USCA1 Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

____________________

No. 94-1081

UNITED STATES,

Appellee,

v.

GUILLERMO ALEMANY RIVERA,

Defendant, Appellant.

No. 94-1082

UNITED STATES,

Appellee,

v.

EDGAR M. STELLA PEREZ

Defendant, Appellant.

____________________

[Hon. Raymond L. Acosta, U.S. District Judge]

___________________

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

____________________

Before

Torruella, Chief Judge,

___________

Campbell, Senior Circuit Judge,

____________________

and Stahl, Circuit Judge.

_____________

____________________

Robert H. Kiernan
_________________

with whom Robert M. Simels, P.C. was on

_______________________

for appellant Edgar M. Stella Perez.

Pedro J. Varela for appellant Guillermo Alemany Rivera.

br

_______________
Sushma
Soni,
_____________
Department of
Guillermo Gil,
______________

Attorney,

Appellate

Staff,

Civil

Justice, Frank W. Hunger, Assistant

________________
United

States

Attorney,

and

Divisi

Attorney Gener

Douglas N. Lett
_________________

Attorney, Appellate Staff, Civil Division, Department of Justice, w

on brief for appellee.

____________________

June 6, 1995
____________________

CAMPBELL, Senior Circuit Judge.

____________________

filed

this

defendants

civil

action

Guillermo Alemany

Stella

Perez ("Stella").

Claims

Act

("FCA"),

government alleged

for

in

31

the

Rivera

Seeking

U.S.C.

The United States

district

against

("Alemany") and

damages under

3729-3733

that defendants had caused

mortgage loan insurance benefits

court

Edgar

the False

(1982),

the

a false claim

to be presented to the

Department

district

of Housing

court

and Urban

denied

Development ("HUD").

defendants'

motion

to dismiss

The

and

granted summary judgment in favor of the government, awarding

it $1,966,592.

United States v. Stella Perez, 839

______________
____________

92, 97-98 (D. P.R. 1993).

this

suit

expired.

after

the

We hold that

applicable

F. Supp.

the government filed

limitations

period

had

We therefore reverse.

I.

During the

scheme

Services

$12.46

engaged in a

to defraud HUD and the Department of Health and Human

("HHS")

million

in

of

connection

mortgage loan.

president, chairman

director

1970s, Alemany and Stella

of the

Hospital

with

At that

federally-insured

time,

board of directors,

Nuestra

Senora de

la

Stella was

and medical

Guadalupe,

hospital

in

Puerto Rico;

comptroller of the

defendant

hospital.

Alemany

The hospital

mortgage loan in 1974 from a private lender,

Hubbard,

Inc.

("Merrill

Lynch"),

-33

for

was a

former

had obtained the

Merrill, Lynch,

the

purpose

of

renovating and expanding its

insure the

hospital's loan pursuant to

Act, 12 U.S.C.

were

according to

HUD had

agreed to

the National Housing

1715z-7 (1982).

During the course

proceeds

facilities.

of the renovation

periodically

disbursed

the following procedure.

of the hospital,

project, loan

to

the

hospital

Stella, as president

filled out a portion of

a HUD "Form 2403,"

listing various items of completed construction and attaching

corresponding invoices.

Merrill Lynch, which

forwarded it to

sent a

Merrill

directly

filled out

HUD.

to the

then forwarded the

a portion of

After approving the

Certificate of

Lynch then

Stella

suppliers and

the form

and

disbursement, HUD

Mortgage Insurance to

released loan funds

form to

Merrill Lynch.

to the

contractors.

hospital or

Occasionally,

loan

funds were

also

escrow account, upon

disbursed from

HUD's receipt of

a separate

equipment

a letter from

Stella

with attached invoices for purchased equipment.

Defendants siphoned

proceeds through

Cardona,

called

soon

Inc.,

off

their control of a

and

AAA Hospital

its subsidiary,

Supply, Inc.,

portion

the

loan

furniture company, Casa

an

equipment

which they

after the hospital secured the loan.

companies, Stella and Alemany sold equipment

to the hospital at

of

company

incorporated

Through these two

and furnishings

substantially inflated prices and charged

the hospital for equipment that the companies never provided.

-44

The hospital paid for

which

were

pursuant

disbursed

to

the

the equipment with the

to

the companies

procedure

described

by

loan proceeds,

Merrill

above.

