United States ex rel. Citynet, LLC v. Gianato

• Decision Date: 22 June 2020
• Docket Number: No. 18-1575,18-1575
• Citation: 962 F.3d 154
• Parties: UNITED STATES EX REL. CITYNET, LLC, Plaintiff - Appellee, v. Jimmy GIANATO, individually; Gale Given, individually, Defendants - Appellants, and Frontier West Virginia, Inc., a West Virginia corporation; Kenneth Arndt, individually; Dana Waldo, individually; Mark McKenzie, individually, Kelly Goes, individually, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

962 F.3d 154

UNITED STATES EX REL. CITYNET, LLC, Plaintiff - Appellee,

v. Jimmy GIANATO, individually; Gale Given, individually, Defendants - Appellants,andFrontier West Virginia, Inc., a West Virginia corporation; Kenneth Arndt, individually; Dana Waldo, individually; Mark McKenzie, individually, Kelly Goes, individually, Defendants.

No. 18-1575

United States Court of Appeals, Fourth Circuit.

Argued: January 29, 2020

Decided: June 22, 2020

ARGUED: Geoffrey A. Cullop, PULLIN, FOWLER, FLANAGAN BROWN & POE, PLLC, Charleston, West Virginia, for Appellants. Benjamin L. Bailey, BAILEY & GLASSER LLP, Charleston, West Virginia, for Appellee. ON BRIEF: Stephen M. Fowler, PULLIN, FOWLER, FLANAGAN BROWN & POE, PLLC, Charleston, West Virginia, for Appellants. Rebecca L. Donnellan-Pomeroy, BAILEY & GLASSER LLP, Charleston, West Virginia, for Appellee.

Before WILKINSON, NIEMEYER, and MOTZ, Circuit Judges.

Vacated and remanded by published opinion. Judge Niemeyer wrote the opinion, in which Judge Wilkinson and Judge Motz joined.

NIEMEYER, Circuit Judge:

Acting on behalf of the United States, a West Virginia company, Citynet, LLC, commenced this "qui tam" action against West Virginia officials Jimmy Gianato, Gale Given, and others, alleging in nine counts that the defendants defrauded the United States when obtaining federal funding for a program to improve broadband connectivity for West Virginia residents, in violation of the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq . Specifically, Citynet alleged that Gianato and Given, respectively the Director of the West Virginia Division of Homeland Security and Emergency Management and the State Technology Officer, along with other defendants, knowingly submitted false statements and records to the United States as part of their application for funding under the federal Broadband Technology Opportunities Program and, once the funding was obtained, made false claims in drawing down funds under the Program.

Gianato and Given filed a motion to dismiss the complaint, asserting, among other things, that it failed to state plausible claims for relief and that they were, in any event, entitled to qualified immunity. The district court ruled that, with the exception of two counts against Given related to her involvement in the preparation of the grant application, the complaint adequately alleged that Gianato and Given had violated the FCA. And with respect to qualified immunity, the court ruled that "the determination of whether [Gianato and Given are] entitled to the defense [of qualified immunity] [had to] be deferred until a later time in light of evidentiary development, such as at the summary judgment stage." It explained that resolving the immunity question required further fact-finding with respect to each official's state of mind in allegedly violating the FCA. In so concluding, the district court implicitly assumed that government officials could invoke qualified immunity as a defense to claims brought under the FCA.

Gianato and Given filed this interlocutory appeal from the district court's ruling on qualified immunity, claiming that, because qualified immunity is an immunity from suit, they ought to be shielded from participating in further proceedings before the district court. Citynet filed a motion to dismiss the appeal, contending that the district court's ruling that further facts were needed before ruling on immunity is not immediately appealable. Citynet also argued that, in any event, persons violating the FCA cannot be protected by immunity because they "knowingly perpetrated a fraud on the United States government."

Because the district court's ruling was contingent on the answer to the threshold legal question of whether qualified immunity may be invoked as a defense to FCA claims, we exercise appellate jurisdiction and hold that qualified immunity does not apply to protect government officials from claims against them for fraud under the Act. Accordingly, we vacate the district court's immunity ruling and remand with the instruction that the district court deny Gianato and Given's claim of qualified immunity.

