Supreme Court May Lower Supposed FCA Immunity Shield Protecting Dishonest State University Healthcare Providers

The United States Supreme Court now has an opportunity to properly attach FCA liability to state university healthcare providers. In a cert petition to the Supreme Court, a qui tam relator who brought an action against the University of Texas Health Science Center has asked the Court to clarify the standard for deciding whether state universities and other political subdivisions can be found liable under the FCA. Specifically, the relator encouraged the Court to grant cert to provide concrete guidance on the proper standard for determining whether certain entities constitute an arm of the state.

In 2000, the United States Supreme Court held in Vermont Natural Resources v. U.S. ex rel. Stevens that state entities are immune from False Claims Act qui tam actions. Since then, various quasi-state entities have claimed immunity under Stevens. By and large, state university healthcare providers have been successful in fending off qui tam suits. However, there have been occasions when courts have rejected such arguments. For example, in 2006, the Tenth Circuit held that a state university-owned laboratory was subject to a qui tam suit, for it was financially independent from the state, was autonomous in its operations, and generated its own profits through its commercial activity.

For over a decade, potential qui tam relators and their counsel have shied away from suing state university healthcare providers. However, if the Supreme Court decides to weigh in next term, such providers could be explicitly reachable by the Act.

More information for whistleblowers is located at the Nolan Auerbach & White website.