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United States ex rel. Salvatore v. Fleming

United States District Court, W.D. Pennsylvania

February 23, 2015

UNITED STATES OF AMERICA ex rel. DIANA SALVATORE, and DIANA M. SALVATORE, Plaintiffs,
v.
MICHAEL FLEMING, TAYLOR MANAGEMENT, INC., and DIXIE REALTY, INC., d/b/a BUY-N-SELL Real Estate, Defendants.

MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION

CYNTHIA REED EDDY, Magistrate Judge.

I. RECOMMENDATION

This is a qui tam action brought by Diana Salvatore ("Plaintiff"), on behalf of the United States Government against her former residential landlord, Michael Fleming ("Defendant Fleming"), and the realty management companies utilized by Defendant Fleming, Taylor Management, Inc., and Dixie Realty, Inc. d/b/a Buy-Sell Real Estate, under the False Claims Act, 31 U.S.C. § 3729 et seq., as amended ("FCA"). Plaintiff alleges that Defendants violated the FCA by knowingly submitting false claims to the federal government for rental subsidy payments under the Section 8 Low-Income Housing Choice Voucher ("Section 8") Program.

Before the Court is Defendant Fleming's motion to dismiss and strike under Federal Rules of Civil Procedure 10(b) and 12(6), or in the alternative, motion for summary judgment under Rule 56. (ECF No. 37).[1] The Court has considered Plaintiff's amended complaint, Defendant Fleming's motion and brief in support thereof, Plaintiff's brief in opposition, Defendant Fleming's reply brief, and the documents attached to the parties' briefs. (ECF Nos. 33, 37, 38, 42 and 48).[2] For the reasons set forth below, it is respectfully recommended that this motion be denied.

II. REPORT

A. FACTUAL AND PROCEDURAL HISTORY

1. Relevant Facts[3]

In August 2007, Plaintiff and Defendant Fleming, by and through Defendant Taylor Management, executed a Section 8 Request for Tenancy Approval and submitted it to the Housing Authority of the City of Pittsburgh ("HACP"). (Am. Compl. ¶ 44, ECF No. 33). Although the Section 8 Program is administered locally by the HACP, it is subsidized through the United States Department of Housing and Urban Development ("HUD"). (Id. at ¶¶ 1, 44). Plaintiff, as a low-income single mother of three minor children and who was pregnant with her fourth child at the time, was seeking to rent a residential premises owned by Defendant Fleming. (Id. at ¶ 38). The parties requested that the HACP authorize that Defendant Fleming lease the subject premises to Plaintiff for $900.00, which included the costs of water and sewage service, under the Section 8 Program. (Id. at ¶ 45). However, the HACP rejected this proposed rent and advised the Defendants that the maximum monthly amount Defendant Fleming could accept for the subject premises under the Section 8 Program was $737.00. (Id. at ¶ 45). On August 30, 2007, Defendants contacted the HACP indicating that Defendant Fleming agreed to accept this amount. (Id. at ¶ 52). On October 16, 2007, the HACP approved the premises for Section 8 benefits. (Id. at ¶ 53).

On December 12, 2007, Defendant Fleming, by and through Defendant Taylor Management, executed a lease for the subject premises with Plaintiff and entered into a Section 8 Housing Assistance Payment Contract with the HACP, which both prescribed that the monthly rent was $737.00 and Defendant Fleming was responsible for the costs of water and sewage. (Id. at ¶¶ 60-62). Both the lease and Section 8 Housing Assistance Payment Contract were formally approved by the HACP on December 18, 2007, and were retroactive to October 16, 2007. (Id. at ¶ 70).

Notwithstanding these agreements, Defendant Fleming initially required Plaintiff to pay the difference between the rental amount approved by the HACP ($737.00) and the initial proposed amount ($900.00), totaling an additional $163.00 per month. Further, contrary to the terms of the agreements, Defendant Fleming required Plaintiff to pay costs of water and sewage. Plaintiff avers that from November 2007 through January 2010, Defendant Fleming, by and through Defendant Taylor Management and Defendant Dixie Realty, [4] fraudulently and illegally collected $3, 859.00 in excess rent payments and $3, 352.03 in excess water and sewage payments from Plaintiff. (Id. at ¶¶ 115, 123). Further, Plaintiff alleges that during that same period, due to "the Defendants' false certifications, material omissions, and rental overcharges, " Defendants unlawfully received $19, 473.00 in federal rent subsidies. (Id. at ¶¶ 122, 124).[5]

In January 2010, Plaintiff had a conversation with her HACP Housing Counselor and learned for the first time that Defendants had been improperly demanding payment from Plaintiff while also collecting the maximum monthly amount through the Section 8 Program. (Id. at ¶ 103). Therefore, from February 2010 through December 2010, Plaintiff stopped paying the additional amount to Defendants. (Id. at ¶ 104). Consequently, in August 2010, Defendant Fleming instituted eviction proceedings against Plaintiff, and in December 2010, Plaintiff and her four minor children vacated the subject premises and relocated to a different Section 8 residence. (Id. at ¶¶ 105-106).

2. Procedural Background

This case was filed as a qui tam action under seal by Plaintiff pursuant to the FCA on September 15, 2011. (Compl., ECF No. 2). The complaint was unsealed by the Court on May 20, 2014, upon notice by the United States of America that it had declined to intervene in the suit. (ECF No. 23). Defendant Fleming moved to dismiss and strike the complaint on August 21, 2014, (ECF No. 30), to which Plaintiff responded by amending her complaint on September 11, 2014. (Am. Compl., ECF No. 33). On September 23, 2014, Defendant filed the present motion to dismiss and strike the amended complaint for failure to state a claim, or in the alternative, motion for summary judgment. (Mot. to Dismiss, ECF No. 37).

In support of his motion, Defendant Fleming primarily asserts that this action is barred by the doctrines of claim preclusion and/or issue preclusion because Plaintiff asserted a counterclaim against Defendant Fleming in the prior state court eviction proceedings containing similar allegations to those in the amended complaint. (Def.'s Br. in Supp. at 3-4, 12-13, ECF No. 38). Defendant Fleming attached the counterclaim filed by Plaintiff in those proceedings (Ex. A, ECF No. 38-1) as well as the praecipe to settle and discontinue the eviction (Ex. B., ECF No. 38-1) to his brief in support. Plaintiff filed a brief in opposition on October 23, 2014 (ECF No. 42), attaching the complaint in the eviction proceedings (Ex. A, ECF No. 42-1) and the settlement agreement relating to those proceedings (Ex. B, ECF No. 42-2). Neither party objects or disputes the authenticity or relevancy of the ...


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