Amicus Curiae Brief — Wilcox v. United States (No. 07-1336)

No. 07-1336

IN THE

Supreme Court of the Anited States

COLLEEN B. WILCOX, ET AL.,

Cross-Petitioners,

v.

- UNITED STATES EX REL. JOHN DAVID STONER,

Respondent.

On Cross-Petition for a Writ c* Certiorari to the

United States Court o: Appeals

for the Ninth Circuit

MOTION OF NEW MEXICO STATE UNIVERSITY

FOR LEAVE TO FILE AMICUS CURIAE BRIEF

IN SUPPORT OF CROSS-PETITIONERS

KENNETH L. HARRIGAN

Counsel of Record

ALEX C. WALKER

MODRALL, SPERLING, ROEHL,

HARRIS & SISK, P.A.

500 Fourth Street NW

Albuquerque, NM 87102

(505) 848-1800

Counsel for Amicus Curiae

RE EE A ATEN RIMS ee

WILSON-EPES PRINTING Co., INC. — (202) 789-0086 — WASHINGTON, D.C. 20002

No. 07-1336

IN THE

Supreme Court of the Gnited States

COLLEEN B. WILCOX, ET AL., CROSS-

PETITIONERS

Vv

UNITED STATES EX REL. JOHN DAVID STONER

ON CROSS-PETITION FOR A WRIT OF

CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MOTION OF NEW MEXICO STATE UNIVERSITY

FOR LEAVE TO FILE AMICUS CURIAE BRIEF

Pursuant to Supreme Court Rule 37.2, New

Mexico State University (““NMSU”) moves for leave to

file the attached amicus curiae brief in support of the

cross-petition. Cross-Petitioners have consented to

the filing of the brief. Petitioner, however, has

withheld consent, necessitating this motion.

NMSU’s brief is appropriate and will assist the

Court in its consideration of this important case. The

cross"petition raises a significant question regarding

the applicability of the False Claims Act (“FCA”) to

ii

state employees acting within the scope of their

employment.

NMSU is an active research university,

ranking in the top 110 institutions in the country in

terms of federal research expenditures, and is a top

Department of Defense contractor among Hispanic

serving universities. Four of NMSU’s past

Presidents and other NMSU high ievel

administrators are currently defendants in their

individual capacities in a suit under the FCA

concerning their certifications of NMSU as a minority

institution in applications for federal set aside

contracts. The issue of the applicability of the FCA to

state employees acting within the scope of their

employment is involved in the cross appeal of that

case pending before the Tenth Circuit Court of

Appeals. See United States ex rel. Burlbaw v.

Orenduff, et al. 10‘ Circuit Nos. 05-2393 and 06-

2006. NMSU and its staff members would be affected

if the Ninth Circuit’s flawed decision, in which it

dramatically expanded the FCA by holding that state

officials are fs“person[s]” subject to gui tam suits

under the FCA for actions taken within the course

and scope of their employment, is allowed to stand.

As explained more fully in NMSU’s brief, the

Ninth Cuircuit’s decision ignores the intent of

Congress when the FCA was enacted in 1863 and

would allow gui tam litigants to do an end run

around this Court’s decision in Vermont Agency of

Natural Resources v. United States ex rel. Stevens,

529 U.S. 765. 120 S.Ct. 1858 (2000).

Respectfully submitted,

Kenneth L. Harrigan

Counsel of Record

Alex C. Walker

Modrall, Sperling, Roehl,

Harris & Sisk, P.A.

