United States of America v. John Hudson Farms, Inc. et al

Filing 54

DEFAULT JUDGMENT in favor of United States of America against Jeremy Hudson. Signed by District Judge Louise Wood Flanagan on 8/29/2018. (Collins, S.)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
SOUTHERN DIVISION
NO:

7:18-CV-7-FL

UNITED STATES OF AMERICA,

)
)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.

JOHN HUDSON FARMS, INC.,
ET AL.,
Defendants.

ORDER AWARDING DEFAULT
JUDGMENT AGAINST DEFENDANT
JEREMY HUDSON WITH EXPRESS
FINDINGS OF FALSE STATEMENTS,
FALSE CLAIMS AND FRAUDULENT
SCHEME

This matter is before the Court on the Motion for Default
Judgment filed by Plaintiff United States of America against
Defendant Jeremy Hudson pursuant to Rule 55(b) of the Federal Rules
of Civil Procedure.
Jeremy Hudson failed to appear, plead, or otherwise defend
this action and the Clerk of Court entered Default, upon Motion of
the Plaintiff.

Plaintiff moved for Default Judgment against

Jeremy Hudson in the amount of $2,625,747, based upon the Complaint
and the Declaration provided.

Default Judgment is warranted.

FINDINGS OF FACT
The facts alleged in the Complaint are deemed admitted based
upon the Entry of Default. (DE 34).

This Court entered summary

judgment against Jeremy Hudson and other defendants for part of
the related loan liabilities in United States v. Wendy Hudson
1

Giddens, et. al., Case No. 7:16-CV-7-FL, and directed judgment
against Jeremy Hudson for over $100,000 based upon his failure to
repay FSA loans.

In addition to the admissions in this action and

summary judgment in the related FSA loan case, Jeremy Hudson’s
dad, Defendant Phil Hudson, has admitted in a Plea Agreement that
he is liable for $676,536 in criminal restitution for theft of the
Government funds. Phil Hudson pleaded guilty to theft of government
funds in violation of 18 U.S.C. § 641, in United States v. Phillip
Hudson, Case No. 5:17-CR-270-FL (DE 12). This theft of government
funds plea is also related to Jeremy Hudson’s fraudulent claims
and false statements to obtain part of the FSA program payments
for the family farming operation at issue in this action (but not
other claims or USDA crop insurance payments set out in the
Complaint).
The following facts are found by the Court based upon the
Declaration of USDA Special Agent Miles Davis and the Complaint.
1.

Jeremy Hudson’s father, Phil Hudson, managed the day-

to-day operations of John Hudson Farms (“JHF”), a North Carolina
corporation that was part of a combined family farming operation
which included soybeans, sweet potatoes, and tobacco. (DE 1 Compl.
¶¶ 5–6, 18, Davis Declaration at 1 (hereafter “Declaration”)).
2.
family

Jeremy
members)

Hudson
falsely

and

the

other

purported
2

to

defendants
be

separate,

(five

other

individual

farming operations in numerous forms and applications provided to
both the USDA Farm Service Agency (“FSA”) and USDA Risk Management
Agency’s

Federal

Crop

Insurance

Corporation

(“FCIC”)

(through

private approved insurance providers or “AIPs”). (DE 1 Compl.
¶¶ 18-20, Declaration at 2).
3.

The

Defendants

used

these

fraudulent

“shell

farming

operations” to fabricate eligibility and obtain additional funds
from FSA programs, as well as FCIC crop insurance.

The Defendants

ultimately used program funds and loans fraudulently obtained from
the FSA (and FCIC crop insurance) to support the single farming
operation of JHF, not six individual farm operations. (DE 1 Compl.
¶¶ 18-20, Declaration at 3).
4.

