Court Opinion

ID: 2656308
Source: CourtListenerOpinion
Date Created: 2014-03-11 20:59:37.294723+00
Date Added: 2024-06-11T12:59:50.169727
License: Public Domain

Filed 3/11/14

                       CERTIFIED FOR PUBLICATION
                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                              FIRST APPELLATE DISTRICT

                                       DIVISION FIVE

SAN FRANCISCO UNIFIED
SCHOOL DISTRICT ex rel.
MANUEL CONTRERAS et al.,                                A136986
        Plaintiffs and Appellants,
                  v.                                    (San Francisco County
                                                        Super. Ct. No. CGC-07-463308)
FIRST STUDENT, INC.,
        Defendant and Respondent.

        California’s False Claims Act (CFCA) (Gov. Code, § 12650 et seq.)1 permits the
recovery of civil penalties and treble damages from any person who knowingly presents a
false claim for payment to the state or a political subdivision. Qui tam2 plaintiffs William
Padilla, Manuel Contreras, and the Environmental Law Foundation (plaintiffs) sued
defendant First Student, Inc. (defendant),3 under the CFCA, seeking to recover funds on

1   All further undesignated section references are to the Government Code.
    Hereafter, the federal False Claims Act (31 U.S.C. § 3729 et seq.) will be referred to
as the “federal FCA.”
2  “Qui tam is short for the Latin phrase qui tam pro domino rege quam pro se ipso in
hac parte sequitur, which means ‘who pursues this action on our Lord the King’s behalf
as well as his own.’ ” (Vermont Agency of Natural Resources v. United States ex rel.
Stevens (2000) 529 U.S. 765, 768, fn. 1; see also § 12652, subd. (c)(1).)
3   The complaint named Laidlaw Transit, Inc., and Laidlaw Transit Services, Inc. First
Student, Inc., is the successor in interest to Laidlaw Transit, Inc., and First Transit, Inc. is
the successor in interest to Laidlaw Transit Services, Inc. The action was dismissed as to
Laidlaw Transit Services, Inc., and First Transit, Inc. References to “defendant” in this
                                               1
behalf of the San Francisco Unified School District (District). Plaintiffs allege defendant
violated the CFCA by submitting claims for payment to the District at times when
defendant knew it was in breach of various terms of its contract to provide student bus
transportation services. In particular, plaintiffs allege defendant failed to maintain its
buses as required under the contract.
       In San Francisco Unified School Dist. ex rel. Contreras v. Laidlaw Transit, Inc.
(2010) 182 Cal. App. 4th 438 (Contreras I), this court reversed the trial court’s orders
sustaining defendant’s demurrer and dismissing the action. We concluded that, under the
CFCA, a vendor impliedly certifies compliance with express contractual requirements
when it bills a public agency for providing goods or services. Plaintiffs’ allegation that
defendant’s implied certifications were false with respect to its maintenance obligations
was sufficient to survive a demurrer. Subsequently, the trial court granted defendant’s
motion for summary judgment. The court concluded no reasonable trier of fact could
find that (1) the false implied certifications were material—that it had a natural tendency
to influence the District’s decision to pay defendant’s invoices—or (2) defendant acted
with knowledge of or reckless disregard as to the falsity of its implied certifications. This
appeal followed and we now reverse, concluding the evidence in the record raises triable
issues of material fact on both elements of plaintiffs’ claim.
                             PROCEDURAL BACKGROUND
       Defendant is a provider of student bus transportation services. Plaintiffs Padilla
and Contreras are former employees of defendant. Plaintiff Environmental Law
Foundation is a California nonprofit organization “dedicated to the preservation and
enhancement of human health and the environment.” In May 2007, plaintiffs filed a
complaint against defendant alleging violations of the CFCA. As required by the CFCA,
the complaint was filed under seal to allow the District to investigate and decide whether
to intervene in the action. (See § 12652, subd. (c).) The District declined to intervene.

decision include First Student, Inc., First Transit, Inc., Laidlaw Transit, Inc., and Laidlaw
Transit Services, Inc., as appropriate.
                                              2
       In July 2008, plaintiffs filed their second amended and operative complaint
(Complaint), seeking damages and civil penalties on behalf of the District for false
claims, records, and statements presented by defendant in violation of the CFCA.
Plaintiffs also sought for themselves an award, as well as payment of their attorney fees,
expenses, and costs of suit.
       Plaintiffs alleged defendant transported District schoolchildren on buses that were
“unsafe, unhealthy, did not meet all federal, state and local safety standards, and were not
properly maintained and repaired as needed.” The Complaint’s first cause of action
alleged defendant violated section 12651, subdivision (a)(1), by knowingly presenting
false claims to the District for payment or approval. It asserted, “[w]hen [defendant]
submitted monthly invoices for payment, [it] impliedly certified that [it] had met each
and every material term of the [C]ontract.” The second cause of action alleged defendant
violated the CFCA by knowingly falsifying records and/or statements; the third cause of
action alleged defendant used false records or statements to avoid a payment obligation to
the District. Defendant demurred to the Complaint. The trial court sustained the
demurrer as to the first two causes of action and overruled the demurrer on the third cause
of action. Plaintiffs dismissed the third cause of action and the court dismissed the
remainder of the Complaint.
       Plaintiffs appealed and, in Contreras I, supra, 182 Cal. App. 4th 438, this court
reversed. As to the first cause of action, we concluded that, under the CFCA, a vendor
impliedly certifies compliance with its express contractual requirements when it bills a
public agency for providing goods or services. (Contreras I, at pp. 448-453.) Plaintiffs
did not challenge the dismissal of their second cause of action. (Id. at p. 444, fn. 6.)
       In March 2012, defendant moved for summary judgment on plaintiffs’ first cause
of action. Plaintiffs opposed the motion. The trial court ruled in favor of defendant,
concluding no reasonable trier of fact could find that defendant’s alleged false implied
certifications were material or that defendant acted with the scienter required by the
CFCA. In September, the court entered judgment in favor of defendant.

