United States v. Hawley

• Decision Date: 01 August 2011
• Docket Number: No. C 06–4087–MWB.,C 06–4087–MWB.
• Citation: 812 F.Supp.2d 949
• Parties: UNITED STATES of America, Plaintiff, v. Russell T. HAWLEY and Hawley Insurance, Inc., Defendant.
• Court: U.S. District Court — Northern District of Iowa

812 F.Supp.2d 949

UNITED STATES of America, Plaintiff,

v.Russell T. HAWLEY and Hawley Insurance, Inc., Defendant.

No. C 06–4087–MWB.

United States District Court, N.D. Iowa, Eastern Division.

Aug. 1, 2011.

Limited on Constitutional Grounds

31 U.S.C.A. § 3729(a)(1)(B)

Jeffrey A. Wertkin, U.S. Department of Justice, Washington, DC, Timothy T. Duax, U.S. Attorney's Office, Sioux City, IA, for Plaintiff.

Sean A. Minahan, Stacy L. Morris, William M. Lamson, Jr., Lamson, Dugan & Murray, LLP, Omaha, NE, for Defendant.

MEMORANDUM OPINION AND ORDER REGARDING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT

MARK W. BENNETT, District Judge.

+-----------------+
                ¦TABLE OF CONTENTS¦
                +-----------------+
                

                I. INTRODUCTION                                                       951
                

 A. Factual Background                                              951
                   B. Procedural Background                                           952
                

                II. LEGAL ANALYSIS                                                    955
                

 A. Standards for Summary Judgment                                  955
                   B. Amendments to the False Claims Act                              956
                   C.   Ex Post Facto Clause under the United States Constitution       958
                   D. Due Process under the United States Constitution                962
                

                III. CONCLUSION                                                        962
                

I. INTRODUCTION

This civil action is before me on a Motion For Partial Summary Judgment filed on the part of defendants Russell T. Hawley and Hawley Insurance, Inc. (collectively the “defendants” or “Hawley”). Hawley alleges that amendments to the False Claims Act (“FCA”), 31 U.S.C. § 3729, as set forth in the Fraud Enforcement and Recovery Act of 2009 (“FERA”), Pub. L. No. 111–21, § 4(f)(1), 123 Stat. 1617, 1625 (2009), do not apply to the present matter and, thus, he is entitled to judgment as a matter of law. Hawley further argues that even if the amendments do apply, such retroactive application would violate the Ex Post Facto clause and Hawley's right to Due Process under the United States Constitution. I have reviewed Hawley's motion in detail, and find the motion to be fully submitted and ripe for decision.

A. Factual Background

Plaintiff United States of America (“the government”), alleges that Hawley engaged in improper conduct that allowed ineligible farmers to obtain and make claims against multi-peril crop insurance (“MPCI”) policies that were sold by Hawley, issued by North Central Crop Insurance (“NCCI”), and reinsured by the Federal Crop Insurance Corporation (“FCIC”), for certain crop land in South Dakota. In my earlier Memorandum Opinion And Order Entering Summary Judgment Sua Sponte On Remaining Claims And Reaffirming Summary Judgment On Count One (docket no. 51), I made the following findings of fact:

The factual background to this action is set forth in some detail in the court's April 3, 2008, ruling on the parties' crossmotions for summary judgment. See United States v. Hawley, 544 F.Supp.2d 787, 791–94 (N.D.Iowa 2008) ( Hawley I ).

For present purposes, suffice it to say that the government alleges that Hawley knew that Ed Marshall owned the crop land in question, that Mark Hoffman had rented the land from Ed Marshall, and that Donald Kluver was actually farming the land in 2000.

Nevertheless, Hawley submitted to NCCI a crop insurance application for the 2000 crop year in the names of Sydney and Stanley Winquist for an interest in crops on the crop land. The Winquists later made claims against the MPCI policy on which the FCIC ultimately reimbursed NCCI for crop insurance indemnities and paid premium subsidies for the 2000 crop year totaling $145,540. The Winquists and Kluver were later prosecuted for conspiring to make fraudulent crop insurance claims relating to the crop land for crop year 2000. Kluver entered into a plea agreement and the Winquists entered into pretrial diversion agreements.

Similarly, the government alleges that, just before the application deadline for the 2001 crop year, Hawley submitted to NCCI an application for crop insurance for the crop land in the name of, and purportedly signed by, Ed Marshall. The application had been hand-delivered to Hawley by Mark Hoffman, so Hawley had not seen Marshall sign the application. The FCIC eventually made payments for indemnity payments for crop losses claimed by Marshall and paid premium subsidies on the crop land for the 2001 crop year totaling $159,960. Ed Marshall signed a civil settlement agreement with the United States Attorney's Office for the Northern District of Iowa in which he admitted that he had not signed a timely application for crop insurance nor had he instructed anyone to sign such an application on his behalf and pursuant to which he repaid part of the overpayment alleged.

