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Eleventh Circuit Court of Appeals reverses summary judgment entered by district court for defendant mortgage lender in quit tam False Claims Act case allegingmilitary veterans were charged mortgage origination fees that were prohibited by VA regulations

On February 17, 2021, in Bibby, et al.,v. Mortgage Investors Corporation, et al., No. 19-12736, the Eleventh Circuit Court of Appeals reversed a summary judgment in favor of the defendant mortgage lender in a qui tam False Claims Act (FCA) case in which the plaintiff Relators alleged that the defendant had charged military veterans mortgage origination fees that were prohibited by VA regulations, while falsely certifying to the VA that they were charging only permissible fees. The district court had dismissed the claim against the defendant after concluding that no reasonable jury could find that the alleged fraud was material. The Eleventh Circuit noted that to prevail on their FCA claim, Relators must prove: “(1) a false statement or fraudulent course of conduct, (2) made with scienter, (3) that was material, causing (4) the government to pay out money or forfeit moneys due,” quoting from Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1045 (11th Cir. 2015). F.3d at 1045. The Court further noted that the U.S. Supreme Court recently addressed materiality under the FCA in a landmark decision. Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), in which the Supreme Court opined, inter alia, that the FCA’s materiality standard is “demanding”, is not “a vehicle for punishing garden-variety breaches of contract or regulatory violations” or satisfied by noncompliance that is “minor or insubstantial”, relates to conduct “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property,” and cannot rest on “a single fact or occurrence as always determinative.” While no single factor is dispositive, some factors that are relevant to the materiality analysis include: (1) whether the requirement is a condition of the government’s payment, (2) whether the misrepresentations went to the essence of the bargain with the government, and (3) to the extent the government had actual knowledge of the misrepresentations, the effect on the government’s behavior. The Eleventh Circuit concluded that viewing the evidence in the light most favorable to Relators and employing a “holistic” approach, a reasonable factfinder could conclude that the materiality requirement was met.

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