                                              3
       This appeal followed. The California Attorney General submitted an amicus
curiae brief challenging the trial court’s analysis of the materiality issue.
                               FACTUAL BACKGROUND4
                           Defendant’s Contract with the District
       For over 20 years, defendant has provided bus transportation for District students.
A contract effective in 2005 and extended in 2010 (Contract) imposed a number of
requirements on defendant. Those requirements included provisions that defendant:
(1) provide school buses meeting state and federal standards relating to pupil
transportation; (2) maintain its buses in “excellent mechanical condition and appearance”
and replace all vehicles “which are deemed to be unfit for providing the required
service”; (3) provide buses meeting or exceeding state and federal safety standards; and
(4) employ a “Fleet Maintenance Supervisor” to “establish and maintain a complete and
effective preventative maintenance program with complete and accurate records on each
vehicle.” The Contract states that the District seeks buses with “the highest standards of
performance and safety for the educational and personal well-being of the students.”
       The District agreed to pay defendant on a monthly basis “for services satisfactorily
performed by [defendant] after receipt of properly documented invoices.” The Contract
authorized the District to terminate the contract without cause on 30 days’ written notice,
and to terminate or suspend the contract immediately for reasons including “[f]ailure or
refusal” of defendant “to perform or do any act herein required.”
           Plaintiffs’ Evidence of Violations of the Maintenance Requirements
       In opposing defendant’s motion for summary judgment, plaintiffs presented
evidence that defendant committed numerous violations of the maintenance requirements,
including among other things: (1) disregarding a 45-day inspection requirement;

4   In this appeal from the trial court’s order granting defendant’s motion for summary
judgment, we view the evidence in the light most favorable to appellant. (Aguilar v.
Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 843 (Aguilar).) Our factual summary
reflects this standard of review. (See Pool v. City of Oakland (1986) 42 Cal. 3d 1051,
1056, fn. 1.)
                                               4
(2) operating buses with defective brake linings; and (3) placing buses into service with
dangerously low tire tread.5
       A. 45-Day Inspection Requirement
       California law requires a preventative maintenance inspection (PMI) of a school
bus every 45 calendar days or 3,000 miles (whichever occurs first), or more often if
necessary to ensure safe operation of the bus. (Cal. Code of Regs., tit. 13, § 1232, subd.
(b).) The requirement is incorporated into defendant’s maintenance policies.
Nevertheless, defendant frequently kept buses in service beyond the 45-day inspection
time limit. Alex Ageev, a lead mechanic for defendant, was responsible for ensuring
compliance with the PMI requirement. He testified at his deposition that defendant
would intentionally operate buses that exceeded the 45-day inspection interval when
defendant got behind on maintenance. This occurred at least once a year for every bus as
far back as 2001.6
       B. Brake Linings
       Plaintiffs, quoting from the Motor Vehicle Safety Compliance Handbook
published by the California Highway Patrol (CHP), points out the CHP warns that “ ‘[a]
truck or bus operated daily on the steep hills of San Francisco obviously will require
much more frequent attention to both the service brakes and the parking brake than the
same vehicle would need if operated exclusively in any of the level ground communities
in California’s central valleys.’ ” (See Department of the California Highway Patrol,
Motor Vehicle Safety Compliance Handbook (3d ed. 1992), p. 2-5 (CHP Handbook).) A
number of defendant’s buses are “Type D” buses that are required by California and

5  Plaintiffs also contend they presented evidence that defendant failed to maintain
pollution control equipment and to acquire and/or repair maintenance equipment.
Because the evidence of other maintenance failures is sufficient to defeat defendant’s
summary judgment motion, we need not discuss plaintiffs’ evidence of failures in these
additional respects.
6   Plaintiffs assert they presented evidence there were over “610 confirmed violations”
of the inspection requirement between 2008 and 2011. However, the trial court
concluded plaintiffs had not established an adequate foundation for the exhibit used to
support that assertion. (See infra, p. 23, fn. 11.)
                                             5
federal law to have a brake lining thickness of at least one-fourth inch; any less renders
the brakes defective. (Cal. Code Regs., tit. 13, § 1239, subd. (b) [incorporating
Commercial Vehicle Safety Alliance North American Standard Out-of-Service Criteria];
49 C.F.R., § 396.17, subd. (a) (2014); 49 C.F.R., ch. III, subch. B, appen. G.1.a.(6), eff.
Sept. 24, 2013.) Defendant’s maintenance manual incorporates that standard and
mandates that technicians “[s]trictly adhere[]” to brake repair standards. Nevertheless,
defendant’s maintenance records show repeated use of Type D school buses with brake
linings less than one-fourth inch in thickness. Plaintiffs assert, without dispute from
defendant, their evidence shows there were 200 inspections revealing “illegal” brake
linings on Type D buses between 2006 and 2011. Defendant’s records also show
instances where an inspection revealed brake linings significantly below one-fourth inch
and yet defendant placed the bus back into service without the defective linings being
replaced. Furthermore, there were instances where defendant’s drivers complained about
brakes problems on buses, but defendant failed to promptly inspect and repair the buses.
       C. Tire Tread
       Sections 27465, subdivision (b)(2) in combination with section 34500 of the
Vehicle Code mandate that school bus tires have a tread depth of at least four thirty-
seconds of an inch on tires on the “steering axle” and at least two thirty-seconds of an
inch on other tires. Defendant’s “Tire Replacement Policy” is more stringent, requiring
replacement of tires on the steering axle with less than five thirty-seconds of an inch
tread, and replacement of tires on the “drive axle” with less than three thirty-seconds of
an inch tread. Nevertheless, there were a number of instances in which defendant kept
buses in service after discovering in an inspection that tires violated either or both
standards.
                                 Plaintiffs’ Other Evidence
       A. The November 2011 Episode Involving the 45-Day PMI Requirement
       In September 2011, defendant met with District officials to discuss plaintiffs’
allegations. Defendant assured the District it was meeting its contractual obligations and
all laws relating to student transportation. The District’s representative made it clear the

                                              6
District expected that from defendant. Subsequently, defendant sent a letter to the
District confirming that, starting on October 1, defendant would establish a “reporting
process . . . to address [the District’s] questions related to our preventative maintenance
program.” Among other things, defendant agreed to provide the District a monthly report
on the 45-day inspection program.
       In November 2011, defendant sent the District a report documenting the PMI
interval for the buses used in October. Although it turned out not to be the case, it
appeared to the District that 31 buses were operated out of compliance with the 45-day
PMI requirement. One of defendant’s employees internally described the District’s
reaction as going “nuts” and “freaking out.”
       On November 13, 2011, the District wrote defendant, stating:
       “First Student agreed to provide the District with certain reports on a regular basis
on the maintenance and servicing of the vehicles transporting [District] students. The
purpose of the reports was, in part, to demonstrate that First Student was performing all
the necessary vehicle maintenance and review services mandated by State law and the
contract.
       “Recently, First Student submitted the first ‘45 Day Vehicle Inspection Report’.
Upon review of the report by staff, it appears that First Student has multiple vehicles in
violation of the state mandated 45 day vehicle safety inspection. The report indicates that
18 [percent] (31 of 176) of the vehicles included in the report were overdue by from 1 to
47 days. Besides being in violation of a State mandated safety inspection, First Student is
also exhibiting disregard for Article 8, subsection ‘d’ of our contract. The District cannot
and will not accept this level of service from the contractor responsible for the safe
transportation of its students.
       “Therefore the District is directing First Student to, immediately and without
delay, remove from service any vehicle where the 45 day inspection time is past and the
District directs First Student to have this situation corrected by the next ‘45 Day
Inspection Report’, and that in the report no bus shall indicate being in operation after its

