Some questions can’t be answered in a vacuum. That’s the situation when the question is whether an entity wants to be part of the state or separate from it. If the specific issue is whether its board meetings are open to the public, or whether its records are open to reporters, the entity probably doesn’t want to be part of the state.
But the question came up for University of Massachusetts Medical School in a context that made the School want to be part of the state. And fortunately for the School, last week the federal court hearing the case agreed with its position.
Michael Willette brought a qui tam case against the School and the estate of Leo Villani. He alleged that the School falsely inflated its Medicaid bills, violating the False Claims Act. He also alleged that in 2009 he and Leo, both employees of the School, discovered a computer glitch in the system used to allocate insurance payments. Leo secretly exploited the error to divert $3 million to his own account. When Michael discovered the fraud and reported it to School officials, they ridiculed him and restricted his computer access.
(By the way, Michael discovered Leo’s theft after Leo died. Leo had named Michael as his personal representative, and Michael found the evidence trail while administering Leo’s surprisingly large estate.)
The School moved to dismiss on the grounds that the False Claims Act doesn’t permit qui tam suits by private individuals against a part of the state. Michael disputed the premise that the School was part of the state. The court applied a two-part test. The first part uses eight criteria, including separate incorporation, funding power, and liability for state taxation. The court concluded that the School easily met these criteria and passed this test for being part of the state.
The second test, which the court called “dispositive,” is whether the state would be on the hook for any liability resulting from the suit. Again, the court had no difficulty in ruling that the School met the test.
Two lessons: First, a private relator can’t sue a state entity under the False Claims Act. Second, be careful in appointing your personal representative.
The case is U.S. ex rel. Willette v. Univ. of Mass., Worcester, 4:13-cv-40066-TSH (D. Mass. 2015).
