U.S. ex rel. Adrian v. Regents of Univ. Of Calif.

• Decision Date: 30 March 2004
• Docket Number: No. 03-30243.,03-30243.
• Parties: UNITED STATES of America, ex rel. Donald Patrick J. ADRIAN, Plaintiff-Appellant, v. REGENTS OF THE UNIVERSITY OF CALIFORNIA; Lawrence Livermore National Laboratory; Ronald Cochran; Anthony Chargin; Robert Burleson; Daniel Thompson; George Weinert; Biomedical Research Foundation of Northwest Louisiana; Louisiana Center for Manufacturing Sciences; John Sharp, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

363 F.3d 398

UNITED STATES of America, ex rel. Donald Patrick J. ADRIAN, Plaintiff-Appellant, v. REGENTS OF THE UNIVERSITY OF CALIFORNIA; Lawrence Livermore National Laboratory; Ronald Cochran; Anthony Chargin; Robert Burleson; Daniel Thompson; George Weinert; Biomedical Research Foundation of Northwest Louisiana; Louisiana Center for Manufacturing Sciences; John Sharp, Defendants-Appellees.

No. 03-30243.

United States Court of Appeals, Fifth Circuit.

March 30, 2004.

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Brian Clay Leighton (argued), Clovis, CA, for Plaintiff-Appellant.

Malcolm A. Heinicke (argued), Munger, Tolles & Olson, San Francisco, CA, Brad D. Brian, Munger, Tolles & Olson, Los Angeles, CA, for Regents of the University of Cal., Lawrence Livermore Nat. Lab., Cochran, Chargin, Burleson, Thompson and Weinert.

Susie Morgan (argued), Wiener, Weiss & Madison, Shreveport, LA, for Biomedical Research Found. of Northwest LA, and Sharp.

William Noel Edlin, Walsworth, Franklin, Bevins & McCall, San Francisco, CA, for Louisiana Ctr. for Mfg. Sciences.

Mark Reese Pharr, III (argued), Galloway, Johnson, Tompkins, Burr & Smith, Lafayette, LA, for La. Ctr. for Mfg. Sciences and Sharp.

Michael Eugene Robinson (argued), Douglas N. Letter, U.S. Dept. of Justice, Civ. Div.-App. Staff, Washington, DC, for U.S., Amicus Curiae.

Appeal from the United States District Court for the Western District of Louisiana.

Before EMILIO M. GARZA, DeMOSS and CLEMENT, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

Donald Patrick J. Adrian, Relator-Appellant, filed a sealed complaint under the qui tam provision of the False Claims Act ("FCA"), 31 U.S.C. § 3730(b), on behalf of the United States of America in the United States District Court for the Northern District of California (the "California court"). The complaint alleged that the Regents of the University of California ("Regents") as manager of the Lawrence Livermore National Laboratory ("Livermore") violated the FCA.¹ Adrian subsequently amended this complaint to include as defendants Livermore employees Ronald Cochran, Anthony Chargin, Robert Burleson, Daniel Thompson and George Weinert (collectively these individuals, the Regents, and Livermore are referred to as the "California Defendants"). The first amended complaint also named Biomedical Research Foundation of Northwest Louisiana, Louisiana Center for Manufacturing, and John Sharp, the president of both companies, as defendants (collectively these companies and Sharp are referred to as the "Louisiana Defendants"). After the United States government declined to intervene, the complaint was unsealed and served on the defendants.

All of the defendants filed motions to dismiss in the California court. The Louisiana Defendants also filed a motion to transfer the case to the Western District of Louisiana (the "Louisiana court"). The California court found that the FCA did not provide a cause of action against the California Defendants and granted their motion to dismiss because the complaint failed to state a claim upon which relief could be granted. See Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 787-88, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000) (holding that the FCA "does not subject a State (or state agency) to liability in [private relator] actions"); FED.R.CIV.P. 12(b)(6). The California court then transferred the case to Louisiana. It did not rule on the Louisiana Defendants' motions to dismiss the first amended complaint for failure to allege fraud with particularity. FED.R.CIV.P. 9(b). Adrian filed a second amended complaint in the Louisiana court. The Louisiana Defendants filed new motions to dismiss claiming the second amended complaint also failed to plead fraud with the specificity required by FED.R.CIV.P. 9(b). The Louisiana court granted these motions to dismiss and refused to allow Adrian another opportunity to amend his complaint. Adrian appeals both district court orders claiming that 1) the California court erred when it found the FCA did not provide a cause of action against Livermore and the California Regents; 2) the California court erred when it dismissed the complaint against the individual Livermore employees; and 3) the Louisiana court erred by refusing to allow Adrian to file another amended complaint before dismissing the case with prejudice.² As discussed below, both the California court and the Louisiana court acted properly in this case.

