80 F. Supp. 3d 296
D. Mass.2015Background
- Relator Michael Willette, a former employee of Commonwealth Medicine’s Center for Health Care Financing (a division of the University of Massachusetts Medical School — UMMS), sued UMMS and the Estate of Leo Villani under the federal False Claims Act (FCA) and Massachusetts False Claims Act (MFCA), alleging two schemes: (1) Villani diverted >$3 million via a computer allocation glitch, and (2) UMMS/Commonwealth Medicine/CHCF inflated Medicaid-related costs to increase federal reimbursements.
- Willette alleged UMMS retaliated against him after he reported Villani’s theft; he seeks to add Commonwealth Medicine and several former UMMS employees as individual defendants.
- UMMS moved to dismiss, arguing it cannot be sued by a private relator under the FCA/MFCA because it is an arm of the state; it also argued the complaint fails Rule 9(b) pleading requirements and retaliation claims are not protected activity.
- The court applied the arm-of-the-state test (used for sovereign immunity) and examined statutory governance, control, funding, incorporation, and whether the state treasury bears judgment risk.
- The court found UMMS/Commonwealth Medicine/CHCF are arms of the Commonwealth (substantial state control, lack of separate incorporation, state budget/appointment structure, and state regulations making the Commonwealth financially responsible), so private qui tam suits under the FCA and MFCA cannot proceed against UMMS.
- The court also denied leave to file a third amended complaint as futile because the proposed fraud claims against individual defendants failed Rule 9(b) particularity requirements and the alleged retaliatory conduct concerned reporting Villani’s theft (not protected FCA/MFCA activity).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether UMMS is subject to qui tam liability under the FCA/MFCA | Willette contends UMMS and its programs are not state actors and thus may be sued by a private relator | UMMS contends it is an arm of the state and private qui tam suits are barred | UMMS is an arm of the state; FCA and MFCA qui tam claims against UMMS dismissed |
| Proper test to determine "state" status for FCA purposes | First Circuit has not fixed a test; Willette offered no workable alternative | Court should apply arm-of-the-state (sovereign immunity) analysis used by other circuits | Court applied arm-of-the-state test and its multi-factor and treasury-risk inquiries |
| Leave to amend to add Commonwealth Medicine and individual defendants | Willette sought to add Commonwealth Medicine and former employees as defendants | UMMS argued immunity/futility and procedural defects in amendment process | Leave denied as futile: Commonwealth Medicine is part of UMMS (arm of state); procedural noncompliance noted but moot |
| Sufficiency of proposed fraud and retaliation claims (Rule 9(b) and protected activity) | Willette alleged a cost-shifting scheme and alleged retaliation for reporting Villani | UMMS argued the complaint lacks time/place/content of specific false claims and retaliation was not protected FCA activity | Fraud claims fail Rule 9(b) for lack of particularity; retaliation claims fail because reporting Villani’s theft did not concern alleged false submissions to government |
Key Cases Cited
- Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (establishes that private relators may not bring qui tam suits against states)
- Fresenius Medical Care Cardiovascular Resources, Inc. v. Puerto Rico and the Caribbean Cardiovascular Center Corp., 322 F.3d 56 (First Circuit arm-of-the-state factors and treasury-risk inquiry)
- United States ex rel. Lesinski v. South Florida Water Management District, 739 F.3d 598 (applying arm-of-the-state analysis for FCA cases)
- United States ex rel. Gagne v. City of Worcester, 565 F.3d 40 (Rule 9(b) particularity in FCA cases)
- United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720 (pleading standards for fraud and state FCA claims)
- United States ex rel. Karvelas v. Melrose-Wakefield Hospital, 360 F.3d 220 (insufficient schematic pleading cannot substitute for specific false claims)
- United States ex rel. Sikkenga v. Regence BlueCross BlueShield of Utah, 472 F.3d 702 (contrast: state-owned entity not an arm where treasury not liable and entity separately incorporated)
- Wojcik v. Massachusetts State Lottery Commission, 300 F.3d 92 (distinguishing governmental vs. proprietary functions)
- McNamara v. Honeyman, 406 Mass. 43 (Massachusetts court recognizing UMMS limitations on bonding and suability)