Case Name: UNITED STATES of America, Plaintiff-Appellant, v. SOUTHLAND MANAGEMENT CORPORATION; et al., Defendants, W. Thad McLaurin; Charles C. Taylor, Jr.; Arthur W. Doty, Defendants-Appellees
Court: United States Court of Appeals for the Fifth Circuit
Jurisdiction: United States
Decision Date: 2002-04-11
Citations: 288 F.3d 665
Docket Number: No. 00-60267
Parties: UNITED STATES of America, Plaintiff-Appellant, v. SOUTHLAND MANAGEMENT CORPORATION; et al., Defendants, W. Thad McLaurin; Charles C. Taylor, Jr.; Arthur W. Doty, Defendants-Appellees.
Judges: Before KING, Chief Judge, and REAVLEY and JONES, Circuit Judges.
Reporter: Federal Reporter 3d Series
Volume: 288
Pages: 665–702

Head Matter:
UNITED STATES of America, Plaintiff-Appellant, v. SOUTHLAND MANAGEMENT CORPORATION; et al., Defendants, W. Thad McLaurin; Charles C. Taylor, Jr.; Arthur W. Doty, Defendants-Appellees.
No. 00-60267.
United States Court of Appeals, Fifth Circuit.
April 11, 2002.
John S. Koppel (argued), Douglas N. Letter, U.S. Dept, of Justice, Civ. Div., Appellate Staff, Washington, DC, for Plaintiff-Appellant.
Alan W. Perry (argued), Roland M. Slo-ver, Forman, Perry, Watkins, Krutz & Tardy, Jackson, MS, for Defendants-Ap-pellees.
Before KING, Chief Judge, and REAVLEY and JONES, Circuit Judges.

Opinion:
KING, Chief Judge:
Plaintiff-Appellant the United States of America ("the Government") brought the instant action against Defendants-Appel-lees W. Thad McLaurin, Charles C. Taylor, Jr., and Arthur W. Doty ("the Defendants") under the civil False Claims Act ("the FCA"). The Government alleges that the Defendants, as owners of the Jackson Apartments in Jackson, Mississippi, repeatedly certified falsely to the Department of Housing and Urban Development ("HUD") that these apartments complied with the "decent, safe, and sanitary" standard established in the Defendants' contract with HUD. The district court granted summary judgment to the Defendants, finding that, under the undisputed material facts of the case, the Government could not establish the materiality element of a cause of action under the civil FCA: namely, that the false claims in question "had a natural tendency to influence" or were "capable of influencing" the decision of the governmental body to which they were addressed. The district court also found that, because HUD remitted funds to the Defendants knowing that their certifications were false, the Defendants could not have "knowingly" submitted false claims to HUD. The Government now appeals the district court's summary judgment, alleging that materiality is not a required element of a cause of action under the civil FCA and that genuine issues of material fact exist regarding whether the Defendants "knowingly" submitted false claims.
We hold that, under the law of this circuit, materiality is a required element of a cause of action under the civil FCA. However, we find that summary judgment was nonetheless inappropriate in the instant case because this court's precedents also dictate that the Defendants' false certifications of compliance with the "decent, safe, and sanitary" standard were material as a matter of law. Using the definition of materiality employed by the Supreme Court in Kungys v. United States, 485 U.S. 759, 108 S.Ct. 1537, 99 L.Ed.2d 839 (1988), which is the definition employed by the district court, we find that the Defendants' certifications had a "natural tendency to influence, or were capable of influencing" HUD's decision whether to honor their claims because receipt of these certifications was a prerequisite to HUD's remittance of funds. We also hold, in accordance with the conclusion of our sister circuits, that government payment of a false claim with knowledge of its falsity does not provide an automatic defense to liability under the FCA. Finally, we agree with the Government that there are genu ine issues of material fact regarding whether the Defendants "knowingly" submitted false claims to HUD in the instant case. Accordingly, we REVERSE the judgment of the district court and REMAND the case for further proceedings consistent with this opinion.
I. FACTUAL AND PROCEDURAL BACKGROUND
Beginning in 1980, the Defendants participated in a federally-funded program to provide housing to low-income individuals at the Jackson Apartments ("the Complex") under the oversight of HUD. During subsequent years, conditions at the Complex deteriorated. While HUD attempted to work with the Defendants over a period of approximately two years to remedy these problems, these informal remedial efforts met with increasing resistance and ultimately proved unsuccessful in improving the habitability of the Complex. In 1997 the Defendants stopped making payments on the building's mortgage debt, and HUD foreclosed on the Complex. The Government subsequently sued the Defendants, alleging that during a nineteen month period (beginning after the two-year remedial efforts had substantially deteriorated, but prior to HUD's ultimate foreclosure) the Defendants violated 81 U.S.C. § 3729(a) by falsely certifying on nineteen separate occasions that the Complex was in "decent, safe, and sanitary" condition. An explanation of HUD's low-income housing program provides a context for the relevant facts.
A. HUD's Housing Program
1. The National Housing Act and Regulatory Agreements
In enacting the National Housing Act, Pub.L. No. 73^479, 48 Stat. 1246 (1934) (codified as amended at 12 U.S.C. § 1701-1750g (2001)) (the "NHA"), Congress sought to increase the supply of low-income housing by creating a program that provides mortgage credit to the private sector. Under this program, HUD insures a housing project owner's mortgage so that the owner may provide low-rent housing "to assist families with incomes so low that they could not otherwise decently house themselves." 12 U.S.C. § 1701t, 1703 (2001). In an effort to encourage private investment, the NHA and HUD regulations also "allow[ ] owners to borrow money at reduced interest rates, reduce[ ] a borrower's equity requirements, permit[] owners to sign non-recourse notes, and, prior to the 1986 tax code changes, grant[ ] owners and investors generous tax benefits." Christopher Vill., Ltd. P'ship v. Retsinas, 190 F.3d 310, 312 (5th Cir.1999).
In exchange for these benefits, the property owner and HUD execute a regulatory agreement that "give[s] HUD extensive regulatory authority over the operation and maintenance of the property." Id.; see also 12 U.S.C. § 1715Z (d)(3) (requiring the owners to be "regulated or supervised . under a regulatory agreement or otherwise, as to rents, charges, and methods of operation, in such form and in such manner as in the opinion of the Secretary [of HUD] will effectuate the purposes of this section"). The owner has many responsibilities under the regulatory agreement. For example, the regulatory agreement in the instant case requires the Defendants to "maintain the mortgaged premises, accommodations and the grounds and equipment appurtenant thereto, in good repair and condition."
2. Section 8 and "HAPs"
In 1937, Congress enacted the United States Housing Act, Pub.L. No. 75-412, 50 Stat. 889 (1937) (codified as amended at 42 U.S.C. § 1437 et seq. (1994 & Supp. 2001)) (the "USHA"), "to address the shortage of housing affordable to low-income families" and "to remedy the unsafe housing conditions and the acute shortage of decent and safe dwellings for low-income families." 42 U.S.C. § 1437(1) (Supp.2001). In 1974 Congress amended the USHA by adding Section 8 (codified as amended at 42 U.S.C. § 1437f (Supp. 2001)), which created a federal program to provide rental assistance for tenants of privately-owned housing. Id. § 1437f(a); Christopher Vill, 190 F.3d at 313. Generally, under this rent subsidy program, a low-income tenant will make rental payments based upon the tenant's income and ability to pay. See 42 U.S.C. § 1437a(a)(l) (1994 & Supp.2001). HUD then pays the property owner an amount calculated to make up the difference between the tenant's contribution and the "contract rent" agreed upon by HUD and the owner. See id. § 1437f(c)(3). These monthly payments to the owner are known as housing assistance payments, or "HAPs."
Pursuant to Section 8 and as required by the regulations governing the substantial rehabilitation program, see 24 C.F.R. § 881.501 (2001), HUD enters into Housing Assistance Payment contracts ("HAP contracts") with private owners. These contracts require the owners to agree to maintain "decent, safe and sanitary" housing in order to receive HAP payments from the government. Once such a contract is established, the owner submits to HUD a monthly Application for Housing Assistance Payments, also known as a "HAP voucher." See 24 C.F.R. § 881.501(c) (2001). Part of this application requires the owner to sign an "Owner's Certification," certifying, inter alia, that the subject property is "decent, safe, and sanitary." The government remits the monthly HAPs only if the owner has signed this certification. The HAP vouchers submitted by the owner also indicate, immediately above the signature line, that HUD has the right' to "prosecute false claims/statements" and to seek civil penalties pursuant to § 3729 of the civil False Claims Act.
If a property does not meet the required specifications, HUD's usual practice is to require the owner to submit a detailed plan indicating how the owner will remedy the defects and to allow the owner a limited time period to fix the problems pursuant to this plan. However, under the HAP contract, if the owner fails to cooperate with HUD and correct the violations within the prescribed time, HUD may exercise any of its rights or remedies under the HAP contract, including abatement of the HAPs.
