District Court Decision Limits State University AMCs Exposure under the FCA

By April 17, 2017No Comments

On April 11, 2017, the United States District Court in Oregon ruled on the application of the sovereign immunity doctrine to suits brought by the Department of Justice (DOJ) under the federal False Claims Act (FCA) against state university academic medical centers (AMCs). The case involved a whistleblower suit against Oregon Health and Sciences University (OHSU), in which DOJ had intervened.  OHSU is a public corporation created by the State of Oregon, and is described as a governmental entity performing governmental functions in its founding statute.

The FCA imposes liability on any “person” who submits a false claim to the government for payment.  In 2000, the Supreme Court decided in Vermont Agency of Natural Resources v. United States ex rel. Stevens¹  that states and state agencies are not a “person” for purposes of the FCA.  But because the Government had not intervened in the Stevens case, there was still an open question as to whether the federal government (as compared to a private relator) could bring a claim against a state or state agency under the FCA.  In particular, Justice Ginsburg in a concurring opinion had stated: “I read the Court’s decision to leave open the question whether the word “person” encompasses States when the United States itself sues under the False Claims Act.”

The OHSU decision answers this question in the negative.

Relying on Justice Ginsberg’s concurring opinion, DOJ had argued that the United States may bring an FCA action against OHSU because the Stevens decision applies only to FCA cases brought by private individuals.  The District Court concluded that nothing in Stevens suggested its outcome would differ if the United States had intervened in that matter, as it did in the present case. Therefore, the District Court concluded that the United States may not bring an FCA action against an arm of the state such as OHSU.

Another interesting aspect of the OHSU decision is that the court denied the government’s request for leave to amend the complaint to assert FCA claims against individuals in their personal capacity. The court noted that the government had nearly four years to make allegations against individuals in their personal capacity, but had not done so.

The case is named:  United States ex rel. Doughty v. Oregon Health and Sciences University, No. 3:13-CV-01306-BR (D. Or. Apr. 11, 2017).

¹ 529 U.S. 765 (2000).

For more information about the district court’s decision regarding United States ex rel. Doughty v. Oregon Health and Sciences University, contact Powers Principal Mark Fitzgerald at 202-872-6771 or Mark.Fitzgerald@PowersLaw.com.

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