U.S. ex rel. Farmer v. City of Houston

• Decision Date: 25 March 2008
• Docket Number: No. 06-20740.,06-20740.
• Citation: 523 F.3d 333
• Parties: UNITED STATES of America ex rel. Marsha FARMER, Plaintiff-Appellant, v. CITY OF HOUSTON; Houston Area Urban League, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

523 F.3d 333

UNITED STATES of America ex rel. Marsha FARMER, Plaintiff-Appellant, v. CITY OF HOUSTON; Houston Area Urban League, Defendants-Appellees.

No. 06-20740.

United States Court of Appeals, Fifth Circuit.

March 25, 2008.

Brantly Harris (argued), Law Offices of Brantly Harris, Houston, TX, for Farmer.

Adolph R. Guerra, Jr. (argued), Jacob Montilijo Monty, Jeremy Daniel Saenz, Daniel Nicholas Ramirez, Monty Partners, LLP, Judith N. Benton, The City of Houston Legal Dept., Houston, TX, for City of Houston.

Alton J. Hall, Jr., Delise & Hall, Covington, LA, A. Martin Wickliff, Jr., Daniella D. Landers (argued), Epstein, Becker, Green, Wickliff & Hall, Houston, TX, for Houston Area Urban League.

Steve I. Frank (argued), Douglas N. Letter, U.S Dept. of Justice, Civ. Div., Washington, DC, for U.S., Amicus Curiae.

Appeal from the United States District Court for the Southern District of Texas.

Before JONES, Chief Judge, and REAVLEY and SMITH, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Marsha Farmer brought an action on behalf of the United States against the City of Houston, Texas, and the Houston Area Urban League ("HAUL"), alleging violations of the False Claims Act ("FCA"), 31 U.S.C. § 3729(a). Farmer claimed that defendants unlawfully received federal funds from the United States Department of Housing and Urban Development ("HUD") based on false and fraudulent information. After the United States declined to intervene and extensive discovery had been conducted, defendants moved for summary judgment, and the city moved to dismiss for lack of jurisdiction. The district court granted the motions for summary judgment and denied the motion to dismiss.

Farmer appeals. Because she is unable to show that the city or HAUL acted with knowledge of any falsity or that defendants agreed with each other to defraud the government, we affirm.

I.

Farmer's action concerns the city's Emergency Home Repair Program ("EHRP"), which is funded by HUD as part of its Community Development Block Grant program ("CDBG"), under which HUD granted the city access to a line of credit to be used for certain types of residential repair projects. A requirement of receiving these funds was that the city's management and expenditures were expressly subject to audit by HUD.¹

The city, in turn, chose HAUL, a non-profit corporation, to perform certain EHRP projects. HAUL elected to retain third-party contractors—as opposed to its own employees—to perform the relevant repairs. The city reimbursed HAUL based on invoices that were submitted by those contractors. The reimbursements were paid from CDBG funds.

Farmer's involvement with the EHRP began in 2001 when she applied for assistance after her roof suffered damage during tropical storm Allison. Inspectors were dispatched to determine whether Farmer qualified for the EHRP. The inspectors examined her property and, based on their estimates of what it would cost to complete the necessary repairs, determined that she did not qualify,² so no work was performed on her house.

When Farmer reviewed the inspector's written estimates, however, she noticed that something seemed amiss: The estimates included several incorrect quantities of materials, most notably that 4,000 square feet of roofing material would be required. Only half that amount had been needed the last time Farmer had had her roof replaced. She became suspicious.

Using data obtained by means of the Texas Public Information Act, Farmer assiduously investigated other properties assigned to HAUL under the EHRP. She compared, for instance, the city's disbursements to HAUL for roof repairs with estimates of roof size that she obtained from the Harris County Appraisal District. Using a similar approach, she analyzed expenditures for gutters, water lines, windows, smoke detectors, counter tops, foundations, and the like. Based on her analysis, she believed the EHRP was being bilked, with reimbursements being approved and building materials being paid for far in excess of what was necessary or actually provided.³

II.

