Defendant’s motion to dismiss a qui tam case as precluded by the public disclosure bar is denied, where the first relator raised new allegations of fraud not covered by the defendant’s settlement agreement with the government nor otherwise publicly disclosed, even though all the allegations related to the same government program. The court also found that three relators added to the lawsuit after the original filing qualified as original sources, as they raised new theories of fraud. The court found the relators provided their information to the government after the original suit was filed, but prior to joining it as relators, and therefore they qualified as original sources. The court found it illogical to reason that a relator could not qualify as an original source of new allegations in an ongoing lawsuit unless the new charges were disclosed to the government prior to the first filing.
JP Morgan Chase Bank N.A. moved the court for summary judgment, arguing the plaintiff’s case should be dismissed under the public disclosure bar.
JP Morgan was enrolled as a participant in the government’s Home Affordable Modification Program, a voluntary program to help homeowners avoid foreclosures during the 2008 housing crisis. When joining the program, the bank expressly certified its compliance with HAMP guidelines and other federal law, and submitted signed annual certifications as a prerequisite to receiving HAMP payments.
On February 8, 2012, JP Morgan and the Department of Justice, Department of Housing and Urban Development, and 49 state attorneys general entered into a $25 billion settlement agreement to address allegations of loan-servicing deficiencies, including HAMP violations. A concurrent consent order released the bank from liability arising out of “Covered Servicing Conduct,” including HAMP participation and implementation, occurring on or before February 8, 2012.
On September 27, 2013, relator Michael Fisher filed a qui tam complaint against JP Morgan, alleging multiple violations of the FCA. On November 3, 2015, three additional relators joined the lawsuit. The relators alleged JP Morgan violated HAMP guidelines and knowingly presented false or fraudulent claims to the government in order to obtain more than $430 million in HAMP payments. The bank challenged the lawsuit under the public disclosure bar.
The bank argued the public disclosure bar applied because (1) the allegations in the relators’ complaint are based on public disclosures; and (2) none of the relators are original sources. The defendant argued that Michael Fisher was not an original source because he did not possess independent information that materially added to the public disclosures. The bank also argued that the three subsequent relators could not be original sources because they did not disclose their information to the government prior to filing their action.
However, the court disagreed. First, the court noted that the three additional relators alleged new, discrete claims of fraudulent conduct against JP Morgan. While their information was not presented before Fisher filed his initial lawsuit, it was disclosed to the government before the three relators were added to the lawsuit via amended filings. The court found no support for the defendant’s argument that to qualify as an original source, a relator must make its disclosures before filing the original complaint. The court reasoned that under the bank’s theory, a relator who amended his complaint to include a new claim of fraud could not qualify as an original source unless the information had been disclosed to the government prior to the original filing, but could qualify as an original source if he filed a separate action.
Next, the court concluded the three relators alleged new claims of fraud, and were thus the original sources. JP Morgan argued the three additional relators merely maintained the same claim Fisher brought in his original suit. However, the court agreed with the relators’ argument that under the FCA, a claim is simply a theory or type of fraudulent conduct. The court held the relators alleged new and discrete theories of fraudulent conduct, even though all the alleged fraud related to HAMP payments. Because each relator had direct and independent knowledge of separate instances of alleged fraud that materially added to the publicly disclosed allegations, each qualified as an original source.
The court also held that original relator Fisher was an original source. The defendant argued that the information Fisher provided to the government prior to filing his lawsuit was tangential to the fraud alleged in his complaint. However, while the case had grown to encompass additional allegations raised by the new relators, the fact remained that Fisher disclosed alleged HAMP violations to the government prior to filing. The court held this information was material to the complaint.
JP Morgan also argued that Fisher did not possess independent information that materially added to the public disclosures, as the alleged false certifications did not change the substance of the fraud subject to the settlement with the government. However, the court noted that the defendant could not identify a single public disclosure that revealed the specific HAMP violation alleged in Fisher’s original complaint. While the defendant argued the violations “merely added color” to the original claims, the court disagreed, finding that a specific allegation that the defendant committed hundreds of fraudulent acts did materially add to the publicly disclosed information.
