United States v. Hallmark Meat Packing Co. | April 20, 2013

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United States v. Hallmark Meat Packing Co.

UNITED STATES of America, ex rel the HUMANE SOCIETY OF the UNITED STATES, Plaintiff,
v.
HALLMARK MEAT PACKING COMPANY, et al., Defendants.

No. EDCV 08–00221–VAP (OPx).

United States District Court, C.D. California.

April 30, 2013.

ORDER GRANTING IN PART AND DENYING IN PART JOANN MAGIDOW AND ANTHONY MAGIDOW AS ADMINISTRATOR WITH WILL ANNEXED OF THE ESTATE OF AARON MAGIDOW AKA ARNIE MAGIDOW'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING THE UNITED STATES' MOTION FOR PARTIAL SUMMARY JUDGMENT

VIRGINIA A. PHILLIPS, District Judge.

Defendants JoAnn Magidow and Anthony Magidow as Administrator with will Annexed of the Estate of Aaron Magidow, aka Arnie Magidow's Motion for Partial Summary Judgment came before the Court for hearing on April 22, 2013. After reviewing and considering all papers filed in support of, and in opposition to, the Motion, as well as the arguments advanced by counsel at the hearing, the Court GRANTS IN PART and DENIES IN PART the Motion.

I. BACKGROUND

This case is brought under the False Claims Act ("FCA"), 31 U.S .C. §§ 3729, et. seq., and alleges several defendants falsely certified and represented in their technical proposals and bids to the United States Department of Agriculture that cattle processed at the facility in question were handled humanely and in accordance with federal rules and regulations. In addition to claims under the False Claims Act, the United States also alleges claims for: fraudulent concealment; negligent misrepresentation; payment by mistake; restitution; money had and received; and breach of contract. The allegations, procedural history, identity of the defendants, and general business relationship between the defendants are summarized in the Court's August 5, 2010 Order, and the Court need not recite them here, with limited exception.

On February 19, 2008, Relator the Humane Society of the United States ("HSUS") filed a federal False Claims Act ("FCA") complaint and demand for jury trial ("Original Complaint") under seal, pursuant to 31 U.S.C § 3720(b)(2). (Doc. No. 1.) As required under the FCA, HSUS provided to the Attorney General of the United States and the United States Attorney for the Central District of California a statement of all material evidence and information arising from HSUS's investigation, as well as material evidence establishing the existence of false claims submitted by the Defendants to the United States. (Original Compl. ¶ 7.) On April 20, 2009, the United States filed a notice of election to intervene and proceed with action ("Notice of Intervention") (Doc. No. 19), and an order regarding the notice of intervention was entered on April 28, 2009 (Doc. No. 20). On March 29, 2010, Plaintiffs United States of America ex rel. the Humane Society of the United States ("United States") filed the First Amended Complaint against Defendants Westland/Hallmark Meat Company ("Westland/Hallmark"), Hallmark Meat Packing Company ("Hallmark"), Westland Meat Company, Inc. ("Westland"), M & M Managment LLC ("M & M"), Cattleman's Choice, Inc. ("Cattleman"), Donald W. Hallmark ("Hallmark Senior"), Donald R. Hallmark ("Hallmark Junior"), Steve Mendell ("Mendell"), Anthony Magidow as administrator with will annexed of the Estate of Aaron Magidow A/K/A Arnie Magidow ("the Estate") and JoAnn Magidow ("Magidows"). (Doc. No. 43.)

Following the Court's ruling on various motions to dismiss, Plaintiffs filed their Second Amended Complaint ("SAC") on December 15, 2010. (Doc. No. 167.) In the SAC, Plaintiffs named as defendants Westland/Hallmark, Hallmark, Westland, M & M, Cattleman, Hallmark Senior, Hallmark Junior, Mendell, the Magidows, and Westland Meat Co.—J.V. ("Westland J.V.").(Id.)

The SAC alleges: (1) violations of 31 U.S.C. § 3729(a)(1) (1986) for "False or Fraudulent Claims ... (Fraudulent Inducement of Contracts, Which Made All Invoices [Submitted] Thereunder False—Inhumane Handling and Processing of Downer/Non–Ambulatory Disabled Cattle)" (against Westland/Hallmark); (2) violations of 31 U.S.C. § 3729(a)(1) (1986) for "False or Fraudulent Claims ... (False Certification of Compliance with Humane Handling/Downer/Non–Ambulatory Disabled Cattle Provisions)" (against Westland/Hallmark); (3) violations of 31 U.S.C. §§ 3729(a)(1)(B) (2009), (a)(2) (1986) for "False Statements Material to False or Fraudulent Claims ... (False Certification of Compliance With Humane Handling/Downer/Non–Ambulatory Disabled Cattle Provisions)" (against Westland/Hallmark); (4) violations of 31 U.S.C. § 3729(a) (1) (1986) for "False or Fraudulent Claims ... (Fraudulently Induced Contracts/False Invoices—Concealment of Aaron Magidow as Person Responsibly Connected with [the Facility] )" (against Westland/Hallmark, Westland, Hallmark, Hallmark Junior, Mendell, and Anthony Magidow); (5) violations of 31 U.S.C. §§ 3729(a)(1)(B) (2009), (a)(2) (1986) for "False Statements Material to False or Fraudulent Claims ... (False Applications for Inspection)" (against Westland/Hallmark, Westland, Hallmark, Hallmark Junior, Mendell, and Anthony Magidow); (6) "Fraudulent Concealment" (against Westland/Hallmark, Westland, and "Fraudulent Concealment" (against M & M "Fraudulent Concealment" (against "Negligent Misrepresentation" (against Westland/Hallmark, Westland, and Hallmark); (10) "Payment by Mistake" (against Westland/Hallmark, Westland, Cattleman, Hallmark, M & M, and Anthony Magidow); (11) "Restitution" (against Westland/Hallmark, Westland, Cattleman, Hallmark, M & M, and Anthony Magidow); (12) "Money Had and Received" (against Westland/Hallmark, Westland, Cattleman, Hallmark, M & M, and Anthony Magidow); (13) "Breach of Contract" (against Westland/Hallmark); (14) violations of California Corporations Code §§ 16306(a),16307(b) for "Joint and Several Liability for Judgment against [Westland/Hallmark]" (against Westland, Hallmark, M & M, Cattleman, Westland J.V.); (15) violations of California Corporations Code §§ 16306(a), 16307(b) for "Joint and Several Liability for Judgment against [Hallmark]" (against Hallmark Junior, Hallmark Senior, Mendell, and Anthony Magidow); (16) violations of California Corporations Code §§ 16306(a), 16307(b) for "Joint and Several Liability for Judgment against [Westland]" (against Westland and Cattleman); (17) violations of California Corporations Code §§ 16306(a), 16307(b) for "Joint and Several Liability for Judgment against Doe 1" (against Mendell and Anthony Magidow); (18) violations of California Corporations Code §§ 16306(a), 16307(b) for "Joint and Several Liability for Judgment against Doe 2" (against Hallmark); (19) violations of California Corporations Code §§ 16306(a), 16307(b)for "Joint and Several Liability for Judgment against Doe 3" (against Hallmark); (20) Alter Ego for "Joint and Several Liability for Judgment against [Cattleman]" (against Anthony Magidow); (21) Alter Ego for "Joint and Several Liability for Judgment against [M & M]" (against Mendell and Anthony Magidow); (22) violations of California Probate Code §§ 13550, 13551 for "Personal Liability for Judgment against [Anthony Magidow]" (against JoAnn Magidow). (See SAC.)

