring on its own.            Id.             ___                                         -15-                                          15                                         II.                                         II.                                         ___                                      DISCUSSION                                      DISCUSSION                                      __________            A.  The Jurisdictional Question            A.  The Jurisdictional Question            _______________________________                      As they did  before the district  court, plaintiffs            here  argue that  (1) the  FDIC  is not,  for  purposes of               3730(e)(3), "the  government"; and (2) the  instant action is            not  "based upon  allegations or  transactions which  are the            subject of" the Collection  case.  See supra note 3.  Because                                               ___ _____            we  believe  that  the second  of  these  two  contentions is            ultimately  persuasive,  and  that  the statutory  bar  of               3730(e)(3)  therefore does not  apply, we turn  our sights to            this provision of the statute.                      We start  by noting the obvious:   the breadth with            which we should read  the phrase "allegations or transactions            which  are  the  subject of  a  civil  suit"  is not  readily                        ___  _______ __            apparent from the  text of the statute.  Defendants' argument            that,  because plaintiffs  denied the  legitimacy of  the put            transaction (alleging fraud) in the Collection case, there is            an identity  between the  allegations and transactions  which            were  at least  a  "subject  of"  that  case  and  the  fraud            allegations which serve as "the basis" of this case certainly            strikes us as being anchored upon a plausible construction of            the  phrase  "the  subject of"  in     3730(e)(3).   So  too,            however, does  plaintiffs' argument  that, when viewed  at an            appropriate   level  of  specificity,  the  transactions  and                                         -16-                                          16            allegations which  are "the  subject of" the  Collection case                                    ___            should and  must be seen only  as Prawer's (1)  making of the            sued-upon  notes, and  (2) alleged  failure to  satisfy them.            Therefore, we regard the statute as ambiguous.                      When  faced  with  a  facially  ambiguous statutory            provision, we look to the statute as  a whole and the history            of  its enactment  in  order to  glean congressional  intent.            See,  e.g.,  Concrete Pipe  &  Prods.,  Inc. v.  Construction            ___   ____   _______________________________     ____________            Laborers Pension Trust, 113 S. Ct. 2264, 2281 (1993); Gaskell            ______________________                                _______            v.  Harvard Coop.  Soc'y, 3  F.3d 495,  499 (1st  Cir. 1993);                ____________________            United States v. Alky Enters., Inc., 969 F.2d 1309, 1314 (1st            _____________    __________________            Cir.  1992).   Here,  we  think  the rather  easily-discerned            purposes underlying the 1986  amendments militate strongly in            favor of plaintiffs' reading of the phrase.                      As Judge  Wald observed in the  Quinn decision (and                                                      _____            as we have noted  above, see supra at 14-15),  "[t]he history                                     ___ _____            of  the   FCA  qui  tam   provisions  demonstrates   repeated                           ___  ___            congressional efforts to walk a fine line between encouraging            whistle-blowing  and  discouraging  opportunistic  behavior,"            Quinn, 14 F.3d at 651.  Clearly, the 1986 amendments, insofar            _____            as they were responding  to a regime in which  the preclusion            of opportunistic litigation was  too heavily weighted, had as            perhaps  their central purpose  an expansion of opportunities            and incentives  for private citizens with  knowledge of fraud            against the government to come forward with that information.                                         -17-                                          17            See S.  Rep. No. 562,  99th Cong., 2d  Sess. 1,  reprinted in            ___                                              _________ __            1986  U.S.C.C.A.N.  at  5266   ("The  purpose  of  [the  1986            amendments] is to enhance the Government's ability to recover            losses   sustained  as   a  result   of  fraud   against  the            Government."); id. at 1-2,  reprinted in 1986 U.S.C.C.A.N. at                           ___          _________ __            5266-67 ("The proposed legislation  seeks not only to provide            the Government's law enforcers with more effective tools, but            to encourage  any individual  knowing of Government  fraud to            bring  that information  forward."); id.  at 2,  reprinted in                                                 ___         _________ __            1986 U.S.C.C.A.N. at 5267 ("[The 1986 amendments]  increase[]            incentives, financial and otherwise, for  private individuals            to bring suits on behalf of the Government.").  