U.S. v. O'Connell, 89-1207

• Decision Date: 12 September 1989
• Docket Number: No. 89-1207,89-1207
• Citation: 890 F.2d 563
• Parties: , 15 Fed.R.Serv.3d 197, 36 Cont.Cas.Fed. (CCH) 75,762, 29 Fed. R. Evid. Serv. 422 UNITED STATES of America, Plaintiff, Appellee, v. John A. O'CONNELL, Jr., et al., Defendants, Appellees, Appeal of ST. AUGUSTINE TRAWLER, INC., Defendant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 563

890 F.2d 563

107 A.L.R.Fed. 653, 15 Fed.R.Serv.3d 197,

36 Cont.Cas.Fed. (CCH) 75,762,

29 Fed. R. Evid. Serv. 422

UNITED STATES of America, Plaintiff, Appellee, v. John A. O'CONNELL, Jr., et al., Defendants, Appellees Appeal of ST. AUGUSTINE TRAWLER, INC., Defendant.

No. 89-1207.

United States Court of Appeals First Circuit.

Heard Sept. 12, 1989.

Decided Dec. 6, 1989.

Fred H. Kent, Jr., with whom Kent, Hayden, Facciolo & McMorrow, Jacksonville, Fla., and Kneeland, Kydd & Handy, Boston, Mass., were on brief, for appellant.

Robert L. Vogel with whom Stuart E. Schiffer, Acting Asst. Atty. Gen., Washington, D.C., Wayne A. Budd, U.S. Atty., Boston, Mass., and Michael F. Hertz, New York City, were on brief, for plaintiffs, appellees.

Before BOWNES, TORRUELLA and MAYER ^* Circuit Judges.

BOWNES, Circuit Judge.

This is an appeal by defendant-appellant St. Augustine Trawlers, Inc. (SAT) from a summary judgment granted against it, John A. O'Connell and Jerry D. Thompson. A default judgment was entered against a fourth defendant, James H. Norton, Jr. The defendants were held liable under the False Claims Act, 31 U.S.C. Secs. 3729-3733, for defrauding the government of about $463,000. The district court held SAT responsible for the acts of its general manager and one third owner, Thompson. Only SAT has appealed. SAT does not deny that Thompson helped the other individual defendants defraud the government. The main thrust of its appeal is that there were genuine issues of material fact to be determined by trial and as a matter of law SAT was not liable.

I. THE FRAUD

The fraud was conceived, hatched and perpetrated by O'Connell, Norton and Thompson. Prior to the bringing of this case, O'Connell and Norton were convicted of conspiracy to defraud the United States Department of Housing and Urban Development (HUD), making false material declarations before the Grand Jury, influencing, obstructing and impeding the due process of justice, and obstructing a witness, in violation of 18 U.S.C. Secs. 371, 1503, 1623 and 2. The convictions were upheld by the Eleventh Circuit. United States v. Norton and O'Connell, 755 F.2d 1428 (11th Cir.1985). Thompson pled guilty to one count of conspiracy to defraud HUD, 18 U.S.C. Sec. 371. He was a witness at the trial. The facts that form the basis for this action are the same the government relied upon to prove a conspiracy to defraud HUD in the criminal case.

We now turn to the facts that the government claims are not in dispute. These facts are derived from the materials submitted by the government in support of its motion for summary judgment. These materials, in the main, consist of exhibits and excerpts of testimony from the criminal trial of O'Connell and Norton, in which Thompson was a witness. SAT does not contest the accuracy of the facts but challenges their use by the district court and the legal conclusions drawn from them.

The fraud began in September of 1979 when O'Connell contacted the Massachusetts Economic Development and Industrial Corporation (EDIC) about leasing and developing Boston waterfront property. In January of 1980, the O'Connell Seafood Company (OSC), a company owned and controlled by O'Connell, applied to HUD for a grant in the amount of $2,087,250 from its Urban Development Action Grant Program. The grant was to be used by OSC for certain improvements to Boston Harbor including the construction and installation of a floating dry dock and the construction of nine fishing boats to be berthed in the harbor. OSC received the grant. It was administered by EDIC and was conditioned on the investment by OSC of at least $150,000 of its own funds towards the construction of the dry dock and not less than $6,579,000 for the building of the fishing vessels.

Our focus is on the financial transactions between OSC and SAT. It is important to bear in mind that throughout this skein of transactions SAT acted solely through its general manager, Thompson.

