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COA affirms denial of Kroger sales tax fraud claim

November 9, 2018

The Indiana Court of Appeals has affirmed the denial of a man’s fraud complaint against several grocery stores  after finding his claims did not meet the specificity requirements of Indiana Trial Rule 9(B).

In January 2017, Michael Harmeyer filed his sixth amended complaint under Indiana’s False Claims and Whistleblower Protection Act, alleging that several Indiana grocery stores failed to properly collect and remit sales tax to the state on candy, soft drinks, prepared food and dietary supplements. During a two-year period, Harmeyer went on a “spending spree” and purchased items from the Indiana stores and recorded those that he claimed should have been subject to sales tax, but were not.  He ultimately concluded that 1,400 of his purchases from various grocery stores were improperly untaxed items.

Harmeyer’s complaint included the fruits of his labor, including a list of purchased items, copies of receipts and photographs of 25 of his purchases. Among them were 131 items listed as nuts that Harmeyer alleged should have been classified as candy, and therefore taxed.

The grocery stores, including The Kroger Company, Kroger Limited Partnership I, KRGP, Inc., Pay Less Super Markets, Inc., and Ralphs Grocery Company, moved to dismiss the complaint, alleging it failed to plead fraud with the specificity required by Indiana Trial Rule 9(B), and that Harmeyer failed to state a claim for relief.

Following the Marion Superior Court’s denial of his compliant, Harmeyer appealed, arguing the trial court erred in its decision. Specifically, he argued the erred by applying the federal, rather than the state, standard for Trial Rule 9(B), and that if it had applied the correct standard, his complaint would have passed muster.

But the appellate court disagreed with Harmeyer, finding no error in the trial court’s use of the language of the federal standard for Trial Rule 9(B), “who, what, when, where, and how.”

“Moreover, Indiana’s Rule 9(B) is nearly identical to and serves the same objectives as its federal counterpart; Indiana’s FCA is likewise substantially similar to its federal counterpart,” Judge John Baker wrote for the panel. “Where a state trial rule is patterned after a federal rule, we will often look to the authorities on the federal rule for aid in construing the state rule.”  

Additionally, while he alleged that the appellees’ fraudulent statements were contained in forms that they submitted to the state, Harmeyer could not say when those forms were submitted or what information they contain, the court found. 

“In other words, Relator’s complaint simply infers from his purchases that the Appellees have engaged in widespread fraudulent conduct and will continue to do so at the expense of the State of Indiana,” Baker wrote.  “Even if we were to relax the Rule 9(B) pleading standards, Relator’s complaint simply does not provide a sufficiently specific picture of the allegations, nor does it substantiate his inference that the Appellees violated the FCA.”

The case is The State of Indiana, ex rel. Harmeyer v. The Kroger Co., Kroger Limited Partnership I, KRGP, Inc., Payless Super Markets, Inc., and Ralphs Grocery Company, 18A-PL-806.

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