A federal appeals court struck a blow to the University when it reinstated the lawsuit of microbiology professor James Zissler.
The court ruled that Zissler can continue litigating against the University for violating the federal False Claims Act.
Zissler originally brought the suit in 1995, accusing the University of misusing federal funds and selling the experimental transplant drug ALG without approval of the federal government. The U.S. Department of Justice joined the suit in 1996; the suit seeks more than $100 million in damages.
Zissler filed the suit as a whistleblower, claiming that because he shed light on the alleged misappropriation of funds, he is entitled to compensation. He stands to receive 15 percent to 25 percent of whatever money the government recovers.
In July 1997, District Court Judge Richard Kyle threw the case out, stating that the University could not be defined as a “person” under the False Claims Act.
The act states that a citizen can hold “any person” liable for making false statements or claims to the United States government. The University argued that since it is a state institution, it is not a “person” as defined by the act.
But a three-judge Eighth Circuit Court panel overruled Kyle’s decision September 4, stating that the suit had validity based on the act’s definition of a “person.”
“Judge Kyle correctly decided that this law doesn’t apply to public institutions,” said University head attorney Mark Rotenberg.
He added that there is not a single example of courts imposing the definition of a “person” on a state or university since the statute became law during the Civil War.
Additionally, Rotenberg argued that the act was meant to punish private individuals or companies, not public states or universities.
But Zissler’s attorney Gary Weissman said the real question is whether the federal government can sue a state university without the school hiding behind an ambiguous definition in the federal False Claims Act.
Weissman said the fact that there are no other supporting cases isn’t relevant. The legislation itself sets the precedent, he said.
The appellate court agreed. Citing a 1986 congressional amendment to the act, the decision states: “The term ‘person’ is used (in the act) in its broadest sense to include partnerships, associations, and corporations … as well as States and political subdivisions thereof.”
Rotenberg said the University is likely to appeal the decision, which could go either to a full appeals court panel or the U.S. Supreme Court.
“Obviously the University is disappointed,” Rotenberg said. “Thirty-six states and many large universities are now exposed to potentially crippling damages.”
He also said all 36 states had filed friend-of-the-court briefs supporting the University.
The ruling also said the University may be forced to pay triple the damages if found to have misused federal funds, which could impact states and universities across the country.