WELLS v. ONE2ONE LEARNING FOUNDATION PART - II

WELLS v. ONE2ONE LEARNING FOUNDATION

Filed 8/31/06 (this opn. should precede companion case, S131807, also filed 8/31/06)

IN THE SUPREME COURT OF CALIFORNIA

JOEY WELLS, a Minor, etc., et al., )

)

Plaintiffs and Appellants, )

) S123951

v. )

) Ct.App. 3 C042504

ONE2ONE LEARNING FOUNDATION )

et al., )

) Sierra County

Defendants and Respondents; ) Super. Ct. No. S46-CV-5844

)

STATE OF CALIFORNIA, )

)

Real Party in Interest and Respondent. )

_ )

Continue from Part I ………

As noted, the CFCA defines covered “persons” to “include[ ] any natural person, corporation, firm, association, organization, partnership, limited liability company, business, or trust.” (Gov. Code, § 12650, subd. (b)(5).) We observe at the outset that while this list is not necessarily comprehensive, the only words and phrases it uses are those most commonly associated with private individuals and entities. While, in the broadest sense, a school district might be considered an “association” or an “organization,” the statutory list of “persons” contains no words or phrases most commonly used to signify public school districts, or, for that matter, any other public entities or governmental agencies.

Yet the statute makes very specific reference to governmental entities in other contexts. Thus, it provides that any “person” who presents a false claim to the “state or [a] political subdivision” is liable to such entity for two or three times the damage thereby sustained. (Gov. Code, § 12651, subds. (a), (b).) A “political subdivision” is defined to include “any city, city and county, county, tax or assessment district, or other legally authorized local government entity with jurisdictional boundaries.” (Id., § 12650, subd. (b)(3).) The specific enumeration of state and local governmental entities in one context, but not in the other, weighs heavily against a conclusion that the Legislature intended to include public school districts as “persons” exposed to CFCA liability.

In other contexts, the Legislature has demonstrated that similar definitions of “persons” do not include public entities, and that legislators know how to include such entities directly when they intend to do so. For example, under the Fair Employment and Housing Act (FEHA; Gov. Code, § 12900 et seq.), a “person” is defined to “include[ ] one or more individuals, partnerships, associations, corporations, limited liability companies, legal representatives, trustees, trustees in bankruptcy, and receivers or other fiduciaries.” (Id., § 12925, subd. (d).) FEHA provides that an “ ‘[e]mployer’ includes any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly, the state or any political or civil subdivision of the state, and cities,” except as otherwise specified. (Id., § 12926, subd. (d), italics added.) This conceptual separation of “persons” from governmental entities in FEHA is an additional indication that the CFCA’s definition of “person” does not include public entities.[1]

The legislative history of the CFCA contains no explicit discussion of the scope of the word “person.” Nonetheless, the limited evidence available suggests there was no intent to include school districts and other public and governmental agencies. As originally introduced on March 4, 1987, Assembly Bill No. 1441 (1987-1988 Reg. Sess.) (Assembly Bill No. 1441), which in final form became the CFCA, explicitly included, as covered “persons,” “any person, firm, association, organization, partnership, business trust, corporation, company, district, county, city and county, city, the state, and any of the agencies and political subdivisions of these entities.” (Italics added.) A substantial subsequent amendment to the bill excised the references to governmental entities, and the definition of “person” was changed to the form finally adopted. (Id., as amended in Assem. (Apr. 29, 1987) § 1; see Stats. 1987, ch. 1420, § 1, p. 5238.)[2] Our past decisions note deletions from bills prior to their passage as significant indicia of legislative intent. (E.g., Sierra Club v. California Coastal Com. (2005) 35 Cal.4th 839, 852; People v. Birkett (1999) 21 Cal.4th 226, 240-242; but cf. American Financial Services Assn. v. City of Oakland (2005) 34 Cal.4th 1239, 1261-1262.)

