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U.S. EX REL. K & R LTD. v. MASSACHUSETTS HOUSING

July 30, 2001

UNITED STATES OF AMERICA, EX REL. K & R LIMITED PARTNERSHIP PLAINTIFFS,
V.
MASSACHUSETTS HOUSING FINANCE AGENCY DEFENDANT.



The opinion of the court was delivered by: Lamberth, District Judge.

MEMORANDUM OPINION

This matter comes before the court upon a motion by the Massachusetts Housing Finance Agency ("MHFA") to dismiss K & R Limited Partnership's ("K & R") qui tam complaint for failure to state a claim upon which relief can be granted. For the following reasons, the Agency's motion shall be denied.

I. FACTS

On March 27, 1999, K & R filed a complaint under seal pursuant to the qui tam provisions of the False Claims Act, 31 U.S.C. § 3730, et seq., (the "FCA") alleging that the MHFA submitted false claims for payment to the United States Department of Housing and Urban Development ("HUD") each month beginning in April, 1993. Specifically, K & R asserts that the MHFA never lowered the amount it submitted to HUD for monthly interest reduction payments for 66 separate housing projects, even after lower interest bonds decreased the monthly mortgage payments that the MHFA was required to make on the projects. After investigating the contentions found in K & R's complaint, the United States' filed a Notice of Election to Decline Intervention in the proceeding against the MHFA. On April 12, 2000, this Court entered an order noting the Government's decision.

On June 19, 2000, in accordance with the Government's request, K & R served its complaint upon the MHFA. Subsequently, on September 14, 2000, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the MHFA filed a motion to dismiss K & R's complaint for failure to state a claim upon which relief can be granted. This court today denies the MHFA's motion.

II DISCUSSION

A. Issues Presented

The MHFA argues that K & R's complaint should be dismissed for three reasons. First, the MHFA holds that as a state agency it is not a "person" subject to liability under the FCA. Second, the MHFA claims that, as a governmental entity, it is presumptively immune from the punitive damages mandated by the FCA. Third, the MHFA contends that the qui tam provisions of the FCA, which allowed K & R to bring its complaint against the Agency, violates the separation of powers doctrine.

B. Standard of Review

If a plaintiff has failed "to state a claim upon which relief can be granted," a court may grant a defendant's motion to dismiss. Fed.R.Civ.P. 12(b)(6); see also Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1114 (D.C.Cir. 2000). In evaluating a motion to dismiss, a court must construe the complaint in the light most favorable to the plaintiff and give the plaintiff "the benefit of all inferences that can be derived from the facts alleged." Schuler v. United States, 617 F.2d 605, 608 (D.C.Cir. 1979); see also Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). "However, legal conclusions, deductions or opinions couched as factual allegations are not given a presumption of truthfulness." Wiggins v. Hitchens, 853 F. Supp. 505, 508 n. 1 (D.C. 1994) (citing 2A Moore's Federal Practice, § 12.07, at 63 (2d ed. 1986) (footnote omitted); Haynesworth v. Miller, 820 F.2d 1245, 1254 (D.C.Cir. 1987)).

C. The MHFA is a "Person" Under the FCA.

The FCA allows a private party to bring a qui tam civil action against "[a]ny person who . . . knowingly presents, or causes to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729(a). In Vermont Agency of Natural Resources v. U.S., ex rel. Stevens, the Supreme Court conclusively determined, after a review of the historical background and the text of the statute, that "the False Claims Act does not subject a State (or state agency) to liability." 529 U.S. 765, 788, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000). In its motion, the MHFA asserts that K & R's complaint should be dismissed, because it is a "state agency" free from liability under the FCA. This Court disagrees.

While this Court agrees with the MHFA that an Eleventh Amendment analysis is not needed to determine if States and state agencies are beyond the scope of the FCA, this Court does believe that a determination of whether the MHFA is an entity covered by Eleventh Amendment immunity is not only justified, but is also proper in light of the Supreme Court's reasoning in Stevens. In that case, as part of its analysis for determining what entities are liable under the FCA, the Supreme Court relied on the "longstanding presumption that `person' does not include the sovereign." Id. at 780, 120 S.Ct. 1858. Because "the States' immunity from suit is a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution, and which they retain today," Alden v. Maine, 527 U.S. 706, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999), it can be deduced that those ...


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