Adrian argues the California court improperly found that the Regents is an arm of the state of California and that consequently the FCA did not provide a cause of action against it. See Stevens, 529 U.S. at 787-88, 120 S.Ct. 1858 (the FCA does not provide a cause of action against state agencies). He contends Stevens, where all parties agreed the defendant was a state agency, differs from this case because the Regents is organized as a corporation with the power to "sue and be sued," see CAL. CONST. art. IX, § 9(a), (f), and municipal or public corporations are subject to FCA claims. See Cook County v. United States ex rel. Chandler, 538 U.S. 119, 127-29, 123 S.Ct. 1239, 155 L.Ed.2d 247 (2003) (distinguishing municipal or public corporations from state agencies for purposes of FCA liability). Further, Adrian argues that even if the Regents is a state agency when performing its main educational mission, it ceases to act as an arm of the state in its capacity as manager of the Livermore laboratory because Livermore competes against private companies in a commercial arena instead of performing the functions of a state agency.

We review de novo a dismissal for failure to state a claim under FED.R.CIV.P. 12(b)(6). Rosborough v. Mgmt. & Training Corp., 350 F.3d 459, 460 (5th Cir.2003). While we have not previously determined whether the Regents is an arm of the state of California, the Ninth Circuit has consistently found that the Regents is an arm of the state for purposes of 42 U.S.C. § 1983 and the Eleventh Amendment even though it is organized as a corporation with the power to sue and be sued. See, e.g., Armstrong v. Meyers, 964 F.2d 948, 949-50 (9th Cir.1992) ("The Regents, a corporation created by the California constitution, is an arm of the state for Eleventh Amendment purposes, and therefore is not a `person' within the meaning of section 1983."). Further, the Ninth Circuit recently held that the Regents, as manager of a university hospital, is not subject to FCA claims by private relators because the Regents is a state entity under Stevens. See Donald v. Univ. of Cal. Bd. of Regents, 329 F.3d 1040, 1043-44 (9th Cir.2003). Finally, the Ninth Circuit has also held that the Regents acts as an arm of the state when managing Livermore. See Doe v. Lawrence Livermore Nat'l Lab., 131 F.3d 836, 839 (9th Cir.1997) (holding that the Regents, as manager of Livermore, is entitled to Eleventh Amendment immunity in a breach of contract case). We see no reason to deviate from this consistent line of precedent. The California court properly dismissed the FCA claims against the Regents and Livermore because those entities are California state agencies and the FCA does not provide a cause of action against state agencies.³ See Stevens, 529 U.S. at 787-88, 120 S.Ct. 1858.

Adrian argues that the California court improperly dismissed the complaint against the Livermore employees. This claim is also reviewed de novo. Rosborough, 350 F.3d at 460; see also Tel-Phonic Servs., Inc. v. TBS Int'l, Inc., 975 F.2d 1134, 1138 (5th Cir.1992) (Fifth Circuit precedent governs the appeal of pre-transfer out-of-circuit decisions to this Court). We have not previously considered when state agency employees qualify as "persons" under the FCA. In the context of a § 1983 claim, however, the Supreme Court held that "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 consequently "it is no different from a suit against the State itself." Will v. Mich. Dep't of State Police, 491 U.S. 58, 71, 109 S.Ct. 2304, 105 L.Ed.2d 45 (1989); see also Kentucky v. Graham, 473 U.S. 159, 165-66, 105 S.Ct. 3099, 87 L.Ed.2d 114 (1985) ("Official-capacity suits ... `generally represent only another way of pleading an action against an entity of which an officer is an agent.' As long as the government entity receives notice and an opportunity to respond, an official-capacity suit is, in all respects other than name, to be treated as a suit against the entity.") (citations omitted). In light of this precedent, we hold that claims against state agency employees in their official capacities are treated as claims against the state agency for purposes of the FCA. See United States ex rel. Gaudineer & Comito, L.L.P. v. Iowa, 269 F.3d 932, 936 (8th Cir.2001) (holding that the FCA does not permit a suit against a state official in their official capacity). Thus, there is no FCA cause of action against the Livermore employees in their official capacities. See Stevens, 529 U.S. at 787-88, 120 S.Ct. 1858.

Although it is unclear whether the first amended complaint named the Livermore employees in their official or in their personal capacities, the course of the proceedings in this case demonstrates that these employees were only named in their official capacities. See Graham, 473 U.S. at 167 n. 14, 105 S.Ct. 3099 ("In many cases, the complaint will not clearly specify whether officials are sued personally, in their official capacity, or both. `The course of proceedings' in such cases typically indicate the nature of the liability sought to be imposed.") (citations omitted). The California Defendants clearly stated, in both the initial and the reply memoranda supporting their motion to dismiss, that the Livermore employees should be dismissed because they were only named in their official capacity. Adrian never challenged this assertion, arguing only that these employees were subject to liability...