Lynch

In

all,

defendants submitted 20 separate fraudulent requests for loan

proceeds

paperwork

insurance.

between

1974

furnished by

and

1978, as

defendants,

to

which

HUD,

issued certificates

upon

of

On May 1, 1979,

the hospital was unable to

scheduled payment on the loan.

expired, the

Merrill

in default on

filed

July 1, 1979.

exercise

The

its

July 2

July 17,

"Mortgagee's

1979,

for

Insurance Benefits,"

Application

forth

specific

loan,

including

financial

the

rights

under

Lynch

for

filed

insurance

only

very basic

lender.

more

Partial Settlement,"

information

amount

and of its

the

the project and the

Merrill

in

to be

2, 1979, Merrill Lynch

document contained

information, identifying

on

On July

letter notifying HUD of the default

to

contract.

for bankruptcy under

Lynch formally declared the loan

"Mortgagee's Application

along with a

intention

After the 30-day grace period

hospital filed a petition

chapter 11.

make a

about

default

and

Then,

detailed

setting

the defaulted

the

unpaid

principal

balance.

On

assigned the mortgage to

contract required.

claim, HUD

October 25,

1979,

Merrill

Lynch

HUD, as the terms of

its insurance

On January 17, 1980, after

approving the

disbursed to

Merrill

-55

Lynch approximately

$12.1

million,

representing

the unpaid

principal balance

on the

mortgage, less certain credits.

In July

nine-count

criminal

described

above.

conspired

to

statements

152,

The

five

the

government and

on

After

all

that

had

30-day

nine

on

the

fined

and both

$10,000.

sentences.

they

made

trial,

counts.

had

false

Stella

2,

jury

was

probation for

condition

This court

events

18 U.S.C.

in prison and placed on

years

under a

the

that

restitution;1 Alemany was sentenced

prison and

convictions

upon

indictment alleged

(1982).

defendants

an additional

in

based

in support of fraudulent claims.

sentenced to 20 years

$686,349 in

defendants were charged

indictment

defraud

371, 1001

convicted

of 1982,

he

to 10 years

affirmed

United States
_____________

pay

both

v. Alemany
_______

Rivera,
______

781 F.2d 229, 238 (1st Cir. 1985), cert. denied, 475
____________

U.S. 1086 (1986).

On

instant

under

or

October 25,

civil action

the FCA.

1985,

against

the government

brought the

defendants, seeking

An individual is

recovery

liable under the FCA if he

she "knowingly presents, or causes to be presented, to an

officer

or employee

fraudulent

3729(1)

claim

of

the Government

for payment

(1982).

government alleged

As

in

the

or

. .

approval."

criminal

that defendants had

31

false or

U.S.C.

indictment,

conspired to

the

divert

____________________

1.

The district court later vacated the restitution order.

-6-

the proceeds of the government-insured

their

mortgage loan through

control of the two supply corporations and through the

submission of

doing,

Lynch to

the

inflated requests

government asserted,

submit an

for loan

defendants

inflated "claim"

insurance contract after the

proceeds.

In so

caused Merrill

for payment

under the

hospital defaulted on the loan.

The

government

Defendants filed

an opposition and

ground the action was

Ruling that the

limitations

motion.

moved

for

summary

moved to dismiss

barred by the statute

action had been filed within

period, the

district

judgment.

on the

of limitations.

the applicable

court denied

defendants'

The court thereupon granted summary judgment for the

government, holding there were no remaining genuine issues of

material fact.

in

The court ruled that the

the civil complaint were

the prior criminal action.

at the criminal

trial.

identical to the allegations in

Accordingly, the

defendants were collaterally

of the factual issues,

factual allegations

court held that

estopped from re-litigating any

as these had already

been determined

See Emich Motors Corp. v.

___ ___________________

General
_______

Motors Corp., 340 U.S. 558, 568-69 (1951).

____________

The court awarded

damages based on "uncontroverted evidence in the record."

II.

Defendants argue on appeal that the district

erred in ruling that this suit

-77

court

was not barred by the statute

of limitations.

that an

The

FCA's statute of

limitations provides

action "must be brought within 6 years from the date

the violation

is committed."

31 U.S.C.

3731(b) (1982).2

The elements of a "violation" of the FCA are, as noted above,

that

an

individual "knowingly

presents,

presented, to an officer or employee of

a false or

U.S.C.

fraudulent claim

Alemany's and

upon the

causes to

be

the Government . . .

for payment or

approval."