                                               7
inspection due date.” The District did not threaten to withhold payments or cancel the
Contract.
       Defendant responded in writing by assuring the District that “First Student is
performing all the necessary vehicle maintenance and services mandated by state law and
our contract.” Defendant’s letter explained that none of the “overdue” buses in the report
had been placed into service past the 45-day PMI interval.
       B. Defendant’s Reckless Disregard of Compliance with Maintenance
          Requirements7
       Defendant’s policies require periodic audits of facilities and vehicles to ensure the
adequacy of maintenance operations. For example, a monthly shop audit policy states
that its goal is “to ensure that all vehicles are maintained in a SAFE, RELIABLE and
CLEAN CONDITION. Vehicles must be available to meet all operational requirements
at optimum cost and in accordance with First Student Operating Procedures and all
relevant legislation.” (Italics omitted.) The policy requires “the Service
Manager/Technician-in-Charge (TIC) to perform a monthly audit to determine trends in
servicing and/or reoccurring repair issues.” Among other things, the monthly audit
should include an audit of “10 [percent] of the vehicles which received regularly
scheduled” PMI’s. The policy requires that any variances from the standards must be
preapproved by defendant’s “Senior Vice President of Maintenance.”
       Plaintiffs presented evidence that defendant failed to follow those policies.
Defendant’s region maintenance manager for San Francisco admitted, “We don’t, per se,
do monthly shop audits. They would be done on an as-needed basis.” He testified he did
perform annual audits, but he admitted he did not have any e-mails related to those
audits. He was not aware of anyone else performing an audit at the San Francisco
location. In a June 2012 deposition, he admitted he had not performed an audit of the

7  Plaintiffs also presented evidence defendant had actual knowledge it was not
complying with its maintenance obligations. Because the evidence of defendant’s
reckless disregard is sufficient to defeat defendant’s summary judgment motion, we need
not discuss plaintiffs’ evidence of defendant’s actual knowledge. (See infra, p. 22, fn.
10.)
                                             8
San Francisco facility in the last two years. Defendant’s area general manager testified in
her deposition that the way they audit is by having the drivers inspect the buses on a daily
basis. She testified that, although she is responsible for ensuring compliance with
defendant’s inspection policies, she does not receive any regular reporting regarding
compliance with those policies.
                             Defendant’s Additional Evidence
       Defendant presented evidence the CHP has subjected defendant’s San Francisco
facility and buses to annual inspections for over 20 years. The primary purpose of the
CHP’s terminal inspections is to ensure compliance with federal and state laws, including
the 45-day PMI requirement. As explained in a declaration from the CHP inspector of
defendant’s facilities, the CHP inspects a “representative sample of the fleet” regarding
PMI compliance, daily vehicle inspection reports, and repair records. The CHP then
assigns a “compliance rating” of “satisfactory,” “unsatisfactory,” or “conditional.”
Defendant’s facilities were consistently rated as “satisfactory,” which meant the facilities
were “in compliance with applicable laws and regulations” and any “deficiencies or
defects” were “minor” and did not jeopardize “highway safety.” A checklist provided to
motor carriers to assist them in preparing for CHP inspections lists “[c]riteria for
assignment of a Satisfactory rating,” including: (1) “Vehicle/equipment condition reflects
effective preventive maintenance practices”; (2) “Vehicle records reflect compliance with
. . . mandated inspection intervals”; (3) “Drivers’ daily vehicle inspections are performed
and documented” and “[d]efects noted are corrected promptly”; and (4) “Vehicles are not
operated with out-of-service conditions or defects of a long standing nature.”
       Defendant also presented evidence the District consistently paid defendant after
receiving its monthly invoices, including in the years after plaintiffs sued defendant under
the CFCA.
                                       DISCUSSION
       Plaintiffs contend the trial court erred in granting defendant’s motion for summary
judgment on their first cause of action for violation of section 12651, subdivision (a)(1).
To obtain summary judgment, a defendant must establish “ ‘there is no triable issue as to

                                              9
any material fact’ ” and that it “ ‘is entitled to judgment as a matter of law.’ ” (Aguilar,
supra, 25 Cal.4th at p. 843.) “There is a triable issue of material fact if, and only if, the
evidence would allow a reasonable trier of fact to find the underlying fact in favor of the
[plaintiff] in accordance with the applicable standard of proof.” (Id. at p. 850, fn.
omitted.) The trial court must view that evidence, and any reasonable inferences from
that evidence, “in the light most favorable to” the plaintiff. (Id. at p. 843.) We review
the trial court’s ruling de novo. (Id. at p. 860.)
I. Introduction to the CFCA
       In Rothschild v. Tyco Internat. (US), Inc. (2000) 83 Cal. App. 4th 488, 494-495
(Rothschild), the court described the CFCA as follows:
       “In 1987, the California Legislature enacted the [CFCA], patterned on a similar
federal statutory scheme [citation], to supplement governmental efforts to identify and
prosecute fraudulent claims made against state and local governmental entities.
[Citation.] As relevant here, the [CFCA] permits the recovery of civil penalties and
treble damages from any person who ‘[k]nowingly presents or causes to be presented [to
the state or any political subdivision] . . . a false claim for payment or approval.’
[Citation.] To be liable under the [CFCA], a person must have actual knowledge of the
information, act in deliberate ignorance of the truth or falsity of the information, and/or
act in reckless disregard of the truth or falsity of the information. [Citation.]
       “The [CFCA] authorizes the Attorney General (in the case of alleged violations
involving state funds) or the prosecuting authority of a political subdivision (in the case
of alleged violations relating to funds of the political subdivision) to bring a civil action
for violations of its provisions. [Citation.] Subject to certain limitations, the [CFCA]
permits a private person (referred to as a ‘qui tam plaintiff’ or a ‘relator’) to bring such an
action on behalf of a governmental agency. [Citation.]
       “If a qui tam plaintiff files a [CFCA] complaint, he or she must file the complaint
under seal and serve it, as well as a written disclosure of the material evidence and
information in support of his or her claims, on the Attorney General. [Citation.] The
Attorney General is required to notify local prosecuting authorities if local funds are

