Kreipke v. Wayne State Univ.

• Decision Date: 04 December 2015
• Docket Number: No. 15–1139.,15–1139.
• Citation: 807 F.3d 768
• Parties: Christian KREIPKE, Plaintiff–Appellant, v. WAYNE STATE UNIVERSITY, Defendant–Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

807 F.3d 768

Christian KREIPKE, Plaintiff–Appellant,

v.WAYNE STATE UNIVERSITY, Defendant–Appellee.

No. 15–1139.

United States Court of Appeals, Sixth Circuit.

Argued: Oct. 8, 2015.

Decided and Filed: Dec. 4, 2015.

Rehearing En Banc Denied Feb. 19, 2016.

ARGUED:William R. Thomas, Akeel & Valentine, PLC, Troy, Michigan, for Appellant. Kenneth J. McIntyre, Dickinson Wright PLLC, Detroit, Michigan, for Appellee. ON BRIEF:William R. Thomas, Shereef H. Akeel, Akeel & Valentine, PLC, Troy, Michigan, for Appellant. Kenneth J. McIntyre, K. Scott Hamilton, Kathryn S. Wood, Daniel J. Phillips, Dickinson Wright PLLC, Detroit, Michigan, for Appellee.

Before: ROGERS and DONALD, Circuit Judges; ROSE, District Judge.^*

OPINION

ROSE, District Judge.

This is a qui tam action brought by Dr. Christian Kreipke ("Kreipke"), a former Assistant Professor at Wayne State University ("WSU") in Detroit, Michigan, for alleged violations of the False Claims Act ("FCA"), 31 U.S.C. § 3729, et seq. , and defamation under Michigan law. Kreipke alleges that WSU engaged in a fraudulent scheme to inflate the amount of funding that it received from the federal government for research grants and that he was fired in retaliation for complaining about the scheme to university officials and refusing to participate in it. The district court granted WSU's motion to dismiss all of the claims against it on the grounds that WSU was not a "person" under the FCA and was entitled to sovereign immunity as an "arm of the state" under the Eleventh Amendment. The district court denied Kreipke's request to amend his complaint because Kreipke failed to file a formal motion to amend and, in any event, the proposed amendment would have been futile.

On appeal, Kreipke challenges the district court's holding that WSU is not a "person" subject to liability under the FCA, its holding that WSU is entitled to Eleventh Amendment immunity, and its denial of Kreipke's request for leave to amend. For the reasons discussed below, we affirm the judgment of the district court.

I. BACKGROUND

A. Kreipke's First Amended Complaint

Appellant, Dr. Christian Kreipke, was an Assistant Professor at WSU from 2008 until his termination in 2012. R. 19 at PAGEID# 663. Kreipke personally began working on federal research grants in 2004. R. 19–1 at PAGEID# 691–92. In 2011, while employed at WSU, Kreipke was appointed to a committee responsible for auditing and investigating WSU's research grants. R. 19 at PAGEID# 662. As a result of his own work on research grants and involvement with WSU's audit committee, Kreipke discovered what he believed to be a fraudulent scheme used by WSU to artificially increase the funding that it receives from the government. R. 19 at PAGEID# 661–62. Kreipke claims that WSU terminated his employment in retaliation for his complaining about this scheme and refusing to participate in it. Id. at PAGEID# 679.

On October 31, 2012, Kreipke filed a qui tam complaint under the False Claims Act against WSU and University Physicians Group ("UPG"),¹ a physician practice serving WSU that, among other functions, manages the billing for WSU's hospitals. R. 1 at PAGEID# 1–23. On March 17, 2014, the United States provided notice that it would not be intervening in Kreipke's action under § 3730(b)(2) of the FCA. R. 17 at PAGEID# 653–57. On June 5, 2014, Kreipke filed the First Amended Complaint—the complaint at issue on this appeal. R. 19.

In the First Amended Complaint, Kreipke alleged that WSU engaged in a deliberate scheme to defraud the federal government in order to inflate the funding that WSU receives for various federal grants and contracts. R. 19. Among other allegations, Kreipke alleges that WSU inflated the costs associated with grants in WSU's budget requests, inflated researchers' salaries and the amount of time that personnel allocated to working on grants, misappropriated federal funds to purchase equipment, and inflated the costs for other services and supplies. R. 19 at 6–12. Kreipke claims that he notified WSU of these alleged fraudulent practices, but WSU did nothing to correct them. R. 19 at 18, ¶ 70.

In March 2014, after the United States declined to intervene, Kreipke's complaint was unsealed and its allegations became public. In response to media reports about WSU's alleged fraud, M. Roy Wilson, WSU's President, authored a commentary in the Detroit Free Press. R. 19–5. Wilson wrote that, based on his review of the allegations reported in the media, he believed that Kreipke's claims were meritless.Id. Wilson added that Kreipke had been fired for his own research misconduct at WSU, and that the Federal Office of Research Oversight had conducted an earlier investigation into Kreipke's conduct that resulted in a 10–year ban on further grant funding to him by the Veterans Administration. Id. Kreipke alleges that Wilson's published comments were false and defamatory.

