US Ex Rel. Fawn Cain v. Salish Kootenai College, Inc. ( 2017 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES EX REL. FAWN CAIN; No. 15-35001
TANYA ARCHER, Relator; SANDI
OVITT, Relator, D.C. No.
Plaintiffs-Appellants, 9:12-cv-00181-
BMM
v.
SALISH KOOTENAI COLLEGE, INC.; OPINION
SALISH KOOTENAI COLLEGE
FOUNDATION; ROBERT FOUTY; JIM
DURGLO; RENE PEIRRE; ELLEN
SWANEY; LINDEN PLANT; TOME
ACEVEDO; ZANE KELLY; ERNEST
MORAN; SALISH KOOTENAI
COLLEGE BOARD OF DIRECTORS;
DOES, 1–10,
Defendants-Appellees,
CONFEDERATED SALISH AND
KOOTENAI TRIBES,
Appellee-Intervenor.
Appeal from the United States District Court
for the District of Montana
Brian M. Morris, District Judge, Presiding
Argued and Submitted April 3, 2017
Seattle, Washington
2 UNITED STATES EX REL. CAIN V. SALISH KOOTENAI
COLLEGE
Filed July 10, 2017
Before: Alex Kozinski and William A. Fletcher, Circuit
Judges, and John R. Tunheim,* Chief District Judge.
Opinion by Judge Kozinski
SUMMARY**
False Claims Act
The panel reversed the district court’s dismissal of the
complaint in a qui tam action brought by former employees
of Salish Kootenai College, Inc., alleging that the College
violated the False Claims Act by knowingly providing false
progress reports on students in order to keep grant monies
coming from the Department of Health and Human Services
and the Indian Health Service.
The False Claims Act permits suits against any “person”
who defrauds the government by knowingly presenting a
false or fraudulent claim.
*
The Honorable John R. Tunheim, Chief United States District Judge
for the District of Minnesota, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
UNITED STATES EX REL. CAIN V. SALISH KOOTENAI 3
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The district court held that the College was an arm of the
Confederated Salish Kootenai Tribes (“Tribe”) that shared the
Tribe’s sovereign immunity.
The panel held that Indian tribes were entitled to the same
interpretative presumption as States, which are excluded from
the term “person” under the False Claims Act. The panel
concluded that the Tribe, like other federally recognized
Indian tribes, was presumptively excluded from the term
“person.”
Turning to the question whether the College functioned as
an arm of the Tribe and thereby shared the Tribe’s sovereign
status, the panel held that the proper standard for answering
the question was the test in White v. University of California,
765 F.3d 1010, 1025 (9th Cir. 2014). The panel remanded so
that the district court could apply the White factors. The
panel also directed the district court to allow appropriate
discovery before determining whether the College was an arm
of the Tribe under White.
COUNSEL
Trent N. Baker (argued), Jason A. Williams, and David B.
Cotner, Datsopoulos MacDonald & Lind P.C., Missoula,
Montana, for Plaintiffs-Appellants.
Martin S. King (argued), Jori Quinlan, and Matthew J. Cuffe,
Worden Thane P.C., Missoula, Montana, for Defendants-
Appellees.
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John Harrison (argued) and Rhonda R. Swaney, Tribal Legal
Department, Pablo, Montana, for Appellee-Intervenor.
OPINION
KOZINSKI, Circuit Judge:
The False Claims Act (FCA), 31 U.S.C. §§ 3729–3733,
permits suits against “any person” who defrauds the
government by “knowingly present[ing] . . . a false or
fraudulent claim for payment or approval.” Id.§ 3729(a)(1)(A). We consider whether Salish Kootenai
College, Inc. is a “person” subject to suit under the FCA.
FACTS
Plaintiffs are former employees of Salish Kootenai
College, Inc. (the College). They brought a qui tam action
against the College, the Salish Kootenai College Foundation
(the Foundation), and eight of the College’s board members,
alleging that defendants violated the FCA and Montana law.
Specifically, they claim that defendants knowingly provided
false progress reports on students in order to keep grant
monies coming from the Department of Health and Human
Services and the Indian Health Service.
After the United States declined to intervene pursuant to
31 U.S.C. § 3730(b)(4)(B), defendants moved to dismiss the
complaint under Federal Rule of Civil Procedure 12(b)(1) for
lack of subject matter jurisdiction and 12(b)(6) for failure to
state a claim. Defendants argued, among other things, that
the suit was barred by tribal sovereign immunity.