31

3729(1) (1982).

The present

upon a

or

case is

Stella's fraud

private lender,

government.

complicated by the

acted, in the

first instance,

Merrill Lynch, rather

This

fact that

fraud, however, was

than directly

followed by

the hospital's default, resulting in Merrill Lynch's claim to

HUD

for

under

reimbursement for

the

procure.

federal

Although,

its loss on

insurance

that

from Merrill

claim it presented may not

the defaulted

defendants

had

loan

helped

Lynch's perspective,

have been "false or

the

fraudulent,"

that claim was inflated by defendants' earlier fraud; and the

case law allows the United States,

sue defendants under

in such circumstances, to

the FCA for having "caused"

the filing

of a "false" claim against the government.

____________________

2.

This

was the

statute as

issue in this case occurred.

to

agree that

statute,
language.

in

this
any

it stood

See 31 U.S.C.
___

events at

All parties in this suit appear

earlier version
event,

when the

contains

applies.
essentially

3731(b)(1) (1988).

The current
the

same

-88

Recognition of

followed upon

v. McNinch, 356
_______

that

a false

claim action of

the Supreme Court's decision

U.S. 595 (1958).

lending institution's

In McNinch
_______

mere

this sort

in United States
_____________

the Court held

application for

credit

insurance, even if fraudulent, did not amount to a "claim" as

that term is used

in the FCA.

against the government, the

demand

Id.
___

for money or

Id.
___

The concept of

a claim

Court said, "normally connotes a

for some transfer

of public property."

The Sixth Circuit found such a demand to exist where, as

here, after

fraud was

perpetrated on a

lending institution

for which the perpetrator of the fraud had secured government

insurance,

the

lender

government

for

payment

presented

or

Ekelman & Assoc., 532 F.2d

_________________

1959).

The

own

insurance.

545, 552

also United States v. Veneziale,

____ ______________
_________

Cir.

its

lender's claim

claim

to

United States
______________

(6th Cir. 1976).

268 F.2d

504, 505-06

in effect

the

v.

See
___

(3d

completes the

perpetrator's violation of the FCA, commencing the running of

the statute of limitations.

to

The Supreme Court itself has yet

endorse this theory, but

all the parties

in the present

case accept it, as, for present purposes, do we.

We

"violation"

accordingly

here was

proceed

on the

"committed," see
___

31 U.S.C.

(1982), for statute of limitation purposes,

Lynch can

properly be said

claim to the government.

theory

that

the

3731(b)

whenever Merrill

to have presented

its insurance

See United States v. Bornstein, 423

___ _____________
_________

-99

U.S. 303, 309 (1976) (false claim may be presented through an

innocent

third party); United States ex rel. Marcus v. Hess,

____________________________
____

317 U.S. 537, 544-45 (1943)

purpose

to reach

causing the government

fraud,

without

any

person who

knowingly

to pay claims which

regard to

contractual relations

(provisions of the FCA "indicate

whether

that

assisted in

were grounded in

person had

with the government").

direct

The claim was

"false or fraudulent" in that the amount claimed was inflated

by $686,349,

of

their

the amount that defendants pocketed as a result

fraudulent scheme.

See Veneziale,

218

F.2d at

___ _________

506.3

Although

fraudulent

the parties

"claim" under

all

the FCA

agree that

a false

was "presented"

or

when the

loan holder, Merrill Lynch, made its claim for payment on the

insurance

contract,

they

differ

as

to

precisely

when

____________________

3.

In holding that a

lender's claim for mortgage insurance

benefits is a claim under the FCA, the Third Circuit panel in

Veneziale wrote:
_________

The

claim

before

us now

is

"grounded in fraud" in that

certainly

a fraudulent

misrepresentation induced the

government

to assume the obligation which it has had

to

perform.

We

are satisfied

government, having been compelled

an innocent
the

third person as

defendant's

fraud

that the
to pay

a result of

in inducing

the

undertaking,
claim

against

is

entitled
the

to

assert

defendant under

a
the

False Claims Act.

Id. at 506.
___

Similarly, in this case,

statements induced

the government to

defendants' fraudulent
assume more

insurance

obligations than it otherwise would have.