Based on the above allegations, Kreipke asserted five claims under the FCA (Counts 1–5), a state law claim for retaliatory discharge (Count 6), and a defamation claim (Count 7) against WSU. The specific counts alleged were:

(1) Presentation of false claims in violation of 31 U.S.C. § 3729(a)(1)(A) of the False Claims Act;

(2) Making or using a false record or statement in violation of 31 U.S.C. § 3729(a)(2) of the False Claims Act;

(3) Conspiracy to defraud under 31 U.S.C. § 3729(a)(3) of the False Claims Act;

(4) A "Reverse False Claims Act Claim" for failing or refusing to return overpayments to the United States Government in violation of 31 U.S.C. § 3729(a)(7) ;(5) Retaliation in violation of 31 U.S.C. § 3729(h) of the False Claims Act;

(6) Retaliatory discharge in violation of public policy under Michigan law; and

(7) Defamation under Mich. Comp. Laws § 600.2911, et seq .

R. 19 at 21–29.

WSU moved to dismiss all of the claims for failure to state a claim under Fed.R.Civ.P. 12(b)(6) and for lack of subject-matter jurisdiction under Fed.R.Civ.P. 12(b)(1). R. 28, PAGEID# 1445–77. Kreipke filed a response in opposition to WSU's motion to dismiss, which included a request for leave to file an amended complaint adding WSU's Board of Governors and President as defendants and, if necessary, greater specificity to his claims. R. 35, PAGEID 1598–1601. Kreipke attached his proposed amended complaint as Exhibit C to his response.

B. The District Court's Rulings

The district court granted WSU's Motion to Dismiss and denied Kreipke's request for leave to file an amended complaint. R. 49.

1. WSU's Motion to Dismiss

In its Motion to Dismiss, WSU made the following arguments for dismissal of Kreipke's claims:

(1) Kreipke's claims under the FCA are barred because WSU is not a "person" subject to liability under the Act;

(2) Kreipke's claims under the FCA fail for failure to plead fraud with particularity under Fed.R.Civ.P. 9(b) ;

(3) Kreipke's state law claims for retaliation are barred under the Michigan Governmental Tort Liability Act ("GTLA"); and

(4) All of Kreipke's claims against WSU are barred by the doctrine of sovereign immunity under the Eleventh Amendment.

Ruling in WSU's favor on all claims, the district court held that the question of whether an entity is a "person" subject to liability under the FCA is determined by applying the same analysis used to decide if an entity is an "arm of the state" entitled to Eleventh Amendment immunity. R. 49 at 10 (citing Vermont Agency of Natural Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000) ). The district court considered the factors of the "arm of the state" analysis set forth in S.J. v. Hamilton County, 374 F.3d 416, 420 (6th Cir.2004), specifically (1) whether the state would be responsible for a judgment against the entity, (2) how state law defines the entity, (3) what degree of control the state maintains over the entity, and (4) the source of the entity's funding. R. 49 at 12. The district court noted that WSU is a public university created by and accountable to the State of Michigan under Article VIII of the Michigan Constitution, is established and maintained under Mich. Comp. Laws § 390.641, and receives funds directly from the State's general fund under Mich. Comp. Laws § 390.649. Id. The district court also placed significant weight on its finding that "any judgment against WSU will be paid out of the state's tax revenues." Id. (citing M.C.L. § 600.6095 ). The district court determined that, based on these factors, WSU is an arm of the State of Michigan entitled to Eleventh Amendment immunity, and therefore not a "person" subject to liability under the FCA.

The district court dismissed Kreipke's defamation claim on Eleventh Amendment immunity grounds based on the same analysis. Id. at 13. The district court did not consider the claim for retaliatory discharge in violation of public policy (Count VI) because Kreipke voluntarily dismissed that claim in response to WSU's motion to dismiss. R. 35 at 4, n. 3.

2. Kreipke's Request for Leave to Amend

Kreipke included a request for leave to amend in his response to WSU's Motion to Dismiss, but the district court did not rule on that request. Kreipke renewed his request by filing a Motion to Alter or Amend Judgment under Fed.R.Civ.P. 59(e), which asked the court to amend its judgment dismissing Kreipke's claims to grant him leave to file an amended complaint. R. 51.

The district court held that Kreipke was not entitled to relief under Rule 59(e), reasoning that such a motion is appropriate only where there has been (1) a clear error of law, (2) newly discovered evidence, (3) an intervening change in controlling law, or (4) a need to prevent manifest injustice. R. 54 at 3 (citing Intera Corp. v. Henderson, 428 F.3d 605, 620 (6th Cir.2005) ). The district court held that its "purported failure to rule" on Kreipke's request for leave to amend did not constitute an error of law or create a manifest injustice. Id. at 3–4. The district court reasoned that there was no error of law because Fed.R.Civ.P. 7(b)(1) requires...