United States v. Bankers Insurance Co ( 2001 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA, 
Plaintiff-Appellee,
v.  No. 00-1342
BANKERS INSURANCE COMPANY,
Defendant-Appellant.

Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
J. Frederick Motz, Chief District Judge.
(CA-99-3538-JFM)
Argued: November 2, 2000
Decided: March 27, 2001
Before WIDENER and KING, Circuit Judges, and
Margaret B. SEYMOUR, United States District Judge
for the District of South Carolina, sitting by designation.
Reversed and remanded by published opinion. Judge King wrote the
opinion, in which Judge Widener joined. Judge Seymour wrote an
opinion concurring in part and dissenting in part.
COUNSEL
ARGUED: Barry Steven Simon, WILLIAMS & CONNOLLY,
L.L.P., Washington, D.C., for Appellant. S. Hollis Fleischer, Assis-
tant United States Attorney, Baltimore, Maryland, for Appellee. ON
BRIEF: William R. Murray, Jr., Eric R. Delinsky, WILLIAMS &
2 UNITED STATES v. BANKERS INSURANCE CO.
CONNOLLY, L.L.P., Washington, D.C., for Appellant. Lynne A.
Battaglia, United States Attorney, Baltimore, Maryland, for Appellee.
OPINION
KING, Circuit Judge:
This appeal arises from a civil suit initiated by the Government in
November 1999 in the District of Maryland, on behalf of the Federal
Emergency Management Agency ("FEMA"), against Bankers Insur-
ance Company. In its Complaint, the Government asserts three com-
mon law theories of recovery, plus a separate statutory claim under
the False Claims Act, 31 U.S.C. §§ 3729-3733 ("FCA"). Bankers
sought to stay the litigation proceedings pending arbitration, but the
district court denied its stay request. Bankers has appealed the district
court’s ruling pursuant to 9 U.S.C. § 16(a)(1)(A) (authorizing inter-
locutory appeals to review denials of motions to stay proceedings
pending arbitration). For the reasons explained below, we reverse and
remand.
I.
A.
Bankers is a private insurance company that sells and administers
flood insurance policies through the National Flood Insurance Pro-
gram ("NFIP").1 In 1983, the Federal Insurance Administration
("FIA"), which is charged by FEMA with administration of the NFIP,
see 44 C.F.R. § 2.31 (1999), established the Write-Your-Own
("WYO") program, under which commercial insurance companies
sell and administer flood insurance policies to the public. See 44
C.F.R. § 62.23 (1999). Bankers has been a participant (an "insurer"
and a "WYO Company") in the WYO program since its inception,
when Bankers entered into a Financial Assistance/Subsidy Arrange-
ment ("Arrangement") with FEMA and the FIA. According to the
1
The NFIP was established by Congress in the National Flood Insur-
ance Act of 1968, 42 U.S.C. §§ 4001-4129 ("NFIA").
UNITED STATES v. BANKERS INSURANCE CO. 3
Complaint, Bankers and the Government renewed the Arrangement
annually from 1984 until 1997. The Arrangement, which tracks a
form agreement promulgated and mandated by FEMA in the Code of
Federal Regulations, governs the terms and conditions of all WYO
program insurers in their sale and administration of federal flood
insurance. See 44 C.F.R. § 62 app. A. Of significance to this appeal,
both the Arrangement and the C.F.R. form agreement contain the fol-
lowing arbitration provision:
Article VIII — Arbitration
If any misunderstanding or dispute arises between the Com-
pany [Bankers] and the FIA with reference to any factual
issue under any provisions of this Arrangement . . . such
misunderstanding or dispute may be submitted to arbitration
for a determination [that] shall be binding upon approval by
the FIA.
Id. and J.A. 42.
