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United States ex rel. Ellis v. Zheng

United States District Court, D. Nevada

February 26, 2018




         Plaintiffs Christina and Jonathan Ellis bring a qui tam action on behalf of the United States pursuant to the False Claims Act, 31 U.S.C. § 3729, et seq. The Ellises assert that defendants Jing Shu Zheng and SJ 5318 Investment Corp. (SJ 5318) misrepresented the amount of rent Zheng was charging the Ellises, whose rent was being subsidized by the United States Department of Housing and Urban Development (HUD). A clerk's entry of default has been entered as to SJ 5318 Investment Corp. ECF No. 17. The Ellises now seek summary judgment against Zheng on their FCA claim.[1]

         I. BACKGROUND

         In March 2013, the Ellises leased from Zheng a house at 4411 Melrose Abbey Place, Las Vegas, Nevada (the “Property”). ECF No. 24 at 6. SJ 5318 acted as Zheng's agent and property manager. ECF Nos. 27 at 4; 27-1. The Ellises signed a lease agreement on March 22, 2013 indicating a total monthly rent of $2, 300. ECF No. 24-3.[2]

         On March 18, 2013, Zheng submitted a Request for Tenancy Approval to the Southern Nevada Regional Housing Authority (SNRHA) asking that the Property be considered for approval under the Section 8 Tenant-Based Housing Choice Voucher Program. ECF No. 24-5. Under Section 8, HUD enters into annual contribution contracts with regional public housing agencies across the United States, including the SNRHA. 24 C.F.R. § 982.151. Pursuant to the contribution contract, the SNRHA makes monthly housing assistance payments to landlords on behalf of eligible tenants. See Id. § 982.451. The contract between the SNRHA and a landlord is known as a Housing Assistance Payments (HAP) Contract. Id.

         The Request for Tenancy Approval submitted by Zheng proposed a monthly rent of $2, 000. ECF No. 24-5. On April 10, 2013, SJ 5318 entered into a HAP Contract with the SNRHA on Zheng's behalf. ECF No. 24-1. The HAP Contract contained the terms of the SNRHA's payment assistance to Zheng on behalf of the Ellises. Part A of the HAP Contract lists the “rent to owner” as $2, 000, of which $456 would be paid by the SNRHA every month as a housing assistance payment pursuant to Section 8. Id. at 3. Parts B and C of the HAP Contract provide, in relevant part, that: (1) the lease shall be consistent with the HAP Contract; (2) the rent payment may at no time exceed the reasonable rent as determined by the SNRHA; (3) except for the “rent to owner” payment, the owner may not accept any additional payment for rent of the unit; and (4) unless the owner has complied with all provisions of the HAP Contract, the owner does not have a right to receive housing assistance payments under that contract. Id. at 6, 7, 10.

         Zheng received a Notice of Rent Payment and Program Abuse Warning Information, which notifies the owner that the HAP Contract will begin. ECF No. 24-2. The notice states that “[r]equiring extra (‘side') payments in excess of the family's share of rent as listed . . . is considered program fraud” and will lead to the termination of the owner and family from the Housing Choice Voucher Program. Id. Throughout the Ellises' tenancy, Zheng received seven SNRHA Notice of Change forms notifying her of increases in the monthly HAP payment but indicating the total rent to owner remained $2, 000. ECF No. 24-6.

         Although the HAP Contract stated the rent was $2, 000, from April 2013 to January 2015, the Ellises deposited $2, 300-their monthly rental share and the extra $300 under the March 22 lease-directly into Zheng's bank account. ECF Nos. 24 at 9-10; 24-8; 24-9; 24-10. Zheng received twenty-two payments from the SNRHA under the HAP Contract for a total of $18, 722. ECF No. 24-11. The Ellises moved out in January 2015, two months before the expiration of their lease agreement. ECF No. 12 at 2.

         II. ANALYSIS

         Summary judgment is appropriate if the pleadings, discovery responses, and affidavits demonstrate “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a), (c). A fact is material if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

         The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then shifts to the non-moving party to set forth specific facts demonstrating there is a genuine issue of material fact for trial. Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 531 (9th Cir. 2000). I view the evidence and draw reasonable inferences in the light most favorable to the non-moving party. James River Ins. Co. v. Hebert Schenck, P.C., 523 F.3d 915, 920 (9th Cir. 2008).

         A. Agency Relationship Between Zheng and SJ 5318

         Zheng's primary argument in opposition is that SJ 5318, not her, signed the HAP Contract. She contends that SJ 5318 managed the Property and “t[ook] care of everything” for her. ECF No. 26 at 1. The Ellises respond that Zheng is liable for SJ 5318's violations of the FCA because it had actual authority to act on her behalf.

         “The general principles of the federal common law of agency have been formulated largely based on the Restatement of Agency.” Doe I v. Unocal Corp., 395 F.3d 932, 972 (9th Cir. ...

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