The immense power wielded by the Department of Justice (DOJ) under the False Claims Act (FCA) has limits according to United States District Judge Anna J. Brown in the District of Oregon. This month the court decided DOJ cannot force the Act to apply to an “arm of the state” simply by intervening in the suit. Although a rare setback to a DOJ position on proper interpretation of the FCA, the issue may not yet be settled.

In 2013, relator Richard Doughty filed a qui tam suit on behalf of the United States alleging that Oregon Health and Sciences University (OHSU) submitted improper reimbursement rates for some projects supported by federal funds. In 2016, the United States intervened by filing its own complaint alleging violations of the FCA. OHSU moved to dismiss the complaints on the ground that it is not a “person” under the definition of those covered by the FCA because OHSU is an “arm of the state.” DOJ opposed dismissal on the ground that, when the United States intervenes and litigates in its own name, the United States may bring an FCA action against an arm of the state.

Judge Brown agreed with OHSU and dismissed the suit by relying upon a Supreme Court decision in another qui tam case, Vermont Agency of Natural Resources v. U.S. ex rel. Stevens. In that decision, the Supreme Court held the FCA “does not subject a State (or state agency) to liability” because of the “longstanding interpretative presumption that ‘person’ does not include the sovereign.” When deciding that OHSU was an “arm of the state,” Judge Brown considered these factors:

• Would state funds pay a money judgment

• Does the entity perform central government functions

• May the entity sue and be sued

• May the entity take property in its own name or only in the name of the State

• What is the entity’s corporate status

DOJ attempted to distinguish Vermont Agency because the United States had declined to intervene in that case. Relying on concurrences in Vermont Agency, DOJ contended that, although a qui tam relator can be dismissed, DOJ’s decision to intervene makes a qualitative difference in application of the FCA. Judge Brown ruled otherwise.

In addition to concurrences in Vermont Agency, DOJ’s assertion of power over an FCA complaint may be bolstered by a recent decision of the Fourth Circuit. In that matter, DOJ declined to intervene in the litigation, but it also refused to agree to a settlement that was acceptable to the relator and to the defendant. Concluding that the United States was the real party in interest in FCA litigation, the Fourth Circuit joined with the Fifth and Sixth Circuits to hold that DOJ controls acceptance of a settlement. As the Fourth Circuit put it, “the Attorney General possesses an absolute veto power over voluntary settlements in FCA qui tam actions.”

This expansive view of DOJ’s authority over settlement conflicts with a Ninth Circuit decision holding that, “while the government may not obstruct the settlement and force a qui tam plaintiff to continue litigation, the government nevertheless may question the settlement for good cause.”

It remains to be seen whether DOJ will seek further review of the OSHU decision in order to secure the authority it seeks.