-1010

presentation of the

the claim was

claim took place.

presented on

Alemany argues

June 1, 1979,

after the

that

30-day

grace

period following

expired.

the

hospital's missed

payment

had

Stella took a similar position when arguing in the

district court, but he now argues that the claim was actually

presented somewhat later, in July of 1979, when Merrill Lynch

filled out,

executed and

for reimbursement

Alemany's

and

contentions,

the

been instituted more than

on October 25, 1985.

the government

two applications

under its insurance contract.

Stella's

untimely, having

submitted to HUD

Under both

present suit

is

six years later,

The district court held,

contends, that Merrill Lynch's

however, and

claim was not

presented until October 26, 1979, when Merrill Lynch formally

assigned

its

mortgage on

the

government, thereby complying

hospital's

property to

with a condition precedent

the

to

HUD's

obligation to

contract.

See
___

24

pay Merrill

C.F.R.

Lynch under

the insurance

207.258, 207.259(a),

242.260

(1981) (detailing the mortgage insurance payment process).

We

claim

was presented

hospital

that,

quickly dismiss

missed a

30 days

on

June 1,

payment

after the

Alemany's

on the

1979,

argument

that

the

30 days

after

the

loan.4

missed payment,

Alemany

argues

defendants' grace

____________________

4.

We review

a district

court's decisions on

dismissal and summary judgment

de novo.
_______

See Heno
___ ____

motions for
v. FDIC.,
_____

20 F.3d 1204, 1205 (1st Cir. 1994); Pagano v. Frank, 983 F.2d
______
_____
343, 347 (1st Cir. 1993).

-1111

period had expired

reimbursement

from the

insurance contract.

had

not

payment.

submit a

and Merrill

At

yet "presented"

Although

Lynch was

government

entitled to

under the

terms of

this point, however,

"claim" to

Merrill Lynch

demand for government

was by

the

its

Merrill Lynch

government for

then entitled
________

funds, there is

that Merrill Lynch had yet done so.

seek

to

no evidence

Indeed, it was possible,

if

highly

unlikely,

for

Merrill Lynch

present a claim to the government at all

to

choose

not to

and to have instead

looked to the mortgage for reimbursement.

See United States

___ _____________

v. Stillwater Community Bank, 645 F. Supp. 18, 19 (W.D. Okla.

_________________________

1986); but cf. United States v. Goldberg, 256 F.

_______ ______________
________

541-42

(D. Mass.

presented,

1966).

and no

before June 1,

In any

"violation" of

1979.

event,

Supp. 540,

no claim

the FCA

was yet

occurred, on

See Stella Perez, 839

___ ____________

or

F. Supp. at 95.

The district court did not err in denying Alemany's motion to

dismiss on this ground.5

The harder

question

and the place where we part

company with the decision below and with the government

whether,

as Stella

now

argues, Merrill

Lynch presented

is

claim to the government

submitted formal

in July of 1979, when

documents notifying HUD of

Merrill Lynch

the default and

____________________

5.

Alemany's reference to Jankowitz

_________

F.2d 538, 547 (Ct.

in

that

case

limitations

Cl. 1976) is unavailing, since

explicitly

period

v. United States,
_____________

begins

refused
to

run

to

decide
at

submission of a claim for mortgage insurance.

-1212

the court

whether

default

533

or

the
upon

applying

for

federal

insurance

defaulted mortgage loan.

nowhere

discussed

"claims"

limitations.

anyone

to

In its opinion the

the July

triggering

This is

benefits relative

the

filings

running

with

of

the

district court

HUD as

the

understandable as neither

else raised the point below.

to

possible

statute

of

Stella nor

Both defendants argued

the district court that the claim and violation should be

deemed

court

to have occurred on

will

arguments

not

consider

not

raised

June 1, 1979.

for

the

below,

first

absent

Ordinarily, this

time

on

appeal

"exceptional

circumstances."

Desjardins v. Van Buren Community Hosp., 969

__________
_________________________

F.2d 1280, 1282

(1st Cir. 1992); United States v. Krynicki,

______________
________

689 F.2d 289, 291 (1st Cir. 1982).

circumstances

government

without

right

has

answered

in any

considering the

Stella's

way objecting

point now.

argument on

to, or

the lack of

believe

absence of

perhaps,

waiving

Whatever

that it

objection that the

is

consideration

that

the

objection

the

government does

prejudiced

of the

matter

below

has some

other

to our

as

consideration

the

merits

We can only

now materially

government

reason,

its

The

questioning, Stella's

to raise it for the first time on appeal.

assume from

not

warrant our

But we think that special

of

government

by the

or

else

reason

for

this argument.

has

offered

no

objection and has responded on the merits, we are disposed to

address

Stella's

argument,

especially

because

it

is

so

-1313

germane to the question

that was extensively addressed below

namely, when the claim was presented and when the statute

of limitations commenced to

1979,

were,

moreover,

run.

closely

The actions taken

related

in

in July

character

and

sequence to the actions in June and October that the district

court did consider.