A traditional rule of statutory construction is that, absent express words to the contrary, governmental agencies are not included within the general words of a statute. (E.g., Estate of Miller (1936) 5 Cal.2d 588, 597; Balthasar v. Pacific Elec. Ry. Co. (1921) 187 Cal. 302, 305.) However, plaintiffs and their amici curiae invoke a more recent exception to this principle, i.e., that government agencies are excluded from the operation of general statutory provisions “only if their inclusion would result in an infringement upon sovereign governmental powers. . . . Pursuant to this principle, governmental agencies have been held subject to legislation which, by its terms, applies simply to any ‘person.’ [Citations.]” (City of Los Angeles v. City of San Fernando (1975) 14 Cal.3d 199, 276-277; see also, e.g., Nestle v. City of Santa Monica (1972) 6 Cal.3d 920, 933 (Nestle); Flournoy v. State of California (1962) 57 Cal.2d 497, 498-499; Hoyt v. Board of Civil Service Commrs. (1942) 21 Cal.2d 399, 402.) In at least one instance, this premise was applied to a statutory definition of covered “persons” somewhat like that used in the CFCA. (State of California v. Marin Mun. W. Dist. (1941) 17 Cal.2d 699, 704 [county held subject to statute allowing Department of Public Works to order “any person” to move his pipeline as necessary for public safety or highway improvement; statute defined “person” to include “any person, firm, partnership, association, corporation, organization, or business trust,” and did not expressly name governmental entities].)

In LeVine I, supra, 68 Cal.App.4th 758, the Court of Appeal held that the defendant school district was a “person” within the scope of the CFCA, and was thus subject to CFCA provisions prohibiting retaliation against an employee for reporting a false claim or furthering a false claims action (Gov. Code, § 12653, subd. (b)). Invoking the “rule that governmental agencies are excluded from the general provisions of a statute only if their inclusion would result in an infringement upon sovereign powers,” the Court of Appeal declined to find that the CFCA would cause such infringement. (LeVine I, supra, at p. 765.) The Court of Appeal reasoned that “no government agency has the power, sovereign or otherwise, knowingly to present a false claim.” (Ibid.)[3] In the case before us, the instant Court of Appeal employed a similar analysis.

We disagree with the ultimate conclusion of LeVine I. In the first place, the premise that public entities are statutory “persons” unless their sovereign powers would be infringed is simply a maxim of statutory construction. While the “sovereign powers” principle can help resolve an unclear legislative intent, it cannot override positive indicia of a contrary legislative intent. As we have explained, the language, structure, and history of the particular statute before us—the CFCA—strongly suggest that public entities, including public school districts, are not “persons” subject to suit under the law’s provisions. On that basis alone, we are persuaded that governmental agencies, including the district defendants in this case, may not be sued under California’s false claims statute.[4]

Moreover, we do not agree with LeVine I’s analysis of the “sovereign power” question. Of course school districts have no “sovereign” power or right to submit false claims against the public treasury. Nonetheless, we cannot accept LeVine I’s determination that application of the CFCA to public school districts would infringe no sovereign powers.

As we will explain, in light of the stringent revenue, appropriations, and budget restraints under which all California governmental entities operate, exposing them to the draconian liabilities of the CFCA would significantly impede their fiscal ability to carry out their core public missions. In the particular case of public school districts, such exposure would interfere with the state’s plenary power and duty, exercised at the local level by the individual districts, to provide the free public education mandated by the Constitution.

The People, by initiative, have put all agencies of government, including school districts, on a strict fiscal diet by adding provisions to the California Constitution that limit their power to tax and spend. Article XIII A, section 1, “places a general ceiling on the ad valorem property taxes which may be levied on behalf of local governments and school districts. [Citation].” (Butt v. State of California (1992) 4 Cal.4th 668, 691, fn. 17 (Butt).) Article XIII A also bans other new local taxes levied by, or for the specific benefit of, school and other special districts except as approved by a two-thirds majority of the voters. (Cal. Const., art. XIII A, § 4; see Rider v. County of San Diego (1991) 1 Cal.4th 1, 13-15; Hoogasian Flowers, Inc. v. State Bd. of Equalization (1994) 23 Cal.App.4th 1264, 1282-1284.) At the state level, article XIII A forbids the enactment of any new ad valorem real property tax, and prohibits all increases in state taxes except by a two-thirds vote of each House of the Legislature. (Cal. Const., art. XIII A, § 3.)

