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Financial Services Law Insights and Observations

Court dismisses FCA action against national bank

Courts False Claims Act / FIRREA Mortgages Loan Modification


On October 29, the U.S. District Court for the Eastern District of Missouri dismissed a False Claims Act (FCA) suit against a national bank, concluding the relator failed to prove the inapplicability of the public disclosure bar. According to the opinion, the relator filed an action against the national bank alleging that from 2009 to 2013, as an employee of the bank, she witnessed “numerous violations of [the bank]’s obligations under [government] loan modification programs.” The bank moved to dismiss the action on five separate grounds, including statute of limitations and public disclosure bar. The court first addressed the statute of limitations claims, applying the six-year limitation after the violation and holding that because the relator filed her action against the bank on June 2, 2018, any claims occurring before June 2, 2012 are barred as untimely.

The court then addressed the public disclosure bar, which requires courts to dismiss an action under the FCA “if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed….” The bank argued, and the relator did not contest, that the relator’s allegations “had already been publicly disclosed through the news media, a federal lawsuit, and federal reports.” The court rejected the relator’s claims that she should qualify as an original source of the information. Specifically, the court concluded that while the relator may have independent knowledge of the information provided in her complaint by virtue of her employment, she did not “materially add[] to” the public disclosures and thus, did not carry “her burden to prove the inapplicability of the public disclosure bar.” Accordingly, the court dismissed all remaining allegations postdating July 2, 2012.