United States ex rel. Grubea v. Rosicki, Rosicki & Assocs., P.C.

Citation: 319 F. Supp. 3d 747Docket: 12-cv-7199 (JSR); 13-cv-1467 (JSR)

Court: District Court, S.D. Illinois; August 14, 2018; Federal District Court

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On June 23, 2018, the Court dismissed with prejudice all qui tam claims filed by Relator Peter D. Grubea against several mortgage servicers, including Bank of America, Citi, and JPMorgan Chase, among others. The dismissal was based on the finding that the Relator failed to adequately plead scienter as required under Rule 9(b) of the Federal Rules of Civil Procedure. Relator alleged that the Servicer Defendants submitted false claims for reimbursement of foreclosure expenses to federal entities, violating the False Claims Act (FCA). The Court determined that the allegations of fraudulent intent were insufficient and mostly conjectural. As a result, Relator's motion for reconsideration and for permission to replead against seven of the Servicer Defendants was denied, reaffirming the Court's commitment to finality in judicial decisions. Reconsideration is considered an extraordinary remedy and should be used sparingly, as highlighted in relevant case law.

Local Civil Rule 6.3 establishes a strict standard for motions for reconsideration, requiring the moving party to identify overlooked controlling decisions or data that could change the court's conclusion. Reconsideration is not intended for relitigating issues, presenting new theories, or seeking a rehearing on the merits. The Relator contends that his claims were improperly dismissed with prejudice, arguing that such dismissals usually allow for amendments under Rule 9(b). However, while it is generally true that complaints under Rule 9(b) are granted leave to amend, the decision is at the district court's discretion, which must be exercised with good reason. One valid reason for denying leave is futility, particularly if the relator has previously failed to meet Rule 9(b) requirements despite multiple opportunities to amend. In this instance, the Relator had amended his claims three times and had further opportunities to amend after being specifically invited by the Court to do so. The Relator chose not to amend and expressed a desire to proceed with the existing complaints. Given this history, the Court acted within its discretion in concluding that the Relator's inability to plead scienter justified dismissal with prejudice. Disagreement with the Court's discretionary decision does not constitute grounds for reconsideration, especially in the absence of an intervening change in law or a clear error. The Relator's cited cases regarding amendments are distinguishable from his situation.

In Wight v. BankAmerica Corp., the Second Circuit overturned a district court's dismissal with prejudice due to inadequate pleading of scienter, as the facts presented were sufficient under Rule 9(b), and the defendant had both motive and opportunity for fraud. Conversely, in Olsen v. Pratt & Whitney Aircraft, the court permitted an amendment despite the complaint's initial failure to meet Rule 9(b) standards, indicating that the plaintiff should have a chance to clarify their fraud claim.

In the current case, the Relator contends that the dismissal with prejudice should not receive deferential treatment as it was not thoroughly addressed. However, the Relator failed to oppose the motion for dismissal or request leave to amend, which the Second Circuit has deemed a valid reason for upholding a dismissal with prejudice. The court emphasized that it is not an abuse of discretion to close a case if the opportunity to amend was not sought.

The Servicer Defendants argued that dismissal should be with prejudice due to the futility of further amendment, noting previous assertions against allowing the Relator to amend. The Relator's motion for reconsideration was deemed meritless, as it merely sought to renew a discovery request already denied by the court. The Relator provided no new information indicating how he could successfully replead under Rule 9(b) and acknowledged that he did not pursue the discovery issue earlier. Furthermore, hindsight does not justify reconsideration. The Relator’s assertion of entitlement to use government information for amending the complaint was unsupported, as the cited cases involved relators whose claims had not been dismissed or who already had access to the necessary information.

In Vasallo v. Rural/Metro Corp., the court permitted the use of government information not obtained through discovery to amend a complaint, highlighting that no Rule 9(b) dismissal was pending. Similarly, in United States ex rel. Banigan v. Organon USA, Inc., the court found no prohibition against amending a complaint with government information absent a required discovery, though it did not rule on the specific case. In U.S. ex rel. Underwood v. Genentech, Inc., amendment was allowed based on government subpoena information received prior to a motion to dismiss, found sufficient under Rule 9(b). However, none of these rulings support the notion that a relator may seek discovery to amend claims already dismissed. The Second Circuit established that relators are not entitled to discovery to meet Rule 9(b) requirements, as seen in Wood ex rel. U.S. v. Applied Research Assocs. Inc., emphasizing that the rule discourages reliance on discovery to assert fraud claims. A relator’s argument for leave to amend regarding JPMorgan Chase is also rejected; the relator failed to provide new evidence, as required for reconsideration, and had access to the pertinent information since 2012. The court noted that the relator's belief in a guarantee for future amendments was based on the court's expressed likelihood, not a binding assurance. Additionally, the relator did not adequately demonstrate how discovery could address the deficiencies in the complaint, making only vague claims about the government's possession of facts that might support his argument. Consequently, the defendants' motion for reconsideration is denied, and the case is closed.