The Defendants’ fraudulent schemes, false claims and

false statements included three types of damages: (1) payments
under FSA programs without required eligibility, (2) farm loans
under FSA programs without required eligibility, and (3) payment
of federal crop insurance claims without an insurable interest.
(DE 1 Compl. ¶¶ 18, 19, 20, Declaration at 4).
Factual Allegations Related to FSA Program Payments
5.
States,

Payments under FSA programs are made from the United
based

upon

payment

limitations

and

eligibility

requirements that the recipient must satisfy. (DE 1 Compl. ¶¶ 12–
15).

These regulations require, inter alia, that an applicant for
3

funding truthfully complete and sign certain documents, including
Form CCC-502A, titled “Farm Operating Plan for Payment Eligibility
Review For An Individual” (“Form 502”), and Form CCC-902I, titled
“Farm Operating Plan for An Individual” (“Form 902”). (DE 1 Compl.
¶¶ 16–17, Declaration at 5).
6.

Jeremy Hudson, through Jacob Giddens and a power of

attorney, submitted a false Form 502 for 2008. (DE 1 Compl. ¶ 21).
Jeremy

Hudson,

through

Phil

Hudson

and

a

power

of

attorney,

submitted false Form 902s for 2009, 2010, and 2012. (DE 1 Compl.
¶¶ 34–36).

Each of the 502s and 902s submitted, or caused to be

submitted, were false.

(DE 1 Compl. ¶¶ 37–40, 42-48, Declaration

at 6).
7.

The false statements on the Form 902s submitted enabled

Jeremy Hudson and his family members to circumvent FSA eligibility
requirements and limitations in order to obtain improper payments
for 2009 through 2014.
8.

(DE 1 Compl. ¶¶ 49-50, Declaration at 7).

Jeremy Hudson caused the submission of at least 3 false

FSA 902s for himself and family members from 2008 to 2012. (DE 1
Compl. ¶¶ 34-36, Declaration at 8).
9.

FSA paid at least $221,142 to Jeremy Hudson and JHF as

a result of the false statements and false claims made.

(DE 1

Compl. ¶ 55, Declaration at 9).
10.

Jeremy

Hudson

made

false
4

representations

with

the

knowledge that the information was false and that the information
would be used by the FSA to determine eligibility for funding as
persons actively engaged in farming. (DE 1 Compl. ¶ 40). The
individual defendants were determined to be eligible for FSA funds
based on these false Form 902 submissions. (DE 1 Compl. ¶ 41,
Declaration at 10).
Factual Allegations Related to FSA Farm Program Loan Fraud
11.

Defendant Jeremy Hudson (and defendants Wendy Giddens,

Seth Giddens and Joshua Hudson) individually sought and obtained
Farm Program Loans from FSA, with current principal balances
totaling $88,207, based upon false Form 502s and Form 902s (as
described above) and false loan applications, including false
representations to FSA at the time he applied for these loans that
each Defendant operated a separate, individual farming operation.
(DE 1 Compl. ¶¶ 71-72, 74-79, 83-84, Declaration at 11).
12.
connection

Jeremy Hudson caused to be signed various documents in
with

obtaining

the

above

FSA

Farm

Program

Loans,

including the false Form 902s, in furtherance of his fraudulent
scheme

with

other

defendants

and

in

order

to

avoid

payment

eligibility and limitation rules for both FSA Farm Program Loans
and FSA Program Payments. (DE 1 Compl. ¶¶ 19, 34-37, 71-72, 7479, 84, 131, Declaration at 12).
13.

Jeremy Hudson presented or caused to be presented to FSA
5

false Form 502s and 902s and false loan applications in order to
facilitate Farm Program loans of at least $88,207 to which he was
not entitled, and Jeremy Hudson conspired with these defendants in
the fraudulent scheme to obtain Farm Program Loans that were used
in the JHF combined family farming operation.

(DE 1 Compl. ¶¶ 19,

34-37, 84-85, 131, Declaration at 13).
Factual Allegations Related To FCIC Crop Insurance Payments
14.