Article XIII B generally limits the annual appropriations of state and local governments to the prior years’ appropriations as adjusted for the cost of living. (Cal. Const., art. XIII B, § 1.) Under this constitutional provision, these limits may be changed only by vote of the affected electorate. (Id., § 4.)[5]

Public school districts face an additional restriction on their ability to tax and spend for their educational mission. Because disparities in school funding levels based on the comparative wealth of local districts violate the equal protection clause of the California Constitution (see Serrano v. Priest (1976) 18 Cal.3d 728; Serrano v. Priest (1971) 5 Cal.3d 584), the Legislature has adopted a strict system of equalized funding (Ed. Code, § 42238 et seq.), under which, as noted above, “the amount of property tax revenues a district can raise, with other specific local revenues, [is] coupled with an equalization payment by the state, thus bringing each district into a rough [per student] equivalency of revenues.” (56 Cal.Jur.3d, supra, Schools, § 7, p. 198, fns. omitted.) “In obedience to Serrano principles, the current system of public school finance largely eliminates the ability of local districts, rich or poor, to increase local ad valorem property taxes to fund current operations at a level exceeding their [s]tate-equalized revenue per average daily attendance. [Citation.]” (Butt, supra, 4 Cal.4th 668, 691, fn. 17.)

School districts must use the limited funds at their disposal to carry out the state’s constitutionally mandated duty to provide a system of public education. The Constitution requires, and makes the Legislature responsible for providing, “a system of common schools by which a free school shall be kept up and supported in each district . . . .” (Cal. Const., art. IX, § 5.) The Legislature has chosen to implement this “fundamental” guarantee through local school districts with a considerable degree of local autonomy, but it is well settled that the state retains plenary power over public education. (Butt, supra, 4 Cal.4th 668, 680-681.)

Hence, there can be no doubt that public education is among the state’s most basic sovereign powers. Laws that divert limited educational funds from this core function are an obvious interference with the effective exercise of that power. Were the CFCA applied to public school districts, it would constitute such a law. If found liable under the CFCA, school districts, like other CFCA defendants, could face judgments—payable from their limited funds—of at least two, and usually three, times the damage caused by each false submission, plus civil penalties of up to $10,000 for each false claim, plus costs of suit. Such exposure, disproportionate to the harm caused to the treasury, could jeopardize a district financially for years to come. It would injure the districts’ blameless students far more than it would benefit the public fisc, or even the hard-pressed taxpayers who finance public education.[6]

The Legislature is aware of the stringent revenue, budget, and appropriations limitations affecting all agencies of government—and public school districts in particular. Given these conditions, we cannot lightly presume an intent to force such entities not only to make whole the fellow agencies they defrauded, but also to pay huge additional amounts, often into the pockets of outside parties. Such a diversion of limited taxpayer funds would interfere significantly with government agencies’ fiscal ability to carry out their public missions.[7]

We note that “ ‘[t]he ultimate purpose of the [CFCA] is to protect the public fisc.’ ” (State v. Altus Finance (2005) 36 Cal.4th 1284, 1297.) Given that school district finances are largely dependent on and intertwined with state financial aid (see Belanger v. Madera Unified School District (9th Cir. 1992) 963 F.2d 248, 251-252 (Belanger)), the assessment of double and treble damages, as well as other penalties, to school districts would not advance that purpose.

Of course, where liability otherwise exists, public entities must pay legal judgments from their limited revenues and appropriations, even if they cannot exceed their tax or appropriations ceilings to do so and must therefore cut spending in other areas. (See Gov. Code, § 970 et seq.; Ventura Group Ventures, Inc. v. Ventura Port Dist. (2001) 24 Cal.4th 1089, 1098-1100.) This obligation, in and of itself, does not infringe their “sovereign powers.” But we may consider the effect on sovereign powers when we are determining whether the Legislature intended, by mere implication, to expose a public entity to a particular statutory liability.

For the reasons we have detailed, we conclude the Legislature did not intend to subject financially constrained school districts—or any agency of state or local government—to the treble-damages-plus penalties provisions of the CFCA. We conclude that such entities are not “persons” subject to suit under that statute. We disapprove LeVine I, supra, 68 Cal.App.4th 758, and LeVine II, supra, 90 Cal.App.4th 201, to the extent they hold otherwise.

