Court Opinion

ID: 2648025
Source: CourtListenerOpinion
Date Created: 2014-01-02 19:57:41.112661+00
Date Added: 2024-06-11T12:57:35.654764
License: Public Domain

Case: 12-16082       Date Filed: 01/02/2014        Page: 1 of 15

                                                                                    [PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT
                              ________________________

                                     No. 12-16082
                               ________________________

                           D.C. Docket No. 9:10-cv-81017-JIC

UNITED STATES OF AMERICA,
Ex rel.
MICHAEL LESINSKI,

                             Plaintiff - Appellant,

versus

SOUTH FLORIDA WATER
MANAGEMENT DISTRICT,

                             Defendant - Appellee.
                              ________________________

                      Appeal from the United States District Court
                          for the Southern District of Florida
                            ________________________

                                      (January 2, 2014)

Before CARNES, Chief Judge, WILSON, Circuit Judge, and DALTON, * District
Judge.

DALTON, District Judge:

         *
          Honorable Roy B. Dalton, Jr., United States District Judge for the Middle District of
Florida, sitting by designation.
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       In 1863, Congress enacted the False Claims Act (“FCA”), 31 U.S.C.

§§ 3729–3733, in response to the massive frauds perpetrated upon the U.S.

Government by private contractors during the Civil War. See Vt. Agency of Natural

Res. v. United States ex rel. Stevens, 529 U.S. 765, 781, 120 S. Ct. 1858, 1867

(2000). The FCA is designed to protect the Government from fraud by imposing

civil liability and penalties upon those who seek federal funds under false

pretenses. Significantly, to enforce the FCA, the Government relies in part upon

private citizens, whom it empowers to bring suit on its behalf by acting as relators

in qui tam actions. A statutory limitation that parallels the scope of the Eleventh

Amendment precludes qui tam relators from bringing suit to redress fraud

perpetrated upon the federal government if the alleged fraudster is a sovereign

state. See 31 U.S.C. § 3729(a); Stevens, 529 U.S. at 787–88, 120 S. Ct. at 1870–71

(holding that the term “person,” as used in the FCA, does not include States or

state agencies for purposes of qui tam liability).

       This FCA action, brought by a qui tam relator against a state instrumentality,

presents a question familiar to federal district courts in Florida1: is the South

Florida Water Management District an arm of the State of Florida such that a suit

       1
          U.S. district courts have addressed the question of whether Florida’s water management
districts constitute an arm of the State of Florida at least thirteen times. See, e.g., Grimshaw v.
So. Fla. Water Mgmt. Dist., 195 F. Supp. 2d 1358 (S.D. Fla. 2002); Miccosukee Tribe of Indians
of Fla. v. United States, 980 F. Supp. 448 (S.D. Fla. 1997).
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against it amounts to a suit against the State itself? For the reasons discussed

below, we hold that it is and therefore cannot be sued by an FCA qui tam relator.

                                              I2

       In 2004 and 2005, a barrage of hurricanes struck the southern coast of

Florida, damaging the region’s flood control works. In response, the South Florida

Water Management District (“District”), a state instrumentality tasked with

maintaining the area’s canals and levees, set about making repairs. To offset the

substantial repair costs, the District solicited reimbursements from the Federal

Emergency Management Agency (“FEMA”).

       Appellant, a former employee of the District who managed the canal repairs,

advised the District’s senior management officials that he believed that the

District’s permanent flood control repairs were ineligible for FEMA

reimbursements. The District ignored Appellant’s objections, continued to solicit

the FEMA reimbursements, and ultimately terminated Appellant’s employment.

       Thereafter, Appellant, acting as relator for the U.S. Government, brought

this qui tam action against the District in the U.S. District Court for the Southern

District of Florida.3 Appellant alleges that the District violated the FCA by

fraudulently claiming FEMA reimbursements for the ineligible canal repairs. The

       2
         The following facts are taken from Appellant’s Complaint and are accepted as true and
construed in the light most favorable to Appellant for the purposes of this appeal from a Rule
12(b)(6) dismissal. See Belanger v. Salvation Army, 556 F.3d 1153, 1155 (11th Cir. 2009).
       3
         The U.S. Government declined to intervene in this action.
                                               3
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District moved to dismiss the suit, arguing that it is an arm of the State of Florida

and therefore not a “person” who could be sued under the FCA. The District Court

granted the District’s motion and dismissed Appellant’s claim with prejudice.4

This appeal follows.

