Although a Federal district court refrained from providing a definitive answer to this question, it appears unlikely given the court’s holding and reasoning in United States v. U.S. Bank, N.A., No. 3:13-cv-704, 2015 WL 2238660 (N.D. Ohio May 12, 2015). Advocates for Basic Legal Equality, Inc. (“ABLE”), a non-profit law firm focused on assisting low and moderate income families enrolled in a government mortgage program, brought three False Claims Act (“FCA”) claims against U.S. Bank based on its purported mortgage lending practices. The district court found that while ABLE had pled FCA claims for false certification, the complaint was nevertheless subject to dismissal on public disclosure grounds. The court went on to reject ABLE’s original source argument, reasoning that its purported information was derivative and based on conversations with families impacted by U.S. Bank’s mortgage practices.
ABLE’s FCA claims were based on allegations that U.S. Bank had falsely certified compliance with Federal regulations aimed at providing insurance benefits to private mortgage lenders—such as U.S. Bank—who provided loans to low-income families who would not otherwise qualify for mortgages in the private market. Specifically, ABLE alleged that U.S. Bank had falsely certified compliance with regulations requiring it to engage in face-to-face meetings with borrowers and evaluate loss mitigation alternatives prior to foreclosing on the borrower’s property. ABLE’s complaint set forth three representative examples, which ABLE alleged were part of a systemic practice by U.S. Bank that resulted in the defendant receiving more than $2.3 billion in Government funding to which it was not entitled.
U.S. Bank moved to dismiss, in part, based on the fact that its purportedly deficient mortgage practices had been the subject of multiple lawsuits, a consent order, and various news articles. The court agreed with U.S. Bank, holding that ABLE’s claims were subject to the public disclosure bar. Attempting to stave off dismissal, ABLE argued that it qualified as an original source of the allegations forming the basis for its FCA claims.
The district court explained that in order to qualify as an original source under the FCA, a relator must demonstrate that it is: “an individual: (1) with direct and independent knowledge of the information on which the allegations are based; and (2) who has voluntarily provided the information to the government before filing an action under the FCA which is based upon the information.”
In rejecting ABLE’s argument that it was an original source, the district court reasoned that “ABLE is not the model whistleblowing insider contemplated by the FCA” and that its knowledge of U.S. Bank’s purported FCA violations was based entirely on ABLE’s conversations with foreclosed mortgagors.
Although the court did not expressly elaborate on its statement that ABLE was not a “model whistleblowing insider,” it can be inferred that the court’s reasoning is based on the fact that a law firm rarely would have direct and independent knowledge of the facts giving rise to an FCA claim, as a law firm’s information is almost always based on statements of its clients or other interested individuals. Because allegations derived off conversations with the individuals with actual first-hand knowledge cannot qualify as an “original source” the relator’s complaint was subject to the public disclosure bar.