Our analysis is not affected by two United States Supreme Court decisions construing the federal false claims statute (FFCA; 31 U.S.C. § 3729 et seq.)—the model for California’s law. In Stevens, supra, 529 U.S. 765, the high court majority held that the several states (including agencies of state governments) are not “persons” subject to qui tam actions under the FFCA. On the other hand, a different majority later concluded in Cook County v. United States ex rel. Chandler (2003) 538 U.S. 119 (Chandler) that certain local governmental entities, including cities and counties, are “persons” subject to such suits.

The parties hotly dispute whether California school districts are “state” agencies as to which Stevens might be persuasive, or local governmental entities that should fall, by analogy, under the rule of Chandler. However, we find little in either case of direct relevance to the issue before us. Both decisions construe a federal statute which, in respects material here, is distinct from its California counterpart. Moreover, both cases apply federal principles of statutory construction that differ from those used in this state.

The FFCA was originally adopted in 1863 to confront massive contractor fraud during the Civil War. (Stevens, supra, 529 U.S. 765, 781.) As enacted and since amended, the federal statute, like California’s, makes “persons” liable for submitting false claims to the government (31 U.S.C. § 3729), but, unlike the California statute, the federal version includes no definition of covered “persons.” In Stevens, the majority noted that the statute had never indicated it applied to states. Thus, the majority applied a “longstanding interpretive presumption,” for purposes of federal law, “that ‘person’ does not include the sovereign. [Citations.]” (Stevens, supra, at p. 780.)

Further, the Stevens majority pointed to a separate section of the FFCA—one also with no California parallel—allowing the Attorney General to serve civil investigative demands upon “persons.” (31 U.S.C. § 3733(a)(1).) As the majority observed, “persons” were defined, for purposes of that section, to include the state (id., § 3733(l)(4)), thus suggesting states were excluded for other purposes. (Stevens, supra, 529 U.S. 765, 783-784.) The majority also cited a similar federal law, the Program Fraud Civil Remedies Act of 1986 (PFCRA), which was adopted just prior to the substantial 1986 amendments to the federal false claims act, and carried lesser penalties. As the majority noted, the PFCRA contains a definition of “persons” that does not include states. It would be anomalous, the majority concluded, for Congress to subject states—generally considered immune from “punitive” damages—to the greater false-claims penalties but not the lesser ones provided by the PFCRA. (Stevens, supra, at pp. 786-787.)

In Chandler, a qui tam plaintiff brought a federal false claims action against the county owner-operator of a hospital, alleging that the hospital submitted falsified compliance documents to obtain federal research funds. The county moved to dismiss, asserting it was not a “person” covered by the FFCA. On authority of Stevens, the district court agreed and dismissed the action. The court of appeals reversed, concluding that Stevens did not apply to the county. The United States Supreme Court affirmed the court of appeals.

In distinguishing Stevens, as had the court of appeals, the Chandler majority applied a different presumption of federal statutory construction—one also in effect since the Civil War inception of the FFCA. This presumption, the majority explained, is that, where not specifically defined, the word “person” encompasses “artificial persons” such as “corporations” (Chandler, supra, 538 U.S. 119, 125-126), including both “full-fledged municipal corporations,” such as towns and cities, that were incorporated at the request of their inhabitants, and “quasi-corporations,” such as counties, that were created unilaterally by the state (id. at p. 127, fn. 7).

The Chandler majority acknowledged that the 1986 amendments had added treble-damage and penalty provisions to the Civil War-era statute, and also conceded the presumption against subjecting government entities to “punitive” damages. However, the Chandler majority observed, there were remedial, nonpunitive aspects to the 1986 damage and penalty provisions. In any event, the majority concluded, given the strong presumption against repeal by implication, the modern addition of arguably “punitive” damages to the FFCA could not be considered a silent reversal of the historical assumption that this statute includes municipalities. (Chandler, supra, 538 U.S. 119, 129-134.)

As noted above, when the issue is whether government entities are “persons” covered by a particular statutory scheme, California courts apply interpretive principles somewhat different from those detailed in Stevens and Chandler. Under California law, absent contrary indicia of legislative intent, statutory “persons” are deemed to include governmental entities, both state and local, unless such inclusion would infringe the entities’ exercise of their sovereign powers and duties. California’s false claims statute, unlike the federal version, defines covered “persons,” and does so in a way that suggests an intent not to include government entities. Other indicia of legislative purpose also support this conclusion. And for reasons we have detailed, application of the CFCA’s treble-damages-plus-penalties requirement to public school districts would place severe and disproportionate financial constraints on their ability to provide the free education mandated by the Constitution—a result the Legislature cannot have intended. Nothing in Stevens or Chandler changes our conclusions in this regard.