UNITED STATES EX REL. CAIN V. SALISH KOOTENAI 5
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The district court dismissed the complaint against the
College and the Foundation with prejudice. The court held
that the College was an arm of the Confederated Salish
Kootenai Tribes (the Tribe)1 that shared the Tribe’s sovereign
immunity, and that neither the Tribe nor Congress waived the
College’s immunity. As for the Foundation, the district court
dismissed the suit for failure to state a claim. The district
court further determined that the board members were
protected by sovereign immunity because they had been sued
in their official capacities.
This appeal followed. Plaintiffs do not challenge the
district court’s dismissal of the claims against the Foundation
or its finding that the board members were sued in their
official capacities.2 Therefore, we limit our review to the
portion of the district court’s order pertaining to the College.3
DISCUSSION
To begin with, we disagree with the district court’s
framing of the central question. The central question in this
1
The Tribe participated in the district court proceeding as amicus
curiae. After plaintiffs appealed, the Tribe petitioned to intervene and we
granted the petition.
2
The district court granted plaintiffs leave to amend their claims
against the board members.
3
Plaintiffs concede that their claims against the College’s board
members in their official capacities stand or fall with their claims against
the College. See Cook v. AVI Casino Enters., Inc., 548 F.3d 718, 727 (9th
Cir. 2008) (holding that “tribal immunity protects tribal employees acting
in their official capacity and within the scope of their authority”).
6 UNITED STATES EX REL. CAIN V. SALISH KOOTENAI
COLLEGE
case is whether the College is a “person” within the meaning
of the FCA. The district court instead focused on whether the
College enjoyed tribal immunity and, if so, whether that
immunity was voluntarily waived.
To be sure, the two questions are linked. As we explain
below, whether a particular entity is a “person” under the
FCA is tied to whether that entity enjoys sovereign immunity.
But the statutory interpretation question is logically
antecedent to the question of sovereign immunity. Whether
the College is an arm of the Tribe and therefore shares the
Tribe’s sovereign immunity is relevant only because our
precedent tells us that sovereign entities are presumptively
excluded from the term “person.” See infra p. 7.
This means we need not decide whether the College
voluntarily waived its sovereign immunity.4 If the College is
a sovereign entity to which Congress didn’t intend the FCA
to apply, the College cannot make the FCA apply to itself by
voluntarily waiving its sovereign immunity; if the College is
not a sovereign entity and therefore is a “person” under the
FCA, it has no sovereign immunity to waive.
With this clarification, we now consider (1) whether the
Tribe is a “person” under the FCA and (2) whether the
College is an arm of the Tribe that shares the Tribe’s status
for purposes of the FCA. We answer the first question in the
negative and remand for further jurisdictional factfinding on
the second question.
4
That said, the Tribe’s intent to share its sovereign immunity with the
College is one of five factors that we consider when deciding whether the
College is an arm of the Tribe. See infra p. 13.
UNITED STATES EX REL. CAIN V. SALISH KOOTENAI 7
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I
In Vermont Agency of Natural Resources v. U.S. ex rel.
Stevens, the Supreme Court concluded that sovereign States
were excluded from the term “person” under the FCA.
529 U.S. 765, 787 (2000). In reaching this conclusion, the
Court relied on its “longstanding interpretive presumption
that ‘person’ does not include the sovereign.” Id. at 780(citations omitted). Acknowledging that “[t]he presumption
is . . . not a hard and fast rule of exclusion,” the Court
nonetheless held that the presumption “may be disregarded
only upon some affirmative showing of statutory intent to the
contrary.” Id. at 781 (citations and internal quotation marks
omitted). After examining the historical context and statutory
scheme, the Court held that the FCA, “far from providing the
requisite affirmative indications that the term ‘person’
included States for purposes of qui tam liability, indicate[s]
quite the contrary.” Id. at 787.
The Court’s reasoning in Stevens is equally applicable
here. Although we no longer consider tribal sovereignty
absolute, we continue to recognize Indian tribes as sovereign
entities. See Nevada v. Hicks, 533 U.S. 353, 361 (2001)
(“Though tribes are often referred to as sovereign entities, it
was long ago that the Court departed from Chief Justice
Marshall’s view that the laws of [a State] can have no force
within reservation boundaries.” (citation and internal
quotation marks omitted)); see also Kiowa Tribe of Okla. v.
Mfg. Techs., Inc., 523 U.S. 751, 754 (1998); Okla. Tax
Comm’n v. Citizen Band Potawatomi Indian Tribe of Okla.,
498 U.S. 505, 509 (1991). Thus, the Tribe, like other
federally recognized Indian tribes, is presumptively excluded
from the term “person.” See, e.g., Inyo County v. Paiute-
8 UNITED STATES EX REL. CAIN V. SALISH KOOTENAI
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Shoshone Indians, 538 U.S. 701, 711–12 (2003) (holding that
a tribe was not a “person” who could bring a § 1983 action).
