JOHN DAVID STONER, individually; UNITED STATES OF AMERICA, Ex Rel. John David Stoner, et al. v. Santa Clara County Office of Education, et al.

Under the False Claims Act ("FCA"), "[a]ny person" who,
among other things, "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" is liable to the Government for a civil penalty, treble
damages, and costs. 31 U.S.C. § 3729(a)(1). The FCA
authorizes a private person, known as a relator, to bring a qui
tam civil action "for a violation of section 3729 for the person
and for the United States Government. . . . in the name of the
Government." 31 U.S.C. § 3730(b)(1). This case requires us
to decide whether a pro se relator may bring a qui tam action
in federal court on behalf of the government against various
actors in the California school system.

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FACTUAL AND PROCEDURAL BACKGROUND

Appellant John David Stoner brought this qui tam action in
the United States District Court for the Northern District of
California against the Santa Clara County Office of Education
("SCCOE"), his former employer, the East Side Union High
School District ("ESUHSD"), and three SCCOE employees,
Colleen Wilcox, Joe Fimiani, and David Wong. In the proceedings before the district court, Stoner appeared pro se.
Although Stoner is a licensed attorney, and has been admitted
to practice before this court, see Fed. R. App. Proc. 46(a), he
is not a member of the State Bar of California, and consequently
could not be admitted to membership before the district
court for the Northern District of California, see Northern
District of California, Civil Local Rule 11-1. Stoner's complaint
alleged that defendants presented various fraudulent
claims for payment or approval to the United States in violation
of the False Claims Act ("FCA"). Specifically, he
claimed that defendants falsely certified compliance with the
Individuals with Disabilities Education Act to induce the government
to disburse more money for certain educational programs.
Stoner's complaint also raised a number of state law
claims, including alleged violations of the California False
Claims Act.

As required by the FCA, Stoner filed his complaint under
seal and served it on the United States. See 31 U.S.C.
§ 3730(b)(2). After the United States declined to intervene,
the complaint was unsealed and served on the SCCOE. The
SCCOE immediately moved to dismiss the claims against it,
arguing, among other things, that it was not a "person" subject
to liability under the FCA. The remaining defendants joined
in that motion.

The district court granted the motion to dismiss after determining
that the complaint failed to state a claim under the
FCA. See Fed. R. Civ. P. 12(b)(6). The court held that the
FCA did not provide a cause of action against the SCCOE and
the ESUHSD because each entity is a state agency, and thus
not a "person" subject to liability under the FCA. See Vt.
Agency of Natural Res. v. United States ex rel. Stevens, 529
U.S. 765, 787-88 (2000) (holding that the FCA does not subject
a state or state agency to liability in a qui tam action
brought by a private relator). Relying on United States ex rel.
McVey v. Board of Regents of the University of California,
165 F. Supp. 2d 1052, 1058-59 (N. D. Cal. 2001), the court also held that Stoner could not sue the individual SCCOE
employees in their personal capacities under the FCA for
actions committed in the course of their official responsibilities.
In addition, the court sua sponte raised the issue of Stoner's
authority to prosecute a qui tam action on behalf of the
United States in propria persona and held that Stoner could
not proceed pro se1 on the FCA claims. The court then
declined to exercise supplemental jurisdiction over Stoner's
remaining state law claims and dismissed Stoner's complaint
in its entirety. Stoner filed this timely appeal. See Arpin v.
Santa Clara Valley Transp. Agency, 261 F.3d 912, 923 (9th
Cir. 2001) (noting that a motion to dismiss becomes a final
appealable order within the meaning of 28 U.S.C. § 1291
when the district court order disposes of all claims against all
parties).

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We first address the question whether school districts in
California, including county offices of education, are subject
to qui tam liability under the FCA. We begin our analysis
with the language of the statute itself. The FCA subjects to
liability any "person" who, among other things, "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). Section
3729 does not define the term "person." However, Stevens
held that a state or state agency is not a "person" for purposes
of § 3729 and, therefore, not subject to liability in qui tam
suits brought by private parties. 529 U.S. at 787-88.

[1] In light of Stevens' holding, we must determine whether
the SCCOE, a California county office of education, and the
ESUHSD, a California school district, are state agencies.
Although we have not yet considered this issue in the context
of the FCA, we previously determined that a California school
district and county office of education were state agencies for
purposes of Eleventh Amendment sovereign immunity.
Belanger v. Madera Unified Sch. Dist., 963 F.2d 248, 254
(9th Cir. 1992); Eaglesmith v. Ward, 73 F.3d 857, 860 (9th
Cir. 1996). The district court looked to these cases in ruling that neither the SCCOE nor the ESUHSD was a "person"
within the meaning of 31 U.S.C. § 3279.

[2] We agree with the district court's approach. As
explained below, Stevens teaches that our Eleventh Amendment
case law should guide our determination of whether an
entity is a state agency and thus not a "person" for purposes
of § 3279. Stevens' analysis of the word "person" in § 3279
was driven by canons of statutory construction relating to protection
of the state's sovereign immunity. See Stevens, 529
U.S. at 781-87. Specifically, Stevens based its holding that
neither a state nor a state agency were "persons" within the
meaning of § 3279 on the following canons of statutory construction
related to state sovereignty: (1) the presumption that
the term "person" does not include the sovereign, id. at 780;
(2) the rule that Congress must clearly state its intention to
subject states to liability, id. at 781-82, 787; (3) the presumption
against imposition of punitive damages on governmental
entities, id. at 784-85; and (4) "the ordinary rule of statutory
construction that if Congress intends to alter the usual constitutional
balance between States and the Federal Government,
it must make its intention to do so unmistakably clear in the
language of the statute," id. at 787. Applying these canons,
the Court observed that "far from providing the requisite affirmative
indications that the term ‘person' included States for
purposes of qui tam liability," Congress expressed a contrary
intent. Id. This conclusion was buttressed by "the doctrine
that statutes should be construed so as to avoid difficult constitutional
questions." Id. With respect to this last point, the
Supreme Court explained that there was "'a serious doubt' "
on the question whether an action in federal court by a qui
tam relator against a state or a state agency would be consistent
with the Eleventh Amendment, id. (quoting Ashwander v.
TVA, 297 U.S. 288, 348 (1936) (Brandeis, J., concurring)),
although the Court was careful to "express no view" on this
issue. Id. In effect, the Court presumed that in enacting the
FCA, Congress intended not to infringe on a state' s sovereign immunity and therefore did not make states subject to suit
under the FCA.