B. The Facts of the Present Suit
The Defendants were general partners of Jackson Apartments, Ltd. (the "Partnership"), a limited partnership created for the purpose of purchasing the Complex. In 1980, HUD advertised for bid proposals for properties to participate in its Section 8 "substantial rehabilitation" program. The Partnership purchased the Complex and submitted a proposal to HUD, which HUD selected. The Partnership then renovated the Complex, and the Complex opened to low-income tenants in 1981.
To fund the renovation of the Complex, the Defendants expended approximately $190,000 of their own funds, and the Partnership executed a $2.4 million note secured by a HUD-insured non-recourse mortgage. To enjoy the benefits of the low-interest, non-recourse mortgage, the Partnership entered into a regulatory agreement with HUD. The Partnership and HUD also executed a HAP contract so that the Partnership could receive HAPs. During the time period between the opening of the Complex and HUD's foreclosure in 1997, the Defendants withdrew $1,109,213 in surplus cash from the project while simultaneously accruing significant tax benefits from the tax credits and accelerated depreciation schedule applicable to the property.
Shortly after the inception of the project, in December 1983, the Partnership contracted with Southland Management Company ("Southland") to manage the Complex. During the time period relevant to this litigation (i.e., July 1995 to January 1997) Southland submitted, on behalf of the Partnership, the monthly HAP vouchers to HUD. As noted above, each of these HAP vouchers contained a certification that the property was in decent, safe, and sanitary condition. An employee of Southland, as an agent of the Partnership, would sign the monthly certification.
Beginning at least as early as August 1993, physical inspections conducted by HUD revealed many maintenance problems and structural defects at the Complex. The physical inspection reports contained in the record demonstrate that the Complex suffered from, inter alia, roach and rodent infestation, deteriorated siding, drainage problems, doors and windows that would not close or lacked functioning locks, inadequate maintenance of fire extinguishers, inoperable smoke alarms, rusted medicine cabinets, and leaking faucets and toilets. These deficiencies were reflected in the overall ratings of "below average" or "unsatisfactory" given to the Complex from August 31, 1993 to November 12, 1996. Furthermore, a December 20, 1996 HUD Management Review Report rated the complex as "unsatisfactory," the lowest rating provided for in the management review and physical inspection reports.
The Defendants received prompt written notice of each of these unsatisfactory inspection reports. As per its standard practice, HUD attempted to give the Defendants a limited opportunity to cure the defects rather than immediately abating the HAP payments. After each inspection, HUD informed the Defendants that they were required to "submit a written response to deficiencies noted" in the inspection report, explaining "in detail" the corrective measures planned, underway, or completed. While Defendants timely provided such a detailed response in 1993, in subsequent years the cooperative remedial process began to break down, and the Defendants' responses to HUD's notifications became increasingly less timely and more cursory.
Despite the significant health and safety problems at the Complex and the inadequacy of the Defendants' recalcitrant repair and improvement efforts, the Defendants continued to submit their monthly HAP vouchers certifying that the property was in "decent, safe, and sanitary condition," and HUD continued to disburse HAPs to the Defendants. On August 5, 1997, however, the Defendants informed HUD that they would make no more payments on the mortgage. HUD consequently foreclosed, and the Complex was sold in late July 1998. On August 5, 1998, the Government filed the instant action under § 3729(a) of the civil False Claims Act, alleging that the Defendants made false claims each month regarding the physical condition of the Complex when they submitted HAP vouchers for payment. The Government's lawsuit seeks recovery only for false claims made between July 1995 (when HUD's cooperative remedial efforts began to encounter substantial resistance from the Defendants) and January 1997.
Specifically, the Government argues that during this time period the Defendants submitted nineteen HAP vouchers falsely certifying that the Complex was decent, safe, and sanitary. The Government contends that each of these voucher submissions constitutes a false claim under the Act and that the certifications therein indicating that the property was in decent, safe, and sanitary condition were false statements made to secure HUD's payment of the HAP vouchers. The Government seeks civil penalties of $10,000 for each certification that was filed, plus treble damages of $2,595,069.
On September 7, 1999, the Defendants moved for summary judgment, arguing that: (1) the HAP certifications were not material to HUD's decision to pay the subsidies and therefore could not form the basis of a "false claim"; (2) the Defendants did not "knowingly" submit false claims because the Defendants knew that HUD was fully aware of the condition of the Complex during the relevant time period; and (3) the "decent, safe, and sanitary" language is too ambiguous to support a finding of liability under the False Claims Act. The district court granted the Defendants' motion for summary judgment, agreeing with their first two arguments.
The Government timely appeals the district court's summary judgment in favor of the Defendants. The Government asserts two primary claims of error: (1) that the materiality of the falsehood to HUD's decision is not relevant in determining whether the Defendants violated 31 U.S.C. § 3729(a); and (2) that genuine issues of material fact exist regarding whether the Defendants "knowingly" submitted the false claims. We address each of these claims in turn.
II. STANDARD OF REVIEW
We review the district court's grant of summary judgment de novo, applying the same standard as the district court. See Rivers v. Cent. & R.W. Corp., 186 F.3d 681, 683 (5th Cir.1999). "Summary judgment is proper only 'if the pleadings, depositions, answers 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 judgment as a matter of law.' " Turner v. Houma Mun. Fire & Police Civil Serv. Bd., 229 F.3d 478, 482 (5th Cir.2000) (quoting Fed.R.Civ.P. 56(e)).
"Courts of Appeals consider the evidence in the light most favorable to the nonmovant, yet the nonmovant may not rely on mere allegations in the pleadings; rather, the nonmovant must respond to the motion for summary judgment by setting forth particular facts indicating that there is a genuine issue for trial." Spivey v. Robertson, 197 F.3d 772, 774-75 (5th Cir.1999) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). After the non-movant has been given an opportunity to raise a genuine factual issue, if no reasonable factfinder could find for the nonmov-ant, summary judgment is appropriate. See Fed.R.CivP. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
III. IS "MATERIALITY" AN ELEMENT OF A CAUSE OF ACTION UNDER THE CIVIL FALSE CLAIMS ACT?
The civil False Claims Act imposes liability on any person who knowingly submits, or causes the submission of, a false or fraudulent claim for money to the government. The current Act originated in the 1863 False Claims Act, which provided both civil and criminal sanctions for "false, fictitious, or fraudulent" claims submitted to the United States Government. See Act of Mar. 2, 1863, ch. 67, 12 Stat. 696; see also S.Rep. No. 99-345, at 8 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5273. In 1874, the civil and criminal provisions were severed, the civil penalties being codified in one portion of the United States Code and the criminal provisions in another. See U.S. Rev. Stat. tit. 36, § 3490 (1875) (civil); id. tit. 70, § 5438 (criminal).
Congress recodified the civil False Claims Act in 1982. See H.R.Rep. No. 651 (1982), reprinted in 1982 U.S.C.C.A.N. 1895, 1895. In this 1982 recodification, Congress eliminated the word "fictitious" and retained the prohibition on "false or fraudulent claim[s]See 81 U.S.C. § 3729 (1982). Congress also significantly revised the civil FCA in 1986, clarifying that a showing of specific intent to defraud is not required for liability under the Act. See 81 U.S.C. § 3729(b) (Supp.2001).
In its current form, the Act provides, in pertinent part:
Any person who—
(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval; [or]
(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government
is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person[.]
31 U.S.C. § 3729(a) (Supp.2001). For the Defendants to be hable under § 3729(a)(1), courts agree that the Government must demonstrate that: (1) the Defendants made a claim against HUD; (2) the claim was false or fraudulent; and (3) the Defendants knew the claim was false or fraudulent. See, e.g., United States v. Basin Elec. Power Coop., 248 F.3d 781, 803 (8th Cir.2001); United States ex rel. Oliver v. The Parsons Co., 195 F.3d 457, 461 (9th Cir.1999); United States v. Burns, 162 F.3d 840, 850 (5th Cir.1998). Similarly, to recover against the Defendants under § 3729(a)(2), the Government must show that (1) the Defendants made a record or statement in order to get HUD to pay money; (2) the record or statement was false or fraudulent; and (3) the Defendants knew it was false or fraudulent. See, e.g., United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1018 (7th Cir.1999).
