United States District Court, D. South Dakota, Northern Division
UNITED STATES OF AMERICA, ex rel. DR. JOHN A MILLIN; and DR. JOHN A. MILLIN, individually, Relator,
LARRY F. KRAUSE, an individual; and KRAUSE-ALLBEE TRUCKING, INC., a South Dakota Corporation, Defendants.
CHARLES B. KORNMANN UNITED STATES DISTRICT JUDGE.
behalf of the United States and himself, Dr. John A. Millin
("Relator, " together with the United States,
"plaintiffs") filed suit on July 18, 2016, against
Larry F. Krause and Krause-Allbee Trucking, Inc.
("defendants") in a qui tam action under
the False Claims Act ("FCA"), Title 31 U.S.Q §
3729, et. seq., as amended, to recover damages and
penalties related to defendants' alleged false claims for
payment to the United States Department of Agriculture, Farm
Services Agency ("FSA") in connection with farm
subsidy payments, farm disaster payments, and loans for
farmers. Relator alleges that defendant Krause misrepresented
the ownership of Krause- Allbee Trucking by submitting
filings to the FSA stating that Relator and his then spouse,
Lori Millin, maintained ownership interests in Krause-Allbee
Trucking, when Relator did not maintain any such ownership
interest. Relator states that he discovered he did not hold
any ownership interest in Krause-Albee Trucking after divorce
from his then spouse, when his attorney contacted defendants
to request Krause-Allbee Trucking's financial statements.
Relator alleges that Krause filed documents with the FSA or
the United States Department of Agriculture or both in 2002,
indicating that Relator and his then spouse owned stock in
Krause-Allbee Trucking. Krause also allegedly signed and
submitted to the FSA a document stating that Relator
designated Krause-Allbee Trucking to receive FSA payments to
which Relator was entitled. The same Farm Operating Plan
listing ownership interests in Krause-Allbee Trucking was
again filed in 2003 with the FSA. In 2004, 2005, and 2006,
Relator alleges that Krause filed documents with the FSA,
stating Relator and his then spouse held the same ownership
interests in Krause-Allbee Trucking.
to plaintiffs' Complaint, filings with the FSA on behalf
of Krause-Allbee Trucking for 2007, 2008, and 2009 similarly
list Relator and his then spouse as holding ownership
interests in Krause-Allbee Trucking. Documents from 2009
include minutes of a corporate meeting dated January 14,
2009, indicating that Relator and his then spouse were the
only stockholders of Krause-Allbee Trucking. Relator alleges
that additional documents from 2009, including the Farm
Operating Plan, list Relator and his then spouse as
guarantors of a loan to Krause-Allbee Trucking from the First
State Bank of Warner, but that both Krause and the . First
State Bank of Warner have represented that Relator never
guaranteed such a loan. Relator further alleges that, from
2010-2015, Krause filed Farm Operating Plans with the FSA,
listing Relator and his then spouse as holding ownership
interests in Krause-Allbee Trucking.
2002, 2006, and 2009 the FSA sent Krause-Allbee Trucking
letters confirming the ' stock ownership, stating that
"[y]ou are 'actively engaged in farming' and
eligible for payments and benefits" and "Adjusted
Gross Income provisions have been met based on your
certifications." According to plaintiffs' Complaint,
Krause-Allbee Trucking received subsidies from the FSA of
$307, 924 in 2008, $62, 506 in 2009, $347, 134 in 2010, $72,
205 in 2011, $258, 104 in 2012 and $108, 585 in 2013.
Plaintiffs' Complaint argues that the alleged false
statements regarding ownership interests were material to the
FSA's grant of farm subsidies, because Krause's
payments would have otherwise been capped by limits on an
individual's receipt of farm subsidies. By listing
Relator and his then spouse as owners of Krause-Allbee
Trucking, plaintiffs' Complaint alleges that
"[d]efendants were able to receive farm subsidy payments
to which they would not have been entitled if Krause and his
wife were listed as the owners of Krause-Allbee
Complaint further states that Krause may have filed similar
statements on behalf of Krause-Allbee Farming, Inc. or
L&L General Partnership or both, and that these entities,
along with K&L Land & Cattle, LLC, received subsidies
from the FSA based on Farm Operating Plans submitted to the
filed claims for relief under the FCA, 3.1 U.S.C. §
3729(a)(1), (i) for presenting a false claim for payment or
approval, (ii) making or using a false record or statement
material to a false claim, (iii) conspiring to defraud the
Government, and (iv) using a false record or statement to
conceal, avoid, or decrease an obligation to pay or transmit
money or property to the Government (also called a
"reverse false claim"). Plaintiffs' Complaint
also seeks a declaratory judgment pursuant to 28 U.S, C.
