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United States v. The Estate of Zimmerman

United States District Court, D. Maryland

December 12, 2019

UNITED STATES, et al., ex rel. SUSAN V.M. MAHARAJ Plaintiffs



         This qui tam action concerns a six-acre parcel of land located in Frederick County, Maryland (the “Land” or the “Disputed Parcel”). Dr. Susan V. M. Maharaj, the Relator, filed suit on behalf of the United States of America and the State of Maryland against the Estate of Charles Howard Zimmerman, Robert Clayton Stevens, and George C. Stevens, pursuant to the False Claims Act (“FCA”), 31 U.S.C. §§ 3729 et seq., and Maryland's analogous statute (“MFCA”), Md. Code, §§ 8-101 et seq. of the General Provisions Article (“G.P.”). ECF 1 (the “Complaint”).[1]

         The Land separates the Relator's farm from a farm formerly owned by Charles Howard Zimmeran, who died in 2011. It is now the property of Robert and George Stevens. The Relator alleges that defendants did not own the Land, but registered it in the Conservation Reserve Enhancement Program (“CREP”), a federal program in which property owners are paid to dedicate agricultural lands for preservation.[2] In so doing, defendants allegedly defrauded the Farm Service Agency (“FSA”) of the United States Department of Agriculture (“USDA”) and its Maryland counterpart, the Maryland Farm Service Agency. According to the Relator, the defendants received “tens of thousands of dollars” from the United States and/or Maryland between 2000 and 2015 by enrolling the Land into the CREP.

         The Relator filed her Complaint under seal, along with eighteen exhibits, pursuant to the initial sealing provisions of the FCA and the MFCA, in order to provide time for the United States and Maryland to decide whether they wished to intervene. See 31 U.S.C. § 3730(b)(2); G.P. § 8-104(a)(3)(ii). Both the United States and the State of Maryland declined to intervene. See ECF 2; ECF 18. The Seal was lifted (ECF 3), and the Relator has continued to pursue the case.

         The Complaint contains four counts. Count I asserts that defendants presented false claims to obtain payment from the United States, in violation of 31 U.S.C. § 3729(a)(1(A). In Count II, the Relator alleges a violation of 31 U.S.C. § 3729(a)(1)(B), claiming the knowing presentation of false records to obtain payment. Count III asserts that defendants used false records to avoid an obligation to pay the United States, in violation of 31 U.S.C. § 3729(a)(I)(G). And, Count IV alleges that defendants made false statement to obtain payment from Maryland, in violation of G.P. §§ 8-101 et seq.

         Defendants have moved to dismiss, pursuant to Fed.R.Civ.P. 12(b)(1), 12(b)(5), and 12(b)(6). ECF 12 (the “Defendants' Motion”). The Defendants' Motion is supported by one exhibit. ECF 12-1. The Relator opposes Defendants' Motion (ECF 13), and defendants have replied (ECF 14), supported by one exhibit. ECF 14-1. In addition, Maryland has moved to dismiss, without prejudice. ECF 18 (the “State Motion”). Defendants filed a response to the State Motion (ECF 19), and the State replied. ECF 20. However, the Relator did not respond to the State Motion.

         No hearing is necessary to resolve the issues. See Local Rule 105.6. For the reasons that follow, I shall grant the State Motion (ECF 18) and grant in part and deny in part the Defendants' Motion (ECF 12).

         I. Factual and Procedural Background[3]

         A. Factual Background

         1. The Underlying Properties

         The Disputed Parcel separates two farms in Frederick County, Maryland. ECF 1, ¶ 11. The “Laughlin Farm” lies to the east. Id. ¶ 12. The Relator and her husband, Dr. Erich E. Blatter, purchased the Laughlin Farm in 2001 from Dr. Henry Laughlin and Marion P. Laughlin, who had held the property since 1963. Id. ¶¶ 12, 16. The Relator refers to it as the “Blatter/Maharaj Farm.” ECF 1, ¶ 14.