500 Fourth Street NW

Albuquerque, NM 87102

(505) 848-1800

Counsel for

Amicus Curiae

iV

TABLE OF CONTENTS

MOTION OF NEW MEXICO STATE

UNIVERSITY FOR LEAVE TO FILE

AMICUS CURIAE BRIEF

TABLE OF AUTHORITIES

INTEREST OF AMICUS CURIAE

SUMMARY OF ARGUMENT

ARGUMENT

I. WHEN CONGRESS ENACTED THE

FCA IN 1863, IT DID NOT INTEND

FOR STATE OFFICIALS PERFORMING

THEIR OFFICIAL DUTIES TO BE

SUBJECT TO INDIVIDUAL LIABILITY

UNDER THE FCA

Il. A QUI TAM SUIT AGAINST INDIVIDUAL

STATE EMPLOYEES IS UNJUSTIFIED

“END RUN” AROUND STEVENS AND

IGNORES THE REAL PARTY IN

INTEREST THE STATE EMPLOYER .....

Ill. IF SUIT IS TO BE ALLOWED AT ALL,

QUI TAM PLAINTIFFS SHOULD BE

REQUIRED TO ALLEGE AND SHOW

PERSONAL GAIN BY THE INDIVIDUAL

STATE EMPLOYEES

Vv

TABLE OF CONTENTS — Continued

CONCLUSION

vi

TABLE OF AUTHORITIES

Cases

Alexander v. Gilmore, 202 F.Supp.2d 478

(E.D. Va 2002)

Bender v. Williamsport Area Sch. Dist., 475 U.S. 534,

Clinton vs. City of New York, 524 U.S. 417............ 16

Church of Holy Trinity vs. United States, 143 U.S.

Dodd v. United States, 545 U.S. 353

ss cin buvievnden ete if

Hater vs. Melo, 502 U.S. 21 (1991)

Idaho v. Coeur d’Alene Tribe of Idaho,

521 U.S. 261

memtucer v. Granam, 473: U.S. 159 ...............0000000..5

Lizzi v. Alexander, 255 F.3d 128

(4th Cir. 2001) 10, 11, 15

Monell v. Dept. of Social Services,

eG apap tnkaddeasseverscoesve oO, Ld

Nev. v. Hicks, 533 U.S. 353 (2001)

vil

TABLE OF AUTHORITIES

Pennhurst State Sch. & Hosp. v. Halderman

RT AA ie EU A ghciink badendnsdaied nd enddas veedip ier eersenceetesa 9, 10

Raygor v. University of Minn.,

604 N. W.2d 128

Scheuer v. Rhodes, 416 U.S. 232 (1974)

Smith v. United States, 287 F.2d 299

(5th Cir. 1961)

Taylor v. Phelan, 912 F.2d 429 (10 Cir. 1990)

Tenn. V. Davis, 100 U.S. 257 (1880)

Terry v. Midwest Refining Co., 64 F.2d 428

(10¢* Cir. 1933)

United States v. Borin, 209 F.2d 145 (5t Cir.) ....... 12

United States v. Bornstein, 423 U.S. 303 ................6

United States ex rel Burlbaw v. Orenduff. et al

10‘ Circuit Nos. 05-2393 and 06-2006... ...............

United States ex rel. Dunleavy v. County of

Delaware, 2000 U.S. Dist. LEXIS 14980 (E.D.

ae es Re ee ik a kisi etcetera |

TABLE OF AUTHORITIES — Continued

PAGE

United States ex. rel. Gaudineer & Comito, LLP

v. Jjowa HHS, 269 F.3d 932 ..

United States ex rel Graber v. City of New York,

4} Supp, Zd d4d (S,D.N_Y, 1998)

United States ex vel). Honeywell, Ine. v.

San Francisco Housing Authority, et al,

2001 U.S, Dist. LEAS 9743

(ND, Ca, 2001)

United States ex rel. Kinney v. Stoltz, No. CIV.

O1°1287, 2002 WL 523869 at *7 n. 3 WD. Minn.

April 6, 200%)

United States v. Lahey Clinic Hosp., Ine., 399

odd 1 Cbs! Cir, 2005)

United States v. Mead, 426 ¥.2d 118

(gh Cir, L970).

