Court Opinion

ID: 9470101
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:57:14.287773+00
Date Added: 2024-06-11T17:41:44.109510
License: Public Domain

CLARK, Circuit Judge,
dissenting:
I respectfully dissent from the majority opinion because I believe the cases cited and relied upon do not support the conclusion reached by the majority. I believe the majority has confused the type or nature of knowledge that must be proved by the government to sustain a claim under the False Claims Act. The majority invokes a standard applicable in an ordinary civil action in which an employee’s knowledge is imputed to a defendant corporation. The liability of the corporation in such a case, arising from, for example, defalcation or carelessness of an employee, is limited to the actual loss of the injured party. In a False Claims Act case the government seeks what are in effect punitive damages. In the present case, the government alleged a loss of $78.00, but it sought damages in the amount of $34,156.00, of which $156.00 was double damages and $34,000.00 was the sum of the $2,000.00 penalties for each of the seventeen transactions. In another False Claims Act case, our court held that where knowledge of a false claim or intent to defraud is an essential requirement for recovery, knowledge of an agent was not imputable to the corporation. United States v. Ridglea State Bank, 357 F.2d 495 (5th Cir.1966). That case is indistinguishable from this one.
The rule in our Circuit, that such knowledge is an essential requirement, has been clearly stated:
The law is settled in this Circuit that to show a violation of the False Claims Act the evidence must demonstrate “guilty knowledge of a purpose on the part of [the defendant] to cheat the Govem*892ment,” United States v. Priola, 272 F.2d 589, 594 (5th Cir.1959), or “knowledge or guilty intent,” United States v. Ridglea State Bank, 357 F.2d 495, 498 (5th Cir.1966).
United States v. Aerodex, Inc., 469 F.2d 1003, 1007 (5th Cir.1972). I would respectfully submit that nowhere in this record has the government demonstrated an inference that any employee of Grand Union had knowledge of a purpose to cheat the government, or knowledge or guilty intent as required by Aerodex. To oppose Grand Union’s motion for summary judgment, the government was required to present some showing that a Grand Union employee knew his or her actions would result in Grand Union filing a false claim against the government or otherwise result in the government being defrauded. This degree or type of scienter cannot be inferred from the facts here.
The majority cites Aerodex and United States v. Hangar One, Inc., 563 F.2d 1155 (5th Cir.1977). In Hangar One, the government filed affidavits of employees of Hangar One, Inc., who stated that they had personally engaged in acts of fraud against the United States by providing the government defective shells for use in the Vietnam War. The affiants were company inspectors who substituted defective shells for good ones after government inspectors had left the plant. It is obvious that such fraudulent actions of agents of the corporation would subject the corporation to liability under the False Claims Act and reversal of the summary judgment in favor of the corporation was appropriate.
The government in its brief relies upon a criminal case, United States v. Milton, 602 F.2d 231 (9th Cir.1979), which held: “To prove falsity, the government only had to prove that the statement was known to be untrue at the time Milton made it.” (Id. at 233) (emphasis in the original). This case cuts against the government.
The majority opinion states: “The record before us plainly permits the inference that the check-out cashiers knowingly permitted the FNS agent to purchase ineligible nonfood items with food stamps.” at 890. The opinion of the district court elucidates this statement contained in the majority opinion as follows:
Grand Union has admitted, as alleged by the government, that three of its employees accepted food stamp coupons in exchange for 32 ineligible non-food items. The coupons, having a combined value of $78.00, were accepted in five transactions on four different days. Grand Union deposited the coupons into local banking channels for ultimate payment from the Federal Treasury. Grand Union was also required by Food Stamp regulations to submit to the local bank a certification that the coupons accepted that business day were accepted in exchange for eligible food items. The certifications for the four business days involved in this lawsuit are not in evidence and apparently are not available. However, the evidence shows that Grand Union’s head cashier generally signed such certifications on behalf of Grand Union’s store manager or assistant store manager. The head cashier stated in her deposition that her certifications were based on her belief that the check-out clerks complied with store policy regarding the acceptance of food stamp coupons. She also testified that she never signed a food stamp certification with knowledge or reason to believe of the existence of any irregularities. Two of the check-out clerks involved in these transactions stated that their understanding of store policy was “what you don’t eat, you don’t sell [for food stamps], except for beer and wine.”
The violating items accepted in the transactions complained of in this lawsuit were all clearly non-food items. They included, among others, cigarettes, deodorant, thread, dusting cloths, tampons, roach killer, and hand lotion. By their own testimony, the clerks knew that these items were ineligible for purchase under the Food Stamp Program and, indeed, expressed doubt in their depositions that they would have accepted such items. Thus, notwithstanding the weaknesses in Grand Union’s training program *893pointed out by the government, the evidence establishes that it was not store policy to contravene the provisions of the federal food stamp law and that the primary rule dividing eligible from non-eligible foods was known to Grand Union’s employees.
Record at 364.
The best case that could be stated for the government under the facts in this record is either that the three cashiers were careless in selling the non-food items or that they knew that they were selling non-food items, although they deny the latter. Giving the government all benefits of inferences that may be drawn from this record, it cannot be said that any agent or employee of Grand Union made or approved such sales of nonfood items that would demonstrate “guilty knowledge of a purpose on the part of [Grand Union] to cheat the Government.” See Aerodex, supra. Consequently, I would affirm the district court’s findings of fact, which are based upon the record, and the conclusions of law, which are based upon the law of this Circuit.