See
___

Knight v. United States, 37

______
______________

F.3d

769, 772 n.2 (1st Cir. 1994).

We

material

realize

that

Stella's

outside the pleadings,

argument

the July

relies

on

forms themselves,

which the district court had before it, making it technically

cross-motion for summary judgment, rather than a motion to

dismiss.

See Fed. R.
___

Civ. P.

12(b); 5A

Charles Wright

Arthur Miller, Federal Practice and Procedure

_______________________________

On appeal, we are not bound

the district court have

Kelly Co.
_________

The only

attached to the motion.

Wright &

1366 (1990).

by the label that defendants and

v. Reconstruction Fin. Corp.,

__________________________

(1st Cir. 1949);

&

Miller,

1366,

William J.
__________

172 F.2d 865,

at 497-98

866

n.20.

question is whether the government has received, as

it

is entitled to under Fed. R.

opportunity

to present

aware that Stella's

Civ. P. 12(b), a reasonable

relevant opposing

evidence.

argument on appeal referred

While

to the July

documents, the government has at no time objected to Stella's

reference to those documents,

nor has it argued that

been materially prejudiced by the reference.

indicating

that

the government

-1414

sees

no

it has

We take this as

need for

further

opportunity

argument.

to

present

evidence

in response

to

Stella's

See Moody v. Town of Weymouth, 805 F.2d 30, 31-32

___ _____
________________

(1st Cir. 1986) (adopting a

pragmatic approach to Rule 12(b)

conversions and holding harmless the district court's failure

to notify a

party of

such conversion where

received the affidavit and

to

respond

accuracy");

Cir.

1990).6

to

them,

the party

"has

materials, has had an opportunity

and

has

not

controverted

their

see also Whiting v. Maiolini, 921 F.2d 5, 6 (1st

___ ____ _______
________

The question

is thus whether

entitled to judgment as a matter of law.

either party is

To

answer

Lynch's interest

in federal

for purposes of the

malefactors

latter

were

being

this, we

FCA

the

merely

earlier fraud ripened

must

determine when

Merrill

reimbursement became a

"claim"

recognizing, of course,

defendants, not

Merrill

vehicle through

which

that the

Lynch,

the

defendants'

into a cognizable claim under the FCA.

The paradigmatic example of a false claim under the

FCA

is a false invoice or bill

for goods or services.

See,
___

____________________

6.

As we

that it

indicate below, the government

would submit any additional

has not suggested

evidence supporting its

arguments on appeal, if given the opportunity to do so.

Moody, 805 F.2d
_____

at 31-32 ("Because

plaintiff has not

See
___
shown

that he

would have done something different had the district

court taken him by

the hand and told him

had been converted

into a

that this

something would

motion for
likely have

defendants' motion

summary judgment

and

defeated defendants'

motions, we conclude plaintiff has not demonstrated prejudice

and that therefore there would be no point in remanding.").

-1515

e.g., Bornstein, 423 U.S. at 309.

____ _________

more generally to

The term, however, applies

other demands for government funds.

See,
___

e.g.,
____

United States v.
______________

(1968) (false

Neifert-White,
_____________

application

for

390

government

U.S. 228,

loan);

Sell
____

230

v.

United States, 336 F.2d 467, 474 (10th Cir. 1964) (fraudulent
_____________

claim for federal assistance).

indicated

money"

that

a "claim"

that induces the

"otherwise suffer

356

U.S.

at

elaborated,

with

the

under the

FCA

is a

"demand for

government to disburse

funds or to

immediate financial detriment."

599.

In Neifert-White,
_____________

defining a claim

purpose

In McNinch, the Supreme Court

_______

and

to be "a

effect of

immediately to part with money."

Enacted during

the

McNinch,
_______

Court

further

false statement made

inducing

the

Government

390 U.S. at 230.

the Civil

War, the

FCA's specific

aim

was to

contractors

clamp

who

down on

were

widespread

submitting

inflated

shipping faulty goods to the government.

