PA Student Loan Agency Seeks Supreme Court Ruling on Government Immunity from FCA Claims

Pennsylvania’s student loan agency—the Pennsylvania Higher Education Assistance Agency (PHEAA)—filed a petition for certiorari on February 16, seeking U.S. Supreme Court’s review of whether the Agency has government immunity from the False Claims Act (FCA).  In short, the PHEAA petition argues that Pennsylvania law “uniformly and unambiguously” treats the Agency as “an arm” of the state government, and that “[s]ince its creation in 1963, the [PHEAA] has occupied an inherently sovereign role as a ‘government’ instrumentality of the Commonwealth of Pennsylvania.”  Therefore, according to the PHEAA, the Fourth Circuit erred in finding that the Agency was not immune from the relator’s FCA allegations in U.S. ex. rel. Oberg v. Pennsylvania Higher Education, Case No. 15-1093.

The underlying case was filed by relator Jon Oberg in 2007, alleging that multiple student loan lenders involved in federal financial aid programs used billing systems that allowed the agencies to collect inflated interest rate subsidies from the U.S. Department of Education.  With the exception of the PHEAA, all loan agencies originally named by Oberg have settled or successfully been dismissed from the case.  The case against PHEAA has gone back and forth between the Fourth Circuit and district court, as the Fourth Circuit has remanded the case three times over the immunity issue.

Most recently, in October 2015, a Fourth Circuit panel ruled that the Agency cannot qualify as a state entity because the Agency’s board, rather than the Pennsylvania government, makes its significant decisions, and its revenue is generated by commercial activities.  PHEAA’s February 16 petition, however, asserts that the Agency is exempt from Pennsylvania taxes, promulgates regulations, and has subpoena power.  Therefore, according to the PHEAA, the Agency is an arm of Pennsylvania entitled to immunity conferred upon sovereigns in federal court, such that the Agency cannot be considered a “person” liable to FCA claims.

Granting certiorari in this case would provide the Supreme Court with an opportunity to provide guidance on the circumstances in which an agency may constitute an “arm of the state” for purposes of government immunity to FCA claims.  Circuits are currently split on how to identify an “arm of the state,” with some circuits, including the Fourth Circuit, applying a multifactor test, while others accord such immunity claims by statewide agencies “substantial deference.”  According to the PHEAA:  “In short, there is a conflict in the circuits, a conflict between state officials in Harrisburg and federal judges in Richmond, and an acute need for this Court to substitute clarity for a thicket of conflicting balancing tests.”

PHEAA’s February 16th petition is available here.