Opinion ID: 3172722
Heading Depth: 2
Heading Rank: 1

Heading: The Claims Against UMMS.

Text: The relator's principal asseveration is that the district court erred in determining that UMMS is a state agency and, thus, exempt from the FCA. This asseveration raises an antecedent question of first impression in this circuit about the are congruent in this respect. For that reason, we say nothing further about Massachusetts's version of the FCA. - 6 - appropriate test for determining whether an entity is a state agency for FCA purposes. Some background is helpful. The FCA subjects to liability any person who submits a false claim to the government for payment or approval. 31 U.S.C. § 3729(a)(1)(A). The statute itself does not define the term person. In Stevens, the Supreme Court filled this void: it applied the longstanding interpretive presumption that 'person' does not include the sovereign, 529 U.S. at 780, and concluded that states are not subject to liability in actions brought by private parties under the FCA, id. at 78788. In its analysis, the Court emphasized the virtual coincidence of scope between the question of whether States can be sued under the FCA and the question of whether unconsenting States can be sued in the Eleventh Amendment context. Id. at 779-80. Though the Court did not explain how to determine whether an entity is a state agency for FCA purposes, the correspondence the Court identified has led every circuit that has confronted the question to conclude that the FCA context requires the same test as that used for determining whether an entity is an arm of the state entitled to share in Eleventh Amendment immunity. See, e.g., Kreipke v. Wayne State Univ., 807 F.3d 768, 775 (6th Cir. 2015); United States ex rel. Lesinski v. S. Fla. Water Mgmt. Dist., 739 F.3d 598, 601-02 (11th Cir.), cert. denied, 134 S. Ct. 2312 (2014); United States ex rel. Oberg v. Ky. Higher Educ. Student Loan Corp., - 7 - 681 F.3d 575, 579-80 (4th Cir. 2012); Stoner v. Santa Clara Cty. Office of Educ., 502 F.3d 1116, 1121-22 (9th Cir. 2007); United States ex rel. Sikkenga v. Regence BlueCross BlueShield of Utah, 472 F.3d 702, 718 (10th Cir. 2006); United States ex rel. Adrian v. Regents of the Univ. of Cal., 363 F.3d 398, 401-02 (5th Cir. 2004). We join this unbroken precedential chain and today hold, as did the court below, see Willette, 80 F. Supp. 3d at 299, that the appropriate test under the FCA for actions brought by private parties is identical to the one we have employed in determining whether an entity is an arm of the state for Eleventh Amendment purposes. It remains, of course, for us to apply this holding.2 We previously have articulated a two-part test for arm-of-thestate status. First, we determine if the state has indicated an intention — either explicitly by statute or implicitly through the structure of the entity — that the entity share the state's sovereign immunity. Redondo Constr. Corp. v. P.R. Highway & Transp. Auth., 357 F.3d 124, 126 (1st Cir. 2004). In the absence of an explicit statement, an analysis of the entity's structure 2 The relator concedes the applicability of the arm-of-thestate test to all of his FCA claims, including the retaliation claim. Consequently, we assume, without deciding, that 31 U.S.C. § 3730(h) does not encompass suits against arms of the state. But see United States ex rel. King v. Univ. of Tex. Health Sci. Ctr.- Hous., 544 F. App'x 490, 498-99 (5th Cir. 2013) (per curiam). - 8 - requires a wide-ranging survey of the entity's relationship with the state. While this survey is not controlled by a mechanical checklist of pertinent factors, the case law offers important clues. See, e.g., Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 44-46 (1994); Lake Country Estates, Inc. v. Tahoe Reg'l Planning Agency, 440 U.S. 391, 401-02 (1979); Fresenius Med. Care Cardiovascular Res., Inc. v. P.R. & the Caribbean Cardiovascular Ctr. Corp., 322 F.3d 56, 68 (1st Cir. 2003); Metcalf & Eddy, Inc. v. P.R. Aqueduct & Sewer Auth., 991 F.2d 935, 939-40 (1st Cir. 1993). Synthesizing these clues, we note that (as pertinent here) the factors include such things as the degree of state control over the entity, the way in which the entity is described and treated by its enabling legislation and other state statutes, how state courts have viewed the entity, the functions performed by the entity, and whether the entity is separately incorporated. See Fresenius, 322 F.3d at 62 nn.5-6, 65 n.7. If this structural analysis is conclusive, our inquiry ends. See id. at 68. If, however, this analysis is inconclusive, the court must proceed to