Plaintiffs make the following pertinent allegations, inter alia, against the Magidows in the SAC:

Anthony Magidow is a son of Aaron Magidow and the lawfully appointed administrator with will annexed of the Estate of Aaron Magidow. From on or about September 1, 1997 through August 6, 2006, Aaron Magidow was a partner in Hallmark Meat Packing. From August 7, 2006 through the present, the Estate of Aaron Magidow has been a partner in Hallmark Meat Packing. In the alternative, from on or about September 1, 1997 through August 6, 2006, Aaron Magidow was a partner in Doe 1; and, from August 7, 2006 through the present, the Estate of Aaron Magidow has been a partner in Doe 1. Since at least October 18, 2000, Anthony Magidow has been the general manager of [Westland/Hallmark Meat Company].... JoAnn Magidow is the surviving spouse of Aaron Magidow. On January 17, 2008, the Superior Court of the State of California for the County of Los Angeles overseeing the probate of the Estate of Aaron Magidow approved JoAnn Magidow's petition seeking confirmation of property belonging to the surviving spouse and/or determination of property passing to the surviving spouse without administration. Property from the Estate of Aaron Magidow, including community property, has been confirmed as belonging and/or has passed to JoAnn Magidow without probate administration.

(SAC at ¶¶ 16, 17 (internal quotations omitted).)

The United States' claims against Anthony Magidow as administrator with will annexed of the Estate of Aaron Magidow a/k/a Arnie Magidow ("the Estate") derive solely from the alleged actions of Aaron Magidow ("Arnie Magidow"). (See SAC at ¶¶ 96–104, 123–124, 142–143, 146–147, 152–158) The United States' claim against JoAnn Magidow derive solely from the United States' claims against the Estate. (See id. at ¶¶ 159–160.)

On February 1, 2013, the Magidows filed their Notice of Motion and Motion for Partial Summary Judgment, Memorandum of Points and Authorities, the Declaration of Amjad M. Khan ("Khan Decl.")[1] with attached Exhibits A through RR[2], Statement of Undisputed Facts ("SUF"), and proposed order. (See Doc. Nos. 403–404.)In its Motion, the Magidows argue, inter alia, the United States cannot prove the essential element of causation for its fraudulent concealment claims, cannot demonstrate there were any false claims submitted to the government because there is no evidence of inhumane acts during Arnie Magidow's lifetime, and the United States cannot prove Arnie Magidow was the alter ego of Cattleman's Choice, Inc. or M & M Managment LLC. Accordingly, the Magidows move for summary judgment as to the United States' claims 1–5, 15, 17, and 20–21.

On March 4, 2013, Plaintiff United States filed its Memorandum in Opposition to the Magidows' Motion, Memorandum of Points and Authorities in Opposition to the Motion, the Declaration of Amy Lewis ("Lewis Decl.") and attached Exhibit 1, the Declaration of Scott Safian ("Safian Decl.") and attached Exhibits 1–4, the Declaration of Duane Williams ("Williams Decl."), the Declaration of Jerald Udinski ("Udinski Decl.") and attached Exhibit 1, the Declaration of John E. Lee ("Lee Decl.") and attached Exhibits 1–36, the Declaration of Beverley Anderson, Statement of Genuine Issues[3] ("SGI"), and Statement of Evidentiary Objections. (See Doc. Nos. 412–414.)Also on March 4, 2013, Relator HSUS filed its joinder to the United States' opposition to the Magidows' Motion. (See Doc. No. 418.) The Court accepts HSUS' joinder.

On April 4, 2013, Cattleman filed its Reply in support of its Motion along with the Supplemental Declaration of Amjad M. Khan ("Supp. Khan Decl.") and attached Exhibits 1–12, the Declaration of Ted P. Singer ("Singer Decl.") with attached Exhibits A and B, the Declaration of Martin S. Reed ("Reed Decl.") with attached Exhibit A, Statement of Genuine Issues in Reply to the United States' Statement of Undisputed Facts, Response to the United States' Evidentiary Objections, Evidentiary Objections to the Lee Declaration, Evidentiary Objections to Exhibits to the Lee Declaration, Evidentiary Objections to the Lewis Declaration, Evidentiary Objections to the Anderson Declaration, Evidentiary Objections to the Williams Declaration, Evidentiary Objections to the Udinsky Declaration, and Evidentiary Objections to the Safian Declaration. (See Doc. No. 433.)

II. LEGAL STANDARD

A court shall grant a motion for summary judgment when there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). The moving party must show that "under the governing law, there can be but one reasonable conclusion as to the verdict."Anderson, 477 U.S. at 250.

Generally, the burden is on the moving party to demonstrate that it is entitled to summary judgment. Margolis v. Ryan, 140 F.3d 850, 852 (9th Cir.1998) (citing Anderson, 477 U.S. at 256–57); Retail Clerks Union Local 648 v. Hub Pharmacy, Inc., 707 F.2d 1030, 1033 (9th Cir.1983). The moving party bears the initial burden of identifying the elements of the claim or defense and evidence that it believes demonstrates the absence of an issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

Where the moving party has the burden at trial, "that party must support its motion with credible evidence ... that would entitle it to a directed verdict if not controverted at trial." Celotex, 477 U.S. at 331. The burden then shifts to the non-moving party "and requires that party ... to produce evidentiary materials that demonstrate the existence of a 'genuine issue' for trial."Id.; Anderson, 477 U.S. at 256; Fed.R.Civ.P. 56(a).

Where the non-moving party has the burden at trial, however, the moving party need not produce evidence negating or disproving every essential element of the non-moving party's case. Celotex, 477 U.S. at 325. Instead, the moving party's burden is met by pointing out that there is an absence of evidence supporting the non-moving party's case. Id. The burden then shifts to the non-moving party to show that there is a genuine dispute of material fact that must be resolved at trial. Fed.R.Civ.P. 56(a); Celotex, 477 U.S. at 324;Anderson, 477 U.S. at 256. The non-moving party must make an affirmative showing on all matters placed in issue by the motion as to which it has the burden of proof at trial. Celotex, 477 U.S. at 322; Anderson, 477 U.S. at 252. See also William W. Schwarzer, A. Wallace Tashima & James M. Wagstaffe, Federal Civil Procedure Before Trial § 14:144.