In its Complaint, the Government has sued Bankers for a variety
of alleged contract breaches stemming from a course of conduct
beginning in fiscal year 1989 and lasting until September 1997. The
Complaint asserts, inter alia, that Bankers failed to turn over to the
Government all interest earned on NFIP funds under the Arrange-
ment, and also that Bankers failed to provide the FIA with true and
accurate information regarding administration of the NFIP and the
interest earned on NFIP funds. The four bases for recovery embodied
in the Complaint are: violation of the False Claims Act (Count I),
breach of contract (Count II), negligent misrepresentation (Count III),
and unjust enrichment (Count IV).2 Bankers responded to the Com-
plaint by filing its motion to stay the proceedings pending arbitration
under Article VIII of the Arrangement. The district court, by letter
2
The ad damnum clause of the Complaint seeks recovery from Bankers
on each count in the sum of $1,098,378, plus costs, interest, and punitive
damages (as well as a civil penalty under Count I). Since a recovery by
the Government under the FCA would entitle it to treble damages, Bank-
ers is apparently exposed to potential liability totalling several millions
of dollars.
4 UNITED STATES v. BANKERS INSURANCE CO.
opinion of March 14, 2000 (the "Order"), denied the stay request and
allowed the Government’s suit to proceed without arbitration of its
claims.
In the Order, the district court correctly observed that, "as a general
proposition, there is a ‘heavy presumption of arbitrability.’" Order, at
1 (citing American Recovery Corp. v. Computerized Thermal Imag-
ing, Inc., 96 F.3d 88, 92 (4th Cir. 1996)). The court ruled, however,
that traditional principles governing arbitration have no application to
a "suit brought by a federal agency asserting, inter alia, a claim under
the False Claims Act." Order, at 1. While this appeal appears to pre-
sent a question of first impression — whether the existence of an FCA
claim precludes arbitration of a contract dispute involving the Gov-
ernment — we address this issue with substantial guidance. The fed-
eral courts have on numerous occasions spoken on issues relating to
arbitration and the obligations of the Government when it enters into
contracts with private parties.
B.
Bankers advances several contentions in support of its position that
the arbitration provision contained in the Arrangement is binding in
this case. First, Bankers asserts that the applicable authorities pre-
scribe that arbitration clauses similar to that in this case — clauses
that speak permissively (i.e., "may be submitted to arbitration") — are
in fact typically construed as mandatory arbitration clauses. Second,
Bankers contends that the district court erred when it ignored the
"heavy presumption of arbitrability" simply because this litigation
involves the assertion of an FCA claim. Finally, Bankers stresses that,
since all claims in the Complaint arise from the Arrangement, each
(including the FCA claim) must be submitted to arbitration pursuant
to the arbitration agreement.
The Government counters by echoing the reasoning of the district
court, and it revives an argument presented to — but not addressed
by — the court below: sovereign immunity. The Government con-
tends that sovereign immunity precludes application of the arbitration
agreement absent the Government’s current consent to arbitrate.
Additionally, the Government’s opposition to arbitration is premised
on the permissive nature of the arbitration provision and the NFIA’s
UNITED STATES v. BANKERS INSURANCE CO. 5
3
specific statutory prohibition against binding arbitration. Finally, the
Government asserts that since the Attorney General was not a party
to the Arrangement, he cannot be bound to arbitrate an FCA claim
arising thereunder.
II.
Under the Federal Arbitration Act ("FAA"), a court is required to
stay "any suit or proceeding" pending the arbitration of "any issue
referable to arbitration under an agreement in writing for such arbitra-
tion." 9 U.S.C. § 3.4 Because ascertaining the scope of an arbitration
agreement is primarily a task of contract interpretation, we review de
novo a district court’s determination of the arbitrability of a dispute.
See Cara’s Notions, Inc. v. Hallmark Cards, Inc., 140 F.3d 566, 569
(4th Cir. 1998). However, "in applying [common law] principles of
contract interpretation to the interpretation of an arbitration agreement
within the scope of the [FAA], due regard must be given to the federal
policy favoring arbitration, and ambiguities as to the scope of the
arbitration clause itself resolved in favor of arbitration." Volt Info.
Sciences, Inc. v. Bd. of Trustees of Leland Stanford Jr. Univ., 489
U.S. 468, 475-76 (1989) (internal citations omitted); see also Moses
H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25
(1983) ("[A]ny doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration[.]"). If the issues in the case
are within the contemplation of the arbitration agreement, the FAA’s
stay-of-litigation provision is mandatory, and there is no discretion
vested in the district court to deny the stay. In re Complaint of Horn-
beck Offshore Corp., 981 F.2d 752, 754 (5th Cir. 1993); see also
Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 937 (4th Cir. 1999).