the second stage and consider whether the state's treasury would be at risk in the event of an adverse judgment. Redondo Constr., 357 F.3d at 126. We review a district court's application of the arm-ofthe-state test de novo. See Fresenius, 322 F.3d at 60. A party - 9 - claiming sovereign status bears the burden of demonstrating that it is an arm of the state. See id. at 61; Wojcik v. Mass. State Lottery Comm'n, 300 F.3d 92, 99 (1st Cir. 2002). These same principles attach in the FCA milieu. We review de novo a district court's determination that an entity is a state agency and, thus, not a person within the purview of the FCA; and an entity claiming such status bears the burden of demonstrating that it is exempt under the FCA. As a general matter, public universities usually are considered arms of the state. 13 Charles Alan Wright et al., Federal Practice & Procedure § 3524.2, at 325-26 (3d ed. 2008); see id. at 326 n.42 (collecting cases). This conclusion flows naturally from [t]he distinctive, public-oriented role that a state university typically plays in its state's higher education landscape. Irizarry-Mora v. Univ. of P.R., 647 F.3d 9, 14 (1st Cir. 2011). While arm-of-the-state status is ultimately a question of federal law, that federal question can be answered only after considering the provisions of state law that define the agency's character. Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 429 n.5 (1997). As we explain below, the statutory framework crafted by the Massachusetts legislature lends itself to the conclusion that the University of Massachusetts (the University), and thus UMMS, is an arm of the state. - 10 - To begin, the University is not separately incorporated but, rather, is simply a public institution of higher learning within the system of public higher education. Mass. Gen. Laws ch. 75, § 1. This public institution has several campuses, including a medical school to be known as the University of Massachusetts medical school. Id. § 34. The overarching purpose of the University is to provide, without discrimination, public service, research, and education programs. Id. § 2. Every feature of the statutory framework is conducive to a finding that both the University and UMMS are arms of the state. So, too, the elaborate system of state controls over both the University and UMMS strongly indicates arm-of-the-state status. The university system is governed by a board of trustees with nineteen voting members, sixteen of whom are direct gubernatorial appointees. See id. § 1A. The governor chooses the board's chair from among these trustees, and the chair serves in that capacity at the governor's pleasure. See id. One of the remaining three members is the state's secretary of education (or the secretary's designee), see id. — and the governor appoints the secretary of education, who serves ex officio at the governor's pleasure, see id. ch. 6A, §§ 2-3. The last two members are elected student representatives. See id. ch. 75, § 1A. This substantial level of control is probative of arm-of-the-state status. See Fresenius, 322 F.3d at 68. - 11 - Arm-of-the-state status is also heralded by the state's close supervision over the University's budget. The board of trustees prepares an annual budget estimate, which is submitted for review by both the secretary of education and the state's board of higher education.3 See Mass. Gen. Laws ch. 75, § 1A. After a budget is approved through that state-centric process, the state auditor is responsible for checking University accounts. See id. § 6. Although UMMS's annual budget is reported by the trustees separately from other parts of the University [i]n order to provide for the maximum allowable degree of fiscal independence, id. § 36, that reporting must comply with all budgetary statutes applicable to state agenc[ies], id. ch. 29, §§ 3-4. The relator, alluding only to a newspaper article, suggests that UMMS's faculty is not paid primarily with taxpayer money and that state appropriations amount to only a small fraction of UMMS's gross revenue. Nothing in the record supports this assertion; and in any event, the assertion does little to aid the relator. The University's enabling act provides that the state 3 The board of higher education is itself a creature of state statute. See Mass. Gen. Laws ch. 15A, § 1. Ten of the board's thirteen members are appointed by the governor (including, ex officio, the secretary of education or her designee), see id. § 4, and the board exercises a range of supervisory powers over the University, see id. § 9. The board is also charged with making proposals for