United States ex rel. Stevens v. Vermont Agency of Natural Resources

162 F.3d 195
CourtCourt of Appeals for the Second Circuit
DecidedDecember 7, 1998
DocketDocket No. 97-6141
StatusPublished
Cited by23 cases

This text of 162 F.3d 195 (United States ex rel. Stevens v. Vermont Agency of Natural Resources) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States ex rel. Stevens v. Vermont Agency of Natural Resources, 162 F.3d 195 (2d Cir. 1998).

Opinions

KEARSE, Circuit Judge.

Defendant State of Vermont Agency of Natural Resources (the “Agency” or the “State”) appeals from an order of the United States District Court for the District of Vermont, J. Garvan Murtha, Chief Judge, denying the State’s motion to dismiss the present qui tam suit brought by Jonathan Stevens on behalf of the United States under the False Claims Act, 31 U.S.C. § 3729 et seq. (1994) (“FCA” or the “Act”), for lack of subject matter jurisdiction. The district court ruled that the State is a “person” within the meaning of § 3729(a) and is thus subject to suit under the Act, and that such suits are not barred by the Eleventh Amendment. The State challenges these rulings on appeal. For the reasons set forth below, we affirm.

I. BACKGROUND

At all relevant times, the Agency was a recipient of federal funds, and Stevens was an employee of the Agency. Stevens commenced this action as a qui tam suit under the FCA for himself and the United States, alleging that the Agency had made fraudulent claims against the United States. The allegations of the complaint, taken as true for purposes of the State’s motion to dismiss, include the following.

A. The Complaint

The Agency, through its Department of Environmental Conservation (“DEC”) and a DEC subdivision called the Water Supply Division (“WSD”), was the recipient of a series of federal grants administered by the United States Environmental Protection Agency (“EPA”) under, inter alia, the Clean Water Act, 33 U.S.C. § 1251 et seq., and the Safe Drinking Water Act, 42 U.S.C. § 300f et seq. These grants, which substantially funded WSD’s budget, provided federal funds to pay for, inter alia, salary expenses for work performed by WSD employees in connection with the grants.

As a recipient of these funds, the Agency was subject to certain reporting requirements, including the requirement that it submit time and attendance records reflecting the hours actually worked and the work actually performed by the pertinent individual employees. The complaint alleges that DEC instead made advance estimates of the federal-grant-attributable time to be worked by individual WSD employees in a given federal fiscal year and instructed those employees to fill out their biweekly reports, purporting to show actual work done, to match DEC’s estimates, regardless of the time actually worked: “[ejmployees of ... DEC did not work the hours which were arbitrarily assigned to them, nor did they record the hours they actually worked” (Complaint ¶ 36).

The complaint alleges that the Agency thus “knowingly and continuously submitted false claims to EPA for salary and wage expenses of its employees purporting to show that employees were working on federally-funded projects when, in fact, they were not working the hours as reported.” (Id. ¶39.) This allowed the Agency to retain funds to which it was not entitled for a given year. In addition, because DEC reported each year that all of the federal grant moneys received had been properly used, and proceeded to submit new grant requests using estimates based on the previous year’s reported spending level, the false reports for a given year enabled the Agency to maintain or increase its funding in each succeeding fiscal year.

Stevens and other DEC employees complained to their supervisors that the biweekly reports that DEC instructed the employees to fill out were not accurate and that the reported hours were not being worked. Management instructed them to continue in accordance with DEC’s prior instructions. The complaint also alleges, on information and belief, that a similar course of action was followed in several DEC subdivisions other than WSD.

Stevens commenced the present suit in May 1995. As required by the Act, see Part [199]*199ILA. below, he filed the complaint in camera and under seal, without serving it on the State, and served a copy, together with material evidence supporting it, on the United States (the “government”) in order to allow the government to investigate the allegations and to decide whether it wished to intervene. In June 1996, having sought and received several extensions of time in which to make that decision, the government filed notice that it declined to intervene. It requested, however, that it be served with copies of all pleadings filed in the case; it reserved the right to order transcripts of depositions; and it expressly reserved the right to- intervene against the State, for good cause shown, at a later time. The government also requested that it be given notice and an opportunity to be heard in the event that Stevens or the State sought to have the action dismissed, settled, or otherwise discontinued.

In July 1996, the district court ordered that the complaint be unsealed and served on the State.

B. The Denial of the State’s Motion To Dismiss

In March 1997, the State moved to dismiss the complaint for lack of jurisdiction, contending (1) that states and their instrumen-talities (collectively “States”) are not “person[s]” under § 3729(a) who are subjected to suit or liability by the terms of the Act, and (2) that, in any event, the imposition of such liability on the States would violate the Eleventh Amendment. Stevens opposed the motion and was supported by the United States as amicus curiae.

In an Order dated May 9, 1997 (“Order”), the district court denied the motion to dismiss. The court rejected the State’s contention that the Act does not make States “person[s]” who are subject to liability under the Act, noting that States have considered themselves “persons” within the meaning of the Act in order to bring suits as qui tam plaintiffs, and pointing out that, as a matter of statutory construction, identical words used in different parts of the same statute should normally be accorded the same meaning. The court stated that

it would be anomalous to acknowledge that a state is a “person” within the meaning of the statute if it chooses to bring a False Claims Act suit, but that the same state is not a “person” if named as a defendant.

Order at 2. The court rejected the State’s claim of Eleventh Amendment immunity on the ground that that Amendment does not bar suits against the States by the United States itself, and that the United States “is the real party in interest and ultimately the primary beneficiary of a successful qui tam action.” Id. at 1.

The State has appealed, see generally Puerto Rico Aqueduct & Sewer Authority v. Metcalf & Eddy, Inc., 506 U.S. 139, 147, 113 S.Ct. 684, 121 L.Ed.2d 605 (1993) (district court order denying motion to dismiss on ground of Eleventh Amendment immunity is immediately appealable), and proceedings in the district court have been stayed pending appeal.

II. DISCUSSION

On appeal, the State contends (1) that Congress did not intend to subject States to suit or liability under the FCA, and (2) that to the extent that the Act is construed to permit qui tam

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Bluebook (online)
162 F.3d 195, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-stevens-v-vermont-agency-of-natural-resources-ca2-1998.