The Fourth Circuit vacated and remanded a district court’s decision deferring judgment on the defendants’ motion to dismiss based on qualified immunity pending the presentation of further evidence. Two defendants argued that the relator’s claims arose from their work as state officials responsible for obtaining and spending federal program funds, and therefore the claims were precluded by the doctrine of qualified immunity. However, the circuit panel explained that qualified immunity was intended to protect officials from financial liability arising from the performance of their duties, not to protect them from fraud claims. Further, the court reasoned that plausibly alleged FCA claims necessarily asserted the requisite scienter, and therefore the defendants could not argue the alleged misconduct was related to mistaken but reasonable judgment. Finally, the court noted that qualified immunity could not protect defendants from liability when the victim of the alleged fraud is the federal government. The court vacated the portion of the district court’s decision deferring judgment on the question of qualified immunity and directed the court to preclude this defense.
Citynet LLC filed a qui tam action alleging that West Virginia officials Jimmy Gianato, Gale Given, and others defrauded the United States when obtaining federal funding for a program to improve broadband connectivity for West Virginia residents. Specifically, the relator alleged the defendants knowingly submitted false statements and records to the United States as part of their application for funding under the federal Broadband Technology Opportunities Program and, once the funding was obtained, made false claims in drawing down funds under the program.
Gianato and Given moved to dismiss, arguing that the complaint failed to state plausible claims for relief and that they were entitled to qualified immunity. The district court denied the motion, finding the complaint adequately pled the allegations. With respect to qualified immunity, the court deferred that decision until after the development of evidence. In so concluding, the district court implicitly assumed that government officials could invoke qualified immunity as a defense to claims brought under the FCA.
Gianato and Given filed this interlocutory appeal from the court’s ruling on qualified immunity, claiming that, because qualified immunity is an immunity from suit, they ought to be shielded from participating in further proceedings before the district court.
Funding for the project was provided under the American Recovery and Reinvestment Act of 2009. On behalf of the state, Gianato and others submitted an application for project funding and subsequently received $126 million. Around the same time, Citynet applied for funding but was unsuccessful.
In its complaint, Citynet alleged the defendants made false statements on the state’s application and later submitted false claims for program funds. According to Citynet, the defendants prepared the application with the intent that another entity, Frontier West Virginia Inc., be the actual recipient of any grant funds awarded to the state, despite representations in the application. Citynet also alleged that the state coordinated with Frontier to submit false invoices to the government while fraudulently using the funds in pursuit of a project entirely different from the one that had been awarded federal funding. Thus, the relator alleged that Frontier, through the state, billed the federal government for material and labor it did not provide and for a project that was not constructed.
Relevant to these proceedings, the district court denied the defendants’ motion to dismiss in relation to their claim of qualified immunity, concluding that further fact-finding was needed to determine whether Gianato and Given had acted with some level of scienter—actual knowledge, deliberate ignorance, or reckless disregard—or whether their actions had violated a clearly established right.
Citynet argued the appeals court lacked jurisdiction to hear the interlocutory appeal, because the ruling on qualified immunity was deferred. The relator also somewhat contradictorily argued that an immunity defense is not available in response to a claim that defendants knowingly violated the FCA, which implied that the issue of immunity can be decided as a matter of law at this stage.
The Fourth Circuit held it possessed jurisdiction. While the district court did defer the question, its ruling presumed that the immunity defense was available in response to an FCA claim. In so presuming, the court skipped the logically antecedent legal question of whether qualified immunity could ever be invoked as a defense to claims of fraud brought under the FCA. The appeals panel explained that resolving that question did not require further factual development and therefore the deferral was unnecessary. Therefore, the court had jurisdiction.
First, the court considered whether qualified immunity may be invoked as a defense in an FCA case. The doctrine of qualified immunity shields federal and state officials from money damages arising from alleged violations of statutory or constitutional rights. Under the FCA’s standard for scienter—that a complaint must show the defendants acted knowingly—a government official who acted intentionally or recklessly would necessarily forfeit any entitlement to qualified immunity. In other words, qualified immunity does not protect government officials when they act to violate the law with actual knowledge or willful disregard.
Thus, the court held that the state of mind required to establish liability under the FCA is also sufficient to preclude immunity protection, and therefore immunity cannot protect a public official from a suit alleging a claim under the FCA. The FCA already protects violations that can be explained by reasonable but mistaken judgments, the court explained. Therefore, a complaint that adequately pleads FCA violations would necessarily also argue that the behavior in question was out of bounds of the area of mistaken judgment.
Further, the court found a good reason to hesitate before applying qualified immunity to situations where the victim of alleged violations is the United States and the perpetrator is a federal or state agent. While courts have recognized the public interest in affording public officers immunity from suit to protect their ability to exercise independent discretion in carrying out their official duties, the appeals panel reasoned the public interest would not be served if immunity were extended to officials who defrauded the government.
Because the court concluded that qualified immunity may not be invoked as a defense to liability under the FCA, it vacated this portion of the district court’s ruling deferring for further factual development the immunity issue and remanded with the instruction that the district court deny Gianato and Given’s motion to dismiss on the basis of qualified immunity.
