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United States v. Vermont Agency of Natural Resources

ELR Citation: 29 ELR 20405
Nos. No. 97-6141, 162 F.3d 195/47 ERC 1939/(2d Cir., 12/07/1998)

The court holds that states are "persons" within the meaning of the False Claims Act (FCA), 31 U.S.C. §3729(a), and, thus, are subject to suits under the Act. An employee of the state environmental agency brought this qui tam suit under the FCA, alleging that the agency made fraudulent claims concerning federal grants under the Federal Water Pollution Control Act and the Safe Drinking Water Act. The court first holds that qui tam suits are, in essence, suits by the United States and, hence, cannot not barred by the Eleventh Amendment. The real party-in-interest in a qui tam suit is the United States because qui tam claims are designed to remedy only wrongs done to the United States. Further, the United States has the right to control the action.

The court next rejects the state's contention that the court should apply the plain statement rule and decline to construe the FCA as exposing states to liability absent the clearest of legislative statements by Congress. The FCA contains no alteration of the usual constitutional balance of federal and state powers such as to require applying the plain statement rule. Moreover, the FCA does not intrude into any area of traditional state power; the goal of the Act is simply to remedy and deter procurement of federal funds by means of fraud. The court then holds that the term "person" in the FCA includes states. The term person is used in the FCA to categorize both those who may sue and those who may be sued. In a number of instances, states have brought suits under the FCA as qui tam plaintiffs, clearly indicating that they viewed themselves as persons. Moreover, an amendment to the FCA for joinder of claims of a state must have been premised on the view that the state may be the qui tam plaintiff. And there is nothing in the language of the FCA or its legislative history to indicate that Congress intended that states would be persons for purposes of bringing qui tam suits, but not for purposes of being subject to qui tam suits. Accordingly, the qui tam suit filed against the state environmental agency for allegedly submitting false monetary claims to the U.S. Environmental Protection Agency is authorized by the FCA.

A dissenting judge would hold that the qui tam suit is barred by the Eleventh Amendment. The dissenting judge argues that the majority decision distorts the dynamics of our federal system, denigrates the traditional role of members of Congress as bridges between their state communities and the Executive Branch, and undermines cooperative relationships between federal and state agencies.

Counsel for Plaintiff
Mark G. Hall
Paul, Frank & Collins, Inc.
One Church St., Burlington VT 05402
(802) 658-2311

Counsel for Defendant
David M. Rocchio, Special Ass't Attorney General
Attorney General's Office
Pavilion Office Bldg.
109 State St., Montpelier VT 05609
(802) 828-3171

Before Walker and Weinstein,* JJ.