Opinion ID: 723865
Heading Depth: 1
Heading Rank: 2

Heading: summary judgment on the false claims act claim

Text: 13 We review a district court's grant of summary judgment de novo. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 1261, 134 L.Ed.2d 209 (1996). We must determine whether the evidence, viewed in a light most favorable to the non-moving party, presents any genuine issues of material fact and whether the district court [properly] applied the law. Id. 14 Hopper contends that the School District submitted false claims actionable under the FCA by (1) annually submitting reports to CDOE reconciling actual enrollment with the School District's predicted enrollment; (2) cashing checks received from CDOE for special education, a portion of which was derived from federal funding; and (3) submitting a triennial certificate to CDOE certifying that LAUSD will meet all applicable requirements of state and federal law and regulations, including general compliance with the IDEA.
15 Hopper's first two contentions originate from her assertion that LAUSD's regulatory violations create a viable cause of action under the FCA. Hopper contends that the School District committed actionable fraud against the government by annually submitting J-50 and J-380 forms to the CDOE indicating the number of special education students in the district. Hopper argues that because the School District was not in regulatory compliance, submission of these forms constitutes an actionable false claim. She also contends that by cashing checks received from CDOE, LAUSD was committing actionable fraud because the School District was not in compliance with IDEA regulations. 16 In granting summary judgment, the district court found that Hopper had not met the FCA's scienter and false claim requirements, stating: 17 It appears to the court that the plaintiff is operating under a fundamental misconception as to the reach and scope of the FCA. It is not the case that any breach of contract, or violation of regulations or law, or receipt of money from the government where one is not entitled to receive the money, automatically gives rise to a claim under the FCA. Plaintiff assumes that if Los Angeles Unified School District (LAUSD) has violated regulations or law governing the Individuals with Disabilities Education Act (IDEA), it is automatically subject to suit under FCA. The FCA is far narrower. It requires a false claim. Thus, some request for payment containing falsities made with scienter (i.e., with knowledge of the falsity and with intent to deceive) must exist. This does not mean that other types of violations of regulations, or contracts, or conditions set for the receipt of moneys, or of other federal laws and regulations are not remediable; it merely means that such are not remediable under the FCA or the citizen's suit provisions contained therein. 18 We agree with the district court's analysis of plaintiff's claims. The FCA was enacted during the Civil War with the purpose of forfending widespread fraud by government contractors who were submitting inflated invoices and shipping faulty goods to the government. U.S. v. Rivera, 55 F.3d 703, 709 (1st Cir.1995). In furthering this goal, the Act attaches liability, not to underlying fraudulent activity, but to the claim for payment. Id. What constitutes the FCA offense is the knowing presentation of a claim that is either fraudulent or simply false. United States ex rel. Hagood v. Sonoma County Water Agency, 929 F.2d 1416, 1421 (9th Cir.1991). 19 The archetypal qui tam 7 FCA action is filed by an insider at a private company who discovers his employer has overcharged under a government contract. See, e.g., United States ex rel. Green v. Northrop Corp., 59 F.3d 953 (9th Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 2550, 135 L.Ed.2d 1069 (1996). However, FCA actions have also been sustained under theories of supplying substandard products or services (see, e.g., United States v. Aerodex, 469 F.2d 1003 (5th Cir.1972)); false negotiation, including bid rigging and defective pricing (see, e.g., United States v. Ehrlich, 643 F.2d 634 (9th Cir.), cert. denied, 454 U.S. 940, 102 S.Ct. 474, 70 L.Ed.2d 247 (1981)); and false certification (see, e.g., United States v. Hibbs, 568 F.2d 347 (3d Cir.1977)). Hopper claims FCA liability as a result of false certification of compliance with federal law. 20 John T. Boese explained the theory of false certification in his text on the False Claims Act: 21 False certification cases differ from mischarging and false negotiation cases. In these cases, parties avail themselves of benefits of some type, such as loan guarantees or agricultural supports, through false statements which create eligibility that otherwise would not exist. Two major questions relating to liability in these cases are: (1) whether the false statement is the cause of the Government's providing the benefit; and (2) whether any relation exists between the subject matter of the false statement and the event triggering Government's loss. 22 John T. Boese, Civil False Claims and Qui Tam Actions 1-29 to 1-30 (1995). 23 In this instance, the School District did not make a certification which could constitute a false claim under the Act, much less a false statement which caused the United States to provide an improper benefit. A brief review of the federal government's mechanism for funding special education illustrates this. Each year, the federal government allocates IDEA funds to California and other states for special education programs to ensure a free appropriate public education for children with disabilities. 20 U.S.C. § 1400(c) (1994). Federal money for special education is assigned to the states on a per-student basis. 20 U.S.C. § 1411(a) (1994). However, California apportions the money among its school districts based upon other information, including the number of special education personnel and other factors, rather than on solely a per-student basis. This information is listed in the J-50 form every district must submit to the CDOE four times a year. At the end of the year, each district submits to the CDOE a form J-380 either to request reimbursement for money spent in excess of budget or to pay back excess money received to which it is not entitled. 24 As the district court observed, Hopper misinterprets the breadth of the Act. Violations of laws, rules, or regulations alone do not create a cause of action under the FCA. It is the false certification of compliance which creates liability when certification is a prerequisite to obtaining a government benefit. See United States ex rel. Fallon v. Accudyne Corp., 880 F.Supp. 636, 638 (W.D.Wis.1995) (false certification of compliance with environmental laws states FCA claim); X Corp. v. Doe, 816 F.Supp. 1086, 1093 (E.D.Va.1993) (The heart of fraud is an intentional misrepresentation. A violation of a regulatory provision, in the absence of a knowingly false or misleading representation, does not amount to fraud.). In the J-50 and J-380 forms, the School District made no such false certification. The forms do not contain any certification concerning regulatory compliance. In fact, the IDEA does not require funding recipients to certify their compliance with federal laws and regulations. 25 Hopper also argues that the School District has made an actionable false claim by accepting federal funds when it was not in compliance with IDEA. This contention suffers from the same fatal defect: lack of a false claim. Mere regulatory violations do not give rise to a viable FCA action. This is particularly true here where regulatory compliance was not a sine qua non of receipt of state funding. There are administrative and other remedies for regulatory violations. Hopper knows this. She has pursued many of them. However, absent actionable false certifications upon which funding is conditioned, the False Claims Act does not provide such a remedy.
