United States ex rel. Ocean State Transit, LLC v. Infante-Green

671 F.Supp.3d 130

UNITED STATES of America, EX REL. OCEAN STATE TRANSIT, LLC,d/b/a Student Transportation of America, Inc.,a Rhode Island limited liability company, Plaintiff, v. Angelica INFANTE-GREEN, in her personal capacity,John, and Jane Does 1-5, in their individual capacities, Defendants.

C.A. No. 1:21-CV-00391-MSM-PAS

United States District Court, D. Rhode Island

Signed April 28, 2023

Bethany N. Wong, DOJ-USAO, Assistant U.S. Attorney, Providence, RI, for Plaintiff United States of America.

Jeffrey L. Schultz, Pro Hac Vice, Paul L. Brusati, Pro Hac Vice, Jonathan R. Shulan, Pro Hac Vice, Armstrong Teasdale LLP, St. Louis, MO, Steven J. Boyajian, Robinson & Cole LLP, Providence, RI, for Plaintiff Ocean State Transit, LLC.

Timothy K. Baldwin, Matthew H. Parker, Robert Clark Corrente, Whelan Corrente & Flanders LLP, Providence, RI, for Defendant Angelica Infante-Green.

John and/or Jane Does, Pro Se.

MEMORANDUM AND ORDER

Mary S. McElroy, United States District Judge.

This is a qui tam suit brought on behalf of the United States of America by relator Ocean State Transit, LLC ("Ocean State") against Rhode Island Commissioner of Elementary and Secondary Education Angélica Infante-Green and several other unnamed state officials in their individual capacities. Ocean State alleges that Commissioner Infante-Green violated the Federal False Claims Act ("FCA"), 31 U.S.C. § 3729, et seq., by falsely certifying that the Rhode Island Department of Elementary and Secondary Education ("RIDE") complied with a requirement in the federal COVID-19 relief statutes - the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), the Consolidated Appropriations Act ("CAA"), and the American Rescue Plan Act ("ARPA") - requiring that RIDE "shall to the greatest extent practicable, continue to pay its employees and contractors during the period of any disruptions or closures related to the coronavirus." (ECF No. 1 ¶ 12.) The United States has declined to intervene, so Ocean State is pursuing this action alone as a qui tam relator. The Court now considers Commissioner Infante-Green's Motion to Dismiss (ECF No. 18) this complaint for failure to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6).

For the reasons below, Commissioner Infante-Green's Motion to Dismiss is GRANTED.

I. BACKGROUND

In response to the COVID-19 pandemic, Congress passed the CARES Act, CAA, and ARPA to provide relief to American families, businesses, and state and local governments. Together, these packages disbursed at least $581,541,859 in funds to RIDE. (ECF No. 1 ¶ 16.) Congress included in these relief statutes provisions creating conditions on an educational agency's receipt of funding, including a requirement that the agency "shall to the greatest extent practicable, continue to pay its employees and contractors during the period of any disruptions or closures related to the coronavirus." See CARES Act § 18006.

To receive funding through these programs, RIDE and State officials signed certifications on three separate occasions agreeing to comply with the requirements set forth in the COVID-19 relief statutes: Commissioner Infante-Green on May 15, 2020; the Governor's Deputy Chief of Staff Kevin Gallagher on May 26, 2020; and RIDE's Deputy Commissioner Ana Riley on February 9, 2021. (ECF No. 1 at 10-12.) These certifications acknowledged that failure to comply with all relevant provisions and requirements of the CARES Act or any other applicable law or regulation "may result in liability under the False Claims Act." Id. The certifications also stated that an agency receiving funding would "to the greatest extent practicable, continue to compensate its employees and contractors during the period of any disruptions or closures related to COVID-19 in compliance with Section 18006 of Division B of the CARES Act." Id.

RIDE had been contracting with Ocean State to provide student transportation services since 2014, with their most recent contract with the company extending through June 30, 2020. (ECF No. 18 at 7.) RIDE stopped paying Ocean State on March 16, 2020, after Governor Gina Raimondo ordered schools to close as part of the state's COVID-19 pandemic lockdown. Id. A "long series of correspondence and discussions" followed between the parties about what RIDE owed to Ocean State for the period of March 16 through June 12, 2020. Id. at 9. Although at one point an agreement was apparently reached to pay Ocean State approximately 34 percent of its fixed costs for the period, this agreement fell through when RIDE added conditions to its offer of payment. Id. To date, RIDE has paid no amount to Ocean State for the period following Rhode Island's cessation of in-person instruction during the 2019-2020 school year. Id. at 10.