Although the statute contains no express reference to materiality, many courts, including this court, have found that there is a fourth, "materiality" element required to maintain a cause of action under the Act. See United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir.1997) ("[T]he FCA 'interdicts material misrepresentations made to qualify for government privileges or services.' ") (quoting United States ex rel. Weinberger v. Equifax, Inc., 557 F.2d 456, 461 (5th Cir.1977)); see also Luckey v. Baxter Healthcare Corp., 183 F.3d 730, 732 (7th Cir.1999); United States ex rel. Berge v. Bd. of Trs. of the Univ. of Ala., 104 F.3d 1453, 1459 (4th Cir.1997); United States v. Intervest Corp., 67 F.Supp.2d 637, 646 (S.D.Miss.1999). But see United States ex rel. Cantekin v. Univ. of Pittsburgh, 192 F.3d 402, 415 (3d Cir.1999) (noting in dicta that "perhaps" there is no materiality requirement under the FCA); United States ex rel. Roby v. The Boeing Co., 184 F.R.D. 107, 112 (S.D.Ohio 1998) (finding that materiality is not a required element of proof in actions under the FCA). In examining statutes similar to the civil FCA, the Supreme Court has defined "material" as "ha[ving] a natural tendency to influence, or [being] capable of influencing, the decision of the decision-making body to which it was addressed." United States v. Wells, 519 U.S. 482, 489, 117 S.Ct. 921, 137 L.Ed.2d 107 (1997) (alterations in original) (internal quotations omitted) (quoting Kungys v. United States, 485 U.S. 759, 770, 108 S.Ct. 1537, 99 L.Ed.2d 839 (1988)). A number of courts finding a materiality element in the civil FCA have interpreted the Supreme Court's definition in Kungys -to require "outcome materiality" — i.e., that a falsehood or misrepresentation must affect the government's ultimate decision whether to remit funds to the claimant in order to be "material." These courts have interpreted the civil FCA similarly to require "outcome materiality." See, e.g., Berge, 104 F.3d at 1459-60; Intervest, 67 F.Supp.2d at 646-48; cf. Luckey, 183 F.3d at 732-33 (not specifically referencing Kungys, but suggesting that an omission must be "material to the United States' buying decision" to support liability under the Act) (emphasis added). In contrast, at least one court has suggested a slightly different, "claim materiality" requirement — i.e., that a falsehood or misrepresentation must be material to the defendant's claim of right in order to be considered "material" for the purposes of the FCA. See United States ex rel. Wilkins v. North American Constr. Corp., 173 F.Supp.2d 601, 630 (S.D.Tex.2001). While this court has in dicated that the Act contains a materiality element, we have not yet clarified the exact nature of this requirement.
The district court concluded that the civil False Claims Act contains an outcome materiality requirement. United States v. Southland Mgmt. Corp., 95 F.Supp.2d 629, 637 (S.D.Miss.2000). The district court then determined that "undisputed evidence" demonstrated that the Defendants' certifications in the HAP vouchers, if false, were not material to HUD's decision to disburse HAPs to the Defendants. The court thus granted summary judgment in favor of the Defendants on this ground. See id. at 643.
On appeal, the Government contends that the civil False Claims Act does not contain the type of "outcome materiality" element espoused by the district court, requiring a plaintiff to demonstrate that the misstatement influenced the government's (i.e., HUD's) ultimate decision whether to remit funds to a defendant. The Government argues that the Supreme Court's recent decisions in Wells and Neder v. United States, 527 U.S. 1, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999), counsel against the existence of such a materiality requirement. Instead, the Government maintains that proving a "false claim" under the Act requires the Government to demonstrate only that the alleged falsehood was relevant to the Defendants' claim of right or entitlement.
We need not decide today what the nature of the FCA's materiality requirement might be. We find that, even under the stricter "outcome materiality" definition applied to the civil FCA by the district court and the courts in Berge and Luckey (as opposed to the "claim materiality" definition urged by the Government and adopted by the court in Wilkins), the Defendants' signed certifications in the HAP vouchers were material to HUD's decision to disburse HAPs to the Defendants. If false, these certifications render the HAP vouchers "false claims" as a matter of law under the law of this circuit.
It is undisputed that the Defendants' legal entitlement to HAP payments is de-pendant upon the condition of the Complex. The HAP contract contains a covenant requiring the Defendants to maintain the property as decent, safe, and sanitary housing, under penalty of loss of their HAP payments. Moreover, the HAP contract specifically requires the Defendants to certify their compliance with this standard in each monthly HAP voucher.
The Defendants concede that they would not have received the monthly HAP payments if they had not signed these certifications. Indeed, the record contains uncontroverted testimony indi-eating that HUD will not remit funds to a claimant if the claimant's HAP voucher does not contain a signed certification that the property is in decent, safe, and sanitary condition. Thus, the certification of the property's condition was unquestionably "material" in the sense that it had the potential to influence HUD's ultimate decision whether to remit funds to the Defendant. Both this court and the Ninth Circuit have recognized that, when the government conditions payment of a claim upon a claimant's certification of compliance with a statutory or regulatory condition, a claimant submits a false claim as a matter of law when he or she falsely certifies compliance with that condition. In Thompson, this court considered the question whether a claim for services rendered in violation of the Medicare anti-kickback statutes necessarily constitutes a false claim. While we noted that a claim is not necessarily "false" simply because it involves a statutory violation, we indicated that a claim is necessarily false when it involves a knowingly false certification of compliance with a statute or regulation and that certification is a prerequisite to payment of the asserted claim. See Thompson, 125 F.3d at 902 ("[W]here the government has conditioned payment of a claim upon a claimant's certification of compliance with, for example, a statute or regulation, a claimant submits a false or fraudulent claim when he or she falsely certifies compliance with that statute or regulation."); see also United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir.1996) (recognizing that, while not all breaches of contract or regulatory violations automatically give rise to liability under the FCA, "the false certification of compliance . creates liability when certification is a prerequisite to obtaining a government benefit") (emphasis in original). We ultimately remanded Thompson to the district court because we were unable to determine from the record whether the certifications of compliance at issue in that ease were actually prerequisites to the defendant's entitlement to the funds claimed. Thompson, 125 F.3d at 902-03. However, our disposition of this claim clearly indicates that if a certification of compliance with a statute or regulation is a prerequisite to the defendant's legal entitlement to funds, the certification is a material misrepresentation and renders the claim false as a matter of law. Accord Weinberger, 557 F.2d at 461 (concluding that a claim for services allegedly rendered in violation of the Anti-Pinkerton Act could not have involved a "material misrepresentation" because the government did not require claimants to make any express representations as to their compliance with the Anti-Pinkerton Act).
Thompson governs our disposition of the instant case. We recognize today that when the government has conditioned payment of a claim upon a claimant's certification of compliance with a provision of a contract entered into pursuant to a regulation, a claimant submits a false claim as a matter of law when he or she falsely certifies compliance with that provision. In the instant case, the government has conditioned HAP payments upon an owner's certification of compliance with the "decent, safe, and sanitary" standard established in the HAP contract mandated by 24 C.F.R. § 881.501. Accordingly, if the Defendants falsely certified their compliance with this standard, they submitted a false claim.
We recognize, as did the Ninth Circuit in Upton, that not all statutory, regulatory, or contractual violations necessarily give rise to liability under the FCA. However, once a claimant has made a certification of compliance with a statutory or regulatory provision or a provision of a contract mandated by statute or regulation, the claimant is subject to liability under the Act for submitting a false claim if that certification of compliance is known by the claimant to be false.
The Defendants nonetheless contend that their certification could not have constituted a "false claim" because the government had knowledge of the falsity of the certification when it remitted payment. While we acknowledge that gov ernment knowledge of the falsity of a claim might, under limited circumstances, be a defense to an action under the FCA, see infra Part IV, we find it difficult to comprehend how the government's awareness that a claimant's submission was false would in any way affect the truth or falsity of the claim. A lie does not become the truth simply because the person hearing it knows that it is a lie.
The premise underlying this argument reveals the true nature of the Defendants' position. In arguing that a claimant's submission is not truly "false" if the government knows it to be untrue, the Defendants are actually arguing that when the government remits payment on a claim knowing that a certification contained therein is false, the government waives its right to pursue a cause of action under the civil FCA. We find this position untenable for a number of reasons.
Initially, we note that the falsity of a claim is determined at the time of submission. If a claimant has submitted a claim (i.e., a request or demand for money or property) to the government and the claimant knows that he or she is not actually entitled to the funds or property in question, the claimant has asserted a false claim. Fortuities in the government's subsequent decisionmaking process have no effect on the objective truth or falsity of the claimant's asserted entitlement, and should thus have no effect on the claimant's potential liability under the Act. Cf United States v. Krizek, 111 F.3d 934, 939-40 (D.C.Cir.1997) (finding that the question of what constitutes a claim under the False Claims Act "turns[ ] not on how the government chooses to process the claim, but on how many times the defendants made a 'request or demand' " because the "gravamen of these cases is that the focus is on the conduct of the defendant"). This reading of the Act is consistent with this court's analysis of analogous provisions in the criminal False Claims Act and related statutes. See United States v. Milton, 602 F.2d 231, 233 (9th Cir.1979) (holding, in the context of the criminal False Claims Act, that "[t]o prove Falsity, the government only had to prove that the statement was known to be untrue at the time [the defendant] made it") (emphasis added); see also United States v. Leahy, 82 F.3d 624, 633 n. 11 (5th Cir.1996) (holding that the defendant contractor violated 18 U.S.C. § 286 — a companion statute to the criminal FCA — because his claims were false when submitted, even though the false claims were ultimately irrelevant to the total amount paid by the government to the contractor).
