Vermont Agency of Natural Resources v. United States ex rel. Stevens
529 U.S. 765 (2000)
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Rule of Law:
A private individual has Article III standing to bring a qui tam action in federal court on behalf of the United States, but the False Claims Act does not subject a state or state agency to liability in such actions because the statutory term 'person' does not include the sovereign.
Facts:
- Jonathan Stevens was an employee of the Vermont Agency of Natural Resources (Agency).
- The Agency administered various federal grant programs for the U.S. Environmental Protection Agency (EPA).
- Stevens alleged that the Agency submitted false claims to the EPA by overstating the amount of time its employees worked on these federally funded projects.
- This alleged overstatement induced the U.S. Government to disburse more grant money to the Agency than it was entitled to receive.
Procedural Posture:
- Jonathan Stevens filed a qui tam action under the False Claims Act against his former employer, the Vermont Agency of Natural Resources, in the U.S. District Court for the District of Vermont.
- The United States government declined to intervene in the case.
- The Vermont Agency of Natural Resources moved to dismiss the lawsuit, arguing that a state agency is not a 'person' subject to liability under the Act and that the suit was barred by the Eleventh Amendment.
- The District Court, a trial court, denied the motion to dismiss.
- The Vermont Agency of Natural Resources (petitioner) filed an interlocutory appeal to the U.S. Court of Appeals for the Second Circuit, an intermediate appellate court.
- The United States intervened in the appeal in support of Jonathan Stevens (respondent).
- A divided panel of the Second Circuit affirmed the district court's refusal to dismiss the case.
- The U.S. Supreme Court granted certiorari to review the Second Circuit's decision.
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Issue:
Does the term 'person' in the False Claims Act, 31 U.S.C. § 3729(a), include states, thereby subjecting them to liability in qui tam lawsuits brought by private individuals?
Opinions:
Majority - Justice Scalia
No. The term 'person' in the False Claims Act (FCA) does not include states for the purposes of qui tam liability. The Court's reasoning is grounded in a longstanding interpretive presumption that the word 'person' does not include the sovereign unless the statute provides an affirmative showing of intent to the contrary. The FCA, both in its original 1863 form aimed at Civil War contractors and its modern version, lacks any such clear indication. Several features of the current statute support this conclusion: 1) A related section on civil investigative demands, § 3733, explicitly defines 'person' to include States, while the liability section, § 3729, does not, suggesting a deliberate omission. 2) The FCA’s treble damages provision is essentially punitive, and there is a presumption against imposing punitive damages on governmental entities. 3) The parallel Program Fraud Civil Remedies Act (PFCRA) contains a definition of 'person' that does not include States. Construing the FCA to exclude states from qui tam liability also avoids the serious constitutional question of whether such suits would violate the Eleventh Amendment.
Dissenting - Justice Stevens
Yes. The term 'person' in the False Claims Act (FCA) should be interpreted to include states. Congress provided a clear indication of its intent in the 1986 amendments to the FCA. The civil investigative demand (CID) provision, § 3733, which was enacted at that time, explicitly defines 'person' to include 'any State' for the purpose of investigating violations of § 3729, the FCA's liability section. This interconnected definition is an unmistakable expression of Congress's understanding that states can be liable under the Act. The majority's reliance on the presumption against including sovereigns is misplaced because the rationale for that presumption does not apply when the federal government legislates against states. Furthermore, pre-1986 case law and the legislative history of the 1986 amendments, including a Senate Report, show a general understanding that states were considered 'persons' under the Act.
Concurring - Justice Ginsburg
No. The judgment that the False Claims Act (FCA) does not authorize qui tam suits against states is correct because the statute lacks the required clear statement to subject states to suits by private parties. Following the principle of constitutional avoidance, the Court correctly resolved the case on statutory grounds without needing to address the Eleventh Amendment question. This decision leaves open the separate question of whether the United States itself can sue a state under the FCA, as the clear statement rule has not historically been applied to suits brought by the federal government against a state.
Analysis:
This decision significantly limits the reach of the False Claims Act, the federal government's primary tool for combating fraud, by shielding state entities from whistleblower lawsuits. By affirming the standing of qui tam relators as partial assignees of the government's claim, the Court preserved the general mechanism of whistleblower suits but narrowed their targets. The ruling reinforces the 'clear statement rule,' requiring Congress to be explicit if it intends to subject states to liability, thus protecting state sovereignty. The decision leaves a critical gap in fraud enforcement, as private individuals can no longer sue states for misuse of federal funds, placing the entire burden of enforcement in such cases on the Department of Justice, which may lack the resources to pursue all claims.
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