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The District of Oregon Rules That the United States May Not Pursue False Claims Act Litigation Against State Entities

20 April 2017

Education Alert

On April 11, 2017, the United States District Court for the District of Oregon held that the United States may not pursue False Claims Act (FCA) litigation against an arm of the State and dismissed the FCA claims in the United States' complaint-in-intervention. The decision is notable because it is the first court to address the question of whether a state university is subject to suit under the FCA where the United States has intervened. After a Supreme Court decision in 2000 held that private relators cannot pursue FCA claims against state agencies, the United States has taken the view that the United States itself can pursue those claims. The court rejected that view and "conclude[d] the United States may not bring an FCA action against an arm of the state[.]" U.S. ex rel. Doughty v. Or Health & Scis. Univ, No. 3:13-cv-01306-BR, 2017 WL 1364208, at *5 (D. Or. Apr. 11, 2017).

The District of Oregon's Holding and Reasoning

In United States ex rel. Doughty v. Oregon Health & Sciences University, No. 3:13-cv-01306-BR, 2017 WL 1364208 (D. Or. Apr. 11, 2017), the district court dismissed the United States' FCA claims against Oregon Health & Sciences University, finding that the university was an arm of the State of Oregon and therefore not a "person" subject to suit under the FCA.

The decision turned on the correct interpretation of a U.S. Supreme Court decision from 2000, Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000). In Stevens, the Supreme Court held – in the context of a private relator's suit – that neither a State nor an arm of the State is a "person" subject to suit under the FCA. Id. at 780-88. Justice Ginsburg authored a concurring opinion in Stevens, in which she asserted that it was an open question "whether the word 'person' encompasses States when the United States itself sues under the [FCA]." Id. at 789 (Ginsburg, J., concurring in the judgment). Relying on Justice Ginsburg's concurrence, the United States argued that the Supreme Court's holding in Stevens about the meaning of the word "person" in the FCA did not apply to cases brought by the United States itself.

The district court reasoned that although Stevens involved a relator's suit, the majority's opinion did not suggest that the outcome of its analysis would be any different if the United States had intervened. 2017 WL 1364208, at *4 "Justice Ginsberg's concurrence is not the opinion of the majority in Stevens. This Court, however, is required to follow the majority opinion in Stevens[.]". As the court explained, "[t]he Supreme Court's analysis of the FCA's application to the state agency did not hinge on the fact that the FCA action was brought by a private individual," and "[t]here is not any indication that the [Stevens] Court's analysis or conclusion would have differed if the United States had intervened in the matter." Id. Rather, the majority decision in Stevens relied on a "longstanding interpretive presumption that 'person' does not include the sovereign." Id. (quoting Stevens, 529 U.S. at 780). As a result, the district court "conclude[d] the United States may not bring an FCA action against an arm of the state such as Defendant." Id. at *5.

The Decision's Impact

Since Stevens was decided in 2000, the United States has relied on Justice Ginsburg's concurrence to bring FCA claims against States and state entities and to push States and state entities into settlements involving multipliers by threatening to file or intervene in FCA suits. In particular, it has argued that it is entitled to FCA damages and penalties from state universities for alleged fraud in connection with grant applications and reimbursement claims, and from state healthcare providers for alleged fraud in connection with healthcare billing.

The District of Oregon's decision is the first case to directly analyze the applicability of Stevens to FCA claims brought by the United States against a state university. It unequivocally rejects the United States' view that it can pursue FCA liability in this context. Any state university or state entity facing an investigation, qui tam suit, or intervention decision by the United States should take note of this decision.

The authors of this memorandum are available to answer any questions about this decision and its relevance to your institution.

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