To effectuate Congress's presumed intent, we must interpret
the term "person" under § 3279 in a way that avoids suits
against "state instrumentalities" that are effectively arms of
the state immune from suit under the Eleventh Amendment.
See also Will v. Mich. Dep't of State Police, 491 U.S. 58, 70
(1989) (instructing lower courts to refer to the Eleventh
Amendment arm-of-the-state analysis in determining whether
an entity is an agency of the state and thus not a "person" for
purposes of 42 U.S.C. § 1983 (citing Mt. Healthy Bd. of Educ.
v. Doyle, 429 U.S. 274, 280 (1977))). Our conclusion that we
must rely on our Eleventh Amendment jurisprudence to determine
whether an entity is a "person" within the meaning of
§ 3279 is further underlined by our post-Stevens holding that
"states and state agencies enjoy sovereign immunity from liability
under the FCA." Bly-Magee v. California, 236 F.3d
1014, 1017 (9th Cir. 2001); see also United States ex rel. Ali
v. Daniel, Mann, Johnson & Mendenhall, 355 F.3d 1140,
1145 (9th Cir. 2004). Both Bly-Magee and Ali implicitly recognize
that Eleventh Amendment principles guided the
Supreme Court's decision in Stevens.

[3] We thus look to our Eleventh Amendment case law in
determining whether the SCCOE and the ESUHSD are state
agencies not subject to FCA liability under Stevens. We have
held that a California school district and county office of education
are arms of the state for purposes of Eleventh Amendment
sovereign immunity. Belanger, 963 F.2d at 254;
Eaglesmith, 73 F.3d at 860. Accordingly, we must conclude
that neither the SCCOE nor the ESUHSD is a "person" subject
to liability under § 3279 of the FCA. Stevens, 529 U.S. at
781-87. By the same reasoning, Stoner's qui tam action
against the SCCOE and the ESUHSD is barred by the Eleventh
Amendment. Ali, 355 F.3d at 1145; Bly-Magee, 236 F.3d
at 1017.

Stoner asks us to revisit Belanger and Eaglesmith in light
of Regents of the University of California v. Doe, 519 U.S.
425 (1997), which was decided by the Supreme Court five
years after Belanger. He contends that after Regents, a state
agency is not shielded by the state's sovereign immunity
unless the state is directly liable for any money judgment rendered
against the agency. We disagree. Regents holds that the
Eleventh Amendment may bar a lawsuit against a state
agency in circumstances where the state is legally liable for
a judgment against that agency, even if the state is indemnified
against that liability by a third party. Id. at 426. But nothing
in Regents requires us to depart from the well-established
Eleventh Amendment principle that a governmental entity
may be an arm of the state protected by sovereign immunity
where the state is functionally liable, even if not legally liable,
on money judgments against the state entity. See, e.g., Hess
v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 50 (1994)
("Where an agency is so structured that, as a practical matter,
if the agency is to survive, a judgment must expend itself
against state treasuries, common sense and the rationale of the
eleventh amendment require that sovereign immunity attach
to the agency." (internal quotation marks omitted)); Lake
Country Estates, Inc. v. Tahoe Reg'l Planning Agency, 440
U.S. 391, 401 (1979) (The Eleventh Amendment "protect[s]
the state treasury from liability that would have had essentially
the same practical consequences as a judgment against
the State itself." (emphasis added)). In decisions issued after
Regents, we held that California school districts and county
offices of education are entitled to the state's Eleventh
Amendment immunity, due in part to their statutorily mandated
relationship with the state, which (among other things)
makes the state treasury unconditionally liable to make up any
budgetary shortfall encountered by either entity as a result of
an adverse judgment. See Beentjes v. Placer County Air Pollution
Control Dist., 397 F.3d 775, 780-81 (9th Cir. 2005);
Holz v. Nenana City Pub. Sch. Dist., 347 F.3d 1176, 1183 (9th
Cir. 2003); Savage v. Glendale Union High Sch. Dist. No.
205, 343 F.3d 1036, 1042 (9th Cir. 2003); Eason v. Clark County Sch. Dist., 303 F.3d 1137, 1142 (9th Cir. 2002). These
cases make clear that Belanger and Eaglesmith remain binding
authority of this circuit following Regents.

[4] Following Belanger and Eaglesmith, therefore, we hold
that the SCCOE and the ESUHSD are arms of the state, and
therefore not "persons" subject to qui tam liability under the
FCA. Stoner thus has no statutory authority to bring an FCA
claim against the SCCOE and the ESUHSD. See 31 U.S.C.
§ 3729(a); Stevens, 529 U.S. at 787-88. By the same token,
the Eleventh Amendment poses an independent bar to qui tam
action against either entity. Bly-Magee, 236 F.3d at 1017.
Accordingly, the district court properly dismissed Stoner's
FCA claims against both entities.

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