§ 2201 for Relator regarding his ownership interest in
Krause-Allbee Trucking, as well as a claim of unjust
enrichment against defendants for receiving payments from
farm subsidy programs on Relator's behalf.
move to dismiss plaintiffs' claims based on the statute
of limitations codified in the FCA at 31 U.S.C. § 3731
(b), stating that the six-year limitation on claims bars
"the majority of plaintiffs' claims. Defendants also
submit that plaintiffs' Complaint failed to meet the
plausibility requirement of Fed.R.Civ.P. 8(a) and the
particularity requirement of Fed.R.Civ.P. 9(b) for fraud
claims. Defendants further argue that plaintiffs'
conspiracy claim is barred by the intracorporate conspiracy
doctrine. Relator's request for declaratory judgment,
defendants state, must be dismissed if the FCA claims are
dismissed, as the Declaratory Judgment Act does not provide
an independent basis for jurisdiction. Finally, defendants
argue that Relator's claim for unjust enrichment must be
dismissed, stating that Relator has not pled the elements
required for such a claim. These arguments are addressed in
filed an opposition to the motion to dismiss requesting, in
the alternative, leave to amend the Complaint.
applicable statute of limitations under the FCA, 31 U.S.C.
motion to dismiss may be granted "when a claim is barred
under a statute of limitations." Bradley Timberland
Res, v. Bradley Lumber Co., 712 F.3d 401, 406 (8th Cir.
2013) (citing Varner v. Peterson Farms, 371 F.3d
1011, 1016 (8th Cir. 2004)). A court may dismiss a complaint
pursuant to Fed.R.Civ.P. 12(b)(6) when it appears from the
face of the complaint that the claim is time-barred and no
facts are alleged to avoid the bar of the statute. Wong
v. Wells Fargo Bank N.A., 789 F.3d 889, 897 (8th Cir.
2015) (citing Illig v. Union Elec. Co., 652 F.3d
971, 976 (8th Cir. 1995)); Varner v. Peterson Farms.
371 F.3d 1011, 1016 (8th Cir.2004); and Brictson v.
Woodrough, 164 F.2d 107 (8th Cir. 1947). In deciding a
motion to dismiss under Fed.R.Civ.P. 12(b)(6), a court must
assume "all facts in the complaint to be true" and
must construe "all reasonable inferences most favorably
to the complainant." U.S. ex rel. Raynor v.
Nat'l Rural Utilities Co-op. Finance. Corp., 690
F.3d 951 (8th Cir. 2012) (citing B&B Hardware, Inc.
v. Hargis Indus., Inc., 569 F.3d 383, 387 (8th
Cir.2009); and Eckert v. Titan Tire Corp,, 514 F.3d
801, 806 (8th Cir.2008)).
that all of the facts in plaintiffs' Complaint are true
and drawing inferences in plaintiffs' favor,
plaintiffs' claims allege that defendants may have
committed violations of the FCA each year from 2002-2015.
However, 31 U.S.C. § 3731(b) provides that a civil
action may not be brought under the FCA
(1) more than 6 years after the date on which the violation
of section 3729 is committed, or
(2) more than 3 years after the date when facts material to
the right of action are known or reasonably should have been
known by the official of the United States charged with
responsibility to act in the circumstances, but in no event
more than 10 years after the date on which the violation is
committed, whichever occurs last.
31 U.S.C. § 3731(b)(1) or (b)(2) applies in the instant
case, then, determines whether false claims submitted after
18 July 2010 or 18 July 2006 remain viable. Because it is
clear from the face of the Complaint that plaintiffs plead
claims that may be barred by the statute of
limitations-specifically, any false claims allegedly
submitted by defendants prior to either of these dates-we may
decide this issue as raised in the defendants' motion to
and defendants acknowledge that where, as here, the
government declines to join a civil action brought by a
private person, the Eighth Circuit has not determined which
limitations period applies. Moreover, circuit courts are
split on this issue. As a question of first impression in our
circuit on which a number of courts are in disagreement,
then, this Court undertakes a review of rationale given by
leading opinions regarding which statute of limitations
applies to private actions brought under the FCA.
Congress has not acted over a period of 25 years to address
all these questions and different interpretations of the
statute is a mystery to me. This inaction is a detriment to
litigants and the courts.
Interpretations of3lU.S.C. § 3731(b) in the Eighth
their motion to dismiss plaintiffs' claims as barred by
the statute of limitations, defendants state that the
six-year limitation applies here, "as the three-year
limitation applies only to the government." In support
of this statement, defendants cite an unreported case
(U.S. ex rel. Read v. Central Plains Clinic, 1998 WL
663330 (D.S.D. 1998)), an Eighth Circuit case in which the
six-year statute of limitations was not on appeal and so not
considered in the Court's decision (Baycol Prods.
