Court Opinion

ID: 2900175
Source: CourtListenerOpinion
Date Created: 2015-09-09 16:00:57.787234+00
Date Added: 2024-06-11T12:50:05.005160
License: Public Domain

NONPRECEDENTIAL DISPOSITION
                To be cited only in accordance with Fed. R. App. P. 32.1

               United States Court of Appeals
                                For the Seventh Circuit
                                Chicago, Illinois 60604

                             Submitted September 2, 2015*
                              Decided September 9, 2015

                                        Before

                      DIANE P. WOOD, Circuit Judge

                      RICHARD A. POSNER, Circuit Judge

                      ILANA DIAMOND ROVNER, Circuit Judge

No. 14-3492

THOMAS L. BURSE,                               Appeal from the United States District
    Plaintiff-Appellant,                       Court for the Eastern District of Wisconsin.

      v.                                       No. 13-C-804

MARK GOTTLIEB, et al.,                         William E. Callahan, Jr.,
    Defendants-Appellees.                      Magistrate Judge.

No. 15-1649

THOMAS L. BURSE,                               Appeal from the United States District
    Defendant-Appellant,                       Court for the Eastern District of Wisconsin.

      v.                                       No. 13-C-1200

STATE OF WISCONSIN,                            Lynn Adelman,
     Plaintiff-Appellee.                       Judge.

      * After examining the briefs and record, we have concluded that oral argument is
unnecessary. Thus the appeal is submitted on the briefs and record. See FED. R. APP. P.
34(a)(2)(C).
No. 14-3492 & 15-1649                                                               Page 2

                                        ORDER

    We have consolidated these two appeals for disposition. Both cases arose after the
Wisconsin Department of Transportation discovered that Thomas Burse, a state
contractor, falsified his education qualifications on his resume and overbilled the
Department by $ 1.3 million. The Department suspended (and eventually barred) him
from the state’s Disadvantaged Business Enterprise (DBE) program, terminated his state
contracts, and withheld payments to Burse in order to mitigate its losses. This forced
Burse and his business into bankruptcy, where the state of Wisconsin filed an adversary
proceeding under 11 U.S.C. § 523(a)(2)(A). That statute prevents discharge of debts
obtained through fraud, and the state invoked it to prevent Burse from discharging
through bankruptcy the $882,000 he still owed to the state. The bankruptcy court ruled
that the debt was non-dischargeable, the district court affirmed, and in the first of these
two consolidated appeals (No. 15-1649) we affirm as well. In a separate suit, the second
of our two appeals (No. 14-3492), Burse alleges that he was deprived of his due process
rights when he was suspended from the DBE program without a pre-suspension
hearing. The district court granted summary judgment for the defendants, and because
Burse received all the process that he was due, we affirm that judgment as well.
    The DBE program aims to boost state contracts awarded to businesses with socially
and economically disadvantaged owners who meet state qualifications. Burse and his
construction-management company, Buveck, began to participate in Wisconsin’s DBE
program in 2003, but in 2010 the state found two problems with his participation. The
first was that Burse had lied about his educational background. In one resume Burse
asserted that he had earned an engineering degree from Illinois State University, but in
another he claimed to have an engineering degree from Bradley University. After the
state asked Burse to verify his Bradley degree, he twice provided forged transcripts, and
Bradley University later reported that Burse was not a graduate. The second problem
was with overbilling. An audit in 2010 revealed that Burse was billing for the same work
twice, inflating the number of hours employees worked, and exaggerating their rate of
hourly pay. In the auditor’s opinion, the sheer number of “mistakes” in the records
combined with evidence of forged employee signatures on timesheets and unauthorized
changes to timesheets established that Burse had committed fraud.
   After uncovering these two problems, the state sent Burse notice on October 14, 2011,
that it was suspending him as a contractor. The notice informed him of the reasons that
the state had found fraud and overbilling and that Burse owed the state $882,528.24
because of his overbilling. The state also notified him that it would not approve him for
new transportation contracts during the suspension, it was posting his name on the
No. 14-3492 & 15-1649                                                                  Page 3

published list of suspended contractors, and it was reviewing his current contracts to
determine whether they would be terminated. The state gave him a prompt opportunity
for a hearing—fifteen days later—to contest the suspension, but Burse requested and
received longer—to November 25—to respond. During the next month the state
provided Burse’s attorney examples of the fraud uncovered in the audit and offered
Burse a chance to submit rebuttal evidence. Burse never responded with any exculpatory
evidence. His attorney merely asserted that the state had not specified the grounds for
suspension and supplied only limited proof of the audit’s findings or Burse’s
involvement in the problems identified in the audit. On December 1, the state barred
Burse and his company from future transportation contracts and terminated the
contracts on his current projects.
    Burse filed for bankruptcy, and in an adversary proceeding the state claimed that
Burse’s debt to the state was obtained through fraud and could not be discharged. The
bankruptcy court held a trial at which the auditor testified that the widespread
overstatements in Burse’s company records could not be attributed to mere negligence.
The bankruptcy judge did not believe Burse’s response that he did not know that the
invoices and timesheets overstated billings. The judge observed that Burse signed many
of the falsified timesheets, Burse oversaw his company’s billing practices, and his
company had a pattern of creating false time sheets and bills. The bankruptcy court
therefore found fraud and ruled that the debt was not dischargeable. Burse appealed to
the district court, which affirmed the bankruptcy court’s ruling.
    In the first appeal, Burse challenges the bankruptcy court’s ruling. Our review
focuses on the bankruptcy court’s rulings, rather than those of the district court, and we
review its factual findings for clear error and legal conclusions de novo. See In re
marchFIRST, Inc., 573 F.3d 414, 416 (7th Cir. 2009). To prove that a debt is
non-dischargeable because of fraud, a creditor must prove by a preponderance of
evidence that “(1) the debtor made a false representation or omission, (2) that the debtor
(a) knew was false or made with reckless disregard for the truth and (b) was made with
the intent to deceive, (3) upon which the creditor justifiably relied.” Ojeda v. Goldberg, 599
F.3d 712, 716–17 (7th Cir. 2010).
    Burse points to nothing that calls the bankruptcy court’s ruling into question. As to
the first element, Burse does not challenge that the invoices and timesheets contained
false representations. On the second element, Burse contends only that no “direct”
evidence made him responsible for the “mistakes” that lead to the overbilling. But the
bankruptcy judge was entitled to rely on circumstantial evidence, which showed that, by
signing inflated timesheets and overseeing a billing system that regularly overcharged
No. 14-3492 & 15-1649                                                                  Page 4