                                              10
involved. [Citation.] The action remains sealed for ‘up to 60 days’ (although the
statutory period is subject to extension for good cause shown) to permit the state and/or
local authorities to investigate and determine whether to proceed in the action. [Citation.]
       “If the state and/or a local prosecuting authority elects to proceed with the action,
that agency (or those agencies) have the primary responsibility for prosecuting the action,
although the qui tam plaintiff has the right to continue as a party to the action. [Citation.]
If no prosecuting authority decides to proceed with the action, the qui tam plaintiff has
the right to do so subject to the right of the state or political subdivision to intervene in
certain circumstances. [Citation.] Regardless of who prosecutes the qui tam action, if it
is successful, the qui tam plaintiff is entitled to a percentage of the recovery achieved in
the case. [Citation.]” (Accord, Contreras I, supra, 182 Cal.App.4th at pp. 445-446.)
       “The Legislature designed the CFCA ‘ “to prevent fraud on the public treasury,” ’
and it ‘ “should be given the broadest possible construction consistent with that
purpose.” ’ [Citations.] In other words, the CFCA ‘ “must be construed broadly so as to
give the widest possible coverage and effect to the prohibitions and remedies it provides.”
[Citation.]’ [Citations.] The CFCA is intended ‘to supplement governmental efforts to
identify and prosecute fraudulent claims made against state and local governmental
entities.’ [Citation.] Given the ‘very close similarity’ of the CFCA to the [federal FCA],
‘it is appropriate to turn to federal cases for guidance in interpreting the [CFCA].’
[Citations.]” (Contreras I, supra, 182 Cal.App.4th at p. 446.)
II. There Are Triable Issues of Material Fact as to Plaintiffs’ Implied Certification Claim
    Under the CFCA
       The Complaint alleges a fraud on the District, in that defendant sought payments
from the District while knowingly failing to provide the services for which the District
contracted—to wit, student transportation on properly maintained buses. In Contreras I,
supra, 182 Cal. App. 4th 438, we rejected defendant’s contention it was immune from
liability under the CFCA because its invoices did not expressly assert compliance with
the requirements of the Contract and because the Contract did not require certification of
compliance with contractual terms as a prerequisite to payment. (Contreras I, at p. 447.)

                                              11
We concluded defendant’s invoices were “claims” within the meaning of the CFCA; the
invoices did not need to contain an expressly false statement to be actionable; and
defendant’s requests for payment under the Contract included “an implied certification of
compliance with contractual requirements that, if false and fraudulent, can form the basis
for a CFCA action.” (Contreras I, at pp. 447-448.)
       We discussed a number of state and federal decisions in upholding plaintiffs’
implied certification theory of violation of the CFCA. (Contreras I, supra, 182
Cal.App.4th at pp. 448-452.) We also rejected defendant’s assertion that “plaintiffs’
construction of the CFCA ‘would enable any private party to sue based on any purported
breach of any public entity’s contract.’ ” (Contreras I, at p. 452.) In doing so, we
pointed out several limitations on liability under the CFCA. Among other things, we
pointed out that “the implied certification of compliance with the breached contract
provision ‘must be material to the government’s decision to pay out moneys to the
claimant’ [citations]” and “the contractor must have the requisite knowledge, rendering
the failure to disclose the contractual noncompliance fraudulent.” (Contreras I, at p.
452.) In granting defendant’s summary judgment motion, the trial court concluded that,
as a matter of law, defendant’s alleged false implied certifications were not material and
defendant did not have the requisite knowledge of the alleged falsity of the implied
certifications. We consider each of those elements in turn.
       A. Materiality
       “The CFCA does not expressly require a showing of materiality to support the
imposition of a statutory penalty for the submission of a false claim. Under section
12651, subdivision (a)(1), a person who ‘[k]nowingly presents or causes to be presented a
false or fraudulent claim for payment or approval’ is ‘liable to the state or political
subdivision for a civil penalty of not less than five thousand dollars ($5,000) and not
more than ten thousand dollars ($10,000) for each violation.’ (Stats. 2009, ch. 277, § 2.)
Nevertheless, a number of courts have concluded that the federal FCA contains an
implicit materiality requirement, because it would not effectuate the intent of the statute
to impose a penalty based on a falsity which would not have influenced the public

                                              12
entity’s payment decision. [Citations.]” (Contreras I, supra, 182 Cal.App.4th at p. 454.)
“[A]n alleged falsity satisfies the materiality requirement where it has the ‘ “ ‘natural
tendency to influence agency action or is capable of influencing agency action.’ ”
[Citation.]’ [Citation.]” (Ibid.)
       In Contreras I, we concluded plaintiffs’ allegations were sufficient to satisfy the
materiality requirement because defendant’s “implied certification that it had
satisfactorily performed its material obligations under the Contract, including provisions
designed to protect the health and safety of the student population, had a ‘ “ ‘natural
tendency’ ” ’ [citation] to cause the District to make payments it would not have made
had it been aware of [defendant’s] noncompliance.” (Contreras I, supra, 182
Cal.App.4th at p. 455.) Essentially, we concluded that defendant’s alleged falsities were
material as a matter of common sense. (U.S. v. Dolphin Mortg. Corp. (N.D.Ill. 2009)
2009 WL 153190, p. *11 [relying on “common sense” in materiality analysis]; U.S. ex
rel. Durcholz v. FKW Inc. (S.D.Ind. 1998) 997 F. Supp. 1159, 1170 [same].)
       We also noted in Contreras I that plaintiffs’ “materiality showing [was]
strengthened by various provisions of the Contract . . . that reflect the District’s concern
with bus maintenance and safety . . . .” (Contreras I, supra, 182 Cal.App.4th at p. 455.)
For example, article 8(d) of the Contract provides, “All buses shall be in excellent
mechanical condition and appearance at the beginning of the Contract and shall be
maintained in that condition at all times during the term of the Contract. The
Superintendent and/or his designees reserves the right to inspect motor vehicle equipment
at any time during the term of the Contract.” Article 12 of the Contract states, “It is the
intent of the District to obtain the best quality transportation available and which
incorporates the highest standards of performance and safety for the educational and
personal well-being of the students.” This connection between maintenance and student
safety is also reflected in the CHP Handbook: “In the CHP’s experience, public attitudes
have always supported requirements for superior maintenance and more stringent
maintenance regulations for . . . [s]chool buses, school pupil activity buses, and general
public paratransit vehicles . . . .”