3
See 42 U.S.C. § 4083(b) ("Such arbitration shall be advisory in nature
. . . final only upon the approval of the [FEMA] Director.").
4
The Government claims that the FAA does not apply in this case, but
is instead superseded by a more specific statute — the NFIA. We dis-
agree. The FAA acts in a complementary fashion by supplying the proce-
dural means of implementing arbitration provisions that otherwise exist
in contracts. The FAA does not lose its force simply because the arbitra-
tion provision is mandated by a separate federal regulation.
6 UNITED STATES v. BANKERS INSURANCE CO.
III.
A.
The Government first contends that it has not waived its sovereign
immunity, and therefore it cannot be forced to engage in the arbitra-
tion process contemplated in the Arrangement. We see the Govern-
ment’s reliance on the doctrine of sovereign immunity as misplaced,
and in these circumstances it borders on frivolous. The Government
prepared the terms of the Arrangement — including its arbitration
provision — and imposed them, through its WYO program, on Bankers.5
The Government now purports not to be bound by its own words,
leaving it free to litigate at its whim. Sovereign immunity is not a
sword, but a shield; and as a shield it means simply that "the United
States cannot be sued at all without the consent of Congress." Block
v. North Dakota, 461 U.S. 273, 287 (1983). Sovereign immunity does
not permit the Government to sue a third party and then pick and
choose the judicial constraints and contractual obligations with which
it will abide. See Guaranty Trust Co. v. United States, 304 U.S. 126,
134 (1938) ("By voluntarily appearing in the role of suitor [the sover-
eign] abandons its immunity from suit and subjects itself to the proce-
dure and rules of decision governing the forum which it has sought.").6
5
In order to become an insurer and a WYO Company under the regula-
tions applicable to the WYO program, Bankers was required to agree to
the terms embodied in the form agreement set forth in Appendix A of the
regulations. See 44 C.F.R. § 62.23(a) ("Arrangements entered into by
WYO Companies . . . shall be in the form and substance of the standard
arrangement . . . a copy of which is included in Appendix A of this part
and made a part of these regulations.").
6
See also United States v. Moscow-Idaho Seed Co., 92 F.2d 170, 173
(9th Cir. 1937) ("When the United States comes into court and institutes
a suit for redress . . . [it] waives any immunity as sovereign and its adver-
sary is entitled to set up any defense which would be available to him
were his opponent another citizen instead of the government."); State v.
Shinkle, 373 P.2d 674, 679 (Or. 1962) ("The state . . . by instituting suit
submits its claim as a private litigant and subjects itself to all of the
defenses available to such litigants. . . . [S]overeign immunity may be
used as a shield but not a sword.").
UNITED STATES v. BANKERS INSURANCE CO. 7
Put simply, the doctrine of sovereign immunity is not in any way
implicated or threatened by the Government’s compliance with its
contract obligations. When the Government chooses to seek damages
in a civil action, it — like all parties — should abide by the law,
including an arbitration process to which it is contractually bound.
B.
Because sovereign immunity does not apply here, our ultimate
question is simply phrased: Must the Government comply with its
contract responsibilities under the arbitration agreement in the
Arrangement? In addressing this question we focus on and analyze
several issues.
First of all, the arbitration agreement in question does not specify
that arbitration must occur, but instead uses permissive language
("[any] such misunderstanding or dispute may be submitted to arbitra-
tion") (emphasis added). The use of the term "may" in Article VIII of
the Arrangement requires us to determine whether arbitration is man-
datory when it is sought prior to litigation. Second, we must decide
whether the arbitration agreement is enforceable notwithstanding that
the arbitration proceeding provided for — in the Arrangement and in
the statutory provisions of the NFIA — is non-binding on the Govern-
ment. Third, we consider whether the existence of the FCA claim pre-
cludes arbitration in this case, in light of the Attorney General’s
special authority to enforce the statute.
1.
Although the arbitration provision of the Arrangement is framed in
permissive terms, its use of permissive phraseology is not dispositive.
In Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d 875 (4th
Cir. 1996), we had occasion to review and interpret a similar arbitra-
tion provision. We held that a clause providing that "disputes . . . may
be referred to arbitration" has the effect of giving "an aggrieved party
the choice between arbitration and abandonment of his claim, [i.e.,]
he ‘may’ either arbitrate or abandon the claim." Id. at 879. As Judge
Widener properly observed, the contrary interpretation "would render
the arbitration provision meaningless for all practical purposes[,]"
since parties "could always voluntarily submit [ ] to arbitration[.]" Id.8 UNITED STATES v. BANKERS INSURANCE CO.
Second, other courts have had the opportunity to construe compara-
ble "permissive" arbitration agreements and have reached similar con-
clusions. See American Italian Pasta Co. v. Austin Co., 914 F.2d
1103, 1104 (8th Cir. 1990) (holding the phrase "if both parties agree"
to be a mandatory arbitration provision); Ceres Marine Terminals,
Inc. v. Int’l Longshoremen’s Ass’n, 683 F.2d 242, 246-47 (7th Cir.
1982) ("may refer the grievance to arbitration" is mandatory); Local
771, I.A.T.S.E. v. RKO Gen., Inc., 546 F.2d 1107, 1116 (2d Cir. 1977)
("may submit to arbitration" is mandatory); Bonnot v. Cong. of Indep.
Unions Local # 14, 331 F.2d 355, 359 (8th Cir. 1964) (Blackmun, J.)
("The obvious purpose of the ‘may’ language is to give an aggrieved
party the choice between arbitration or the abandonment of its
claim.").
It is well settled that, when the United States is a party to a con-
tract, ordinary principles governing contracts and their interpretation
remain applicable. See Lynch v. United States, 292 U.S. 571, 579
(1934). Indeed, the Supreme Court recently reaffirmed this principle
in United States v. Winstar Corp., 518 U.S. 839, 895 (1996). As Jus-
tice Souter succinctly stated: "[W]hen the United States enters into
contract relations, its rights and duties therein are governed generally
by the law applicable to contracts between private individuals." Id.(quoting Lynch, 292 U.S. at 579). Our decision in Austin was prem-
ised on the ordinary principles of contract interpretation referred to by
the Court in Winstar, which apply regardless of the identity of the
parties to the arbitration agreement. We have no reason not to apply
those principles in this case.7
7
Furthermore, it bears repeating that FEMA prepared the Arrangement,
the precise form and language of which was promulgated by the Govern-
ment in the Code of Federal Regulations. See, e.g., United States v. Seck-
inger, 397 U.S. 203, 210 (1970) (applying the "general maxim that a
contract should be construed most strongly against the drafter" in choos-
ing to interpret a contract unfavorably to the Government, which had
drafted the contract); Mastrobuono v. Shearson Lehman Hutton, Inc.,
514 U.S. 52, 61 (1995) (citing Seckinger); see also United States v. Har-
vey, 791 F.2d 294, 300-01 (4th Cir. 1986) (applying the same rule in the
context of Government-drafted plea agreements).
UNITED STATES v. BANKERS INSURANCE CO. 9
2.
In asserting that the arbitration agreement should not be applied
here, the Government also points out that the NFIA specifically pre-
cludes arbitration that is binding on the Government. See 42 U.S.C.
§ 4083(b). An arbitration agreement under the NFIA is therefore non-
binding — the FIA Director must approve an arbitration "award, deci-
sion, or recommendation" before it is permitted to "become final[.]"
Id. Hence, the Government claims that the arbitration agreement
embodied in the Arrangement should not be enforced because it will
not resolve its dispute with Bankers.
