In an opinion by Judge Lourie, joined by Chief Judge Rader and Judge Moore, regarding Stauffer v. Brooks Brothers, Inc., No. 09-1428 et al. (Fed. Cir. August 31, 2010) (Stauffer), the Federal Circuit reversed the district court and held that qui tam plaintiff Raymond Stauffer had standing to sue under Section 292 and that the U.S. government could intervene in the standing controversy at the pleadings phase. The Federal Circuit also remanded the case back to the Southern District of New York to “address the merits of the case, including Brooks Brothers’ motion to dismiss pursuant to Rule 12(b)(6) ‘on the grounds that the complaint fails to state a plausible claim to relief because it fails to allege an ‘intent to deceive’ the public—a critical element of a section 292 claim—with sufficient specificity to meet the heightened pleading requirements for claims of fraud imposed by’ Rule 9(b).”
Regarding Mr. Stauffer’s standing, which the court reviewed de novo, the court stated that under Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, 529 U.S. 765 (1999), a qui tam plaintiff “can establish standing based on the United States’ implicit partial assignment of its damages claim to … ‘any person.’” In other words, even though a relator may suffer no injury himself, a qui tam provision operates as a statutory assignment of the United States’ rights, and “the assignee of a claim has standing to assert the injury in fact suffered by the assignor.” The court declined to take a view “as to whether section 292 addresses a proprietary or a sovereign injury of the United States, or both,” based on its belief that “either one would confer standing on the government, and therefore Stauffer.”
Regarding the nature of the injury being assigned and with a hint toward potential future constitutional challenges to Section 292, the court noted the brief of amicus curiae Ciba Vision Corporation (Ciba). Ciba contended that the government cannot constitutionally assign any claim without retaining control over the assignee’s actions, because such assignment would violate the “take care” clause of the Constitution (Art. II, § 3). The court stated, “[w]hile Ciba raises relevant points, the district court did not decide, and the parties did not appeal, the constitutionality of Section 292. Thus, we will not decide its constitutionality without the issue having been raised or argued by the parties.”
Finally, with respect to the district court’s denial of the U.S. government’s motion to intervene, the Federal Circuit, applying regional Second Circuit law, held that because the “the government has an interest in enforcement of its laws and in one half the fine that Stauffer claims, disposing of the action would ‘as a practical matter impair or impede the [government’s] ability to protect its interest’ and Stauffer may not adequately represent that interest.” The court further observed that if Mr. Stauffer lost, res judicata would prevent the government on its own from later recovering a fine from the defendant based on the particular markings at issue.
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Jeanne M. Gills