694 F.3d 1076
9th Cir.2012Background
- Bates filed a CFCA qui tam suit on behalf of California Counties alleging false naming of MERS as beneficiary to avoid recording fees.
- Bates alleged the MERS System allows tracking of loan interests without recording assignments, rendering the Counties owed recording fees.
- District court dismissed the action as barred by the CFCA public disclosure provision and declined to rule on later Rule 12(b)(6) issues or amendment.
- MERS removed the case to the Eastern District of California asserting diversity; court held the State was a nominal party and Counties were the real parties in interest, thus diversity existed.
- Bates argued he was the original source and that public disclosures were insufficient to bar his suit; district court found public disclosures sufficient and Bates could not be original source.
- GMAC Mortgage filed bankruptcy and the appeal became automatically stayed as to GMAC.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the case should be remanded for lack of diversity | Bates argued State is a real party in interest. | District court properly treated Counties as real parties; State is nominal. | The district court did not err; remand denied. |
| Whether the CFCA public disclosure bar applies | Bates contends disclosure does not bar his claim. | Public disclosures sufficiently place government on notice of fraud. | CFCA public disclosure bar applied; action barred. |
| Whether Bates was an original source to defeat the bar | Bates claims he was original source for new information. | Public disclosures predated Bates’s discovery; not original source. | Bates not original source; bar upheld. |
Key Cases Cited
- Navarro Savings Ass’n v. Lee, 446 U.S. 458 (1980) (limits on jurisdiction where real party in interest is nominal)
- Grayson v. Pac. Bell Tel. Co., 142 Cal. App. 4th 741 (2006) (public disclosures bar qui tam when substantially similar information exists)
- United States ex rel. Findley v. FPC-Boron Emps. Club, 105 F.3d 675 (D.C. Cir. 1997) (public disclosures suffice to bar action)
- City of Hawthorne v. H&C Disposal Co., 109 Cal. App. 4th 1668 (2003) (original source concept in California CFCA context)
- Hubbard v. SoBreck, LLC, 554 F.3d 742 (9th Cir. 2009) (state-law precedents binding when no clear state decision against federal standard)
- Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034 (9th Cir. 2011) (analysis of MERS and related issues in related context)