D. Count II: Unjust Enrichment
The United States's unjust enrichment claim is that the
Postal Service was not properly paid for providing the service
of delivering the disputed mailings. There was no valid
contract (express or implied in fact) between R & W and the
Postal Service because, as discussed above, federal law bars
use of the non-profit rate for the disputed mailings. "A
promise to pay for services is sometimes implied by law, but
this is done only when the court can see that they were
rendered under such circumstances as authorized the party
performing to entertain a reasonable expectation of their
payment by the party soliciting the performance." Davidson v.
Westchester Gas-Light Co., 99 N.Y. 558, 566-67, 2 N.E. 892, 895
(1885) (citation omitted). More precisely, the United States's
unjust enrichment claim is a quantum meruit claim for the value
of services rendered, which is appropriate when there was no
properly agreed-upon payment amount for agreed-upon provision
of goods or services. See, e.g., Douglas Constr., Inc. v.
Marcais, et al., 239 A.D.2d 803, 804 657 N.Y.S.2d 835, 836-37
(3d Dept. 1997) (holding, where plaintiff rendered construction
services while contract was no longer valid, that "[i]n the
absence of any binding contract and because the record
establishes that plaintiff rendered services and labor and
furnished materials under circumstances implying an
understanding that defendants would be obligated to pay for
same, plaintiff was entitled to recover on the theory of
quantum meruit"); Nassau v. Incorporated Village of Roslyn, et
al., 218 A.D.2d 688, 631 N.Y.S.2d 42 (2d Dept. 1995) (holding
Village liable under quantum meruit for use of County sewage
facility where Village and County agreed on Village's use of
facility but not on price).
"`[T]o make out a claim in quantum meruit, a claimant must
establish (1) the performance of the services in good faith,
(2) the acceptance of the services by the person to whom they
are rendered, (3) an expectation of compensation therefor, and
(4) the reasonable value of the services.'" Martin H. Bauman
Assocs., Inc. v. H & M Int'l Transp., Inc., 171 A.D.2d 479, 567
N YS.2d 404 (1st Dept. 1991) (quoting Moors v. Hall,
143 A.D.2d 336, 337-38, 532 N.Y.S.2d 412, 414 (2d Dept. 1988)). "As
a general rule, the performance and acceptance of services
gives rise to the inference of an implied contract to pay for
the reasonable value of such services." Moors v. Hall,
143 A.D.2d 336, 338, 532 N.Y.S.2d 412, 414 (2d Dept. 1988) (holding
man liable to woman who performed domestic and other services
for him while they were romantically involved). The Postal
Service's provision of mailing services for R & W, without
proper payment, satisfies all quantum meruit elements.
Accordingly, as to Count II, the United States's motion for
summary judgment is granted.
E. Count III: False Claims Act
The United States bases its cause of action under the False
Claims Act, 31 U.S.C. § 3729 et seq., on the allegation that R
& W submitted to the Postal Service 753 mailing statements
falsely certifying that the disputed mailings were not
cooperative mailings and failing to disclose R & W's role.
While a typical False Claims Act action alleges an excessive
payment from the United States to the defendant, the statute
also supports a "reverse false claim" action alleging an
insufficient payment to the United States from the defendant.
Any person who "knowingly makes, uses, or causes to be made or
used, a false record or statement to conceal, avoid, or
decrease an obligation to pay or transmit money or property to
the Government" is liable under 31 U.S.C. § 3729(a)(7).
"A claim under § 3729(a)(7) requires proof: (1) that the
defendant made, used, or caused to be used a record or
statement to conceal, avoid, or decrease an obligation to the
United States; (2) that the statement or record was false; (3)
the defendant knew that the statement or record was false; and
(4) that the United States suffered damages as a result."
Wilkins ex rel. United States v. Ohio, 885 F. Supp. 1055, 1059
(S.D.Ohio 1995) (citing United States ex rel. Stinson, Lyons,
Gerlin & Bustamante, P.A. v. Provident Life & Accident Ins.
