Ninth Circuit Remands False Claims Act Case against Tribal College for Determination of Sovereign Status

By on July 20, 2017
Posted In Uncategorized

On July 10, 2017, US Circuit Court of Appeals for the Ninth Circuit reversed a December 3, 2014, district court dismissal of False Claims Act (FCA) claims against Salish Kootenai College (College), a tribal college of the Salish Kootenai Tribes (Tribe).  United States ex rel. Cain v. Salish Kootenai College, Inc. (July 10, 2017). The 9th Circuit directed the district court to reconsider whether the College is subject to liability under the FCA under a different standard than used by the district court.

The district court had entered its order dismissing claims by the qui tam relators that the College filed false progress reports to the US Department of Health and Human Services and the Indian Health Service in order to retain grant funding from the agencies, holding that the College was an arm of the Tribe and shared the Tribe’s sovereign immunity, which had not been waived by the Tribe or Congress. (The district court also dismissed claims against the members of the College board of directors and the College foundation. Relators, however, only appealed the dismissal of claims against the College.)

The court of appeals disagreed with the district court’s framing of the question. The central question is not, as the district court found, whether the College enjoyed tribal immunity and whether such immunity had been waived. Rather, the central issue in a FCA case is whether the College is a “person” within the meaning of the FCA, and, thus subject to liability under the FCA. Accordingly, the court undertook a two-part analysis to decide the question: (1) whether the Tribe is a person under the FCA or a sovereign not subject to the FCA, and, if the latter; (2) whether the College is an arm of the Tribe that shares the Tribe’s sovereign status for purposes of the FCA.

The court first found that the Tribe is not a person for purposes of FCA liability under Vermont Agency Natural Resources v. United States ex rel. Stevens, 529 US 765 (2000), which found that sovereign states are excluded from the term “person” under the FCA. The ruling in Stevens drew upon the Supreme Court’s “longstanding interpretive presumption that ‘person’ does not include the sovereign.” The 9th Circuit noted that while tribal sovereignty is no longer considered absolute, “[n]othing in the FCA’s text or legislative history overcomes this presumption.”

Under the second prong of the analysis, the court of appeals determined that the district court incorrectly relied upon Smith v. Salish Kootenai College, 434 F.3d 1127 (9th Cir. 2006) to determine whether the College is an “arm” of the Tribe. The appeals court observed that Smith had considered whether the tribal court had jurisdiction over claims brought by non-tribal members against the College. The court acknowledged that Smith drew upon cases discussing tribal sovereign immunity, but held that Smith was not controlling authority for determining whether the College was a sovereign entity. Instead, the court held that the proper standard was provided by White v. University of California, 765 F.3d 1010 (9th Cir. 2014), which addressed whether a tribe’s sovereign immunity extended to the tribe’s repatriation committee in a context outside of the FCA. The plaintiffs argued that rather than applying White, which was not an FCA case, the court should apply its “arm of the state” analysis from Stoner v. Santa Clara County Office of Education, 502 F.3d 1116 (9th Cir. 2007). The 9th Circuit disagreed, noting that the Stoner analysis was based in Eleventh Amendment case law and the Eleventh Amendment does not apply to Indian tribes. The 9th Circuit consequently remanded the case to the district court for analysis under White.

Cain follows a recent district court decision in the 9th Circuit, addressing tribal immunity FCA liability. In March, a district court dismissed FCA claims against the Sauk-Suiattle Indian tribe on the basis of its sovereign immunity but found that such immunity did not extend either to the defendant health clinic under the “arm-of-the-state test” articulated in White or to the individual defendants who were employees, agents or officials of the tribe, applying Stoner’s analysis of individual liability of state employees. Dahlstrom v. Sauk-Suiattle Indian Tribe (W.D. Wash. March 21, 2017). The court of appeals decision in Cain should serve to clarify the appropriate standard under which to analyze “arm of the state” defenses in a tribal and other FCA contexts.

Amanda Enyeart
  Amanda Enyeart maintains a general health industry and regulatory practice, focusing on fraud and abuse, information technology and digital health matters. Amanda advises health care industry clients in all aspects of software licenses and other agreements for the acquisition electronic health record (EHR) systems and other mission critical health IT.  Amanda’s health care IT transactional experience also includes advising clients with respect to software development, maintenance, service and outsourced hosting arrangements, including cloud-computing transactions. Read Amanda Enyeart's full bio.