By Taylor Anderson

On February 1, 2016, the Fourth Circuit issued its published opinion regarding the civil case Warfaa v. Ali. Farhan Warfaa (“Warfaa”), the plaintiff, appealed the district court’s summary dismissal of his Alien Tort Statute (“ATS”) claims after the district court found that Warfaa’s ATS claims did not sufficiently “touch and concern” the United States so as to establish jurisdiction in the United States. Additionally, Yusuf Ali (“Ali”) appeals the district court’s decision to allow Warfaa’s Torture Victim Protection Act of 1991 (“TVPA”) claims to proceed. The district court allowed the TVPA claims to proceed because Ali was not entitled to immunity as a foreign official. The Fourth Circuit affirmed the judgment of the district court.

Warfaa Alleges Several Violations of International Law

Throughout the 1980s, the Somali government targeted members of certain opposition “clans” through killings, torture, and property destruction. This government regime was titled the “Barre” regime. Warfaa’s clan, the Isaaq, was one of the targeted clans. Ali supported the Barre regime and commanded the Fifth Battalion of the Somali National Army stationed in Gebiley, the area where Warfaa lived. One morning in December 1987, two armed soldiers from the Fifth Battalion appeared at Warfaa’s hut and captured him. Warfaa was later detained and placed in a small, windowless cell with ten other prisoners.

Warfaa alleged he was subjected to many acts of violence during his detention at the direction of Ali. These acts included, but were not limited to, beatings with the butt of a gun, being tied up in a painful position, being kicked, being stripped naked, and being beat into unconsciousness. Throughout his capture, Ali abused and tortured Warfaa at least nine times.

In March 1988, Ali’s base was attacked. After ordering his soldiers to defend the base, Ali shot Warfaa in the wrist and leg, causing him to fall unconscious. Ali thought he had killed Warfaa and ordered his guards to bury the body; however, Warfaa regained consciousness while in the guards’ possession and convinced the guards to accept a bribe. Warfaa was released, and he still resides in Somalia today.

The Barre regime collapsed in 1991, but Ali had departed the country in advance of the fall. He came to the United States, and the United States began deportation proceedings soon thereafter. Ali voluntarily left the country in 1994 before the conclusion of the deportation proceedings. Ali returned to the United States in December 1996 and now resides in Alexandria, Virginia.

Warfaa filed suit against Ali in the United States District Court for the Eastern District of Virginia in 2004. For most of its duration, the case was stayed. On April 25, 2014, the district court lifted the stay and ordered Warfaa to file an amended complaint. Warfaa’s amended complaint contained six counts, and all six counts alleged torts purportedly committed in violation of international law, with jurisdiction arising under the ATS. Additionally, the first two counts were alleged to violate the TVPA, which provides a jurisdictional basis separate from the ATS. The district court dismissed the ATS claims because “such claims, generally speaking, must be based on violations occurring on American soil.” The district court also rejected Ali’s motion to dismiss the TVPA claims, concluding that Ali could not claim “official acts” immunity because his alleged acts violated jus cogens norms. Both parties timely appealed.

The ATS Does Not Grant Original Jurisdiction

The Fourth Circuit started its ATS analysis by pointing out that the ATS grants district courts “original jurisdiction” over “any civil action by an alien for a tort . . . committed in violation of the law of nations or a treaty of the United States.” The Fourth Circuit then narrowed its analysis of Warfaa’s claims based on the Supreme Court’s decision in Kiobel v. Royal Dutch Petroleum Co. In Kiobel, the Supreme held that an ATS claim may not reach conduct occurring in the territory of a foreign sovereign. Additionally, the Kiobel presumption provides that when a statute gives no clear indication of an extraterritorial application, as the ATS did, it has none. Finally, the Fourth Circuit recognized that the Supreme Court emphasized that the ATS can create jurisdiction for such claims only where they “touch and concern” United States territory “with sufficient force to displace the presumption against extraterritorial application.”

The Fourth Circuit held that Warfaa’s ATS claims fell squarely within the ambit of Kiobel’s broad presumption against extraterritorial application of ATS because all of the relevant conduct in Warfaa’s case took place outside of the United States, in Somalia. Nothing in Warfaa’s case involved U.S. citizens, the U.S. government, U.S. entities, or events in the United States. The Fourth Circuit stated that the only purported “touch” in this case is the happenstance of Ali’s after-acquired resident in the United States long after the alleged events of abuse; however, this “touch” is not enough to overcome the Kiobel presumption. For this reason, the Fourth Circuit affirmed the district court’s decision to dismiss Warfaa’s ATS claims.

Ali Is Not Immune from the TVPA Claims

The district court allowed Warfaa’s TVPA claims to go forward, finding that Ali lacked foreign official immunity for jus cogens violations under the Fourth Circuit’s holding in Yousuf v. Samantar. On appeal, Ali’s only challenge was that Samantar was wrongly decided, and jus cogens violations deserve immunity.

The Fourth Circuit held that it was not in a position to overrule Samantar, as Ali wished. Instead, the Fourth Circuit stated that one panel’s decision is binding, not only upon the district court, but also upon another panel of this court—unless and until it is reconsidered en banc. For this reason, the Fourth Circuit did not consider the Samantar holding’s validity and held that the district court properly concluded Samantar forecloses Ali’s claim to foreign official immunity.

Judgment Affirmed

Because the district court correctly held that Warfaa’s ATS claims lacked a sufficient nexus with the United States to establish jurisdiction over those claims and Ali was not to receive foreign official immunity, the Fourth Circuit affirmed the decisions of the district court.

One judge wrote an opinion concurring in part and dissenting in part. This judge dissented on the issue of the ATS claims and believed that the Fourth Circuit should have reversed the district court’s decision in relation to them because Ali had extensive contacts with the United States which should have subjected him to the jurisdiction of the United States.

