## United States Court of Appeals FOR THE EIGHTH CIRCUIT

_____________ No. 97-1940EA

_____________ United States of America ex rel. * Frankie Carolyn Rodgers and * Delbert O. Lewis, * * Plaintiffs - Appellees; * * * United States of America, * * Intervenor on Appeal, * * v. * On Appeal from the United * States District Court State of Arkansas and Arkansas * for the Eastern District Department of Education, * of Arkansas. * Defendants - Appellants, * * Little Rock School District; * Benton School District; Magnet Cove * School District; Hope School District; * Malvern School District; and * Gurdon School District, * * Defendants. *

___________ Submitted: June 10, 1998 Filed: September 4, 1998

___________The Hon. Owen M. Panner, United States District Judge for the District o f 1 Oregon, sitting by designation. -2- Be fore RICHARD S. ARNOLD and MORRIS SHEPPARD ARNOLD, Circui t Judges, and PANNER, District Judge. 1

___________ RICHARD S. ARNOLD, Circuit Judge. Two Arkansas residents brought this qui tam action against the State of Arkansas an d the Arkansas Department of Education for allegedly obtaining federal educatio n funding by filing false claims of compliance with federal civil-rights laws, in violation of the False Claims Act, 31 U.S.C. §§ 3729 - 3733 (1994). The State and it s Department of Education m oved to dismiss the claim, asserting that it is barred by the Eleventh Amendment to the United S tates Constitution. The District Court denied the motion, and this appeal followed. We affirm.
I. Arkansas residents Frankie Carolyn Rodgers, a former publi c school teacher and coun selor, and Delbert O. Lewis, a former employee of the Arkansas Division o f Reh abilitation Services, undertook an investigation into whether the State, it s Dep artment

of Education, and several Arkansas school districts were in complianc e with federal civil-rights laws. Rodgers and Lewis allege that the defendants hav e falsely claimed compliance w ith § 504 of the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 794 (1994), and Titles I an d II of the Americans with Disabilities Act, 42 U.S. C. §§ 12101-12213 (1994). Assurance of compliance is a prerequisite to th e continued receipt of certain federal funds. Acting on their belief that the State , includ ing legislators and auditors, and several school districts have misrepresente d compliance with the laws since 1985, Rodgers and Lewis brought suit as qui tamThe Hon. William R. Wilson, Jr., United States District Judge for the Eastern 2 District of Arkansas. -3- rel ators under the Federal Claims Act. As permitted by the statute, 31 U.S.C. § 3730(b)(4)(B), the United States allowed th e relators to prosecute the case and did not itself become a party. Asserting immunity from sui t under the Eleventh Amendment, the State and the Depart ment moved to dismiss the complaint. The District Court determined that the 2 State does not enjoy Eleventh Amendment immunity from False Claims Act suits b y qui tam relat ors, and denied the motion to dismiss. The State and the Departmen t appea lfrom the denial of the motion to dismiss, and the District Court stayed th e proceeding pending the outcome here. We have jurisdiction because denial s of motions to dismiss on Eleventh Amendment immunity grounds are immediately appealable

. Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc. , 506 U.S. 139, 14 7 (1993).
II.
On appeal, the State acknowledges that the United States is not subject to th e Eleven thAmendment prohibition on federal jurisdiction over “commence[ment] o r prose cut[ion] [of a suit] against one of the United States by Citizens of anothe r State . . .,” or over a suit against a State by one of its own ci tizens. U.S. Const. amend. XI; Mancuso v. New York State Thruway Auth. , 86 F.3d 289 (2d Cir.), cert. denied , 117 S. Ct. 481 (1996). See also United States v. Mississippi , 380 U.S. 128, 138-4 1 (1965). They contend that when the United States declines to prosecute a violation of the Fa lse Claims Act, the suit is not brought by the United States for Eleventh Amendment purposes. Under this reasoning, the qui tam relator is characterized as a citizen, and the Eleventh Amendment bars the suit against the state.Qui tam is s hort for the Latin phrase, “ qui tam pro domino rege quam pro s e 3 ipso in hac parte sequitur :” “who sues in this case on behalf of our lord t he King as well as on his behalf.” -4- Section 3729 of the False Claims Act provides, in pertinent part: (a) Liability for certain acts.--Any person who-- (1) knowingl y presents, or causes to be presented, to an officer o r employee of the United States Government . . . a false or fraudulent claim for payment or approval; (2) knowingly makes, uses, or causes to be made or used, a fals e record or statement to get a false or fraudulent claim paid or approved by the Government; (3) consp ires to defraud the Government by getting a false o r fraudulent claim allowed or paid; . . . is liabl e to the United States Government for a civil penalty . . . plus 3 times the amount o f damages which the Government sustains because of the act of that person . . ..
Section 3730, the qui tam pr ovision of the False Claims Act, states in pertinent 3 part:
(b) Actions by Private Persons.--(1) A person may bring a civil action fora violation of section 3729 for the person and for the United State s Government. The action shall be brought in the name of the Government. The action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.-5-