approval by the secretary of education or the legislature relating to public higher education. See id. - 12 - shall annually appropriate such sums as it deems necessary for the maintenance, operation and support of the university, including UMMS. Id. ch. 75, § 8. Nor does anything in the statutory scheme indicate that the Commonwealth is not responsible for the debts and obligations of UMMS, see Fresenius, 322 F.3d at 69; to the contrary, the Commonwealth provides a mechanism for providing funds to satisfy judgments or settlements for which UMMS is responsible, see 815 Mass. Code Regs. 5.01-.11. Finally, UMMS lacks the authority to issue bonds. See McNamara v. Honeyman, 546 N.E.2d 139, 142 (Mass. 1989); see also Irizarry-Mora, 647 F.3d at 15-16 (identifying authority to issue bonds as an important indicator pointing away from immunity). The University, and with it UMMS, is also subject to substantial state supervision in carrying out its educational mission. Mission statements for each campus in the university system, admission standards, proposed instructional programs, and the University's five-year master plan must be submitted for approval by the secretary of education, the board of higher education, or both. See Mass. Gen. Laws ch. 75, § 1A. All property owned by the University is considered state property. See id. § 12. While the University's board of trustees is empowered to lease or convey state land for limited purposes, see id. §§ 2526, any such transactions are subject to approval by the governor and the board of higher education, see id. § 27. Last — but surely - 13 - not least — University employees (including employees of UMMS) are designated as employees of the commonwealth. Id. § 14. This overwhelming statutory evidence is matched by the treatment that the University and its medical school have consistently received from state courts. The Massachusetts Supreme Judicial Court (SJC) has stated in no uncertain terms that the University of Massachusetts and the Commonwealth are 'one and the same party, namely the Commonwealth of Massachusetts.' Wong v. Univ. of Mass., 777 N.E.2d 161, 163 n.3 (Mass. 2002) (quoting Hannigan v. New Gamma-Delta Chapter of Kappa Sigma Frat., Inc., 327 N.E.2d 882, 883 (Mass. 1975)). Similarly, the SJC (in addressing a suit against a UMMS employee) declared that the university is an agency of the Commonwealth and thus is a public employer. McNamara, 546 N.E.2d at 142 (citing, inter alia, the state's control over UMMS's finances and appropriations, UMMS's inability to issue bonds, and its inability to sue or be sued in its own name). Though perhaps less telling, it is also worth noting that federal district courts in Massachusetts have uniformly determined that UMMS and its affiliated programs are arms of the state. See, e.g., McGee v. UMass Correctional Health, No. 09-40120, 2010 WL 3464282, at -4 (D. Mass. Sept. 1, 2010); Jaundoo v. Clarke, 690 F. Supp. 2d 20, 29 (D. Mass. 2010); Ali v. Univ. of Mass. Med. Ctr., 140 F. Supp. 2d 107, 110 (D. Mass. 2001); Neo Gen Screening, Inc. v. New Engl. Newborn Screening Program, - 14 - No. 98-10394, 1998 WL 35278283, at -3 (D. Mass. Dec. 3, 1998), aff'd, 187 F.3d 24 (1st Cir. 1999). The functions assigned to UMMS reinforce the idea of arm-of-the-state status. UMMS — like the University as a whole — exists to further the critically important governmental objective of providing higher education to the people of Massachusetts. See Mass. Gen. Laws ch. 75, § 2; Irizarry-Mora, 647 F.3d at 14. This compendium of considerations points unerringly to the conclusion that UMMS is structured as an arm of the state and, thus, is not a person subject to suit under the FCA. For FCA purposes, UMMS and the state are indistinguishable. The relator balks at this conclusion, advancing four additional arguments. Without exception, these arguments lack force. First, the relator asserts that UMMS is not a state agency because a Massachusetts law passed in 1997, 1997 Mass. Acts 854, separated out [UMMS] as its own distinct legal entity. This assertion elevates hope over reason: the 1997 law merely separate[s] the operations, assets, liabilities and obligations of the existing clinical division of UMMS from the commonwealth and creates a nonprofit corporation to house this spinoff. Id. at 855. As the law's definitional section makes clear, the clinical division consists only of the clinical components of the University of Massachusetts Worcester, including the - 15 - University of Massachusetts medical school teaching hospital, the University of Massachusetts medical school group practice, and ancillary