By Amanda Whorton

On October 21, 2015, the Fourth Circuit issued a published opinion in the civil case United States ex rel. Oberg v. Pennsylvania Higher Education Assistance Agency. The court held that the Pennsylvania Higher Education Assistance Agency (“PHEAA”) is an independent political division, and not an “arm” or “alter ego” of Pennsylvania, and is therefore not subject to state immunity. Rather, PHEAA is a “person” subject to liability under the False Claims Act.

Oberg’s Claim

PHEAA was established by Pennsylvania to administer grants and scholarship programs on behalf of the state and is “one of the nation’s largest providers of student financial aid services.” Dr. John H. Oberg (“Oberg”) sued PHEAA and other private and state-funded student loan organizations, alleging that defendants violated the False Claims Act (“FCA”) by fraudulently claiming millions of dollars in federal student loan interest-subsidy payments. The other defendants settled or were dismissed from the suit, leaving PHEAA as the sole defendant.

The “Arm of the State” Factors

The FCA renders “any person” who makes or presents a false claim for payment to the federal government civilly liable. Corporations, including cities and counties, are “persons” under the FCAA, but states and state agencies are not. Cities and counties are political divisions, which, although created by the state, operate independently and do not fall under state immunity.

To determine whether PHEAA is a “person” under the FCA, the court must first look at whether PHEAA is an “arm” or “alter ego” of Pennsylvania. There are four factors the court considers in this analysis: (1) whether any judgment against the organization will be paid by the State, (2) the degree of autonomy exercised by the organization, (3) whether the organization is involved with state concerns, as opposed to non-state or local concerns, and (4) how the organization is treated under state law.

Summary of Appeals

The district court originally held that PHEAA was a state agency without applying the “arm of the state” factors and dismissed Oberg’s complaint. The Fourth Circuit, in their first opinion (“Oberg I”), held that the district court erred in dismissing the complaint and remanded.

The district court then went through the “arm of the state” analysis and again granted PHEAA’s motion to dismiss, stating that PHEAA was not a “person” under FCA. Oberg again appealed and the Fourth Circuit again, in their second opinion (“Oberg II”), held that the district court erred in dismissing the claims. In Oberg II, the Fourth Circuit held that Oberg alleged sufficient facts that PHEAA was not an “arm of the state” but was a “person” under FCA. Therefore, the Fourth Circuit remanded the case again to the district court.

On remand, the parties engaged in limited discovery to determine whether PHEAA was truly an “arm of the state.” When PHEAA moved for summary judgment, the district court granted the motion, holding that all four factors weighed in favor of PHEAA being an “arm of the state” and that PHEAA was therefore not subject to suit under FCA.

Oberg once again appealed, stating that the district court failed to apply the “arm of the state” factors consistently with the Fourth Circuit’s Oberg II decision.

Analysis of the “Arm of the State” Factors

(1) Whether Any Judgment Against the Organization will be Paid by the State

In Oberg II, the Fourth Circuit held that Pennsylvania was not legally or functionally liable for any judgment against PHEAA. The court reasoned that the first factor weighed heavily against PHEAA being an “arm of the state” because the obligations of PHEAA do not bind Pennsylvania. State law also explicitly grants control over funds to PHEAA and funds are held in a separate account within the Treasury.

The facts assumed by the court in Oberg II were confirmed through the parties’ discovery, mainly that PHEAA has control over its significant and independent funds. Therefore, in the current case, the Fourth Circuit still held that Pennsylvania was not legally or functionally liable for a judgment against PHEAA, and so the first factor still weighed heavily against “arm of the state” status.

(2) Degree of Autonomy Exercised by the Organization

In Oberg II, the court found that the following factors weighed in favor of “arm of the state” status: PHEAA’s board is comprised of gubernatorial appointees and state legislators, the statutory requirement that the Governor approve PHEAA bond issues, and PHEAA activities are subject to audit by the Auditor General for Pennsylvania. However, other facts, the court found, were suggestive that PHEAA is not an “arm of the state.” These facts include that PHEAA exerts financial independence, has control over its revenues, and has corporate powers to “enter into contracts, sue and be sued, and purchase and sell property in its own name.” The Fourth Circuit in Oberg II held that this factor cut against holding PHEAA as an “arm of the state.”

The Fourth Circuit affirmed this holding in the current case by reasoning that PHEAA exercises control over its revenues, makes policy decisions, sets its own budget, and manages its own daily activities without much oversight from Pennsylvania. The ways in which the State does exercise some control are mainly ministerial matters and are not substantive. Therefore, this factor also weighs heavily against PHEAA being an “arm of the state.”

(3) Whether the Organization is Involved with State Concerns, as Opposed to Non-State or Local Concerns

The Fourth Circuit, in Oberg II, held that this factor weighed in favor of “arm of the state” status because PHEAA focused on improving access to higher education, which is a matter of “legitimate state concern.” However, PHEAA’s revenues were mostly generated through out-of-state activities, weakening the factor.

In the current case, the Fourth Circuit upheld its former ruling in determining that this factor only weighed slightly in favor of “arm of the state” status.

(4) How the Organization is Treated under State Law

The Fourth Circuit also held that the fourth factor weighed in favor of treating PHEAA as an “arm of the state” because state law treats PHEAA as a state agency and as an organization to benefit its own citizens.

The Fourth Circuit upheld this ruling in the current case.

Fourth Circuit Vacates and Remands

The court held that the PHEAA is an independent political division, not an arm of Pennsylvania, and therefore is a “person” under the FCA. The Fourth Circuit vacated the district court’s grant of summary judgment for PHEAA and remanded for further proceedings on the merits of the FCA claims Oberg asserted against PHEAA.