United States ex rel. Oberg v. Kentucky Higher Education Student Loan Corp.
2012 U.S. App. LEXIS 12290
| 4th Cir. | 2012Background
- Relator Dr. Jon Oberg filed a qui tam FCA action on behalf of the United States against four state-created student loan corporations: Kentucky Higher Education Student Loan Corporation, Pennsylvania Higher Education Assistance Agency, Vermont Student Assistance Corporation, and Arkansas Student Loan Authority.
- Oberg alleged the entities knowingly submitted false or fraudulent claims to the Department of Education to inflate SAP payments, causing overpayments.
- The district court dismissed the complaint as to all four entities, treating them as state agencies not subject to FCA liability under Stevens.
- The district court relied on state-law labels and did not apply a test linking state control to whether an entity is an ‘arm of the state’ under the Eleventh Amendment framework.
- On appeal, the Fourth Circuit vacated and remanded to apply the arm-of-the-state analysis to determine if any appellee is an arm of the State and thus not a “person” under the FCA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are appellees “persons” subject to the FCA | Oberg argues corporations are FCA persons independent of the State. | Appellees contend Stevens bars FCA liability for state agencies. | Arm-of-state analysis governs; not decided here. |
| Whether the arm-of-the-state framework applies to the FCA context | If the framework applies, certain appellees may be non-persons. | Stevens framework should be applied; local government distinctions may matter. | Yes, apply the arm-of-state analysis in the FCA context. |
| How to determine arm-of-the-state status under the four-factor test | Independent corporations are not arms of the state merely due to corporate form. | State control factors support agency status for some appellees. | Proceed in district court to apply the four-factor test to each appellee. |
| Relation to Chandler and local governments under FCA | Chandler should be read to allow FCA claims against municipal entities. | Chandler is not restricted to municipal entities and may not apply to state agencies. | District courts may apply Chandler appropriately to locals; not foreclosed. |
Key Cases Cited
- Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000) (states and state agencies generally not subject to FCA liability)
- Cook County v. United States ex rel. Chandler, 538 U.S. 119 (2003) (municipal corporations are “persons” under the FCA)
- Stoner v. Santa Clara County Office of Education, 502 F.3d 1116 (9th Cir. 2007) (arm-of-the-state framework applied in FCA context)
- United States ex rel. Adrian v. Regents of University of California, 363 F.3d 398 (5th Cir. 2004) (arm-of-the-state concepts in FCA analysis)
- Hoover Universal, Inc. v. City of Asheville, 535 F.3d 300 (4th Cir. 2008) (arm-of-the-state factors for state-created entities)
- Ram Ditta v. Maryland National Capital Park & Planning Comm’n, 822 F.2d 457 (4th Cir. 1987) (early arm-of-the-state considerations for state entities)
- Fed. Maritime Comm’n v. South Carolina Ports Auth., 535 U.S. 743 (2002) (relevant to sovereign immunity and state actor distinctions)
- S.C. Dep't of Disabilities & Special Needs v. Hoover Universal, Inc., 535 F.3d 300 (4th Cir. 2008) (articulates arm-of-the-state framework in diversity-like contexts)