Indeed, it is            apparent that a primary objective of the 1986 amendments,  as            revealed in  the above-quoted Senate Report  and in published            hearings on  the proposed  legislation, was to  encourage and            provide incentives for the bringing of qui tam actions in all                                                   ___ ___            ___            but the several circumstances delineated  in   3730(e).   See            ___                                                       ___            generally  id. at  1-17,  reprinted in  1986 U.S.C.C.A.N.  at            _________  ___            _________ __            5266-82; see also generally False Claims Reform Act:  Hearing                     ___ ____ _________ _________________________________            Before the  Subcomm.  on Admin.  Practice  and Proc.  of  the            _____________________________________________________________            Senate Comm. on  the Judiciary, 99th Cong.,  1st Sess. (Sept.            ______________________________            17, 1985); False Claims Act Amendments:  Hearings Before  the                       __________________________________________________            Subcomm.  on Admin.  Law  and Governmental  Relations of  the            _____________________________________________________________            Comm. on the Judiciary  House of Representatives, 99th Cong.,            ________________________________________________            2d Sess. (February 5 and 6, 1986).                                         -18-                                          18                      Obviously,   then,  the  question  becomes:    What            circumstances  does    3730(e)(3) seek  to  avoid?   It seems            clear  that  the answer  to  this  question is  circumstances            involving "parasitic" qui tam actions which are not otherwise                                  ___ ___            barred  by    3730(e).   Cf.,  e.g., Quinn,  14  F.3d at  651                                     ___   ____  _____            (interpreting   the  1986   amendments   as  "still   another            congressional effort to reconcile avoidance of parasitism and            encouragement  of  legitimate citizen  enforcement actions").            Thus, when  it is not clear  whether or not a  qui tam action                                                           ___ ___            should be  barred by  the ambiguous provision  precluding the            action if it is "based upon transactions or allegations which            are the subject of"  another suit or proceeding in  which the            government  is a  party, we  think that  a court  should look            first  to whether  the two  cases can  properly be  viewed as            having  the qualities  of a  host/parasite relationship.   In            answering  this question, we think it would be useful for the            court  to be guided by the definition of the word "parasite,"            and  ask whether  the  qui tam  case  is receiving  "support,                                   ___ ___            advantage,  or the like" from  the "host" case  (in which the            government is a  party) "without giving any useful  or proper            return" to the  government (or at least  having the potential            to  do so).    See Random  House  Dictionary of  the  English                           ___ __________________________________________            Language  1409 (2d ed. unabridged 1987).  If this question is            ________            answered in the affirmative,  the court may properly conclude            that there is an identity between  "the basis" of the qui tam                                                                  ___ ___                                         -19-                                          19            action  and "the subject of" the other suit or proceeding; if            this  question  is  answered   in  the  negative,  the  court            similarly may gather that such an identity is lacking.                      Of  course, because Congress's intuition as to what            constitutes  "potential useful  and  proper  return"  to  the            government  clearly changed  with the  enactment of  the 1986            amendments,  our endorsement  of this  inquiry would  beg the            question  entirely without  two  further points.   While  the            question of  what now constitutes potential  useful or proper            return to the government  will not always be  easily answered            and must necessarily be addressed on a case-by-case basis, we            believe it important to  note that one of the  most important            perceptions   precipitating  the  1986  amendments  was  that            actions which had the potential of providing such return were            being precluded  by the  then-existing statutory regime.   In            light of  this, we  feel courts  should proceed with  caution            before  applying  the  statutory   bar  of     3730(e)(3)  in            ambiguous circumstances.                      On the other hand, we think it clear that a qui tam                                                                  ___ ___            suit's  potential  for  adding   funds  to  the  government's            coffers, without more, should not be regarded as constituting                     _______ ____            useful or proper return  to the government.  