In addressing this contention, we first observe that the NFIA does
not preclude mandatory arbitration; it only precludes arbitration from
being binding on the Government. Mandatory arbitration, as a prereq-
uisite to initiation of litigation, and binding arbitration, where the par-
ties must accept an award or decision of the arbitrator, are two
different things. Although non-binding arbitration may turn out to be
a futile exercise — because the FIA can ultimately reject an arbitra-
tor’s decision — this fact does not, as a legal matter, preclude a non-
binding arbitration agreement from being enforced. See Wolsey, Ltd.
v. Foodmaker, Inc., 144 F.3d 1205, 1209 (9th Cir. 1998) (holding
non-binding arbitration clause to be enforceable); AMF Inc. v. Bruns-
wick Corp., 621 F. Supp. 456, 461 (E.D.N.Y. 1985) (court could com-
pel the parties to submit their dispute to third party for an advisory
non-binding opinion under the FAA). The Government, however,
contests this point also, asserting that non-binding arbitration unlikely
or unable to resolve the issue fully is, by its very nature, unenforce-
able. See Brennan v. King, 139 F.3d 258, 265 (1st Cir. 1998) (refusing
to enforce arbitration clause because arbitrator lacked authority to
resolve "substantive" issues dividing the parties and because, even if
the arbitrator were able to resolve the issue in the employee’s favor,
the employer could reject the decision).
Whether an agreement to enter into a non-binding arbitration pro-
cess is enforceable under the FAA is a matter not well-settled in the
federal courts, and we have not yet directly addressed the question.
See Wolsey, 144 F.3d at 1208-09 (noting that issue is unsettled, but
favoring the view that "the FAA applies to non-binding arbitration").
Some courts have chosen to focus on whether the arbitration process
10 UNITED STATES v. BANKERS INSURANCE CO.
is likely to resolve the issues, and whether the parties "agree not to
pursue litigation ‘until the process is completed.’" Id. (quoting Harri-
son v. Nissan Motor Corp., 111 F.3d 343, 350 (3d Cir. 1997)). In
evaluating a similar issue, Judge Weinstein observed, "The arbitra-
tor’s decision need not be binding . . . [as long as there are] reason-
able commercial expectations [that] the dispute will be settled by this
arbitration." AMF Inc., 621 F. Supp. at 460-61.
The foregoing discussion, however, simply emphasizes the unusual
nature of the circumstances underlying this appeal. On the one hand,
Bankers asserts that the arbitration process will likely resolve this
case, in part because the arbitration proceeding will include the FIA.
Bankers points out that the FIA has "intimate knowledge of the pro-
grams at issue," and it is "familiar[ ] with Bankers’ practices over the
years[.]" Appellant’s Reply Br., at 8. On the other hand, the Govern-
ment — seeking to avoid arbitration — must believe either that arbi-
tration will be unsuccessful or that any resort to the arbitration
process weakens its bargaining position.8
The Government’s position, viewed in a pragmatic manner, makes
some sense. If the Government is opposed to arbitration and can reject
an arbitration award or decision, the arbitration process is unlikely to
provide a resolution to this case. Cf. American Tel. & Tel. Co. v.
Communication Workers of Am., AFL-CIO, 985 F.2d 855 (6th Cir.
1993) (refusing to enjoin union protest activities pending non-binding
arbitration, because in addition to failing to provide a resolution to the
dispute, it would delay the union’s exercise of "meaningful" activi-
ties). However, because the Government would presumably act rea-
sonably and rationally, and would approve an arbitration award or
decision that it found favorable, we are unable to conclude that arbi-
tration proceedings would be futile.
8
The Government’s position that arbitration will be futile is under-
mined by the reality that the arbitration decision or award is binding on
Bankers. Under the arbitration provision, the FIA can either accept or
reject the arbitration decision, whereas Bankers is obliged to accept it.
Bankers concedes this point, see Appellant’s Reply Br., at 8 ("[T]he gov-
ernment’s argument [that arbitration will be futile] overlooks the fact that
arbitration is binding on Bankers; it is only non-binding on the govern-
ment.") (emphasis in original).
UNITED STATES v. BANKERS INSURANCE CO. 11
C.
Finally, the Government contends that the arbitration agreement is
unenforceable because of the peculiar nature of an FCA claim, and
also because the Attorney General "was not a party" to the Arrange-
ment. The Government argues that, as a non-party to the Arrange-
ment, the Attorney General is not bound by the terms of the
arbitration provision, in light of (1) his exclusive statutory authority
to enforce the FCA,9 and (2) the permissive nature of the arbitration
agreement. The district court accepted this rationale, concluding that,
notwithstanding the rule that arbitration agreements are to be con-
strued liberally, the Government’s involvement as a plaintiff in this
case mandated "that the arbitration provision be construed narrowly."
