March 13, 2014 4th Circuit published opinion

United States ex rel. Oberg v Pennsylvania Higher Education Assistance Agency

Oberg brought qui tam suits against Agency and similar entities in Vermont and Arkansas alleging fraudulent receipt of interest subsidies. After an earlier remand, the district court ruled each entity was an arm of the state and dismissed the complaints. The panel, with one judge dissenting in part, affirmed in part, vacated in part and remanded. The majority held that whether a state created corporation is a “person” for False Claim Act purposes is an element of the claim and not an affirmative defense. Applying the “arm of state” framework, the majority affirmed as to the Arkansas entity, but, vacated as to Agency and the Vermont entity. The majority held that Agency could not be ruled an arm of the state as a matter of law given the segregation of its funds from state funds, actual independence from state control while acknowledging Agency was mostly involved in Pennsylvania and had been declared a state entity by Pennsylvania courts. This claim was remanded for discovery on the “person” issue. The Vermont entity claim was also remanded for limited discovery as it was unclear whether Vermont would be liable for a judgment, it was unclear how much autonomy the entity actually enjoyed, it was focused on state level student loan activity and it is treated as a state entity under Vermont law. The Arkansas claim was properly dismissed as all of that entities monies goes to the state, the governor appoints all board members, it made no out of sate loans during the time covered by the claim and state law explicitly identifies the entity as an arm of the state. The dissent argued that Oberg properly pled “person” status for Agency and the other entities by alleging they are corporations which are presumptively persons for purposes of the Act. Thus, arm of state status is an affirmative defense which Oberg did not need to disprove at this stage of the case. Alternatively, the dissent argued that the complaint as to the Arkansas entity plausibly pled a lack of arm of the state status as the entity is self sustaining financially and it is autonomous in its operations.

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