Filed: Jun. 22, 2020
Latest Update: Sep. 22, 2020
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 18-1575 UNITED STATES EX REL. CITYNET, LLC, Plaintiff - Appellee, v. JIMMY GIANATO, individually; GALE GIVEN, individually, Defendants - Appellants, and FRONTIER WEST VIRGINIA, INC., a West Virginia corporation; KENNETH ARNDT, individually; DANA WALDO, individually; MARK MCKENZIE, individually, KELLY GOES, individually, Defendants. Appeal from the United States District Court for the Southern District of West Virginia, at Charle
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 18-1575 UNITED STATES EX REL. CITYNET, LLC, Plaintiff - Appellee, v. JIMMY GIANATO, individually; GALE GIVEN, individually, Defendants - Appellants, and FRONTIER WEST VIRGINIA, INC., a West Virginia corporation; KENNETH ARNDT, individually; DANA WALDO, individually; MARK MCKENZIE, individually, KELLY GOES, individually, Defendants. Appeal from the United States District Court for the Southern District of West Virginia, at Charles..
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 18-1575
UNITED STATES EX REL. CITYNET, LLC,
Plaintiff - Appellee,
v.
JIMMY GIANATO, individually; GALE GIVEN, individually,
Defendants - Appellants,
and
FRONTIER WEST VIRGINIA, INC., a West Virginia corporation; KENNETH
ARNDT, individually; DANA WALDO, individually; MARK MCKENZIE,
individually, KELLY GOES, individually,
Defendants.
Appeal from the United States District Court for the Southern District of West Virginia, at
Charleston. John T. Copenhaver, Jr., Senior District Judge. (2:14-cv-15947)
Argued: January 29, 2020 Decided: June 22, 2020
Before WILKINSON, NIEMEYER, and MOTZ, Circuit Judges.
Vacated and remanded by published opinion. Judge Niemeyer wrote the opinion, in which
Judge Wilkinson and Judge Motz joined.
ARGUED: Geoffrey A. Cullop, PULLIN, FOWLER, FLANAGAN BROWN & POE,
PLLC, Charleston, West Virginia, for Appellants. Benjamin L. Bailey, BAILEY &
GLASSER LLP, Charleston, West Virginia, for Appellee. ON BRIEF: Stephen M.
Fowler, PULLIN, FOWLER, FLANAGAN BROWN & POE, PLLC, Charleston, West
Virginia, for Appellants. Rebecca L. Donnellan-Pomeroy, BAILEY & GLASSER LLP,
Charleston, West Virginia, for Appellee.
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NIEMEYER, Circuit Judge:
Acting on behalf of the United States, a West Virginia company, Citynet, LLC,
commenced this “qui tam” action against West Virginia officials Jimmy Gianato, Gale
Given, and others, alleging in nine counts that the defendants defrauded the United States
when obtaining federal funding for a program to improve broadband connectivity for West
Virginia residents, in violation of the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq.
Specifically, Citynet alleged that Gianato and Given, respectively the Director of the West
Virginia Division of Homeland Security and Emergency Management and the State
Technology Officer, along with other 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 filed a motion to dismiss the complaint, asserting, among other
things, that it failed to state plausible claims for relief and that they were, in any event,
entitled to qualified immunity. The district court ruled that, with the exception of two
counts against Given related to her involvement in the preparation of the grant application,
the complaint adequately alleged that Gianato and Given had violated the FCA. And with
respect to qualified immunity, the court ruled that “the determination of whether [Gianato
and Given are] entitled to the defense [of qualified immunity] [had to] be deferred until a
later time in light of evidentiary development, such as at the summary judgment stage.” It
explained that resolving the immunity question required further fact-finding with respect
to each official’s state of mind in allegedly violating the FCA. In so concluding, the district
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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 district 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.
Citynet filed a motion to dismiss the appeal, contending that the district court’s ruling that
further facts were needed before ruling on immunity is not immediately appealable.
Citynet also argued that, in any event, persons violating the FCA cannot be protected by
immunity because they “knowingly perpetrated a fraud on the United States government.”
Because the district court’s ruling was contingent on the answer to the threshold
legal question of whether qualified immunity may be invoked as a defense to FCA claims,
we exercise appellate jurisdiction and hold that qualified immunity does not apply to
protect government officials from claims against them for fraud under the Act.