Co., 721 F. Supp. 1247, 1259 (S.D.Fla. 1989)). Any reasonable
fact finder would find the requisite falsity because, as
discussed earlier, the mailing statements claimed that the
disputed mailings were eligible for the non-profit rate as
mailings of only each sponsoring Institution, when in fact they
were cooperative mailings with R & W.
a. Causation of the Falsity
R & W asserts that the mailing statements were the work of
St. John, on behalf of the Institutions, and that the decision
to use the non-profit rate was that of the Institutions. As
discussed above, however, R & W was a participant in the
venture, not just a functionary of the Institutions. It was R
& W that hired St. John to complete and submit the mailing
statements; R & W also instructed St. John to claim the
non-profit rate by listing only the Institutions as the
mailers. This is sufficient for R & W to be liable even though
it was St. John that actually completed and submitted the
mailing statements. "[T]he statute is violated not only by a
person who makes a false statement or a false record . . ., but
also by one who engages in a fraudulent course of conduct that
causes the government" to lose money by honoring a false claim.
United States v. Incorporated Village of Island Park,
888 F. Supp. 419, 439 (S.D.N.Y. 1995).
False Claims Act liability attaches not only to the actual
maker of the false statement, but also to "any person who
knowingly assisted in causing the government to pay claims
which were grounded in fraud, without regard to whether that
person had direct contractual relations with the government" or
only had contact with the government through an "intermediary."
United States ex rel. Marcus v. Hess, 317 U.S. 537, 544-45, 63
S.Ct. 379, 384, 87 L.Ed. 443 (1943) (upholding finding of
liability). See also United States v. Veneziale, 268 F.2d 504,
505 (3d Cir. 1959) (holding that liability may attach to party
who fraudulently induces a contract that results in a
government payment). The statute also "gives the United States
a cause of action against a subcontractor who causes a prime
contractor to submit a false claim." United States v.
Bornstein, 423 U.S. 303, 309, 96 S.Ct. 523, 528, 46 L.Ed.2d 514
(1976) (holding defendant liable for causing other contractor
to submit false claims). See also United States ex rel. Davis
v. Long's Drugs, Inc., 411 F. Supp. 1144, 1148 (S.D.Cal. 1976)
(quoting id.); Woodbury v. United States, 232 F. Supp. 49
(D.Or. 1964) (holding principal liable for agent's false
claim because principal knew of and "knowingly participated in
the making of the claim"), rev'd on other grounds, 359 F.2d 370
(9th Cir. 1966). Accordingly, whether St. John was an agent of
R & W, or a separate entity following instructions from R & W,
R & W sufficiently participated in the false statements that it
"cause[d] to be used . . . [a] statement . . . to the
government." 31 U.S.C. § 3729(a)(7).
b. Obligation to the United States
The presence of the requisite obligation to the United States
is evident from the contrast between the present case and
United States v. Q Int'l Courier, Inc., 131 F.3d 770 (8th Cir.
1997). The reverse false claims action in Q Int'l was
essentially identical to the present suit, except that it
addressed impermissible use of a favorable international mail
rate, not, as here, impermissible use of a favorable non-profit
mail rate. The Eighth Circuit held that the statutes,
regulations, and other published Postal Service rules on
eligibility for discounted international mail rates "serve
only to release the Postal Service from an obligation, not to
impose an obligation on anyone to pay postage." Id. at
773. Thus, although the wrongful use of the international rates
"might well support a judgment that . . . defendants engaged in
illegal and fraudulent activity," it did not inherently create
an obligation to pay the higher domestic mail rate.
Id. In contrast, as to the non-profit rate at issue here, the
required Postal Service mailing statement explicitly states
that "[t]he signature of a mailer certifies that . . . (5) it
will be liable for and agrees to pay, subject to appeals
prescribed by postal laws and regulations, any revenue
deficiencies assessed on this mailing, whether due to a finding
that the mailing is cooperative or for other reasons." See
Willens Decl.Ex. 12.