A genuine issue of material fact will exist "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson, 477 U.S. at 248. In ruling on a motion for summary judgment, a court construes the evidence in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378, 380 (2007); Barlow v. Ground, 943 F.2d 1132, 1135 (9th Cir.1991); T.W. Elec. Serv. Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630–31 (9th Cir.1987).

III. UNCONTROVERTED FACTS

The following material facts are supported adequately by admissible evidence and uncontroverted. They are "admitted to exist without controversy" for the purposes of this Motion. See Local Rule 56–3.

In 1974 and 1983, Arnie Magidow was convicted of felonies for bribing federal meat inspectors and for his participation in fraudulent meat purchasing practices. (SUF ¶¶ 7, 8.)

In 1989, Donald R. Hallmark ("Donnie Jr.") and his father Donald W. Hallmark ("Donnie Sr.") formed a 50/50 partnership to establish a meat packing business, Hallmark Meat Packing Company ("Hallmark").(Id. at ¶ 9.) Hallmark's business operation purchased cattle, slaughtered them, and then sold the meat to a company that would process the meat; Hallmark did not process the meat as part of its business. (Id. at ¶¶ 11, 12.)Hallmark operated continuously from 1989 to 2008 at a facility located at 13677 Yorba Avenue in Chino, California ("the Facility").(Id. at ¶¶ 13, 14.)The Facility is also known as "Establishment 336." (Id. at ¶¶ 23, 31.)

In 1991, Steven Mendell incorporated Westland Meat Company ("Westland") and he was the sole owner and corporate officer of Westland for the entire period of its existence. (Id. at ¶¶ 15–17.)Westland processed slaughtered meat for consumption and sold the processed meat to consumers. (Id. at ¶ 18.)Between 2000 and 2003, Westland began operating at the Facility. (Id. at ¶ 21.)

In approximately 1990, Hallmark began selling its meat to Westland for processing. (Id. at ¶ 19.)

In May 1992, Westland signed an Agreement with Cattleman's Choice, Inc. ("Cattleman") to establish a relationship between the two companies. (Id. at ¶ 102; GSUF at ¶ 1.) Under the Agreement, the two companies agreed to "combine the two operations," with Cattleman agreeing to pay for all operational costs, employ all the employees, and own the accounts receivable, inventory, and equipment purchased and paid for by Cattleman while Westland agreed to manage and operate the boning operation. (GSUF at ¶ 2.)

In 1997, Steve Mendell and Arnie Magidow incorporated M & M Management, LLC ("M & M") and they were the only two members of M & M from the date of incorporation until Arnie Magidow's death in August 2006. (Id. at ¶ 95.)As of 2000, M & M owned the Facility. (Id.at ¶ 100.)Arnie Magidow and Steve Mendell executed agreements on behalf of M & M. (Id. at ¶ 116.)A 2006 appraisal of the members' equity of M & M estimated the equity as exceeding $1.5 million. (Id. at ¶ 118.)A 2006 appraisal of the Facility valued the property as exceeding $4.5 million. (Id. at ¶ 119.)

In August 1997, Hallmark executed a Management Agreement with M & M. (Id. at ¶ 92; GSUF at ¶ 6.) Donnie Jr. and Donnie Sr. signed the Agreement on behalf of Hallmark. (SUF at ¶ 93.) Steve Mendell and Arnie Magidow signed the Agreement on behalf of M & M. (Id. at ¶ 94.)Pursuant to the Agreement, Steve Mendell "and/or" Arnie Magidow agreed, on behalf of M & M, to manage the "day to day" operations of Hallmark, including purchasing cattle, purchasing supplies, overseeing production, and dealing with USDA compliance matters.(Id. at ¶ 96; GSUF at ¶¶ 8–10.) From the execution of the Agreement in 1997 until January 2008, Steve Mendell managed the "day to day" operations of Hallmark. (Id. at ¶ 98.)

In 1997, Steve Mendell signed letters bearing Hallmark's letterhead. (GSUF at ¶ 16.)

In March 1998, Westland and Cattleman signed another Agreement, amending their May 1992 Agreement to allow the equal sharing of profits and losses of the boning operation. (SUF at ¶ 103; GSUF at ¶ 3.) From December 1997 to August 7, 2006, Arnie Magidow was the sole shareholder of Cattleman. (SUF at ¶ 106; GSUF at ¶ 4.) As the owner of Cattleman, Arnie Magidow executed agreements on behalf of Cattleman. (SUF at ¶ 110.)

In 1999, Cattleman obtained workers' compensation insurance for Cattleman and Westland. (GSUF at ¶ 17.)

In 2000, Hallmark executed a lease with M & M to lease the slaughtering side of the Facility. (Id. at ¶ 101.)

The Federal Meat Inspection Act ("FMIA") requires meat slaughtering and processing facilities to operate under a USDA Grant of Inspection. (Id. at ¶ 24; GSUF at ¶ 28.) USDA regulations require that, "each person conducting operations at an establishment subject to the [FMIA], whether tenant, subsidiary, or landlord, shall make application therefor to the Administrator ...." and the regulations define "person" as "[a]ny individual, firm, or corporation." 9 C.F.R. §§ 304.1(a), 301.2. Moreover, the USDA's form applications for Grants of Inspection, requires that the applicant list each person "responsibly connected" to the facility. (SUF at ¶¶ 25, 26.) If persons with felony convictions are identified as "responsibly connected" to the facility, then that is a basis for the government to deny the application.(Id.)

In October 2000, Donnie Jr. signed an application for Grant of Inspection on behalf of Hallmark, which Anthony Magidow alone completed. (Id. at ¶¶ 27, 32, 37.)On the application, Westland was listed as a "dba" and the following persons were listed as "responsibly connected" to the operations at the Facility/Establishment 336: Donnie Jr. (Partner), Donnie Sr. (Partner), Steve Mendell (President), Anthony Magidow (General Manager), Antonio Rodriguez (Shipping Foreman), and Stan Mendell (Plant Manager).(Id. at ¶¶ 28, 31; GSUF at ¶ 29.) Anthony Magidow testified that he only spoke to Steve Mendell when filling out the 2000 application and they did not discuss whether to identify Arnie Magidow on the application. (SUF at ¶¶ 33–35.) Donnie Jr. testified he did not have any conversations with anyone regarding who should be listed as responsibly connected on the 2000 application. (Id. at ¶ 38.)Steve Mendell testified he did not have any conversations with Arnie Magidow or anyone else about who should be listed as "responsibly connected" to the Facility/Establishment 336 on the 2000 application. (Id. at ¶¶ 59, 60.)The USDA granted the Facility/Establishment 336's application for Grant of Inspection on February 5, 2001. (Id. at ¶ 40.)