A great deal of Section 3730 establishes as superior the role of the government in the prosecution of qui tam suits. For example, the government may intervene in the action, and in the event that it elects not to do so within an in itial 60-day period, it may, for good cause, intervene at a later date. 31 U.S.C. §§ 3730(b)(5) and (c)(3)

. Additionally, “[ i]f the Government proceeds with the action, it . . . shall not be bound by an act of the person bringing the action.” 31 U.S.C. § 373 0(c)(1). The Government also has the

power to “dismiss [or settle] the action notwithstanding the objections of the person initiating the action . . .,” subject only to notice and a hearing for the qui tam relator. The government will collect the bulk of any damages awarded, and in no case less than 70%, regardless of who prosecutes the suit. 31 U.S.C. §§ 3730(c)(2)(A) and 3730(c)(2)(B).
We hold that a qui tam

action under this Act is a suit by the United States fo r EleventhAmendment immunity purposes. The focus of the Act is on exposing fraud on the government and recovering resulting government losses. The qui tam provisions facilitate this process, but they do not alter the underlying cha racter of the action as one for the aggr

ieved party as defined by the statute. See Marvin v. Trout , 199 U.S. 212, 22 4-26 (1905). The qui tam mechanism exists to motivate individuals to further th e inte restof the government in remaining free from frauds perpetrated against it

. Confronting the same que stion before us, the Fourth Circuit stated, and we agree, that “the structure of the qui tam procedure, the extensive benefit flowi ng to the government from any recovery, and the extensive power the government has to control the litigation weighheavily against [the defendant].” United States ex rel. Milam v. University of Texas M.D. Anderson Cancer Ctr. , 961 F.2d 46, 49 (4th Cir. 1992).
Other circuits have held similarly. “ Qui tam relators cannot and do not sue for FCA vio lations on their own behalf. Rather, they sue on behalf of the government as agents of the government, which is alw ays the real party in interest.” United States ex rel. Hyatt v. Northrop Corp. , 91 F.3d 1211, 1217 n.8 (9th Cir. 1996) (citing Unite d States ex rel. Killingsworth v. Northrop Corp. , 25 F.3d 715, 720 (9th Cir. 1994)-6-

(citations omitted). See also United States v. ex re l. Hall v. Tribal Dev. Corp. 49 F. 3d 120 8, 1213 (7th Cir. 1995). Many of our sister circuits have rejected challenges to a qui tam relator’s action on similar reasoning. “ In a qui tam action, the plaintiff sues on behalf of and in the name of the government and invokes the standing of th e governme nt

