United States District Court, D. Minnesota
United States of America, ex rel. Kenneth Kraemer, and Kenneth Kraemer and Kraemer Farms, LLC, a Minnesota limited liability company, Plaintiffs,
United Dairies L.L.P., a Minnesota limited liability partnership; Union Dairy, L.L.P., a Minnesota limited liability partnership; Westland Dairy, LLP, a Minnesota limited liability partnership; Alpha Foods, L.L.P., a Minnesota limited liability partnership; Nicholas Ridgeway; Craig Achen; Steven Landwehr; Thomas Landwehr; Matthew Landwehr; Robert Hennen; Silverstreak Dairies, LLC, a Minnesota limited liability company; Greg Marthaler; Marthaler Properties Family LLLP, a Minnesota limited liability limited partnership, d/b/a Marthaler Farms; and Dairyridge, Inc., a South Dakota corporation, Defendants.
A. Blumenfield and Pamela A. Marentette, Assistant United
States Attorneys, United States Attorney's Office,
counsel for Plaintiff United States of America, ex rel.
Matthew Albin Anderson, Esq., Law Office of Matthew A.
Anderson; Thomas F. DeVincke, Esq., and Patrick B. Steinhoff,
Esq., Malkerson Gunn Martin LLP, counsel for Plaintiffs
Kenneth Kraemer and Kraemer Farms, LLC.
R. Leistico, Esq., and Alexander T. Mastellar, Esq., Rinke
Noonan, counsel for Defendants.
MEMORANDUM OPINION AND ORDER
DONOVAN W. FRANK UNITED STATES DISTRICT JUDGE
Kenneth Kraemer (“Kraemer”) and Kraemer Farms,
LLC (collectively, “Plaintiffs”) initiated this
qui tam action on behalf of the United States of
America (the “Government”), against Defendants
United Dairies L.L.P. (“United”), a Minnesota
limited Liability partnership; Union Dairy, L.L.P.
(“Union”), a Minnesota limited liability
partnership; Westland Dairy, LLP (“Westland”), a
Minnesota limited liability partnership; Alpha Foods, L.L.P.
(“Alpha”), a Minnesota limited liability
partnership; Nicholas Ridgeway (“Ridgeway”);
Craig Achen (“Achen”); Steven Landwehr (“S.
Landwehr”); Thomas Landwehr (“T.
Landwehr”); Mathew Landwehr (“M.
Landwehr”); Robert Hennen (“Hennen”);
Silverstreak Dairies, LLC (“Silverstreak”), a
Minnesota limited liability company; Greg Marthaler
(“Marthaler”); Marthaler Properties Family LLLP
(“Marthaler Farms”), a Minnesota limited
liability limited partnership, d/b/a Marthaler Farms; and
Dairyridge, Inc. (“Dairyridge”), a South Dakota
corporation (collectively “Defendants”). (Compl.)
qui tam Complaint was filed under seal on September
15, 2016. (Id.) The Complaint was unsealed on August
4, 2017 and served on Defendants between August 24 and
September 5, 2017. (See Doc. Nos. 18, 25, and 26.)
Kraemer asserts two causes of action under the False Claims
Act (“FCA”), 31 U.S.C. § 3729(a)(1), and a
third cause of action for Unjust Enrichment, on behalf of the
Government. (Compl. ¶¶ 72-81.) Kraemer and
Kraemer Farms, L.L.C. initially alleged four additional
causes of action (the “Kraemer Counts”): (1)
retaliation under the FCA, 31 U.S.C. § 3730(h) against
Defendants United, Union, Ridgeway, Achen, S. Landwehr, T.
Landwehr, M. Landwehr, and Hennen (id. ¶¶
82-87); (2) breach of contract against United, and the same
individuals listed in Kraemer Count One (id.
¶¶ 88-96); (3) declaratory judgment against the
same defendants for the breach of contract alleged in Kraemer
Count Two, (id. ¶¶ 97-103); and (4) breach
of contract against Union (id. ¶¶ 104-08).
the first Kraemer Count remains. The Court dismissed Count IV
with prejudice on March 26, 2018. (Doc. No. 66.) The Court
found Counts II and III subject to mandatory arbitration and
dismissed them without prejudice on July 6, 2018. (Doc. No.
69 (“Order”).) Counts II and III were
subsequently resolved through arbitration on August 30, 2018.
(Doc. No. 95 (“Leistico Decl.”) ¶ 5, Ex. 1.)
matter is before the Court on Plaintiffs' motion for
partial summary judgment (Doc. No. 86), and Defendants'
motion for summary judgment (Doc. No. 92). For the reasons
set forth below, the Court denies Plaintiffs' motion, and
grants in part and denies in part Defendants' motion.