Accordingly, we vacate the district court’s immunity ruling and remand with the instruction
that the district court deny Gianato and Given’s claim of qualified immunity.
I
Under the American Recovery and Reinvestment Act of 2009, Congress
appropriated approximately $4.7 billion in federal funds for the Broadband Technology
Opportunities Program, seeking to create jobs and expand broadband access in rural and
underserved communities. On behalf of the Executive Office of the State of West Virginia,
Gianato and others submitted an application for funding under the Program with a proposal
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for a “middle-mile” project, which would link a telecommunications carrier’s core network
to local hubs, such as schools, libraries, and healthcare facilities. In February 2010, the
Executive Office received a grant of over $126 million in Program funding for that project.
Citynet, a communications service provider that had unsuccessfully applied for
Program funding, commenced this action on behalf of the United States under the FCA. It
alleged in nine counts that Gianato, Given, and various other defendants not involved in
this appeal engaged in a scheme to fraudulently cause the federal government to award
Program funds to the Executive Office by knowingly submitting false statements and
records as part of the grant application and by subsequently submitting false claims to the
federal government for payments under the Program. According to the complaint, the
defendants prepared the grant application with the intent that another entity, Frontier West
Virginia, Inc., “be the actual recipient of [any] grant funds awarded to the [Executive
Office],” and, as a result, the Executive Office’s grant proposal contained numerous
material misrepresentations. Citynet also alleged that, once the Executive Office had been
awarded a grant under the Program, it 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, Frontier, through the Executive
Office, billed the federal government for “material and labor it did not provide, and for
fiber links that were not constructed.”
Gianato and Given filed a motion to dismiss the complaint under Federal Rule of
Civil Procedure 12(b)(6), arguing, inter alia, that each count against them failed to state a
plausible claim for relief; that, as state officials sued in their individual capacities for
5
conduct undertaken in the course of their official duties, they were not “persons” subject
to liability under the FCA; and that, in any event, they were entitled to qualified immunity.
In a 104-page opinion and order dated March 30, 2018, the district court granted the
motion to dismiss in part and denied it in part. As relevant to this appeal, the court
determined that, with the exception of two counts against Given related to the preparation
of the grant application, Citynet had adequately pleaded that both Gianato and Given had
violated the FCA. The court deferred ruling on Gianato and Given’s assertion of qualified
immunity, concluding that, without further facts, it could not determine the level of scienter
with which they had acted or, relatedly, whether their actions had violated a clearly
established right. Recognizing that the FCA requires a showing that the defendant acted
with actual knowledge, deliberate ignorance, or reckless disregard, the court observed that
“a reasonable person with ‘actual knowledge’ of his fraud would doubtlessly know that the
fraud he perpetrates is wrong. At the other end, whether a reasonable person ‘act[ing] in
reckless disregard of the truth’ would recognize that his actions constitute a fraud under
the FCA is a much closer issue.” The court concluded:
While the complaint sufficiently alleges that the defendants acted with the
requisite scienter, the court cannot at this juncture decide the level of scienter
with which [Gianato and Given] acted in allegedly violating the FCA. That
obfuscates the qualified immunity analysis as set forth above, and the
qualified immunity decision consequently must be deferred until a time when
the court can make an informed decision based upon the evidence.
Gianato and Given filed this interlocutory appeal from the district court’s immunity
ruling, asserting that it was a “final decision under the collateral order doctrine.”
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Contending otherwise, Citynet filed a motion to dismiss the appeal, and we deferred ruling
on the motion pending briefing on the merits and oral argument.
II
At the outset, we must address Citynet’s motion to dismiss this appeal, as it
challenges our jurisdiction.
Citynet contends in its motion that when a district court defers ruling on the claim
of qualified immunity because of a need for factual development, a court of appeals lacks
jurisdiction to review the district court’s order. But in its subsequent brief, Citynet takes a
position somewhat in tension with its motion, asserting that an immunity defense is not
available in response to a claim that defendants knowingly violated the FCA, thus implying
that the issue of immunity can be decided as a matter of law at this stage of the proceeding.
