Background
Relators Roger Moseley and Martha Brodzik sued on Colorado’s behalf under the Colorado False Claims Act (CFCA). Their amended complaint alleged that the Town of Palmer Lake knowingly submitted false claims to obtain federal and state grant funds, then failed to put those funds in the proper accounts or spend them for their intended purposes.
The Town moved to dismiss under Rules 12(b)(5) and 12(b)(1). The district court held that a municipality is not a “person” subject to CFCA liability and, alternatively, that the Colorado Governmental Immunity Act barred the claim. The relators appealed.
The Court’s Holding
The Colorado Court of Appeals affirmed the dismissal under Rule 12(b)(5). In this first-impression decision, the division held that a municipality is excluded from the CFCA’s definition of “person,” which covers specified entities and “other nongovernmental legal entit[ies].” A town therefore cannot be liable under the CFCA.
Reading the statute as a whole, the court concluded that the legislature treated municipalities as governmental entities, even though they may also be corporations in other legal contexts. The CFCA separately defines political subdivisions, including towns, and its provisions treat political subdivisions as possible victims or recipients of recoveries. The court also found federal False Claims Act precedent inapposite because the federal statute does not define “person,” while the CFCA does. Having affirmed the Rule 12(b)(5) dismissal, the court did not reach the governmental-immunity issue.
Key Takeaways
- Municipalities are not “persons” subject to liability under the Colorado False Claims Act.
- The CFCA’s express reference to nongovernmental legal entities excludes governmental entities, including towns.
- The decision affirms dismissal for failure to state a claim and leaves the CGIA question unresolved.
Why It Matters
The decision establishes that CFCA qui tam actions cannot be brought against Colorado municipalities based on alleged false claims for public funds. It also underscores that federal False Claims Act decisions concerning municipal liability do not control where Colorado’s statute uses materially different language.