Vermont Agency of Natural Resources v. U.S., ex rel. Stevens, Jonathan (05/22/2000)

By: Susan Stumme, Medill News Service

Questions presented

(1) Is the state a ""person"" subject to liability under the False Claims Act? (2) Does the 11th Amendment preclude a private relator from commencing and prosecuting a federal false claims suit against an unconsenting state?(3) Does a private person have standing under Article III of the Constitution to litigate claims of fraud upon the government?

Brief

Under both the Clean Water Act and the Safe Drinking Water Act, the Vermont Agency of Natural Resources received federal grant money from the U.S. Environmental Protection Agency to administer its clean water programs throughout the state. Like all state agencies receiving federal funds, the agency was required to report how the funds were used, often in the form of time sheets for employees performing grant-related work.

Jonathan Stevens was an attorney for the agency, and complained to his supervisors that because he and other employees were required to complete time reports in advance, they did not accurately reflect the work being performed. Management instructed Stevens and his colleagues to continue to complete their time cards in advance. Stevens, unsatisfied with the agency's response to his grievance, filed suit in federal court in May 1995 under the False Claims Act, alleging that the agency made fraudulent claims to the EPA in order to maintain its federal funding.

Stevens could file suit because the act allows for qui tam suits, or suits filed by individuals on behalf of both themselves and the federal government. Originally, the federal government declined to intervene in the suit, so Stevens continued to pursue the claim on the government's behalf.

The state of Vermont asked a federal judge to dismiss the case for lack of jurisdiction, citing the 11th Amendment as a bar that prevents individuals from suing states without a prior waiver of immunity. The state also argued that a state is not a ""person"" subject to liability under the act. Stevens opposed the motion, and the district judge denied the state's claim of 11th Amendment immunity.

In December 1998, a divided 2nd Circuit Court of Appeals affirmed.

""As against the United States, however, States have no sovereign immunity,"" wrote Appeals Judge Amalya L. Kearse on behalf of the court. She rejected the idea that qui tam suits are brought by an individual solely for personal gain and not for the greater good of the government, saying that ""the real party in interest in a qui tam suit is the United States.""

Addressing the question of whether a state can be considered a ""person"" under the act, Kearse wrote that since the act allows states to bring qui tam suits as plaintiffs, the same logic must apply to states as defendants under the same statute. The judge cited a 1986 Senate report that included ""states and political subdivisions"" as persons under the act.

In his dissent, U.S. District Judge Jack B. Weinstein (sitting by designation on this case) strongly opposed the majority's interpretation of the 11th Amendment, saying the amendment's language was clear.

""Whatever the motives, the amendment stands as a barrier to private suits against a state in federal court without the state's consent,"" Weinstein wrote. He added that the federal government's power to sue a state is a ""narrow and nontransferable exception,"" concluding that suits filed by what he called ""private plaintiffs,"" such as Stevens, are unconstitutional.

Weinstein also said such suits undermined the long history of federal-state relations and the use of congressional intervention to resolve federal-state disputes.

The U.S. Supreme Court granted certiorari on June 24, 1999. Forty-four states had supported Vermont's petition, arguing in an amicus brief that states could be subject to huge penalties if such whistle-blower suits could be filed against them.

Just the day before it granted certiorari, the Court decided two cases with direct links to the Vermont case. In Alden v. Maine, the Court said states cannot be sued against their will in state courts by private parties wishing to enforce a federal right. In Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, the Court said Congress acted unconstitutionally and ignored states' sovereign immunity when it allowed states to be sued in federal court for alleged patent infringements.

On Nov. 19, just 10 days before scheduled oral argument in the case, the Court directed the parties to file supplemental briefs addressing the following question: “Does a private person have standing under Article III to litigate claims of fraud upon the government?”

On May 22, 2000, the Court answered no.

""We hold that a private individual has standing to bring suit in federal court on behalf of the United States under the False Claims Act,"" Justice Antonin Scalia wrote for a 7-2 majority, ""but that the False Claims Act does not subject a state (or state agency) to liability in such actions.""

Notwithstanding a ""long tradition"" of such suits in England and the American colonies, Justice Scalia concluded that the False Claims Act does not include states as ""persons"" who can be sued under the law. In so holding, the Court did not decide whether the 11th Amendment also protects states from being sued under the law. However Justice Scalia took the opportunity to note that there is ""a serious doubt on that score.""

Justices John Paul Stevens and David Souter dissented.