In addition, the Defendants' position is problematic because they are effectively invoking estoppel against the government. The Defendants contend that because the government's remission of payment represents that the government entity has evaluated all the relevant information and (presumably) determined that a claim is valid, the government should be estopped from arguing that the claim is invalid in a subsequent judicial proceeding. The premise underlying this argument is contrary to our longstanding presumption that estoppel against the government is impermissible. See, e.g., Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 382, 386, 68 S.Ct. 1, 92 L.Ed. 10 (1947) (holding that a farmer who obtained federal insurance based on improper advice by an agent of the Federal Crop Insurance Corporation that his entire crop qualified for insurance could not recover for the loss of his crop because the government could not be estopped from denying the claim by the agent's erroneous statements); see also Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 419-20, 110 S.Ct. 2466, 110 L.Ed.2d 387 (1990) (recognizing that "equitable estoppel will not lie against the Government as it lies against private litigants" and acknowledging Merrill as "the leading case in [the Court's] modern line of estop-pel decisions").
We decline to depart from this longstanding presumption in the instant case. Initially, we observe that even the traditional, more lenient requirements to invoke estoppel against a private party are not present in this case. The four traditional requirements are: "(1) that the party to be estopped was aware of the facts and (2) intended his act or omission to be acted upon; (3) that the party asserting estoppel did not have knowledge of the faets[] and (4) reasonably relied on the conduct of the other to his injury." Lin-kous, 142 F.3d at 278 (citing United States v. Bloom, 112 F.3d 200, 205 (5th Cir.1997)) (alterations in original). The Defendants' estoppel-type argument fails because they cannot satisfy the third requirement. The Defendants had knowledge of the relevant facts (i.e., the condition of the Complex and the falsity of the certification that the Complex was in decent, safe, and sanitary condition). Thus, the traditional requirements for invoking estoppel are not met.
Moreover, even if all four traditional requirements for private-party estoppel were satisfied, estoppel against the government would still be inappropriate under the circumstances of this case. The Court in Richmond expressly held that "judicial use of the equitable doctrine of estoppel cannot grant [a claimant] a money remedy that Congress has not authorized." 496 U.S. at 426-27, 110 S.Ct. 2465 (noting further that "not a single case has upheld an estoppel claim against the Government for the payment of money"). The Court's asserted rationale for this holding was to prevent fraud against the government via collusion between government officials and private claimants and, more generally, to ensure that public funds are spent "according to the letter of the difficult judgments reached by Congress as to the common good and not according to the individual favor of Government agents or the individual pleas of litigants." Id. at 428, 110 S.Ct. 2465. We find this logic to be equally applicable in situations like the present case, where the Government seeks to recover funds spent contrary to the will of Congress, as in situations like Richmond, where the government sought to prevent payment of a claim that would have been paid in derogation of the will of Congress. Cf. United States ex rel. Hagood v. Sonoma County Water Agency, 929 F.2d 1416, 1422 (9th Cir.1991) (noting in dicta that a defendant's " 'inability to retain money that it should never have received in the first place' is not the kind of detrimental reliance that justifies estoppel against the government") (quoting Heckler v. Cmty. Health Servs., 467 U.S. 51, 61, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984)). While we acknowledge that the treble damage provision of the civil FCA produces a harsher result than mere recovery of the expended funds, we note that these damages and other remedies are authorized by Congress. In addition, the fact that the unavailability of estoppel permits the government to recover treble damages does not justify departure from the longstanding and widely-accepted principle disfavoring government estoppel. See Merrill, 332 U.S. at 386, 68 S.Ct. 1 (recognizing that "not even the temptations of a hard case" will provide a basis for ordering recovery of funds that would be expended contrary to law).
Finally, from a practical perspective, we note that acceptance of the Defendants' position in this litigation would place HUD in an extremely difficult position. The argument that payment by the government of a false claim with knowledge of its falsity forecloses any future false claims action assumes that, upon receiving a HAP voucher for a property that is not decent, safe, and sanitary, HUD must either immediately cease HAP payments (which, in most cases, would effectively put the claimant out of business and the tenants on the street) or forfeit the right to pursue a false claims action against the claimant in the future. Put differently, if HUD elects to work with the claimant to improve the condition of the property rather than to cut off payments immediately, HUD waives the government's right to pursue a cause of action under the FCA. Such an "election of remedies" requirement is not contemplated by the statutory, regulatory, or contractual regime governing this Section 8 program. The Government's rights under the regulatory contract and under the False Claims Act are not mutually exclusive.
The Defendants suggest that if there is no de facto "election of remedies" requirement, the Government can use the threat of FCA liability "as an in terrorem device . to force the Partners and other owners . to invest their own money to make up the shortfall in funds for maintenance." Relying on Christopher Village, the Defendants argue that an owner is not required "to absorb or subsidize operating and maintenance deficiencies" if HUD has not established rental rates adequate to cover a property's expenses. 190 F.3d at 316. However, the question of whether HUD properly considered the Defendants' requests for rent increases is not presented in this case. Our task is to determine whether HUD's choice to continue remitting HAP payments to an owner whose property is not in decent, safe, and sanitary condition precludes the government from pursuing a false claims action based on the owner's false certification that the property was, in fact, decent, safe, and sanitary. We find no basis for such a preclusion. To the extent that the multiple remedial paths available to the government under this regulatory and contractual regime have the effect of pressuring owners to take steps (such as investing in preventive maintenance or retaining what is likely to be an adequate reserve during the early years of a project) to ensure they can provide decent, safe, and sanitary housing throughout the duration of a project's existence, such an incentive structure is clearly contemplated by the statutory and regulatory regime governing the Section 8 program and by the contract that the Defendants willingly signed.
It is clear that the position taken by both the Defendants and the dissent is motivated by an underlying concern that the Government has somehow treated the Defendants "unfairly" by pursuing an action under the FCA after HUD initially chose to work with the Defendants cooperatively to remedy the problems at the Complex. We cannot similarly conclude that the Defendants have been ill-used. As noted above, the fact that HUD, upon discovering maintenance and safety problems at the Complex, chose to provide the Defendants with an opportunity to cure the defects rather than immediately cutting off the Defendants' HAP payments in no way implicates the Government's ability to maintain a cause of action under the FCA. Further, even if it would be problematic for the Government to pursue a civil FCA action against an owner for false claims made while the owner was making a good faith attempt to work with HUD and remedy the problems at a project, this was not the situation in the instant case. The Government did not initiate any action under the FCA until well after the informal cooperative process had broken down and the Defendants had, in fact, indicated their intent to abandon the project entirely. Moreover, we emphasize that the Government has not attempted to hold the Defendants liable for false claims made while the Defendants were participating in good faith in the cooperative remedial process. The instant action is based only on claims made during the time period after the Defendants effectively ceased cooperating with the requirements of HUD's informal remedial process. Under these circumstances, we cannot conclude that the government has acted deceptively in pursuing its contractual remedies by initiating a false claims action.
In light of the above analysis, we conclude that the district court erred in granting summary judgment to the Defendants on the ground that they did not, as a matter of law, submit a "false claim." Maintaining a property in decent, safe, and sanitary condition is a prerequisite to the Defendants' entitlement to HUD funds in the instant case. Accordingly, a false certification of compliance with the decent, safe, and sanitary standard is material and renders the claim false as a matter of law.
Because there is a genuine issue of material fact regarding whether the submission was indeed false (i.e., whether the property was actually in decent, safe, and sanitary condition during the time period in question), we cannot hold as a matter of law that the Defendants submitted a false claim. However, in the same vein, the substantial evidence in the record indicating that the property was unsafe and unsanitary during the time period in question — suggesting that the claim was indeed false — certainly precludes summary judgment in favor of the Defendants on these grounds.
IV. DID THE DEFENDANTS "KNOWINGLY" SUBMIT A FALSE CLAIM?
We turn now to the mens rea element of a cause of action under the Act, i.e., the requirement that a defendant must "knowingly" submit false or fraudulent claims, or false or fraudulent statements in support of those claims, to the government. See 31 U.S.C. § 3729(a)(1) & (a)(2) (Supp.2001). The Defendants maintain that a claimant cannot have the requisite mens rea to be held liable under the Act if the claimant knows that the government is aware of the falsity of the information submitted. The district court agreed, concluding that "[biased on the undisputed evidence, and specifically the record of HUD's knowledge . together with the proof of communications between HUD and defendants concerning the problems at the apartments, there could be no reasonable finding that defendants acted knowingly." Southland Mgmt. Corp., 95 F.Supp.2d at 641 (emphasis omitted).