                                             13
       Although we concluded in Contreras I that plaintiffs’ allegations were sufficient
to survive defendant’s demurrer, we also pointed out that the issue of materiality was
ultimately a mixed question of law and fact, “and a showing in a motion for summary
judgment or at trial that the alleged breach would not have affected the payment decision
will defeat a CFCA claim.” (Contreras I, supra, 182 Cal.App.4th at p. 456.) To
exemplify the point, we discussed a federal decision, U.S. ex rel. Berge v. Trustees of
Univ. of Ala. (4th Cir. 1997) 104 F.3d 1453 (Berge): “There, the defendants appealed
from denial of their motion for judgment as a matter of law following a jury verdict
finding them liable under the federal FCA. [Citation.] The defendants were funded by
the National Institutes of Health (NIH) to conduct research regarding a common cause of
birth defects. [Citation.] The qui tam plaintiff alleged the defendants had made false
statements to the NIH in annual progress reports including, among other things,
assertions about the amount of data that had been computerized. [Citation.] The Fourth
Circuit reversed denial of the motion for judgment because there was no substantial
evidence from which a reasonable jury could conclude the defendants’ errors and
omissions ‘were materially capable of influencing’ the government’s funding decision.
[Citation.] The court pointed out that the program officer with responsibility for the grant
testified that ‘the principal purpose of the project was the collection of data, not its
computerization.’ [Citations.]” (Contreras I, at pp. 456-457.)
       In the present appeal, defendant does not dispute that plaintiffs have presented
evidence of a substantial number of maintenance failures and that the condition of
defendant’s buses is a matter of great importance to the District. Instead, defendant
argues its evidence shows the alleged false implied certifications were not material
because the District declined to intervene in the present action, declined to bring an
action of its own for breach of contract, always paid defendant’s monthly invoices in full,
and extended the Contract in 2010. Defendant asserts, “Since [the District] in fact
continued to pay, even though it knew of the alleged falsity of [defendant’s] claims,
[defendant] established that any such alleged falsity did not have any natural tendency or
capability to influence [the District’s] payment decision.” The trial court accepted this

                                              14
argument below, stating “It is undisputed that [the District] was aware of violations of
contractual provisions via both the allegations in the lawsuit and the [November 2011]
letter and despite this knowledge continued to pay on [defendant’s] submitted invoices.
This showing that the alleged breach did not affect the District’s payment decision
defeats the CFCA claim.” Defendant’s reasoning is misplaced for several reasons.
       First, defendant has not established a critical factual predicate to giving any
significance to the District’s reaction to the plaintiffs’ allegations—that the District knew
about the falsity of defendant’s implied certifications. Instead, the evidence shows the
District became aware of plaintiffs’ allegations, which defendant denied. Accordingly,
the present case is unlike the case upon which defendant relies, U.S. ex rel.
Yannacopoulos v. General Dynamics (7th Cir. 2011) 652 F.3d 818, in which the
governmental entity obtained actual knowledge of the defendants’ wrongdoing. In
Yannacopoulos, the defendant sold fighter jets to Greece; Greece borrowed the funds for
the purchase from the United States government, which paid the defendant directly. (Id.
at p. 821.) The plaintiff claimed the defendant made a number of false statements to the
United States in obtaining payments. (Id. at p. 823.) As relevant here, the plaintiff
alleged the defendant failed to disclose promptly to the United States its decision to
delete a certain clause from a draft contract for the aircraft sale. (Ibid.) The Seventh
Circuit concluded the district court properly granted summary judgment to the defendant
on the claim on the ground of materiality, because the government agency took no
adverse action when it “actually learned of” omission of the clause. (Id. at p. 831.)
There was also evidence the clause was of no substantive importance (id. at p. 830) and
“unenforceably vague” (id. at p. 831), and the government approved the final contract
without the clause at issue (ibid.).
       In the present case, there is no evidence the District had actual knowledge of
defendant’s wrongdoing—as opposed to allegations of wrongdoing—and there is no
evidence the contractual maintenance requirements were unimportant to the District.
Accordingly, the present case is also distinguishable from Berge, where the contracting
entity “ ‘determined that the information [the plaintiff] alleged was false or

                                             15
misrepresented was not material to its funding decisions.’ ” (Berge, supra, 104 F.3d at p.
1460.) In sum, defendant cites no evidence suggesting the District would have
considered the alleged maintenance failures immaterial, if the District knew the
allegations were true.
       Second, as the Attorney General argues in her amicus brief, even assuming the
District were aware defendant had failed to comply with the contractual maintenance
requirements, the District’s reaction would not be dispositive. The materiality
determination turns on whether the alleged false statement was such that it had a natural
tendency to influence or was capable of influencing government action. (Contreras I,
supra, 182 Cal.App.4th at p. 454.) We agree with the decisions under the federal FCA
that have concluded the materiality test “focuses on the potential effect of the false
statement when it is made, not on the actual effect of the false statement when it is
discovered.” (U.S. ex rel. Harrison v. Westinghouse Savannah River Co. (4th Cir. 2003)
352 F.3d 908, 916-917 (Harrison); accord, U.S. ex rel. A+ Homecare, Inc. v. Medshares
Management Group, Inc. (6th Cir. 2005) 400 F.3d 428, 445 (Medshares); see also U.S. v.
Rogan (7th Cir. 2008) 517 F.3d 449, 452; U.S. ex rel. El-Amin v. George Washington
Univ. (D.D.C. 2008) 533 F. Supp. 2d 12, 22 (El-Amin); U.S. States ex rel. Oliver v. The
Parsons Corp. (C.D.Cal. 2006) 498 F. Supp. 2d 1260, 1289-1290.)
       Thus, the government contracting entity’s actual reaction upon learning of a false
claim is not dispositive of the issue of materiality. If a false statement was clearly
material when it was made, the fact that the contracting entity did not treat the falsity as
material upon discovering it would not preclude a claim under the CFCA. This is
consistent with the important remedial purposes of the CFCA and our obligation to
construe the law broadly. (Contreras I, supra, 182 Cal.App.4th at p. 446.) As the
materiality requirement itself is a judicially-created restriction on the scope of the law’s
application (id. at p. 454), the requirement should not be construed as immunizing
conduct the CFCA sought to sanction. The CFCA, like the federal FCA, is “ ‘intended to
reach all types of fraud, without qualification, that might result in financial loss to the
[g]overnment.’ [Citation.]” (U.S. ex rel. Hendow v. University of Phoenix (2006) 461

