United States of America, ex rel. v. United Dairies, L.L.P.

Background

Kenneth Kraemer and Kraemer Farms, LLC brought this whistleblower action for the United States under the False Claims Act. The complaint alleged that various dairy partnerships, companies, and individuals falsely reported corn intended for silage as grain corn on federal crop-insurance forms and obtained insurance payments as a result. Kraemer also alleged retaliation under the False Claims Act, and the plaintiffs asserted an unjust-enrichment claim for the Government.

The relevant crop-insurance program was administered through the United States Department of Agriculture, its Federal Crop Insurance Corporation, and its Risk Management Agency, although private insurance companies sold and administered the policies. The court concluded that the policy and related materials linked insurance coverage to the grower’s intended method of harvest. Thus, reporting corn as grain when the grower intended to harvest at least some of it as silage constituted a false claim. But the court found factual disputes about whether the defendants knowingly made false claims. Those disputes included the practices at Farm Services Agency offices, the lack of clear official guidance about intended use and brown mid rib corn, the defendants’ reliance on insurance agents, and whether that reliance was objectively reasonable.

Plaintiffs’ Motion for Partial Summary Judgment

The plaintiffs sought summary judgment—a ruling without a trial when no important factual dispute exists—on the False Claims Act liability claims against United, Union, Westland, Thomas Landwehr, Greg Marthaler, and Marthaler Farms. The court denied the motion because it could not decide as a matter of law whether the defendants knowingly submitted false claims. The court stated that a jury would have to resolve the disputed factual questions.

Defendants’ Motion for Summary Judgment

The defendants sought summary judgment on all remaining claims and against various defendants. The court denied the motion as to Westland, Union, Alpha, Dairyridge, Marthaler Farms, Marthaler, and Thomas Landwehr because the knowledge issue could not be resolved as a matter of law. It also denied the motion as to United, Nicholas Ridgeway, Craig Achen, Robert Hennen, Steven Landwehr, and Mathew Landwehr, explaining that liability could potentially arise from knowingly conspiring to present or cause the presentation of false claims.

The court rejected Dairyridge’s argument that the complaint did not describe the alleged fraud specifically enough. Reading the complaint as a whole, the court found that Dairyridge had sufficient information about the allegation that it falsely certified brown mid rib corn as grain when it was harvested as silage.

The court granted the defendants’ motion as to Silverstreak Dairies, LLC. The record showed that Silverstreak did not certify brown mid rib or similar varieties as grain corn during the relevant years, and the plaintiffs did not identify specific facts creating a genuine issue for trial. The order therefore dismissed all causes of action against Silverstreak with prejudice.

Unjust Enrichment, Retaliation, and Attorney Fees

The court denied the defendants’ motion concerning unjust enrichment because it could not determine whether the defendants were entitled to the crop-insurance benefits before resolving the False Claims Act issues.

The court also declined to dismiss Kraemer’s False Claims Act retaliation claim. The earlier arbitration of the plaintiffs’ contract claims did not bar the separate retaliation claim. The court further held that the retaliation provision was not limited to employees and that Kraemer, as a partner in United, could potentially qualify as an agent.

The court denied the request for attorney fees and expenses as premature. Under the False Claims Act, the defendants could potentially seek such fees only if they prevailed and the court found that the claims were clearly frivolous, clearly vexatious, or brought primarily to harass. The court found that the defendants had not prevailed because their liability could not yet be decided as a matter of law.

Disposition

The court denied the plaintiffs’ motion for partial summary judgment. It granted the defendants’ motion for summary judgment to the extent that all causes of action against Silverstreak Dairies, LLC were dismissed with prejudice, and denied the defendants’ motion in all other respects. Judge Donovan W. Frank ordered that judgment be entered as to Silverstreak.