U.S. v. Texas Tech University

• Decision Date: 29 March 1999
• Docket Number: No. 97-11182,97-11182
• Citation: 171 F.3d 279
• Parties: 133 Ed. Law Rep. 691, 15 IER Cases 6 UNITED STATES of America, ex rel., Plaintiff-Intervenor, Carol Rae Cooper Foulds, Plaintiff-Appellee, v. TEXAS TECH UNIVERSITY, et al., Defendants, Texas Tech University; Texas Tech University Health Science Center, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 279

171 F.3d 279

133 Ed. Law Rep. 691, 15 IER Cases 6

UNITED STATES of America, ex rel., Plaintiff-Intervenor Carol Rae Cooper Foulds, Plaintiff-Appellee, v. TEXAS TECH UNIVERSITY, et al., Defendants Texas Tech University; Texas Tech University Health Science Center, Defendants-Appellants.

No. 97-11182.

United States Court of Appeals Fifth Circuit.

March 29, 1999.

Peter Wilson Chatfield, Mary Louise Cohen, Phillips & Cohen, Washington, DC, Mark Alan Wilson, Smith, Storrs, Wilson & McConnell, Amarillo, TX, Randall Bruce Pyles, Burgess & Pyles, Plainview, TX, for Plaintiff-Appellee.

Michael Eugene Robinson, Douglas N. Letter, U.S. Department of Justice, Civil Division, Appellate Staff, Washington, DC, for Plaintiff-Intervenor.

Toni B. Hunter, Austin, TX, for Defendants-Appellants.

Mark A. Bohnhorst, University of Minnesota, Minneapolis, MN, for Regents of the University of Minnesota, Purdue University, Board of Trustees of the University of Illinois, Regents of the University of Michigan, Regents of the University of California, Board of Trustees of the California State University, Amici Curiae.

Frederick L. Robinson, Washington, DC, for Association of American Medical Colleges, Amicus Curiae.

Priscilla R. Budeiri, Taxpayers Against Fraud, The False Claims Act Legal Center, Washington, DC, for Taxpayers Against Fraud, The False Claims Act Legal Center, Amicus Curiae.

Appeal from the United States District Court for the Northern District of Texas.

Before JOLLY, BARKSDALE and BENAVIDES, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

This appeal speaks of a qui tam action brought by Carol Rae Cooper Foulds, on behalf of the United States, against Texas Tech University and Texas Tech University Health Sciences Center for violations of the False Claims Act, 31 U.S.C. § 3729 et seq. (West Supp.1998). We must initially decide a jurisdictional issue--whether under the Eleventh Amendment private citizens acting as qui tam plaintiffs can institute such suits against the sovereign states. Because we hold that the Eleventh Amendment bars this suit, we lack the constitutional authority to decide the second--and broader--issue presented in this appeal of whether the False Claims Act creates a cause of action, at all (whether by an individual or the United States government), against an individual state when that state knowingly submits false or fraudulent claims for payment to the United States. In short, we simply hold that the Eleventh Amendment divests the federal courts of jurisdiction over this qui tam action brought against Texas Tech University and Texas Tech University Health Sciences Center ("Texas defendants").

I

A

Foulds possesses information that she believes will bring to light a massive number of fraudulent claims submitted to the United States. She obtained this information as a dermatology resident at the Texas Tech Health Sciences Center ("TTHSC"). Foulds worked at various clinics run by TTHSC. She examined patients, made diagnoses, and prescribed treatment for patients. Resident physicians performed these services, Foulds alleges, without any supervision by the staff physicians. She says that after residents had rendered these services without oversight, staff physicians routinely signed patient charts and Medicare/Medicaid billing forms certifying that the services were personally performed by the staff physicians or by the staff physicians' employees under their personal direction. Foulds alleges no simple clerical error. Indeed, she estimates that the defendants have submitted almost one-half million false claims over a period of ten years.

This alleged falsification of documents forms the basis for Foulds's action under the False Claims Act ("FCA" or "Act"). That Act creates civil liability for, inter alia, "[a]ny person who knowingly presents, or causes to be presented, to an officer or employee of the United States Government ... a false claim for payment or approval." 31 U.S.C. § 3729(a)(1) (emphasis supplied). ¹ Foulds and the United States argue that the term "person" includes a state. The Texas defendants disagree, arguing that "person" does not include a sovereign state.

