Are State Colleges and Universities Exempt From Access to the False Claims Act’s Qui Tam Provisions?

The heart of the False Claims Act is its qui tam provisions, which allow ordinary private citizens the opportunity to commence a lawsuit against companies alleged to have committed fraud against the government – often exposing widespread fraud by massive corporations. What’s more, the qui tam provisions allow these private plaintiffs the opportunity to collect up to 30 percent of the eventual settlement or judgment. For a number of plaintiffs, this pay day often reaches the millions of dollars.

An “arm of the state” is exempt and precluded from filing a lawsuit under these qui tam provisions. In a recent case involving the University of Texas, a researcher has asked the Supreme Court to decide whether the facts of his case are such that he is prevented from accessing the qui tam protections, despite exposing extensive fraud with regard to federal grant money.

Background of King v. University of Texas Health Science Center 

The relator in this case worked as a researcher at the University of Texas from 2001 through 2005. During that time, her program received millions of dollars in grant money from the federal government. While working in the research lab, the relator began to notice discrepancies in data, which she reported to her supervisor. She was allegedly thereafter demoted and terminated in retaliation for her inquiry into the way grant money was spent. She filed a claim under the False Claims Act shortly thereafter, alleging the University unlawfully covered up misconduct pertaining to the federal grant money, as well as wrongful retaliation and termination.

Upon review by the U.S. District Court, the realtor’s claim was dismissed. Relying on the preclusion of state entities from filing qui tam lawsuits, the Court held the University was an “arm of the state” and could not be held liable under the False Claims Act. It reasoned the University enjoyed sovereign immunity protection under the Eleventh Amendment, and that the state was not a “person” subject to liability under the FCA.

The realtor thereafter appealed the decision to the U.S. Court of Appeals for the Fifth Circuit, which affirmed the lower court’s decision. It applied five factors to the determination of whether an entity is an “arm of the state” and therefore exempt from liability:

  • Whether state law characterizes the entity as an “arm of the state;”
  • How the entity is funded;
  • The degree of local autonomy;
  • Whether the entity is concerned primarily with local, as opposed to statewide, problems;
  • Whether the entity has the authority to sue and be sued in its own name;
  • Whether the entity has the right to hold and use property.

Upon applying these factors, the Fifth Circuit concluded that the University of Texas Health Science Center was an “arm of the state,” noting its limited autonomy and significant state funding sources.

The relator has filed a Petition for Writ of Certiorari to the U.S. Supreme Court, requesting that the Court overturn the Fifth Circuit. The realtor’s Petition cites several rebuttals to the Fifth Circuit’s decision, primarily focusing on the Health Science Center’s local autonomy and the fact it has $1 billion in its own assets.

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By | 2018-03-27T10:27:01+00:00 July 17th, 2014|Healthcare Fraud|