Order, at 1.
1.
Because ordinary principles of contract law must be applied, the
Attorney General’s involvement in this case does not mandate the
result sought by the Government. First, the role of the Attorney Gen-
eral relates not only to his obligations under the FCA, but also to his
more general obligation to bring actions on behalf of the United
States in support of government agencies. See 28 U.S.C. § 516 (grant-
ing the Attorney General and the Department of Justice exclusive
power to direct litigation involving the United States). At bottom, the
Attorney General’s rights and responsibilities under the Arrangement
are derivative of FEMA and the FIA, and he possesses no right to
ignore the arbitration agreement that these agencies do not also pos-
sess.
Second, if we were to rely on the Attorney General’s presence as
counsel in this litigation to allow him to ignore the arbitration agree-
ment, we would run afoul of applicable precedent. For example, no
party suing on a contract should be able to enforce certain contract
9
Pursuant to the provisions of 31 U.S.C. § 3730, the "Attorney General
diligently shall investigate a violation under [the FCA]. If the Attorney
General finds that a person has violated or is violating [the FCA], the
Attorney General may bring a civil action under this section against the
person."
12 UNITED STATES v. BANKERS INSURANCE CO.
provisions while simultaneously attempting to avoid the terms of an
arbitration provision contained therein. See Int’l Paper Co. v. Schwa-
bedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 418 (4th Cir.
2000) (holding that it would "both disregard equity and contravene
[the FAA]" to allow a plaintiff "to claim the benefit of the contract
and simultaneously avoid its burdens"); see also Grigson v. Creative
Artists Agency, L.L.C., 210 F.3d 524, 527 (5th Cir. 2000); MS Dealer
Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999). These
decisions demonstrate that, when a third party sues on a contract, any
arbitration provision contained therein remains in force. We are
unable to ignore this rule simply because the Attorney General serves
as counsel for the Government.
2.
The Government contends, in the alternative, that even if its three
common law counts are subject to the arbitration agreement, the pres-
ence of the FCA claim gives it the right to immediately pursue litiga-
tion. This is so, the Government maintains, because of the statutory
authority of the Attorney General as the exclusive enforcer of the
FCA. The district court agreed on this point, concluding that directing
the Attorney General to arbitrate an FCA action would dilute his "ex-
clusive statutory authority" to institute such a claim. This was espe-
cially true, reasoned the district court, in light of the permissive
language of the arbitration provision.
a.
As discussed supra, at Part III.B.1, our Austin decision controls the
permissive-mandatory question, and the arbitration provision of the
Arrangement must be read and applied in a mandatory fashion. Fur-
thermore, the Supreme Court has recognized that civil claims based
on statutory provisions are subject to arbitration when a controlling
arbitration agreement exists.10 Shearson/American Express, Inc. v.
10
There can be no doubt that the arbitration agreement embodied in
Article VIII of the Arrangement controls the claims made in the Com-
plaint. This arbitration provision is an example of the broadest type of
arbitration agreement: "any misunderstanding or dispute . . . with refer-
ence to any factual issue under any provisions of this Arrangement[.]"
J.A. 42 (emphasis added). See Int’l Paper, 206 F.3d at 416 n.3 (finding
a similar clause to be a "broad" one).
UNITED STATES v. BANKERS INSURANCE CO. 13
McMahon, 482 U.S. 220, 226 (1987) (holding statutory claims under
RICO and the federal securities laws subject to arbitration). Accord-
ing to the Government, however, the McMahon decision does not
apply because the FCA is different from other statutory claims, and
resort to the arbitration process would, in this case, dilute the statutory
authority of the Attorney General.11
We do not share the trepidation of the Government regarding arbi-
tration of its FCA claim. Arbitration is not binding on the Govern-
ment, and this arbitration process will not in any way dilute the
Attorney General’s authority. Additionally, the Government has no
special right to ignore its contract responsibilities. The Government
should comply with its contract obligations, and it cannot avoid them
merely by invoking a statutory civil claim, such as one contemplated
under the FCA.12 See, e.g., United States v. Carter, 454 F.2d 426, 428
(4th Cir. 1972) (contract signed by an authorized official of the Gov-
ernment bound the entire Government, because "[t]he United States
government is the United States government throughout all of the
states and districts"); Harvey, 791 F.2d at 303 (4th Cir. 1986) (same);
see also H.F. Allen Orchards v. United States, 749 F.2d 1571, 1575
(Fed. Cir. 1984) (to recover for breach of contract against Govern-
ment, plaintiff must show "that the officer whose conduct is relied
upon had actual authority to bind the government in contract").