345, 99th Cong., 2d

5266,

government

invoices

U.S.C.C.A.N.

5273 (briefly summarizing the history of the FCA).

underlying fraudulent

wrongful

and

See S. Rep. No. 99___

Sess. 8, reprinted in 1986

____________

furthering this goal, the

the

fraud by

In

statute attaches liability, not to

activity or

to the

government's

payment, but to the "claim for payment."

Indeed, a

contractor who submits a false claim for payment may still be

liable

under the FCA for statutory penalties, even if it did

not actually induce

the government

-1616

to pay out

funds or

to

suffer

any loss.

See, e.g.,
___ ____

Rex Trailer Co.

________________

v.

United
______

States, 350 U.S. 148, 153 & n.5 (1956); United States ex rel.
______
_____________________

Hagood v.
______

Sonoma County Water Agency,

___________________________

(9th Cir. 1991).

929 F.2d

1416, 1421

This focus on the claim for payment appears

to reflect a congressional

judgment that fraud by government

contractors is best prevented

by attacking the activity that

presents the

risk of

wrongful payment,

until the

public

fisc is

liability

to the

claim or

and not by

actually damaged.

demand for payment,

By

waiting

attaching

the statute

encourages contractors to "turn square corners when they deal

with the government."

Co.
___

Thus,

Rock Island, Arkansas & Louisiana R.R.

______________________________________

v. United States, 254 U.S. 141, 143 (1920) (Holmes, J.).

_____________

in deciding whether a given false statement is a claim

or demand for payment, a court

the payment

and

effect,

should look to see if, within

scheme, the statement has

and

poses

the

attendant

the practical purpose

risk,

of

inducing

wrongful payment.

Applying

with the

this understanding

language in McNinch and

_______

of the

statute along

Neifert-White, we conclude
_____________

that the

application

filed by

Merrill

Lynch on

July

constituted a "claim for payment" against the government.

official

HUD

document titled

Partial Settlement," the July

to furnish

the

name of

"Mortgagee's

An

Application for

17 form required Merrill Lynch

detailed information about

the insured

17,

project, the

-1717

the loan,

including:

project

number, the

date,

the names of the mortgagee and servicer, the amount of

payment

in default, the date

default,

principal

the

aggregate cash

balance,

The form also set

which

of default, the

and the

escrows

on

undisbursed

the contract

required

the

telegram and

once

hand, the

the

mortgagee

mortgage was

to

specified how payment could

in cash or through debentures.7

method through

under the terms of

assigned.

send notice

unpaid

mortgage proceeds.

forth, in some detail, the

the mortgagee would obtain payment

nature of the

of

The

assignment

form

by

be obtained either

Merrill Lynch completed the

form and provided the requested answers.

The contents of the July 17 application, therefore,

even

when

viewed

government, Rivera
______

in

the

v. Murphy,
______

1992), indicate that it

meaning of

Lynch

McNinch.
_______

979 F.2d

By submitting

favorable

Moreover,

to

259, 261

the

(1st Cir.

within the

the application, Merrill

was exercising its

contract.

financial information

most

was a "demand for money"

told HUD that it

insurance

light

in

rights under the

providing

detailed

about the mortgage, the completed form

____________________

7.

The form

deed is filed

provides: "On

the date

for record, a telegram is to

address], advising the date that

filed

for record . . . .

endorsed for

of the assignment

or

be sent to [this

the assignment or deed

was

If the mortgage

has been finally

insurance, partial settlement

of approximately

90% of the unpaid principal balance will be made upon receipt

of the telegram above

. . . .

The final settlement

will be

made after receipt of the fiscal data and title requirements,

which are to be submitted within 45 days after the assignment

. . . ."

-1818

specified the amount Merrill

that contract.

of

payment,

In

Lynch expected to receive under

setting forth both the amount

the application

resembled,

in

and method

many ways,

an

invoice, bill, application for loan proceeds, or other demand

for money from

the government.

The completed

form can

be

read as essentially saying

under the terms

of our

to HUD, "We are owed

insurance contract."

this amount

It was

literally a demand for payment from the government.

title

of the

government

(holding

form states

funds.

that an

that it

is an

The very

"application" for

Compare Neifert-White,
_______ _____________

application for

quite

390 U.S.

at 230

government loan

was a

"claim" under the FCA).

