656 F. App'x 328
9th Cir.2016Background
- Relator Brian Hastings filed a qui tam False Claims Act (FCA) suit alleging FHA-insured loan fraud tied to seller-funded down-payment assistance programs (notably the Nehemiah program).
- Hastings sent letters to HUD in 1997 raising concerns and advocating for his seller-funded program; he sent additional material to HUD in 2012 including listings, internal lending guidelines, and a list of FHA claims.
- The government and public already knew about seller-funded down-payment programs: HUD had settled with Nehemiah in 1998 and the programs were later subject to proposed rules, audits, a GAO report, and congressional hearings.
- The district court dismissed Hastings’ qui tam complaint for failure to qualify as an "original source" under the FCA; Hastings sought to amend to add additional dates but the court denied leave.
- Hastings appealed, arguing the district court applied the 1986 original-source definition instead of the 2010 amended definition; the Ninth Circuit affirmed on the ground Hastings is not an original source under either definition.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Hastings is an "original source" under the 1986 FCA definition (direct and independent knowledge) | Hastings argued his 1997 and 2012 submissions to HUD showed knowledge of fraud sufficient to be an original source | Government argued Hastings’ 1997 materials were speculative and his 2012 materials were compiled from public sources and not direct knowledge | Hastings is not an original source under the 1986 definition (1997 letters speculative; 2012 materials not direct knowledge) |
| Whether Hastings qualifies under the 2010 FCA first prong (voluntary pre-disclosure disclosure of information to the government) | Hastings argued his 1997 letters were voluntary disclosures to HUD before public disclosure | Government argued the 1997 letters lacked the factual "information" required (they were warnings/speculation without key facts) | 1997 letters did not provide the requisite "information," so Hastings fails the first prong |
| Whether Hastings qualifies under the 2010 FCA second prong (knowledge independent of and materially adding to public disclosures) | Hastings argued his 2012 materials added independent, material information about fraudulent FHA claims | Government argued HUD already knew about seller-funded programs and Hastings’ materials only provided background/examples that did not materially add | 2012 materials did not materially add to public disclosures; Hastings fails the second prong |
| Whether denial of leave to file a second amended complaint was an abuse of discretion | Hastings contended adding dates could cure original-source defects | Government argued added dates would not make Hastings an original source | Denial was not an abuse of discretion because added dates would not establish original-source status |
Key Cases Cited
- United States ex rel. Aflatooni v. Kitsap Physicians Servs., 163 F.3d 516 (9th Cir. 1999) (FCA requires relators to have true knowledge, not mere speculation)
- United States ex rel. Bly-Magee v. Premo, 470 F.3d 914 (9th Cir. 2006) (relator must provide specific factual detail to qualify as original source)
- United States ex rel. Devlin v. California, 84 F.3d 358 (9th Cir. 1996) (direct knowledge requires firsthand observation or unmediated personal labor)
- United States v. Alcan Elec. & Eng’g, Inc., 197 F.3d 1014 (9th Cir. 1999) (learning of fraud through status or public sources is not direct knowledge)
- Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729 (9th Cir. 1987) (standard for abuse of discretion on denial of leave to amend)