         To the east lies the “Zimmerman Farm.” Id. ¶ 13. Beginning in the 1950s, Charles Zimmerman and his wife, Mildred, rented the Zimmerman Farm, which was then a dairy farm, from Ada Devries and Hilda D. Davies. Id. ¶ 15. The Zimmermans purchased the property from Hilda D. Davies on or about September 28, 1965. Id. ¶ 17. However, according to the Relator, the Zimmerman's did not acquire title to the Disputed Parcel. Id. The Zimmermans owned the Zimmerman Farm until Mr. Zimmerman's death in 2011. Id. ¶ 26. The Zimmerman Farm is presently owned by Robert and George Stevens. Id. ¶¶ 28-29.[4]

         The parties fiercely contest the ownership of the Land, which has been the subject of extensive litigation in the Maryland courts. Plaintiff asserts that “none of the parties to this action is the record owner” of the Disputed Parcel. Id. ¶ 14.

         2. Allegations Relating to The Estate of Charles Zimmerman

         The Zimmermans ceased dairy operations in 1999. Id. ¶ 18. Shortly thereafter, Mr. Zimmerman applied to place 37.3 acres of property in the CREP, knowing that he did not own all of the property. Id. ¶¶ 10, 19-21. The CREP is a land conservation program administered by FSA. Id. ¶ 10 n.1. Farmers participating in the CREP agree to remove environmentally sensitive land from production in exchange for annual payment and other federal and state benefits. Id. According to the Relator, the 37.3 acres that Mr. Zimmerman sought to enroll in the CREP included the Disputed Parcel. See Id. ¶¶ 11, 22.

         To that end, Mr. Zimmerman submitted a Conservation Program Worksheet (“CREP Worksheet”) on November 27, 2000. Id. ¶ 19; see ECF 1-3 (“CREP Worksheet”). The same day, the Zimmermans executed a CREP Contract (“CREP Contract”). Id. ¶ 20; see ECF 1-4 (“11/27/2000 CREP Contract”). In the CREP Contract, the Zimmermans represented that Mr. Zimmerman was the “‘100' percent owner, rather than operator, of the 37.3 acres for enrollment, which included the Disputed Land.” ECF 1, ¶ 21; see Id. ¶ 23. In support of the CREP Contract, the Zimmermans provided the Maryland Farm Service Agency with a deed to the Zimmerman Farm. Id. ¶ 21.

         The CREP Contract began on January 1, 2001, and was renewed annually. Id. ¶¶ 20, 24. When Ms. Zimmerman passed away in 2007, Mr. Zimmerman revised the CREP Contract, naming himself as the sole contract participant. Id. ¶ 26; see ECF 1-5 (“7/11/2007 CREP Contract”).

         However, according to the Relator, the Zimmermans “were ineligible to place the Disputed Parcel in a CRP Contract.” ECF 1, ¶ 22. In order to enter into a CREP Contract, the participant “must be an owner or operator of the eligible land, ” but Mr. Zimmerman was neither the owner nor the operator of the Disputed Parcel. Id. (citing 7 C.F.R. § 1410.5). He did not hold the title to the Disputed Parcel. Id. ¶ 17. And, he was not an operator of the Disputed Parcel, because he ceased farming the prior year, and he did not submit any paperwork averring to be an operator of the Land. Id. ¶ 23.

         Mr. Zimmeran allegedly knew that he did not own the Disputed Parcel. Id. ¶ 34. He told family and neighbors that the Disputed Parcel was part of the Laughlin Farm. Id. ¶ 35. And, in the 1980s, Mr. Zimmerman allegedly had an argument with Dr. Laughlin about their property boundaries. Id. ¶ 36. Dr. Laughlin's son mediated the dispute, which culminated in Mr. Zimmerman and Dr. Laughlin signing a written agreement acknowledging that their property boundaries were contested, but agreeing that both parties could use the Disputed Parcel rent-free. Id. Further, the Relator alleges that in the spring of 2002, Mr. Zimmerman admitted to her that she owned the Disputed Parcel. Id. ¶ 44. And, in September 2010, he confirmed his lack of ownership over the Disputed Parcel because he had Zimmerman Farm surveyed, and the surveyors characterized the Disputed Parcel as an “Area of Unknown Ownership.” Id.; see ECF 1-11 (“Easement Survey”).

