Tribal Employees Potentially Liable Under False Claims Act, Washington Federal Court Finds

A federal judge in the Western District of Washington has ruled that tribal employees may still be liable in their individual capacities under the False Claims Act, even if Native American tribes themselves are protected from such suits by sovereign immunity. This interpretation could have important implications for Alaska Native-owned and Native American-owned businesses as federal courts across the country confront a range of tribal sovereignty issues in the coming months.

The case concerns a qui tam suit by a former employee of the Sauk-Suiattle Tribe of Washington, who asserted that the Tribe, a Tribally-owned health clinic, and three tribal employees had submitted fraudulent claims to the federal government in violation of the federal False Claims Act (32 U.S.C. §§ 3729-33) and the Washington State Medical Fraud and False Claims Act (RCW 74.66.005 et seq.). After the United States and the State of Washington chose not to intervene, defendants filed a Rule 12(b)(6) Motion to Dismiss on the grounds that the Tribe had sovereign immunity which extended to all defendants.

The court found that while the FCA imposes civil liability on “any person” who knowingly presents a false or fraudulent claim, “a Native American tribe is a sovereign that does not fall within the definition of a ‘person’ under the FCA.” Accordingly, the court held that the Sauk-Suiattle were immune from the qui tam suit, though it refrained from opining whether this would still be the case if the United States had intervened.

Ninth Circuit has previously held that federally-recognized tribes are generally immune from FCA liability, and the court’s Order went on to apply the Ninth Circuit’s existing five-factor test to determine whether the health clinic functions as an “arm of the tribe” also entitled to sovereign immunity. The court’s disposition of the claims against tribal employees was more novel.

Defendants argued that the individuals “were tribal employees or agents or officials acting in their official tribal capacity,” and thus are protected from liability by the Tribe’s sovereign immunity. The court disagreed, finding that the tribal employees were equivalent to state employees. Under Stoner v. Santa Clara County Office of Educ., 502 F.3d 1116 (9th Cir., 2007), “state employees may be sued under the FCA even for actions taken in the course of their official duties” because the damages would come from the individuals rather than the state treasury. Accordingly, the three individual defendants were “not immune from suit due to sovereign immunity.”

The order coincides with another, higher profile FCA suit pending before the Western District of Washington. The Nooksack Tribe made national headlines after purging its membership rolls of over 300 people with disputed tribal lineage, including several members of the tribe’s governing council. The remaining members of the council have failed to hold new council elections and are operating without the quorum required by the tribal constitution, prompting some disenrollees to assert that the council is acting without proper authority. In a complaint filed in January 2017, these disenrollees argue that payment claims transmitted to the federal government by the purportedly unauthorized council on behalf of the tribe are effectively fraudulent claims under the FCA. If the court agrees that the current council is operating without tribal authority, then the individual council members could face FCA liability under the reasoning applied to the Sauk-Suiattle employees.

Both cases could soon be moot, however, if an upcoming Supreme Court decision involving torts committed by a tribally-employed limo driver substantially reshapes the landscape of tribal sovereign immunity.