The principles for determining our jurisdiction are well established. Ordinarily, the
denial of a motion to dismiss is interlocutory and thus not subject to immediate appeal. See
Cohen v. Beneficial Indus. Loan Corp.,
337 U.S. 541, 546 (1949). But, under the collateral
order doctrine, appellate jurisdiction extends to “‘a narrow class of decisions that do not
terminate the litigation,’ but are sufficiently important and collateral to the merits that they
should ‘nonetheless be treated as final.’” Will v. Hallock,
546 U.S. 345, 347 (2006)
(quoting Digital Equip. Corp. v. Desktop Direct, Inc.,
511 U.S. 863, 867 (1994)).
Under this doctrine, a conclusive order denying a motion to dismiss on qualified
immunity grounds constitutes an immediately appealable collateral order if it turns on a
pure issue of law. See Ashcroft v. Iqbal,
556 U.S. 662, 671–72 (2009) (“A district-court
7
decision denying a Government officer’s claim of qualified immunity can fall within the
narrow class of appealable orders despite the absence of a final judgment” if it “turns on
an issue of law” (cleaned up)); see also Al Shimari v. CACI Int’l, Inc.,
679 F.3d 205, 221
(4th Cir. 2012) (en banc) (“[O]rders denying dismissal motions, insofar as those motions
are based on immunities that are not absolute but conditioned on context, . . . are . . .
immediately appealable” when based on “abstract issues of law” (cleaned up)). This is so
because qualified immunity “is an immunity from suit rather than a mere defense to
liability; and . . . it is effectively lost if a case is erroneously permitted to go to trial.”
Mitchell v. Forsyth,
472 U.S. 511, 526 (1985). Accordingly, we have recognized that a
district court’s refusal to rule on the immunity question nullifies the benefits of the defense
and may thus be treated as an immediately appealable denial of immunity. See Nero v.
Mosby,
890 F.3d 106, 125 (4th Cir. 2018); Jenkins v. Medford,
119 F.3d 1156, 1159 (4th
Cir. 1997) (en banc). An exception arises, however, when further factual development is
needed to rule on the immunity question itself. See Al
Shimari, 679 F.3d at 220 (“[E]ven
a party whose assertion of immunity ultimately proves worthy must submit to the burdens
of litigation until a court becomes sufficiently informed to rule”).
Citynet bases its motion to dismiss this appeal on this exception. The district court
did indeed conclude that factual development was needed to rule on the immunity question.
But the court’s 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. And resolution of this question requires no factual development. The
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district court’s deferral ruling in this case thus depends on resolution of this pure issue of
law, supporting our exercise of appellate jurisdiction at this time. Accordingly, we deny
Citynet’s motion to dismiss the appeal.
III
When applicable, the doctrine of “[q]ualified immunity shields federal and state
officials from money damages” in cases alleging violations of either “statutory or
constitutional right[s].” Ashcroft v. al-Kidd,
563 U.S. 731, 735 (2011). But we have yet
to address the more specific question of whether qualified immunity may be invoked as a
defense to claims brought under the FCA — the resolution of which turns on whether the
FCA’s scienter requirement is inconsistent with the doctrine.
Originally passed in 1863 in response to widespread fraud against the government
during the American Civil War, “the FCA is a fraud prevention statute” that imposes
liability on those who defraud federal government programs. United States ex rel. Owens
v. First Kuwaiti Gen. Trading & Contracting Co.,
612 F.3d 724, 728 (4th Cir. 2010)
(cleaned up); see also Rainwater v. United States,
356 U.S. 590, 592 (1958). In its current
version, the FCA provides that suit may be brought against “any person” who, inter alia,
“knowingly presents, or causes to be presented, [to the United States government] a false
or fraudulent claim for payment or approval”; “knowingly makes, uses, or causes to be
made or used, a false record or statement material to a false or fraudulent claim”; or
conspires to commit such acts. 31 U.S.C. § 3729(a)(1)(A)–(C). “In adopting the FCA,
9
‘the objective of Congress was broadly to protect the funds and property of the
government.’”
Owens, 612 F.3d at 728 (quoting
Rainwater, 356 U.S. at 592).
The FCA requires explicitly that, to be liable under the Act, the defendant must have
acted “knowingly.” And it defines “knowingly” to “mean that a person, with respect to
information — (i) has actual knowledge of the information; (ii) acts in deliberate ignorance
of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or
falsity of the information.” 31 U.S.C. § 3729(b)(1)(A). We have previously recognized
that this element is so defined to ensure that liability is not imposed for “honest mistakes
or incorrect claims submitted through mere negligence.”