In  enacting the            1943  amendments to  the FCA's  qui tam  provisions, Congress                                            ___ ___            clearly rejected the view (espoused in Hess, 317 U.S. at 545)                                                   ____            that this  potentiality alone  was sufficient to  render non-                                    _____                                         -20-                                          20            parasitic (and therefore  viable) a qui  tam action which  is                                                ___  ___            completely derivative of another case in which the government            __________            is  a party.  And, while the 1986 amendments certainly reveal            an  intent to recharacterize as "non-parasitic" actions which            would have  been considered  "parasitic" under the  1943-1986            regime  (which regarded  as "parasitic"  all qui  tam actions                                                     ___ ___  ___            based upon  evidence or  information the government  had when            the action was brought), nothing in these amendments suggests            a congressional  desire to return to  the 1863-1943, pre-Hess                                                                     ____            regime.                      Turning to  the instant  appeal, we think  that two            facts combine to compel the conclusion that this case has the            potential  of  providing "useful  or  proper  return" to  the            government,  and   therefore  is   not  "parasitic"   of  the            Collection  case.   First,  the FDIC  (which we  shall assume            arguendo  to  be "the  government"  within the  meaning  of              ________            3730(e)(3)) was not proceeding against the defendants to this                            ___            action,  for fraud  or  otherwise, in  the Collection  case.9            Therefore, because this case is seeking  to remedy fraud that            the government has not yet  attempted to remedy, it is, as  a            threshold matter,  wholly unlike  the one  the drafters  of              3730(e)(3)  almost  certainly  had  in  mind  and  sought  to                                            ____________________            9.  Of the defendants named here, only  Fleet and Recoll were            parties  to the Collection case.   Moreover, Fleet and Recoll            were only parties  to that  case because Prawer  had filed  a                                                     ______            series of third-party claims against them.                                         -21-                                          21            preclude (i.e., a  qui tam action  based upon allegations  or                               ___ ___            transactions  pleaded  by the  government  in  an attempt  to                                   __ ___  __________            recover for fraud committed against it).                      Second, it does not appear that the FDIC could have                                                               _____ ____            sued Fleet for fraud as part  of the Collection case as  that                                                                 __  ____            case was constituted.   Had it attempted  to do so, the  FDIC            ____ ___ ___________            not  only would have been asserting, as a plaintiff, both the            validity and  the invalidity  of the sued-upon  notes against            separate  defendants  in  the   same  lawsuit,  but  it  also            seemingly  would   have  been  claiming   under  an  entirely            different  "transaction or occurrence" (i.e., the put-back of            the notes pursuant to the  Assistance Agreement) than the one            (Prawer's making of the notes and alleged failure to  satisfy            them) which  was the subject  matter of the  Collection case.            This scenario  is not, of  course, allowed under  the Federal            Rules of Civil  Procedure.  See Fed.  R. Civ. P.  14(a) ("The                                        ___            plaintiff  may  assert  any  claim  against  the  third-party            defendant arising  out of the transaction  or occurrence that                                                                     ____            is the subject  matter of the  plaintiff's claim against  the            __ ___ _______  ______ __ ___  ___________ _____ _______  ___            third-party plaintiff . . . .") (emphasis supplied); see also            ___________ _________                                ___ ____            C.  Wright, A.  Miller,  and M.  Kane,  Federal Practice  and                                                    _____________________            Procedure,    1459  at 449 n.4  (1990) ("Plaintiff  cannot in            _________            effect  substitute,  as  against  the  third-party defendant,            another  cause of  action  for that  originally commenced  by                                         -22-                                          22            him.")  (citing  Welder v.  Washington  Temperance  Ass'n, 16                             ______     _____________________________            F.R.D. 18, 20 (D. Minn. 1954)).                      Another  way  to  look   at  this  question  is  to            determine  whether defendants' construction of this ambiguous            statutory provision would further the purposes underlying the            1986  amendments.   