In addition, Jeremy Hudson made false crop insurance

indemnity claims to FCIC through AIPs. (DE 1 Compl. ¶¶ 4, 86-89,
95, , Declaration at 14).
other

defendants

claimed

Specifically, Jeremy Hudson and the
their

purported

individual

farming

operations were eligible for crop insurance, but in fact each
individual lacked a separate insurable interest in JHF crops, that
being the value of the producer’s interest in a crop that was at
risk from insurable cause of loss. (DE 1 Compl. ¶¶ 90, 91, 96, 97,
98).

Instead, JHF had the insurable interest in its crops, or at

least Jeremy Hudson and the individual defendants had a lesser
interest than that stated. (DE 1 Compl. ¶ 106, Declaration at 14).
15.

Jeremy Hudson caused false representations to be made in

order to obtain FCIC funds for JHF.

The false statements to obtain

crop insurance payments were contained within documents caused to
be submitted for payment.

Defendants submitted false acreage

reports and insurances claims annually from 2010 through 2015
6

through the AIPs. (DE 1 Compl. ¶ 102).

In each of those years,

Defendants submitted false claims with the AIPs, the AIPs paid
Jeremy Hudson, and the FCIC reimbursed the AIPs based upon these
false representations. (DE 1 Compl. ¶ 103).

As a result, Jeremy

Hudson (and other Defendants) obtained funds for which he was
ineligible because he falsely stated the individual Defendants’
insurable

interest

in

JHF

crops.

(DE

1

Compl.

¶¶ 104,

105,

Declaration at 15).
16.

FCIC

reimbursed

at

least

$521,900

for

these

false

claims, including the claims for which Jeremy Hudson and the other
These crop insurance

defendants were paid. (DE 1 Compl. ¶ 103).

funds were transferred by Jeremy Hudson and other Defendants to
JHF for JHF’s benefit, including by Defendants’ depositing the
funds into individual checking accounts and then drawing checks
from

those

accounts

to

pay

JHF.

(DE

1

Compl.

¶¶ 108–112,

Declaration at 16).
Factual Allegations Related to False Claims Act Violations For
FSA Program Payments, FSA Loans, and FCIC Crop Insurance Payments
17.
presented

Jeremy
false

Hudson
and

knowingly

fraudulent

presented

claims

to

or

the

caused
United

to

be

States,

including claims for FSA program payments, FSA loan payments, and
FCIC crop insurance claims. (DE 1 Compl. ¶¶ 18-20, 34-39, 102,
108–110, 118-124, 131, Declaration at 17).
18.

Jeremy Hudson knowingly made or caused to be made false
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statements material to false claims to the United States, including
claims for FSA program payments, FSA loan payments, and FCIC crop
insurance payments. (DE 1 Compl. ¶¶ 18-20, 34-39, 102, 108–110,
127-128, 131, Declaration at 18).
19.

Jeremy Hudson acted with actual knowledge and reckless

disregard that the statements and claims at issue were false,
including false Form 902s, Form 502s, acreage reports, insurance
claims, and fraudulent requests for payments for FSA programs, FSA
loans, and FCIC crop insurance. (DE 1 Compl. ¶¶ 18-20, 22, 34-39,
95, 99, 102, 113, 124, 128, 131, Declaration at 19).
20.

Jeremy Hudson participated in the fraudulent scheme in

order to obtain FSA program payments, FSA loans, and FCIC crop
insurance payments that exceeded the requirements and limitations
for JHF and himself. (DE 1 Compl. ¶¶ 18-20, 117-132, Declaration
at 20).
21.

Jeremy Hudson made false representations and committed

fraud to obtain USDA program payments, loans, and crop insurance
payments, including signing and using false forms and applications
to obtain payments. (DE 1 Compl. ¶¶ 18-20, 117-132, Declaration at
21).
22.

Jeremy Hudson made materially false written statements

respecting his financial condition and related matters, with the
intent to deceive USDA in order to obtain federal payments, and
8

USDA relied upon the false statements in making payments. (DE 1
Compl. ¶¶ 18-20, 40, 52, 85, 96-101, 117-132, Declaration at 22).
23.