I

Under the American Recovery and Reinvestment Act of 2009, Congress appropriated approximately $4.7 billion in federal funds for the Broadband Technology Opportunities Program, seeking to create jobs and expand broadband access in rural and underserved communities. On behalf of the Executive Office of the State of West Virginia, Gianato and others submitted an application for funding under the Program with a proposal for a "middle-mile" project, which would link a telecommunications carrier's core network to local hubs, such as schools, libraries, and healthcare facilities. In February 2010, the Executive Office received a grant of over $126 million in Program funding for that project.

Citynet, a communications service provider that had unsuccessfully applied for Program funding, commenced this action on behalf of the United States under the FCA. It alleged in nine counts that Gianato, Given, and various other defendants not involved in this appeal engaged in a scheme to fraudulently cause the federal government to award Program funds to the Executive Office by knowingly submitting false statements and records as part of the grant application and by subsequently submitting false claims to the federal government for payments under the Program. According to the complaint, the defendants prepared the grant application with the intent that another entity, Frontier West Virginia, Inc., "be the actual recipient of [any] grant funds awarded to the [Executive Office]," and, as a result, the Executive Office's grant proposal contained numerous material misrepresentations. Citynet also alleged that, once the Executive Office had been awarded a grant under the Program, it coordinated with Frontier to submit false invoices to the government while fraudulently using the funds in pursuit of a project entirely different from the one that had been awarded federal funding. Thus, Frontier, through the Executive Office, billed the federal government for "material and labor it did not provide, and for fiber links that were not constructed."

Gianato and Given filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), arguing, inter alia , that each count against them failed to state a plausible claim for relief; that, as state officials sued in their individual capacities for conduct undertaken in the course of their official duties, they were not "persons" subject to liability under the FCA; and that, in any event, they were entitled to qualified immunity.

In a 104-page opinion and order dated March 30, 2018, the district court granted the motion to dismiss in part and denied it in part. As relevant to this appeal, the court determined that, with the exception of two counts against Given related to the preparation of the grant application, Citynet had adequately pleaded that both Gianato and Given had violated the FCA. The court deferred ruling on Gianato and Given's assertion of qualified immunity, concluding that, without further facts, it could not determine the level of scienter with which they had acted or, relatedly, whether their actions had violated a clearly established right. Recognizing that the FCA requires a showing that the defendant acted with actual knowledge, deliberate ignorance, or reckless disregard, the court observed that "a reasonable person with ‘actual knowledge’ of his fraud would doubtlessly know that the fraud he perpetrates is wrong. At the other end, whether a reasonable person ‘act[ing] in reckless disregard of the truth’ would recognize that his actions constitute a fraud under the FCA is a much closer issue." The court concluded:

While the complaint sufficiently alleges that the defendants acted with the requisite scienter, the court cannot at this juncture decide the level of scienter with which [Gianato and Given] acted in allegedly violating the FCA. That obfuscates the qualified immunity analysis as set forth above, and the qualified immunity decision consequently must be deferred until a time when the court can make an informed decision based upon the evidence.

Gianato and Given filed this interlocutory appeal from the district court's immunity ruling, asserting that it was a "final decision under the collateral order doctrine." Contending otherwise, Citynet filed a motion to dismiss the appeal, and we deferred ruling on the motion pending briefing on the merits and oral argument.

II

At the outset, we must address Citynet's motion to dismiss this appeal, as it challenges our jurisdiction.

Citynet contends in its motion that when a district court defers ruling on the claim of qualified immunity because of a need for factual development, a court of appeals lacks jurisdiction to review the district court's order. But in its subsequent brief, Citynet takes a position somewhat in tension with its motion, asserting that an immunity defense is not available in response to a claim that defendants knowingly violated the FCA, thus implying that the issue of immunity can be decided as a matter of law at this stage of the proceeding.

The principles for determining our jurisdiction are well established. Ordinarily, the denial of a motion to dismiss is interlocutory and thus not subject to immediate appeal. See Cohen v. Beneficial Indus. Loan Corp. , 337 U.S. 541, 546, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). But, under the collateral order doctrine, appellate jurisdiction extends to " ‘a narrow class of decisions that do not terminate the litigation,’ but are sufficiently important and collateral to the merits that they should ‘nonetheless be treated as final.’ " Will v. Hallock , 546 U.S. 345, 347, 126 S.Ct. 952, 163 L.Ed.2d 836 (2006) (quoting Digital Equip. Corp. v. Desktop Direct, Inc. , 511 U.S. 863, 867, 114 S.Ct. 1992, 128 L.Ed.2d 842 (1994) ).

Under this doctrine, a conclusive order denying a motion to dismiss on qualified...