                                              16
F.3d 1166, 1170 (Hendow); accord, Contreras I, at p. 449; see also State of California v.
Altus Finance (2005) 36 Cal. 4th 1284, 1297 (Altus Finance) [“ ‘[t]he ultimate purpose of
the [CFCA] is to protect the public fisc.’ ”].) The standard of materiality adopted by the
trial court would immunize certain instances of significant fraud and weaken the CFCA’s
effectiveness at “policing the integrity of the government’s dealings with those to whom
it pays money.” (Harrison, supra, 352 F.3d at p. 917.) Harrison’s conclusion with
respect to the federal FCA is equally applicable to the CFCA: Courts best give effect to
the law “by holding a party liable if the false statement it makes in an attempt to obtain
government funding has a natural tendency to influence or is capable of influencing the
government’s funding decision, not whether it actually influenced the government not to
pay a particular claim.” (Harrison, at p. 917; see also U.S. v. Rivera (1st Cir. 1995) 55
F.3d 703, 709 (Rivera) [the federal FCA reflects “a congressional judgment that fraud by
government contractors is best prevented by attacking the activity that presents the risk of
wrongful payment, and not by waiting until the public fisc is actually damaged”].)
       This focus on materiality at the time a false claim was presented finds further
support in the proposition that a party can be subject to liability under the CFCA even if a
false claim does not actually result in a loss to the government, “ ‘for example, where the
government discovers that a claim is false before it makes payment.’ ” (McVeigh v.
Recology San Francisco (2013) 213 Cal. App. 4th 443, 459, quoting U.S. ex rel. Sanders
v. American-Amicable Life, TX (3d Cir. 2008) 545 F.3d 256, 259; see also Altus Finance,
supra, 36 Cal.4th at p. 1299 [“the CFCA authorizes civil penalties for attempts to
misappropriate public funds that were not in fact completed by payment from the
treasury”]; Medshares, supra, 400 F.3d at pp. 445-446; Rivera, supra, 55 F.3d at p. 709.)
If a violation of the CFCA is complete with the submission of a false claim for payment,
then the government’s actual response to the claim cannot be dispositive on the issue of
materiality.
       Third and finally, although defendant does not appear to dispute the general
proposition that a contracting agency’s response is not legally dispositive of the issue of
materiality, defendant nevertheless argues the District’s response constitutes evidence

                                             17
that determines the issue of materiality in its favor as a matter of law. We disagree.
Accepting that the District’s actual reaction has some relevance to the materiality
determination, the trial court erred in concluding a reasonable trier of fact could only
infer a lack of materiality from the District’s response to plaintiffs’ allegations—
including its decisions not to intervene, not to bring its own suit for breach of contract, to
continue to make payments on the Contract, and to extend the Contract.
       Contrary to defendant’s view, the District’s decisions not to intervene or bring suit
for breach of contract could simply reflect a judgment that plaintiffs’ claims should be
resolved in the present action at minimal cost to the District. (U.S. ex rel. Chandler v.
Cook County, Ill. (7th Cir. 2002) 277 F.3d 969, 974, fn. 5 (Chandler).) Moreover,
“assuming the government looked unfavorably upon each qui tam action in which it did
not intervene would seem antithetical to the purpose of the qui tam provision—to
encourage private parties to litigate on behalf of the government.” (El-Amin, supra, 533
F.Supp.2d at p. 21; see also U.S. ex rel. Atkins v. McInteer (11th Cir. 2006) 470 F.3d
1350, 1360, fn. 17; U.S. ex rel. Williams v. Bell Helicopter Textron, Inc. (5th Cir. 2005)
417 F.3d 450, 455; Chandler, at p. 974, fn. 5; Berge, supra, 104 F.3d at p. 1458.)
       Furthermore, the District’s decision to continue to make payments could reflect
acceptance of defendant’s representations of compliance, the expense and difficulty of
investigating the allegations of wrongdoing, fear of litigation with defendant, or concerns
about the possibility of disrupting services. (See Harrison, supra, 352 F.3d at p. 917
[“we can foresee instances in which a government entity might choose to continue
funding the contract despite earlier wrongdoing by the contractor”]; U.S. ex rel. Gillespie
v. Kaplan University (S.D.Fla. 2012) 2012 WL 1852085 , p. *4 [government’s continued
payments did not defeat materiality showing where defendants entered into agreement to
correct their noncompliance].) Finally, the District’s decision to extend the contract
could reflect a judgment that, regardless of whatever past maintenance problems existed,

                                              18
defendant is now complying with its contractual obligations.8 Although none of those
suggested inferences favorable to plaintiffs’ claims are supported by direct evidence,
neither is defendant’s suggested inference that the District’s restrained response shows
the implied false certification was not material.
       In addition, a reasonable trier of fact could infer that the District’s reaction to what
it believed to be an admission of noncompliance by defendant showed it considered the
maintenance requirements in the Contract to be of great importance. Thus, when in
November 2011 the District received information from defendant that it believed showed
defendant had committed multiple violations of the 45-day PMI requirement in October,
the District immediately notified defendant in writing that the District “cannot and will
not accept this level of service from the contractor responsible for the safe transportation
of its students.” The District directed defendant to “immediately and without delay”
remove from service buses not in compliance with the inspection requirement and
required that in the next report “no bus shall indicate being in operation after its
inspection due date.” In internal communications, one of defendant’s employees
described the District’s reaction as going “nuts” and “freaking out.” Defendant argues
the incident demonstrates a lack of materiality, because the District did not actually cease
paying defendant, attempt to recover past payments, demand liquidated damages, or
threaten to terminate the Contract. However, that is not the only, or even the most,
reasonable inference from the episode, because defendant promptly assured the District
there were no PMI violations in October 2011. More broadly, defendant had recently
told the District it was in compliance with the Contract and all applicable laws. That the
District did not threaten to withhold payments or take other such steps without providing

