_ states that her parent’s adjusted gross income was $26,315. (Id.) In response to SIU’s
verification’ request, the Reeds submitted a verification worksheet along with a tax return
indicating that their gross income was $26,315. In signing the worksheet, Carla and her parents
certified “that all the information reported to qualify for Federal student aid is complete and
correct.” In academic year 1995-96, Carla received Pell Grants in the amount of $2,290. (d.)

Carla submitted FAFSAs and received SARs for the 1996-97 and 1997-98 academic
years. (PJ. L.R. 56.1 {] 6-7.) In both years SIU made a verification request. In 1996-97, the
Reeds submitted a verification worksheet along with a tax return indicating that their gross
income was $23,159. (PI. L.R. 56.17.) In 1997-98, the Reeds submitted a verification
worksheet and tax return indicating that their gross income was $25,357. (PI. L.R. 56.1 7. In
both years Carla and her parents certified “that all the information on this form is complete and
correct.” (PI. L.R. 56.1 {{ 6-7.) Carla received Pell Grants in the amount of $2,470 in 1996-97
and $1,350 in 1997-98. (Id.)

For the academic years 1995-96, 1996-97 and 1997-98, Sharay submitted FAFSA
statements and received SARs. (Pl. L.R. 56.1 §{] 8-10.) Sharay’s parents’ adjusted gross income
was listed as $26,315 in 1995-96, $23,159 in 1996-97 and $25,537 for 1997-98. (id.) As part of
the verification process in each academic year, Sharay and his parents certified that “all of the
information on this SAR is true and complete to the best of my knowledge.” (/d.) Sharay
received Pell Grants in the amount of $2,290 in 1995-96, $2,470 in 1996-97 and $2,250 in 1997-
98. Ud.)

Each of the defendants denies under oath that he or she submitted false documents to the

Department of Education. Each further states that if the documents were false, they had no


returns, which form the basis of the claim, were false. There is no indication that an effort to
depose the defendants was made by which admissions might have been obtained. The United
States might have sought a sanction under Rule 37(b)(2)(A) to have designated facts taken to be
established for purpose of this action as a result of defendants’ failure to make discovery, but it
did not do so. Moreover, the sanction imposed by this court on July 29, 2002, barring defendants
from introducing documents does not permit this court to draw an inference that the tax
information and FAFSA forms were false. Thus, there is a gaping hole in the plaintiff's proof.
There is no prima facie case.

For these reasons, the court concludes that the United States has failed to demonstrate
that the defendants made false statements. Because there is no genuine issue of material fact as
to an essential element of the claim, the court will enter summary judgment in favor of the

defendants.‘

‘Here, because the plaintiff moved for summary judgment (rather than the typical case, in which the
defendant makes such a motion), it was plaintiff’s responsibility to show that there was no genuine issue of material
fact with respect to every essential element of proof, of which falsity is certainly one in this instance. Although the
defendants have not cross-moved, “district courts are widely acknowledged to possess the power to enter summary
judgments sua sponte, so long as that losing party was on notice that she had to come forward with all of her
evidence.” Pike vy. Caldera, 188 F.R.D, 519, 523 n.18 (S.D. Ind. 1999). That proof of each essential element of the
claim must come from the plaintiff is so fundamental, there can be no doubt that the United States was on notice.
Thus, it’s failure to produce evidence is fatal and the court believes it appropriate to enter summary judgment sua
sponte in favor of the defendants.


_ Gd) Itis administered by the United States Department of Education and provides federal
monies to éligible post-secondary students in financial need. (d.) To qualify for Pell Grants,
students must meet financial eligibility requirements. (Pl. L.R. 56.142.) A dependent student’s
eligibility for grants is based on the student’s financial need, which involves an evaluation of the
household incomes of the parents of the student for the previous year. (/d.) The post-secondary
institution acts as the disbursement agent for the Department of Education. (/d.) Pell Grants
received from the Department of Education are credited to the student’s account and applied
against tuition costs by the post-secondary institution. (Id.)

A student applying for federal financial aid first submits a Federal Application for
Student Financial Aid (“FAFSA”) to the Department of Education’s contractor, the Central
Processing Center (“CPS”) in lowa. (Pl. L.R. 56.193.) The CPS enters the data provided and
computes an expected family contribution for that student. (Id.) It then generates a Student Aid
Report (“SAR”), which it simultaneously sends to the school and to the student for verification
by signature. (/d.) To verify the income information reported on the SAR, many post-secondary
institutions require students to submit a Financial Aid Application signed by the student and his
or her parents, accompanied by a copy of the parent’s federal income tax returns. Ud.)

Carl and Patricia Reed reside in Carpentersville, Iinois. (PL LR, 56.194.) They have a
daughter, Carla, who attended Southern Illinois University (“STU”) during academic years 1995-
96, 1996-97, and 1997-98. (/d.) They also have a son, Sharay, who attended DePaul University
during academic years 1995-96, 1996-97, and 1997-98. (Jd.)