On March 22, 2002, Donnie Jr. signed another application for Grant of Inspection on behalf of the Facility/Establishment 336, which Anthony Magidow filled out entirely. (Id. at ¶¶ 41, 46, 51.)The 2002 application listed "Regal Brand" as a dba and listed the following persons as "responsibly connected" to the operations at the Facility/Establishment 336: Donnie Jr. (Partner), Donnie Sr. (Partner), Steve Mendell (President), Anthony Magidow (General Manager), Pablo Salas (Plant Manager), Stan Mendell (Plant Manager).(Id. at ¶¶ 42, 45; GSUF at ¶ 30.) Anthony Magidow testified that he only spoke to Steve Mendell when completing the 2002 application and they did not discuss whether to identify Arnie Magidow on the application. (SUF at ¶¶ 47–49.) Donnie Jr. testified he did not have any conversations with anyone regarding who should be listed as responsibly connected on the 2002 application. (Id. at ¶ 52.)Steve Mendell testified he did not have any conversations with Arnie Magidow or anyone else about who should be listed as "responsibly connected" to the Facility/Establishment 336 on the 2002 application. (Id. at ¶¶ 61, 62.)The USDA granted the Facility/Establishment 336's application for Grant of Inspection on April 16, 2002. (Id. at ¶ 54.)

No application for a Grant of Inspection at the Facility was submitted to FSIS by Arnie Magidow, Cattleman, or M & M and none of them were disclosed on any application for Grant of Inspection at the Facility. (GSUF at ¶¶ 31, 32.)

Beginning on August 8, 2003, Westland bid for a total of 140 contracts for the USDA's National School Lunch Program and other federal food programs, and Westland was awarded contracts under these federal programs from August 8, 2003 to January 30, 2008. (SUF at ¶¶ 63, 64.) The Agricultural Marketing Service ("AMS") within the USDA was responsible for awarding Westland contracts.(Id.at ¶¶ 65, 79.)

USDA's Food Safety and Inspection Service ("FSIS") stationed eight inspectors at the Facility. (Id. at ¶ 84.)From August 2003 through January 2008, FSIS inspectors issued one noncompliance report for inhumane handling of cattle at the Facility. (Id. at ¶¶ 86–88.)In 2005, AMS awarded Westland the Livestock and Seed Program's Supplier of the Year. (Id. at ¶ 81.)

Arnie Magidow died on August 7, 2006. (Id. at ¶ 5.)

In 2007, Cattleman and Westland entered into another Agreement, with JoAnn Magidow and Anthony Magidow signing for Cattleman. (GSUF at ¶¶ 25–27.)

For approximately two months in 2007, a HSUS employee worked at the Facility and videotaped the work undertaken. (SUF at ¶¶ 120, 121.) In January, 2008, the HSUS released the video of material recorded by its employee at the Facility, on its website. (Id. at ¶ 122.)

IV. DISCUSSION[4]

A. Causation Under the False Claims Act[5]

The Magidows move for summary judgment on the United States' fourth and fifth claims for violations of the FCA because, they argue, the United States cannot meet its burden to prove that Arnie Magidow caused anyone to present a false claim or make false statements to the government. (See Mot. at 9–17; Reply at 3–8.)

As an initial matter, the parties dispute which causation standard should be applied here. Thus, the Court first turns to the appropriate FCA causation standard, and then will turn to whether or not there remains a triable issue of fact on this issue.

The False Claims Act states: "any person who (a)(1) knowingly presents, or causes to be presented, to an officer or employee of the United States ... a false or fraudulent claim for payment or approval; [or] (a)(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government ... is liable to the United States Government ...." 31 U.S.C. § 3729(a)(1), (a) (2) (1986).

The parties dispute the appropriate legal standard for causation to apply, in light of the FCA's phrases "causes to be presented" and "causes to be made or used."The Magidows urge the Court to apply the "proximate cause" standard for assessing causation under the FCA, also arguing "mere 'acquiescence' and generalized 'support in business activities' do not constitute proximate causation under the FCA."(Mot. at 11.) The Magidows contend that even under the "substantial factor" test for causation, the United States cannot raise a triable issue of fact because there is no evidence that Arnie Magidow caused any of the defendants to present a false claim to the government. (See Mot. at 9–17; Reply at 3–8; SUF ¶¶ 66–78.) In Opposition, the United States argues the appropriate causation standard is not necessarily "proximate cause" or "substantial factor" but that the Court should look to the reasonably foreseeable consequences of Arnie Magidow's failure to disclose his involvement with the Facility's operations to determine the requisite causal connection for FCA liability. (See Opp'n at 12–22.)

The Court must interpret the FCA to determine the causation standard. In this analysis, the Court starts by analyzing the plain language of the statute. Carson Harbor Vill., Ltd. v. Unocal Corp., 270 F.3d 863, 877 (9th Cir.2001) (en banc) ("We look first to the plain language of the statute, construing the provisions of the entire law, including its object and policy, to ascertain the intent of Congress."(citation and quotes omitted)); Chubb Customs Ins. Co. v. Space Systems/Loral, Inc., 710 F.3d 946, 2013 WL 1093071 at *5 (9th Cir.2013);Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 843 n. 9 (1984)."If the statutory language is ambiguous, then [the court must] consult legislative history." Washington v. Chimei Innolux Corp., 659 F.3d 842, 848 (9th Cir.2011) (citing Washington v. Daas, 198 F.3d 1167, 1174 (9th Cir.1999). In its analysis the Court should consider "the purpose and context of the statute, and consult[ ] any precedents or authorities that inform the analysis." Dolan v. U.S. Postal Serv., 546 U.S. 481, 486 (2006). The Court may not interpret the FCA in a way that "would thwart the overall statutory scheme or lead to an absurd result." Chubb Customs Ins. Co., 2013 WL 1093071 at *5 (citing Wilshire Westwood Assocs. v. Atl. Richfield Corp., 881 F.2d 801, 804 (9th Cir.1989)).

Looking at the plain language of the statute, the FCA does not include a definition of the phrases "causes to be presented" or "causes to be made or used," nor is it apparent from the context of the statutory framework which causation standard to apply when interpreting the FCA. 31 U.S.C. §§ 3729, et seq. The absence of such language causes an ambiguity on this issue; thus, the Court must turn to the FCA's legislative history to interpret the statute in light of Congressional intent. Washington, 659 F.3d at 848; Dolan, 546 U.S. at 486. The legislative history behind the FCA is evidenced in the Congressional record. See, e.g., S.Rep. No. 96–615 (1980);S.Rep. No. 99–345 (1986); H. Rep. No. 99–660 (1986). The House and Senate Reports on the FCA, unfortunately, do not discuss the statute's causation language, nor do they indicate which test to implement when analyzing causation under the FCA.(Id.) Accordingly, the legislative history provides no assistance to the Court in interpreting the causation language in the FCA.