Equally beside the point are federal and California decisions holding that California school districts are “arms of the state,” and thus enjoy the state’s sovereign immunity, under the Eleventh Amendment, from suits in federal court. (E.g., Belanger, supra, 963 F.2d 248, 250-251 [civil rights action under 42 U.S.C.A. § 1983]; Kirchmann v. Lake Elsinore Unified School District (2000) 83 Cal.App.4th 1098, 1100-1102, 1105-1115 [entity with Eleventh Amendment immunity also enjoys immunity from state court suits under 42 U.S.C. § 1983]; also cf. U.S. ex rel. Ali v. Daniel, Mann, Johnson (9th Cir. 2004) 355 F.3d 1140, 1147 [five-pronged “arm of the state” test is appropriate for determining whether government entity enjoys immunity from federal false claims liability under Stevens].) When we decide whether the California Legislature intended a California statute to include or exclude California government entities, we are not concerned with issues of federalism, constitutional or statutory.

Nothing in decisions addressing such issues precludes us from holding, for the reasons we have explained, that there was no legislative intent to apply the CFCA to public school districts. We conclude that neither such districts, nor any other agencies of state and local government, are “persons” subject to suit under the CFCA.[8]

5. May charter schools and their operators be sued under the CFCA?

Though we have disagreed with the Court of Appeal about whether the district defendants are “persons” subject to CFCA actions, we have little difficulty upholding the Court of Appeal’s determination that the charter school defendants are “persons” who may be liable under the CFCA.[9]

The CFCA expressly defines “persons” to include “corporations” and “limited liability companies,” as well as, among other things, “organizations” and “associations.” (Gov. Code, § 12650, subd. (b)(5).) The statute includes no exemption, either in the definitional section or elsewhere, for “corporations” organized under the Nonprofit Public Benefit Corporation Law (Corp. Code, § 5110), or for “corporations,” “limited liability companies,” “organizations,” or “associations” that operate charter schools under the CSA.

The instant complaint alleges, and apparently there is no dispute, that defendants One2One, CSRA, Sierra Summit Academy, and Camptonville Academy are corporations. Moreover, Mattole Valley School, though apparently not itself a corporation, is alleged to be operated by corporations, and is certainly an “organization” within the meaning of the statutory definition.

Nonetheless, the charter school defendants insist that, by virtue of the CSA, they are entitled to any “public entity” immunity enjoyed by their chartering districts. The charter school defendants point to various declarations in the CSA that charter schools are “part of the Public School System as defined in [a]rticle IX of the California Constitution” (Ed. Code, § 47615, subd. (a)(1)),[10] are “under the jurisdiction of the Public School System and the exclusive control of the officers of the public schools” (id., subd. (a)(2)), and, for specified purposes of funding, are “deemed to be . . . ‘school district[s]’ ” (id., § 47612, subd. (c); see also id., § 47650).[11]

We are not persuaded. Though charter schools are deemed part of the system of public schools for purposes of academics and state funding eligibility, and are subject to some oversight by public school officials (see Wilson, supra, 75 Cal.App.4th 1125, 1136-1142), they are operated, not by the public school system, but by distinct outside entities— including nonprofit public benefit corporations with independent legal identities (see Ed. Code, § 47604, subd. (a); Corp. Code, §§ 5000 et seq., 5110 et seq.)—that are given substantial freedom to achieve academic results free of interference by the public educational bureaucracy. The sole relationship between a charter school operator and the chartering district is through the charter governing the school’s operation. Except in specified respects, charter schools and their operators are “exempt from the laws governing school districts.” (Ed. Code, § 47610.)

The autonomy, and independent responsibility, of charter school operators extend, in considerable degree, to financial matters. Thus, where a charter school is operated by a nonprofit public benefit corporation, the chartering authority is not liable for the school’s debts and obligations. (Id., § 47604, subd. (c).) A 2003 amendment to the CSA makes clear that the chartering authority’s immunity from financial liability for a charter school extends to “claims arising from the performance of acts, errors, or omissions by the . . . school, if the authority has complied with all oversight responsibilities required by law.” (Ibid.)

