United States ex rel. Mitchell v. CIT Bank

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UNITED STATES OF AMERICA ex rel. ANDREW MITCHELL, AND ANDREW MITCHELL, Individually, Plaintiffs/Relator, v. CIT BANK, N.A., d/b/a ONEWEST BANK, and CIT GROUP, INC., Defendants.

Civil Action No. 4:14-CV-00833

United States District Court, E.D. Texas, Sherman Division

January 13, 2022

MEMORANDUM OPINION AND ORDER

AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

Pending before the Court is Defendant's Motion for Partial Summary Judgment Under the Public Disclosure Bar (Dkt. #179). Having considered the motion and the relevant pleadings, the Court finds that the motion should be DENIED.

BACKGROUND

In 2008, the United States faced a housing crisis caused, in part, by mortgage fraud and predatory lending. The crisis caused home prices to plummet and foreclosures to skyrocket leaving homeowners with negative equity in their homes. Distressed homeowners were unable to sell or refinance their homes to meet their mortgage obligations. In response to this crisis, the Government enacted the Emergency Economic Stabilization Act of 2008 (“EESA”).

The Home Affordable Modification Program (“HAMP”) administered by the Treasury Department, was a voluntary program under EESA designed to prevent avoidable foreclosures by providing homeowners with affordable mortgage-loan modifications and other alternatives to eligible buyers. HAMP's primary goal was to relieve the burden on homeowners by lowering their mortgage payments to 31% or less of their gross monthly income. Investors would receive payments and a guarantee that no modification would result in a mortgage worth less than the net-present value of the property. In return, mortgage servicers, in addition to their annual servicing fees, received HAMP incentive payments to complete the modifications. Each successful modification entitled the servicer from $1, 200-2, 000 depending on how long the mortgage was delinquent. From the program's start in 2009 through the second quarter of 2016, HAMP generated more than 1.6 million permanent modifications. In addition to HAMP, the Fair Housing Administration's (“FHA”) and Veterans Administration (“VA”) each had companion HAMP programs “FHA-HAMP” and “VA-Hamp, ” respectively.

In 2009, OneWest Bank (“OWB^[1]”) enrolled in the HAMP, FHA-HAMP, and VA-HAMP programs. On August 18, 2009, OWB Executive Vice President and Chief Operating Officer Tony Ebers expressly certified OWB's compliance with HAMP guidelines and applicable federal laws in signing the initial Servicer Participation Agreement (“SPA”). The SPA named OWB as the servicer and Fannie Mae as Financial Agent of the United States. The SPA required OWB to provide annual certifications of compliance with the specified terms and conditions.

OWB expressly represented in the SPAs and annual certifications that: (1) it was in compliance with the terms and guidelines of HAMP; (2) it was in compliance with all applicable laws and requirements; (3) it created and maintained an effective HAMP program and committed the resources needed to employ enough trained, experienced personnel with the tools and technology necessary to provide quality service to homeowners; and (4) it had adequately documented and monitored its compliance and immediately reported to the Government any credible evidence of material violations of these certifications. Each annual certification included an express statement certifying that OWB continued to meet the terms and conditions of the SPA, including the representation of compliance with applicable laws.

On December 23, 2014, Relator Michael J. Fisher (“Fisher”) and Relator Andrew Mitchell (“Mitchell” or “Relator”) filed their Original Complaint under seal (Dkt. #1). On October 21, 2016, Fisher and Mitchell filed an Amended Complaint under seal (Dkt. #24). On September 13, 2019, Fisher withdrew as a Relator (Dkt. #50; Dkt. #51). On October 11, 2019, Mitchell filed Relator's Second Amended Complaint (“SAC”) (Dkt. #52). In the SAC, Mitchell, an employee of OWB from 2009-2011, alleges that OWB made false claims to the United States in relation to its obligations under HAMP, FHA-HAMP, and VA-HAMP (Dkt. #52). Defendants were thereafter served on October 15, 2019 (Dkt. #53; Dkt. #54).