The Court now turns to other cases that have applied a causation standard for FCA claims to determine the appropriate standard to apply here. See Dolan, 546 U.S. at 486. The Magidows rely on several cases to support their argument that the Court should apply a proximate causation standard. (See Mot. at 10–12 (citing, inter alia, United States v. Hibbs, 568 F.2d 347, 349 (3d Cir.1977), United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 714 (10th Cir.2006), and United States ex rel. Shaver v. Lucas Western Corp., 237 F.3d 932, 933 (8th Cir.2001)).) The United States argues a broader standard for causation should be applied here, consistent with the binding precedent of, inter alia, several Supreme Court and Ninth Circuit cases. (See Opp'n at 13–14 (citing United States ex rel. Marcus v. Hess, 317 U.S. 537, 544–45 (1943), Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 672 (2008), United States v. McLeod, 721 F.2d 282, 284 (9th Cir.1983), United States v. Eghbal, 548 F.3d 1281, 1284 (9th Cir.2008), and United States ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1174 (9th Cir.2006)).)

The Court has reviewed all the authorities cited by the parties and finds none definitively answer the question of whether to apply "but for" causation, proximate causation, or the looser standard sought by the United States. In addition, there are factual and procedural distinctions between them and the present case, and most do not address causation under the FCA; the Court will not discuss these cases further, with two exceptions.

First, the Court is persuaded by the Tenth Circuit's decision in United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah,which discusses causation under the FCA, finding:

We agree that a standard requiring more than mere passive acquiescence is most consistent with the purposes of the FCA. Furthermore, such a standard strikes the appropriate balance between shielding from liability parties who merely fail to prevent the fraudulent acts of others, and ensuring that liability attaches for "affirmative acts" that do cause or assist the presentation of a fraudulent claim.

472 F.3d at 714–715. The Court agrees that causation under the FCA requires more than "mere passive acquiescence." Second, as the Court is compelled to follow binding precedent of this Circuit, the Court now applies both the "but for" and "proximate cause" tests to the facts at issue here, consistent with the Ninth Circuit's decision in United States v. Eghbal, upholding the district court's[6] application of both tests to evaluate a FCA claim. 548 F.3d at 1284–1285 ("The parties disagree about the requisite causation the Government must prove in order to establish FCA liability—a narrower proximate causation versus a "but for" standard—but the district court found that the undisputed evidence would satisfy either standard. This court agrees.").

The Court now turns to whether or not there remains a triable issue of fact as to causation under the FCA.

The Magidows argue the Court should narrow its causation inquiry and, as supported by their admissible evidence, evaluate Arnie Magidow's lack of involvement in and failure to exert any influence over Donnie Jr., Steve Mendell, and Anthony Magidow, who were involved in filling out and submitting the applications for Grants of Inspection to the United States. (See Mot. at 9–18; SUF ¶¶ 66–78.) Without such influence or involvement in the creation or submission of the applications, the Magidows argue, Arnie Magidow did not cause any false claims to be presented to the United States. (Id.)

As the Magidows do not have the burden of proof on this issue at trial, the Magidows meet their burden on the Motion by pointing to the absence of evidence supporting the United States' position and exceed their burden by producing admissible evidence showing Arnie Magidow's lack of involvement in the submission of the claims at issue in this case. Celotex, 477 U.S. at 325. The burden now shifts to the United States to show there is a genuine dispute of material fact that must be resolved at trial. Fed.R.Civ.P. 56(a); Celotex, 477 U.S. at 324; Anderson, 477 U.S. at 256.

In Opposition, the United States argues the Magidows attempt to limit the Court's inquiry unduly because, it argues, there is no requirement that Arnie Magidow personally submit the claims for liability to attach under the FCA. (See Opp'n at 13.) Specifically, the United States argues Arnie Magidow had a duty, and deliberately failed, to disclose his connection with the Facility on the applications for Grants of Inspection, thereby causing Westland/Hallmark to make a materially false statement on the applications, i.e., that Arnie Magidow was not "responsibly involved", upon which the United States relied in granting the applications. (See Opp'n at 12–22.)

The Court is not persuaded by the Magidows' arguments seeking to narrow the causation inquiry. According to the Supreme Court's decision in United States v. Bornstein, 423 U.S. 303 (1976) and the Ninth Circuit's decision in United States v. Mackby, 261 F.3d 821 (9th Cir.2001) ("Mackby I"), whether or not Arnie Magidow directed others to omit his name or influenced them directly to do so is not relevant for causation purposes under the FCA. Bornstein, 423 U.S. at 309 (false claim may be presented through an innocent, unknowing third party); Mackby I, 261 F.3d at 827. The Court now applies the causation standards, discussed supra.

Under the "but for" causation test, the Court evaluates whether or not the United States would have initially entered into or continued to engage in its contracts for meat products with the Facility, but for Arnie Magidow's concealment or omission of his involvement at the Facility. See Eghbal, 475 F.Supp.2d at 1014; Eghbal, 548 F.3d at 1284. Under the proximate causation test, the Court inquires whether Arnie Magidow's concealment or omission of his involvement at the Facility foreseeably caused the presentation of false claims to the United States. (Id.)

In Opposition, the United States offers admissible evidence in an attempt to raise a triable issue of fact. First, the United States offers evidence that Arnie Magidow was a convicted felon, barred from participating in the production of meat for human consumption, and that Arnie Magidow knew he could not have an inspection number in his name. The United States provides the 1999 deposition testimony of Arnie Magidow in a different case, where he testified under oath, as follows:

Q. Have you ever been convicted of a felony?

A. Yes, I have.

Q. When was that?

A. ′85.

Q. What was the felony that you were convicted of?

A. What was it? I don't know the—I don't remember the actual limitation. Fraud, I guess, mail order fraud and mail—what? Mail fraud. I don't remember.

Q. And was that in conjunction with some kind of a prosecution of you or your business entity?

A. Yeah.

Q. And that was in 1985?

A. I believe so.

Q. Was it the federal government or the state government?

A. No. Federal.

Q. And was there some kind of a court order that prohibited you, as a result of that conviction, from engaging in the or working in or having an ownership interest in any meat packing plant?

A. No. If you want to know the answer to the question, I will make it easy for you. I can't have an inspection number in my name. I can have any plant I want.

(Lee Decl., Ex. 1 at 61:20–62:18.) This testimony shows Arnie Magidow understood as of 1999 that his felony convictions affected his ability to participate in meat processing. Second, the United States also presents evidence that Arnie Magidow participated in the operation of Cattleman's Choice and M & M Management, both of which operated along with Westland/Hallmark in its meat production at the Facility, but that none identified themselves as participants on the applications for Grants of Inspection with the USDA, in violation of USDA regulations and requirements. (Opp'n at 3–7, 14–22; GSUF ¶¶ 1–4, 6, 8–10, 16, 17, 25–28, 31–32.)