Specifically, the Court dismisses Defendant Silverstreak as a
party, but denies Defendants' motion in all other
was a partner in Defendants Union and United, Minnesota
partnerships involved in dairy farming operations. (Doc. No.
37 (“R. Hennen Decl.”) ¶ 3, Ex. 1 at 1,
§§ 1.3, 2.1; R. Hennen Decl. ¶ 4, Ex. 2 at 1,
§§ 1.3, 2.1.) The partnerships also grow corn or
contract with other growers to produce corn crops.
(See Compl. ¶¶ 32, 57.) The partnerships
and other defendants obtain insurance from the federal
government to protect against crop losses. (See Id.
United States Department of Agriculture (“USDA”)
administers crop insurance policies through its Federal Crop
Insurance Corporation (“FCIC”) and its Risk
Management Agency (“RMA”). (See
Compl. ¶¶ 2-3.) The RMA serves as a reinsurer to
private insurance companies. (Doc. No. 89 (“Steinhoff
Decl.”) ¶ 7, Ex. C (“Voy Dep.”) at 12;
Compl. ¶ 2) The RMA writes the terms, establishes the
rates and coverages, and develops the policies and procedures
that govern the crop insurance policies; however, the
policies are sold and administered by authorized private
insurance companies. (Voy Dep. at 12-14; Compl. ¶¶
2-3.) The RMA makes administrative and operating payments to
the private insurance companies for the cost of administering
the policies. (Voy Dep. at 14.) The RMA also pays premium
subsidies to the private insurance companies on behalf of the
policy holder. (Id.) Losses are a shared risk
between the RMA and the private companies. (Id. at
coverage is available for both grain corn and silage corn;
however, the policies are different. (Id. at 22;
see also Voy Dep., Ex. 1 (“Policy”) at
¶5(b)(1) (“[T]he crop insured will be all corn
that is  [p]lanted for harvest either as grain or as
silage.”).) Silage is corn that is often fed to
livestock. (See Id. at 23; see also Policy
at 1 (defining silage as “[a] product that results from
severing the plant from the land and chopping it for the
purpose of livestock feed”).) Grain is corn that is
typically processed with a combine and sold on the market to
other end-users. (See Voy Dep. at 24, 37.)
coverage, premium, and actuarial tables for grain and silage
insurance are different because there are different risks
associated with each type. (Id. at 24, 36-37.) For
example, revenue protection is a coverage that is only
available for grain corn. (Id. at 38.) Revenue
protection insures both the yield and the price of a crop so
that a specific revenue is guaranteed even if the market
price drops. (Id.) Revenue protection is not
available for silage corn because it generally is not sold.
(Id. at 37.) Insurance coverage for silage is based
only on yield, determined by a grower's average
production history. (Id. at 38.)
eligible to participate in crop insurance, a grower must
submit an application, annual acreage report, and production
history report. (Compl. ¶ 4.) The annual acreage report
includes the: (1) amount of acreage of the crop in the county
(insurable and not insurable) in which the grower has a share
and the date the insured crop was planted; (2) grower's
share at the time coverage beings; (3) practice; (4) type;
and (5) the land identifier for the crop acreage.
See 7 C.F.R. § 457.8, Model Policy §
6(c)(1)-(5)). The Acreage Reporting Form includes a statement
above the signature block whereby the grower certifies the
truthfulness of the reporting and acknowledges that
“failure to report completely and accurately” may
result in criminal or civil penalties under the FCA.
(See Steinhoff Decl. ¶¶ 18-20, Exs. N-P
(“Acreage Reporting Forms”).)
year, a grower also completes a USDA document called
“Form 578.” (Steinhoff Decl. ¶ 11, Ex. G
(“Triplett Dep.”) at 23; Voy Dep. at 45.) After
planting crops, the grower completes Form 578 and files it at
a Farm Services Agency (“FSA”) office. Form 578
requires a grower to identify the type of crop planted in
each field. (See Steinhoff Decl. ¶¶ 15-17,
Exs. K-M (“Form 578s”).) For corn crops, Form 578
includes a column to indicate intended use as either
“GR” (for grain), or “FG” (for
forage). (Id.) Form 578 also includes a
statement above the signature block which requires the grower
certify that the information in the form is true.
the FSA developed Form 578 primarily for use in other farm
programs, insurance companies and the RMA use it to
cross-check and verify information reported on the Acreage
Reporting Form. (Triplett Dep. at 22-24). Accordingly,
growers are required to provide insurance agents with copies
of Form 578 on the date of or prior to filling out the
Acreage Reporting Form. (Id.)