                                               II

       To reach its conclusion that the District constitutes an “arm and

instrumentality of the State of Florida” and not a “person” within the meaning of

the FCA, the District Court applied the arm of the state analysis used to determine

Eleventh Amendment immunity. Thus, the threshold question is whether the arm

of the state analysis under the Eleventh Amendment parallels the personhood

analysis under the FCA, an issue of first impression in this Circuit.

       “The Eleventh Amendment largely shields states from suit in federal courts

without their consent, leaving parties with claims against a State to present them, if

the State permits, in the State’s own tribunals.” Hess v. Port Auth. Trans-Hudson

Corp., 513 U.S. 30, 39, 115 S. Ct. 394, 400 (1994). The Eleventh Amendment’s

protection extends not only to the state itself, but also to state officers and entities

when they act as an “arm of the state.” Manders v. Lee, 338 F.3d 1304, 1308 (11th

Cir. 2003) (en banc). Under the traditional Eleventh Amendment paradigm, states

       4
        The District alternatively argued that it was an arm of the State of Florida entitled to
Eleventh Amendment immunity from suit. While the District Court agreed that the District was
an arm of the state, it dismissed the case only on FCA grounds, declining to address the Eleventh
Amendment issue.
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are extended immunity, counties and similar municipal corporations are not, and

entities that share characteristics of both require a case-by-case analysis. See Mt.

Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S. Ct. 568,

572 (1977).

      By comparison, the FCA imposes liability upon “any person” who, inter

alia, “knowingly presents, or causes to be presented, a false claim or fraudulent

claim for payment.” 31 U.S.C. § 3729(a). Although the FCA does not define the

term “person,” the U.S. Supreme Court has held that the term cannot include states

or state agencies, at least for qui tam purposes. See Stevens, 529 U.S. at 780,

120 S. Ct. at 1866 (applying the Court’s “longstanding interpretive presumption

that ‘person’ does not include the sovereign”). In reaching this conclusion, the

Court observed that there is a “virtual coincidence of scope” between the “statutory

inquiry [into] whether States can be sued under [the FCA]” and “the Eleventh

Amendment inquiry [into] whether unconsenting States can be sued [under the

FCA].” Id. at 779–80, 120 S. Ct. at 1866. The Court subsequently held in Cook

County v. United States ex rel. Chandler that, in contrast to states and state

agencies, the term “person” under the FCA includes local governments and

municipalities. 538 U.S. 119, 134, 123 S. Ct. 1239, 1249 (2003). Thus,

corresponding to Eleventh Amendment immunity, qui tam relators can bring FCA

                                           5
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claims against local governments and municipalities, but not against states and

agencies acting as arms of the state.

       In light of this significant “coincidence of scope,” and guided by Stevens and

Chandler, we join our sister circuits in concluding that courts should employ the

Eleventh Amendment arm of the state analysis to determine whether a state entity

is a “person” subject to FCA liability. See United States. ex rel. Oberg v. Ky.

Higher Educ. Student Loan Corp., 681 F.3d 575, 579–80 (4th Cir. 2012); Stoner v.

Santa Clara Cnty. 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 Univ. of Cal., 363 F.3d
398, 401–02 (5th Cir. 2004).

                                               III

       “We review the grant of a motion to dismiss under Rule 12(b)(6) 5 for failure

to state a claim de novo, accepting the allegations in the complaint as true and

construing them in the light most favorable to the plaintiff.” Belanger v. Salvation

Army, 556 F.3d 1153, 1155 (11th Cir. 2009). Likewise, whether an entity

constitutes an arm of the state under Eleventh Amendment immunity analysis is a

question of law subject to de novo review. See Abusaid v. Hillsborough Cnty. Bd.

