In Vermont Agency of Natural Resources v. United States ex rel. Stephens, 2000 U.S. Lexis 3428 (U.S. May 22, 2000), the Supreme Court held that private individuals have standing to bring suit in federal court on behalf of the United States of America under the False Claims Act.

In Vermont v. United States ex rel. Stephens, supra, the qui tam plaintiff, Stephens, brought an action against the state of Vermont Agency of Natural Resources (hereinafter referred to as the "Agency"). Mr. Stephens claimed that the Agency had submitted false claims to the Environment Protection Agency in connection with various federal grant programs administered by the EPA. Specifically, he claimed that the Agency had overstated the amount of time spent by its employees on federally funded projects thereby inducing the government to disburse more grant money than petitioner was entitled to receive. The State of Vermont moved to dismiss arguing that a state is not a person subject to liability under the FCA and that a qui tam action in federal court against the state is barred by the Eleventh Amendment. The district court denied the motion and the Second Circuit affirmed. The Supreme Court granted cert with respect to the issue of whether or not a private individual could bring suit in federal court on behalf of the United States against a state under the federal False Claims Act. At the oral argument, the Supreme Court asked the parties to address the jurisdictional issue of whether or not the plaintiff qui tam had standing under Article 3 of the Constitution to maintain this suit since the plaintiff did not sustain a personal injury (ordinarily a prerequisite to standing). Supplemental briefs were subsequently ordered with respect to this issue.

In Vermont Agency, supra, the Court held that the plaintiff qui tam did have standing to bring suit under the False Claims Act. The Court found an adequate base for the relater’s suit in the doctrine that the assignee of a claim has standing to assert the injury in fact suffered by the assignor. The Court emphasized that the False Claims Act could reasonably be regarded as effecting a partial assignment of the government’s damage claim under the False Claims Act. The Court noted that this form of representational standing on the part of assignees, has been routinely entertained in a variety of other suits over time. Based upon this, the Court concluded that the United States injury in fact sufficed to confer standing on the plaintiff qui tam Stephens.

However, the U.S. Supreme Court also held that a plaintiff qui tam could not bring suit in federal court on behalf of the United States against a state under the FCA. The Court noted that the relevant provisions of the False Claims Act subjected to liability any "person" who presented a false or fraudulent claim for payment or approval to the United States government. The Court noted that long-standing principles of statutory interpretation establish a presumption that the term "person" as used in statutes does not include a sovereign. In addition, the Supreme Court read the historical context of the FCA to mean that the FCA’s liability provisions did not subject the states to penalties. The Court also noted that although the liability provision of the original False Claims Act had undergone various changes, none of them suggested a broadening of the term "person" as used in the statute to include states. The Court also noted that other provisions of the current statutory scheme supported the conclusion that states were not subject to qui tam liability. For example, the Court noted that another section of the False Claims Act, 31 U.S.C. § 3733, which enables the Attorney General to issue civil investigative demands to persons possessing information related to False Claims Act investigations contained a provision that expressly defined "person" for purposes of the section to include "states." The presence of such a definitional provision in § 3733, together with the absence of such a provision from the definitional provisions contained in the § 3729 liability section, suggested to the Court that states were not persons for purposes of qui tam liability.

Next, the Court noted that the current version of the False Claims Act imposed damages that were essentially punitive in nature, which would be inconsistent with the presumption against imposition of punitive damages on governmental entities.

Finally, the Program Fraud Civil Remedies Act of 1996 (PFCRA,) a sister scheme creating administrative remedies for false claims and enacted just before the FCA was amended in 1986, contains (unlike the FCA) a definition of "persons" subject to liability, and that definition did not include "states."

Based upon all of these circumstances, the Court held that that False Claims Act did not subject a state or state agency to liability under the False Claims Act.

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