San Francisco Unified School District Ex Rel. Contreras v. First Student, Inc.
168 Cal. Rptr. 3d 832
Cal. Ct. App.2014Background
- First Student (successor to Laidlaw) contracted with San Francisco Unified School District to provide student bus transport; contract required strict maintenance (45-day PMIs, brake lining and tire-tread standards) and monthly invoices for "services satisfactorily performed."
- Relators (former employees Padilla and Contreras, plus Environmental Law Foundation) filed a qui tam CFCA suit alleging First Student submitted invoices that implied compliance while routinely violating maintenance obligations. The District declined to intervene.
- On prior appeal (Contreras I), the Court of Appeal held invoices can constitute implied certifications of contractual compliance under the CFCA and rejected immunity from suit at the demurrer stage.
- At summary judgment, plaintiffs produced evidence of recurring maintenance failures (missed 45‑day inspections, thin brake linings, low tire tread), internal admissions about missed PMIs, and deficiencies in First Student’s internal audit practices; First Student relied on CHP ‘‘satisfactory’’ terminal inspections and continued District payments/contract extension.
- Trial court granted summary judgment for First Student, finding no triable issue on materiality or scienter; this appeal reversed, holding triable issues exist as to both materiality and knowledge/reckless disregard.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Materiality of implied certification (did false billing have tendency to influence payment?) | Implied certification that buses met safety/maintenance was naturally capable of influencing District payment; contract language and District’s reaction to PMI report show importance. | District’s continued payments, declined intervention, and contract extension show any alleged falsity was immaterial as a matter of law. | Reversed: materiality is a fact-based inquiry; reasonable inferences support triable issues for plaintiffs (focus on potential to influence at time of claim). |
| Knowledge (actual knowledge, deliberate ignorance, or reckless disregard) | First Student ignored its audit policies and failed to conduct required checks; widespread failures (PMIs, brakes, tires) support reckless-disregard theory. | CHP annual inspections and satisfactory ratings, plus some inspections/repairs, show reasonable belief of compliance and negate scienter. | Reversed: triable issues exist—plaintiffs’ evidence of ignored audit procedures and pervasive failures permits inference of reckless disregard. |
| Effect of District’s response (non-intervention/continued payment) on CFCA claim | District’s response is not dispositive; materiality depends on whether false claim could influence payment when made, not how government reacted later. | District’s conduct demonstrates lack of materiality and absence of harm. | Held: District’s conduct is relevant but not dispositive; it supports competing inferences and cannot resolve materiality on summary judgment. |
| Admissibility/necessity of certain exhibits (e.g., Web Fleet report) at summary judgment | Even without contested electronic report, deposition testimony and other evidence suffice to raise triable issues. | Court below excluded the electronic exhibit for lack of foundation, undermining plaintiffs’ quantified violation claims. | Held: appellate decision does not rely on the excluded exhibit; admissibility issue left for trial (appellate court finds remaining evidence adequate to defeat summary judgment). |
Key Cases Cited
- Rothschild v. Tyco Internat. (US) Inc., 83 Cal. App. 4th 488 (describing CFCA purpose and standards for knowledge)
- Contreras v. Laidlaw Transit, Inc., 182 Cal. App. 4th 438 (prior opinion holding invoices can imply certification of contractual compliance under the CFCA)
- U.S. ex rel. Berge v. Trustees of Univ. of Ala., 104 F.3d 1453 (materiality requires evidence the falsity could influence funding decision)
- U.S. ex rel. Harrison v. Westinghouse Savannah River Co., 352 F.3d 908 (materiality focuses on potential influence when claim presented)
- U.S. ex rel. Medshares Mgmt. Grp., Inc. v. A+ Homecare, Inc., 400 F.3d 428 (materiality and FCA remedial scope)
- Altus Finance, Ltd. v. State of California, 36 Cal. 4th 1284 (CFCA interpreted to protect public fisc)
- Aguilar v. Atlantic Richfield Co., 25 Cal. 4th 826 (summary judgment standard and de novo review)