United States ex rel) MeVey v. Board ot Kegents

Of University of California, \65 ¥ Supp. 2d 1052

(ND. Cal, 2001)

United States v. Silliman, 167 ¥.2d 6GO7

(4d Cir)

Vermonl . lvency Ol Natural Kesources v

United States ex rel. Stevens, 529 U.S. 765.....

Will vo Mich. Dept of State Police, 491 US

iX

TABLE OF AUTHORITIES — Continued

PAGE

Wilson v..Graham County Soil and Water

Conservation Dist., 224 F.Supp. 2d 1042.. .........

Statutes

28 U.S.C. § 1345

28 U.S.C. § 1367

TEE. © BOIS. nnccsccsccessccesccossecvorsscerssoaveverens 7,9

Other

Restatement (3d) Agency § 7-07

No. 07-1336

IN THE

Supreme Court of the Anited States

COLLEEN B. WILCOX, ET AL., CROSS-

PETITIONERS

V.

UNITED STATES EX REL. JOHN DAVID STONER

ON CROSS-PETITION FOR A WRIT OF

CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF OF NEW MEXICO STATE UNIVERSITY

AS AMICUS CURIAE

IN SUPPORT OF CROSS PETITION

Kenneth L. Harrigan

Counsel of Record

Alex C. Walker

Modrall, Sperling, Rochl,

Harris & Sisk, P.A.

500 Fourth Street NW

Albuquerque, NM 87102

(505) 848-1800

Counsel for

Amicus Curiae

2

INTEREST OF AMICUS CURIAE!

New Mexico State University (““NMSU”) is a

comprehensive land-grant institution of higher

learning, founded in 1888 as an agricultural college

and preparatory school, NMSU is dedicated to

teaching, research, and service at both the

undergraduate and graduate levels.

NMSU’s statewide system provides learning

opportunities through cooperative extension offices in

the 33 New Mexico counties, 13 research and science

centers statewide, campuses in Alamogordo,

Carlsbad, Dona Ana County, Grants and Las Cruces,

an Albuquerque Center and distance education

programs.

NMSU is a very active research university,

with research and public service expenditures

exceeding $140 million in 2005-2006. NMSU ranks

in the top 110 institutions in the country in terms of

federal research expenditures. In addition to its

status as a land-grant institution, NMSU also serves

as the headquarters for the New Mexico Space Grant

Consortium, the New Mexico Water Resources

Research Institute, and WERC, a_ statewide

consortium for environmental education = and

technology development. NMSU is a top USS.

Department of Defense contractor among Hispanic:

serving universities. NMSU is the only university to

reach the platinum, or highest, level of service to

| This brief was not authored in whole or in part by counsel for

either party. No person or entity other than amicus curiae has

made a monetary contribution to the preparation or submission

of this brief.

3

NASA’s Space Alliance Technology Outreach

Program, which makes the expertise of corporate and

university researchers available to small businesses.

NMSU has a strong interest in this case. The

cross"petition raises a significant question regarding

the applicability of the False Claims Act (“FCA”) to

state employees acting within the scope of their

employment. Given NMSU’s various government

contracts, NMSU and its staff members would be

affected if the Ninth Circuit's flawed decision, in

which .it dramatically expanded the FCA by holding

that state officials are “personls]” subject to gui tam

suits under the FCA for actions taken within the

course and scope of their employment, is allowed to

stand.

While this Court’s previous decisions have

clarified the meaning of “person” under the FCA to

exclude states and state employees sued in their

“official” capacities, uncertainty remains regarding

whether the FCA’s use of “person” encompasses state

employees named in their “individual” capacities.

This very issue is currently involved in the cross

appeal of a case before the Tenth Circuit in which

four former Presidents of NMSU and other NMSU

high level administrators were sued in_ their

“individual capacities” under the FCA in connection

with their certifications of NMSU as a minority

institution in applications for federal set-aside

contracts. See United States ex rel. Burlbaw v.