We disagree with the district court's conclusion. While we agree that, in certain situations, evidence that the defendant knew that the government was aware of the falsity of a claim when it was submitted may be relevant in determining whether the defendant knowingly submitted a false claim, we hold that such knowledge on the part of the defendant is not an automatic defense to liability. We further conclude that the district court erred in finding, as a matter of law, that HUD's knowledge of the condition of the Complex negated the Defendants' mens rea in this case.
The mens rea required for a person to be held liable under the civil False Claims Act has always been the submission of a claim "knowing" it to be false. See 31 U.S.C. § 3729(1) (1983). Under the Act, a person acts "knowingly" if he or she "(1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required." Id. § 3729(b). The text of the Act as it appears today (i.e., subsequent to the 1986 amendments) contains no indication that government knowledge of the falsity of a submission might bear on the defendant's mens rea. Moreover, there is nothing in the legislative or statutory history of the Act suggesting that Congress intended to preclude the government from pursuing an action under the civil FCA when the government was aware of the facts and circumstances rendering a claim false at the time of submission. The Defendants nonetheless contend that such government knowledge is an absolute bar to liability-under the Act.
We find it difficult to justify the proposition that an individual who submits a false claim to the government with knowledge of its falsity should necessarily be excused from liability under the Act merely because the government was also aware that the claim was false when it was submitted. Several of our sister circuits have recognized that, while evidence that the government was aware of the facts and circumstances rendering a claim false at the time of submission may be relevant to a defendant's state of mind in submitting a false claim, such knowledge does not provide an automatic bar to suit. See, e.g., United States ex rel. Kreindler & Kreindler v. United Technologies Corp., 985 F.2d 1148, 1156-57 (2d Cir.1993); Hagood, 929 F.2d at 1421. These courts explain that, while government knowledge may, in some circumstances, provide evidence that a defendant did not submit a claim with actual knowledge of its falsity or in deliberate ignorance or reckless disregard for the truth, see Kreindler & Kreindler, 985 F.2d at 1156; Hagood, 929 F.2d at 1421, a defendant alleged to have violated the civil False Claims Act "is not automatically exonerated by any overlapping knowledge by government officials," Kreindler & Krein-dler, 985 F.2d at 1156.
We agree with the Kreindler and Ha-good courts that a defendant's knowledge that the government is aware of the falsity of a claim can, under certain circumstances, be relevant to mens rea. However, in the context of a claim brought by the government (as opposed to a qui tam action), the circumstances in which such knowledge is relevant are quite limited. In the context of government-initiated FCA actions, we would permit a "government knowledge defense" primarily in the rare situation where the falsity of a claim is unclear and the evidence suggests that the defendant actually believed his claim was not false because the government approved and paid the claim with full knowledge of the relevant facts.
In contending that a "government knowledge" defense should apply in the instant case, the Defendants rely on qui tam cases such as Lamers and Wang v. FMC Corp., 975 F.2d 1412 (9th Cir.1992). The courts in these qui tam cases have acknowledged that there are potential problems with allowing private relators to bring qui tam actions while the government is in the process of trying to work informally with a defendant to achieve compliance with particular statutory or regulatory provisions. See, e.g., Lamers, 168 F.3d at 1020 ("Lamers, it seems, wants to use the FCA to preempt the FTA's discretionary decision not to pursue regulatory penalties against the City."). While these might be valid concerns in the qui tam context, we find these potential problems far less compelling in the context of an FCA action brought by the federal government, particularly when the action is brought after any informal negotiation process has proved unsuccessful, as in the instant case. Thus, the qui tam cases cited by the Defendants and the dissent do not provide a compelling reason why the Defendants should be excused from liability based on a "government knowledge defense" under the circumstances of this case.
With these principles in mind, we now turn to the question whether the dis trict court properly granted summary judgment in favor of the Defendants on the mens rea issue. As noted, the district court held that because of HUD's knowledge and the communications between the parties, "there could be no reasonable finding that defendants acted knowingly." Southland Mgrrvt. Corp., 95 F.Supp.2d at 641. Although the record makes clear that HUD had a fair amount of information regarding the condition of the Complex, the record also indicates that the Defendants, as the ones who monitored the property and entered the units, had actual knowledge that the Complex was not in decent, safe, and sanitary condition. Moreover, there is evidence in the record suggesting that it was clear to the Defendants that the certifications in their HAP vouchers were false.
After our review of the record, we conclude that a factfinder could determine on this record that the Defendants knowingly submitted false claims to the government. Thus, there is a genuine issue of material fact regarding the Defendants' knowledge, and the district court erred in granting summary judgment in favor of the Defendants on this issue.
V. IS THE PHRASE "DECENT, SAFE, AND SANITARY" SUFFICIENTLY CONCRETE TO SUPPORT A FINDING OF LIABILITY UNDER THE ACT?
The Defendants contend that an allegedly false certification that a property is in "decent, safe, and sanitary" condition cannot provide the basis for civil False Claims Act liability. Noting that the phrase "decent, safe, and sanitary" is not defined in the HAP contract, they argue that any evaluation of a property pursuant to this standard is inherently subjective. According to the Defendants, because a jury cannot determine whether a certification of compliance with the "decent, safe, and sanitary" standard is objectively "true" or "false," such a certification cannot support a false claims action under the FCA.
The Government responds that the "decent, safe, and sanitary" standard is meaningful and susceptible to objective analysis. The Government points to the 1995 version of 24 C.F.R. § 881.201 stating that "Mousing continues to be decent, safe and sanitary if it is maintained in a condition substantially the same as at the time of acceptance," 24 C.F.R. § 881.201 (1995), arguing that this language gives the standard substance. Moreover, the Government claims that the published Housing Quality Standards ("HQS") that HUD inspectors employ during annual physical inspections also clarify the correct interpretation of the phrase.
The district court did not rule on this issue, but did suggest that the Defendants' position had "arguable merit." See Southland Mgmt. Corp., 95 F.Supp.2d at 635 n. 7. The court correctly noted that, during the time period in question, the Housing Quality Standards on which the Government relies were not expressly referenced in the regulations governing the Substantial Rehabilitation Section 8 Program, and no other HUD regulations then applicable to the Substantial Rehabilitation Program defined the phrase "decent, safe, and sanitary." While the district court indicated that the standard appeared to be subjective, the court also recognized that "there are cases in which property would not qualify as 'decent, safe and sanitary' under any conceivable definition of those terms." Id. at 635 n. 7.
As this issue was not the basis of the district court's summary judgment in favor of the Defendants, we assume that the Defendants raise this argument on appeal in order to invite this court to affirm the district court's judgment on these alternate grounds. We decline this invitation.
The question presented by the Defendants is one of first impression for this court: Whether a certification that a property is in "decent, safe, and sanitary" condition is sufficiently concrete that a jury could determine if the certification is true or false? While the normal procedure where the lower court has not considered a pertinent issue is to remand the case, considerations of judicial economy can dictate otherwise in circumstances such as these, where the issue is a purely legal question subject to plenary review by this court. See Mitchell v. Forsyth, 472 U.S. 511, 530, 105 S.Ct. 2806, 86 L.Ed.2d 411 (1985); see also Hudson United Bank v. LiTenda Mortgage Corp., 142 F.3d 151, 159 (3d Cir.1998). Accordingly, we can appropriately reach this question despite the fact that the district court's summary judgment was not based on this issue.
In contending that the phrase "decent, safe, and sanitary" is too subjective to support FCA liability, the Defendants rely on a number of cases holding that this phrase is too indefinite to create any legally cognizable rights for the tenants of programs funded under the housing statutes. See, e.g., Perry v. Hous. Auth. of Charleston, 664 F.2d 1210, 1217 (4th Cir.1981). This court has recently indicated support for this proposition as well. See Banks v. Dallas Hous. Auth., 271 F.3d 605, 610 (5th Cir.2001). However, these decisions are inapposite. As the Government correctly points out, none of these cases is an FCA case, and the question whether language is too indefinite to create a legally cognizable statutory right is entirely separate from whether that language can form the basis of a "false claim" action under the FCA.
We find that the phrase "decent, safe, and sanitary," as applied in the context of assessing housing conditions, has a commonsense "core of meaning" such that it is capable, -without additional definition, of being understood by a factfinder called upon to evaluate whether a certification of compliance with this standard is objectively true or false. Certainly, different members of the general public might provide different specific definitions of this term or might emphasize different factors in assessing whether housing is "decent, safe, and sanitary." However, the fact that each individual's exact definition of the meaning of this phrase might differ does not undermine the proposition that the general meaning of the concept is commonly understood. As we have noted in another, quite different context, despite the fact that certain words or phrases might "strike distinct chords in individual jurors," they can nevertheless have a "plain meaning of sufficient content that the discretion left to the jury" is "no more than that inherent in the jury system itself." Milton v. Procunier, 744 F.2d 1091, 1096 (5th Cir.1984) (holding that the Texas capital sentencing scheme is permissibly applied when the sentencing jury evaluates the terms "deliberately," "probability," "criminal acts of violence," and "continuing threat to society" without any specific definitions); see also James v. Collins, 987 F.2d 1116, 1120 (5th Cir.1993) (same). We find that the phrase "decent, safe, and sanitary" has a widely accepted ordinary meaning in the context of housing quality assessments that enables a jury to evaluate whether a property meets this standard, even if the applicable regulations provide no further elaboration on the meaning of the term.