Jeremy Hudson caused total single damages of at least

$831,249 under the False Claims Act through causing false claims,
causing false statements, and engaging in a fraudulent scheme to
obtain USDA payments, which included at least $221,142 in FSA
program payments, at least $88,207 in FSA loan payments, and at
least $521,900 in crop insurance payments. (DE 1 Compl. ¶¶ 18-20,
51, 83, 103, 117-132, Declaration at 23).
24.

Jeremy

Hudson

is

further

liable

for

12

statutory

penalties, including 3 false 902 statements, at least 3 false crop
insurance applications, at least 3 false acreage reports, and at
least 3 false insurance claims for 2009-2014 that he caused to be
used (as well as other false statements and false claims). (DE 1
Compl. ¶¶ 18-20, 34, 35, 36, 37, 50, 88, 94, 95, 102, 103, 117132, Declaration at 24).
25.

Jeremy Hudson is liable under the False Claims Act for

treble damages of $2,493,747 (three times the single damages
established), and $132,000 in penalties (for 12 penalties at
$11,000 per penalty), for a total of $2,625,747. (DE 1 Compl.
¶¶ 18-20, 34, 35, 36, 37, 50, 51, 83, 88, 94, 95, 102, 103, 117132, Declaration at 25).
CONCLUSIONS OF LAW
9

Defendant Jeremy Hudson is liable under the False Claims Act
for damages and penalties based upon the Entry of Default, the
allegations of the Complaint, and the Special Agent’s Declaration,
as set out in the above Findings of Fact.
The entry of default judgment is governed by Rule 55 of the
Federal Rules of Civil Procedure which provides in relevant part
that “[w]hen a party against whom a judgment for affirmative relief
is sought has failed to plead or otherwise defend, and that failure
is shown by affidavit or otherwise, the clerk must enter the
party's default.” Fed.R.Civ.P. 55(a). If, after the entry of
default, Plaintiff's complaint does not specify a “sum certain” or
“a sum that can be made certain by computation,” the Court may
enter a default judgment against the defendant. See Fed.R.Civ.P.
55(b)(1), (2).
Upon the entry of default, the defaulted party is deemed to
have admitted all well-pleaded allegations of fact contained in
the complaint. Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780
(4th Cir. 2001); Richardson v. Bostick, 2014 WL 3508916 at *5
(E.D.N.C. July 14, 2014); Weft, Inc. v. GC Inv. Assocs., 630
F.Supp. 1138, 1141 (E.D.N.C. 1986).

However, “a default is not

treated

by

as

an

absolute

confession

the

defendant

of

his

liability” and “the court must consider whether the unchallenged
facts support the relief sought.”
10

See, e.g., Ryan, 253 F.3d at

780; Richardson, 2014 WL 3508916 at *5.

The party in whose favor

a default has been entered is entitled to the benefit of all
reasonable inferences from the evidence tendered, and attempts by
the party against whom a default has been entered to attack the
validity of the allegations deemed proven by the default are to be
strictly circumscribed.

See, e.g., Ryan, 253 F.3d at 780.

If the court determines that liability is established and
default judgment is warranted, it then must make an independent
determination

of

the

appropriate

amount

of

damages.

The

allegations in the complaint with respect to the amount of the
damages are not controlling.

Ryan, 253 F.3d at 780–81; J&J Sports

Productions, Inc. v. Bullard, 2012 WL 5844807 at * 1 (E.D.N.C.
Nov. 19, 2012); Richardson, 2014 WL 3508916 at *6; Arista Records,
LLC v. Gaines, 635 F.Supp.2d 414, 416-17 (E.D.N.C. 2009); Credit
Lyonnais Secs. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d
Cir. 1999); Fed.R.Civ.P. 55(b)(2)(B).
While

the

court

may

conduct

an

evidentiary

hearing

to

determine damages, it is not required to do so, but may rely
instead on declarations or documentary evidence in the record to
determine the appropriate damages amount.