11
The Government provides no valid basis for its claim that arbitration
of the FCA claim would impair the Attorney General’s authority. Indeed,
Department of Justice policy favors use of alternative dispute resolution
in FCA cases. Policy on the Use of Alternative Dispute Resolution, 61
Fed. Reg. 36895, 36899 (1996) ("[L]itigation . . . under the False
[C]laims Act . . . [is a] good candidate[ ] for ADR mechanisms.").
12
Additionally, we observe that the Attorney General is entrusted with
the power to direct all litigation involving the United States. See 28
U.S.C. § 516; Dresser Indus., Inc. v. United States, 596 F.2d 1231, 1237
(5th Cir. 1979). Although the FIA possessed authority to enter into the
Arrangement and the arbitration provision therein, nothing prevents the
Attorney General from using his position (to control litigation on behalf
of the Government) to insure that federal agencies refrain from agreeing
to arbitrate potential FCA claims. See, e.g., Thomas v. INS, 35 F.3d 1332,
1340-41 (9th Cir. 1994).
14 UNITED STATES v. BANKERS INSURANCE CO.
b.
In the final analysis, the Government comes to court in the same
position as any other plaintiff, except that one of its four theories of
recovery, the FCA claim, is premised on a unique statutory right. Stat-
utory civil claims are subject to the arbitration process, and the Gov-
ernment has demonstrated no valid basis for placing the FCA claim
in a different category. In deciding whether the arbitration agreement
applies, we "must determine whether the factual allegations underly-
ing the claim are within the scope of the arbitration clause, regardless
of the legal label assigned to the claim." J.J. Ryan & Sons, Inc. v.
Rhone Poulenc Textile, S.A., 863 F.2d 315, 319 (4th Cir. 1988) (citing
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S.
614, 622 n.9 (1985)). Whether there has been a civil violation of the
FCA depends on the duties imposed on Bankers by the Arrangement,
measured against its compliance thereunder. Such issues, involving
civil claims for money damages, could well be fully resolved by arbi-
tration.
Finally, where the Government has previously agreed to an arbitra-
tion process, the statutory authority of the Attorney General is not
compromised by that agreement being honored. As Justice Brandeis
cogently observed years ago, "In a government of laws, existence of
the government will be imperiled if it fails to observe the law scrupu-
lously. Our government is the potent, the omnipresent teacher. For
good or for ill, it teaches the whole people by its example." Olmstead
v. United States, 277 U.S. 438, 468 (1928) (Brandeis, J., dissenting).
IV.
Pursuant to the foregoing, we reverse the district court’s ruling, and
we remand this case for entry of a stay pending arbitration of the
claims asserted in the Complaint.
REVERSED AND REMANDED
SEYMOUR, District Judge, concurring in part and dissenting in part:
I respectfully dissent to the extent the majority concludes that the
False Claims Act (FCA) claim is arbitrable. The FCA claim does not
UNITED STATES v. BANKERS INSURANCE CO. 15
arise pursuant to the Arrangement and consequently is not subject to
the arbitration provision at issue. See United States v. Boeing Co., 73
F. Supp. 2d 897, 910-11 (S.D. Ohio 1999) (claims under FCA do not
arise pursuant to a contract) (citing cases).
Because the FCA claim does not arise out of the Arrangement, I
believe the court must look to the language of the controlling statute
to determine whether the FCA claim may be submitted to arbitration.
As in any case turning on statutory interpretation, our goal is to ascer-
tain the intent of Congress. See Dole v. United Steelworkers, 494 U.S.
