Supreme Court ruling locks in False Claims Act
Court also rules that states are not persons’ subject to liability
The Supreme Court’s decision that private individuals have standing to sue under the False Claims Act (FCA) means health care providers will get no reprieve from qui tam lawsuits anytime in the near future.
In the closely watched civil FCA case, Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, the court concluded that the government’s injury under the FCA includes "proprietary injury" when fraud is committed against the government. It also determined that the long tradition of qui tam actions supported the conclusion that such actions are cases or controversies on which that standing can be based.
"This shook out exactly the way most observers thought it would shake out," says Bill Sarraille of the Washington, DC-based Arent, Fox. "Given the life the False Claims Act has taken onto itself, it would have been a major change to deny standing to whistle-blowers; I don’t think the Supreme Court was prepared to do that."
However, the court also ruled that states and state entities are not "persons" subject to liability under the FCA. That means that absent congressional action the term "person" in the FCA does not include state entities, according to health care attorney John Boese of the Washington, DC-based law firm Fried, Frank.
The court did not reach a decision about whether qui tam suits violate state sovereign immunity under the Eleventh Amendment, but expressed "serious doubt" about the propriety of those suits, he adds.
The court initially was to consider only two issues in Stevens — whether states are "persons" subject to liability under the FCA, and whether qui tam suits against states violate principles of sovereign immunity under the Eleventh Amendment. But the court significantly expanded the scope of its review when it ordered the parties to submit briefs addressing the issue of relator standing.
While the court’s decision deals only with the standing issue, the Eleventh Amendment, and not other potential legal attacks, Sarraille says health care providers should take from this case a strong statement in favor of the standing of a whistle-blower. "That is certainly something that advocates of change under the False Claims Act are upset about because it signals a certain regard to the standing of whistle-blowers."
By deciding the broader-standing issue, as well as the question of statutory interpretation, the court resolved two significant challenges to qui tam litigation. But Boese notes that the court’s decision leaves unresolved at least two other major constitutional challenges — those based on the Appointments Clause, the Separation of Powers doctrine, and the "take care" clause in the Constitution.
The first argues that relators effectively act as officers of the United States without the advice and consent of the Senate. The second argues that qui tam litigation intrudes on the executive’s duty to "take care that the laws be faithfully executed." Both challenges are currently before the Fifth Circuit, in Riley v. St. Luke’s Episcopal Hospital. n
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