See, e.g., American

Dairy Queen Corp. v. YS & J Enterprises, Inc., 2014 WL 4055550 at
*2

(E.D.N.C.

Aug.

14,

2014)(hearing

not

warranted

because

”sufficient affidavits and supporting documents to enable the
11

court to calculate damages”); J&J Sports, 2012 WL 5844807 at *1;
EEOC v. Carter Behavior Health Services, 2011 WL 5325485, at *4
(E.D.N.C. Oct. 7, 2011); United States v. Walker, 2017 WL 3974242
at *2. (W.D.N.C. September 8, 2017); EEOC v. North Am. Land Corp.,
2010 WL 2723727, at *2 (W.D.N.C. Jul. 8, 2010). In entering default
in a False Claims Act case, a hearing may not be necessary if the
specific amount of the false claims are set forth in the Complaint.
United States v. Graham County Soil & Water Conservation District,
2016 WL 910191 at *2 (W.D.N.C. March 9, 2016).
The well-pleaded facts contained in the Complaint, along with
the Declaration of Special Agent Miles Davis, are sufficient to
establish a basis for the relief sought and the damages set forth
in the Complaint.

See, e.g., Arista Records, 635 F.Supp.2d at

416; Dairy Queen, 2014 WL 4055550 at *2; Walker, 2017 WL 3974242
at *2; Graham County, 2016 WL 910191 at *2.

The Court has

discretion under Fed. R. Civ. P. 55(b)(2) to enter a judgment after
a default has been entered.
The False Claims Act provides for treble damages, plus $5,500
to $11,000 per false claim as a required statutory penalty.

31

U.S.C. § 3729(a)(1); 28 C.F.R. § 85.3(a)(9); United States v. Byrd,
100 F.Supp.2d 342, 344 (E.D.N.C. 2000).

A penalty may be awarded

for each separate false form submitted as part of a false claim.
United States v. Tuomey, 792 F.3d 364, 386 (awarding penalty for
12

each separate claim based upon each form submitted).

The Court

may award FCA treble damages and penalties on default judgment or
summary judgment.
(default

judgment

See, e.g., Graham County, 2016 WL 910191 at *2
awarding

treble

damages

and

six

separate

penalties); Byrd, 100 F.Supp.2d at 342, 344 (summary judgment
awarding 264 penalties for each separate claim); United States v.
Convalescent Transports, Inc., 2007 WL 2090210 at *7 (E.D.N.C.
July 19, 2007)(awarding treble damages and one maximum penalty
established).
The Complaint and Declaration establish that Jeremy Hudson
participated in a scheme to present false statements and fraudulent
claims to obtain FSA program payments and FCIC insurance payments
for himself and JHF. (Findings of Fact 2-4, 6-23 above).
The Complaint and Declaration establish that Jeremy Hudson
caused the false statements and false claims with actual knowledge.
(Findings of Fact 10, 19 above).
These Findings of Fact enable the Court to determine damages
(trebled under False Claims Act) and statutory penalties (per false
claim or false statement).

Jeremy Hudson caused single damages

in the amount of $831,249, comprised of $221,142 in FSA program
payments, $88,207 in FSA loan payments, and $521,900 in FCIC crop
payments. (Findings of Fact 23 above).

Jeremy Hudson also caused

to be used 12 false statements and false claims. (Findings of Fact
13

24 above).
Jeremy Hudson is jointly and severally liable under the False
Claims Act for treble damages of $2,493,747 (three times single
damages established), and $132,000 in penalties (for 12 penalties
at $11,000 per penalty), for a total of $2,625,747. (Findings of
Fact 23-25 above).
For the foregoing reasons, the Clerk of Court is directed to
enter Default Judgment against Defendant Jeremy Hudson in the
amount of $2,625,747, based upon the express findings that he
caused false statements, caused false claims, and engaged in a
fraudulent scheme to obtain federal funds.
SO ORDERED, this the 29th day of August, 2018.

__________________________________
LOUISE W. FLANAGAN
United States District Court Judge

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