8   On January 14, 2014, respondent requested that this court take judicial notice of
District agenda and minutes, both dated June 25, 2013, reflecting renewal of the District’s
bus transportation contract with respondent through June 2014. However, in reviewing
the 2012 ruling on respondent’s motion for summary judgment, “we will consider only
the facts properly before the trial court at the time it ruled on the motion.” (Brantley v.
Pisaro (1996) 42 Cal. App. 4th 1591, 1601.) Respondent cites no authority to the
contrary. In any event, for the reasons discussed herein, the 2013 contract renewal would
not affect our analysis. The request for judicial notice is denied.
                                              19
defendant an opportunity to respond does not necessarily show that the alleged implied
false certifications regarding the maintenance requirements were not capable of
influencing the District’s payment decisions. A more reasonable inference is that the
episode shows the maintenance requirements were material, but the District decided to
accept defendant’s assurances of compliance.
       In sum, the record shows a triable issue of material fact as to materiality. A
conclusion that the alleged false implied certification was material is supported by
common sense, by the language of the Contract, and by reasonable inferences from the
District’s reaction when presented with evidence of potential violations of the PMI
requirement in late 2011. On the other hand, a conclusion that the alleged false implied
certification was not material is supported by competing inferences from the District’s
response to plaintiffs’ allegations and the late 2011 incident. The conflicting evidence
and inferences precluded grant of summary judgment on the ground that plaintiffs could
not demonstrate materiality as a matter of law. (Cohen v. Five Brooks Stable (2008) 159
Cal. App. 4th 1476, 1497 [“ ‘ “Only when the inferences are indisputable may the court
decide the issues as a matter of law.” ’ ”].)
       B. Knowledge
       The trial court also concluded that, as a matter of law, defendant did not have the
requisite knowledge of the falsity of its implied certifications of contract compliance. As
noted previously, the CFCA is violated by a person who “[k]nowingly presents or causes
to be presented a false or fraudulent claim for payment or approval.” (§ 12651, subd.
(a)(1).) The CFCA provides that “knowingly” means that a person, with respect to the
alleged false information at issue in the claim, “[h]as actual knowledge of the
information,” “[a]cts in deliberate ignorance of the truth or falsity of the information,” or
“[a]cts in reckless disregard of the truth or falsity of the information.” (§ 12650, subd.
(b)(3); see also Contreras I, supra, 182 Cal.App.4th at pp. 452-453; Rothschild, supra, 83
Cal.App.4th at pp. 494-495.) “Proof of specific intent to defraud is not required.”
(§ 12650, subd. (b)(3).)

                                                20
       The definition of “knowingly” in the federal FCA is the same as the definition in
the CFCA, and, in adopting the federal FCA definition, “Congress attempted ‘to reach
what has become known as the “ostrich” type situation where an individual has “buried
his head in the sand” and failed to make simple inquiries which would alert him that false
claims are being submitted.’ [Citation.] Congress adopted ‘the concept that individuals
and contractors receiving public funds have some duty to make a limited inquiry so as to
be reasonably certain they are entitled to the money they seek.’ [Citations.]” (U.S. v.
Bourseau (9th Cir. 2008) 531 F.3d 1159, 1168; see also Gulf Group General Enterprises
Co. W.L.L. v. U.S. (Ct.Cl. 2013) 114 Fed. Cl. 258, 314 [“The standard was designed to
address ‘the problem of the “ostrich-like” refusal to learn of information which an
individual, in the exercise of prudent judgment, had reason to know.’ [Citation.] Thus,
the [federal FCA] covers not just those who set out to defraud the government, but also
those who ignore obvious deficiencies in a claim.”]; U.S. ex rel. Ervin and Associates,
Inc. v. Hamilton Securities Group, Inc. (D.D.C. 2005) 370 F. Supp. 2d 18, 42 [“[t]he
standard of reckless disregard . . . was designed to address the refusal to learn of
information which an individual, in the exercise of prudent judgment, should have
discovered”]; but see U.S. ex rel. Hefner v. Hackensack University Medical Center (3d
Cir. 2007) 495 F.3d 103, 109 [“Congress specifically expressed ‘ “its intention that the
act not punish honest mistakes or incorrect claims submitted through mere
negligence.” ’ ”].) Among other things, “A failure to make a minimal examination of
records can constitute deliberate ignorance or reckless disregard, and a contractor that
deliberately ignores false information submitted as part of a claim can be found liable
under the” federal FCA. (Gulf Group, at p. 315.) The plain language of the CFCA
reflects similar legislative intent. (See Thompson Pacific Construction, Inc. v City of
Sunnyvale (2007) 155 Cal. App. 4th 525, 548 (Thompson) [reckless disregard standard in
federal FCA and CFCA “indistinguishable”].)9

9   Defendant cites federal cases stating that liability under the federal FCA requires that
the defendant told a “lie.” (Hendow, supra, 461 F.3d 1166 at p. 1172; U.S. ex rel.
Hochman v. Nackman (1998) 145 F.3d 1069, 1073.) Those cases make no attempt to
                                             21
       Plaintiffs argue the payment claims at issue in the present case were presented in
reckless disregard of the truth or falsity of whether defendant was in compliance with the
Contract’s maintenance standards because defendant disregarded its own audit policies,
which defendant was contractually obligated to follow in providing services to the
District.10 Among other things, although defendant’s policies required monthly internal
audits, defendant’s region maintenance manager for San Francisco admitted the company
did not perform monthly audits. The San Francisco location manager admitted in her
deposition that, with the exception of two particular audits, she was not aware of any
audits of the location’s maintenance records, other than CHP audits. Defendant’s area
general manager testified in her deposition that, although she is responsible for ensuring
compliance with defendant’s inspection policies, she does not receive any regular
reporting regarding compliance with those policies.
       Plaintiffs also argue a finding defendant acted in reckless disregard of the truth of
its implied certifications of contractual compliance is supported by the evidence of
widespread and persistent violations of contractual maintenance requirements. Among
other things, plaintiffs presented evidence the 45-day PMI requirement was missed for
every bus at least once every year, and they assert their evidence showed over 200
instances of illegally thin brake linings on buses between 2006 and 2011. Defendant
does not dispute plaintiffs’ evidence of widespread maintenance failures, other than to
argue that one exhibit quantifying violations of the PMI requirement was properly ruled

harmonize that assertion with the reckless disregard basis for liability specified in both
the federal FCA and the CFCA. “The CFCA does not demand a deliberate lie but allows
for liability where the defendant acts in deliberate ignorance or in reckless disregard of
the truth of the claim.” (Thompson, supra, 155 Cal.App.4th at pp. 549-550.)
10  Plaintiffs also argue there is a triable issue of material fact as to defendant’s actual
knowledge of the falsity of its implied certifications. Because we conclude there is a
triable issue as to the reckless disregard aspect of the knowledge element, we need not
and do not consider whether there is also a triable issue as to the actual knowledge aspect
of the element.
                                             22
inadmissible by the trial court.11 We agree the frequency of the maintenance failures
provides further basis for a reasonable inference that defendant acted in reckless
disregard of the truth of its implied certifications of compliance with the Contract. (See
U.S. v. Cabrera-Diaz (D.P.R. 2000) 106 F. Supp. 2d 234, 238 [hundreds of instances of
regular Medicare overbilling established that defendant acted, at least, in reckless
disregard of the truth of his claims].)
       The present case is analogous to U.S. ex rel. Compton v. Midwest Specialties, Inc.
(6th Cir.1998) 142 F.3d 296, 304, where the court held the “reckless disregard” aspect of
the knowledge element of a federal FCA claim was satisfied where a military supplier
sought payment for jeep brake shoes even though the shoes had not been tested as
required under the contract. (See also Laymon, Jr. v. Bombardier Transp. (Holdings)
USA, Inc. (W.D. Pa. Mar. 23, 2009) 2009 WL 793627, p. *12 [defendant failed to take
steps to ensure the accuracy of cost reports submitted to government]; United States v.
Raymond & Whitcomb Co. (S.D.N.Y. 1999) 53 F. Supp. 2d 436, 447 [defendant failed to
investigate whether mailings qualified for nonprofit status].) Similarly, plaintiffs have
presented evidence that defendant failed to comply with its own policies requiring regular
audits that could have disclosed the maintenance failures at issue in the present case.
       On appeal, defendant cites some limited evidence it conducted inspections and
maintenance on particular buses in its fleet, but it does not dispute plaintiffs’ evidence of