Our conclusion that the concept of "decent, safe, and sanitary" housing has a commonly-understood ordinary meaning is bolstered by the history of the parties' interactions pursuant to the HAP contract. Initially, we note that the HAP contract signed by the Defendants contains a covenant requiring the owner to agree to maintain the facilities "so as to provide Decent, Safe, and Sanitary housing." The Defendants willingly agreed to this covenant without indicating any uncertainty about the meaning of the standard. Similarly, more than one hundred times during the course of the project's history, the Defendants certified under penalty of fine or imprisonment that the Complex was in decent, safe, and sanitary condition. The record contains no indication that the Defendants even once inquired as to the meaning of this term prior to signing these certifications. The Defendants' repeated certifications in the HAP vouchers, combined with the complete lack of prior dispute about the meaning of the standard, provide strong indication that the Defendants and HUD had a mutual, common understanding of the meaning of the phrase "decent, safe and sanitary."
It is also significant that the "decent, safe, and sanitary" language has been part of the statutory scheme governing public housing since the inception of the current federal housing program in the 1930s. During the almost seventy years since the program's enactment, there are no reported cases challenging this terminology on the ground that it provides inadequate notice of the standard governing public housing conditions. This notable lack of legal debate further supports our conclusion that the concept of "decent, safe, and sanitary" housing has a sufficiently concrete, commonsense meaning that is neither inherently subjective nor impermissibly vague. A factfinder in a civil action is perfectly capable of applying this standard and determining whether a certification that housing is in "decent, safe, and sanitary" condition has been falsely made.
The Defendants also appear to argue that, even if the phrase "decent, safe, and sanitary" has an objective and ascertainable meaning, they still cannot be held liable for a false claim based on this provision. They point to a number of decisions from other circuits suggesting that errors attributable to differences in the interpretation of disputed legal questions cannot form the basis of a false claims action under the FCA. See, e.g., Lamers, 168 F.3d at 1018; Hagood, 81 F.3d at 1478-79. Relying on these authorities, the Defendants suggest that they cannot be held liable under the Act if their submission was grounded in a legitimate dispute about the correct legal interpretation of the phrase "decent, safe, and sanitary."
The Defendants' briefs do not indicate the exact nature of their disagreement about the meaning of the standard. However, in the portions of their testimony contained in the record, two of the Defendants offer alternate definitions of the phrase "decent, safe, and sanitary" that would purportedly render their certifications correct. Defendant Doty initially grants in his testimony that the term "decent, safe, and sanitary" should be evaluated based on common and ordinary understanding of the terms. Doty then suggests that under this common understanding, the term "decent, safe, and sanitary" housing refers to housing that "where you walk in, you wouldn't fall in through the floor." Defendant McLaurin similarly suggests that "decent, safe, and sanitary" housing is housing that "[keeps] the weather out" and "[does not] have things falling on you."
Even if this testimony does indicate that the Defendants were operating pursuant to a bona fide dispute about the meaning of the "decent, safe, and sanitary" standard, we note that the Defendants can still be held liable under the FCA for submitting false claims if their interpretation of the disputed regulatory or contractual language was unreasonable. A number of courts have recognized that, while a legitimate dispute regarding the meaning of a regulatory or statutory provision might preclude FCA liability, the government can nonetheless prove the falsity of a claim by establishing the unreasonableness of the defendant's interpretation of the regulation or contractual provision. See, e.g., Commercial Contractors, Inc. v. United States, 154 F.3d 1357 (Fed.Cir.1998); United States v. Krizek, 859 F.Supp. 5, 11-12 (D.D.C.1994), aff'd, 111 F.3d 934 (D.C.Cir.1997).
This issue was not addressed by the district court and is not sufficiently developed in this record or in the briefs for us to express any view upon it other than to set out the applicable law. We leave it to the district court on remand.
In sum, we decline to uphold the district court's summary judgment on the alternate grounds suggested by the Defendants.
VI. CONCLUSION
For the foregoing reasons, the district court's grant of summary judgment in favor of the Defendants is REVERSED and the case is REMANDED for further proceedings consistent with this opinion. Costs shall be borne by the Defendants.
. Because of the significant tax benefits involved, this program became a popular source of "tax shelters" for individual investors in the early 1980s. Frequently such tax shelters were structured as limited partnerships, as in the instant case. Typically,, individuals formed a limited partnership, Inade a minimal initial capital contribution, and obtained a non-recourse mortgage guaranteed by the federal government to cover the bulk of the costs of building or rehabilitating a property. While the limited partners were liable only to the extent of their initial capital investment, the partnership was a "pass through" entity for tax purposes — i.e., the partnership allocated gains or losses to individual partners, who reported such items on their individual tax returns. Because the tax laws allowed the partnership to depreciate the building (or the improvements to an existing property) on an accelerated timetable, these projects tended to accrue large "losses" in their early years. The individual members of the partnership used these "passed through" losses to offset individual income, thereby "purchasing" more than one dollar of tax savings with each dollar of capital they contributed. At the same time, the excess cash flows generated by the project during its early years were paid out to the partnership rather than preserved for the support of the project.
When the accelerated depreciation period was over and the shelter had (in the vernacular) "burned out," if the partnership defaulted on the mortgage (because of inadequate cash flow or any other reason), HUD (as guarantor) was compelled to institute proceedings to foreclose on the property. This default did not put the investors' personal assets at risk, as the mortgage was non-recourse debt. See generally Arthur R. Hessel, Heard from HUD, 6 SUM J. Affordable Housing & Community Dev. L. 268, 270 (1997) (describing the tax incentives for private investors to participate in construction and rehabilitation of low-income housing); Daryl S. Alterwitz, Low Income Housing Under the New Conservatism: Trickle Down or Dry Up?, 26 Santa Clara L.Rev. 461, 461 & nn. 5, 6, 23 & 93-96 (1986) (same).
Such tax shelters were particularly financially advantageous prior to the Tax Reform Act of 1986, which restricted the extent to which investors could use deductions and credits derived from tax shelters to offset earned income. These reforms also repealed some of the specific tax incentives applicable to low-income housing projects. See generally Janet Steams, The Low-Income Housing Tax Credit: A Poor Solution to the Housing Crisis, 6 Yale L. & Pol'y Rev. 203, 208-10 (1988) (describing the effects of the Tax Reform Act of 1986).
. There are many Section 8 programs. See, e.g., 24 C.F.R. § 880.101-880.612a (2001) (new construction); id. § 881.101-881.601 (substantial rehabilitation); id. § 882.101-882.810 (moderate rehabilitation); id. § 883.101-883.701 (state housing agencies). Each program has its own specific rales and eligibility requirements. In the present suit, we are concerned with the Section 8 program involving substantial rehabilitation. See id. § 881.101-881.601. Section 881.201 defines "substantial rehabilitation" as:
(a) The improvement of a property to decent, safe and sanitary condition in accordance with the standards of this part from a condition below those standards. Substantial rehabilitation may vary in degree from gutting and extensive reconstruction to the cure of substantial accumulation of deferred maintenance. Cosmetic improvements alone do not qualify as substantial rehabilitation under this definition.
(b) Substantial rehabilitation may also include renovation, alteration or remodeling for the conversion or adaptation of structurally sound property to the design and condition required for use under this part or the repair or replacement of major building systems or components in danger of failure.
Id. § 881.201.
. The HAP vouchers require that the owners of the federally-subsidized properties provide information regarding the number of total units, the number of vacant units, the contract rent amount, the amount of rent paid by the tenants, and the amount of payment requested by the owners. There are also other certifications that the property owners must make, including that the information provided in the HAP voucher is true and correct; that the "tenant's eligibility] and assistance] was computed in accordance with' HUD's reg[ulations], procedures, and the Contract"; that "required inspections are complete"; and that the owners "have not and will not receive any money or other consideration from tenant or other source for Units beyond that authorized by HUD[.]"
. While the dissent downplays the severity of these problems, the record provides ample evidence that conditions at the Complex were deplorable. One resident attested that she would catch ten or more rats in her apartment every day and that the rats would crawl in her baby's crib, chew the nipples off the baby's bottles, and drink the baby's milk. Another resident indicated that roaches were so prevalent in her home that they had infested her bed. She would kill roaches inadvertently while she was sleeping by rolling over in her sleep. A third resident stated that, in addition to problems with roaches and mice, her apartment had non-functional plumbing, holes in the walls, doors with no doorknobs, and windows that could not be locked.