Nothing in the FCA’s text or legislative history overcomes
this presumption. See Stevens, 529 U.S. at 783–86
(discussing features of the FCA’s statutory scheme that
suggest governmental entities are not subject to qui tam
liability). Tribes may be “domestic dependent nations,”
Cherokee Nation v. Georgia, 30 U.S. 1, 17 (1831), but “are
sovereigns nonetheless,” and “something more than mere use
of the word ‘person’” is required to “demonstrate the federal
intent to authorize unconsented private suit against them,”
Stevens, 529 U.S. at 780 n.9.
Some features of the FCA that the Court discussed in
Stevens were specific to States. For example, the Court relied
on the fact that the FCA elsewhere explicitly defined
“person” to include States for purposes of that section. Id. at
783–84 (citations and footnote reference omitted). The Court
also found support for its conclusion in a parallel statutory
scheme that explicitly left States out of its definition of
“persons.” Id. at 786. These features merely provide reasons
for affirming the presumption that the term “person” doesn’t
include States. They don’t change the fact that the
presumption applies equally to sovereign tribes. See United
States v. Menominee Tribal Enters., 601 F. Supp. 2d 1061,
1067–68 (E.D. Wis. 2009).
That Indian tribes are entitled to the same interpretive
presumption as States is further supported by the Court’s
holding in Cook County v. U.S. ex rel. Chandler, 538 U.S.
119 (2003). The Court found that when the FCA was first
enacted, municipalities like private corporations were
presumed to be persons within the meaning of § 3729. Id. at
UNITED STATES EX REL. CAIN V. SALISH KOOTENAI 9
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125–27. Because neither the historical context nor any
subsequent statutory amendments provided reason to displace
that understanding, the Court held that municipalities are
subject to suit under the FCA. Id. at 127–34. The key
distinction that drove the Court to apply opposite
presumptions in Stevens and Chandler was the municipality’s
ability to sue and be sued. Id. at 125–26 (noting that
“municipal corporations and private ones were . . . treated
alike in terms of their legal status as persons capable of suing
and being sued.” (citation omitted)). In this respect, Indian
tribes are analogous to States. Like States, Indian tribes are
immune from suits unless their immunity is waived or
abrogated by Congress. Compare Kiowa Tribe of Okla.,
523 U.S. at 754 (recognizing that tribes are presumptively
immune), and Atascadero State Hosp. v. Scanlon, 473 U.S.
234, 238 (1985), superseded by statute as stated in Lane v.
Pena, 518 U.S. 187, 198 (1996) (recognizing that states are
presumptively immune), with N. Ins. Co. of N.Y. v. Chatham
County, 547 U.S. 189, 193 (2006) (refusing to extend
sovereign immunity to counties). Therefore, it makes ample
sense that we apply to Indian tribes the same interpretive
presumption that the Court applied to States in Stevens.
Applying this presumption, we cannot hold that the Tribe is
a “person” subject to suit under the FCA. The statute doesn’t
once mention tribes, hardly an “affirmative showing” that
Congress intended to include them in the term “person.”
Stevens, 529 U.S. at 781.
Plaintiffs point to Donovan v. Coeur d’Alene Tribal
Farm, which held that federal statutes of general applicability
are presumed to apply to Indian tribes unless one of three
exceptions is satisfied. 751 F.2d 1113, 1115–16 (9th Cir.
1985). We have affirmed the continued validity of this
10 UNITED STATES EX REL. CAIN V. SALISH KOOTENAI
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presumption post-Stevens. See Consumer Fin. Prot. Bureau
v. Great Plains Lending, LLC, 846 F.3d 1049, 1053–54 (9th
Cir. 2017). However, our conclusion that the FCA was not
intended to apply to Indian tribes “forecloses the argument
that [the FCA] is of general applicability vis-a-vis the
[t]ribe[s].” Miller v. Wright, 705 F.3d 919, 927 (9th Cir.
2013). Our decision turns on the meaning of the term
“person.” If that term doesn’t include Indian tribes, the FCA
cannot be a statute of general applicability.
II
The question remains whether the College functions as an
arm of the Tribe and therefore shares the Tribe’s sovereign
status. Contrary to the decision below, Smith v. Salish
Kootenai College, 434 F.3d 1127 (9th Cir. 2006) (en banc),
doesn’t control this question. In Smith, we were considering
whether the Tribal Court had jurisdiction over tort claims
brought by a non-tribal member against the College. Id. at
1128. Smith was not deciding whether the College is a
sovereign entity. That the Smith court drew upon several
cases discussing tribal sovereign immunity is insufficient to
make Smith controlling precedent in this context. See id. at
1133 (“Whether an entity is a tribal entity depends on the
context in which the question is addressed.” (citation
omitted)); cf. Kiowa Tribe of Okla., 523 U.S. at 760 (“The
doctrine of sovereign immunity is an amalgam of two quite
different concepts, one applicable to suits in the sovereign’s
own courts and the other to suits in the courts of another
sovereign.” (Stevens, J., dissenting) (citation and internal
quotation marks omitted)).
