Public Workers May Be Personally Sued Under FCA

Monday, September 10, 2007

Page 3

Public Workers May Be Personally Sued Under FCA—Court

By a MetNews Staff Writer

The Eleventh Amendment bars liability under the federal False Claims Act against public school authorities and officials acting in an official capacity, but not in an individual capacity, the Ninth U.S. Circuit Court of Appeals ruled Friday.

In an opinion by Judge Sandra S. Ikuta, the court partially affirmed the decision by Judge James Ware of the U.S. District Court for the Northern District of California that the Santa Clara County Office of Education, the East Side Union High School District, and three county employees, Colleen Wilcox, Joe Fimiani, and David Wong, were all state agents holding sovereign immunity from suit.

The panel, however, reversed Ware’s ruling that the plaintiff, John David Stoner, could not proceed against the three employees as individuals.

Stoner, a former employee of the county education office, brought a qui tam action alleging that the defendants falsely certified compliance with the Individuals with Disabilities Education Act in order to induce the government to disburse more money for certain educational programs.

A qui tam action is a proceeding authorized under the FCA by which a private person, known as a relator, may bring suit in the name of the government against any person who knowingly presents a false or fraudulent claim for payment or approval to an officer or employee of the government. Under the act, a defendant is liable for a civil penalty and treble damages, a percentage of which goes to the relator, as well as costs.

The defendants argued that liability could not attach under Eleventh Amendment jurisprudence because they were state agents, and thus could not be “persons” under the act. They also argued that as state agents they held sovereign immunity from suit in federal courts.

Ware agreed, and granted the defendants’ motion to dismiss the action.

The appellate panel agreed with Ware that the Eleventh Amendment barred liability against all of the defendants for acts taken in an official capacity, but disagreed that immunity extended to individuals. “State officials, sued for damages in their individual capacities, are “persons” within the meaning of” the statute, Ikuta wrote.

“Where a plaintiff seeks to hold individual employees personally liable for their knowing participation in the submission of false or fraudulent claims to the United States government, the state is not the real party in interest… and the Eleventh Amendment poses no barrier to such a suit,” she added, citing a U.S. Supreme Court ruling.

In remanding the proceedings to the district court, the panel also declared that Stoner, who is an attorney but not licensed to practice law in California, could not represent himself in a qui tam action and instructed the district court to give Stoner reasonable time to find counsel or to obtain pro hac vice admission.

Judge Diarmuid F. O’Scannlain and visiting Judge Leonard B. Sand of the U.S. District Court for the District of New York joined Ikuta in her opinion.

The case is United States ex rel. Stoner v. Santa Clara, 04-15984.