Third, the United States offers evidence that it would never have approved the Grants of Inspection applications had Arnie Magidow been disclosed as "responsibly connected." Scott Safian, the Director of the Evaluation and Enforcement Division at the USDA, testifies in his declaration that he was aware of Arnie Magidow's federal convictions in 1974 and 1983 and states "[b]ased on Magidow's history of felony convictions, I would have initiated the necessary procedures to seek to refuse to provide or withdraw inspection service from any federally-inspected facility with which Magidow was responsibly connected."(Safian Decl. ¶ 5.) Likewise, Duane Williams, the Branch Chief of the Agricultural Marketing Service ("AMS"), testifies that he was unaware of Arnie Magidow's involvement in the Facility when the United States awarded contracts to the Facility and that every time Williams authorized payment of an invoice from the Facility, he was unaware of Magidow's involvement at the Facility. (Williams Decl. ¶¶ 8, 9.)

Despite its attempt to do so with admissible evidence, the United States cannot raise a triable issue of fact as to causation under either "but for" or proximate causation.[7]Although, as stated above, the United States need not show that Arnie Magidow actually submitted the claims or coerced those who submitted the claims to demonstrate causation, the United States, nevertheless, does not present any admissible evidence that Arnie Magidow did anything to cause a false claim to be presented to the United States. To the contrary, all of the persons involved with the drafting and submission of the applications for Grants of Inspection testified that Arnie Magidow was not involved in, exerted no influence over, and had nothing to do with, the application process. (See SUF ¶¶ 27, 32–35, 37, 38, 41, 46–49, 51–52, 59–62.) There is simply no evidence of a nexus between any act of Arnie Magidow and the submission of purported false claims to the United States. See, e .g., Bornstein, 423 U.S. at 312–313 (finding the FCA "penalizes a person for his own acts, not for the acts of someone else"); United States ex rel. Bane v. Breathe Easy Pulmonary Servs., Inc., 597 F.Supp.2d 1280, 1292 (M.D.Fla.2009) (finding link between the defendant's conduct and the submission of the claims "is simply too attenuated to support liability under the causation element alone."); Sikkenga, 472 F.3d at 714 (finding the causation requirement of the FCA "separates the wheat from the chaff allowing FCA claims to proceed against parties who can fairly be said to have caused a claim to be presented to the government, while winnowing out those claims with only attenuated links between the defendants' specific actions and the presentation of the false claim.").

As causation is an essential element of the United States' FCA claims against the Magidow Defendants, for which the United States has the burden of proof at trial, the Court finds the United States cannot meet its burden and fails to raise a triable issue of fact. Celotex,477 U.S. at 322; Anderson, 477 U.S. at 252. Accordingly, the Court grants the Magidows' Motion as to the United States' Fourth and Fifth claims for violations of the FCA.

B. Inhumane Handling During Arnie Magidow's Lifetime

The Magidows move for summary judgment on the United States' first, second, third, fifteenth, and seventeenth claims because, they argue, the United States cannot meet its burden of proving that egregious inhumane handling occurred at the Facility in Arnie Magidow's lifetime and that the United States would not have entered into contracts with the Facility had it known of the acts.[8] (See Mot. at 18–21; Reply at 9–10.) Specifically, in light of the United States' reliance only on the testimony of Ugarte Navarro to support its claim of inhumane treatment during Arnie Magidow's lifetime, the Magidows argue the testimony does not describe conduct that rises to the level of illegal inhumane handling. (See Reply at 9–10.)

As the Magidows do not have the burden of proof on this issue at trial, they meet their burden on the Motion by pointing to the absence of evidence supporting the United States' position. Celotex, 477 U.S. at 325. The burden now shifts to the United States to show there is a genuine dispute of material fact that must be resolved at trial. Fed.R.Civ.P. 56(a); Celotex, 477 U.S. at 324; Anderson,477 U.S. at 256.

In Opposition, the United States argues the testimony of Ugarte Navarro demonstrates that inhumane handling took place at the Facility during Arnie Magidow's lifetime. Ugarte Navarro testified he worked at the Facility for about 25 years, until the Facility shut down. (SeeSGI ¶ 91; Lee Decl., Ex. 10, Ugarte Navarro Dep. (hereinafter "Ugarte Navarro Dep.") at 11:23–24; 13:13–14.) He testified that the police showed him portions of the HSUS's undercover video of the Facility. (Ugarte Navarro Dep. at 55:20–56:11, 57:9–18.) He explained what he saw in the video accurately portrayed the workers'—and his own—treatment of cattle at the Facility while he worked there. (Id.) He specifically testified that he and other workers at the Facility slaughtered non-ambulatory cattle throughout his 25–year tenure, as well as frequently used forklifts and chains to move non-ambulatory cattle. (Id. at 60:4–13, 74:22–75:4, 75:7–76:4, 82:14–83:20, 111:18–112:23, 113:11–15, 113:23–114:5, 132:11–134:4.)He also testified that he and his co-workers used electric shocks, called a "Hot–Shot," on the cattle regularly during his 25–year tenure. (Id. at 85:2–12.)Also, he sprayed a water hose into the nostrils of the cattle to force the cattle to stand up. (Id. at 87:23–88:15.)Finally, he testified that he and his co-workers would use their cellular telephones to warn each other of the location of the government inspectors to evade detection of the inhumane treatment and slaughter of non-ambulatory cattle. (Id. at 120:13–124:13.)

The United States also offers the Williams Declaration to show that the inhumane treatment of the cattle at the Facility rendered the Facility ineligible to contract with the United States for provision of meat products as well as rendered the meat products themselves ineligible. (See Williams Decl.) Duane Williams is the Branch Chief of the United States Department of Agriculture, Agricultural Marketing Service Contracting Branch, who was responsible for awarding AMS contracts to Westland/Hallmark from June 2002 to January 2011. (Id. at ¶ 1–2.)Williams explains in his declaration the ordinary procurement process for the meat products at issue in this case, as well as eligibility requirements for contractors, e.g., the "contractors' establishments must be operating under a valid grant of inspection under the Federal Meat Inspection Act in order to be eligible to receive an award of contracts."(Id. at ¶ 5.) He also explains AMS's animal welfare provisions in its meat purchase contracts since 2000 and why those provisions were implemented: "solely to ensure the humane treatment of animals."(Id. at ¶¶ 12–13.)Finally, Williams states that AMS would not have entered into contracts with the Facility had AMS known of the inhumane treatment of the cattle and, even if AMS had learned of the inhumane treatment after contracting with the Facility, AMS would not have authorized future payment to the Facility and would have rejected the meat products and directed the Facility to "end production." (Id. at ¶ 14 .)

