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Tuesday, May 21, 2024 | Back issues
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State Officials Can’t Use Immunity to Dodge Fraud Claims, Panel Rules

Legal experts say a new ruling out of the Fourth Circuit could mark the end of state agency officials claiming qualified immunity when they are accused of defrauding the federal government.

RICHMOND, Va. (CN) — Legal experts say a new ruling out of the Fourth Circuit could mark the end of state agency officials claiming qualified immunity when they are accused of defrauding the federal government.  

In a unique case that saw West Virginia-based internet provider Citynet challenge the director of the state’s Division of Homeland Security and chief technology officer for allegedly scheming to illegally snatch up federal broadband funds, even the federal government, a co-plaintiff in the case, agreed the False Claims Act allegations should overcome the controversial legal doctrine most recently associated with police brutality. 

In an opinion released Monday, a three-judge panel at the Richmond-based appeals court agreed.

“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, it surely does not serve the public interest to extend immunity protection to public officials who defraud the government,” U.S. Circuit Judge Paul V. Niemeyer, a Ronald Reagan appointee, wrote in the 13-page opinion. “Thus, while immunity should protect discretion, it must not shield fraud.” 

Niemeyer was joined on the unanimous panel by U.S. Circuit Judges Harvie Wilkinson, another Reagan appointee, and Diana Motz, a Bill Clinton appointee. 

The case involves claims brought under the False Claims Act accusing the agency heads of submitting false information in applications for funding under the federal Broadband Technology Opportunities Program, which aims to support broadband infrastructure in rural parts of the country. 

Monday’s ruling came in response to early filings by the two West Virginia officials that sought to have the case dismissed before it could be fully argued. 

In a brief filed on behalf of the officials, attorney Geoffrey Cullop with the Charleston-based firm Pullin, Fowler, Flanagan, Brown & Poe argued that the defendants — Jimmy Gianato and Gale Given — “are sued for simply performing their jobs by applying for grant money and processing invoices.”

“If government officials are able to be sued for such simple acts... then many qualified candidates will be deterred from ever attempting to perform such duties and government operations will slow to a crawl,” the brief states.

But Benjamin L. Bailey, an attorney with another Charleston-based firm, Bailey & Glasser, wrote in Citynet’s response brief that the state officials should not be protected by qualified immunity.

“They are just as liable as anyone else for their false statements to the federal government about the amount of money they needed and then the amount of money they spent,” he wrote. 

The agency heads using qualified immunity as a defense isn’t a surprise, according to Institute for Justice senior attorney Robert McNamara, even considering the evidence of fraud brought before the court. 

“It sounds flippant until you realize it's an argument that has prevailed in other contexts,” McNamara said of state officials’ efforts to circumvent civil claims by using the judicial doctrine. 

“You can’t blame them for trying,” he added. 

McNamara said he was intrigued by the Fourth Circuit judges venturing so deep into qualified immunity’s unwritten waters. The lack of statutory definition for the court-established doctrine granting protection when a violation is rooted in negligence doesn’t usually see such clearly limited application, he said. 

“It’s not what we usually see judges do, usually they try to interpret the law,” he said. “When judges don’t think it's a good idea it disappears, but it's unusual because the doctrine has no real footing in text anywhere.” 

Ari Yampolsky, an attorney with the San Francisco-based firm Constantine Cannon, was glad to see such a definitive ruling on the issue. He’s most familiar with the False Claims Act, also called Lincoln’s Law for being signed after the Civil War, being used against government contractors.

Yampolsky specializes in such claims, but he said the use of qualified immunity by government actors in fraud disputes like the one in West Virginia is not common.

He pointed to the 2000 case Vermont Agency of Natural Resources v. United States, in which the U.S. Supreme Court addressed such a claim while still offering some space for the issue to be handled by other courts. 

In this case, Yampolsky said the court finalized the idea that state actors cannot hide behind immunity when evidence shows knowledge of fraud.

“If they’re taking federal money and using it inappropriately and making claims against the Federal Treasury that are false, they can be held liable,” he said in a phone interview, noting that trying to use qualified immunity in such an instance was like trying to put a square peg in a circular hole. “This case is akin to the final nail in the coffin that some defendants have made to try and get off scot-free.” 

The False Claims Act lets whistleblowers file lawsuits on the federal government’s behalf. If the government decides to join as a plaintiff, the whistleblower, called the relator in court filings, gets a reward of 15–25% of any settlement or judgment.

Attempts to reach attorneys for Citynet and the West Virginia defendants were not returned by press time.

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Categories / Appeals, Government, Law

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