support and operating services. Id. at 856. Given this definition, CHCF is manifestly not part of the medical school's clinical division; and nothing in the legislation supports the notion that the entire medical school operation was somehow detached from the state. Indeed, the law specifically mentions the need for the university to maintain its medical school, id. at 855, and describes the newly created corporation as support[ing] the commonwealth's medical school, id. Second, the relator argues that Commonwealth Medicine and CHCF should be carved out of UMMS and treated differently than other parts of the University. This argument is premised, in the relator's words, on the theory that Commonwealth Medicine and CHCF are for-profit operations. But the mere fact that a governmental agency generates revenue for the state does not deprive the agency of arm-of-the-state status. See Wojcik, 300 F.3d at 99-100. The argument is especially unconvincing here because these collection efforts are at least in part mandated by statute. See 42 U.S.C. § 1396a(a)(25)(A). Third, the relator contends that independence should be inferred from the fact that some of CHCF's activities are carried out pursuant to an interagency service agreement (ISA) between UMMS and the state's Executive Office of Health and Human Services - 16 - (EOHHS). This contention rests on a faulty understanding of the import of the ISA. Under Massachusetts law, ISAs exist to enable one governmental unit to provide funding in exchange for services rendered by another governmental unit. See, e.g., 815 Mass. Code Regs. 6.02 (The ISA is a contract between two state departments that documents the terms and conditions of their business relationship.). The contract between UMMS and EOHHS is of this genre: it merely delineates the relationship between two state departments.4 So viewed, the existence of the ISA strengthens, rather than weakens, the conclusion that UMMS is an arm of the state. Finally, the relator posits that this case is analogous to Sikkenga, in which the Tenth Circuit concluded that a laboratory affiliated with the University of Utah was not entitled to armof-the-state status. See 472 F.3d at 722. But this case and Sikkenga are not fair congeners. There, the laboratory was separately incorporated under a general business corporation statute, id. at 718-19; could sue and be sued in its own name, id. at 719; and entered into contracts with state agencies that were 4 To be sure, statutory authorization exists for ISAs between municipalities. See Mass. Gen. Laws ch. 40, § 4A. Though the relator is correct in positing that municipalities may be subject to FCA liability, see, e.g., Cook County v. United States ex rel. Chandler, 538 U.S. 119, 122 (2003), that is of no consequence here: the ISA on which the relator relies does not involve any municipality. - 17 - essentially commercial contracts, id. at 720. Though the University of Utah was involved in the laboratory's governance, the ties that bound them together arose as an incidence of ownership and were found to be several degrees removed from the direct relationship present between the university and the state. Id. When all was said and done, the laboratory possessed a level of independence appropriate to an entity designed to enter the private sector and compete as a commercial entity. Id. at 721. That is not remotely comparable to the situation here. To say more about this aspect of the matter would be pointless. In this case, a structural analysis of the pertinent factors is altogether conclusive. That analysis shows that UMMS is an arm of the state.5 We hold, therefore, that UMMS is not a person subject to suit under the FCA. It follows inexorably that the district court did not err in dismissing the relator's second amended complaint against UMMS.6 5The district court went further: it proceeded to the second step of the analysis. See Willette, 80 F. Supp. 3d at 301. But where, as here, the arm-of-the-state inquiry is conclusively answered at the first step of the analysis, it is not necessary to proceed to the second step. See Fresenius, 322 F.3d at 68. We see no reason to do so in this case. 6Although this conclusion makes a full assessment of the relator's claims unnecessary, we note that the relator does not appear to have identified a single instance in which a false claim was submitted for approval or payment. Nor has the relator provided any other details from which a court could permit discovery on the putative FCA claims. Consequently, we doubt that the relator could satisfy the particularity standard required by - 18 -