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

Background

Kenneth Kraemer and Kraemer Farms brought a qui tam action on behalf of the United States against United Dairies, Union Dairy, Westland Dairy, Alpha Foods, and other defendants. The United States declined to intervene but allowed the plaintiffs to continue the action in the United States’ name. The complaint included an unjust-enrichment claim.

After a bench trial in August 2021, the court found that the plaintiffs had not proved that the defendants knowingly made false claims under the federal false-claims law. The court nevertheless found that the defendants had been unjustly enriched and determined that the resulting damages to the Government were $1,007,191.30. Thirty percent of that amount was awarded to Kenneth Kraemer under 31 U.S.C. § 3730(d)(2). The court did not award attorneys’ fees or costs to either side.

Standing and jurisdiction

The United States later moved for relief from judgment or, alternatively, to amend the judgment, arguing that the plaintiffs lacked standing to pursue unjust enrichment on behalf of the Government. The defendants agreed. The plaintiffs argued that the Government could not bring a post-trial motion because it was not a party, but the court held that it had an independent duty to determine whether it had subject-matter jurisdiction, meaning legal authority to hear the claim.

Under Federal Rule of Civil Procedure 12(h)(3), a court must dismiss an action if it lacks subject-matter jurisdiction. The court explained that Article III standing requires a concrete injury, a connection between the injury and the challenged conduct, and a likelihood that a favorable decision will remedy the injury.

The court relied on Supreme Court precedent holding that a qui tam plaintiff may assert the Government’s injury when pursuing a claim under the federal false-claims statute because federal law assigns that type of claim to the plaintiff. But the court concluded that Congress had authorized assignment only of claims under 31 U.S.C. § 3729, not common-law claims based on harm suffered by the United States. The court therefore held that the plaintiffs lacked standing to pursue the unjust-enrichment claim.

Ruling

The court stated that it was required to dismiss the claim even though the jurisdictional issue was raised after trial and judgment. It vacated its March 30, 2022 judgment on the unjust-enrichment claim and entered judgment in favor of the defendants. The court emphasized that its earlier conclusion that the defendants had been unjustly enriched remained unchanged, but the plaintiffs could not pursue that claim on the Government’s behalf after the Government declined to intervene.

Judge Donovan W. Frank granted the United States’ motion for relief from judgment or, alternatively, to amend the judgment. The court denied as moot the plaintiffs’ motion to amend the judgment and seek prejudgment interest, and denied as moot the defendants’ motion to amend the judgment.