The CFCA was designed to help the government recover public funds of which it was defrauded by outside entities with which it deals. There can be little doubt the CFCA applies generally to nongovernmental entities that contract with state and local governments to provide services on their behalf. The statutory purpose is equally served by applying the CFCA to the independent corporations, organizations, and associations that receive public monies under the CSA to operate schools on behalf of the public education system.

On the other hand, we conclude, the sovereign power over public education is not infringed by application of the CFCA, including its treble-damages-plus-penalties provisions, to independent charter school operators. As we have seen, public school districts are the entities fundamentally responsible for operating the system of free public education required by the Constitution. The districts’ continuing financial ability to carry out this mission at basic levels of adequacy is thus critical to satisfying the state’s free public school obligation. (See Butt, supra, 4 Cal.4th 668, 678-692.) Accordingly, we have concluded that the Legislature did not intend to undermine this sovereign obligation by exposing public school districts to the harsh monetary sanctions of the CFCA.

But the CSA assigns no similar sovereign significance to charter schools or their operators. Under that statute, the term of a charter cannot exceed five years, subject to renewal. (Ed. Code, § 47607, subd. (a)(1).) The grant and renewal of charters are dependent upon satisfaction of statutory requirements, including attainment of specific educational goals. (Id., subds. (b), (c); see also id., § 47605.) A charter may be revoked for material violations of the law or charter, failure to meet pupil achievement goals, or fiscal mismanagement. (Id., § 47607, subd. (d).) If a charter school ceases to exist, its pupils are reabsorbed into the district’s mainstream public schools, and the ADA revenues previously allotted to the charter school for those pupils revert to the district.

The CSA was adopted to widen the range of educational choices available within the public school system. That is a salutary policy. Yet application of the CFCA’s monetary remedies, however harsh, to a particular charter school or its operator presents no fundamental threat to maintenance, within the affected district, of basically adequate free public educational services. Thus, application of the CFCA to charter school operators cannot be said to infringe the exercise of the sovereign power over public education.

This being so, there is no reason to conclude that the charter school defendants are not “persons” within the definition expressly set forth in the CFCA. In our view, they are such “persons,” and they may be held liable under the terms of that statute if they submit false claims for state or district educational funds.[12]

To be continue as Part III ..

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[1] Perusal of the codes discloses other similar examples. Labor Code section 18 defines “person,” for all purposes of that code, to mean “any person, association, organization, partnership, trust, limited liability company, or corporation.” In division four of the Labor Code, concerning workers’ compensation insurance, a covered “employer” is defined to include “[e]very person including any public service corporation, which has any natural person in service” (Lab. Code, § 3300, subd. (c), italics added) and, additionally and separately, “[t]he State and every State agency” (id., subd. (a)) and “[e]ach county, city, district, and all public and quasi public corporations and public agencies therein” (id., subd. (b)). Section 19 of the Water Code defines “[p]erson,” for all purposes of that code, to mean “any person, firm, association, organization, partnership, business trust, corporation, limited liability company, or company.” However, for purposes of division seven of that code, concerning water quality, “ ‘[p]erson’ ” also “includes any city, county, district, the state and the United States. . . .” (Wat. Code, § 13050, subd. (c).)

On the other hand, amicus curiae Taxpayers Against Fraud invokes the maxim expressio unius est exclusio alterius. Amicus curiae notes that Government Code section 12652, subdivision (d)(1), explicitly prohibits, under certain circumstances, qui tam actions against “Member[s] of the State Senate or Assembly, . . . member[s] of the state judiciary, . . . elected official[s] in the executive branch of the state, or . . . member[s] of the governing body of [a] political subdivision.” By exempting these particular “public” defendants, amicus curiae argues, the CFCA must mean to include all others. We are not persuaded. The designated officials, as natural persons, clearly fall within the statute’s definition of covered “persons,” and thus must be expressly exempted in situations where the statute intends exemption.

[2] The current reference to “limited liability company” in the statutory definition was added to the CFCA by a 1994 amendment. (Stats. 1994, ch. 1010, § 141, p. 6088.)

