The United States Supreme Court recently declined review of the First Circuit Court of Appeals’ ruling that the University of Massachusetts Medical School was an “arm of the state,” and thus, not subject to the federal False Claims Act (FCA). U.S. ex rel. Willette v. University of Massachusetts, Worchester, No. 15-1437 (2017). In declining review, the Supreme Court impliedly acknowledged the “bedrock proposition” that states, including state agencies and state institutions of higher learning, cannot be sued in a private action under the FCA. U.S. ex rel. Willette v. Univ. of Massachusetts, Worchester, 812 F.3d 35 (1st Cir. 2016).
This bedrock proposition was delivered by the Supreme Court in its 2000 opinion in Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, 529 U.S. 765 (2000). Although the FCA subjects to liability “any person” who submits a false claim to the government “for payment or approval, the statute itself does not define the term ‘person.’” In Stevens, the Supreme Court filled this void and applied the “longstanding interpretive presumption” that “person” does not include the sovereign, including states and “arms of the states.” The ruling in Stevens has since been extended to state institutions of higher learning, and its consistent and continued application has been a significant deterrent to whistleblowers attempting to pursue alleged FCA actions against the states and, of particular importance, against state institutions of higher learning in the medical or healthcare fields.
Another recent example of Stevens’ consistent application was seen when the Western District of Kentucky dismissed an FCA lawsuit against the University of Louisville, the University of Louisville Research Foundation and several university officials. Although the district court was sympathetic to the relators’ plea that “it would be unfair for the defendants to obtain federal grant money under false pretenses and then fire the plaintiffs for complaining about it, all without the fear of liability,” the court held true to Stevens’ precedent that the FCA does not apply to state agencies or individuals sued in their capacity as university officials. U.S. ex rel. Brinkley v. Univ. of Louisville, No. 15-cv-180-DJH, 2017, 2017 WL 210244 (W.D. KY Jan. 17, 2017).