II. STANDARD OF REVIEW

On a motion to dismiss under Rule 12(b)(6), courts must evaluate whether the complaint adequately pleads facts that "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In performing this evaluation, courts "assume the truth of all well-plead[ed] facts and give plaintiff the benefit of all reasonable inferences therefrom." Ruiz v. Bally Total Fitness Holding Corp., 496 F.3d 1, 5 (1st Cir. 2007). But they do not "draw unreasonable inferences or credit bald assertions [or] empty conclusions." Theriault v. Genesis HealthCare LLC, 890 F.3d 342, 348 (1st Cir. 2018).

III. DISCUSSION

The FCA imposes civil liability on any person who "knowingly presents," "causes to be presented," or conspires to present "a false or fraudulent claim for payment or approval" to the United States government. Borzilleri v. Bayer Healthcare Pharm., Inc., 24 F.4th 32, 36 (1st Cir. 2022). The FCA includes a scienter requirement, meaning that a person must have "actual knowledge of the information [presented to the government]" and either "act[ ] in deliberate ignorance of the truth or falsity of the information" or "in reckless disregard of the truth or falsity of the information," § 3729(b)(1)(A), as well as a materiality requirement, meaning the information must have "a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property," § 3729(b)(4). FCA actions are also subject to the heightened pleading standard for fraud allegations under Rule 9(b), which means that "a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). Such particularly requires "that a complaint must specify 'the time, place, and content of an alleged false representation.' " United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 731 (1st Cir. 2007) (quoting Doyle v. Hasbro, Inc., 103 F.3d 186, 194 (1st Cir. 1996)).

Commissioner Infante-Green presents five arguments in support of her motion: (1) the action should be dismissed under the doctrine of sovereign immunity, because the Complaint is in fact against the State of Rhode Island; (2) defendants are entitled to qualified immunity, because the CARES Act is a "standardless" statute incapable of clearly establishing a statutory right that the defendants should reasonably have known about; (3) the dispute is over such a small proportion of the overall pandemic relief funding RIDE received that there is no materiality; (4) this is essentially a contractual dispute that does not meet the FCA's falsity requirement; and (5) the defendants did not have the requisite scienter to violate the FCA.

A. Sovereign Immunity

The Commissioner first argues that although Ocean State's Complaint is stylized as a suit against the defendants in their individual capacities, its allegations are in reality against the State of Rhode Island, which is entitled to sovereign immunity. (ECF No. 18 at 12.) The First Circuit has held that "the distinction between official capacity and individual capacity suits is well established. That distinction depends on 'the capacity in which the state officer is sued, not the capacity in which the officer inflicts the alleged injury.' " Guillemard-Ginorio v. Contreras-Gomez, 585 F.3d 508, 530 (1st Cir. 2009) (quoting Hafer v. Melo, 502 U.S. 21, 26, 112 S.Ct. 358, 116 L.Ed.2d 301 (1991)). Personal capacity suits "seek to impose individual liability upon a government officer for actions taken under color of state law . . . . [A] suit against a state officer in his or her individual capacity for money damages is not a suit against the state for purposes of Eleventh Amendment immunity." Id. at 531 (quoting New Orleans Towing Ass'n v. Foster, 248 F.3d 1143 (5th Cir. 2001)).

In contrast to this rule, the Commissioner contends that it is the capacity in which the officer inflicts the alleged injury that matters. She cites a line of cases from the Eighth Circuit for the argument that, when an FCA complaint does not allege with specificity how a state official "acted outside of [their] official duties," any FCA claim against that official is really a claim against the state that must be dismissed under the Eleventh Amendment. U.S. ex rel. Gaudineer & Comito, L.L.P. v. Iowa, 269 F.3d 932, 936-37 (8th Cir. 2001). In this case, where "there is no allegation that Defendants took any action outside of their official duties, that any Defendant personally benefited from the allegedly false claims, or that any funds from the federal government were used for private or improper reasons," the Complaint should be interpreted as actually being against the state. (ECF No. 18 at 14.)

Ocean State counters that the holding in Gaudineer has been rejected by several other courts. For example, the Ninth Circuit held that an FCA complaint "need not allege that the individual defendants personally profited from such false submissions" because "nothing in [the FCA] requires the person knowingly making a false submission to obtain a personal benefit from the wrongful act," and any holding otherwise "would be tantamount to a...