United States ex rel. Brinkley v. Univ. of Louisville
| Decision Date | 17 January 2017 |
| Docket Number | Civil Action No. 3:15-cv-180-DJH |
| Parties | UNITED STATES OF AMERICA, ex rel. KAREN BRINKLEY and CAROL WHETSTONE, Plaintiffs, v. UNIVERSITY OF LOUISVILLE, et al., Defendants. |
| Court | U.S. District Court — Western District of Kentucky |
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Plaintiffs Karen Brinkley and Carol Whetstone brought this qui tam action under the False Claims Act alleging that the defendants—the University of Louisville, University of Louisville Foundation, Inc.; University of Louisville Research Foundation, Inc.; and eight University researchers—made false claims to obtain research grants and unlawfully terminated Plaintiffs' employment at the University after they complained of the wrongdoing. University of Louisville Foundation, Inc. was dismissed by stipulation (Docket No. 17); the remaining defendants seek dismissal of the amended complaint under Rule 12(b)(1) and (6). (D.N. 11) During a hearing on the motion held November 8, 2016, Plaintiffs conceded that their state-law whistleblower and wrongful-discharge claims should be dismissed. (See D.N. 30, PageID # 1072-73) Having considered the parties' initial and supplemental briefs, as well as the oral argument presented at the hearing, the Court will dismiss the remaining claims as well.
To survive a motion to dismiss for failure to state a claim, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Factual allegations are essential; "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice," and the Court need not accept such statements as true. Id. A complaint whose "well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct" does not satisfy the pleading requirements of Rule 8 and will not withstand a motion to dismiss. Id. at 679.
The first three counts of the amended complaint allege that the defendants obtained federal grants through the use of false records or statements and failed to refund those monies to the government, all in violation of the False Claims Act, 31 U.S.C. § 3729(a)(1). (See D.N. 9, PageID # 538-39) The plaintiffs also assert a claim of retaliation under § 3730(h) of the FCA, alleging that they were discriminated against and ultimately fired for having complained of the defendants' wrongdoing. (See id., PageID # 540) Although each of these claims is asserted against "Defendants" generally (id., PageID # 538-40), the Court will separately address the claims against the entity and individual defendants.
31 U.S.C. § 3729(a)(1). Pursuant to § 3730(b) (), a plaintiff "may bring a civil action for a violation of section 3729" on her own behalf and on behalf of the United States. (See D.N. 1, PageID # 515, 538-39)
A state or state agency is not a "person" for purposes of a qui tam action under the FCA. Vt. Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 787-88 (2000). The defendants maintain that the University and the Research Foundation are state agencies and thus cannot be held liable here. (D.N. 11-1, PageID # 976-78; D.N. 24, PageID # 1035-39) This Court has previously found that both entities are state agencies relieved of FCA liability. See United States v. Solinger, 457 F. Supp. 2d 743, 755 (W.D. Ky. 2006). In the defendants' view, the Court's analysis should begin and end with Solinger. (See D.N. 24, PageID # 1037 (asserting that Solinger's conclusion regarding these defendants' status as arms of the state "is dispositive here")) But the Court "is not bound by the decisions of its fellow District Judges." Krumpelbeck v. Breg, Inc., 759 F. Supp. 2d 958, 966 n.7 (S.D. Ohio 2010) (citing Fox v. Acadia State Bank, 937 F.2d 1566, 1570 (11th Cir. 1991)).
Moreover, while Judge Heyburn's reasoning in Solinger appears sound, the Sixth Circuit has since adopted a test for determining whether an entity is an arm of the state—i.e., "a stateagency excluded from liability under the FCA." Kreipke v. Wayne State Univ., 807 F.3d 768, 775 (6th Cir. 2015).1 That test requires the Court to consider four factors:
(1) the State's potential liability for a judgment against the entity; (2) the language by which state statutes and state courts refer to the entity and the degree of state control and veto power over the entity's actions; (3) whether state or local officials appoint the board members of the entity; and (4) whether the entity's functions fall within the traditional purview of state or local government.
Id. (quoting Ernst v. Rising, 427 F.3d 351, 359 (6th Cir. 2005)). These factors are not "a checklist that must be satisfied"; rather, they are to be "weighed and balanced against each other based on the unique circumstances of the case." Id. at 778 (citations omitted). However, "the state's potential liability" is "the 'foremost factor'" and thus "must be given substantial weight." Id. at 776 (quoting Ernst, 427 F.3d at 359). Here, the Ernst factors indicate that both the University and the Research Foundation are arms of the state.
Unlike in Kreipke, there does not appear to be any state statute expressly providing that a judgment against the University of Louisville would be paid by the state. Cf. id. Nevertheless, the University is "a state institution" whose property legally belongs to the Commonwealth, Ky. Rev. Stat. § 164.870, and it is supported by state funds. See Ky. Rev. Stat. § 164.026 (); see also Ky. Rev. Stat. § 164A.550(2) (). Thus, Kentucky is potentially liable for a judgment against the University. See Kreipke, 807 F.3d at 776 ; see also Graham v. NCAA, 804 F.2d 953, 959-60 (6th Cir. 1986) (dismissing claims against University of Louisville and its agents in their official capacities after noting that Eleventh Amendment bars "actions brought against a state agency or state officer where the action is essentially one for recovery of money from the state treasury" (citing Edelman v. Jordan, 415 U.S. 651, (1974)).
The Research Foundation presents a closer question. The Court observed in Solinger that "because the . . . [Research] Foundation operate[s] within and as part of the University, any judgment against [it] would threaten assets of the state."2 457 F. Supp. 2d at 762. At the November 8 hearing, the Court inquired whether the same could be said of the Research Foundation today, a decade after the Solinger decision. Though defense counsel was unable to answer that question during the hearing, the defendants' supplemental brief convinces the Court that the answer is yes.
Attached to the defendants' supplemental brief is an affidavit by William M. Pierce Jr., Ph.D., Executive Vice President of Research and Innovation at the University of Louisville. (D.N. 32-1) Pierce avers that the Research Foundation's Articles of Incorporation and bylaws have not been amended since January 2005 and November 2004, respectively; that the Research Foundation is "created and controlled by," and "exists exclusively for the benefit of," the University; and that the Research Foundation's employees, services, board members, and officers all come from the University. (Id., PageID # 1102-03).
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