Stephenson v. Powell

• Court: District Court, District of Columbia
• Decided: August 24, 2018
• Docket: Civil Action No. 2018-0927
• Status: Published

Opinion

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

2 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

3 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

1 The Court makes no finding regarding whether service on the government was adequate.