State Schools Gain Protection From Whistleblower/Qui Tam Suits

Author:Mr Richard Duvall
Profession:Holland & Knight LLP

In Vermont Agency of Natural Resources v. United States ex rel. Stevens, 120 S. Ct. 1858 (2000), the Supreme Court recently held that states and state agencies are not ìpersonsî that can be sued under the Federal Civil False Claims Act (FCA) by qui tam relatorsóìwhistleblowersî ó suing on behalf of the United States. State schools have been occasional targets of whistleblowers who allege that the school has submitted a false claim or is otherwise liable to the United States under the FCA, and who seek a percentage of the amount recovered through the litigation. Stevens is of great importance to state universities and other state agencies because it significantly limits, and possibly eliminates, their exposure from whistleblower suits under the FCA. Stevens thus reduces the legal exposure that state schools incur when they accept federal grant money or submit claims under federal government contracts.

Private educational institutions, by contrast, have been hurt by the ruling in Stevens. The Court's ìno personî holding does not apply to them. Moreover, the Court confirmed that whistleblowers have standing under Article III of the U.S. Constitution to bring an action under the FCA. Thus, individuals can continue to bring FCA actions against private schools, colleges and universities.

The Civil False Claims Act

The FCA establishes liability for ìany personî who, inter alia, knowingly presents a false claim for payment upon the U.S., or who uses a false record or statement to get a false claim approved. 31. U.S.C. ßß 3729(a), et. seq. There are severe penalties for violating the FCA, including a monetary award of three times actual damages and a civil penalty of $5,000 to $10,000 per violation, plus attorneys fees and costs. To encourage reporting, the FCA, in certain circumstances, provides that a private person, as a relator, may commence an action on behalf of the U.S. These ìrelatorsî or whistleblowers are eligible to receive a portion of the amount recovered, plus attorneys fees and costs: 15-25% where DOJ intervenes, and 25-30% where DOJ does not take over the action.

Supreme Court's Analysis

The Court focused on whether the Vermont Agency was a ìpersonî within the meaning of the basic liability provision of the FCA, i.e., 31 U.S.C. ß3729(a)óentitled ìLiability for certain actsî and beginning with the phrase ìAny person who.î If the Vermont Agency was not a ìperson,î it could not be liable under ß3729(a).

Because the FCA...

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