Orenduff et al, 10% Circuit Nos. 05-2393 and 06-

2006. As the Burlbaw cross appeal involves some of

the same issues made the subject of the cross-

petition, any resolution by this Court of the issues

4

raised in the cross-petition could directly impact the

outcome of the Bur/baw matter, not to mention the

administration of numerous federal contract and

grant programs involving institutions of higher

education, ike NMSU.

SUMMARY OF ARGUMENT

In Vermont Agency of Natural Resources v.

United States ex rel. Stevens, 529 U.S. 765, 120 S.Ct.

1858 (2000), this Court looked to the intent of

Congress when the FCA was enacted in 1863 in

concluding that Congress did not intend to include

states as “persons” under the FCA. Since Congress

did not intend the FCA to include states as “persons”

when the FCA was enacted in 1863, then state

officials acting within the course and scope of their

employment are also not to be considered “persons”

subject to suit under the FCA, since there was no

recognized distinction in 1863 between “official

capacity” and “individual capacity” suits.

Moreover, the FCA should not be interpreted

in such a way as to authorize a gui tam plaintiff to do

indirectly that which he cannot do directly by the

simple pleading artifice of labeling the claim as one

against the official in his individual capacity. Where

the state employee was acting within the course and

scope of their employment, basic agency principles

dictate that the state is liable for the actions and

responsible for any money judgment awarded —

which in FCA cases, effectively allowing for a

punitive award, can be substantial. Accordingly, a

suit against a state employee in his “individual”

capacity, albeit for actions taken within the course

5

and scope of his employment, is a suit against the

individual state employee in name only, since the

real party in interest remains the state entity that

employs him.

ARGUMENT

On April 11, 2000, this Court decided Vermont

Agency of Natural Resources v. United States ex rel.

Stevens, supra, holding that the FCA does not apply

to a state or state agency because states are not

“persons” covered by the Act. Jd. at 784-787. A

necessary corollary of that decision is that the FCA

also does not allow FCA claims against individual

governmental employees in their official capacities.

See, e.g., Kentucky v. Graham, 473 U.S. 159, 165, 87

L. Ed. 2d 114, 105 S. Ct. 3099 (1985) (“Official-

capacity suits... ‘generally represent only another

way of pleading an action against an entity of which

999

an officer is an agent.”) (quoting Monell v. Dept. of

Social Services, 436 U.S. 658, 690, n.55, 56 L. Ed. 2d

611, 98 S. Ct. 2018 (1978)); also Will v. Mich. Dep't of

State Police, 491 U.S. 58, 71 (1989) (“a suit against a

state official in his or her official capacity is not a suit

against the official but rather is a suit against the

official’s office,” and for this reason “is no different

from a suit against the State itself’).

Following Stevens, qui tam litigants attempted

to evade this Court’s holding by simply recasting

what were previously alleged to have been “official”

capacity actions as having been taken in the

governmental employee’s “individual” capacity. If, as

the Ninth Circuit’s decision suggests, qui tam

litigants are allowed to circumvent Stevens simply by

6

changing the wording of the caption, this Court’s

holding in Stevens is meaningless.

I. WHEN CONGRESS ENACTED THE FCA IN

1863, IT DID NOT INTEND FOR STATE

OFFICL LS PERFORMING THEIR

OFFICIAL DUTIES TO BE SUBJECT TO

INDIVIDUAL LIABILITY UNDER THE FCA

In Stevens, this Court was asked to determine

whether a private individual could bring a gui tam

action against a state under the FCA. Stevens, 529

U.S. 765, 768. In answering that question, this Court

focused largely on the fact that the FCA was “enacted

in 1863 with the principal goal of ‘stopping the

massive frauds perpetrated by large [private]

contractors during the Civil War.” Jd. at 781

(quoting United States v. Bornstein, 423 U.S. 303,

309, 46 L. Ed. 2d 514, 96 S. Ct. 523 (1976)). The

Court then noted that the 1863 version of the FCA

“bore no indication that States were subject to its

penalties” and that “the text of the original statute

does less than nothing to overcome the presumption

that States are not covered.” Jd. at 782. The Court

went on to note that while “the lability provision of

the original FCA has undergone various changes,

none of them suggests a broadening of the term

‘person’ to include States.” Jd. at 782. The Court

concluded that there was nothing to suggest that

Congress, when the act was drafted in 1863, intended

to include states as “persons” under the FCA. Under

the clear holding of Stevens, the FCA is simply not

directed at the conduct of the state.

