Tuesday, April 29, 2008
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False Claims Act Inapplicable to Acts in ‘Official Capacity’—C.A.
By STEVEN M. ELLIS, Staff Writer
Employees of a public agency acting in the course of their employment and solely on the agency’s behalf cannot be sued for presenting a false claim to the state for payment if their employer could not be sued for doing so, the Fourth District Court of Appeal ruled Friday.
Affirming Orange Superior Court Judge James Di Cesare’s decision to dismiss an action under the California False Claims Act against three employees of the Los Angeles Unified School District who submitted false requests seeking funding for new school construction, Div. Three held that the suit was tantamount to a suit against the district itself—which cannot be sued under the act—because of a state law requiring the district to indemnify employees for acts or omissions occurring within the scope of their employment.
Dennis Dockstader and Christopher Dockstader had originally sued the district itself on behalf of the state under the act seeking to recover approximately $100 million they contained the district had wrongfully obtained for new school construction. They alleged that the district submitted funding requests that deliberately understated the number of classrooms it had available for general student use and overstated the number of students anticipated to attend particular schools.
Qui Tam Action
The CFCA allows a private individual with knowledge of past or present fraud committed against the government to bring suit on the government’s behalf, and, if successful, to receive a portion of any penalty imposed. Such an action is also known at common law as a Qui Tam action, which is an abbreviation of the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” meaning “he who sues in this matter for the king as well as for himself.”
Complaints are filed under seal, with a copy sent to the California Attorney General’s so that the Attorney General may determine whether to intervene in the action. If the Attorney General declines, the CFCA authorizes the plaintiff to receive between 25 and 50 percent of any proceeds from the action.
Attorney General Jerry Brown declined to intervene in the Dockstaders’ action, and the California Supreme Court subsequently held in Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164 that a school district was not a person under the CFCA and therefore could not be sued under the act.
Fraud Alleged
The Dockstaders then amended their complaint to delete the school district and add employees Beth Hamby, Lynn M. Roberts, and Julie Crum as defendants, alleging that the three knowingly signed fraudulent funding applications in the course and scope of their employment as district officials.
However, when the employees demurred, Di Cesare dismissed the action, concluding that the act did not authorize a lawsuit against defendants for acts taken in their official capacities.
On the Dockstaders’ appeal, Justice Richard M. Aronson wrote to agree with the trial court, noting that Government Code Sec. 825 requires a government agency to defend and indemnify a public employee against claims arising out of an act or omission occurring within the scope of his or her employment.
He wrote:
“Simply allowing plaintiffs to substitute the individual [district] employees for the district itself amounts to little more than a pleading device that seeks to circumvent the Legislature’s intent to shield public entities from the draconian effects of CFCA….[A] public official may not be a proper defendant under [the] CFCA for acts taken in his or her official capacity.”
Justices Kathleen O’Leary and Raymond J. Ikola joined Aronson in his opinion.
The case is State of California v. Hamby, 08 S.O.S. 2490.
Copyright 2008, Metropolitan News Company