         The Relator alleges that she has exercised ownership over the Disputed Parcel since purchasing the Laughlin Farm in 2001. Id. ¶ 39. She treated the Land as her property, including mowing and clearing brush and building a stone walkway and patio. Id. ¶¶ 42, 43. And, when individuals wanted to use the Disputed Parcel for recreation, they asked Dr. Maharaj for permission, not the Zimmermans. Id. ¶¶ 40, 41. Mr. Zimmerman never objected to Dr. Maharaj or third parties using the Disputed Parcel. Id. ¶¶ 40, 43.

         Mr. Zimmerman passed away on January 29, 2011. Id. ¶ 26. Robert, acting as the personal representative of the Estate of Charles Howard Zimmerman (the “Estate”), revised the CREP Contract on August 1, 2011, to name the Estate as the CREP participant. Id.; see ECF 1-6 (“1/29/2011 CREP Contract”). But, when Robert filed an inventory of the Estate's assets in May 2011, he did not list the Disputed Parcel as Estate property. ECF 1, ¶ 27.

         3. Allegations Relating to Robert and George Stevens

         On April 18, 2012, the Estate conveyed 5.515 acres of the Zimmerman Farm to Robert and Diane Cole Stevens, and William E. Moxley and Joan Moxley, as life tenants; and then to Robert and George as tenants in common. Id. ¶ 28; ECF 1-7 (“4/12/2012 Deed”). On January 1, 2013, the Estate conveyed the remaining 162.33 acres of the Zimmerman Farm to Robert and George as joint tenants. ECF 1, ¶ 29; see ECF 1-8 (“12/3/2012 Deed”). Robert and George revised the CREP Contract on January 16, 2013, naming themselves as the CREP participants. ECF 1, ¶ 30; ECF 1-9 (“9/0/2015 CRP Contract”). The CREP Contract ended on September 30, 2015. ECF 1, ¶ 20.

         The Relator alleges that Robert and George were aware that the Zimmerman Farm did not include the Disputed Parcel. Id. ¶ 46. Dr. Maharaj discussed the issue with Robert on May 31, 2011. Id. ¶ 47. And, Robert allegedly admitted to Dr. Maharaj's husband in June 2011 that the Disputed Parcel was part of the Laughlin Farm, not the Zimmerman Farm. Id. ¶ 48.

         B. Procedural History

         1. State Litigation

         On June 4, 2014, Robert, on behalf of the Estate, filed a complaint in the Circuit Court for Frederick County against, inter alia, the Relator and her husband. He sought to quiet title to the Disputed Parcel on the ground that the Estate had obtained title to the Land through adverse possession. Id. ¶ 51; see ECF 1-13 (“Circuit Court Complaint”).

         Judge William R. Nicklas, Jr. conducted a two-day bench trial on September 15-16, 2015. ECF 1, ¶ 54; ECF 1-14 (“Transcript of Proceedings”). As a preliminary matter, Judge Nicklas asked the parties whether the case could proceed without the record title owners of the Disputed Parcel being named as defendants. The Estate contended that, notwithstanding the absence of the record title holder, the court could determine which of the parties had a superior right to possess the Land. ECF 1, ¶ 54. At the conclusion of the trial, Judge Nicklas ruled that the Estate “had met ‘the criteria of adverse possession' and that, as between or amongst the Estate and the relator, Dr. Maharaj, and her husband, Erich E. Blatter, the Estate had the right to possess the Disputed Land by adverse possession.” Id. (quoting ECF-14 at 11). The circuit court entered an order on November 3, 2015, granting the Estate the right to use and possess the Disputed Parcel as against the Relator. Id. ¶ 56; ECF 1-15 (“11/2/2015 Order”).