A finding of wrongful use of the non-profit rate yields a
clear actual obligation to pay the deficiency, unlike a finding
of wrongful use of the international rate at issue in Q Int'l.
Q Int'l explicitly made such a distinction, stating that if the
applicable postal rules actually "created a duty to pay full
domestic postage as to each piece of mail sent . . . [, w]e are
satisfied as a legal matter that such a duty would qualify as
an `obligation' under the False Claims Act." Q Int'l, 131 F.3d
at 773. The non-profit rate postal rules at issue here are
exactly the sort of clearer postal rules that Q Int'l
envisioned as sufficient to create an obligation to pay for a
deficiency stemming from a finding that the more favorable rate
was used improperly. Accordingly, R & W's wrongful use of the
non-profit rate created an obligation to the United States
sufficient for a reverse false claims action.
c. Knowledge of Falsity
The difficult question regarding R & W's False Claims Act
liability is whether R & W knowingly caused the falseness of
the mailing statements submitted to the Postal Service. R & W
argues that it relied on the Institutions' expertise in
non-profit rate eligibility and St. John's expertise in postal
submissions. Most significant is R & W's assertion that it
reasonably followed the view of the Institutions, which are
non-profit entities that hold the requisite non-profit rate
permit, that the disputed mailings qualified for the non-profit
rate. "The Act's scienter requirement is something less than
that set out in the common law" for fraud-based causes of
action. Wang ex rel. United States v. FMC Corp., 975 F.2d 1412,
1420 (9th Cir. 1992). Accord Wilkins ex rel. United States v.
Ohio, 885 F. Supp. 1055, 1060 (S.D.Ohio 1995) (quoting Wang for
proposition that "the scienter requirement is something less
than the elements of fraud at common law"). The statute
delineates the standard as follows:
(b) Knowing and knowingly defined. — For
purposes of this section, the terms "knowing" and
"knowingly" mean that a person, with respect to
(1) has actual knowledge of the information;
(2) acts in deliberate ignorance of the truth or
falsity of the information; or
(3) acts in reckless disregard of the truth or
falsity of the information, and no proof of
specific intent to defraud is required.
31 U.S.C. § 3729(b).
Under this standard, "[t]he requisite intent is the knowing
presentation of what is known to be false." United States ex
rel. Kreindler & Kreindler v. United Techs. Corp.,
985 F.2d 1148 (2d Cir. 1993) (quoting United States ex rel. Hagood v.
Sonoma County Water Agency, 929 F.2d 1416, 1421 (9th Cir.
1991)). The United States "need not prove an intent to defraud,
but only that the violations were committed knowingly, that is
with willful blindness to the existence of a fact or reckless
disregard for the truth." United States v. Incorporated Village
of Island Park, 888 F. Supp. 419, 439 (E.D.N.Y. 1995). "[W]hat
constitutes the offense is not intent to deceive but knowing
presentation of a claim that is either `fraudulent' or simply
`false.' . . . What is crucial — and
what must be proven at trial — is that the [defendant] knew
that the information was false. . . . Innocent mistake is a
defense. . . . So is mere negligence. The statutory definition
of `knowingly' requires at least `deliberate ignorance' or
`reckless disregard.'" Hagood, 929 F.2d at 1421. Because other
elements of the United States's cause of action under the False
Claims Act are satisfied, both sides' motions for summary
judgment on this count turn on the scienter element.
2. Raymond & Whitcomb's Motion for Summary
The United States survives R & W's motion for summary
judgment with evidence sufficient to "raise a fact question
regarding whether Defendant . . . knew the substance of the
false forms." United States v. Oakwood Downriver Med. Ctr.,
687 F. Supp. 302, 309 (E.D.Mich. 1988) (denying summary judgment to
reverse false claims defendant). Compare id. with Wang ex rel.
United States v. FMC Corp., 975 F.2d 1412, 1420-21 (9th Cir.