On June 24, 2021, Defendant filed two summary judgment motions (Dkt. #178; Dkt. #179). While the first one (Dkt. #178) applies to all of Mitchell's claims, the second one (Dkt. #179), the present motion, focuses on a separate barrier to suit that applies only to Mitchell's Treasury HAMP claims. The motion before the Court contends that partial summary judgment is warranted as to Mitchell's Treasury HAMP claims because Mitchell's claims are barred by the False Claims Act (“FCA”)'s public disclosure bar (Dkt. #179). On July 15, 2021, Mitchell filed his response (Dkt. #186). On August 10, 2021, OWB filed a reply (Dkt. #198). On August 31, 2021, Mitchell filed a sur-reply (Dkt. #208).

LEGAL STANDARD

The purpose of summary judgment is to isolate and dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Summary judgment is proper under Rule 56(a) of the Federal Rules of Civil Procedure “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”

FED. R. CIV. P. 56(a). A dispute about a material fact is genuine when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). Substantive law identifies which facts are material. Id. The trial court “must resolve all reasonable doubts in favor of the party opposing the motion for summary judgment.” Casey Enters., Inc. v. Am. Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981). The party seeking summary judgment bears the initial burden of informing the court of its motion and identifying “depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials” that demonstrate the absence of a genuine issue of material fact. FED. R. CIV. P. 56(c)(1)(A); Celotex, 477 U.S. at 323. If the movant bears the burden of proof on a claim or defense for which it is moving for summary judgment, it must come forward with evidence that establishes “beyond peradventure all of the essential elements of the claim or defense.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). Where the nonmovant bears the burden of proof, the movant may discharge the burden by showing that there is an absence of evidence to support the nonmovant's case. Celotex, 477 U.S. at 325; Byers v. Dall. Morning News, Inc., 209 F.3d 419, 424 (5th Cir. 2000).

Once the movant has carried its burden, the nonmovant must “respond to the motion for summary judgment by setting forth particular facts indicating there is a genuine issue for trial.” Byers, 209 F.3d at 424 (citing Anderson, 477 U.S. at 248-49). A nonmovant must present affirmative evidence to defeat a properly supported motion for summary judgment. Anderson, 477 U.S. at 257. Mere denials of material facts, unsworn allegations, or arguments and assertions in briefs or legal memoranda will not suffice to carry this burden. Rather, the Court requires “significant probative evidence” from the nonmovant to dismiss a request for summary judgment. In re Mun. Bond Reporting Antitrust Litig., 672 F.2d 436, 440 (5th Cir. 1982) (quoting Ferguson v. Nat'l Broad. Co., 584 F.2d 111, 114 (5th Cir. 1978)). The Court must consider all of the evidence but “refrain from making any credibility determinations or weighing the evidence.” Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007).

ANALYSIS

OWB argues that partial summary judgment is warranted as to Mitchell's Treasury HAMP claims because they are barred by the FCA's public disclosure bar. Under the public disclosure bar, the court “shall dismiss an action or claim” brought under the FCA “if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed (i) in a Federal criminal civil, or administrative hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing audit, or investigation; or (iii) from the news media.” 31 U.S.C. § 3730(e)(4)(A) (2010).^[2] However, a relator can avoid dismissal even if his claims were publicly disclosed if he is an “original source of the information.” Id. Under the statute, an “original source” is defined as a person “who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.” 31 U.S.C. § 3730(e)(4)(B).^[3] Courts in the Fifth Circuit apply a three-part test to determine whether the public disclosure bar applies, asking: “(1) whether there has been a ‘public disclosure' of allegations or transactions, (2) whether the qui tam action is ‘based upon' such publicly disclosed allegations, and (3) if so, whether the relator is the ‘original source' of the information.” U.S. ex rel. Reagan v. E. Tex. Med. Ctr. Reg'l Healthcare Sys., 384 F.3d 168, 173 (5th Cir. 2004) (quotations omitted). The Court is not required to rigidly follow the three steps. U.S. ex rel. Jamison v. McKesson Corp., 649 F.3d 322, 327 (5th Cir. 2011). Indeed, the Fifth Circuit has recognized that “combining the first two steps can be useful, because it allows the scope of the relators' action in step two to define the ‘allegations or transactions' that must be publicly disclosed in step one.” Id.; see also U.S. ex...