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

Background

Kenneth Kraemer and Kraemer Farms, LLC brought a qui tam action on behalf of the United States against United Dairies, L.L.P., Union Dairy, L.L.P., Westland Dairy, LLP, Alpha Foods, L.L.P., and other named defendants. A qui tam action allows a private person to bring certain claims in the Government’s name. The Government declined to intervene but acknowledged that the plaintiffs could proceed in the United States’ name.

The complaint included a third cause of action for unjust enrichment. The case proceeded to a bench trial in August 2021. The court found that plaintiffs had not proved that defendants knowingly made false claims in violation of the False Claims Act. It nevertheless found that defendants had been unjustly enriched and determined that the Government had incurred damages of $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.

Jurisdiction and Standing

After judgment, the Government moved for relief from judgment or, alternatively, to amend the judgment. The Government argued that plaintiffs lacked standing to pursue the unjust-enrichment claim on the Government’s behalf. The defendants agreed and requested dismissal of the unjust-enrichment judgment.

The court explained that subject-matter jurisdiction—the court’s legal authority to hear a claim—cannot be waived and may be challenged at any stage, including after trial and entry of judgment. Under Federal Rule of Civil Procedure 12(h)(3), a court must dismiss an action if it lacks subject-matter jurisdiction. Standing is a requirement for that jurisdiction. To have standing under the Constitution, a plaintiff must show a concrete injury, a connection between the injury and the challenged conduct, and a likelihood that a favorable decision would remedy the injury.

The court relied on the Supreme Court’s decision concerning standing in qui tam cases. That decision recognizes that a relator may assert the Government’s injury when pursuing a False Claims Act violation because federal law assigns that claim to the relator. But, according to the court, Congress authorized that assignment only for claims under 31 U.S.C. § 3729. A relator therefore cannot assert common-law claims based on harm suffered by the United States, including unjust enrichment.

Ruling

The court concluded that plaintiffs did not have standing to pursue the unjust-enrichment claim. It held that the lack of standing required dismissal even though the case had already gone through trial and judgment. The court also stated that its prior conclusion—that defendants had been unjustly enriched at the expense of American taxpayers—remained the same, but the plaintiffs could not pursue the claim on the Government’s behalf.

The court granted the United States’ motion for relief from judgment or, alternatively, to amend the judgment. It vacated the court’s March 30, 2022 judgment for plaintiffs on the unjust-enrichment claim and entered judgment in favor of defendants. It denied plaintiffs’ motion to amend the judgment and request for prejudgment interest as moot, and denied defendants’ motion to amend the judgment as moot.