the state, Burse knew about the falsehoods and intended to deceive the state. See Matter
of Sheridan, 57 F.3d 627, 633 (7th Cir. 1995). For the final element, Burse seems to argue
that the state was not justified in relying on his falsified resume for his DBE certification
because DBE regulations do not require a college degree. But the non-dischargeable debt
stems from the intentional overbilling, not the DBE certification. True, the bankruptcy
judge said that, “arguably, under that premise [that the resume fraud led to an
undeserved DBE certification], every dollar that Buvek collected when it acted as a DBE
sub should be non-dischargeable.” But the bankruptcy judge recognized that the state
was not asking for repayment of “every” dollar, but rather only the debts from the
overbilling. Accordingly, the fraud and non-dischargeability rulings were proper, so we
affirm the first judgment.
    The second appeal arises from Burses’s separate suit alleging that his seven-week
suspension violated his procedural rights. In it he raises two claims that he continues to
pursue on appeal. First, he contends that the state violated due process by suspending
him and withholding contract payments before it gave him a chance to refute the
charges. The district court rejected this claim. It accepted that Burse was deprived of
property interests in the form of both a continued contractual relationship and contract
payments. But in light of the state’s significant interest in preventing fraud, the minimal
risk of an erroneous suspension based on the audit, and the prompt opportunity to
oppose the suspension, Burse received due process. The court also rejected Burse’s
second claim, which is that by publicizing his suspension the state defamed him in
violation of due process. The judge explained that Burse identified no “lost
opportunities” because of the posting.
    On appeal Burse maintains that the state violated due process by denying him a
hearing before it suspended him. To prevail on this due process claim, Burse must show
that the state deprived him of a protected interest and that the procedures it used did not
comply with minimum due process requirements. See Hinkle v. White, No. 14-2254, 2015
WL 4297887, at *2 (7th Cir. July 16, 2015). The defendants concede that Burse had a
protected interest before it suspended him, so all that we must decide is what process
Burse was due. A pre-deprivation hearing is not always required; the need for one
depends on the balance “between the benefits and costs of such process.” Siebert v.
Severino, 256 F.3d 648, 659 (7th Cir. 2001) (quoting Penn Cent. Corp. v. U.S. R.R. Vest Corp.,
955 F.2d 1158, 1163 (7th Cir. 1992)). The three relevant considerations are: (1) the private
interest that will be affected, (2) the risk of an erroneous deprivation, and (3) the
government interest. See Mathews v. Eldridge, 424 U.S. 319, 335 (1976).
No. 14-3492 & 15-1649                                                               Page 5

    Balancing these three considerations, we conclude that Burse had no right to
pre-suspension process. Burse has a strong interest in receiving payments for past work
and continuing his contractual relationship with the state. But the seven-week
suspension limited only Burse’s ability to enter into new state contracts. The state
terminated his existing contracts only after his debarment, which occurred after he was
offered a full hearing, the adequacy of which Burse does not challenge. The second and
third considerations outweigh Burse’s private interest. The government has a substantial
interest in protecting taxpayers from fraudulent billing. And the risk of an erroneous
suspension was low because the audit, its findings, and the pre-suspension investigation
established reasonable grounds to believe Burse had defrauded the state. Those findings
obviated the need for a pre-suspension hearing. See Barry v. Barchi, 443 U.S. 55, 64–65
(1979) (a pre-deprivation hearing was unnecessary for suspending horse-racing license
because the suspension was based on probable cause). Furthermore Burse received
immediate notice of the suspension and a prompt opportunity to contest the suspension.
These added procedures supplied whatever process he was due.
    Burse also repeats his claim that, by publishing his name on the list of suspended
contractors, the state harmed his reputation and thereby violated due process. A
defamation claim ground in due process requires some showing that the defamatory
statements “alter[ed] or extinguish[ed] a right or status recognized by state law.“ Santana
v. Cook County Bd. of Review, 679 F.3d 614, 621 (7th Cir. 2012) (quoting Brown v. Michigan
City Ind., 462 F.3d 720, 730 (7th Cir. 2006)). As the district court correctly pointed out,
Burse identified no situation in which a prime contractor ended or refused to enter into a
contract because of the posting. Any contracts that Burse lost directly with the state
resulted from his suspension, not the posting. The district court thus properly granted
summary judgment for the defendants in the second case.
                                                                              AFFIRMED.