7

If Congress did not intend the FCA to include

states a: “persons” under the FCA in 1863, then it

cannot iollow that the same Congress nevertheless

intended state officials to be considered “persons.”

This conclusion necessarily flows from the fact that,

at the time the FCA was enacted in 1863, there was

no recognition of separate “official” and “individual”

capacities for state officials. Nor did courts recognize

that a state official acting within the course and

scope of his duties could be held personally lable,

since a state could act only through its employees.

E.g., Tenn. v. Davis, 100 U.S. 257, 263 (1880) (state

“can act only through its officers and agents”). It was

not settled until well after the enactment of the FCA

in 1863 that state officials could be subject to

personal liability. See Ex parte Young, 209 U.S. 123,

159-160 (1908) (settling the issue of 11th Amendment

immunity for state officials and holding that, whexe

injunctive damages are at issue, a state official

violating federal law “is subjected in his person to the

consequences of his individual conduct”); also

Scheuer v. Rhodes, 416 U.S. 232 (1974) (Congress

enacted 42 U.S.C. § 1983 “to enforce provisions of the

Fourteenth Amendment against those who carry a

badge of authority of a State and represent it in some

capacity, whether they act in accordance with their

authority or misuse it.”) (cited in Hafer v. Melo, 502

U.S. 21, 30°31 (1991) (‘the Eleventh Amendment

does not erect a barricr against suits to impose

‘individual and personal liability’ on state officials

under § 1983”)).

Since Stevens holds that states are not

“persons” under the FCA because, at least in part,

there is no indication that Congress so intended in

8

1863, then state officials are also not “persons” under

the FCA, because there is no indication that Congress

understood there to be any such thing as a claim for

money damages against a state official (acting within

the course and scope of his duties) in his “individual”

capacity in 1863. As recognized in United States ex

rel. McVey v. Board of Regents of University of

California, 165 F Supp.2d 1052 (N.D. Cal. 2001), any

other reading of the FCA is in conflict with Stevens.

If Congress intended state officials — but not states —

to be subject to suit under the FCA (ie., a departure

from the status quo as of 1863), it would have said so.

It did not, leaving no valid basis for the Ninth

Circuit’s departure from the Stevems analysis.

Il. <A QUI TAM SUIT AGAINST INDIVIDUAL

STATE EMPLOYEES IS AN UNJUSTIFIED

“END RUN” AROUND STEVENS AND

IGNORES THE REAL PARTY IN INTEREST

— THE STATE EMPLOYER

The Ninth Circuit’s decision is in open conflict

with the decisions of several other courts that have

rejected attempts by gu: tam plaintiffs to bring

claims under the FCA alleging personal liability

against state officials. For example, in United States

ex rel. Gaudineer & Comito, LLP v. Iowa HHS, 269

F.3d 932, rehearing and rehearing en banc denied,

cert. denied 122 S.Ct. 2593 (8th Cir. 2001), the qui

tam relator originally brought claims against various

governmental entities. After this Court’s decision in

Stevens (which effectively dismissed relator’s claims),

the relator sought to amend to name a state official in

his “individual capacity.” Jd. at 934. The relator’s

proposed amended complaint (naming the state

9

official in his individual capacity) was almost

identical to the original complaint against the

governmental entities and the state official in his

official capacity. Jd. at 935. The district court denied

the motion to amend and the relator appealed.

