GM 15-044

Federal Court Rules Tribes Not Subject to Suit under False Claims Act

In an unpublished case from the Ninth Circuit Court of Appeals, a three-judge panel affirmed the District Court of Nevada’s dismissal of a case alleging Medicare/Medicaid fraud against the Duck Valley Tribes. The case is United States ex rel. Howard v. Shoshone-Paiute Tribes of the Duck Valley Indian Reservation, No. 13-16118 (9th Cir., June 15, 2015). The Appeals Court agreed with the lower court that the Tribes are a sovereign, like a state, and thus do not fall under the definition of a “person” to which the federal False Claims Act (FCA) applies. This finding upholds the Tribes’ sovereign immunity, which protects the Tribes from suit and divests courts of jurisdiction to hear the case.

The case was brought by two individuals on behalf of the United States government in an action called “qui tam” which provides a way for private individuals to sue on behalf of the government to prosecute instances of fraud or submittal of false claims for payment to the government. The federal government has an opportunity to join qui tam suits, but in this case chose not to do so. The individual plaintiffs were ex-employees of the Tribes’ health care facility.

The trial court considered whether an Indian tribe would be considered a “person” under the definitions of the FCA. While the FCA does not specifically define “person,” the trial court held that Indian tribes are sovereigns, and that “there is a longstanding interpretive presumption that ‘person,’ as defined in statute, does not include the sovereign.” United States ex rel. Howard v. Shoshone Paiute Tribes, No. 2:10-cv-01890-GMS-PAL, 2012 WL 2327676, *6 (D. Nev., June 19, 2012) (quoting Vermont Agency of Nat. Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000)). Accordingly, the District Court and the Appeals Court both held that the plaintiffs failed to make a claim.

While the qui tam rules allowed the plaintiffs to sue on behalf of the government, the trial court rejected both of their arguments that: 1) the federal government as a “superior sovereign” may enforce the FCA against tribes without regard to tribal sovereign immunity; and 2) that they, as private plaintiffs on behalf of the United States, should be able to exercise that superior power. The court, in dicta, suggested that the FCA would not apply to tribes even if the United States itself had brought this case. The trial court adopted the ruling of an earlier case from Wisconsin (United States v. Menominee Tribal Enters., 601 F.Supp.2d 1061 (E.D. Wis. 2009)) which held the FCA does not apply to tribes, period, even if the United States itself is the plaintiff. Applying the same reasoning, the District Court held that if the United States could not sue tribes under the FCA, then private plaintiffs could not sue either.

While two federal trial courts have now held that the FCA does not apply to tribes, we caution tribes and their entities from assuming the same. The Ninth Circuit’s affirmation in this case does not squarely address this reasoning, even when upholding the outcome. Further, the Appeals Court decision is not published and, therefore, not binding precedent. It is very possible that the United States will take the position in future cases that its ability to pursue FCA actions is not hampered by sovereign immunity.

Please let us know if we may provide additional information regarding this decision or applicability of the False Claims Act to tribes.