Litig., 732 F.3d 869 (2013)), and two cases from the
District of Minnesota which cite an Eighth Circuit case,
Joshi, as precedent (U.S. ex rel. Dicken v. Nw.
Eye Center, P.A., 2017 WL 2345579 (D. Minn. 2017); and
U.S. ex rel. Sammarco v. Ludeman, 2010 WL 681454 (D.
Minn. 2010) (unreported)). The Court in Joshi,
however, in fact declined to decide whether § 3731(b)(2)
applies where the government does not intervene (U.S. ex
rel. Joshi v. St. Luke's Hosp., Inc., 441 F.3d 552,
559 (8th Cir. 2006)). There is no case law that otherwise
determines how this Court must decide this issue.
have recognized three approaches to interpreting how the
statute of limitations in 31 U.S.C. § 3731(b) applies to
actions brought by a private person in which the government
declines to intervene. The first approach, which defendants
argue this court should adopt, interprets § 3731(b)(2)
as applying to the government only and as inapplicable in
cases where the government does not intervene. U.S. ex
rel. Sanders v. N. Am, Bus. Indus., Inc., 546 F.3d 288
(4th Cir. 2008). The second approach asserts that private
parties are entitled to the 10 year statute of limitations
§ 3731(b)(2) and that the limitations period begins on
the date the government should have known of facts material
to the right of action. U.S. ex rel. Pogue v. Diabetes
Treatment Ctrs. of Am., 474 F.Supp.2d 75 (D.D.C. 2007).
Finally, the third approach is that the private party stands
in for the government where the government declines to
intervene, and that the limitations period begins to run on
the date that the plaintiff knew or should have known the
facts relevant to the right of action. U.S. ex rel. Hyatt
v. Northrop Corp., 91 F.3d 1211 (9th Cir. 1996).
First approach: Limiting private plaintiffs to the six year
Sanders, the Fourth Circuit decided that, based upon
a claimed plain reading of § 3731(b), it is clear that
Congress intended clause (b)(2) of that section to apply only
to cases in which the government is a party, as reading
clause (b)(2) to apply when the government is not a party
produces the "bizarre" result in which "the
limitations period in a relator's action depends on the
knowledge of a nonparty to the action." U.S. ex rel.
Sanders v. N. Am. Bus. Indus., Inc., 546 F.3d 288, 293
(4th Cir. 2008). Such an interpretation of the
government's awareness of facts relevant to the claim
"does not notify the relator of anything, so that
knowledge cannot reasonably begin the limitations period for
a relator's claims." Id. at 294. Moreover,
the government official responsible for acting on such
knowledge cannot "be charged with any responsibility
other than to see that the government brings or joins an FCA
action within the limitations period." Id.
There is no responsibility for such official to assume that a
private party will bring an FCA action.
Fourth Circuit further explains that, following the Supreme
Court's decision in Graham, it is clear that the
reference to a "civil action" in § 373
l(b)'s preface should not be interpreted to mean that all
civil actions are covered by each clause of § 3731(b),
but rather that "only a subset of civil actions may
benefit from the extended limitations period in §
3731(b)(2)-those in which the government is a party."
Id. at 295 (citing Graham Cty. Soil & Water
Conservation Dist. v. ex rel. Wilson, 545 U.S. 409, 411
(2005)). The Fourth Circuit notes that § 3731(b)(2) is
almost identical to another federal statute, 28 U.S.C. §
2416(c), which "tolls the generally applicable statute
of limitations in actions brought by the United States-and
only by the United States--until 'facts material to the
right of action' are actually or constructively known by
an 'official of the United States charged with the
responsibility to act in the circumstances.'"
Sanders at 294 (internal citations omitted). It is
argued then that Congress transcribed language enacted in 28
U.S.C. § 2416(c), which applies only to the government,
when adopting § 3731(b)(2), suggesting that Congress
intended § 3731(b)(2) to similarly only apply to the
§ 3731 (b)(2) to apply to private plaintiffs could
result in unfavorable outcomes. In addition to requiring
defendants, in asserting a statute of limitations defense,
"to seek out and litigate the identity and knowledge of
a government official not a party to the action, " it
would also allow private plaintiffs to delay in filing an
action, increasing their own recovery in doing so and
rendering the six-year statute of limitations in §
3731(b)(1) superfluous. Id. at 295. A private
plaintiffs failure to timely file a claim may also cause the
government to lose the opportunity to bring a criminal action
for the fraud, which must be filed "within five years of
the violation, " although this outcome could also occur
in the event a plaintiff exercises the full six-year
limitations period set forth in ...