On August 8, 2019, the U.S. Court of Appeals for the Fifth Circuit issued an opinion stating that it was affirming a lower court’s award totaling: (i) under the False Claims Act for treble damages and penalties, $23.1 million against a loan correspondent and its owner and $268.8 million against an affiliated lender, and (ii) $2.2 million in FIRREA penalties against each of the defendants. The original award had followed a vigorously fought 5-week jury trial.
The Court issued a 19-page opinion for publication, addressing a number of issues particularly relevant to FHA lenders. The issues include the intent, materiality, and causation needed to show liability under the FCA for failing to follow FHA rules (in this case alleging failure to register branches and reckless underwriting). The opinion also addressed the lower court’s dismissal of one juror, instead of ordering a mistrial, when the juror allegedly refused to participate in deliberations. The Court stated that the juror had commented that “when the Government has it in for you, they will find a way to get you,” and then commenced wearing ear plugs to avoid hearing the other jurors deliberate.
The case is a stark reminder that compliance with FHA rules and requirements is critical. Failure to comply can result in substantial risk to lenders, and even the individuals involved.
The opinion can be found here: http://www.ca5.uscourts.gov/opinions/pub/17/17-20720-CV0.pdf.
Garris Horn frequently represents lenders in interpreting FHA rules as applicable to their operations, and defending the lenders in cases brought by FHA and other governmental agencies. For more information on this matter, or to discuss other FHA or enforcement issues, contact Troy Garris at 301-461-8952.