United States of America ex rel v. NVWM Realty, LLC
2:18-cv-01409
D. Nev.Jun 25, 2019Background
- Plaintiff rented a residence in the Section 8 Housing Choice Voucher Program administered by the Southern Nevada Regional Housing Authority (SNRHA).
- A Housing Assistance Payment (HAP) contract between the owner-defendants and SNRHA defined rent and prohibited owner receipt of additional side payments from tenants.
- Plaintiff alleges defendants charged her $35 monthly for sewer and trash from April 2016 to June 2018 despite the HAP allocation of those charges to the owner.
- Plaintiff claims defendants’ acceptance of tenant side payments breached the HAP, caused false certifications to SNRHA, and thereby violated the False Claims Act (FCA).
- Plaintiff applied for in forma pauperis status; the Court granted the application and performed the required §1915 screening of the complaint.
- The Court found the complaint adequately alleged the four FCA elements (false statement/fraudulent conduct, scienter, materiality, and causation) and ordered service to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether charging sewer/trash fees constituted a false claim/fraudulent course of conduct under the FCA | Charging undisclosed additional fees violated the HAP and amounted to a fraudulent course of conduct (side payments) | (Implicit) Fees were lawful or not a basis for FCA liability | Court: Allegations sufficiently plead a fraudulent course of conduct (false certification/side payments) |
| Whether plaintiff adequately alleged scienter for FCA liability | Defendants knew or recklessly disregarded that accepting side payments breached the HAP while receiving subsidy payments | (Implicit) Any error was not knowing or reckless | Court: Allegations that defendants executed and certified compliance with HAP while taking side payments sufficiently plead scienter |
| Whether the misrepresentations were material to the government’s payment decision | Acceptance of side payments would lead SNRHA to terminate HAP and bar participation; thus material | (Implicit) Fees not material to SNRHA’s payment decision | Court: Allegations sufficiently plead materiality given HAP and SNRHA administrative plan prohibiting side payments |
| Whether plaintiff pleaded causation (that the government paid money because of the false claims) | Defendants received 27 subsidy payments from SNRHA that derived from HUD funds and would not have if false claims were known | (Implicit) Government payments not caused by alleged misrepresentations | Court: Allegations sufficiently plead that government paid out money because of defendants’ certifications; FCA claim survives screening |
Key Cases Cited
- Buckey v. Los Angeles, 968 F.2d 791 (9th Cir. 1992) (standard for dismissal under §1915)
- Neitzke v. Williams, 490 U.S. 319 (1989) (frivolousness doctrine under §1915)
- Denton v. Hernandez, 504 U.S. 25 (1992) (factual frivolousness standard)
- Cato v. United States, 70 F.3d 1103 (9th Cir. 1995) (leave to amend when dismissing under §1915)
- Eldridge v. Block, 832 F.2d 1132 (9th Cir. 1987) (liberal construction of pro se complaints)
- Ferdik v. Bonzelet, 963 F.2d 1258 (9th Cir. 1992) (treatment of pro se civil rights complaints)
- Bruns v. Nat’l Credit Union Admin., 12 F.3d 1251 (9th Cir. 1993) (limits of liberal construction to supply missing elements)
- Ivey v. Board of Regents, 673 F.2d 266 (9th Cir. 1982) (pro se pleading standards)
- Chappel v. Laboratory Corp. of America, 232 F.3d 719 (9th Cir. 2000) (Rule 12(b)(6) is a legal ruling)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (conclusory allegations insufficient)
- Papasan v. Allain, 478 U.S. 265 (1986) (court need not accept legal conclusions as true)
- Univ. of Phoenix v. Nev. ex rel. (cited as Univ. of Phoenix), 461 F.3d 1166 (9th Cir. 2006) (materiality and FCA causation principles)