Using that research, Farmer alleged that defendants had made false and fraudulent claims that had been paid using federal funds. In September 2003, after providing notice to the Attorney General of the United States and to the United States Attorney for the Southern District of Texas, she filed a complaint on behalf of the United States, alleging that defendants had violated the FCA. She also claimed that defendants had failed to comply with the EHRP requirements, and she asserted a claim for money had and received.

After the United States decided not to intervene, Farmer filed an amended complaint, and defendants each filed a motion to dismiss. The court granted those motions in part, dismissing Farmer's claims for money had and received and for defendants' alleged failures to comply with program requirements; the court permitted the FCA claims to go forward.

Following discovery, defendants moved for summary judgment, and the city once again moved to dismiss, this time based on allegedly newly discovered information that Farmer was not an "original source" of the information about the supposed fraudulent claims and thus was jurisdictionally barred from bringing an FCA suit under 31 U.S.C. § 3730(e)(4)(A). In support of their summary judgment motions, defendants argued that, for myriad reasons, Farmer had failed to establish a prima facie case under the FCA.⁴

Regarding § 3729(a)(2), defendants argued that under United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C.Cir.2004), a plaintiff must present evidence that a false or fraudulent claim was presented to an officer or employee of the federal government. According to defendants, Farmer could not establish that such a presentment had taken place, because HUD's post-disbursement audit process was legally inadequate, and Farmer could point to no other potential presentment. Also regarding § 3729(a)(2), defendants—primarily HAUL—argued that Farmer had failed to proffer sufficient evidence from which a reasonable jury could conclude that there were any knowingly false statements, a fundamental scienter condition for liability under the FCA.⁵ For § 3729(a)(3), defendants argued that there was insufficient evidence from which a reasonable jury could find a conspiracy between the city and HAUL to defraud the federal government.

The district court granted defendants' respective motions for summary judgment and denied the city's motion to dismiss as moot. Agreeing with the analysis in Totten, the court concluded that § 3729(a)(2) contains a presentment requirement and that Farmer had failed to satisfy it. The court also held that Farmer had failed to produce evidence that the city and HAUL had entered into an agreement to get a false or fraudulent claim paid or approved by the federal government, so the court dismissed the § 3729(a)(3) claim with prejudice.

III.

We review a summary judgment de novo under Federal Rule of Civil Procedure 56. See, e.g., TIG Ins. Co. v. Sedgwick James, 276 F.3d 754, 759 (5th Cir. 2002). A summary judgment will be affirmed "only if `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' when viewed in the light most favorable to the non-movant, `show that there is no genuine issue as to any material fact.'" Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Though the "court must draw all justifiable inferences in favor of the non-moving party," a genuine dispute about a material fact exists only "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id.

"[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial" and "mandates the entry of summary judgment" for the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "Once the moving party has initially shown `that there is an absence of evidence to support the non-moving party's cause,' the non-movant must come forward with `specific facts' showing a genuine factual issue for trial." TIG Ins., 276 F.3d at 759 (quoting Celotex, 477 U.S. at 325, 106 S.Ct. 2548). "Conclusional allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation do not adequately substitute for specific facts showing a genuine issue for trial." Id.

The district court held that § 3729(a)(2) implicitly — as § 3729(a)(1) does explicitly — contains a presentment requirement. The court also rejected Farmer's contention that even if there is such an implicit presentment requirement, it was satisfied by the EHRP's post-disbursement audit requirement. The court held that because the allegedly false documents were not submitted to HUD at the time of, or in conjunction with, the city's use of federal funds, there was no presentment under the FCA. The court finally held that there was insufficient evidence from which a reasonable jury could find a conspiracy between the defendants, so it granted summary judgment on Farmer's § 3729(a)(3) claim. Farmer contends that each of these rulings is error.⁶

IV.

A.

The question whether § 3729(a)(2) contains a presentment requirement—and if so, what that requirement entails—is both intricate and unsettled. The threshold question whether presentment is necessary under § 3729(a)(2) has divided the courts of appeals.⁷ The second question — what sort of presentment § 3729(a)(2) requires—is by and large unexplored. Accordingly, it is not surprising that there is uncertainty as to whether HUD's statutory obligation to audit its CDBG disbursements constitutes presentment for purposes of § 3729(a)(2), or whether instead the district court is correct that presentment under § 3729(a)(2) requires a concurrence of payment and presentation...