Given the testimony about the regular occurrence of inhumane treatment over the course of 25 years, the Court finds unavailing the Magidows' argument that the conduct explained by Ugarte Navarro is not sufficient to show "egregious inhumane treatment." The Court agrees with the Magidows that Ugarte Navarro did not testify specifically, inter alia, about "whether hot shots were used excessively."(Reply at 9–10 (citing 9 C.F.R. § 313.2.) According to 9 C.F.R. Section 313.2, there are limited circumstances under which electronic prods may be used and disabled or non-ambulatory animals may be dragged or moved with equipment. 9 C.F.R. § 313.2. Ugarte Navarro did, however, testify as to the frequent use of forklifts employed to move non-ambulatory cattle. (Ugarte Navarro Dep. at 60:4–13, 74:22–75:4, 75:7–76:4, 82:14–83:20, 111:18–112:23, 113:11–15, 113:23–114:5, 132:11–134:4.) Forklifts are not identified under the C.F.R as "equipment suitable for such a purpose; e.g., stone boats." 9 C.F.R. § 313.2(d)(3). In fact, forklifts could qualify as a "sharp or pointed objects" that should not be used "to drive livestock." 9 C.F.R. § 313.2(c). Moreover, shooting water into the nostrils of the animals to make them stand up is not identified as an appropriate treatment of animals under the C.F.R., but Ugarte Navarro testified doing this repeatedly. (Ugarte Navarro Dep. at 87:23–88:15.)

Finally, the Court points out the Magidows incorrectly asserted that Ugarte Navarro did not testify "whether chains were used to move live [animals]." (Reply at 9–10.) In fact, Ugarte Navarro testified that he and his co-workers frequently used chains to drag live cattle (Ugarte Navarro Dep. at 113:11–114:5) and that they would drag non-ambulatory cattle when the animals were unable to get off the trucks, which occurred for two or three animals per truckload (Id. at 112:2–15). His testimony on this point warrants a logical inference that the cattle the workers dragged with chains in these instances had not been stunned, in violation of 9 C.F.R. § 313.2(d)(2), and also clearly shows the cattle being dragged were alive. For these reasons, the Court finds the Ugarte Navarro deposition testimony sufficient evidence of unlawful inhumane treatment.

The Magidows next argue that, even if Ugarte Navarro's testimony demonstrates inhumane treatment of the cattle, the United States "admits that regulatory deviations alone do not constitute egregious acts of inhumane handling."(Reply at 10 (citing portions of the Dr. Engeljohn deposition transcript).) Dr. Engeljohn, the USDA FSIS Office of Field Operations' Federal Rule of Civil Procedure 30(b)(6) witness, testified at his deposition that some noncompliance issues at meat processing facilities, like the Facility, are more serious than others; he explained the difference by distinguishing food safety noncompliance from timekeeping noncompliance. (See Supp. Khan Decl., Ex. 2, Deposition of Dr. Engeljohn ("Engeljon Dep.") at 59:10–61:13.) He also discussed the 2005 noncompliance issue at the Facility where inhumane treatment was observed and documented. (Id. at 162:14–164:16.)During the deposition, counsel pointed to one aspect of the 2005 noncompliance report, specifically item number 7, and apparently read the following into the record: "Too much electronic prodding causing animals to get more excited while being driven towards the stunning box. Out of 100 animals observed, 33 were prodded, and out of the 33, 22 animals required multiple prodding to get them into the knocking box."(Id. at 163:18–25.)Counsel then asked Dr. Engeljohn, "Is it fair to say this was not considered to be egregious—egregious violation of policy?"(Id. at 164:12–14.)Dr. Englejohn answered "It is correct to say it's not an egregious violation."(Id. at 164: 15–16.)

Dr. Englejohn was answering questions based on one incident documented in 2005 of inhumane treatment of cattle at the Facility. The Magidows do not, however, designate any testimony of Dr. Englejohn admitting the inhumane treatment documented by the HSUS video and described by Ugarte Navarro in his deposition failed to demonstrate an egregious violation. Accordingly, the Court does not find the Dr. Englejohn deposition excerpts to be relevant to the Court's determination of whether or not the United States can raise a triable issue of fact as to inhumane treatment at the Facility during Arnie Magidow's lifetime.

Based on the foregoing, the Court finds the United States has met its burden to raise a triable issue of fact with the Ugarte Navarro deposition testimony of the inhumane treatment of the cattle at the Facility during Arnie Magidow's lifetime. The United States has also raised a triable issue of fact with the Williams Declaration that the United States would not have entered into contracts with the Facility had it known of the inhumane treatment. Celotex, 477 U.S. at 322; Anderson, 477 U.S. at 252. Accordingly, the Court denies the Magidows' Motion on the inhumane treatment claims.

C. Piercing the Corporate Veil

The Magidows move for summary judgment on the United States' twentieth and twenty-first claims because, they argue, the government cannot meet its burden to prove that Arnie Magidow was the alter ego of Cattleman's Choice or M & M Management. (SeeMot. at 21–23; Reply at 10–12.) Specifically, the Magidows argue "the evidence indisputably demonstrates that Arnie [Magidow] meticulously guarded and respected the separate corporate structure and assets of Cattleman's and M & M." (Mot. at 22 (citing SUF ¶¶ 107–116.)

As the Magidows do not have the burden of proof on this issue at trial, they meet their burden on the Motion by pointing to the absence of evidence supporting the United States' position and exceed their burden by producing admissible evidence to support their argument. Celotex, 477 U.S. at 325. The burden now shifts to the United States to show there is a genuine dispute of material fact that must be resolved at trial. Fed.R.Civ.P. 56(a); Celotex, 477 U.S. at 324; Anderson, 477 U.S. at 256.

In Opposition, the United States argues its Declaration of Dr. Udinsky[9], along with his Economic Rebuttal Report ("Udinsky report") attached thereto as Exhibit 1, meet its burden to raise a triable issue of fact that Arnie Magidow was the alter ego of Cattleman's Choice and M & M Management, to pierce the corporate veil and reach the individual assets of the Magidows. (See Opp'n at 23–24.)

The requirements to pierce the corporate veil are substantially similar between federal and California law. See, e.g., Ministry of Defense of the Islamic Republic of Iran v. Gould, Inc., 969 F.2d 794, 769 n. 3 (9th Cir.1992). Here, the Court applies California law to determine whether or not to pierce the corporate veil. SEC v. Hickey, 322 F.3d 1123, 1128 (9th Cir.2003) (citations omitted)."California law recognizes an alter ego relationship, such that a corporation's liabilities may be imposed on an individual, only when two conditions are met: (1) there is such a unity of interest and ownership that the individuality, or separateness, of the said person and corporation has ceased, and (2) an adherence to the fiction of the separate existence of the corporation would ... sanction a fraud or promote injustice."Id. (internal quotations omitted) (quoting Firstmark Capital Corp. v. Hempel Fin. Corp., 859 F.2d 92, 94 (9th Cir.1988) and Wood v. Elling Corp., 20 Cal.3d 353 (1977)).