On appeal, the state official argued that since

he did not act outside of the scope of his duties, he

was not a “person” under the FCA because the state

was the real party in interest, meaning the claims

were barred by the Eleventh Amendment in any

event. Jd. at 936. The Eighth Circuit agreed and

declined to adopt relator’s argument that the term

“person” under the FCA should be construed the

same as “person” under 42 U.S.C. § 1983. Jd. The

Eighth Circuit also rejected the dissent’s and the

relators’ argument that Hafer v. Melo (discussing

“individual” versus “official” capacity claims) meant

the amendment should be granted as a matter of

right. Instead, the Eighth Circuit reasoned that, in

determining whether a state official may be liable for

money damages in his individual capacity, courts

should not rely wholly on “the elementary mechanics

of captions and pleading.” /d. at 937 (quoting Jdaho

v. Coeur d'Alene Tribe of Idaho, 521 U.S. 261, 270,

117 S. Ct. 2028 (1997)). “It is not enough for a relator

to simply label the claim as one against the official in

his individual capacity.” Jd. at 937 (internal citation

and quotation omitted).

A state can act only through its officers and

agents. Nev. v. Alcks, 533 U.S. 353, 365 (2001)

(State can act only through its officers and agents);

Pennhurst State Sch. & Hosp. v. Halderman, 465

U.S. 89, 114 (1984) (“an American State can act only

10

through its officials”) (superceded on other grounds

by 28 U.S.C. § 1367 as stated in Raygor v. University

of Minn., 604 N.W.2d 128, 133 (Minn. Ct. App.

2000)); Terry v. Midwest Refining Co., 64 F.2d 428,

434 (10th Cir. 1933) (“the state could act only

through officers or agents”). Since states take no

actions independent of the actions of their agents,

Stevens and the 11th Amendment cannot be properly

evaded by a qui tam litigant simply asserting that

the state employees were acting in their “individual”

capacities. The “mere incantation of the term

‘individual capacity’ is not enough to transform an

official capacity action in to an individual capacity

action.” Lizzi, 255 F.3d at 137 (citing Bender v.

Wilhamsport Area Sch. Dist., 475 U.S. 534, 543

(1985)); Coeur a2’ Alene Tribe of Idaho, 521 U.S. at

270 (“the real interests served by the Eleventh

Amendment are not to be sacrificed to elementary

mechanics of captions and pleading.”).

Accordingly, even when a complaint expressly

names a state official is his or her “individual”

capacity, the 11th Amendment will still bar the suit if

the state is the real party in interest. Ha/derman,

465 U.S. at 101. Under basic agency principles, a

principal is liable for the tortious misrepresentations

(z.e., fraud) of the agent if the representation is

authorized, apparently authorized, or within the

power of the agent to make for the principal.

Restatement (2d) Agency, § 257. Further, an

employer is responsible for the fraudulent conduct of

an employee under the same standard. /d., § 249;

also Taylor v. Phelan, 912 F.2d 429, 433 (10th Cir.

1990); Restatement (3d) Agency, § 7.07. Thus, unless

there is some allegation that the governmental

11

employees were acting outside the course and scope

of their employment, the governmental entity

remains the real party in interest for any claim of

money damages.

The Ninth Circuit improperly ignored this

legal reality. Under its decision, a state official could

be acting within the course and scope of his duties

and still violate the FCA, thereby subjecting the state

to damages. However, the reality is that the

perfunctory act of labeling conduct as being

performed in the official’s “individual” capacity does

not magically transform a suit from one against the

state to one against an individual. See Bender, 475

U.S. at 543; Lizzi, 255 F.3d at 136°137; Wilson v.

Graham County Soil and Water Conservation Dist.,

224 F.Supp.2d 1042, 1049-50 (W.D.N.C. 2002). The

state remains the real party in interest.