For academic year 1995-96, Carla submitted a FAFSA. (Pl. LR. 56.195.) Asa tesult of

the filing of the FAFSA, Carla was issued a SAR. Ud.) Carla’s SAR for academic year 1995-96


. knowledge of their falsity.”
DISCUSSION

In Count I, the United States argues that the Reeds are liable under the FCA for false
statements made to the United States in order for Carla and Sharay to receive need-based student
financial aid. In Count UH, in the alternative, the United States argues it may recover disbursed
monies under the common law doctrine of payment by mistake of fact because such monies were
wrongfully or erroneously paid. Alternatively, in Count IU, the United States argues that it may
tecover from the Reeds under an unjust enrichment theory.

Under the FCA, it is unlawful for any person to knowingly (1) present, or cause to be
presented, a false or fraudulent claim for money or property against the United States; (2) make
or cause to be made a false statement to get a false claim paid or approved; (3) conspire to
defraud the government by getting a false claim paid; or (4) knowingly make, use, or cause to be
made or used, a false statement to conceal, avoid or decrease an obligation to the government.

31 U.S.C. § 3729(a). The FCA allows the United States to recover triple the amount of actual
damages suffered, plus a civil penalty of $5,000 to $10,000 for each false statement submitted to

the United States, regardless of actual damages. Id.

Defendant Carl Reed stated in his affidavit “I did not, at any time from August 1994 through June 1998 or
any time alleged by the government, engage[] in any behavior that I knew or reasonably understood would result in
false information being given and/or acted in disregard of the truth of any matters contained in the documents.”

(Carl Reed Aff. 420.) Defendant Patricia Reed stated “I had no reason to be believe nor was in any manner aware of
any false or misleading statements having been made or any false or misleading documents having been submitted by
anyone acting for or on my behalf pertaining to financial aid or for any other unlawful or wrongful purpose.”
(Patricia Reed Aff. ] 11.) Defendant Carla Reed stated that “I had no reason to believe or was in any manner aware
of any false or misleading statements or any submission of documents having been made by anyone acting for or on
my behalf pertaining to the financial aid matters raised by the government in this case.” (Carla Reed. Aff. { 11.)
Defendant Sharay Reed stated “I had no reason to believe or was in any manner made aware of any false or
misleading statements having been made or any false or misleading documents having been submitted by anyone
acting for or on my behalf pertaining to financial aid or for any other purpose whatsoever. (Sharay Reed Aff. {[ 9.)

5


2 ORDER
The motion of the United States for summary judgment is denied [#14]. The court sua

sponte enters judgment in favor of the defendants. The case is terminated.

ENTER: Snezor I xsteor—

@OAN HUMPHREY LEFKOW
United States District Judge

Dated: February 25, 2003


United States District Court, Northern District of Dlinois

Name of Assigne b Sitting Judge if Other
norMagistaeJuage | _ S0a0 H. Lefow than Assigned Sudge
CASE NUMBER 01 C 6535 DATE 2/25/2003
CASE United States of America vs. Reed, et al.
TITLE

[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented.]

MOTION:

DOCKET ENTRY:

qd) oO Filed motion of [ use listing in “Motion” box above.]

(2) QO Brief in support of motion due

(3) oO Answer brief to motion due___. Reply to answer briefdue___.

(4) QO Ruling/Hearingon___setfor___at

(5) Oo Status hearing[held/continued to] [set for/re-set for]on___——ssetfor__— at

(6) Oo Pretrial conference[held/continued to] [set for/re-set forlon___setfor___——at_—
(7) Q Trial{set for/re-set for]on__—_at

(8) Q (Bench/Jury trial] [Hearing] held/continued to. at.

(9) Q This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

COFRCP4(m) (Local Rule 41.1 CFRCP41(a)(1) CO FRCP41(a)(2).

ao) i [Other docket entry] | Enter Memorandum Opinion and Order. Motion of the United States for
summary judgment [14-1] is denied. The Court sua sponte enters judgment in favor of the defendants.
The case is terminated.

dl) of (For further detail see order attached to the original minute order.]

No notices required, advised in open court.
2

No notices required,
(0 Motices requi number of notices

a | Notices mailed by judge’s staff.

FEB 25 2003

date docketed

Docketing to mail notices, UL.
¥ | Mail AO 450 form, Mailed by MD. , LIM 8 Cc
f

Notified counsel by telephone

Copy to judge/magistrate judge.

72572003

date muited notice
courtroom

MD deputy’s

. MD
initials

Date/time received in ;
central Clerk’s Office ‘mailing deputy initials



A person “knowingly” makes a false claim if she: (1) has actual knowledge of the
information; (2) acts in a deliberate ignorance of the truth or falsity of the information; or (3) acts
in reckless disregard of the truth or falsity of the information. 31 U.S.C. § 3729(b); United States
ex rel. Chandler v. Cook County, Illinois, 277 F.3d 969, 976 (7th Cir. 2002). No proof of
specific intent is required. Jd. A “claim” under the FCA includes any request or demand for
money or property which is made to a contractor, grantee or other recipient of United States
government money. 31 U.S.C. § 3729(c).

