On April 11, 2017, the U.S. District Court for the District of Oregon granted Oregon Health and Sciences University’s (OHSU) motion to dismiss a qui tam False Claim Act (FCA) suit, holding that (1) OHSU is an “arm of the state” of Oregon, and therefore (2) OHSU is not subject to FCA liability, regardless of whether the United States intervenes in the case. The Court concluded that the Supreme Court’s holding in Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, 529 U.S. 765 (2000) that a state or a state agency is immune from FCA liability extends to cases in which the United States elects to intervene.
The FCA provides in pertinent part that “any person who . . . knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval . . . is liable to the United States Government.” 31 U.S.C. § 3729(a). A private person (a relator) may bring a qui tam civil action “for a violation of section 3729 for the person and for the United States Government . . . in the name of the Government.”
In Doughty, the relator filed a qui tam action against OHSU, a public corporation created by the State of Oregon and defined in state statute as “a governmental entity performing governmental functions and exercising governmental powers.” OHSU is a state university offering programs in medicine, nursing, and dentistry. The relator alleged that OHSU violated the FCA when OHSU applied improper reimbursement rates to certain federally-sponsored projects. OHSU filed a motion to dismiss, arguing that it is an arm of the state and therefore cannot be liable under the FCA. The Court agreed with OHSU that, under the Ninth Circuit test, OHSU is an arm of the state. The more difficult question was whether, under Stevens, an arm of the state may be liable in a qui tam FCA suit in which the United States Government intervenes.
In Stevens, the relator brought a qui tam action against a state agency, alleging that it had submitted false claims to the Environmental Protection Agency. The United States declined to intervene in the case. The state agency moved to dismiss, arguing that it was not a “person” under the FCA. The Supreme Court agreed with the state agency, and held that the FCA does not subject a state or a state agency to liability in a federal-court suit by a private individual on behalf of the United States. The Court reasoned—based on a review of the legislative history of the FCA—that a state agency is not a “person” subject to qui tam liability for the purposes of the FCA.
In Doughty, the plaintiff argued that Stevens’ holding is limited to cases where the relator proceeds without the United States’ intervention in the case. The plaintiff pointed to Justice Ginsburg’s concurring opinion in Stevens, which stated that “the Court’s decision . . . leave[s] open the question whether the word ‘person’ encompasses States when the United States itself sues under the False Claims Act.” The Doughty Court, however, focused on the Stevens majority opinion instead, and concluded that “[t]here is not any indication that the [Supreme] Court’s analysis or conclusion would have differed if the United States had intervened in the matter.” Accordingly, the Court concluded that the United States may not bring an FCA action against an arm of the state, such as OHSU.
The case is United States ex rel. Doughty v. Or. Health & Scis. Univ., 2017 BL 118712, D. Or., No. 3:13-cv-1306, 4/11/17, available here. The Supreme Court opinion Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, 529 U.S. 765 (2000), is available here.