1992) (granting summary judgment to defendant because, with
negligence insufficient for liability, "[b]ad math is no
fraud[,] . . . [p]roof of one's mistakes or inabilities is not
evidence that one is a cheat[,] . . . [and] the common failings
of engineers and other scientists are not culpable under the
Act"). R & W's argument that it lacked the requisite scienter
because it relied on the Institutions' non-profit expertise is
insufficient to compel a reasonable fact finder to rule in its
The certification that the signer of a mailing statement
adopts creates a duty to investigate whether the material
qualifies for the non-profit rate or is a cooperative mailing.
One who signs a certification cannot choose to remain unaware
of the veracity of that certification like the proverbial
ostrich who buried its head in the sand so as to see no evil,
hear no evil, and speak no evil. Thus, a failure to conduct a
proper investigation before making a false statement may be
sufficiently reckless to yield False Claims Act liability.
See, e.g., United States ex rel. Compton v. Midwest
Specialties, Inc., 142 F.3d 296 (6th Cir. 1998) (holding that
defendant who had not properly tested the nonconforming goods
it sold the United States had a reckless disregard for the
falsity of its claim for payment); United States v. Krizek,
111 F.3d 934 (D.C. Cir. 1997) (holding that psychiatrist and wife
acted with reckless disregard in submitting incorrect billings
where wife made implausibly high volume of submissions and
psychiatrist failed to review the submissions).
Moreover, as stated above, any reasonable fact finder would
conclude that the mailing statements were false in their
certifications that the disputed mailings were not cooperative
mailings; they were cooperative mailings. The clarity of the
falsity supports the United States's position that a failure to
know of the falsity was at least reckless. Thus, a reasonable
fact finder could conclude that R & W "had at least a reckless
disregard for the falsity of its claims." United States ex rel.
Compton v. Midwest Specialties, Inc., 142 F.3d 296 (6th Cir.
1998). Accordingly, as to Count III, R & W's motion for summary
judgment is denied.
3. The United States's Motion for Summary Judgment
The United States's evidence is sufficient only to allow, not
to compel, a reasonable fact finder to conclude that R & W
acted "knowingly" within the meaning of the False Claims Act.
Where the alleged falsity is an inaccurate certification of
compliance with a legal requirement, the United States must
prove, if not intent to deceive, at least reckless or "willful
blindness to the existence of a fact." United States v. Inc.
Village of Island Park, 888 F. Supp. 419, 439 (E.D.N.Y. 1995).
Both the Met and the Smithsonian are respected, established,
well-funded non-profit institutions. A reasonable fact finder
could conclude that R & W, in relying on the Institutions'
expertise as to nonprofit rate eligibility, acted unjustifiably
and negligently, but not recklessly or in deliberate ignorance.
Such a finding would be insufficient
for False Claims Act liability because "[w]hat is crucial
— and what must be proven at trial — is that the [defendant]
knew that the information was false. . . . Innocent mistake is
a defense. . . . So is mere negligence. The statutory
definition of `knowingly' requires at least `deliberate
ignorance' or `reckless disregard.'" United States ex rel.
Hagood v. Sonoma County Water Agency, 929 F.2d 1416, 1421 (9th
Cir. 1991). See also Wang ex rel. United States v. FMC Corp.,
975 F.2d 1412, 1420-21 (9th Cir. 1992) (granting defendant
summary judgment because evidence supported a finding of only
negligent, not reckless, falsity). Accordingly, as to Count
III, the United States's motion for summary judgment is denied.
For the reasons given above, the United States's motion for
summary judgment is granted in part and denied in part while R
& W's motion for summary judgment is denied in its entirety.
The United States is granted summary judgment on Count I
(Federal Debt Collection Procedure Act) and Count II (unjust
enrichment). This judgment is in the amount of $398,960.05, the
undisputed difference in postage between the regular rate and
the non-profit rate. Pl.'s R. 56.1 Stmt. ¶ 5. Summary judgment
is denied to both parties in all other respects.