       5
         Although the district court did not expressly state that it dismissed Appellant’s claim
under Rule 12(b)(6), bringing an FCA qui tam action against an entity not considered a “person”
is properly considered a failure to state a claim. See Oberg, 681 F.3d at 578; Stoner, 502 F.3d at
1120.
                                                6
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of Cnty. Comm’rs, 405 F.3d 1298, 1303 (11th Cir. 2005); Garret v. Univ. of Ala. at

Birmingham Bd. of Trs., 344 F.3d 1288, 1290 (11th Cir. 2003) (per curium).

                                           IV

      To determine whether an entity is acting as an “arm of the state” when

carrying out a particular function, this Court looks to four factors: “(1) how state

law defines the entity; (2) what degree of control the State maintains over the

entity; (3) where the entity derives its funds; and (4) who is responsible for

judgments against the entity.” Manders, 338 F.3d at 1309. “[W]hether an entity is

an ‘arm of the State’ for Eleventh Amendment purposes is ultimately a question of

federal law. But the federal question can be answered only after considering

provisions of state law.” Id.

                                           A

      As to the first factor, there is little dispute that Florida law defines the

District as an arm of the State. By mandate of the Florida Constitution, the Florida

Legislature must protect and conserve the State’s natural resources, including its

waters. See Fla. Const. art. II, § 7; see also Askew v. Cross Key Waterways, 372
So. 2d 913, 914 (Fla. 1978). Florida water management districts are creatures of

statute created and defined in the Florida Water Resources Act to implement a

“comprehensive statewide plan for the conservation, protection, management, and

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control of state waters.” St. Johns River Water Mgmt. Dist. v. Deseret Ranches of

Fla., 421 So. 2d 1067, 1068 (Fla. 1982) (citing Fla. Stat. § 373.016).

      Structurally, the districts are designed to perform a state function—water

management and protection—with regional flexibility and discretion. See Fla. Stat.

§ 373.016(5); see also Deseret Ranches, 421 So. 2d at 1069 (holding that the

“statewide water management plan created and implemented by chapter 373 is

primarily a state function serving the state’s interest in protecting and managing a

vital natural resource”). The State’s five water management districts have

boundaries drawn along hydrological lines and represent an attempt to reconcile

Floridians’ common, statewide interest in protecting Florida’s waters with the

reality that “the water resource problems of the state vary from region to region,

both in magnitude and complexity.” Fla. Stat. § 373.016(5).

      Ultimately, the District’s power to manage South Florida’s waters stems

solely from, and is limited by, the State; the District is not autonomous, and no

county, municipality, or other local government delegates to it any authority.

Cf. Abusaid, 405 F.3d at 1309 (observing that Florida sheriffs derive power from

both the State and from counties, and they do not act as an arm of the state when

enforcing county ordinances). As such, the first Manders factor favors the

conclusion that the District is an arm of the state.

                                           B

                                           8
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      State control of the District, the second factor in the arm of the state

analysis, is “pervasive and substantial.” Grimshaw v. S. Fla. Water Mgmt. Dist.,

195 F. Supp. 2d 1358, 1366 (S.D. Fla. 2002) (Middlebrooks, J.). The District is

governed by a board appointed by the Governor of Florida and approved by the

Florida Senate. See Fla. Stat. § 373.073(1)(a). The Governor may remove any

officer of the District. See id. § 373.076(2). The Executive Director of the District

must be approved by the Governor and confirmed by the Florida Senate. See id.

§ 373.079(4)(a). The District budget must be submitted to the Governor, the

President of the Senate, the Speaker of the House, the Secretary of the Department

of Environmental Protection, and legislative chairs and subcommittees. See id.

§ 373.536(5)(d). The District’s budget is subject to approval by the Governor. See

id. § 373.536(5)(a). The Florida Land and Water Adjudicatory Commission,

comprised of the Governor and his Cabinet, “[has] the exclusive authority to

review any order or rule of a water management district.” Id. § 373.114(1). In

short, as Judge Middlebrooks noted in Grimshaw, “[t]he degree of state control

exercised over [t]he South Florida Water Management District] is very

compelling.” 195 F. Supp. 2d at 1366.

