U.S. ex rel. Bahrani v. Conagra, Inc.

• Decision Date: 12 October 2006
• Docket Number: No. 04-1407.,04-1407.
• Citation: 465 F.3d 1189
• Parties: UNITED STATES of America, ex rel., Ali BAHRANI, Plaintiff-Appellant, v. CONAGRA, INC.; Conagra Foods, Inc.; Conagra Hide Division; Conagra Beef Company; and Montfort, Inc., Defendants-Appellees. United States of America, Amicus Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

465 F.3d 1189

UNITED STATES of America, ex rel., Ali BAHRANI, Plaintiff-Appellant, v. CONAGRA, INC.; Conagra Foods, Inc.; Conagra Hide Division; Conagra Beef Company; and Montfort, Inc., Defendants-Appellees.

United States of America, Amicus Curiae.

No. 04-1407.

United States Court of Appeals, Tenth Circuit.

October 12, 2006.

G. Bryan Ulmer, III, The Spence Law Firm, LLC, Jackson, WY (George Harold Parker, Jr., Dedolph & Parker, LLC, Fort

Collins, CO, with him on the briefs), for the Plaintiff-Appellant.

Darrel G. Waas, Otten, Johnson, Robinson, Neff & Ragonetti, P.C., Denver, CO (Patricia C. Campbell, Otten, Johnson, Robinson, Neff & Ragonetti, P.C.; Edward G. Warin, McGrath, North, Mullin, & Kratz, P.C., L.L.O., Omaha, NE; and Carol C. Payne, Vinson & Elkins, L.L.P, Dallas, TX, with him on the brief), for the Defendants-Appellees.

Peter D. Keisler, Assistant Attorney General, Douglas N. Letter, Appellate Litigation Counsel, Michael D. Granston and Alan E. Kleinburd, Attorneys, Civil Division, United States Department of Justice, Washington, D.C., for amicus curiae, the United States of America.

Before HENRY, McKAY, and TYMKOVICH, Circuit Judges.

HENRY, Circuit Judge.

Ali Bahrani filed this reverse false claims action against his former employer Conagra, and its related corporations, which are engaged in exporting meat products and animal hides. He alleged that employees at Conagra's Greeley, Colorado office routinely altered export certificates issued by the United States Department of Agriculture (USDA) in order to avoid obtaining replacement certificates for which the company should have paid a fee, in violation of the reverse false claims provision of the False Claims Act, 31 U.S.C. § 3729(a)(7). Mr. Bahrani maintained that by altering the export certificates, Conagra employees "used ... a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government." 31 U.S.C. § 3729(a)(7).

The district court granted summary judgment to Conagra, reasoning that Conagra's alleged "obligation" to obtain the replacement certificates was not "quantifiable and existing before the allegedly fraudulent acts taken to avoid it." See United States ex rel. Bahrani v. Conagra, Inc., 338 F.Supp.2d 1202, 1207 (D.Colo. 2004). We disagree with the district court's reasoning. The record indicates that, as to a certain class of errors and omissions in export certificates—those deemed "major" or "significant"—the USDA required Conagra to obtain replacement certificates and pay the accompanying fee. In our view, that requirement is sufficient to constitute an "obligation" under § 3729(a)(7). Because we are not persuaded by Conagra's arguments that we affirm on alternative grounds, we vacate the district court's grant of summary judgment and remand for further proceedings.

I. BACKGROUND

We begin with an overview of USDA regulations governing export certificates. Then, we summarize Mr. Bahrani's allegations, the applicable provision of the False Claims Act, 31 U.S.C. § 3729(a)(7), and the grounds for the district court's grant of summary judgment to Conagra. We view the record in the light most favorable to Mr. Bahrani. See Terra Venture, Inc. v. JDN Real Estate Overland Park, L.P., 443 F.3d 1240, 1243 (10th Cir.2006).

A. USDA Export Certificates

To facilitate and promote foreign trade and to protect the food supply, the USDA provides certificates to companies that export animal products. These export certificates are part of a comprehensive scheme administered by the Food Safety and Inspection Service ("the Food Inspection Service"), which regulates meat exports, and the Animal Plant Health Inspection Safety Service ("the Animal Inspection Service"), which regulates hide exports. See 9 C.F.R. §§ 130, 156, 307, 322.2, 350, 351, 390. The regulations are authorized by the Federal Meat Inspection Act, 21 U.S.C. §§ 601-695, the Poultry Products Inspection Act, 21 U.S.C. §§ 451-471, and the Agricultural Marketing Act, 7 U.S.C. §§ 1621-27.

