Grand Union Company v. United States

696 F.2d 888, 1983 U.S. App. LEXIS 31159

• Court: Court of Appeals for the Eleventh Circuit
• Decided: January 24, 1983
• Docket: 81-7557
• Status: Published

Opinions

TJOFLAT, Circuit Judge:

The sole question presented in this appeal is whether there exists a genuine issue of material fact that precludes the district' court from entering summary judgment for Grand Union Co. on the government’s claim against it under the False Claims Act, 31 U.S.C. § 231 (1976). We conclude that such an issue exists, and therefore vacate the judgment of the district court and remand the case for further proceedings.

I.

The Food and Nutrition Service (FNS) of the United States Department of Agriculture is the agency charged with the supervision of the federal food stamp program. On January 16, 1979, the FNS determined that one of Grand Union’s “Big Star” supermarkets in Richmond, Virginia, had a much higher rate of food stamp redemptions than its competitors. The FNS then conducted a field investigation of the store’s redemption practices.

An FNS agent made five visits to the Big Star store over a two-week period, April 10-24, 1979. On each visit, the agent purchased several items that were clearly ineligible for food stamp purchases, e.g., cigarettes, household cleaning products, and paper products. Nonetheless, the FNS agent paid for these items with food stamps. The check-out counter cashiers who accepted the agent’s food stamps turned them over to the store’s head cashier, Inez Slaughter, along with the day’s receipts, which included other food stamps. Slaughter endorsed all of the stamps, signed a certificate stating that they had not been accepted for ineligible items, and deposited them with Grand Union’s bank in Richmond. In due course, the Treasurer of the United States redeemed the stamps, and Grand Union received the proceeds.

On May 29, 1979, the FNS informed Grand Union of the results of its investigation and disqualified the store from participation in the food stamp program for a period of one year.¹ Grand Union obtained review² of this decision within the agency, and the decision was affirmed.

Grand Union then brought suit against the United States to obtain judicial review of this agency action.³ The United States counterclaimed against Grand Union, alleging that Grand Union’s redemption of food stamps that it had obtained in the sale of ineligible items constituted a false claim against the United States, in violation of the False Claims Act, 31 U.S.C. § 231 (1976), thereby subjecting Grand Union to a $2,000 fine plus double the amount of any damages the Government may have sustained.⁴ In its answer to the Government’s counterclaim, Grand Union admitted that the alleged sales had occurred, but denied that it had violated the False Claims Act.

Following discovery, both parties moved for summary judgment. Grand Union supported its motion with the depositions of two of the check-out cashiers who had handled the FNS agent’s purchases. In these depositions the cashiers admitted that they knew certain non-food items, such as cigarettes and cleaning products, could not be bought with food stamps and stated that they would not have knowingly accepted food stamps for such items. They denied ever accepting any food stamps from an FNS agent. Grand Union also presented the affidavit of Inez Slaughter, the head cashier who redeemed the stamps in question. Slaughter stated that she endorsed the food stamp coupons received from the cashiers, and certified that they had not been received in payment of ineligible items, under the expectation that the cashiers had accepted the food stamp coupons only for eligible food items. She further stated that she had never endorsed and certified any food stamp coupons knowing, or having any reason to believe, that any cashier had accepted any of them as payment for ineligible items.

The government countered with the authenticated reports of the FNS agent who directed the field investigation of Grand Union’s Richmond store. These reports detailed the five visits and sales we have recited.

Before the district court could rule on the parties’ motions for summary judgment, Grand Union notified the court that it had closed the store involved in the dispute and moved that its complaint be dismissed. The court granted the motion. The court then granted Grand Union’s motion for summary judgment on the government’s counterclaim.

The court rejected the government’s argument that Grand Union was responsible, under the doctrine of respondeat superior, for the acts of its check-out counter cashiers in knowingly accepting food stamps for ineligible. goods. In the court’s view, the conduct of these cashiers was irrelevant; the dispositive issue was the intent of the head cashier, Inez Slaughter, in certifying that the food stamps she presented to the government for redemption had not been received as payment for ineligible items. The court looked to Slaughter’s deposition for the answer and found that it evinced no knowledge or intent to defraud on her part. See Record, vol. I, at 365 — 66.

II.

The record before us plainly permits the inference that the check-out cashiers knowingly permitted the FNS agent to purchase ineligible non-food items with food stamps. The sole question we must decide, then, is whether the knowledge of these cashiers can be imputed to Grand Union.