resulting from the fraud injury.” United States ex rel. Kreindler & Kreindler v. United Tec hnologies Corp. , 985 F. 2d 1148, 1154 (2d Cir.), cert. denied , 50 8 U.S. 973 (1993) (citations omitted). In so stating, the Second Circuit drew from an earlier case in which it st ated “although qui tam actions allow individual citizens to initiate e nforcement against wrongdoers who cause injury to the public at large, th e Government remains the real party in interes t.” Minotti v. Lensink , 895 F.2d 100, 104 (2d Cir. 1990). In a similar vein, the Fourth Circuit in Milam stated “[w]e could not lightly co nclude that the party upon whose standing the justiciability of the cas e depends is not the real party in interest.” 961 F.2d at 49. Finally, we address the State’s and the Department’s argument that our recent decision in Moad v. Arkans as State Police Department , 111 F.3d 585 (8th Cir. 1997), is dispositive of an outcome in their favor. In Moad , we held that the Eleventh Amendment is a bar to a suit against a state for violations of the Fair Labor Standards Act. Our dec ision was required by that of the Supreme Court in Seminole Tribe o f Fl orida v. Florida , 517 U.S. 44 (1996), that the Interstate Commerce Clause is a n impermissible basis for the abrogation of state immunity under the Eleventh Amendment. Moad is not controlling. There, the real party in interest was a private person. Here, i t is the United States. The State and its agencies are not entitled t o Eleventh Amendment immunity. The judgment is affirmed.Th e United States has intervened in this appeal for the limited purpose o f 1 defending the constitutionality of the False Claims Act. See Motion of United States to Intervene as of Right Under 28 U.S.C. § 2403. The United States has not intervened in the underlying action pursuant to 31 U.S.C. § 3730. -7- PANNER, District Judge, dissenting. The Eleventh Amendment provides that:
The Judicial power of the United States shall not b e construed to extend to any suit in lawor equity, commenced or pr osecuted against one of the United States by Citizen s of another State, or by Citizens or Subjects of any Foreign State. (Emp hasis added.) This action was commenced, and is being prosecuted, by tw o priva te citizens. The United States was not consulted before this action was filed. It didnot screen the claims before filing to ensure that prosecution was warranted, and it has since declined to prosecute this action in its own right. If the United State s 1 intervenes, it is not bound by anything the relators have done. 31 U.S.C. § 3730(c)(1). Unless i t intervenes, the United States is not liable for any costs or attorney fee s awarded to the defendants. 31 U.S.C. § 3730(f) and (g) (distinguishing betwee n actio ns brought by the relator and those filed by the “United States”). The Unite d States has little control over the conduct of this litigati on, unless it intervenes as a party or by moving to dismiss the action. See generally 31 U.S.C. § 3730.
Bas ed upon the decisions cited in the majority opinion, the majority understandably c oncludes that this action against a state is not barred by the Eleventh Amendme nt. However, those cases primarily involve issues of standing, or ar e premised upon other decisions that involve standing. They speak in terms of the “real party in interest.”-8-

United States ex rel. Kelly v. Boeing Co. , 9 F.3d 743 (8th Cir. 1993), discusses the relationship b etween the United States and the relator in an action under the False Claims Act: [T]he FCA effectively assigns the government’s claims t o

qu itam plaintiffs such as Kelly, who then may sue base d upon an in jury to the federal treasury. Under this theory of standing, the FCA’s qui tam provisions operate as a n enforceable unilateral contract. The terms and conditions of the contract are accepted by the relator upon filing suit. If the government declines to prosecute the alleged w rongdoer, the qui tam plaintiff effectively stands in the shoes of th e government.

Id. at 748. Others have likened the relationship to an assi gnment of a contract or chose in action, or

a collection agency, bounty hunter, or contingency fee relationship. See,
e. g., United States ex rel. Milam v. University of Texas M.D. Anderson Cance r Center , 961 F.2d 946, 949 (4th Cir. 1992) (endorsing contingency fee analysis). “Standing in the sho es of the assignor” may suffice to confer standing to sue or to overcome a contractual defense, but only the United States itself should be able to pier ce a state’s sovereign immunity, not its collection agencies, assignees, bount y hunters, or delegees. Milam ’s answer was that:

Congress has let loose a posse of ad hoc deputie s to uncover an d prosecute frauds against the government. States an d state ag encies . . . may prefer the dignity of being chase d only by the regular troops; if so, they must seek relief from Congress.-9-

Id. at 4 9. That misses the mark. It is not a question of “dignity” but of whether th e limited waiver of sovereign immunity, that is inherent in the design of the Constitution, extends to self-appointed “ad hoc depu ties” who are largely beyond the supervision of the U nited States and for whose actions the United States is not accountable. “Th e consent, ‘inherent in the convention,’ to s uit by the United States -- at the instance and under the control of responsible federal officers -- is not consent to suit by anyon e whom the United States might select; and e ven consent to suit by the United States for a particular person’s benefi t is not consent to suit by that person himself.” Blatchford v. Native Village of Noatak , 501 U.S. 775, 785-86 (1991).
The only case cited by the majority that is directly in point is Milam , supra . While that decision is well written by Judge Hall, it does not persuade me that th e Eleventh Amendment can be overcome so easily.
Th e Supreme Court has expressed reservations about limiting the Eleventh Ame ndment

in other types of cases. See Seminole Tribe of Florida v. Florida , 51 7 U.S. 44 (1996) and Blatchford , supra . The prese nt action is distinguishable from United States ex rel. Zissler v

. Regents of the University of Minnesota , No. 97-4099MN, also decided today. I n Zissler , the United States has intervened and is prosecuting that action at the instance, and under the control, of re sponsible federal officials. The same cannot be said of the claims here. I therefore respectfully dissent. A true copy.
Attest: CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.