Under the Food Inspection Service regulations, exporters are required to obtain certificates from USDA inspectors for each shipment. Each certificate has a unique serial number and states the shipment's destination, the exporter, the consignee, and the number and kinds of products it contains. 9 C.F.R. § 322.2. The destination may affect the content of the certificates: some countries require more information than the Food Inspection Service does, and, in those instances, the USDA provides exporters with certificates that comply with those other countries' requirements.

The Animal Inspection Service regulations contain a similar provision addressing certificates for exports of animal hides. 9 C.F.R. § 156.3. In contrast to the Food Inspection Service regulations, the Animal Inspection Service regulations do not require a certificate for every shipment. However, some foreign countries do require certificates, and the Animal Inspection Service regulations provide that exporters shipping hides to those countries may obtain a certificate from an inspector.

The Food Inspection Service and the Animal Inspection Service both charge fees for the certificates. The Food Inspection Service's export certificate fee is based upon the time expended by its inspectors for providing information over and above the minimum certification requirements set forth by federal law. See 9 C.F.R. §§ 307.4-307.6, 322.2, 391.1-391.3. In contrast, the Animal Inspection Service charges a flat fee (currently $32). See id. § 130.20. The purpose of the fee is to reimburse the government for the costs incurred.

Occasionally, an exporter may discover inaccuracies in an export certificate after it has been issued by a USDA inspector. There may be typographical errors or more substantive deficiencies involving matters such as the grade of beef or the destination of the product. In those instances, the inspectors' practice has been to make corrections on the original certificate themselves, authorize those corrections to be made by the exporters, or to issue a new certificate. The Food Inspection Service's regulations expressly provide for such new certificates. See id. § 322.2(c) (setting forth the requirements for "in lieu of" certificates). The Animal Inspection Service's regulations do not contain a similar provision. However, the record indicates that, in certain instances, its inspectors do issue replacement certificates when the original certificates are inaccurate. Although there is not a separate provision addressing the payment of fees for these "in lieu of" and replacement certificates, the parties do not dispute that the regulations authorize the Food Inspection Service and the Animal Inspection Service to charge fees for them.

The regulations do not set forth a standard for determining when these "in lieu of" and replacement certificates are required. However, both parties have submitted affidavits—from USDA officials and a Conagra employee—agreeing that these certificates are required when the original certificate contains significant errors or omissions. See Aplt's App. vol. I, at 101 (affidavit of Dr. Mark T. Mina, Mr. Bahrani's expert, stating that new certificates are required for "major" changes); Aple's Supp.App. vol. II, at 375 (affidavit of Brad Schmeh, Conagra's expert, stating that new certificates are required in "situations where the customer needs an entirely different shipment or if the weights used for the hides are completely wrong as opposed to one digit being incorrect or transposed"); id. at 385 (affidavit of Mariana Lambert, Conagra's Letter of Credit Manager stating that new certificates are required for "changes to the product information, which would include changes to the number of pelts or pieces, the type of hide, or the weight ... [or] significant changes to the identification information, including entirely different container numbers or significant changes to the port of loading or port of discharge"); id., at 475 (affidavit of Dr. Claude Nelson, Conagra's expert, stating that new certificates are required when "the customer needs an entirely different shipment, or if the weights used for the hides are completely wrong or the consignee is different from on the original certificate, as opposed to one digit being incorrect or transposed"); id. at 278 (affidavit of Dr. Robert Fetzner, Conagra's expert, stating that new certificates are not required if the changes are "minor").

B. Mr. Bahrani's Allegations

From 1996 to 1998, Mr. Bahrani worked as a document coordinator at Conagra's Greeley, Colorado facility. According to Mr. Bahrani, when Conagra employees discovered errors and omissions in export certificates, they routinely altered the original certificates or forged new certificates, rather than obtaining "in lieu of" or replacement certificates. Based on his personal experience and information from co-workers, Mr. Bahrani maintained that Conagra employees altered more than 200 export certificates per week, and that they followed this practice at the company's Greeley facility and at other locations for at least ten years preceding the commencement of this action. According to Mr. Bahrani, by altering the original certificates, Conagra employees avoided the fees that the company would have been required to pay for new certificates. Thus, he asserted, he was entitled to damages under the reverse false claims provision of the False Claims Act, 31 U.S.C. § 3729(a)(7).

C. The False Claims Act

Congress passed the original False Claims Act in 1863 "to combat rampant fraud in Civil War defense contracts." S.Rep. No. 99-345, at 8, reprinted in 1986 U.S.C.C.A.N. 5266, 5273 (1986). "The Supreme Court has given the statute an expansive reading," Am. Textile Mfrs. Inst., Inc. v. The Limited, Inc., 190 F.3d 729, 733 (6th Cir.1999), observing that it "covers all fraudulent attempts to cause the Government to pay out sums of money."...