Indeed, if a state can act only through its

employees, and if the state is legally responsible for

actions by its employees taken within the course and

scope of their duties, then a suit against a state

employee for actions taken within the course and

scope of his duties is different than a suit directly

against the state in name only. To hold that

individual state officials (acting on behalf of the state

and within the course and scope of their duties) can

be sued under the FCA, while also recognizing that

the FCA prohibits the state itself from being sued,

completely undermines this Courts decision in

Stevens, and allows qui tam plaintiffs to easily skirt

the Eleventh Amendment protection that states (the

real parties in interest) would otherwise enjoy. Even

though Stevens clearly says that an FCA suit against

12

a state is not allowed (in substantial part because of

the punitive nature of damages that the state would

be forced to incur under the FCA), the Ninth Circuit's

ruling means that gui tam plaintiffs can effectively

ignore Stevens and recover from the state the exact

damages that Stevens says states are not liable for

under the FCA.

The Ninth Circuit justified its ruling by

suggested that not allowing state employees to be

sued in their “individual” capacities would be

tantamount to granting absolute immunity to all

state employees, for FCA purposes. To the contrary,

allowing gui tam suits against individual state

employees creates an exception to the _ state's

sovereign immunity which is not warranted by the

FCA or Stevens. Indeed, the Ninth Circuit's

simplistic assumption that disallowing gui tam suits

against government employees would equal “absolute

immunity” for the actions of a state official overlooks

the vast array of common law remedics? that the

* See, e.g., United States v. Lahey Clinic Hosp., Inc., 399 ¥ 3d 1,

6 (1st Cir. 2005) (United States filed an action under 28 U.S.C. §

1345 against hospital alleging “vioiations of the common law

giving rise to causes of action for unjust enrichment and

payment under mistake of fact.”); United States v. Mead, 426

F.2d 118, 124-25 (9th Cir. 1970) (common law remedy of

payment by mistake not abrogated by False Claims Act's

statutory remedies); United States v. Borin, 209 F.2d 145, 148

(5th Cir.) (common law remedy of fraud not abrogated by False

Claims Act's statutory remedies), cert. demied, 348 U.S. &21, 99

L. Ed. 647, 75 S. Ct. 33 (1954); United States v. Silliman, 167

F.2d 607, 610-11 (3d Cir.) (common law remedies not abrogated

by False Claims Act). cert. dented, 335 U.S. 825, 93 L. Ed. 379

69 S. Ct. 48 (1948)

14

federal government has at its disposal when it

believes it have been wronged, which remedies are

not in any way tied to the meaning of “person” under

the FCA or to the Eleventh Amendment

it if SUIT IS TO BE ALLOWED AT ALL, QUI

TAM PLAINTIFFS SHOULD BE REQUIRED

TO ALLEGE AND SHOW PERSONAL GAIN

BY THE INDIVIDUAL STATE EMPLOYEES

Kiven if state employees are deemed “persons”

under the FCA and subject to suit, in order to avoid a

situation in which Stevens is rendered virtually

meaningless, and in order to prevent litigants from

doing an improper “end run” around the Eleventh

Amendment, gui tam plaintifis should be required to

show some personal gain by the state employees.

hor instance in United States ex rel.

Honeywell, Ine. v. San Francisco Housing Authority,

et al, 2001 U.S. Dist. LEXIS 9743 (N.D. Ca. 2001)

