False Claims Act (“FCA”) matters have a notoriously long lifespan.  United States v. Mortgage Investors Corporation, 2021 WL 137739 (11th Cir. 2021), has had an exceptionally long life.  Originally filed on March 3, 2006, after nearly fifteen years, this case has been brought back from the dead and is now a teenager a few months away from obtaining its learner’s permit.  After the government declined to intervene in the qui tam action – a decision that is often a deathblow to qui tam actions – the lawsuit was carried on by two relators.  The relators, mortgage brokers who had dealt with Mortgage Investors Corporation (“MIC”), allege that MIC charged prohibited fees to veterans obtaining VA loans while certifying to the federal government that it had only charged permissible fees.  Following a decision by the Eleventh Circuit on January 15, 2021, this case has new life. 

Following a series of orders by Judge Amy Totenberg of the Northern District of Georgia, the case went before a panel of the Eleventh Circuit.  Circuit Judge Charles Wilson, writing for the majority, reversed the trial court’s decision dismissing the claims against MIC.  The relators had alleged that MIC charged veterans prohibited attorney’s fees when obtaining VA loans and bundled the attorney’s fees with permissible fees to hide the improper charges.  MIC then certified to the VA that it had only charged the fees that were allowed under the law.  The relators sought to recover payments the VA had made upon the foreclosure of home mortgage loans taken out by veterans through MIC.  The relators also alleged that, between 2011 and 2013, MIC had transferred just over $242 million to its shareholders, including its Chairman, leaving MIC insolvent.  Because of that, the relators added a state law fraudulent transfer claim.

The District Court ruled that the relators’ fraudulent transfer claim lacked standing, that the FCA claim was not barred by public disclosure, and that summary judgment was appropriate because there was no issue of material fact on the question of materiality.  The Court of Appeals affirmed the dismissal of the fraudulent transfer claim, but it reversed the grant of summary judgment on the question of materiality.  Notably, the court stated that the VA’s continued payment for foreclosure deficits was not dispositive of a lack of materiality because the VA was bound to provide payments to companies that had purchased the loans from MIC, even if it did not have to provide those payments to MIC itself.  Because there was an issue of material fact as to materiality, the Court of Appeals sent the case back to the District Court for consideration.

This case demonstrates how drawn-out FCA litigation can be, and defendants are left to bear that uncertainty.  The case also highlights the wide variety of industries impacted by the FCA.  Although the vast majority of FCA cases involve the healthcare industry, any industry can be impacted, notably defense contractors, energy companies, Big Tech, and home mortgage lenders.  Any company can be subject to FCA liability if it receives payments in any form from the U.S. government, and litigation involving the FCA can hang over the company for years.  That is why well organized and implemented compliance programs are important to any company dealing with the government.

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with False Claims Act investigations and qui tam litigation.  If you need assistance with such a matter, please contact us today.