Posted by Ellyce Cooper and Christopher Munsey
In a case decided last week, United States ex rel. Lesinski v. South Florida Water Management District, No. 12-16082, 2014 U.S. App. LEXIS 14 (11th Cir. January 2, 2014), the Eleventh Circuit Court of Appeals affirmed the dismissal of a qui tam suit against the South Florida Water Management District, holding that the District is an arm and instrumentality of the state of Florida, and therefore not a “person” under the False Claims Act. The relator alleged that the District violated the FCA by fraudulently claiming FEMA reimbursements for ineligible repairs to the area’s canals. The district court granted the District’s motion to dismiss on the ground that the District is an arm of the state of Florida. The relator appealed, arguing that the District is a municipal, rather than state, agency. Under relevant Supreme Court authority, local governments and municipalities constitute “persons” who can be sued under the FCA, but states and agencies acting as arms of the state cannot. Compare Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 780 (2000), and Cook County v. United States ex rel. Chandler, 538 U.S. 119, 134 (2003).
The Eleventh Circuit, joining the Fourth, Fifth, Ninth, and Tenth Circuits, held that the Eleventh Amendment “arm of the state” analysis is the proper test for determining whether a state entity is a “person” under the FCA. After analyzing the test’s four factors – (1) how state law defines the entity; (2) what degree of control the state maintains over the entity; (3) where the entity derives its funds; and (4) who is responsible for judgments against the entity – the court concluded that the District is an arm of the state of Florida, and affirmed the dismissal. The court placed particular weight on the fact that the state’s control of the District was “pervasive and substantial.” 2014 U.S. App LEXIS 14 at *11. The circuit court declined to address the District’s argument that it was immune from suit in federal court under the Eleventh Amendment, although it specifically noted that the analysis is identical to that for the FCA “person” question. Id. at *18 n.9.