The Udinsky report was prepared in rebuttal to the Tucker expert report on the issue of alter ego liability. (Udinsky Decl., Ex. 1, Udinsky report at 3.) Dr. Udinsky opines that Tucker failed to consider necessary factors when evaluating alter ego. (Id.) He also states that he reached opposite conclusions as to Arnie Magidow's commingling of assets with Cattleman and M & M and as to the undercapitalization of M & M, and points out Tucker failed to use Generally Accepted Accounting Principles when reaching his contrary conclusions. (Id.) Dr. Udinsky evaluated documentary evidence as well as deposition testimony when reaching his conclusions. Based on his analysis of the evidence, in light of industry standards and evaluation tools, Dr. Udinsky opines that "it would be reasonable to conclude that Cattleman's Choice, Inc., and M & M Management, LLC, were being run in a manner which made them alter egos of Aaron Magidow."(Id. at 24.)

Based on the Udinsky report, despite the sustained legal conclusion objections thereto, the Court finds the United States meets its burden to raise a triable issue of fact that Arnie Magidow was an alter ego of Cattleman's Choice and M & M, sufficient for the Court to pierce the corporate veil and hold the Magidows personally liable. Celotex, 477 U.S. at 322; Anderson, 477 U.S. at 252. Accordingly, the Court denies the Magidows' Motion on the alter ego claims.

D. Falsity Under the False Claims Act

In its Opposition, the United States requested entry of summary judgment as to the element of falsity under the False Claims Act. (See Opp'n at 24–25.) The United States has not moved via a cross-summary judgment motion but, rather, argues there is no material dispute of fact on this issue and the Magidows have been given "a full and fair opportunity to ventilate the issues involved in the motion."[10](Id. at 24 (internal quotations omitted) (citing Cool Fuel, Inc. V. Connett, 685 F.2d 309, 312 (9th Cir.1982))). The United States argues "the evidence is indisputable that Cattleman's and M & M each "conducted operations" at the Facility. As such 9 C.F.R. § 304.1(a) required them to submit their own applications for inspection, or disclose themselves along with Westland on HMP's applications for inspection. They did neither."(Id. at 25.)

In their Reply, the Magidows materially dispute, with admissible evidence, nearly each fact that the United States argues is undisputed on the falsity issue. (See Reply at 13–15; Reply to SGI.) In particular, the Magidows produce admissible evidence that Cattleman's Choice did not have offices at the Facility and did nothing at the Facility, as well as evidence that Arnie Magidow had no management role in M & M Management. (Id. at 13–14 (citing Supp. Khan Decl. at Exs. 1, 5, 7; Khan Decl. at Exs. B, J, P, S, W, X, GG; see also Magidows' Reply to SGI.)

Based on the admissible evidence relied upon by the parties to support their respective positions on this issue, the Court finds this issue disputed. Accordingly, the Court must deny the United States' request for entry of summary judgment on the element of falsity. Cool Fuel, Inc. V. Connett, 685 F.2d at 311–312.

V. CONCLUSION

For the foregoing reasons, the Court GRANTS the Magidows' Motion for Partial Summary Judgment with respect to the United States' Fourth and Fifth claims for relief under the False Claims Act. The Court DENIES the Magidows' Motion with respect to the remaining claims, i.e., claims 1–3, 15, 17, and 20–21. The Court also DENIES the United States' Motion for Partial Summary Judgment.

[1] The Magidows failed to separate their exhibits to the Khan Declaration with tabs, in violation of Local Rule 11–5.3.

[2] The Magidows substituted several exhibits on April 2, 2013 to reflect necessary redactions of private information. (SeeDoc. No. 429.)

[3] The United States also submits undisputed facts within its SGI, to which the Court refers as "GSUF."

[4] The Court issues its evidentiary rulings in a separate order.

[5] The Court notes the Magidows do not move for summary judgment on the issue of whether or not Arnie Magidow was "responsibly connected" to or "conduct[ed] operations" at the Facility, which affects the Court's determination of the ultimate issue of whether or not there were false claims presented to the United States in this case. (See Mot.; Reply.) For the purposes of the Court's analysis of causation under the FCA, although in no way conceded by the Magidows, the Court must assume that Arnie Magidow was "responsibly involved" with and "conducted business" at the Facility and should have, at the least, been disclosed to the United States on the Facility's applications for Grants of Inspection.

[6] The district court in United States v. Eghbal found as follows:

The FCA's causation requirement is satisfied if the defendant caused a claim to be submitted to the government, even if he or she did not personally submit the claim. The FCA requires a causal rather than a temporal connection between fraud and payment. [¶] A demonstration that the government would not have guaranteed the loan but for the false statement is sufficient to establish the causal relationship between the false claim and the government's damages necessary to permit recovery under the False Claims Act. [¶] Moreover, where a defendant's false statements concern the buyer's financial qualifications for a HUD-insured home mortgage loan, the false statements are more than a but-for cause of any damages that the government sustains as a result of the borrower's default. In Spicer, the Court found that while it was undoubtedly true that in each case other factors also caused the buyer's default ... as long as [the] misrepresentations were a material and proximate cause, they need not have been the sole factor causing HUD's losses. [¶] Defendants have admitted that HUD would not have insured the 27 loans if it knew that they had paid, or caused to be paid, the down payments, and it would not have insured the 27 loans if the HUD–1 Addendum, containing Defendants' false statements, had not been signed. Additionally, the uncontroverted evidence establishes that HUD would not have issued mortgage insurance without the HUD–1 Addendum. Accordingly, there is no dispute that but for Defendants' false statements HUD would not have [i]nsured the 27 home mortgage loans at issue and after the buyers' defaulted it would not have been obligated to pay the lender's claims. Therefore, the evidence establishes that Defendants' false statements caused the Government to pay out money.

United States v. Eghbal, 475 F.Supp.2d 1008, 1014–1016 (C.D.Cal.2007) (citations, internal quotations, footnotes omitted).

[7] The evidence the United States presents on this issue would be persuasive if the United States were demonstrating that Arnie Magidow was "responsibly connected" to the Facility. Here, however, the United States must show that Arnie Magidow personally did something that caused the submission of the claims at issue; whether or not Arnie Magidow was "responsibly connected" to the Facility is not necessarily relevant to this inquiry.

[8] The Magidows argue their liability is limited to the period of August 8, 2003, when Westland entered into its first contract with the United States, and August 7, 2006, when Arnie Magidow died. (See Mot. at 19 (citing SUF ¶¶ 5, 64). The United States does not address this argument in its Opposition papers. (See Opp'n.) Accordingly, the Court finds the United States has conceded this point.

[9] The Court notes the Magidows object to the Udinsky Declaration and his expert report on a number of bases, which the Court has sustained in part and overruled in part, as discussed in the Court's separate evidentiary rulings.

[10] The Court hereinafter refers to the United States' request for entry of summary judgment on the falsity element as the United States' Motion for Partial Summary Judgment.

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Case Information

January 22, 2015

2013-04-20

Phillips

No. EDCV 08–00221–VAP (OPx).

United States District Court, C.D. California

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