Supreme Court Deals Cities A Victory and A Defeat

Article excerpt

The U.S. Supreme Court dealt cities nationwide a win and a loss in two important cases handed down last week.

In the first case, Vermont Agency of Natural Resources v. U.S., No. 98-1828, the Court held that a private individual may not bring suit in federal court on behalf of the United States against a state or state agency under the federal False Claims Act. NLC, joined by the other members of the Big 7 state and local government associations, filed an amicus brief in the case.

The Federal False Claims Act

This case presents yet another attack on the sovereign immunity of the States. The case was brought under the federal False Claims Act (FCA). The FCA subjects a person who knowingly presents a false or fraudulent claim to the United States to civil penalties and treble damages. Under the Act's qui tam (qui tam is an action where an informer sues on behalf of the government as well as himself) provisions, a private individual, called a relator, can file a lawsuit against a person who has allegedly presented false claims to the United States and prosecute that action in place of the United States. As an incentive to file suit, the relator receives 25 to 30 percent of the recovery plus "reasonable attorneys' fees." The FCA is affectionately referred to as the "send a rogue to catch a rogue" statute.

The Vermont case presented two issues concerning whether a state can be sued under the FCA. First, the U.S. Supreme Court was asked to determine whether a state is a "person" under the FCA and is therefore subject to suit. Second, the Court was asked to determine whether a qui tam suit to recover monetary damages from a state is barred by the 11th Amendment.

Facts

A former employee of the Vermont Agency of Natural Resources brought suit against the state of Vermont. He alleged that his former employer knowingly and continuously submitted false claims to EPA for salary and wage expenses of its employees purporting to show that employees were working on federally-funded projects when, in fact, they were not working the hours as reported.

Vermont moved to dismiss the case for two reasons. First, it argued that it is not a "person" for purposes of the FCA. Second, it argued that the suit is barred by the 11th Amendment. The district court and U.S. Appeals Court for the Second Circuit ruled against Vermont. Vermont appealed to the U.S. Supreme Court. NLC filed an amicus brief in support of Vermont's request to be heard by the U.S. Supreme Court.

The Supreme Court Ruling

NLC argued in its brief that the lower court's holding that a state can be sued for treble damages at the behest of private parties flies in the face of federalism, and a person under the FCA does not include a state. The Supreme Court agreed and stated "a `person' does not include the sovereign (in this case, the State).

If Congress intends to alter the usual constitutional balance between states an the federal government, it must make its intention to do so unmistakably clear in the statute's language." NLC further argued that qui tam suits fundamentally alter the federal/state balance in multiple ways. First, the relators are motivated by the prospects for profit rather than the public good.

Second, the treble (triple) damages section is unequivocally punitive in nature. Subjecting States to punitive measures on its face, alters the federal/state balance. Third, the FCA permits "a posse of politically unaccountable ad hoc deputies" to sue the States, which is an unprecedented intrusion into the federal/state relationship.

The Supreme Court did not opine on whether an action in federal court by a qui tam relator against a state would run afoul of the 11th Amendment, but notes that there is "a serious doubt" on that score.

In the second case, Geier v. …