In April, OSC and SAT signed an agreement that provided that SAT would build the dry dock and sell it to OSC for $890,000. This agreement was false; the amount actually paid by OSC to SAT was about $425,000. These particular facts are based on the testimony of Thompson at the criminal trial and notations he had made. It is not clear from Thompson's testimony whether the false agreement was for $790,000 or $890,000 but SAT has not challenged the amount claimed by the government, $890,000, so we assume it is correct.

In May, O'Connell gave Thompson two OSC checks made payable to SAT in the amounts of $2,000 and $150,000. Thompson in turn gave O'Connell false SAT invoices confirming these two payments, and at the same time gave O'Connell a SAT check for $152,000 payable to OSC. Copies of the OSC checks given to SAT were furnished by O'Connell to EDIC and then forwarded to HUD. In June, Norton, as general counsel to OSC, wrote a letter to HUD stating that OSC had entered into a valid and legally enforceable contract with SAT for the construction of the dry dock at a price of $890,000 and that OSC had paid SAT $152,000 on the dry dock contract.

In July, O'Connell gave EDIC a false SAT invoice which stated that $300,000 was due and owing on the dry dock. EDIC then disbursed $300,000 in reliance on the false invoice. In August, O'Connell gave Thompson an OSC check for $300,000 payable to SAT in partial payment for the dry dock. Thompson in turn gave O'Connell four SAT checks for $50,000 each, purportedly for sales commissions due him on four of the fishing boats. In fact, these checks were issued to cover up the fact that O'Connell had pocketed $200,000 of federal money; no commissions were due O'Connell.

In September, O'Connell presented another false SAT invoice to EDIC requesting a final payment on the dry dock of $438,000. In October and November, EDIC disbursed that amount to OSC in reliance on the false invoice.

In response to O'Connell's false claims for payments and in reliance on the fraudulent documentation, EDIC paid out a total of $738,000 in HUD funds to OSC. The dry dock had only cost OSC about $425,000 and OSC had not invested, as it agreed, $150,000 of its own money towards the construction of the dry dock. As a result the government was defrauded of about $463,000. Under the False Claims Act, that amount is tripled and each defendant is jointly and severally liable. 31 U.S.C. Sec. 3729(a).

II. SUMMARY JUDGMENT

In reviewing a grant of summary judgment by the district court, we look to the pleadings and supporting materials submitted by the parties in order to determine whether or not an issue exists that requires a trial for its resolution. Fed.R.Civ.P. 56(c); Daury v. Smith, 842 F.2d 9, 11 (1st Cir.1988); Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976). The inferences to be drawn from the underlying facts contained in the materials submitted by the moving party must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Hahn v. Sargent, 523 F.2d at 464. If the moving party has met its initial burden, the opposing party may not rely on a general denial as the basis for a favorable inference; it "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986); Daury v. Smith, 842 F.2d at 11. As the Court has said: "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986) (footnote omitted). The test for whether an opposing party has established a genuine issue for trial is whether it "present[s] evidence from which a jury might return a verdict in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. at 257, 106 S.Ct. at 2515; Daury v. Smith, 842 F.2d at 11.

Having set forth the standard of review, we turn to SAT's contentions.

A. The Pleading Argument.

SAT's first contention is outright frivolous. It claims that because the government did not state explicitly within the four corners of its motion for summary judgment that there were no genuine issues of material fact, the motion was fatally defective. Along with its motion for summary judgment, the government filed a 20 page document entitled "Statement of Material Facts That are Not In Dispute." This document was incorporated by reference in the motion. SAT tries to avoid the consequences of this by arguing that the statement was provided in compliance with local rule 18 of the Massachusetts District Court, and it, therefore, does not cure the failure to comply with Fed.R.Civ.P. 56.

There is no requirement in Rule 56 that a motion for summary judgment state explicitly that there are no genuine issues of material fact. This is the basis for a motion for summary judgment. The very filing of a motion for summary judgment amounts to a statement that the proponent is claiming that there are no issues of material fact. That is what Rule 56 is all about. Rule 56(c) states in pertinent part:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answer to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Moreover, SAT cites no authority for its contention. It cites a single case at the end of its argument on this issue, Berard v. General Motors Corp, 493 F.Supp. 1035, 1037 (D.C.Mass.), aff'd without opinion, 657 F.2d 261 (1st Cir.1980), cert. denied, 451 U.S. 987, 101 S.Ct. 2322, 68 L.Ed.2d 845 (1981). But there is nothing in Berard that...