      Of course, the amount of general control exercised over the District may

vary depending upon the “particular function in which the defendant was engaged

when taking the actions out of which liability is asserted to arise.” Manders, 338

                                          9
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F.3d at 1308. Here, the District and Appellant disagree on how the particular

function at issue in this case should be articulated. Specifically, the actions giving

rise to the District’s asserted FCA liability were its allegedly fraudulent requests

for FEMA reimbursements. The District contends that, because the

reimbursements were tied directly to necessary canal repairs, the function at issue

is the District’s core mission of water management. Therefore, because the State

maintains substantial control over the District’s water management operations, the

District argues that it was acting as an arm of the state when it made the

reimbursement requests. According to Appellant, however, the function at issue is

much narrower: the solicitation of public grants. Thus, because the statute that

authorizes the District to solicit public grants does not require direct State

oversight, see Fla. Stat. § 373.083(4), Appellant argues that the District was acting

with autonomy akin to that of a county or municipality when it requested the

FEMA reimbursements and therefore was not functioning as an arm of the state.

      This abstraction argument strays from the “key question” of the Manders

function-by-function inquiry, which “is not what . . . powers [state entities] have,

but for whom [they] exercise that power.” Abusaid, 405 F.3d at 1310 (quoting

Manders, 338 F.3d at 1319 n.35) (internal quotation marks omitted). Whether the

function at issue is articulated as water management operations or the solicitation

of public grants, the District derives both the authority and the obligation to

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exercise those powers directly from the State.6 See id. at 1304 n.4 (looking to the

sources of an entity’s authority to take a particular action and its duty to do so

when considering the first two prongs of the Manders inquiry); see also Fla. Stat.

§ 373.083(4) (authorizing the District to solicit and accept public grants only for

District projects); Fla. Stat. § 373.036(2)(a) (requiring water management districts

to maintain flood protection plans). That the District maintains some degree of

autonomy over its day-to-day operations does not change the fact that the State of

Florida ultimately retains near-total control over it. See Fouche v. Jekyll Island-

State Park Auth., 713 F.2d 1518, 1521 (11th Cir. 1983) (reasoning that a state

park’s authority to operate profit-making enterprises did not alter its status as an

arm of the state where the state controlled the park’s use of its profits).

Accordingly, the state-control factor weighs heavily in favor of the conclusion that

the District is an arm of the State of Florida.

                                                C

       6
          Moreover, the cases to which Appellant cites to support his narrow characterization of
the function at issue all involve defendants that derive power from, and are controlled by,
multiple entities. See Abusaid, 405 F.3d at 1303–14 (addressing Florida sheriffs, who derive
power from both the State and counties); Keene v. Prine, 477 F. App’x 575, 578 (11th Cir. 2012)
(involving Georgia sheriffs subject to state and county control); Rosario v. Am. Corrective
Counseling Servs., Inc., 506 F.3d 1039, 1044–45 (11th Cir. 2007) (concerning independent
contractors subject to partial state control but retaining substantial autonomy). By contrast, the
District answers only to the State and is not independently autonomous. Distillation of the
function to its most ministerial conception does not alter that fact.
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       Appellant urges the third Manders factor—the source of the District’s

funding—weighs strongly in favor of the District’s autonomy and compels

reversal. We disagree. While it is true that water management districts are

empowered to levy ad valorem taxes, issue bonds, buy land, and borrow money,

see Fla. Const. art. VII, § 9, it is equally clear that the State of Florida provides a

significant, albeit fluctuating,7 portion of the District’s funding, as well. The

funding mechanism established by the Florida Legislature seeks to harmonize the

regional impact of water management district projects on the State’s natural

resources with the fact that preservation and management of these resources is

crucial to all residents, not just those who are affected locally. See Fla.

Stat. § 373.503(1) (establishing blended state and local financing for water

management districts based on the legislative finding that they provide both state

and regional benefits). Thus, this funding mechanism does not create such

autonomy in the District so as to render it a “person” within the meaning of the

FCA, nor does it strip the District of its insulation from suit in a federal forum. See

Williams v. Dist. Bd. of Trs. of Edison Cmty. Coll., 421 F.3d 1190, 1194 (11th Cir.