26 Hopper next argues that the School District's submission of a triennial certification, containing general assurances that the School District will generally comply with applicable federal law, is an actionable false certification under the Act. Every three years, each California school district must prepare a Local Plan to submit to the CDOE. The Local Plan is an agreement between the school district and the district's community detailing how the district is going to implement its special education programs. This Local Plan includes the Certification of Participation, Compatibility, and Compliance Assurances (Certification of Assurances), which the district superintendent signs to indicate that a district will operate its special education programs in a manner consistent with both state and federal law. The affected school district certifies: 27 that the agency(ies) herein represented will meet all applicable requirements of state and federal laws and regulations, including general compliance with Public Law 94-142, Section 504 of Public Law 93-112 and the provisions of the California Education Code, Part 30. 28 Every three years, the CDOE conducts a comprehensive review of school districts' special education programs and outlines problem areas. If the review reveals areas of noncompliance with law or regulation, a school district must propose a solution to the problem acceptable to the CDOE. 29 However, this Certification of Assurances is not a prerequisite for the School District to receive annual IDEA funds. This is partly because IDEA funding has been assigned to California before the state has apportioned the funding among its districts. Thus, even if false, the LASUD certificate fails the test of being the cause of the Government's providing the benefit. See Boese at 1-29. 30 In addition, although promissory fraud may be actionable in rare circumstances under the FCA, the promise must be false when made. See U.S. v. Shah, 44 F.3d 285, 290 (5th Cir.1995) (holding a promise of nondisclosure made after the defendant had made a specific promise to another party to disclose the information was actionable). For a certified statement to be false under the Act, it must be an intentional, palpable lie. Hagood, 81 F.3d at 1478. Innocent mistakes, mere negligent misrepresentations and differences in interpretations are not false certifications under the Act. Id. For a qui tam action to survive summary judgment, the relator must produce sufficient evidence to support an inference of knowing fraud. United States ex rel. Anderson v. Northern Telecom, 52 F.3d 810, 815 (9th Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 700, 133 L.Ed.2d 657 (1996). 31 Here, the record is devoid of any such showing. In fact, the undisputed evidence leads to the opposite conclusion concerning the School District's intent to be in general compliance with applicable laws. LAUSD is one of the largest public school districts in the United States, serving nearly 640,000 students on a $4 billion annual budget. It has one of the largest special education programs in the country, providing services beyond those required by law. While the School District receives a significant amount of funding from the federal government for special education programs under the IDEA, it spends routinely between 15 and 20 times this amount on special education programs. 8 The School District spends 100% of its IDEA funding on special education programs and services as provided under 20 U.S.C. § 1411(c). To meet state and federal requirements, LAUSD must also take money from the fund intended for general education for all students. This is called encroachment, and the amount of encroachment typically falls between $160-180 million annually, or roughly 32-36% of the approximate $500 million total budget for special education. With 64,000 students eligible for special education, LAUSD receives 15 complaints of noncompliance every year. This number is consistent with the number of complaints submitted against other California school districts. 32 The undisputed facts show that it is the School District's general policy to comply with all applicable state and federal laws and regulations and that it has an elaborate administrative structure to do so. The CDOE also monitors LAUSD's compliance with state and federal special education laws. The School District has a policy of curing items of noncompliance with laws or regulations when noted by the CDOE. When the CDOE on February 16, 1990 found the School District out of compliance by excluding classroom teachers from IEP meetings, the CDOE and the School District negotiated over the course of the next two years to solve the problem. 33 Hopper argues that past regulatory noncompliance creates an inference that the School District lied when certifying future compliance. This is not sufficient evidence to establish knowing fraud under the Act.
34 A district court's refusal to permit additional discovery is reviewed for an abuse of discretion. Qualls v. Blue Cross, 22 F.3d 839, 844 (9th Cir.1994). We will only find that the district court abused its discretion if the movant diligently pursued its previous discovery opportunities and can show how allowing additional discovery would have precluded summary judgment. Id. The new material Hopper discovered after the district court granted summary judgment against her was nothing more than additional proof of the School District's continuing failure to comply with federal regulations. Thus, the additional material demonstrating the School District's continued noncompliance would not have prevented the entry of summary judgment against Hopper. Coupled with the fact that Hopper had eighteen months prior to the hearing to conduct discovery, this leads to the conclusion that the district court did not abuse its discretion in denying additional discovery. 35