At  oral argument,  when pressed  on this            point, defendants' attorneys acknowledged that their position            necessarily was predicated upon the view that qui tam actions                                                          ___ ___            were  to be  avoided once  the government  had notice  of the            transactions  or allegations  giving  rise to  the actions.10            However, such a  view must be rejected for two  reasons:  (1)            Congress has explicitly deemed a "notice" regime insufficient            to protect  the government  against false claims  (indeed, it            was precisely such  a regime that Congress  sought to abandon                _________ ____  _ ______            in  enacting the 1986 amendments); and  (2) Congress, when it            wants to establish a notice regime, knows how to do so in far            less ambiguous terms than those utilized in   3730(e)(3), see                                                                      ___            31 U.S.C.   3730(e)(2)(A) (precluding qui tam actions brought                                                  ___ ___            against  members of  Congress, members  of the  judiciary, or            senior  executive branch  officials "if  the action  is based            upon evidence or information known to the Government when the            action  was  brought");   31  U.S.C.      3730(b)(4)   (1982)                                            ____________________            10.  After all, given  the facts noted  in the preceding  two            paragraphs, the  most defendants here  can argue is  that the            government was, in the  Collection case, provided with notice            of the allegedly fraudulent nature of put-back transaction.                                           -23-                                          23            (superseded)  (precluding  all  qui  tam  actions  "based  on                                            ___  ___            evidence or  information the  Government had when  the action            was brought").                      To  sum  up, the  instant  qui tam  action  has the                                                 ___ ___            potential  for providing  "useful  or proper  return" to  the            government  in at least two  significant ways:   (1) it seeks            recovery from alleged defrauders  of the government for fraud            that  has  not  yet been  the  subject  of  a  claim  by  the            government;  and (2) it has the potential to restore money to            the  public fisc  that  would not  and  could not  have  been            restored in  the Collection case.   As such, we do  not think            that it can  be characterized as "parasitic."   Therefore, we            believe that  it would  undermine  the purposes  of the  1986            amendments  to  construe this  action  as  being "based  upon            allegations  or transactions  which are  the subject  of" the            Collection case.            B.  Other Matters            B.  Other Matters            _________________                      We  recognize  that  defendants have  made  several            alternative  arguments for  affirmance  in  their  respective            briefs.   We  also recognize  that  plaintiffs have  moved to            dismiss Fleet and Recoll from this action.  Given the nascent            state  of this  litigation  (and  all  that this  implies  --            including an undeveloped record, an inadequate period of time            for plaintiffs to have cured any defects in  their pleadings,            and the lack of a full opportunity for the government to have                                         -24-                                          24            reviewed the pleadings, see 31 U.S.C.   3730(b)), however, we                                    ___            decline either  to delve into defendants'  other arguments or            to  grant  plaintiffs'  motion   to  dismiss  at  this  time.            Instead,  we leave  these matters for  the district  court to            decide after the government determines whether or not it will                   _____            intervene.  So  too do  we leave  to the  district court  all            requests  for costs arising out of claims that this action is            frivolous  and  has been  undertaken in  bad  faith.   To the            extent that any such request may be predicated on an argument            that this appeal was frivolous, it is rejected.                                         III.                                         III.                                         ____                                      CONCLUSION                                      CONCLUSION                                      __________                      For the  reasons explained  above, we do  not think            that the instant qui tam action "is based upon allegations or                             ___ ___            transactions which  are the subject of"  the Collection case.            Accordingly,  the  district  court  erred  in dismissing  sua                                                                      ___            sponte plaintiffs'  complaint  on the  basis of  31 U.S.C.               ______            3730(e)(3).   The judgment of the district court therefore is            vacated.                      Vacated and remanded.  No costs.                      Vacated and remanded.  No costs.                      ________________________________                                         -25-                                          25