         The Relator noted an appeal on November 30, 2015. ECF 1, ¶ 57; ECF 1-16 (“Notice of Appeal”). In an unreported opinion, the Maryland Court of Special Appeals vacated the judgment, reasoning that the record owner was a necessary party and therefore must be joined to a quiet title action. ECF 1, ¶ 58; see Erich E. Blatter, et ux. v. Estate of Charles Howard Zimmerman, No. 2146, Sept. Term, 2015, 2017 WL 2730237, at *7 (Md. Ct. Spec. App. June 26, 2017). Thereafter, the Maryland Court of Appeals granted certiorari. ECF 1, ¶ 58.

         In an opinion of April 20, 2018, the Maryland Court of Appeals determined that amendments to the Real Property Article of the Maryland Code and to the Maryland Rules, enacted while the case was pending before the Maryland Court of Special Appeals, had retroactive effect and governed the quiet title action. Id. ¶ 59; see Estate of Zimmerman v. Blatter, 458 Md. 698, 706-07, 183 A.3d 223');">183 A.3d 223, 228 (2018); see also Title 14, Subtitle 6 of the Real Property Article of the Maryland Code, and Maryland Rules 12-801 to 12-811. Accordingly, the Maryland Court of Appeals concluded “‘that, under the circumstances of this case, the proper disposition is to reverse the Court of Special Appeals's judgment and remand this case to that Court with instructions to vacate the circuit court's judgment and remand this case to the circuit court for further proceedings, so that the Estate can follow the procedures that are outlined in the new statutes and Maryland Rules concerning joinder of a defendant who is a deceased record owner with no known personal representative.'” ECF 1, ¶ 59 (quoting Estate of Zimmerman, 458 Md. at 743, 183 A.3d at 250).

         Pursuant to this ruling, on May 23, 2018, the Maryland Court of Special Appeals vacated the underlying judgment of the circuit court and remanded the case for further proceedings. ECF 1, ¶ 60; ECF 1-17 (“5/23/2018 Order”). The Estate filed an amended complaint on June 13, 2018, again seeking to quiet title to the Disputed Parcel and asserting ownership through adverse possession. ECF 1, ¶ 61; ECF 1-18 (“6/12/2018 Amended State Court Complaint”). The quiet title action is pending in State court. See Estate of Zimmerman v. Blatter, 10-C-14-001668 (Frederick Cty. Cir. Ct.).

         2. Federal Litigation

         In July and August 2014, the Relator filed complaints with the FSA regarding the enrollment of the Disputed Parcel in the CREP. ECF 1, ¶ 32. At the time, she also disclosed information to the FSA regarding defendants' receipt of allegedly improper payments. Id. Pursuant to the Freedom of Information Act (“FOIA”), in December 2014, Dr. Maharaj requested the results of the FSA's investigation into her complaint. Id.; see ECF 1-10 (“FOIA Response”). The FOIA Response reflected that the FSA decided against pursuing legal action against defendants. ECF 1, ¶ 32.

         The Relator filed her Complaint under seal on behalf of the United States and Maryland on September 28, 2018. ECF 1. The United States filed a notice declining to intervene in the suit on February 25, 2019. ECF 2. The Complaint was unsealed by Order of April 15, 2019, which was docketed the following day. ECF 3.

         Summons were issued on April 22, 2019. ECF 4. On July 23, 2019, summons were returned executed, reflecting that the Relator served the Estate, Robert, and George on July 16, 2019. ECF 9; ECF 10; ECF 11.