type of insurance coverage available for corn depends on the
county where the corn is grown. (Voy Dep. at 18.) The RMA
designates counties as: (1) grain only; (2) silage only; (3)
or both grain and silage. (Id.). If a grower
lives in a county designated as silage only but wishes to
grow corn as grain and obtain the requisite coverage, the
grower may request written permission from the RMA to grant
an exception. (Id. at 19.) In counties where both
grain and silage are insurable, a grower must report the
acreage of each type on the Acreage Reporting Form to
determine which coverage applies to which
crops. (Id. at 53; Policy at ¶
5(c)(1); see also 7 C.F.R. § 457.113
(“[A]ll insurable acreage will be insured as the type
or types reported by you on or before the acreage reporting
date.”).) The 2014 FCIC Crop Insurance Handbook
For corn, grain and silage counties are counties for which
the actuarial documents provide grain and silage types. Both
types are insurable. Insureds must report insurance acreage
by unit and by type (grain or silage) according to the
intended method of harvest.
(Voy Dep., Ex. 3 (“Crop Ins. Handbook”) ¶ 5
at 411.) In the event of damage or loss, the Policy
If you will harvest any acreage in a manner other than as you
reported it for coverage (e.g., you reported
planting it to harvest as grain but will harvest the acreage
for silage, or you reported planting it to harvest as silage
but will harvest the acreage for grain), you must notify us
before harvest begins.
(Policy at ¶ 10(c).)
Crop Ins. Handbook also states, “a variety of corn
adapted for use as silage only is not insurable as grain and
must be insured as silage.” (Crop Ins. Handbook ¶
5.) The Policy similarly specifies that coverage is
not available for “a variety of corn adapted for silage
use only when reported for insurance as
grain.” (Policy ¶ 5(b)(2)(ii).) Neither the
Crop Ins. Handbook nor the Policy define which varieties of
corn adapted for silage use are not insurable as grain.
(See Crop Ins. Handbook; See also Policy.)
are several varieties of corn adapted for silage use,
including brown mid rib (“BMR”). (Leistico Decl.
¶ 11, Ex. 7 (“Plehn Dep.”) at 47.) BMR is a
silage-hybrid that has a recessive mutation which increases
digestibility when it is processed as silage. (See
Plehn Report at 4; Leistico Decl. ¶ 19, Ex. 15
(“Miller Report”) at 4.) It also produces a
standard ear of yellow corn that can be processed and sold as
grain. (Miller Report at 4; Plehn Dep. at 116-117.)
fall of 2013, United, through one of its partners, claimed
revenue losses for BMR seeds planted as grain corn and
obtained crop insurance proceeds from the federal government.
(Compl. ¶¶ 34, 36.) United made similar claims for
losses in 2014 and 2015, obtaining crop insurance proceeds in
both years. (Id. ¶¶ 41, 43, 48, 50.) In
the fall of 2014, Kraemer began to suspect that United may
have been falsely certifying the type of crop it planted in
obtaining insurance. (See Id. ¶¶ 52, 53.)
Specifically, Kraemer suspected that United was falsely
certifying crops as grain corn when they were actually silage
corn and receiving insurance payments on that basis. (See
generally Id. ¶¶ 26, 28- 50.) Plaintiffs
allege similar crop insurance fraud by other entities and
their partners, including Union, Westland, Alpha Foods,
Marthaler Farms, Dairyridge, and Silverstreak. (Id.
by the possibility that the partnership might have received
insurance proceeds through fraud, Kraemer met with
United's managing partner on September 11, 2014 to
explain his concerns. (See Id. ¶ 52.) The
managing partner told Kraemer that he would look into the
matter, but no corrective action was taken. (Id.
¶¶ 52-55.) Kraemer conducted an investigation into
the possible fraud against the government and retained his
own counsel to remedy the alleged wrongdoing. (Id.
to Kraemer, in October 2014, the other United partners began
to retaliate against him by providing themselves compensation
for management activities without compensating Kraemer,
disproportionately paying distributions, and excluding
Kraemer from partnership management. (Id.
¶¶ 54, 83-85.) Kraemer and the other United
partners subsequently began communicating with each other
exclusively through their respective counsel. (See
id. ¶¶ 54-56.) On July 29, 2016 and August 2,
2016, counsel for Kraemer sent a letter to counsel for
United, relaying Kraemer's allegations regarding the crop
insurance fraud and the other partners' retaliatory
conduct. (Doc. No. 48 ¶¶ 5, 6, Exs. C & D.) On
September 15, 2016, Plaintiffs filed a qui tam
complaint under seal against United, United's partners,
and other defendants in this court. (See Compl.) The
Complaint was unsealed on August 4, 2017 and served on
Defendants between August 24 and September 5, 2017.
(See Doc. Nos. 18, 25, and 26.)
