United States District Court, S.D. Texas, Houston Division
MEMORANDUM OPINION AND ORDER
C. HANKS, JR. UNITED STATES DISTRICT JUDGE
the Court are the Allied Defendants' Motion for
Judgment as a Matter of Law (Dkt. 390); and [Renewed] Motion
for Judgment as a Matter of Law (Dkt. 508); as well as
associated memoranda, appendices, and responsive pleadings.
original motion for judgment as a matter of law has been
superseded by its post-trial renewed motion. Allied's
original motion (Dkt. 350) is therefore DENIED as
moot. Based on the motions, response, reply, and
various supplemental briefings; the applicable law; and the
arguments of counsel, the Allied Defendant's renewed
motion for judgment as a matter of law (Dkt. 508) is
DENIED. The reasons for the ruling are
motion for judgment as a matter of law challenges "the
legal sufficiency of the evidence supporting a jury's
verdict." Ford v. Cimarron Ins. Co., 230 F.3d
828, 830 (5th Cir. 2000) (quoting Jones v. Kerrville
State Hosp., 142 F.3d 263, 265 (5th Cir. 1998)). A
movant may file a renewed motion for judgment
("RJMOL") as a matter of law if its original motion
was not ruled upon during a jury trial. Fed.R.Civ.P. §
50(b). "The motion must specify the judgment sought and
the law and facts that entitle the movant to the
judgment." Fed.R.Civ.P. § 50(a)(2).
should only grant a JMOL if "a reasonable jury would not
have a legally sufficient evidentiary basis to find for the
party" on the raised issue. Fed.R.Civ.P. §
50(a)(1). "It goes without saying that the evidence must
be viewed in the light most favorable to the nonmovant."
Montano v. Orange County, Texas, 842 F.3d 865,
873-74 (5th Cir. 2016). It is not within the province of the
trial court to weigh the evidence or the credibility of the
witnesses. Id. at 874. These matters are reserved
solely for the jury. Id. On the other hand, a
jury's factual findings must be supported by
"substantial evidence." American Home Assurance
Co. v. United Space All, LLC, 378 F.3d 482, 487 (5th
Cir. 2004). A trial court should grant judgment "only if
the evidence points so strongly and so overwhelmingly in
favor of the moving party that no reasonable juror could
return a contrary verdict." Porter v. Epps, 659
F.3d 440, 445 (5th Cir. 2011) (internal quotation marks and
argues that the United States failed to: 1) establish the
required elements of an FCA claim; 2) prove that Allied
proximately caused the defaults; and 3) failed to prove its
FIRREA claims. As the moving party, Allied faces a rigorous
task in establishing that the jury's verdict should be
Whether the United States Established Essential Elements of
an FCA Claim
[A]ny person who (A) knowingly presents, or causes to be
presented, a false or fraudulent claim for payment or
approval; [or] (B) knowingly makes, uses, or causes to be
made or used, a false record or statement material to a false
or fraudulent claim . . . (G) is liable to the United States
Government for a civil penalty of not less than [$5, 500] and
not more than [$11, 000], plus 3 times the amount of damages
which the Government sustains because of the act of that
31 U.S.C. § 3729(a). Under Fifth Circuit precedent, the
United States was thus required to prove the following
elements: 1) a false statement or false conduct; 2) made with
the requisite scienter; 3) that was material; and 4) that
caused the loss to the government. United States ex rel.
Longhi v. United States, 575 F.3d 458, 467 (5th Cir.
2009) (quoting United States ex rel. Wilson v. Kellogg
Brown & Root, Inc., 525 F.3d 370, 376 (4th Cir.
2008)). Allied does not dispute that false statements were
made. Rather, it argues that the United States failed to
introduce evidence of scienter (here,
"recklessness") or materiality.
United States introduced evidence that Allied was aware of
HUD regulations prohibiting unregistered branches from
originating loans, Dkt. 457, p. 112; that Allied continued
originating loans from unregistered branches after learning
of the HUD rule, id. at 113-14; that Allied
nevertheless certified on each loan that it complied with all
HUD requirements, Dkt. 516, p. 358; that some unregistered
branches provided the FHA identification numbers of its
registered branches to skirt the HUD prohibition, Dkt. 458,
pp. 109-111; and that Allied forged its branch managers'
signatures, Dkt. 472, pp. 25, 65. Here, the jury received
substantial evidence that warranted its finding that
Allied's false statements were the result of its reckless
disregard for the truth. Based on this same evidence,
Allied's related argument that the United States failed
to connect the false statements with the required scienter is
also without merit.
recent decision by the Supreme Court of the United States
clarified the FCA's materiality requirement. The FCA
provides the following definition of materiality: "[T]he
term 'material' means having a natural tendency to
influence, or be capable of influencing, the payment or
receipt of money or property." 31 U.S.C. §
3729(b)(4). Justice Thomas's unanimous opinion in
Escobar recently clarified "how the [FCA's]
rigorous materiality requirement should be enforced."
Universal Health Servs., Inc. v. United States ex rel.
Escobar, ___U.S. ___, 136 S.Ct. 1989, 1996, 195 L.Ed.2d
Escobar, "evidence that the defendant knows
that the Government consistently refuses to pay claims in the
mine run of cases based on noncompliance with the particular
statutory, regulatory, or contractual requirement"
constitutes proof of materiality. Id. at 2003.
Conversely, Escobar notes two situations creating
"very strong evidence that those requirements are not
material": (1) "if the Government pays a particular
claim in full despite its actual knowledge that certain
requirements were violated"; and (2) "if the
Government regularly pays a particular type of claim in full
despite actual knowledge that certain requirements were
violated, and has signaled no change in position ...."
Id. at 2003-04.
United States produced evidence showing the importance that
HUD officials placed upon Allied's false certifications
in deciding whether to pay. Dkts 401, 458, 469. For example,
the government introduced a HUD addendum to the Uniform
Residential Loan Application ("92900-A").
Plaintiffs Ex. 196. Through the testimony of fourteen-year
HUD employee Scott Bice, the Government examined the 92900-A,
discussing the importance of the various required entries.
Dkt. 469. Under Blocks 13 and 15, the originating branch was
required to enter its HUD-approved lender ID and address.
Id. According to Bice, this information is necessary
for HUD to track, inter alia, the branch office's
claim-to-default ratio. Id. HUD does not allow
non-registered branches to originate loans for insurance.
Id. HUD will not approve an application without this
information. Id. Under Lender Certification, Part B,
the lender was required to certify that "[t]he
information contained in [this Application] was obtained
directly from the borrower by an employee of the undersigned
lender or its duly authorized agent and is true to the best
of the lender's knowledge and belief." Id.
trial transcripts are replete with detailed analyses of
various HUD-requirements, the importance of those
requirements, and why these requirements were necessary for
HUD to make an informed decision. See, e.g., Dkt.
469, pp. 115-16, 122- 23, 131-35, 181. The Court finds that
the United States presented sufficient evidence of
Whether the United States Proved Proximate Causation
argues that the United States failed to prove that
Allied's malfeasance proximately caused any loss.
According to Allied: 1) there was no evidence showing that
the defaults occurred because of the FCA violations; 2) there
was no basis for the United States' determination of
damages through extrapolation; 3) the margin of error for the
Allied eligibility rates for its claim and non-claim loans