Owens, 612 F.3d at 728 (quoting
S. Rep. No. 99-345, at 7 (1986), as reprinted in 1986 U.S.C.C.A.N. 5266, 5272). Thus,
FCA liability attaches only where a person has acted intentionally or recklessly.
Yet, by acting intentionally or recklessly, a government official necessarily forfeits
any entitlement to qualified immunity. See
al-Kidd, 563 U.S. at 743 (explaining that
qualified immunity protects “all but the plainly incompetent or those who knowingly
violate the law” (emphasis added) (quoting Malley v. Briggs,
475 U.S. 335, 341 (1986))).
Stated otherwise, qualified immunity does not protect government officials when they act
to violate the law with actual knowledge, deliberate ignorance, or reckless disregard of a
risk to a constitutional or statutory right. See, e.g., Washington v. Wilmore,
407 F.3d 274,
283–84 (4th Cir. 2005) (reasoning that qualified immunity may not shield government
officials who knowingly create or use false evidence to obtain a criminal conviction); Hope
v. Pelzer,
536 U.S. 730, 744–45 (2002) (reasoning that qualified immunity may not shield
government officials for a course of conduct where they have ignored a regulation with
10
impunity); Raub v. Campbell,
785 F.3d 876, 884 n.8 (4th Cir. 2015) (explaining that “[i]n
the arrest context, a law enforcement officer’s omission of material facts from a warrant
affidavit deprives him of qualified immunity . . . if the omission was made intentionally or
with a ‘reckless disregard for the truth’” (emphasis added) (quoting Miller v. Prince
George’s Cnty.,
475 F.3d 621, 627 (4th Cir. 2007))). Thus, 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. In order to have violated the FCA, a government official would have necessarily had
to act in a manner inconsistent with the type of “reasonable but mistaken judgments”
qualified immunity is designed to shield.
al-Kidd, 563 U.S. at 743.
Moreover, there is good reason to hesitate before applying qualified immunity — a
doctrine that “acts to safeguard the government, and thereby to protect the public at large”
rather than to “benefit [the government’s] agents” — to situations where the victim of the
alleged violation is the United States government itself, and the perpetrator a federal or
state agent. Wyatt v. Cole,
504 U.S. 158, 168 (1992). 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, see, e.g., Nixon v.
Fitzgerald,
457 U.S. 731, 744–45 (1982), it surely does not serve the public interest to
extend immunity protection to public officials who defraud the government. Thus, while
immunity should protect discretion, it must not shield fraud.
At bottom, we hold that qualified immunity may not be invoked as a defense to
liability under the FCA. See Samuel v. Holmes,
138 F.3d 173, 178 (5th Cir. 1998)
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(reasoning that “qualified immunity seems particularly ill-suited” to FCA retaliation claims
under 31 U.S.C. § 3730(h) because “[g]ranting government officials the protection of
qualified immunity would hardly spur reluctant employees to step forward” with
knowledge of fraud against the government); United States ex rel. Parikh v. Citizens Med.
Ctr.,
977 F. Supp. 2d 654, 685 (S.D. Tex. 2013) (holding that because the FCA attaches
liability only if a defendant knowingly presents a false or fraudulent claim, “qualified
immunity . . . has little role to play in False Claims Act cases”). Therefore, Gianato and
Given cannot claim qualified immunity as a defense to Citynet’s FCA claims, as the district
court assumed was a possibility.
IV
Gianato and Given ask us also to exercise pendent appellate jurisdiction over the
district court’s determination that, as state officials sued in their individual capacities for
actions taken in the course of their official duties, they qualify as “persons” subject to FCA
liability. Pendent appellate jurisdiction, however, is available “only (1) when an issue is
inextricably intertwined with a question that is the proper subject of an immediate appeal;
or (2) when review of a jurisdictionally insufficient issue is necessary to ensure meaningful
review of an immediately appealable issue.” Adams v. Ferguson,
884 F.3d 219, 224 (4th
Cir. 2018) (cleaned up). Because the question of whether the state officials are “persons”
under the FCA is neither inextricably intertwined with nor necessary to ensure meaningful
review of their claim of qualified immunity, pendent appellate jurisdiction to consider the
issue is unavailable.
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* * *
For the foregoing reasons, we vacate the district court’s ruling deferring for further
factual development the immunity issue and remand with the instruction that the district
court deny Gianato and Given’s motion to dismiss on the basis of qualified immunity.
VACATED AND REMANDED
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