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False Claims Act Statistics, News & Analysis

False Claims Act Cert. Monitor: Solicitor General Asked to Weigh in on Public Disclosure Bar Petition, and New Petition Filed on FERA Retroactivity

Straight out of the gates from the long conference, the Supreme Court yesterday, October 3rd, called for the views of the Solicitor General (CVSG) on a relator’s cert. petition about the FCA public disclosure bar in U.S. ex rel. Advocates for Basic Legal Equality, Inc. v. U.S. Bank, N.A. (“ABLE”), No. 16-130, a case which we have written about previously. The petition asks whether a public disclosure of a broad, general category of alleged misconduct bars an FCA claim about a narrower, specific subtype of that misconduct, even though that subtype was not specifically addressed in the public disclosure. Also, a new petition has been filed on the question of the retroactive application of the 2009 FCA amendments. Kmart Corp. v. U.S. ex rel. Garbe, No. 16-408.

The ABLE petition arises out of allegations that defendant U.S. Bank falsely certified to the Federal Housing Administration (FHA) that it was in compliance with FHA’s pre-foreclosure loss mitigation requirements in order to obtain FHA insurance. The relator alleges that based on these false certifications, U.S. Bank made claims on that FHA insurance.

The district court dismissed the case pursuant to the public disclosure bar, relying on the public disclosure of two government documents as well as media reports. The first government document was a government report about a number of banks, including U.S. Bank, utilizing insufficient pre-foreclosure practices generally, but not alleging violations of FHA insurance pre-foreclosure requirements. United States ex rel. Advocates for Basic Legal Equality, Inc. v. U.S. Bank, N.A., No. 3:13-cv-704, 2015 WL 2238660, at *9 (N.D. Ohio May 12, 2015). The second government document was a consent order stating that U.S. Bank, among others, had “engaged in unsafe or unsound banking practices,” but not identifying violations of the specific FHA loss mitigation requirements at issue in the case. And the third public disclosure was media reports describing these government documents. On appeal, the Sixth Circuit affirmed based on the two government documents, explaining that those general public disclosures sufficed to put the government on notice of the possible fraud, including violations of the FHA loss mitigation requirements alleged by the relator, and barred the FCA claims. United States ex rel. Advocates for Basic Legal Equality, Inc., 816 F.3d 428, 432-33 (6th Cir. 2016).

The cert. petition argues that the Sixth Circuit erred in allowing a high-level public disclosure of general misconduct in the handling of mortgage servicing to bar the relator’s FCA claim, which was based on specific conduct not discussed in the public disclosures. Relator asserts that the Sixth Circuit’s application of the public disclosure bar conflicts with that of the Seventh and Ninth Circuits. In those circuits, relator contends, a case providing additional material details about publicly disclosed misconduct, or addressing a type of misconduct not specifically disclosed in the general public disclosure, will not be barred by a very broad public disclosure. With the Court’s CVSG yesterday, this petition now has a significantly better chance of a grant than the average petition, so we will monitor it closely.

In other news, the new Kmart petition raises the question of the retroactivity of the 2009 FERA amendments to the FCA. FCA defendant Kmart argues for the application of the pre-FERA requirement that false statements are actionable only if they are made with the intention that the claim be paid by the government. FERA removed that requirement. Congress provided in FERA that this amendment would apply to “claims” that were “pending” after June 7, 2008. Kmart argues that courts have divided about whether “claims” means “claims under the False Claims Act” (Eighth, Ninth, and Eleventh Circuits) or “claims for payment” (Second, Fifth, Sixth, and Seventh Circuits), and that this deep split is ripe for Supreme Court review.

Finally, a few parting notes about other petitions we have noted previously: Two FCA petitions were denied. They would have addressed a different series of questions about the public disclosure bar and Rule 9(b). U.S. ex rel. Cause of Action v. Chicago Transit Authority, No. 16-131; U.S. ex rel. Walterspiel v. Bayer AG, No. 16-8. And the last FCA petition from the long conference, about collateral estoppel, remains pending, probably because the government’s response was filed only a few days before the long conference. Anghaie v. United States, No. 15-1456.

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