UNITED STATES EX REL. CAIN V. SALISH KOOTENAI 11
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Smith was also grounded in the record of that case. The
status of the College, either for “purposes of civil tribal court
jurisdiction,” Smith, 434 F.3d at 1135, or for purposes of the
FCA, is a mixed question of law and fact. Even if we were
considering the same question as the Smith court, a different
factual record could lead to a different conclusion. No matter
how extensive the record in Smith, the College cannot knock
out plaintiffs’ suit by mere citation to Smith.
In any event, we have already adopted the proper standard
for answering this question. Under White v. University of
California, “whether an entity is entitled to sovereign
immunity as an arm of the tribe” turns on several factors,
“including: (1) the method of creation of the [entity]; (2) [its]
purpose; (3) [its] structure, ownership, and management,
including the amount of control the tribe has over the entit[y];
(4) the tribe’s intent with respect to the sharing of its
sovereign immunity; and (5) the financial relationship
between the tribe and the entit[y].” 765 F.3d 1010, 1025 (9th
Cir. 2014) (internal quotation marks omitted).
Plaintiffs argue that the White test is inapposite because
White wasn’t an FCA case. They argue we should instead
apply the “arm of the state” analysis from Stoner v. Santa
Clara County Office of Education, 502 F.3d 1116, 1122–23
(9th Cir. 2007). Stoner primarily turns on whether the State
is directly or functionally liable for monetary judgments
against the purported state agency. Id.; see also Belanger v.
Madera Unified Sch. Dist., 963 F.2d 248, 251 (9th Cir. 1992)
(“The most crucial question . . . is whether the named
defendant has such independent status that a judgment against
the defendant would not impact the state treasury.” (citations
and internal quotation marks omitted)).
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Our reasoning in Stoner undermines plaintiffs’ argument.
In Stoner, we considered whether a California county office
of education and a California school district were state
agencies that were excluded from the term “person” within
the meaning of the FCA. 502 F.3d at 1121. We held that
“our Eleventh Amendment case law should guide [this]
determination” because “Stevens’[s] analysis of the word
‘person’ in § 3729 was driven by canons of statutory
construction relating to protection of the state’s sovereign
immunity.” Id. (citing Stevens, 529 U.S. at 781–87). In other
words, we held that whether a state entity is covered by the
FCA depends on whether that entity shares the State’s
sovereign immunity. Accordingly, to answer whether the
College is covered by the FCA, we should apply a test for
determining whether the College shares the Tribe’s sovereign
immunity. The White test does precisely that.
It is of no moment that White wasn’t an FCA case. White
was about whether the Native American Graves Protection
and Repatriation Act abrogated tribal sovereign immunity and
whether that immunity extended to the tribe’s repatriation
committee. 765 F.3d at 1023–25. Similarly, the issue here is
whether Congress intended the FCA to apply to tribal
sovereigns and whether the Tribe’s sovereign immunity
extends to the College.
It may seem somewhat arbitrary to apply different tests
for determining whether an entity is an arm of a state than for
determining whether an entity is an arm of a tribe. But this is
the product of our unusual history. Our country has two
different types of domestic sovereigns: States and Indian
tribes. While they are both sovereigns, their respective
sovereign immunities differ in scope. Unlike States, Indian
UNITED STATES EX REL. CAIN V. SALISH KOOTENAI 13
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tribes were not at the Constitutional Convention and the
Eleventh Amendment doesn’t apply to them. See Kiowa
Tribe of Okla., 523 U.S. at 756. To determine the reach of
tribal immunity using Eleventh Amendment case law would
be anachronistic.
Having concluded that White provides the appropriate test
for determining whether the College is an arm of the Tribe,
we remand so that the district court may apply the White
factors. There’s one last wrinkle: The district court denied
plaintiffs additional jurisdictional discovery because it
believed that Smith controlled the result and further discovery
wouldn’t make any difference. But information that is
relevant under White remains to be discovered.5 On remand,
the district court shall allow appropriate discovery before
determining whether the College is an arm of the Tribe under
White.
REVERSED AND REMANDED.
5
The record seems silent, at least, as to the last of the White factors.
During oral argument, the College and the Tribe both represented to us
that there are documents that would show the financial arrangements
between the two entities. In fact, the College attempted to supplement the
record with one such document by way of a motion for judicial notice.
We deny that motion as moot.