The

contents

of

the

form,

"purpose and effect" of inducing

its money.

because

See Neifert-White,
___ _____________

of

defendants'

figures in the

and

should

be

390 U.S. at

earlier

the

had

the

the government to part with

form were what the

paid by

moreover,

fraudulent

232.

Inflated

conduct,

insured said it was

government.

the

owed

The application

created the risk that the government

those

figures, be

There is no

induced to

would, in reliance upon

pay the

evidence that Merrill Lynch

"fraudulent" amount.

submitted any later

forms that could have been used to fix the amount of payment.

The government

assignment

executed

asks us

by Merrill

-1919

to hold that

Lynch

in

the mortgage

October was

the

"claim" under the

transferred the

FCA.

But

mortgage

the mortgage assignment

to the

with a condition to payment which

government, in

mortgage contained no figures

amount and did

not purport

form,

per contra,
__________

might

be

allowed

disbursed, under

compliance

had to be met, as a matter

of course, in effectuating the July 17 claim.

of the

merely

constituting a payment

to demand

for the

The assignment

money.

The July

possibility that

some circumstances,

17

funds

simply upon

HUD's receipt of notice of the assignment, further suggesting

that

the form was intended

amount of

payment.

to be relied

The government has

upon in fixing the

mentioned no

facts

contradicting this reading.

Once Merrill Lynch submitted the

completed form, the government

had an actionable claim under

the FCA.

The government

appears to

argue that the

form is more

accurately characterized, not

payment, but

as

merely notice

from

intention eventually to file a claim.

July 17

as a demand

Merrill Lynch

of

for

its

We take this to be an

argument that, as a

factual matter, the July 17 form did not

have

and

the

purpose

effect

of

inducing

payment

and

accordingly presented no risk of wrongful payment in reliance

thereof.

merely

not

If the

form could

in

fact be

characterized as

notice, we would agree with the government that it is

a "claim," as notice ordinarily

does not put government

-2020

funds

at

risk

or

attempt,

by

itself,

to

induce

the

The government has failed, however, to support

the

disbursement of funds.8

above

argument.

No

regulations

have been

called

to our

attention suggesting that, within

the

filing

of the

July 17

form really

effect

of inducing payment and

notify

HUD of its estimated

evidence

been

required

filings with

These,

had no

purpose or

was instead only

a means to

liability.

pointed out

scheme,

that

Nor,

Merrill

more detailed

as noted, has

Lynch made

other

financial information.

had they occurred, might have suggested that the July

17 form was

not

the HUD insurance

to be

understood to be merely

relied

upon in

fixing

a preliminary estimate,

the amount

of

payment.

However, the government has nowhere pointed or alluded to any

later

Merrill

papers

submitted, or

Lynch

calculating

which

required

could

the amount of

have

payment.

to

formed

be submitted,

the

basis

The completed

by

for

July 17

form, on its face, fully supports Stella's contention that it

was a demand for payment from the government.

The government

has pointed to no facts that would contradict this reading of

the form and no facts suggesting that the figures on the form

posed no risk of

wrongful payment, relying instead primarily

____________________

8.
2

The earlier document submitted

was arguably merely notice,

basic
decide

information about
the point,

as the

the

by Merrill Lynch on July

as it provides
mortgage loan.

July

sufficient to constitute a claim.

-2121

17 application

only the most

We need

not

was clearly

upon the

legal arguments

genuine issue

judgment

presented below.

Accordingly, no

fact remains to

preclude summary

of material

for defendants

on

this issue.

See Anderson
___ ________

v.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

___________________

The government's principal argument is a legal one.

It

relies on the statement in

McNinch that the insufficient

_______

claim there (the request for government insurance coverage of

a future loan) did

not, among its other failings,

FHA to "suffer immediate

financial detriment."

cause the

McNinch, 356
_______

U.S. at 599.

whether a

The government

contends that, in

request for government funds

financial detriment," the

determining

caused an "immediate

key factor is the

legal effect of
____________

such a request, as specified under the terms of the contract.

The government points to the terms of the insurance contract,

under

which

the government's

obligation

to

pay insurance

benefits arises only upon assignment of the mortgage.

C.F.R.

207.259(a), 242.260 (1981).

the insurance

See 24
___

As, under the terms of

contract, submission of the

completed July 17

form did not give rise to an instant unconditional obligation

to

pay, the government contends that the form could not have

been a "claim" under the FCA.