Defendants seek dismissal from this action for a variety of
reasons: (1) Defendants Westland, Union, Alpha, Marthaler
Farms, Dairyridge, T. Landwehr and Marthaler because any
claim they made was not false, and, in the alternative, no
false claim was made knowingly, and none was submitted as a
claim for payment to the government; (2) Defendants Ridgeway,
Achen, Hennen, S. Landwehr, and M. Landwehr because they were
not involved with certifications or procurement of crop
insurance; (3) Defendant United because it is a management
entity that does not own crops or crop insurance; (4)
Defendant Dairyridge because Plaintiffs failed to plead fraud
with particularity; and (5) Defendants Silverstreak and
Hennen because they did not certify BMR or any similar
nonconventional varieties as grain corn during the relevant
years. (Doc. No. 94 (“Defs.' Memo.”) at
United and its partners, Ridgeway, Achen, S. Landwehr, T.
Landwehr, M. Landwehr, and Hennen, also seek dismissal of
Kraemer Count I, retaliation damages under the FCA, because
it was already litigated and disposed of in arbitration and,
in the alternative, because FCA retaliation damages are only
available in an employment-type relationship. (Id.
Defendants seek dismissal of the claim for unjust enrichment
because there is no evidence of wrongdoing and they were
entitled to the money received for crop insurance payments.
(Id. at 47.) Finally, Defendants seek an award for
attorney fees and expenses because they allege that
Plaintiffs' claims are vexatious and brought primarily
for purposes of harassment. (Id. at 55; Doc. No. 23
at 19 ¶¶ 1-5.)
move on behalf of the Government only with respect to their
first and second causes of action and only against Defendants
United, Union, Westland, T. Landwehr, Marthaler, and
Marthaler Farms. Plaintiffs contend that there are no
disputed issues of material fact concerning whether these
Defendants are liable to the United States under the FCA.
(Doc. No. 88 (“Plaintiffs' Memo.”) at 2.)
The False Claims Act
the FCA's qui tam provisions, relators-private
citizens acting as whistleblowers-may sue on behalf of the
Government to recover damages for submission to the
Government of materially false claims for payment. 31 U.S.C.
§§ 3729, 3730; see, e.g., U.S. ex rel.
Donegan v. Anesthesia Assocs. of Kan. City, PC, 833 F.3d
874, 876 (8th Cir. 2016). “The FCA attaches liability,
not to the underlying fraudulent activity, but to the claim
for payment.” U.S. ex rel. Onnen v. Sioux Falls
Indep. Sch. Dist. No. 49-5, 688 F.3d 410, 414 (8th Cir.
2012) (quoting U.S. ex rel. Costner v. URS Consultants,
Inc., 153 F.3d 667, 677 (8th Cir. 1998)). As such, a
viable FCA claim generally requires a relator to establish
that the defendant presented a claim for payment to the
Government, that the claim was false or fraudulent, and that
the defendant knew the claim was false or fraudulent.
U.S. ex rel. Simpson v. Bayer Healthcare (In re Baycol
Prods. Litig.), 732 F.3d 869, 875 (8th Cir. 2013). In
addition, an FCA violation requires proof that a false or
fraudulent claim or statement was material to the
Government's decision to pay a claim. Universal
Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S.Ct.
1989, 2001 (2016); U.S. ex rel. Vigil v. Nelnet,
Inc., 639 F.3d 791, 797 (8th Cir. 2011).
turning to the motions filed by the parties, the Court
briefly addresses the FCA's knowledge requirement, which
the parties dispute. Under the FCA, a defendant must
knowingly present a materially false claim. In
re Baycol, 732 F.3d at 875. The FCA defines
“knowing” as having “actual
knowledge” or acting “in deliberate ignorance
of” or “reckless disregard of the truth or
falsity of the information.” 31 U.S.C. §
3729(b)(1)(A). It does not require “proof of specific
intent to defraud.” Id. § 3729(b)(1)(B).
this case, an FCA claim may arise when a defendant certifies
compliance with statutory, regulatory, or contractual
requirements but allegedly does not comply with such
requirements. See, e.g., Escobar, 136 S.Ct.
at 1995-96; Donegan, 833 F.3d at 876-77; U.S. ex
rel. Ketroser v. Mayo Found., 729 F.3d 825, 827 (8th
Cir. 2013). A defendant does not knowingly present a
false claim when: (1) the requirement at issue is
“ambiguous”; (2) the defendant acted pursuant to
an “objectively reasonable” interpretation of the
requirement; and (3) no formal government guidance warned the
defendant away from its interpretation of the requirement.
Donegan, 833 F.3d at 878-79; see also U.S. ex
rel. Purcell v. MWI Corp., 807 F.3d 281, 287-91 (D.C.
Cir. 2015) (applying the interpretation of “reckless
disregard” established in Safeco Ins. Co. of Am. v.