Stephenson v. Powell ( 2018 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES GOVERNMENT ex rel.
DAVID CARROLL STEPHENSON et al.,
Plaintiffs,
v. Civil Action No. 18-927 (TJK)
JEROME H. POWELL et al.,
Defendants.
MEMORANDUM OPINION
On April 16, 2018, David Carroll Stephenson and Steven Fishman (“Relators”) filed this
qui tam action against Defendants, asserting claims brought as relators on behalf of the United
States under the False Claims Act (the “FCA”), 31 U.S.C. § 3729 et seq., as well as claims
brought as plaintiffs on their own behalf for injunctive and declaratory relief and a writ of
mandamus. Defendants are members of the Board of Governors of the Federal Reserve System
(the “Board”) in their official capacities; the presidents of the Federal Reserve Banks in their
capacities as such; and the Federal Reserve Banks themselves. See ECF No. 1 at 10-15. The
gravamen of the complaint is that the issuance of Federal Reserve Notes by Federal Reserve
Banks constitutes a false claim against the United States, on the theory that those notes are an
invalid form of currency under the U.S. Constitution. See, e.g., id. at 251-63. Upon review of
the complaint and other filings, the Court will sua sponte dismiss and unseal the action.
Several considerations independently require dismissal.
First, Relators are not barred lawyers and improperly seek to bring their FCA claims pro
se. It is well established that pro se litigants may not bring qui tam actions under the FCA,
because qui tam relators represent another party, the United States—something nonlawyers
cannot do. Idrogo v. Castro, 672 F. App’x 27 (D.C. Cir. 2016). Courts may dismiss such
actions sua sponte. Deutsche Bank Nat’l Tr. Co. v. Holyfield, 309 F. App’x 331, 333 (11th Cir.
2009).
Second, the Court lacks jurisdiction over Relators’ FCA claims against members of the
Board in their official capacities. The Board is a government body that enjoys sovereign
immunity. Albrecht v. Comm. on Emp. Benefits, 357 F.3d 62, 67 (D.C. Cir. 2004). Sovereign
immunity bars FCA suits against government officials in their official capacities, because such
suits are effectively against the government itself. See Abou-Hussein v. Mabus, 953 F. Supp. 2d
251, 263 (D.D.C. 2013).
Third, the complaint merely rehashes theories that have been litigated numerous times in
federal court. Courts “shall dismiss” any FCA action, “unless opposed by the Government, if
substantially the same allegations or transactions . . . were publicly disclosed . . . in a Federal
criminal, civil, or administrative hearing in which the Government or its agent is a party.” 31
U.S.C. § 3730(e)(4)(A)(i). The theories that Relators advance in their complaint have been
previously considered—and rejected—by the government in federal litigation. In fact, the
government has prosecuted “tax protestors” who advance such theories about the invalidity of
Federal Reserve Notes to excuse their failure to pay federal income tax. See, e.g., United States
v. Schmitz, 542 F.2d 782, 785 (9th Cir. 1976).
Fourth, all of Relators’ claims—both the FCA claims and any claims that Relators bring
as plaintiffs on their own behalf—must be dismissed because they are clearly frivolous. A court
may sua sponte dismiss a cause of action for failure to state a claim where it is clear that the
plaintiff has no possibility of obtaining relief. See Simpkins v. D.C. Gov’t, 108 F.3d 366, 370
(D.C. Cir. 1997). Legal theories based on the purported invalidity of Federal Reserve Notes are
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meritless, as courts have explained time and time again to “tax protesters” who advance these
theories. See, e.g., Schmitz, 542 F.2d at 785; In re Yuska, 571 B.R. 424, 427-29 (Bankr. N.D.
Iowa 2017). “Federal Reserve Notes constitute legal tender, and [Relators’] constitutional
argument has been summarily found by [courts] to be without merit.” Schmitz, 542 F.2d at 785.
These frivolous theories fare no better in the FCA context. The issuance of Federal Reserve
Notes and their use as legal tender are authorized by statute, see 12 U.S.C. § 411; 31 U.S.C.
§ 5103, and thus cannot constitute a false claim against the United States. Nor can these theories
serve as the basis for any other cognizable claim (except, of course, claims that may arise against
individuals who advance these meritless theories for their own gain).
Finally, Relators appear to lack standing to bring the claims they have asserted as
individual plaintiffs. The complaint does not assert any particular harm suffered by Relators, but
rather raises generalized grievances concerning the operation of the monetary system in this
country. See, e.g., ECF No. 1 at 15-16. “A litigant ‘raising only a generally available grievance
about government—claiming only harm to his and every citizen’s interest in proper application
of the Constitution and laws, and seeking relief that no more directly and tangibly benefits him
than it does the public at large—does not state an Article III case or controversy.’”
Hollingsworth v. Perry, 133 S. Ct. 2652, 2662 (2013) (quoting Lujan v. Defenders of Wildlife,
504 U.S. 555, 573-74 (1992)). That aptly describes Relators’ individual claims here, providing
another reason why they must be dismissed.
In addition to dismissing the case, the Court will also order it unsealed. FCA complaints
are required to be maintained under seal for 60 days, which the Court may extend for good
cause. 31 U.S.C. § 3730(b)(2)-(3). Well over 60 days have passed since the complaint was filed
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under seal. Over 60 days have also passed since June 7, 2018, the date by which the Relators
claim to have served the government pursuant to 31 U.S.C. § 3730(b)(2). See ECF No. 4. 1
Relators have filed two motions to extend the 60-day sealing window. ECF Nos. 3, 5.
As an initial matter, only the government—not Relators—may seek an extension of the seal. See
31 U.S.C. § 3730(b)(3). Regardless, there is no good reason to maintain this particular case
under seal any longer. “FCA cases are sealed to allow the United States time to investigate the
allegations . . . .” United States ex rel. Grover v. Related Companies, LP, 4 F. Supp. 3d 21, 27
(D.D.C. 2013). Given the nature of the complaint, which does not contain any confidential
information about a fraud against the government, but instead brings patently frivolous
allegations against the government itself, there is nothing for the government to investigate and
no justification for maintaining the action under seal. Indeed, the case amounts to an abuse of
the FCA’s procedures: this is not a bona fide qui tam action, but merely a platform for Relators
to advance their meritless conspiracy theories about our country’s monetary system.
Accordingly, Relators’ motions to extend the seal (ECF Nos. 3 and 5) will be denied, and
the action dismissed and unsealed, in a separate order.
/s/ Timothy J. Kelly
TIMOTHY J. KELLY
United States District Judge
Date: August 24, 2018
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The Court makes no finding regarding whether service on the government was adequate.
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