26, 35 (1990). To accomplish this goal, we begin by looking at the
language of the statute. Adams v. Dole, 927 F.2d 771, 774 (4th Cir.
1991). If the language is plain and unambiguous, we look no further.
See United States v. Ron Pair Enters., Inc., 489 U.S. 235, 240-41
(1989).
The FCA imposes civil liability upon any person who:
(1) knowingly presents, or causes to be presented, to an offi-
cer or employee of the United States Government . . . a false
or fraudulent claim for payment or approval;
(2) knowingly makes, uses, or causes to be made or sued,
a false record for statement to get a false or fraudulent claim
paid or approved by the Government;
(3) conspires to defraud the Government by getting a false
or fraudulent claim allowed or paid;
(4) has possession, custody, or control of property or money
used, or to be used, by the Government and, intended to
defraud the Government or willfully to conceal the property,
delivers, or causes to be delivered, less property than the
amount for which the person receives a certificate or receipt;
(5) authorized to make or deliver a document certifying
receipt of property used, or to be used, by the Government
and, intended to defraud the Government, makes or delivers
the receipt without completely knowing that the information
on the receipt is true;
16 UNITED STATES v. BANKERS INSURANCE CO.
(6) knowingly buys, or receives as a pledge of an obligation
or debt, public property from an officer or employee of the
Government . . .; or
(7) knowingly makes, uses, or causes to be made or used,
a false record or statement to conceal, avoid, or decrease an
obligation to pay or transmit money or property to the Gov-
ernment.
31 U.S.C. § 3729(a).
The FCA further provides that:
[t]he Attorney General diligently shall investigate a viola-
tion under 3729 of this title. If the Attorney General finds
that a person violated or is violating section 3729, the Attor-
ney General may bring a civil action under this section
against that person.
Id. § 3730(a).
In addition, a private person may bring a civil action for violation
of § 3729 on behalf of the person and the government, and in the
name of the government. Id. § 3730(b). Notwithstanding a private
party’s right to bring a qui tam action,
the Government may elect to pursue its claims through any
alternate remedy available to the Government, including any
administrative proceeding to determine a civil money pen-
alty. If any such alternate remedy is pursued in another pro-
ceeding, the person initiating the action shall have the same
rights in such proceeding as such person would have had if
the action had continued under [the qui tam section]. . . .
Id. § 3730(c)(5).
A plain reading of these provisions reveals that Congress has
granted the Attorney General authority to elect arbitration at his or her
discretion, at least in cases wherein a private party has initiated the
action.
UNITED STATES v. BANKERS INSURANCE CO. 17
In this case, the Attorney General elected to pursue the FCA claim
against Bankers through a civil action. Assuming, for purposes of dis-
cussion, that the Attorney General possesses the authority to arbitrate
FCA claims outside of qui tam actions, the Attorney General has
declined to make such an election with respect to the FCA claim
against Bankers. Bankers has no corresponding right under the FCA
to seek arbitration. I would affirm the trial judge as to this issue.*
However, I agree with the majority’s view that FAA principles
should extend to arbitration agreements involving federal agencies.
Thus, I concur that the arbitration clause at issue should be construed
as mandatory despite the permissive nature of its wording. The major-
ity’s interpretation of the arbitration clause in question properly
places Bankers, a private party that has contracted with the govern-
ment, on the same footing as a private party that has contracted with
another private party. Accordingly, the causes of action brought on
behalf of FIA should be submitted to arbitration pursuant to the terms
of the Arrangement. See Dean Witter Reynolds, Inc. v. Byrd, 470 U.S.
213, 217 (1985) (requiring bifurcation of arbitrable claims when a
motion to compel arbitration is made).
I would affirm in part and reverse in part.
*Moreover, the doctrine of sovereign immunity prohibits the court
from compelling the Attorney General to elect arbitration of the FCA
claim. See United States v. Murdock Machine & Engineering Co., 81
F.3d 922, 931-32 (10th Cir. 1996) (in the absence of governmental con-
sent, the court lacks jurisdiction to "‘restrain the government from acting,
or to compel it to act’") (quoting Larson v. Domestic & Foreign Com-
merce Corp., 337 U.S. 682, 704 (1949)).