We have held in cases brought under the False Claims Act that the knowledge of an employee is imputed to the corporation when the employee acts for the benefit of the corporation and within the scope of his employment.⁵ United States v. Hangar One, Inc., 563 F.2d 1155 (5th Cir.1977); accord United States v. Ridglea State Bank, 357 F.2d 495 (5th Cir.1966); see United States v. Aerodex, Inc., 469 F.2d 1003 (5th Cir.1972); cf. Henry v. United States, 424 F.2d 677 (5th Cir.1970) (partner’s scienter imputed to partnership where partner acted on behalf of partnership).

In Hangar One, for example, we held liable under the False Claims Act a defense contractor whose employees knowingly delivered defective materials to the government because the employees were acting for the benefit of the contractor and within the scope of their employment. We rejected the contractor’s claim that a corporation may not be charged with the knowledge of an employee who was not responsible for the operations of the corporation. We observed that

[i]n United States v. Ridglea State Bank, 357 F.2d 495 (5th Cir.1966), this court indicated that a corporation will be liable for violations of the False Claims Act if its employees were acting within the scope of their authority and for the purpose of benefiting the corporation.... In short, liability of a corporation for a False Claims Act violation may arise from the conduct of employees other than those with “substantial authority and broad responsibility.”

Hangar One, 563 F.2d at 1158 (emphasis added).

Thus, the district court erred when it focused solely on the head cashier’s knowledge when deciding the summary judgment motion.⁶

The judgment of the district court is VACATED, and this case is REMANDED for further proceedings.

1 . The FNS acted pursuant to 7 C.F.R. § 278.-6(e)(2) (1979), which provides:

(e) Penalties. FNS shall take action as follows against any firm determined to have violated the Act or regulations. The FNS regional office shall:

(2) Disqualify the firm for 1 year if:

(i) The evidence shows that: (A) It is the firm’s policy to sell expensive or conspicuous nonfood items, cartons of cigarettes, or alcoholic beverages, in exchange for food coupons, and the firm has engaged in such practices ...

and

(ii) The firm was warned about the possibility that violations were occurring and of the possible consequences of violating the regulations. The regional office may disqualify a firm for 1 year, even though the firm was not warned about the possibility that violations were occurring, if the regional office finds that the firm has committed unusually serious violations of the kind described in [ (e)(2)(i)(A) ] of this subparagraph.

2 . Grand Union obtained review pursuant to 7 C.F.R. § 278.8 (1979), which provides that a food retailer, such as Grand Union, “aggrieved by administrative action under ... [section 278.6] may file a written request for review of the administrative action with the food stamp review officer.”

3 . Grand Union proceeded under 7 U.S.C. § 2023 (Supp. IV 1980), which provides in pertinent part:

If the store ... feels aggrieved by such final determination, it may obtain judicial review thereof by filing a complaint against the United States in the United States court for the district in which it resides or is engaged in business, or, in the case of a retail food store or wholesale food concern, in any court of record of the State having competent jurisdiction, within thirty days after the date of delivery or service of the final notice of determination upon it, requesting the court to set aside such determination.

Grand Union also proceeded under 28 U.S.C. § 1346 (1976 and Supp. IV 1980), which provides in pertinent part:

(a) The district courts shall have original jurisdiction, concurrent with the Court of Claims, of:

* * * * * *

(2) Any other civil action or claim against the United States, not exceeding $10,000 in amount, founded ... upon ... any regulation of an executive department ....

4 . The False Claims Act, 31 U.S.C. § 231 (1976), provides:

Any person ... who shall make or cause to be made, or present or cause to be presented, for payment ... any claim upon or against the Government of the United States, or any department or officer thereof, knowing such claim to be false, fictitious, or fraudulent, or who, for the purpose of obtaining or aiding to obtain the payment or approved of such claim, makes, uses, or causes to be made or used, any false ... certificate ... knowing the same to contain any fraudulent or fictitious statement or entry ... shall forfeit and pay to the United States the sum of $2,000, and, in addition, double the amount of damages which the United States may have sustained by reason of the doing or committing such act, together with the costs of the suit

5 . Cases that the Court of Appeals for the Fifth Circuit decided prior to October 1, 1981, are precedent in this circuit. Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir.1981) (en banc).

6 . Because of our disposition in this case, we need not reach appellant’s claim that the decision granting summary judgment should be reversed because the affidavits filed by Grand Union contained inadmissible evidence.