Crime at the Complex was alarmingly high as well. Drug related crimes were particularly prevalent. In 1995 alone, the Jackson Police Department received 43 calls reporting narcotics violations at the Complex and the police made arrests at the Complex on at least 17 different occasions for narcotics violations. Non-drug-related crimes were also common at the Complex. In one two-year interval during the time period relevant to this litigation, the Jackson Police Department's records indicate 57 cases of aggravated or simple assault, 12 auto burglaries, 26 house burglaries, 9 auto thefts, 1 armed robbery, 17 cases of vandalism, 1 murder, 14 larcenies, and 2 rapes at the Complex.
. The record contains reports from inspections conducted by the Defendants' mortgage company giving the Complex "satisfactory" ratings during the relevant time period. However, as John Maertz, the Government's expert witness, indicated in his report, mortgage company inspections tend to be far shorter and less thorough than the inspections conducted on behalf of HUD. Consistent with this assessment, the mortgage company's inspector, Joseph Toler, voluntarily characterized his own inspection as "cursory" in his deposition, indicating that he did not look at every building in the Complex and that, for the buildings he did examine, he "would be like walking in the door and looking around . and saying, well, this isn't too bad" and then leaving.
.For example, on August 7, 1995, HUD sent to the Defendants a July 11, 1995 physical inspection report and requested a "detailed" written response. The Defendants responded on September 6, 1995, in a brief letter that touched on only a few of the reported deficiencies. On September 11, 1995, HUD wrote to the Defendants, informing them that their letter of September 6 failed to provide the "detailed plan of action" that HUD requested in its August 7 letter. HUD again requested a detailed response, this time within fifteen days. On October 17, 1995, still not having received any response from the Defendants, HUD wrote a third request for a detailed plan, giving the Defendants another fifteen days to respond. In reply, HUD received from the Defendants a rather indignant letter stating in two short paragraphs which deficiencies noted in the inspection report had been corrected.
. We note that the Government does not seek to recover for any false claims made during the time period when the Defendants complied in good faith with HUD's informal remedial efforts.
. The civil False Claims Act defines a "claim" as "any request or demand, whether under a contract or otherwise, for money or property . [where] the United States Government provides any portion of the money or properly." 31 U.S.C. § 3729(c) (Supp.2001).
. The Government reaches this figure by trebling $865,023 — the amount that HUD claims to have disbursed to the Defendants during the time period covered by its complaint.
. The minor textual changes that accompanied this recodification were designed only to "eliminate unnecessary words" and provide "consistency," rather than to enact any substantive change. See H.R.Rep. No. 97-651, at 142 (1982), reprinted, in 1982 U.S.C.C.A.N. 1895, 1896.
. The 1986 amendments also: (1) clarified that the government need establish the elements of a cause of action under the Act only by a preponderance of the evidence; (2) lengthened the statute of limitations under the Act beyond six years in cases where the government fails to detect the false claims at the time they are submitted; (3) increased the penalties under the Act from $2000 per claim to between $5000 and $10,000 per claim; (4) increased the Act's damages provision, authorizing courts to award the government treble damages; and (5) expanded the role of (and the rewards available to) qui tarn relators under the Act. See generally John T. Boese, Civil False Claims and Qui Tam Actions § 104 (2d ed. 2000 & Supp.2001) (describing the impact of the 1986 amendments).
. While the dissent disputes this characterization of Wilkins, the Wilkins opinion contains ample evidence indicating that court's intent to espouse a "claim materiality" requirement. Initially, the court in Wilkins repeatedly characterizes the FCA's materiality element to require that a false submission bear on the claimant's entitlement to payment. See, e.g., 173 F.Supp.2d at 622 (characterizing Weinberger to suggest a requirement that "the misrepresentation made had to bear on, or be material to, the entitlement to payment"); id. at 623 ("A statement or action in or related to a claim makes the claim itself false only if it bears on, or is material to, the person's entitlement to the money or property claimed."); id. at 624 ("[T]he FCA implicitly requires statements or conduct that are material to the person's entitlement to the money or property claimed before liability can arise."); id. at 630 ("Liability for both a 'false claim' and a 'fraudulent claim' implicitly requires a showing that what makes the claim either false or fraudulent is material to the asserted claim of entitlement to receive money or property from the government."); id. at 635 (faulting the government for failing to demonstrate "how the alleged 'padding' of waste costs was material to the defendants' entitlement to be paid by the government on the contract") (emphasis added). In its extended discussion of the materiality issue, the Wilkins court never suggests that a false submission must have actually affected the government's ultimate decision to remit funds in order to be "material."
Moreover, interpreting the Wilkins opinion to espouse an "outcome materiality" requirement would be inconsistent with the underlying rationale of that opinion. The Wilkins court determined that — despite the absence of any statutory reference to materiality — the civil FCA contains an implicit materiality requirement. This determination was based on the court's conclusion that materiality is inherent in the concept of a "false claim." Id. at 623-24. According to the Wilkins court, a false claim is distinguishable from a false statement because the former requires that the "claim itself must be false or fraudulent." Id. at 623. The defining characteristic of a "false claim" is that the claimant is not actually entitled to the money or property claimed. Thus, the Wilkins court concluded that a false or misleading statement renders a claim "false" only if that falsehood implicates the claimant's entitlement or right to the ben efit in question. Id. at 624. The actual impact of the falsehood on the government's subsequent decisionmaking process did not play any role in the Wilkins court's analysis. Indeed, the Wilkins court specifically rejected the suggestion (made by the government in that case) that the FCA's implicit materiality requirement should turn on whether the government would have approved the claim in question but for the alleged falsehood. Id. at 636. The fact that the government would not have ultimately approved the contract in question but for the alleged false statements was not dispositive to the Wilkins court.
. The dissent suggests that this corn! is bound by the Supreme Court's decision in Kungys to find that the FCA's implicit materiality requirement must be an "outcome materiality" requirement. While we emphasize that we need not decide the exact nature of the FCA's materiality requirement in the instant case, we note that Kungys is not disposi-tive on this issue. In Kungys, the Court considered the meaning of the term "material" in the context of the Immigration and Nationality Act, which provides for the denaturalization of citizens whose citizenship orders and certificates of naturalization were illegally procured or were procured by concealment of a material fact or by willful misrepresentation. See 8 U.S.C. § 1451 (1994). To discern Congress's intended meaning of the word "material," the Court looked to the common law definition of the word, reasoning that " '[wjhere Congress-uses terms that have accumulated settled meaning under either equity or the common law, a court must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning of these terms.' " Kungys, 485 U.S. at 770, 108 S.Ct. 1537 (quoting NLRB v. Amax Coal, Inc., 453 U.S. 322, 329, 101 S.Ct. 2789, 69 L.Ed.2d 672 (1981)). Based on its review of the common law, the Court determined that "a concealment or misrepresentation is material if it 'has a natural tendency to influence, or was capable of influencing, the decision of the decisionmak-ing body to which it was addressed." Id. at 770, 108 S.Ct. 1537 (quoting Weinstock v. United States, 231 F.2d 699, 701 (D.C.Cir.1956)). However, the reasoning espoused by the Court in Kungys is inapplicable to the instant case. The word "material" does not appear in the civil FCA — the materiality requirement that courts have imposed upon the Act is entirely implicit. Accordingly, unlike the Court in Kungys, we cannot draw conclusions about the nature of the materiality requirement that is implicit in the Act by relying on Congress's presumed invocation of the common law meaning of the word "material."
. Specifically, the district court found that, given the physical inspection reports, HUD was aware of the condition of the Complex during the relevant time period and "would have approved payment on the vouchers regardless of the condition of the property." Southland Mgmt. Corp., 95 F.Supp.2d at 633. The district court concluded that, for these reasons, "it follows that defendants' certifications were not 'material' to HUD's decision to continue housing assistance payments to defendants pursuant to their HAP vouchers." Id.
. While we do not reach this issue today, we note that if a future panel of this court is faced squarely with the question whether materiality is an element of the civil FCA, this court will need to assess whether and to what extent Wells and Neder might undermine our precedents interpreting the civil FCA to contain an implicit materiality requirement.
. We note that this argument mirrors the analysis of the Wilkins court. While the Wilkins court calls this implicit requirement a 'materiality" element and the Government does not, it appears that the "claim materiality" element espoused by the court in Wilkins is the same requirement advocated by the Government in the instant case.
. In discussing HUD employee Quentin Lewis's deposition testimony, the dissent apparently contends that a false certification of statutory or regulatory compliance cannot be a "prerequisite" to receipt of government funds under Thompson unless the person who processed the certifications took into account the truth or falsity of the certified statements in determining whether to remit funds. However, the fact that the particular bureaucrat charged with confirming whether a claimant has complied with a certification requirement has no independent knowledge of the truth or falsity of the certified statements does not alter the fact that the certification is a prerequisite to receipt of funds, especially when it is undisputed that funds would not have been paid to the claimant in the absence of the certification. Thompson clearly dictates that a certified statement of statutory or regulatory compliance is material when the certification is a prerequisite to receipt of government funds. Thompson, 125 F.3d at 902. The materiality of the certified statement is not dependent upon how large a role the truth or falsity of the certification plays in the government's ultimate decision whether to remit payment.