We

think

the

government

reads

too

much

into

McNinch's
_______

reference

financial detriment

reasons an

to

immediacy.

is cited in

application for

Lack

McNinch as
_______

of

one of

credit insurance falls

immediate

several

short of

-2222

being

a claim.

In Neifert-White,
_____________

a later case in which the

question

was

government

whether

loan constituted

Supreme Court

out funds.9

'claims' which

fraudulent

application

"claim" under

held that the application was

the FCA even though it

to pay

the FCA,

"This remedial

statute reaches

Neifert-White,
_____________

U.S.

at

233

clear that

the

of money."

(emphasis

FCA

beyond

to all fraudulent

Government to pay out sums

makes

the

a "claim" under

attempts to cause the

Neifert-White
_____________

triggered no instant legal obligation

might be legally enforced,

________________

390

for

added).10

reaches not

only

claims that trigger the government's legal obligation to pay,

but more generally all claims that are "made with the purpose

and

effect of

inducing the

____________________

Government immediately

to part

9.

The

government

assignment of
rights

makes

so

mortgagor,

in

or

arising under
default,

others,

transaction," implying
sued

of

and

assigned the

claims

out

of

the

and credit
against

the

the government

mortgage.

that

the government "all

all

arising

that

fact

the mortgage

(and thus that the statute did

it was

the

the mortgage conferred on

and interest

instrument

much

the

mortgage

could not

have

not begin to run) until

This

reveals a

confusion,

however, between a suit against defendants under the terms of

the

mortgage and a

former

could

not

suit under the

be

FCA.

instituted by

the

The

fact that the

government

until

assignment is irrelevant with respect to whether a suit under

the FCA could be instituted.

10.
under

Compare the
the FCA:

liability

to

July 17 form to

an invoice
an

poses

a risk that the

false statements
funds.

for payment.

invoice,

obligation to pay (though

the paradigmatic case

not

because

The
it

FCA attaches
triggers

an

it may well do so), but because it

government may, in

contained in

reliance upon the

the invoice, wrongly

pay out

Claims that trigger a legal obligation to pay merely

constitute a

special subset of claims

high risk of mistaken payment.

-2323

posing a particularly

with

demand

its money." Id.11

___

for payment,

unconditional

practical

The

key inquiry is thus whether the

whether

or not

legal obligation

effect

of

to pay

inducing

the

it

gives rise

right away,

government

to

an

has the

to

suffer

immediate financial harm.12

We hold

had

the

that the July

practical

effect

of

17 form's demand

inducing

for funds

payment

in

sufficiently "immediate" manner to satisfy the requirement in

McNinch.
_______

While

"immediate," in

the

this

the payment

of

that nearly six months

application and the transfer

lag is not by

might be

funds

was

not literally

would elapse between

of the bulk

itself dispositive.

of the funds,

Some similar delay

expected in the government's payment

of an invoice

or a loan application, both of which are plainly claims under

the FCA.

Indeed, most

disbursed to

the

of the funds

Merrill Lynch

mortgage was

assigned.

language in McNinch as
_______

in this case

until nearly three

We do

not read

were not

months after

the immediacy

suggesting that government funds must

be unconditionally available on literally the same day as the

____________________

11.
1986

This reading
amendments to

of the

the FCA,

term was reemphasized

which defines

"request or demand" for payment.

31 U.S.C.

in the

a "claim"

as a

3729(c) (1988);

S. Rep. No. 99-345, 1986 U.S.C.C.A.N. at 5284-85.

12.
could

This is not to
never, alone,

under the

FCA.

since the "claim

rule that the subsequent assignment

be sufficient

to constitute

a "claim"

It is just that we need not reach this issue

for payment" was clearly submitted

case several months earlier, on July 17, 1979.

-2424

in this

claim

in

is made.

In McNinch,
_______

the lack of immediacy was noted

the context of an application for mortgage insurance, the

submission of

which could occur

several years prior

occurrence of

any liquidated claims for

to the

the disbursement of

government funds, if, indeed, any claim for disbursement ever

arose at

situation

sort.

all.

McNinch, therefore, presented

_______

the different

of there being as yet no crystallized claim of any

In this case, we hold that Merrill Lynch's filing of a

specific

claim for government

insurance on the government's

form on July 17, 1979 was a "claim" within the FCA.

As this action was

over

six years later, it was

instituted on October 25, 1985,

barred by the FCA's statute of

limitations.

We do not reach the other arguments on appeal.

Reversed.
________

-2525