11  Exhibit 84 in opposition to defendant’s motion for summary judgment was described
by plaintiffs’ counsel as a “printed representation of electronic data that is contained
within the Web Fleet Assistant database maintained by [defendant]” and produced by
defendant in electronic format. Plaintiffs assert Exhibit 84 shows there were over 600
violations of the mandatory 45-day inspection requirement over a four-year period. The
trial court ruled the exhibit was inadmissible for lack of a proper foundation. Plaintiffs
contend the court erred, but suggest this court need not reach the issue because plaintiffs
also presented deposition testimony from a lead mechanic that the inspection requirement
was frequently violated. We agree plaintiffs’ evidence is sufficient to survive summary
judgment even without considering Exhibit 84. Accordingly, we need not and do not
consider whether the trial court erred. The decision in People v. Zavala (2013) 216
Cal. App. 4th 242, 246-249, may be of assistance to the trial court in determining whether
the exhibit is admissible at trial.
                                             23
defendant’s overall failure to take reasonable steps to ensure compliance with the
Contract’s specific maintenance requirements. Instead, defendant relies on language in
the Contract that the District was obligated to pay “monthly in arrears for services
satisfactorily performed by [defendant] after receipt of properly documented invoices.”
Defendant then asserts, “[t]he evidence showed that [defendant] had a reasonable belief
that it had satisfactorily performed the services covered by each invoice.” In support of
that assertion, it points to evidence the CHP has subjected defendant’s San Francisco
facility and buses to annual inspections for over 20 years, in order to ensure compliance
with federal and state laws. After each terminal inspection, the CHP assigned its
“compliance rating” of “satisfactory” to defendant’s facilities. “Satisfactory” was the
highest available rating, and it meant the facilities were “in compliance with applicable
laws and regulations” and any “deficiencies or defects” were “minor” and did not
jeopardize “highway safety.” The trial court essentially treated the CHP inspections as
dispositive, stating “It is undisputed that [defendant] consistently received the highest
rating possible from the CHP after inspections. It is also undisputed that the CHP
inspections included assurances and certifications that [defendant] was in compliance
with all applicable laws and regulations. This showing that [defendant] did not have the
scienter required under the CFCA defeats the CFCA claim.”
       Although the CHP inspections may have been enough to satisfy defendant’s
burden of making a prima facie showing in moving for summary judgment (Aguilar,
supra, 25 Cal.4th at p. 850), it was not sufficient to resolve the knowledge issue as a
matter of law in the face of plaintiffs’ evidence, detailed above.12 Moreover, plaintiffs

12  Contrary to defendant’s assertion, plaintiffs’ evidence did not merely support a
conclusion that its compliance with the Contract was imperfect. Plaintiffs’ evidence
raised a triable issue whether its performance was satisfactory within the meaning of the
Contract. Moreover, the District’s payment of defendant’s invoices, extension of the
Contract, and decision not to intervene in the present lawsuit or bring its own lawsuit for
breach of contract does not demonstrate satisfactory performance where defendant did
not disclose its maintenance failures to the District. (Shaw v. AAA Engineering &
Drafting, Inc. (10th Cir. 2000) 213 F.3d 519, 534 [alleged government knowledge of
wrongdoing did not provide defense where it was the plaintiff who informed the
                                             24
presented reasons to doubt the significance of the annual CHP inspections and the
reasonableness of relying on those annual inspections to ensure compliance with the
maintenance requirements in the Contract. The CHP inspector had no knowledge of the
Contract’s maintenance requirements and he did not purport to determine whether
defendant was in compliance with the Contract. The inspector stated in his deposition
that he performed between 150 and 180 terminal inspections per year, which raises a
reasonable inference that defendant should have known the inspections were not
thorough enough to substitute for its own maintenance and inspection program. The CHP
Handbook states: “The inspections performed by the CHP or any other regulatory agency
do not count as part of any motor carrier’s own preventative maintenance program.”
Finally, plaintiffs presented evidence CHP standards for a “satisfactory” rating are
different from and/or not as stringent as the standards in the Contract. On appeal,
respondent fails to directly dispute the evidence cited by plaintiffs on that point. We
conclude plaintiffs’ evidence demonstrates that different reasonable inferences can be
made about the appropriateness of defendant’s purported reliance on the CHP inspections
to ensure compliance with contractual maintenance requirements. As we pointed out
previously, “ ‘ “Only when the inferences are indisputable may the court decide the
issues as a matter of law.” ’ ” (Cohen, supra, 159 Cal.App.4th at p. 1497.) Accordingly,
the trial court erred in giving the CHP inspections dispositive effect in considering
whether plaintiffs could establish that defendant acted in reckless disregard as to the truth
of its implied certifications of compliance with contractual maintenance requirements.
       For the above reasons, the trial court erred in concluding, as a matter of law, that
plaintiffs could not establish the knowledge element of their CFCA claim.
                                      DISPOSITION
       The trial court’s judgment is reversed. Costs on appeal are awarded to plaintiffs.

government of the wrongdoing and the defendant was not forthcoming]; see also ante,
pp. 15-19.)
                                             25
                   SIMONS, J.

We concur.

JONES, P.J.

NEEDHAM, J.

              26
1
Superior Court of the City and County of San Francisco, No. CGC-07-463308, Ernest H.
Goldsmith, Judge

Baron & Budd, P.C., Thomas M. Sims and Laura J. Baughman; April M. Strauss;
Environmental Law Foundation and James Wheaton, for plaintiff and appellants.

Reed Smith LLP, Jesse L. Miller, Dennis Peter Maio, James M. Neudecker and Matthew
T. Peters, for defendant and respondent.

Kamala D. Harris, Attorney General, Martin Goyette, Assistant Attorney General, Larry
G. Raskin, Deputy Attorney General, as Amicus Curiae on behalf of for plaintiffs and
appellants.

                                          2