Sovereign Immunity Defenses In FCA Cases
Often in False Claims Act (FCA) cases the defendant is a corporate entity being sued for some kind of healthcare or procurement fraud. Either the government of the United States and/or an individual plaintiff, known as a relator, will prosecute the claim. However, what happens when the defendant is a state or state actor? This article will review in general the defense of sovereign immunity plaintiffs will almost certainly face in a 12(b)(6) motion to dismiss when the defendant claims immunity from suit.
Defining “Person” Under the FCA For Purposes of Sovereign Immunity
It is settled law that the False Claims Act does not subject a state or state agency to liability, even if the United State intervenes in the case. Vt. Agency of Nat. Res. v. United States ex real. Stevens, 529 U.S. 765, 787 (2000). In Stevens, the Court held that the term “person” in the FCA statute does not include states.
But, what about state employees? The answer to this question is it depends on what jurisdiction the case is subject to and the facts of the underlying case. Typically, the question of whether a state employee can be sued under the FCA depends on whether they are being sued in their official or personal capacity. In most jurisdictions, if the individual is being sued in their official capacity it is tantamount to suing the state agency (i.e. damages would be paid from the treasury) and will therefore likely be barred. Alternatively, if the state employee is being sued in their personal capacity and damages are sought from the individual, then it is likely plaintiffs would prevail on a motion to dismiss by the individual defendant based on sovereign immunity. This conclusion is not true in all jurisdictions, however; an example being a case out of the Ninth Circuit that allows individuals to be sued in FCA cases even if their actions are taken in the course of their official duties. Stoner v. Santa Clara County Office of Education, 502 F.3d 1116, 1125 (9th Cir. 2007). As such, it is imperative to research the law in the governing jurisdiction.
Whether quasi-state entities like hospitals and universities are covered by a state’s sovereign immunity defense depends greatly on the jurisdiction and facts as well, with the pertinent issue being state control over the entity to the degree that it makes it an “arm of the state.” If it is determined the university or hospital is an arm of the state, then it will likely obtain the benefits of the state’s sovereign immunity shied.
Tribal Governments and Sovereign Immunity in FCA Cases
A particularly unique circumstance is when a tribal government and its partners and employees are the defendants in a False Claims Act case. As a matter of federal law, the U.S. Supreme Court has clearly held that an Indian tribe is subject to suit only where Congress has authorized the suit or the tribe has waived its immunity. Kiowa Tribe of Okla. v. Mfg. Techs. Inc., 523 U.S. 751, 754 (1998) (citing other U.S. Supreme Court cases). Therefore, if the defendant is a federally recognized Native American tribe it enjoys the same sovereign immunity as a state and will prevail on a motion to dismiss.
What about entities, like casinos, that do business with the tribe? Like the state analysis, the decision depends on whether the entity functions as an arm of the tribe. Per Kiowa Tribe, immunity extends to the business activities of the tribe, not just the governmental activities. However, similar to the state analysis whether the immunity attaches to the defendant depends on whether it can demonstrate that it functions as an arm of the tribe, which varies depending on the facts of the case.
As for individual defendants in Indian tribe FCA cases, in at least one decision, again out of the Ninth Circuit, the court held that individual defendants in a case against a tribal government and its partners were not protected by the tribe’s sovereign immunity even though they were acting in their official capacity. Dahlstrom v. Sauk-Suiattle Indian Tribe, et. al., 2017 WL 1064399, citing its reasoning in Stoner.
As many practitioners know, in federal court proceedings the 12(b) motion will be the first big hurdle plaintiffs face, and defendants know that the motion to dismiss is a great opportunity to get an early victory and hopefully dispose of most or all of the case. In cases where the defendant is a state or tribal government, the law is well established that the defendant will prevail on a motion to dismiss based on sovereign immunity. The more difficult and likely more realistic case scenarios are where the defendant is a state actor or quasi state institution. In these cases, the law is and therefore the potential outcome is dependent on the particular jurisdiction and the facts surrounding the conduct of the defendants. Plaintiff’s attorneys with cases against these kinds of clients should take care to carefully research the law of the governing forum, analyze the facts prior to filing suit, and be prepared to defend what will most certainly be a motion to dismiss based on sovereign immunity.
Kristi Morgan Aronica, Attorney