. The dissent maintains that Thompson is not dispositive in the instant case because the certification requirement at issue here has only a "formalistic connection with the payment decision." The dissent appears to suggest that a certification requirement cannot be a "true" prerequisite to payment unless the truth or falsity of that certification was the actual, "but-for" cause of the government's ultimate determination whether to remit funds on the claim. We find this suggestion problematic for a number of reasons. Initially, we are bound by our precedent in Thompson, which concludes that "false certifications of compliance create liability under the FCA when certification is a prerequisite to obtaining a government benefit" without suggesting any "but-for causation" caveat as advocated by the dissent.
Secondly, this interpretation appears inconsistent with the "outcome materiality" requirement espoused by the dissent. Kungys defines a material misrepresentation as a misrepresentation that "has a natural tendency to influence or was capable of influencing the decision of" the governmental entity to which the statement was addressed. This definition does not suggest that the misrepresentation must have actually influenced the relevant governmental entity to be deemed "material." Indeed, as three members of the Court in Kungys pointed out, a materiality requirement is not the equivalent of a but-for causation requirement:
We do not agree with petitioner's contention that [the Immigration and Nationality Act's language sanctioning individuals whose naturalization was "procured by" concealment of a "material" fact] requires the Government to establish that naturalization would not have been granted if the misrepresentations or concealments had not occurred. If such a "but for" causation requirement existed in [the "procured by" language] it is most unlikely that a materiality requirement would have been added as well — requiring, in addition to distortion of a decision, a natural tendency to distort the decision. Moreover, the difficulty of establishing "but for" causality . many years after the fact, is so great that we cannot conceive that Congress intended such a burden to be met before a material misrepresentation could be sanctioned.
485 U.S. at 776-77 (opinion of Scalia, J., joined by Rehnquist, C.J., and Brennan, J.). This analysis suggests that "materiality" and "but-for causation" are distinct (and, indeed, inconsistent) requirements.
Finally, as the above passage indicates, there are problems of proof that arise when the government is required to demonstrate that a claimant's misrepresentation actually motivated its decision to approve a claim. Imposing such an evidentiary burden risks excessively constraining the government's ability to sanction claimants who make false representations to the government. As we share Justice Scalia's concerns in this regard, we reject the dissent's suggestion that "but-for causation" is the appropriate test of materiality in the instant case.
. The dissent points to four cases from other circuits that, according to the dissent, "reject[ ] civil FCA liability where defendant contractors arguably submitted 'false' certifications, but were engaged in cooperative or supervised undertakings with the government that rendered the certifications irrelevant to the ongoing payment decisions." See infra n. 8 and accompanying text. Of these four cases, only United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013 (7th Cir.1999), involves a certification of statutory or regulatory compliance akin to the certification requirement at issue in the instant case. Lamers was a qui tarn case where the Seventh Circuit considered a private relator's claim that the City of Green Bay had, on numerous occasions, falsely certified (and falsely represented in informal correspondence) that its transit system complied with federal regulations. While the court's rejection of the relator's FCA claim was based largely on its determination that it was unclear whether the city's certifications were actually false, the court also took note of the evidence that the City was cooperating with federal authorities in an attempt to bring their transit system into full compliance with federal regulations and reasoned that FCA liability would be inappropriate under these circumstances. See id. at 1019-20.
Initially, we note that it is unclear from Lamers whether the Seventh Circuit refused to impose liability because the government's knowledge undermined the falsity of the claim or because the Seventh Circuit accepted that government knowledge was a viable defense to FCA liability under the circumstances of that case. Moreover, as discussed infra at Part IV, the rationale provided by the Seventh Circuit for its refusal to impose FCA liability in Lamers is specific to qui tarn cases and is far less compelling in the context of an FCA claim brought by the government. Accordingly, we are not persuaded that the reasoning of Lamers obligates us to depart from Thompson's clear holding that "false certifications of compliance create liability under the FCA when certification is a prerequisite to obtaining a government benefit." Thompson, 125 F.3d at 902 (adopting the reasoning of Anton, 91 F.3d at 1266).
. The dissent contends that this is a mischar-acterization of the Defendants' position. According to the dissent, the Defendants are arguing "not that the government is estopped from holding them liable on [a false claims] theory, but that they are not liable as a matter of law." While this may be true with respect to the Defendants' invocation of government knowledge as a defense, the Defendants' contention that a claim cannot be false if the government was aware of the circumstances rendering it untrue is equivalent to an estop-pel argument. As noted above, as a matter of pure logic, the fact that the government is aware that a claimant's submission is false upon receipt of that submission does not make the statement any less false. Accord ingly, what the Defendants must be contending is that once the government accepts and remits payment on a claim knowing that claim to be false, the government cannot argue that the claim was false in a court of law.
. The Supreme Court has mentioned the possibility that some type of "affirmative misconduct" by a government official might give rise to estoppel against the government. See, e.g., Richmond, 496 U.S. at 421, 110 S.Ct. 2465; see also Linkous v. United States, 142 F.3d 271, 277 (5th Cir.1998) ("In order to establish estoppel against the government, a party must prove affirmative misconduct by the government in addition to the four traditional elements of the doctrine."). However, the Court has never invoked this exception and there is no suggestion of such "affirmative misconduct" in the instant case.
. We note that the instant case is not a particularly "hard case" from an equitable perspective. The Defendants were well aware of their contractual and regulatory obligation to maintain the Complex in decent, safe, and sanitary condition. Similarly, at the time that they signed the HAP contract, the Defendants were aware that they would be obliged to make a monthly certification of their compliance with the "decent, safe, and sanitary" standard, and that a false certification of compliance with this standard would subject them to treble damages under the civil FCA or prosecution under the criminal FCA.
. Prior to the 1982 Amendments, the text of the Act did indicate that private plaintiffs could not pursue qui tarn actions under the Act if the government was aware of the information forming the basis of the complaint. See 31 U.S.C. § 232(C) (1976). While the early versions of this provision (i.e., prior to the 1982 recodification) did not indicate whether it applied to actions brought by the government, the provision was contained within a section of the statute specifically addressing the procedural requirements for qui tam actions. See generally 31 U.S.C. § 232 (1976) (entitled "Procedure for private claims"). This jurisdictional bar was subsequently eliminated in the 1986 amendments. For the purposes of the instant case, we note that this prohibition was never applicable to actions initiated by the government. See 31 U.S.C. § 3730(b)(4) (1982) ("Unless the Government proceeds with the action, the court shall dismiss an action brought by the person on discovering the action is based on information the Government had when the action was brought.") (emphasis added).
. We emphasize that we need, not, and do not, address today the availability of a "government knowledge" defense in qui tam actions. Qui tam actions are governed by substantively different rules than government-initiated FCA actions in many respects. Government knowledge of the facts and circumstances underlying a claim has historically played a different role in qui tam actions than in FCA actions brought by the government. See supra note 23. Indeed, under certain circumstances relators are still jurisdictionally barred from bringing qui tam actions under the FCA if the government had knowledge of the facts and circumstances that form the basis of the relator's claim. See 31 U.S.C. § 3730(e). In light of these distinctions, it is appropriate for this court in the instant case to confine our discussion of the availability of a "government knowledge defense" to government-initiated FCA actions.
. The Defendants contend that this regulatory guidance is insufficient to give meaning to the phrase "decent, safe, and sanitary" because there is no implication that housing is decent, safe, and sanitary only if it is maintained in this manner. We agree that this language suggests an affirmative defense rather than an exclusive definition of "decent, safe and sanitary."
. We note that we have the ability to affirm on these alternate grounds. See Manning v. Warden, La. State Penitentiary, 786 F.2d 710, 711 (5th Cir.1986) (affirming on other grounds); see also Bickford v. Int'l Speedway Corp., 654 F.2d 1028, 1031 (5th Cir.1981) (stating that "reversal is inappropriate if the ruling of the district court can be affirmed on any grounds").
. One particularly relevant distinguishing feature between these two inquiries is that while courts do not consider regulatory guidance in determining whether statutory language creates a legally cognizable right, see Banks, 271 F.3d at 610 n. 4, it is appropriate to consider regulatory clarification in the instant case.
. Indeed, there are cases that successfully apply this standard to determine whether owners are in compliance with their contractual obligations regarding the condition of housing projects. These cases do not elaborate on the meaning of the phrase "decent, safe, and sanitary" or suggest in any way that the standard lacks a concrete meaning. See, e.g., Marshall v. Cuomo, 192 F.3d 473, 479-80 (4th Cir.1999) (determining that a corporation was appropriately debarred from further participation in Section 8 programs because its properties were not maintained in "decent, safe, and sanitary" condition).