2005) (per curium) (finding that the mixed state and local funding mechanism

       7
         Appellant alleges that, by the 2009–2010 fiscal year, state appropriations accounted for
only 11% of the District’s funding. Cf. Grimshaw, 195 F. Supp. 2d at 1366–67 (finding that,
“[w]hile it varies from year to year because of large acquisitions, [in 2002] state funding
[accounted for] between 20 to 30 percent of [the South Florida Water Management District’s
annual budget]”).
                                               12
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requiring state budget approval weighed in favor of concluding that Florida

community colleges are arms of the State).

                                             D

       As to the fourth factor, which concerns whether the State bears the ultimate

responsibility for adverse judgments against an entity, Appellant argues that he

would look only to the District to satisfy any money judgment that might result

from this action. Furthermore, Appellant contends that the District’s creation of a

self-insurance fund ensures that only the District, and not the State of Florida,

would be liable for adverse judgments. In so arguing, Appellant joins a long line of

litigants who have sought “to detach the importance of a State’s legal liability for

judgments against a state agency from its moorings as an indicator of the

relationship between the State and its creation and to convert the inquiry into a

formalistic question of ultimate financial liability.” Regents of Univ. of Cal. v. Doe,

519 U.S. 425, 430–31, 117 S. Ct. 900, 904–05 (1997). However, “it is the entity’s

potential legal liability, rather than its ability or inability to require a third party to

reimburse it, or to discharge the liability in the first instance, that is relevant.” Id. at

431, 117 S. Ct. at 904 (holding that a state university was entitled to Eleventh

Amendment immunity despite the fact that the federal government had agreed to

fully indemnify the university against the cost of litigation, including adverse

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judgments). Accordingly, the presence or absence of a self-insurance fund is not

determinative of the District’s status as an arm of the state.

      Moreover, this argument digresses from the real funding issue: Should

judgment creditors deplete the District’s funds to the point that it can no longer

effectively function, the State would ultimately have to choose between increasing

its appropriation to make up the shortfall or shirking its constitutionally mandated

duty to “conserve and protect [the State’s] natural resources and scenic beauty.”

Fla. Const. art. II, § 7(a). Ultimately then, “while a judgment is legally enforceable

against the district . . . [t]he state’s treasury is directly implicated.” Grimshaw, 195
F. Supp. 2d at 1369. The fourth Manders factor therefore favors concluding that

the District constitutes an arm of the State.

                                          ***

      In summary, we hold for the reasons expressed herein that the South Florida

Water Management District is an arm of the State of Florida under the Eleventh

Amendment immunity analysis—and therefore not a “person” for purposes of FCA

qui tam liability.

                                           IV

      Our opinion today, which applies the Eleventh Amendment’s arm of the

state analysis to this FCA qui tam action, touches on a curious quirk in our system

of dual sovereignty: an analysis borrowed from an Amendment designed to protect

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state coffers from private citizens 8 compels the conclusion that private citizens

cannot protect federal coffers from deceitful states. Curiosities aside, the result in

this case is clear: we hold that, as an arm of the State of Florida, the South Florida

Water Management District is not a “person” that can be subjected to suit by a qui

tam relator under the False Claims Act. 9

AFFIRMED.

       8
          In 1795, the United States adopted the Eleventh Amendment largely in response to the
States’ fears that federal courts would require them to repay their Revolutionary War debts to
private, individual creditors, which could have led to their financial ruin. See Hess, 513 U.S. at
39, 115 S. Ct. at 400; Petty v. Tenn.-Mo. Bridge Comm’n, 359 U.S. 275, 276 n.1, 79 S. Ct. 785,
787 n.1 (1959).
        9
          Having held in this case that the South Florida Water Management District is an arm of
the State of Florida and that it is therefore not a person subject to FCA qui tam actions, we
decline, as did the district court, to reach the question of whether the District is entitled to
Eleventh Amendment immunity from suit in federal court. See Stevens, 529 U.S. at 779–80, 120
S. Ct. at 1866 (determining that the statutory question of whether a state agency can be sued by
an individual FCA relator should be addressed prior to the Eleventh Amendment immunity
question of whether the state agency is immune from suit in the federal forum). We note,
however, that the analysis for the two questions is identical.
                                                15