(docket no. 51, pp. 2–3)

B. Procedural Background

I will, once again, quote from my prior Memorandum Opinion And Order Entering Summary Judgment Sua Sponte On Remaining Claims And Reaffirming Summary Judgment On Count One (docket no. 51), to illustrate the applicable procedural history.

The government originally brought claims pursuant to 31 U.S.C. § 3729(a)(1), (a)(2), and (a)(3) of the False Claims Act (FCA), and common-law claims of fraud and payment under mistake of fact. However, the court granted summary judgment in favor of the defendants on Count One, the FCA claim pursuant to 31 U.S.C. § 3729(a)(1) alleging “presentation of a false claim,” and as to Count Five, the common law claim for “payment under mistake of fact,” but otherwise denied the defendants' motion for summary judgment. See id. Therefore, this matter was scheduled for trial to begin on June 30, 2008, on the following claims: Count Two, the “false record or statement” claim, in which the government asserts a claim pursuant to 31 U.S.C. § 3729(a)(2) of the FCA alleging that the defendants knowingly made, used, or caused to be made or used false records or statements in order to get false or fraudulent claims paid or approved by the United States; Count Three, the “conspiracy” claim, in which the government asserts a claim pursuant to 31 U.S.C. § 3729(a)(3) of the FCA alleging that the defendants conspired with others to get false or fraudulent claims allowed or paid by the United States in that the defendants entered into an agreement to submit and process false and fraudulent information in order for ineligible individuals to receive indemnities that would ultimately be reimbursed by the United States through the Federal Crop Insurance Corporation (FCIC); and Count Four, the “common-law fraud” claim, in which the government alleges that the defendants engaged in common-law fraud by making or using false records and statements or by concealing the true facts surrounding the individuals actually owning the farmland on which MPCI policies were issued and claims were made, knowing that the misrepresentations or concealments were material and knowing and intending that the United States would rely upon them, thereby causing the United States damages.

The court entered an extensive ruling on the parties' motions in limine on June 23, 2008. See United States v. Hawley, No. C 06–4087–MWB (N.D. Iowa June 23, 2008) (slip op.) ( Hawley II ) (docket no. 47). In a footnote in that decision, the court observed that the Supreme Court had recently issued a decision in Allison Engine Co., Inc. v. United States ex rel. Sanders, 553 U.S. 662 [128 S.Ct. 2123, 170 L.Ed.2d 1030] 2008 WL 2329722 (June 9, 2008) (Allison Engine), on FCA claims under all three subsections of § 3729(a), but that this court did not find that the Supreme Court's decision changed the disposition of the parties' cross-motions for summary judgment on the FCA claims in this case, although it might change particulars of the jury instructions on and the requirements for proof of the remaining FCA claims in this case. Hawley II, slip op. at 4 n. 1.

Notwithstanding that observation, in the course of preparation of jury instructions, after further review of the Allison Engine decision; review of Iowa law applicable to common-law fraud claims; review of the parties' trial briefs addressing, inter alia, the impact of the Allison Engine decision on this case; and review of the record, stipulations, and arguments previously submitted in support of the parties' cross-motions for summary judgment, the court came to the conclusion that the government's remaining claims in this case are not submissible. Therefore, by order (docket no. 50) dated June 25, 2008, the court canceled the trial set to begin on June 30, 2008, and advised the parties that this more detailed ruling granting summary judgment on all of the government's remaining claims would follow at the earliest opportunity.

(docket no. 51, pp. 3–5)

On June 27, 2008, I filed a Memorandum Opinion And Order Entering Summary Judgment Sua Sponte On Remaining Claims And Reaffirming Summary Judgment On Count One. See docket no. 51. In this decision, I held that Allison Engine Co., Inc. v. United States ex rel. Sanders, 553 U.S. 662, 662, 128 S.Ct. 2123, 170 L.Ed.2d 1030 (2008), foreclosed the government's “false record or statement” claim pursuant to § 3729(a)(2) in Count Two, and their “conspiracy” claim pursuant to § 3729(a)(3) in Count Three. With regard to Count Two, I found that the government failed to prove intent, a key requirement under Allison Engine, 553 U.S. at 671–672, 128 S.Ct. 2123. The government must prove that “the defendant made a false record or statement for the purpose of getting ‘a false or fraudulent claim paid or approved by the Government.’ ” Allison Engine, 553 U.S. at 671, 128 S.Ct. 2123 (“Under § 3729(a)(2), a defendant must intend that the Government itself pay the claim.”). I also found that the alleged false crop insurance claims were never forwarded to or approved by the government, nor was the payment of the crop insurance claims conditioned on review or approval by the government....