[3] In LeVine II, supra, 90 Cal.App.4th 201, the Court of Appeal affirmed, as law of the case, its ruling in LeVine I that public school districts are “persons” subject to suit under the CFCA. The LeVine II court declined to reconsider its prior holding in light of several intervening federal decisions, including Vermont Agency of Natural Resources v. United States ex rel. Stevens (2000) 529 U.S. 765 (Stevens). Stevens held that states are not “persons” subject to qui tam liability under the federal false claims statute. We discuss Stevens in greater detail below.

[4] We have indicated (ante, fn. 1) that the CFCA provides a single definition of “person,” governing both who may be sued and who may sue as a qui tam plaintiff. In Harris, supra, Cal.4th _, we consider whether public entities are “persons” for the latter purpose. As we explain in Harris, there is ample evidence the Legislature did not contemplate public entities as qui tam plaintiffs under the CFCA. (See Harris, supra, Cal.4th at pp. _-_ [at pp. 11-14].) Given the statute’s uniform definition of “person,” Harris’s analysis further informs our conclusion here that public entities also are not “person[s]” subject to suit under the CFCA.

[5] Article XIII B allows governmental entities to establish reserve, contingency, emergency, trust, sinking, and other like funds to pay unexpected or extraordinary expenses. Payments from such funds do not constitute appropriations subject to limitation, but contributions to such funds do count against an entity’s appropriations limit. (Cal. Const., art. XIII B, § 5.)

[6] We note that the Legislature has provided other, detailed means by which the state may discover and recoup overpayments of state educational funds to local districts. Thus, as the district defendants and several amici curiae point out, local districts must undergo independent annual audits (Ed. Code, § 41020), and the State Controller may also audit local school districts (see id., §§ 14506, 14507, 41344, subd. (e)). If an audit shows the district received an overapportionment equal to, or greater than, the sum due for even one unit of ADA, the state must reduce accordingly the total ADA apportionment otherwise due to the district for a succeeding year. (Id., §§ 41341, 41344.) If a single-year recoupment would create hardship for the local district, a plan may be implemented for repayment over a period of up to eight years. (Id., § 41344, subd. (a)(2).) While these provisions accord the state a strict remedy for funds improperly apportioned to a local district, they also display the Legislature’s realistic solicitude for the several financial constraints under which modern California school districts, like all government agencies, must carry out their vital mission. They are additional evidence that the Legislature did not intend to apply the CFCA’s draconian remedies in this context.

[7] By statute, “[n]otwithstanding any other provision of law, a public entity is not liable for damages awarded under [s]ection 3294 of the Civil Code [governing punitive damages] or other damages imposed primarily for the sake of example and by way of punishing the defendant.” (Gov. Code, § 818.) One might argue that the CFCA’s treble-damage provisions are not strictly, or even primarily, “punitive,” in that they are necessary to ensure both (1) full recovery by the state or political subdivision against which the false claim was made and (2) due compensation to the party who undertook the false claim action on behalf of the defrauded entity. (Cf., e.g., People ex rel. Younger v. Superior Court (1976) 16 Cal.3d 30 [Government Code section 818 did not prohibit assessment, under statute expressly applicable to public entities, of civil penalties against port district for oil spill into estuary; penalties compensated people of state for real, but unquantifiable, damage from spill]; State Dept. of Corrections v. Workmen’s Comp. App. Bd. (1971) 5 Cal.3d 885 [Government Code section 818 did not prohibit assessment, under statute expressly applicable to public entities, of 50 percent increase in workers’ compensation award otherwise payable by corrections department because of agency’s serious and willful misconduct, since employee did not thereby receive more than full compensation for his injuries].) But the purpose behind the statutory ban on punitive damages against public entities—to protect their tax-funded revenues from legal judgments in amounts beyond those strictly necessary to recompense the injured party—applies equally here. In our view, this is an additional indication that the Legislature did not intend, without expressly saying so, to apply the CFCA to public entities such as school districts.

[8] The State of California argues that a public school district should be deemed a “person” under the CFCA, and thus liable under that statute for false claims against state education funds, unless any CFCA judgment against the district would essentially be paid from state funds, in which case the district should be considered an “arm of the state” and thus exempt. Whether a CFCA judgment against a district would be paid from state funds is a case-by-case determination, the state urges, and the instant record lacks information from which we may make such a determination in this case. Hence, the state asserts, a remand to the trial court is required. We are not persuaded. Under the revenue equalization system of California school finance, any judgment finding the district liable for a false claim against state funds will necessarily be paid, at least in part, from funds originally derived from the state. Indeed, the district defendants have urged that there is no purpose in holding them to CFCA liability in this regard, because the district’s satisfaction of a CFCA judgment would, in effect, constitute “the state paying itself.” We need not immerse ourselves in this thicket. For the reasons we have explained, we are satisfied that the Legislature did not intend to impair districts’ financial ability to carry out their public educational mission on behalf of the state by exposing them to the harsh monetary sanctions of the CFCA.