the court granted a motion to dismiss the FCA

complaint against public officials in their personal

capacity, concluding that such a suit may not be

maimtamed without an allegation that the officials

“nersonally benefited from the freeze benefit obtained

from HUD.” /d, at * 11. The court noted that any

such benefit remaimed with the San _ Francisco

Housing Authority (employer of the public officials),

and explained that: “Given the allegations in the

Complaint it does not appear that Honeywell could

amend the Complaint to allege personal gain.” /d. at

"14 n. 4

14

In Alexander v. Gilmore, 202 F.Supp.2d 478

(E.D. Va 2002), Plaintiffs alleged that the Virginia

Department of Corrections made false certifications

and representations to the federal government in

order to receive federal grants. The certifications

were signed by state employees. Plaintiffs sued these

and other Virginia public officials under the FCA in

their “individual” capacities. The court emphasized

that the complaint did not contain any facts that

suggested that the officials who signed and submitted

the federal grant application were acting in anything

other than their official capacities. /d. at 482. Then,

relying on Smith v. United States, 287 F.2d 299 (5th

Cir. 1961), in which the Fifth Circuit noted that FCA

claims against government officials in their personal

capacities should rest on allegations of personal gain,

the court dismissed the complaint for failure to state

a claim because there were “no allegations that

lindividual defendants] converted funds from

VOITIG (the federal grant program) to their personal

use.” Alexander, 202 F.Supp.2d at 482; see also

United States ex rel. Graber v. City of New York, 8

F.Supp.2d 343 (S.D.N.Y. 1998) (stating that suit

under FCA could not be brought against public

officials absent allegations they personally received

funds paid by federal government on basis of alleged

false claims); United States ex rel. Kinney v. Stoltz,

No. CIV. 01-1287, 2002 WL 523869 at *7 n. 3 (D.

Minn. April 5, 2002) (stating that officials must have

personally benefited from the alleged submission of

false claims to Medicare before suit under FCA is

anything other than one against the governmental

employer); United States ex rel. Dunleavy v. County

of Delaware, 2000 U.S. Dist. LEXIS 14980 (E.D. Pa.

Oct. 12, 2000) (no allegation that officia) acted for his

15

own benefit, profited at the public’s expense, spent

the money at issue for any non-public purpose, or

acted in any capacity other than his official one):

Lane v. Texas Dep't of Health, 2003 Tex. App. LEXIS

6524, * 17-18 (Ct. App. — Third Dist., Austin July 30,

2003) (holding that “even if individual state officials

or employees are sued in their individual capacities,

no FCA liability arises unless there is evidence that

the official or employee converted the federal funds or

property to their own personal use or benefit.”).

A rule imposing individual liability on state

officials acting within the course and scope of their

duties simply because they are sued that way “would

do nothing more than adhere to an empty formalism”

that other courts have rightly rejected. Lizzi v.

Alexander, 255 F.3d 128, 137 (4th Cir. 2001) (internal

citations omitted). Absent a requirement of a

showing of personal gain, the Ninth Circuit’s ruling

means that state officials can be held personally

liable even though the state was the only entity

benefiting from the alleged FCA violation. This

Court has previously noted the absurdity of such a

holding in other contexts. Monell v. Dept of Soc.

Servs., 436 U.S. 658, 687 (U.S. 1978) (in deciding that

municipalities can be held liable under § 1983,

stating: “it beggars reason to suppose that Congress

would have exempted municipalitics from suit,

insisting instead that compensation for a taking come

from an officer in his individual capacity rather than

from the government unit that had the benefit of the

property taken.”). In rejecting the requirement that

qui tam pilaintiffs allege and show some sort of

personal benefit to the individual defendants, the

Ninth Circuit allowed for the FCA and Stevens to be

16

interpreted so as to reach an equally illogical result.

See, e.g., Dodd v. United States, 545 U.S. 353 (U.S.

2005) (J. Stevens, dissenting) (even clear text should

be interpreted in a manner that avoids an absurd

result) (citing Clinton v. City of New York, 524 U.S.

417, 429, 141 L. Ed. 2d 393, 118 S. Ct. 2091 (1998)

and Church of Holy Trinity v. United States, 143 U.S.

457, 459, 36 L. Ed. 226, 12 S. Ct. 511 (1892)).

CONCLUSION

For the foregoing reasons, the cross-petition for

a writ of certiorari should be granted and the Ninth

Circuit Court of Appeals’ holding that state

employees may be sued in their individual capacities

under the FCA for actions taken in the course of their

official duties should be reversed.

Respectfully submitted,

Kenneth L. Harrigan

Counsel of Record

Alex C. Walker

Modrall, Sperling, Roehl,

Harris & Sisk, P.A.

500 Fourth Street NW

Albuquerque, NM 87102

(505) 848-1800

Counsel for

Amicus Curiae