Aside from the question of whether the Act's language subjects states to potential liability, Foulds has other hurdles to clear. An uninterested third party ordinarily cannot seek relief for the United States' injuries suffered at the hands of another. See, e.g., Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 474, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982) (recognizing the principle that a plaintiff generally must assert his own rights, and not the rights of third parties). Many a good citizen, without hope of personal reward, might choose to expose such corruption to allow the government to recoup its losses. The FCA, however, provides a mechanism to coax the less altruistic to come forward. Section 3730(b) of the Act allows private persons to "bring a civil action for a violation of § 3729 for the person and for the United States Government." 31 U.S.C. § 3729(b)(1). To be sure, the statute provides for what can amount to massive rewards for a person who undertakes this task. ²

For hundreds of years, these proceedings have been labeled "qui tam" actions. ³ A qui tam plaintiff under the FCA must file her complaint under seal and deliver copies of the complaint to the United States. Id. § 3730(b)(2). The United States then must decide within sixty days, unless granted an extension, whether to intervene and prosecute the action itself or whether to take on a passive role and allow the qui tam plaintiff (also called a "relator") to prosecute the action. Id. § 3730(b)(4). In the instant case, the United States has not intervened in the action leading to this appeal.

B

This appeal presents an additional claim. According to Foulds, her decision to blow the whistle on the allegedly fraudulent activities led to retaliatory conduct by the chairman of the dermatology department. ⁴ Foulds contends that she first notified Texas Tech University's general counsel of the false claims in the fall of 1993. She alleges that soon thereafter she received derogatory memoranda from the chairman of the dermatology department and was subsequently placed on probation. Section 3730(h) of the FCA provides remedies for those employees harassed by their employers because of lawful acts performed in furtherance of qui tam actions under the Act. The "employee may bring an action in the appropriate district court of the United States for the relief provided in this subsection." 31 U.S.C. § 3730(h).

II

Foulds filed her complaint with the district court in August of 1995. This complaint remained under seal until the district court issued an order in September of 1996, denying the United States' request for an extension of time during which it could determine whether to intervene. ⁵ According to assertions made by the United States at oral argument, the federal government simply did not have the time necessary to determine whether this case warranted its intervention. Shortly after the district court issued the order denying the government's request for an extension, two of the defendants, Texas Tech University and Texas Tech Health Sciences Center ("Texas defendants"), ⁶ filed a motion to dismiss the qui tam action pursuant to Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure. The Texas defendants based their motion to dismiss on four arguments: (1) the Eleventh Amendment precludes a private citizen from bringing a qui tam suit against the sovereign states for alleged violations of the FCA; (2) the Eleventh Amendment bars private citizens from naming states as defendants to a claim seeking a retaliation remedy under § 3730(h) of the FCA; (3) states are not "persons" for purposes of the FCA; and (4) Foulds failed to plead fraud with particularity. ⁷

The district court denied the Texas defendants' motion to dismiss. Noting that a ruling on a 12(b)(1) motion to dismiss for lack of subject matter jurisdiction must precede any decisions on other Rule 12 motions, the court first addressed the defendants' Eleventh Amendment arguments.

The Texas defendants argued that the principles recognized in Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996), apply to this case. In Seminole Tribe, the Supreme Court announced a two-step analysis for determining whether Congress has legitimately denied the states the sovereign immunity recognized under the Eleventh Amendment. First, a court must determine whether "Congress has 'unequivocally expresse[d] its intent to abrogate the immunity.' " Id. at 55, 116 S.Ct. 1114 (citation omitted). Second, the court must decide "whether Congress has acted 'pursuant to a valid exercise of power.' " Id. (citation omitted). With regard to the second inquiry, the Supreme Court held that Congress could not abrogate Eleventh Amendment immunity simply by enacting legislation under its general grant of Article I legislative powers. Id. at 72-73, 116 S.Ct. 1114. Controlling Supreme Court precedent has recognized only one valid source of Congressional power that would allow the abrogation of a state's immunity from suit by its citizens: § 5 of the Fourteenth Amendment. Id. at 59, 72-73, 116 S.Ct. 1114. The Texas defendants have argued that, with respect to the False Claims Act, Congress' only source of legislative power is Article I. Consequently, there has been no abrogation of the Eleventh Amendment bar to this suit.

The district court quickly brushed aside the applicability of Seminole Tribe. The court decided that it need not address Seminole Tribe 's holding because the defense of sovereign immunity from suit under the Eleventh Amendment was not presented here inasmuch as the Eleventh Amendment did not apply to suits by the United States against a state, which, it held, a qui tam action is in fact. United...