Finally, the analysis we have adopted makes it unnecessary to reach the district defendants’ claims that they are immune from liability under various provisions of the TCA (Gov. Code, § 815 et seq.)

[9] As indicated above, the charter school defendants, as so labeled for purposes of this opinion, include the schools themselves, in whatever legal form they are operated, as well as all other entities having legal form, other than the district defendants, which entities are named in the complaint as having direct or indirect responsibility for, or control of, the operation of such schools.

[10] Article IX, section 6 of the California Constitution defines the Public School System to “include all kindergarten schools, elementary schools, secondary schools, technical schools, and State colleges, established in accordance with law and, in addition, the school districts and the other agencies authorized to maintain them.”

[11] Education Code section 47612, subdivision (c), states that charter schools are deemed to be school districts for purposes of (1) Education Code sections 14000 through 14058 (concerning appropriations, disbursements, and apportionment from the State School Fund to local districts based on ADA), 41301 (concerning apportionment formulas based on ADA), 41302.5 (defining “school districts” for purposes of article XVI, sections 8 and 8.5, of the California Constitution, which sections earmark levels of state funding for public schools), 41850 through 41857 (concerning apportionment from the State School Fund for home-to-school transportation), and 47638 (concerning charter schools’ eligibility for State Lottery funds based on ADA), and (2) article XVI, sections 8 and 8.5 of the California Constitution.

[12] Defendants Camptonville Academy and Jablecki insist that application of the CFCA to charter schools and their operators would violate constitutional and statutory mandates that state school funds be separately apportioned and maintained. (Citing Cal. Const., art. XVI, § 8, subd. (a) [“From all state revenues there shall first be set apart the moneys to be applied by the state for support of the public school system”]; see also id., § 8.5 [referring to this separate fund as the State School Fund]; Ed. Code, § 14040 [State Controller shall keep separate account of State School Fund].) This would require, these defendants assert, that money falsely received from the State School Fund must revert to that account alone when recovered from the false claimant. Yet, they observe, the CFCA provides, in subdivision (j) of Government Code section 12652, that “[p]roceeds from the action or settlement of [a CFCA] claim by the Attorney General” shall be deposited into a different fund, the False Claims Fund created by the same subdivision, and shall be used by the Attorney General, upon appropriation by the Legislature, for ongoing investigation and prosecution of false claims. We are not persuaded by this hypertechnical argument. Even assuming that the premise advanced by these defendants is correct (i.e., funds falsely received from the State School Fund must revert only to that fund), subdivision (j), reasonably read, does not provide otherwise. As noted, the CFCA specifies recovery of double or triple the amount falsely received. (Gov. Code, § 12651, subds. (a), (b).) From this total amount, the Attorney General, local prosecuting authority, and/or qui tam plaintiff, receive percentage “cuts” (id., § 12652, subd. (g)(1)-(5)), with the remainder “revert[ing] to the state [or] the political subdivision” (id., subd. (g)(6)). Elsewhere than in subdivision (j), section 12652 makes clear that the Attorney General, or a local prosecuting authority, is to use that officer’s “cut” of the proceeds for ongoing investigation and prosecution of false claims. (Id., subd. (g)(1)(A), (B), (2).) In this context, subdivision (j), when referring to “[p]roceeds from the action or settlement of the claim by the Attorney General,” means only the Attorney General’s “cut” of the total amount recovered in the action or settlement, leaving the remainder for reversion to the public fund, treasury, or account—general or specific—from which it was falsely obtained. In providing for double or treble recovery, the CFCA seeks to ensure that the “cuts” awarded to the public or private parties who prosecute false claims actions will not prevent the defrauded treasury itself from obtaining full recovery of the funds actually lost to the false claim. We see in this scheme no violation of the constitutional and statutory provisions cited by Camptonville Academy and Jablecki.