         As noted, defendants moved to dismiss the Complaint. ECF 12. Relator timely responded (ECF 13), and defendants replied. ECF 14. On October 30, 2018, Maryland filed a notice declining to intervene, and moving to dismiss, without prejudice, under the Maryland FCA. ECF 18. Defendants filed a response on November 11, 2019. They assert that, as to the Relator, the Maryland FCA claims should be dismissed with prejudice but, as to the State, they should be dismissed without prejudice. ECF 19. The State filed a reply on December 3, 2019, seeking dismissal without prejudice. ECF 20.

         II. Standards of Review

         A. Rule 12(b)(1)

         Under Rule 12(b)(1), the plaintiff bears the burden of proving, by a preponderance of evidence, the existence of subject matter jurisdiction. See Demetres v. East West Const., Inc., 776 F.3d 271, 272 (4th Cir. 2015); see also The Piney Run Preservation Ass'n v. Cty. Comm'rs of Carroll Cty., 523 F.3d 453, 459 (4th Cir. 2008); Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999). A challenge to subject matter jurisdiction under Rule 12(b)(1) may proceed “in one of two ways”: either a facial challenge, asserting that the allegations pleaded in the complaint are insufficient to establish subject matter jurisdiction, or a factual challenge, asserting “‘that the jurisdictional allegations of the complaint [are] not true.'” Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009) (citation omitted); accord Durden v. United States, 736 F.3d 296, 300 (4th Cir. 2013).

         In a facial challenge, “the facts alleged in the complaint are taken as true, and the motion must be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction.” Kerns, 585 F.3d at 192. On the other hand, in a factual challenge, “the district court is entitled to decide disputed issues of fact with respect to subject matter jurisdiction.” Id. In that circumstance, the court “may regard the pleadings as mere evidence on the issue and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment.” Velasco v. Gov't of Indonesia, 370 F.3d 392, 398 (4th Cir. 2004); see also In re KBR, Inc., Burn Pit Litig., 744 F.3d 326, 333 (4th Cir. 2014); Evans, 166 F.3d at 647.

         Defendants raise an as-applied challenge to the Court's subject matter jurisdiction, asserting that this Court should abstain from exercising jurisdiction under the doctrine of Colorado River abstention. ECF 12 at 2; see Colo. River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). Therefore, the Court may consider evidence outside the pleadings in addressing the merits of this argument, without converting the proceedings to one for summary judgment.

         B. Rule 12(b)(6)

         A defendant may test the legal sufficiency of a complaint by way of a motion to dismiss under Rule 12(b)(6). In re Birmingham, 846 F.3d 88, 92 (4th Cir. 2017); Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th Cir. 2016); McBurney v. Cuccinelli, 616 F.3d 393, 408 (4th Cir. 2010), aff'd sub nom., McBurney v. Young, 569 U.S. 221 (2013); Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). A Rule 12(b)(6) motion constitutes an assertion by a defendant that, even if the facts alleged by a plaintiff are true, the complaint fails as a matter of law “to state a claim upon which relief can be granted.”

         Whether a complaint states a claim for relief is assessed by reference to the pleading requirements of Fed.R.Civ.P. 8(a)(2). That rule provides that a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” The purpose of the rule is to provide the defendants with “fair notice” of the claims and the “grounds” for entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007).

         To survive a motion under Fed.R.Civ.P. 12(b)(6), a complaint must contain facts sufficient to “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; see Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009) (citation omitted) (“Our decision in Twombly expounded the pleading standard for ‘all civil actions' . . . .”); see also Paradise Wire & Cable Defined Benefit Pension Plan v. Weil, 918 F.3d 312, 317 (4th Cir. 2019); Willner v. Dimon, 849 F.3d 93, 112 (4th Cir. 2017). To be sure, a plaintiff need not include “detailed factual allegations” in order to satisfy Rule 8(a)(2). Twombly, 550 U.S. at 555. Moreover, federal pleading rules “do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.” Johnson v. City of Shelby, Miss., 574 U.S. ...

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