United States v. Saavedra (In re Saavedra)
| Decision Date | 07 April 2022 |
| Docket Number | Adv. 20-1062-t,20-10742-t13 |
| Parties | In re: ALEX EDDIE SAAVEDRA, Debtor. v. ALEJANDRO SAAVEDRA, Defendant. UNITED STATES OF AMERICA, Plaintiff, |
| Court | U.S. Bankruptcy Court — District of New Mexico |
In 2015 Plaintiff obtained a $192, 000 judgment against Defendant for violating the federal False Claims Act, 31 U.S.C. § 3729 ("FCA"). Defendant's belated response was this chapter 13 case, filed in 2020. Plaintiff then brought this proceeding, seeking a ruling that the judgment debt is nondischargeable under § 523(a)(2)(A).[1]
Plaintiff previously filed a motion for summary judgment. The Court granted the motion with respect to three of the five elements of a § 523(a)(2)(A) claim but denied it for the other two (intent to deceive and justifiable reliance).
Before the Court is Plaintiff's motion to reconsider. Upon reconsideration, the Court finds that there is a genuine fact issue about Defendant's intent to deceive but not about Plaintiff's justifiable reliance.
A. Facts.[2]
The following facts are relevant to Plaintiff's motion to reconsider:
Defendant is a former director of the Upper Manhattan and Bronx Workforce1 Career Centers in New York City (the "Career Centers"). The Career Centers were designed to help find jobs for unemployed and underemployed people. The Career Centers are funded by federal money provided through the Workforce Investment Act of 1998 and the American Recovery and Reinvestment Act of 2009. The Career Centers were operated by the Structured Economic Employment Development Company ("SEEDCO"), a nonprofit corporation pursuant to contracts with the New York City Small Business Services Administration ("SBS"). The funds SBS paid SEEDCO were reimbursed by the United States Department of labor.
Under SEEDCO's contract with SBS, the more job placements SEEDCO reported to SBS, the more federal money it received. SEEDCO used the money to operate the Career Centers including paying the directors' salaries and benefits.
From at least 2009-2011, SEEDCO collected millions of dollars based on falsified job placement reports. SEEDCO's scheme was revealed in 2011 when a whistle blower filed a qui tam action against it in the United States District Court for the Southern District of New York (the "FCA Action"). The United States intervened and filed an amended complaint, joining as additional defendants seven directors of SEEDCO's Career Centers, including Defendant, on the theory that the directors "were the primary architects and engineers of the false job placement scheme." The amended complaint included two FCA violation counts and counts for common law fraud, unjust enrichment, and payment under mistake.
SEEDCO was dismissed from the action pursuant to a Consent Decree and Order of Settlement, in which SEEDCO admitted that the Career Centers submitted false job placement reports. In addition, all the directors except Defendant settled the claims against them and were dismissed. The FCA Action went to trial only against Defendant.
On the morning of trial Plaintiff withdrew the counts for common law fraud, unjust enrichment, and payment by mistake, leaving only the FCA counts.
Plaintiff's FCA claims were premised on the allegation that Defendant knowingly caused false job placement reports to be submitted to the SBS, which used those records to make claims for federal funds, in violation of the FCA.
At trial, Defendant testified that he had no knowledge of any false job placement reports. He admitted that he pushed SEEDCO employees to increase their placement numbers, but denied that he encouraged, instructed, or knew about any falsification of job placement reports.
After a five-day trial, the district court judge instructed the jury as follows:
After deliberating for two days, the jury returned a verdict that Defendant violated the FCA by knowingly causing thirteen materially false job report records to be made or used. The jury did not indicate which version of the term "knowingly" they found applicable. The jury found that Defendant's conduct caused the government $13, 000 in damages.
The presiding judge took exception to Defendant's refusal to "accept responsibility for his actions, issuing a press release stating that he was 'gratified by the verdict' and stating the verdict 'is a very significant vindication.'" The judge entered a judgment against Defendant for $192, 872.29, which included penalties, treble damages, and costs (the "Judgment"). Defendant appealed the Judgment to the Second Circuit Court of Appeals, which affirmed.
Defendant filed this chapter 13 bankruptcy case on April 2, 2020. Plaintiff brought the nondischargeability proceeding on October 30, 2020, and moved for summary judgment on June 11, 2021. Based on issue preclusion principles, the Court granted the motion with respect to the § 523(a)(2)(A) elements of false representation, reliance, and damages, but denied the motion on the issues of intent to deceive and justifiable reliance.[3]
In the motion to reconsider, Plaintiff argues that, apart from issue preclusion, the trial evidence from the FCA Action entitles it to summary judgment on the intent to deceive and justifiable reliance elements. Large portions of the trial record, totaling about 1, 200 pages, are part of the record in this proceeding. Plaintiff cited to a number of pages of the record in support of its argument.
Defendant did not submit affidavits or other materials in opposition to the summary judgment or reconsideration motions, nor did he cite to the FCA Action trial record. Instead, Defendant argued:
The documents Plaintiff does present do not comply with the evidentiary requirements of Rule 56. Plaintiff presents no affidavit or other sworn statement authenticating the exhibits it has provided. . . . The documents are not identified in a supporting affidavit, are not sworn or certified copies, and absolutely no foundation has been laid for their admission. . . . The documents are subject to a hearsay objection, are not relevant to the issues in dispute, and should be stricken from the Motion. . . . Plaintiff could have, but did not, provide certified copies of the documents it presents as another way around the hearsay problems presented by the exhibits.
B. The Partial Summary Judgment Order is Interlocutory.
The Court's order granting partial summary judgment is interlocutory. See Ralston v. Cannon, 2021 WL 3478634, at *3 (10th Cir. 2021) (); Roberts v. Roadway Express, Inc., 149 F.3d 1098, 1103 (10th Cir. 1998) (a "[d]enial of summary judgment 'is strictly a pretrial order that decides only one thing- that the case should go to trial.'" (quoting Glaros v. H.H. Robertson Co., 797 F.2d 1564, 1573 (Fed. Cir. 1986)); Conrad v. Phone Directories Co., Inc., 585 F.3d 1376, 1380 (10th Cir. 2009) ().
C. Standard for Reviewing Motions to Reconsider Interlocutory Orders.
Fed. R. Civ. P. ("Rule") 54(b) provides that an order adjudicating fewer than all claims of all parties "may be revised at any time before the entry of a judgment…." The rule applies to reconsiderations of interlocutory orders. See, e.g., Raytheon Constructors, Inc. v. ASARCO, Inc., 368 F.3d 1214, 1217 (10th Cir. 2003) (); C & A Const. Co. v. DHC Dev., 501 Fed.Appx. 763, 779 (10th Cir. 2012) (same); Trujillo v. Board of Educ. of Albuquerque Public Schools, 212 Fed.Appx. 760, 765 (10th Cir. 2007) (unpublished) (same).
Some courts apply a strict standard for reviewing motions to reconsider interlocutory orders, using an analysis similar to Fed. Rules Civ. P. ("Rules") 59 or 60.[4] See, e.g., Shervington v. Village of Piermont, 732 F.Supp.2d 423, 425 (S.D.N.Y. 2010) (); Lancer Ins. Co. v. Malco Enter. of Nevada Inc., 2012 WL 2886708, at *1 (D. Utah...
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