The FCA and Its Anti-Retaliation Provision Yields to Tribal Immunity

It is not often that the False Claims Act (FCA) encounters a gating issue like tribal sovereign immunity, but late last month, the Seventh Circuit published an insightful opinion highlighting the boundaries between tribal entities and FCA liability in Mestek v. Lac Courte Oreilles Community Health Center, No. 22-2077 (7th Cir.) (June 29, 2023).

In August 2021, Teressa Mestek (Plaintiff) sued her former employer and several of its employees in the U.S. District Court for the Western District of Wisconsin, alleging violation of the FCA’s anti-retaliation provision, 31 U.S.C. § 3730(h). Prior to her termination, Plaintiff was the Director of Health Information at a community health center (the Health Center) affiliated with the Lac Courte Oreilles Band of Lake Superior Chippewa Indians (the Tribe), a federally recognized tribe in western Wisconsin. In 2017, Plaintiff flagged to her superiors certain billing irregularities found in Medicare and Medicaid claims that she believed were fraudulent. According to the complaint, after conducting an external audit that found numerous issues, the head of the Health Center asked Plaintiff if she was “loyal.” Plaintiff said yes but continued to investigate billing irregularities. She was terminated a month later. Not surprisingly, Plaintiff then filed the instant action, alleging she was terminated for reporting billing fraud in violation of the FCA. The district court dismissed the action on tribal sovereign immunity grounds after which Plaintiff appealed to the Seventh Circuit.

The Seventh Circuit affirmed in a unanimous decision on June 29, 2023. The Court first tackled the issue of whether the FCA’s anti-retaliation provision abrogated tribal sovereign immunity. As the Court stated, Congress can abrogate tribal sovereign immunity but “the authorization must be crystal clear.” The Court examined the language of the anti-retaliation provision, § 3730(h)(1), noting that while Congress named employees, contractors, and agents, “nowhere did Congress explicitly reference ‘Indians’ or ‘tribes’” or employ “catch-all” language to encompass a broad spectrum of government entities. Ultimately, the Seventh Circuit held that “abrogation is not a close call” as to the FCA’s anti-retaliation provision. While the Court’s analysis was focused on anti-retaliation, there is no reason tribal immunity would not apply to substantive FCA charges as there is no language in any FCA provision mentioning “Indians” or “tribes.”

The Court next determined if the Health Center was protected by the immunity of the Tribe. Applying the well-recognized “arm of the tribe” test, the Court found the Health Center was protected based on that test’s pertinent factors. Specifically, the Court found the Health Center: (1) was established under the inherent authority of the Tribe; (2) was intended to improve the health of the Tribal community; (3) was ultimately controlled by the Tribe; and (4) was specifically included as an entity protected by immunity under the Tribe’s Code of Law. The Court’s discussion of these factors as applied to the Health Center provides useful guidance to any FCA defendant affiliated with a tribe considering a tribal sovereign immunity defense.

Mestek is one of the rare FCA cases involving a tribe. As the Seventh Circuit made clear, tribal sovereign immunity holds even in the face of the seemingly strong allegations of retaliation as set forth by the Plaintiff in her complaint, unless there is “crystal clear” statutory language abrogating tribal immunity, which does not appear in the current, or any previous versions, of the FCA.

© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.