by Ben Vernia | September 5th, 2012
On August 9, the Eighth Circuit Court of Appeals, in U.S. ex rel. Onnen v. Sioux Falls Indep. School Dist., affirmed the dismissal of a whistleblower’s case, but rejected the district court’s conclusion that the existence of comprehensive federal education regulations preclude liability under the False Claims Act. The case was brought by the former registrar of a technical school operated by a school district. The registrar alleged that the school district was responsible, under respondeat superior for the technical school’s false claims for federal funds after signing a Program Participation Agreement with the U.S. Department of Education. The Eighth Circuit affirmed the district court’s grant of summary judgment to the school district, rejecting the relator’s argument that it should expand the record to include depositions that took place after a hearing on the motion for summary judgment; the court reasoned that because the whistleblower had failed to raise the new evidence in the district court, he was barred from doing so on appeal.
The Court of Appeals rejected, however, the alternative ground on which the district court had based its decision: that False Claims Act suits based upon the education statute at issue were “inconsistent with, and thus precluded by, the comprehensive administrative remedies and sanctions available to the Government under the Act.” The Eighth Circuit noted that regulatory requirements and sanctions may be relevant to determine whether a violation of them amounts to a materially false claim, but it concluded that no court had held that the existence of the regulatory scheme precluded the government from bringing a False Claims Act suit, and it agreed with the government’s position as amicus, that “Congress intended to allow the government to choose among a variety of remedies, both statutory and administrative, to combat fraud.”
The Court also rejected the defendant’s request for attorney’s fees, writing: “It is appropriate that defendants pay their own attorney’s fees when they chose, unnecessarily, to use this case in a misguided attempt to obtain blanket immunity from FCA liability.”