The court has scoured the record for evidence of the threshold proof here, that the
documents submitted were false? The only evidence presented that any documents were false is
contained in an affidavit by a Special Agent with Department of Education, who states that based
on a “plea agreement with defendant Marcus Washington and interviews with Truxton King, for
academic years 1995-96, 1996-97 and 1997-98, to apply for student financial assistance,
defendants submitted signed financial aid applications to the government using false income
information.” (Skonieczny Aff. 7.) Insofar as the United States relies on the affidavit to
establish the falsity of any statements, that evidence is hearsay and may not be considered on this
motion. See Morrow v. Wal-Mart Stores, Inc., 152 F.3d 559, 563 (7th Cir. 1998). Although the
United States might have submitted the affidavits of Washington and King describing what they
did with respect to the Reeds, from which a fact finder might infer that one or more of the
defendants made a statement or claim that was false or made in reckless disregard for truth, it has

not done so. No W-2 form or any other evidence is present that would suggest that the tax

>This issue would be the threshold proof not only for the FCA claim but also the payment by mistake and
unjust enrichment claims.


UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
)
UNITED STATES OF AMERICA, )
)
Plaintiff, )
)
vs. ) No. 01 C 6535
) Judge Joan H. Lefkow
CARL REED, PATRICIA REED, CARLA )
REED, and SHARAY REED. ) err
} DOCKETED
Defendants. ) FEB 25 2003

MEMORANDUM OPINION AND ORDER

Plaintiff, United States of America (“United States”), brings this law suit against
defendants Carl Reed, Patricia Reed, Carla Reed and Sharay Reed (collectively “Reeds”),
alleging claims under the False Claims Act, 31 U.S.C. §§ 3729 et seg. (“FCA”) (Count I), and
common law doctrines of payment by mistake (Count II) and unjust enrichment (Count III). The
United States has moved under Rule 56, Fed. R. Civ. P., for summary judgment as to all of its
claims. The court has jurisdiction pursuant to 28 U.S.C. § 1345 and 31 U.S.C. § 3730(a). For
the reasons set forth below, the motion is denied.

SUMMARY JUDGMENT STANDARDS

Summary judgment obviates the need for a trial where there is no genuine issue as to any
material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(c). To determine whether any genuine fact exists, the court must pierce the pleadings and
assess the proof as presented in depositions, answers to interrogatories, admissions, and

affidavits that are part of the record. Fed R. Civ. P. 56(c) Advisory Committee’s notes. The

on


party seeking summary judgment bears the initial burden of proving there is no genuine issue of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In response, the nonmoving
party cannot rest on bare pleadings alone but must use the evidentiary tools listed above to
designate specific materia) facts showing that there is a genuine issue for trial. Jd. at 324;
Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). A material fact must be
outcome determinative under the governing law. Jnsolia, 216 F.3d at 598-99. Although a bare
contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v.
Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the court must construe all facts in a light most
favorable to the nonmoving party as well as view all reasonable inferences in that party’s favor.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
FACTS'

The United States provides student financial assistance in the form of Pell Grants to

eligible students to help defray the costs of their education following high school. (Pl. L.R. 56.1

1.) The Pell Grant program is authorized under Title IV-A, § 411 of the Higher Education Act.

‘On June 24, 2002, this court granted the United States’ motion to compel, ordering the Reeds to comply
with requests for written discovery by July 15, 2002. On July 29, 2002, the court held a hearing on the United
States’ motion for a discovery sanction because the Reeds continued to not comply with requests for written
discovery. Because no one for the defendants appeared at the hearing, the court granted the motion and barred the
Reeds from introducing documentary evidence and from challenging the United States’ documentary evidence. The
Reeds were also barred from raising any affirmative defenses. Thus, the court takes the United States’ documentary
evidence as true.

Defendants also did not respond to the United States’ Local Rule 56.1 statement of facts. Normally, if a
party fails to respond to a Local Rule 56.1 statement of material facts, all such facts supported by the record are
deemed admitted. The United States, however, did not abide by the requirement under Local Rule 56.2 regarding
notice to pro se litigants opposing summary judgment. This rule requires the moving party to give pro se litigants
specific notice about the requirements in responding to a motion for summary judgment. Since no Local Rule 56.2
notice was given to the defendants, the court will not deem the United States’ Local Rule 56.1 statement to be
admitted and will conduct an independent review of the entire record to determined which facts are disputed. See
Schafer v. Querry & Harrow, Ltd., No. 01 C 3908, 2002 WL 360651, at *2 n.1 (N.D. Ill. March 7, 2002).

2