from the United States District Court for the Southern
District of Texas
BARKSDALE, SOUTHWICK, and HAYNES, Circuit Judges.
H. SOUTHWICK, CIRCUIT JUDGE.
five-week trial on False Claims Act and Financial
Institutions Reform, Recovery and Enforcement Act claims, the
government secured judgments and penalties that totaled
nearly $300 million. On appeal, the defendants challenge the
sufficiency of the evidence, the admissibility of the
government's expert evidence, and the district
court's dismissal of a juror shortly before the remaining
jurors reached their verdict. We AFFIRM.
AND PROCEDURAL BACKGROUND
Federal Housing Agency ("FHA") mortgage insurance
program insures participating lenders against any losses on
qualifying mortgage loans, which are primarily loans to
Hodge was the owner and chief executive officer of defendants
Allied Home Mortgage Capital Corporation ("Allied
Capital") and Allied Home Mortgage
Corporation ("Allied Corporation"). Both
companies participated in the FHA insurance program but in
Capital was a loan correspondent, meaning it could originate
loans but was not permitted to hold loans. 24 C.F.R. §
202.8(a). Instead, information it collected was forwarded to
Allied Corporation, the lender or mortgagee responsible for
underwriting and funding the loan. Id. §
202.7(a). As a loan correspondent, Allied Capital was
required to obtain Department of Housing and Urban
Development ("HUD") approval for each branch office
where it originated loans.
lenders must submit a loan file to HUD to be endorsed for FHA
insurance. Loan files submitted to HUD for endorsement are
accompanied by Form 92900-A. That form requires the unique
registration number for the originating branch as well as
certification that the loan is eligible for insurance and
compliant with HUD underwriting guidelines. Allied
Corporation was a participant in HUD's "direct
endorsement lender" program, which authorized it to
determine eligibility on HUD's behalf by certifying that
a given loan met FHA guidelines.
2011, an Allied Capital branch manager filed a qui
tam action under the False Claims Act ("FCA")
alleging that the defendants had defrauded the government by
fraudulently obtaining FHA insurance for loans that later
defaulted. See 31 U.S.C. §§ 3729-33. The
government exercised its right to intervene in the lawsuit.
See id. § 3730(b)(2).
the course of a five-week trial, the government advanced
multiple theories of liability based on alleged violations of
the FCA and the Financial Institutions Reform, Recovery and
Enforcement Act ("FIRREA").
jury did not immediately return a verdict, which led to a
sequence of events that culminated in the district court
excusing one of the jurors. The day after the juror was
excused, the jury returned a verdict finding Allied
Corporation liable under the FCA for misrepresentations about
its compliance with FHA underwriting guidelines. See
31 U.S.C. § 3729(a)(1)(A), (B). The jury awarded $85.6
million in damages. It likewise found Hodge and Allied
Capital liable under the FCA for misrepresenting that loans
actually originated by unregistered "shadow"
branches were loans instead originated by registered
branches. See id. § 3729(a)(1)(B). For that
violation of the FCA, the jury awarded $7.4 million in
damages. Finally, the jury also found all three defendants
were liable under FIRREA for false certifications about their
compliance with HUD's quality control requirements.
See 12 U.S.C. § 1833a(a), (c)(1).
district court denied the defendants' motions for
judgment as a matter of law and for a new trial. It also
granted the government's post-trial motion for treble
damages and civil penalties. It awarded treble damages and
penalties under the FCA against Allied Capital and Hodge
totaling $23.1 million, against Allied Corporation totaling
$268.8 million, and FIRREA penalties of $2.2 million against
start with analysis of the sufficiency of the evidence, then
discuss the admission of expert testimony, and finally
address the dismissal of a juror.
Sufficiency of the Evidence
motion for judgment as a matter of law . . . in an action
tried by jury is a challenge to the legal sufficiency of the
evidence supporting the jury's verdict." Flowers
v. S. Reg'l Physician Servs. Inc., 247 F.3d 229, 235
(5th Cir. 2001) (citations omitted); see also Fed.
R. Civ. P. 50. Our review of the ruling on such a motion is
de novo, using the same analysis as the district
court that the motion should be granted if "there is no
legally sufficient evidentiary basis for a reasonable jury to
have found for that party with respect to that issue."
Flowers, 247 F.3d at 235 (citation omitted).
Granting the motion requires that the "facts and
inferences point 'so strongly and overwhelmingly in the
movant's favor that reasonable jurors could not reach a
contrary conclusion.'" Id. (quoting
Omnitech Int'l, Inc. v. Clorox Co., 11 F.3d
1316, 1322 (5th Cir. 1994)). "The district court's
damages and penalty determinations are reviewed for an abuse
of discretion." SEC v. Kahlon, 873 F.3d 500,
504 (5th Cir. 2017).
determining whether liability attaches under the FCA, this
court asks '(1) whether there was a false statement or
fraudulent course of conduct; (2) made . . . with . . .
scienter; (3) that was material; and (4) that caused the
government to pay out money.'" United States ex
rel. Harman v. Trinity Indus. Inc., 872 F.3d 645, 653-54
(5th Cir. 2017) (quoting Gonzalez v. Fresenius Med. Care
N. Am., 689 F.3d 470, 475 (5th Cir. 2012)).
False Claims Act - Unregistered Branches
jury found Hodge and Allied Capital liable under the False
Claims Act and awarded $7.4 million in damages for concealing
that unregistered branches had originated many of the loans
being endorsed for FHA insurance.
and Allied Capital argue there was insufficient evidence of
scienter, materiality, and causation to support the
prove scienter, the government must show "the
[d]efendants had (1) actual knowledge of falsity, (2) acted
with deliberate ignorance of the truth or falsity of the
information provided, or (3) acted with reckless disregard of
the truth or falsity of the information provided."
United States ex rel. Longhi v. United States, 575
F.3d 458, 468 (5th Cir. 2009).
defendants argue there was no evidence that Hodge "or
anyone at Allied Capital ever had any form of knowledge that
these entries concerning the mere identity of a branch
location were 'material to a false or fraudulent
claim.'" The government, though, identifies evidence
that Allied Capital, with Hodge's approval, hid the
involvement of unregistered branches from HUD and that Hodge
lied about them when the violations were discovered in a
state audit. For example, Allied compliance chief Jeanne
Stell Hammond testified that Hodge decided to continue
originating loans from unregistered branches even after HUD
notified them it was not permitted, and that Hodge did not
want to register branches because of "the scrutiny by
jury could have relied on such evidence to find Hodge and
Allied Capital acted with scienter.
defendants argue there is insufficient evidence that the
originating branch information was material. "[T]he term
'material' means having a natural tendency to
influence, or be capable of influencing, the payment or
receipt of money or property," which requires us to
evaluate "the effect on the likely or actual behavior of
the recipient of the alleged misrepresentation."
Trinity Indus. Inc., 872 F.3d at 661 (emphasis
omitted) (quoting Universal Health Servs., Inc.
v. United States ex rel. Escobar, 136 S.Ct. 1989, 2002
gist of this inquiry is whether false representations about
the originating branch for a loan induced HUD to issue
insurance. The defendants rely on the fact that the form did
not list the branch number as a matter certified to induce
insurance; that underwriting certifications were more
directly relevant; that HUD later eliminated the registration
requirement; and that HUD knew about the unregistered
branches when it issued insurance.
the branch number was not listed as a matter certified to
induce the insurance, there was testimony that the agency
would not have insured loans originated by unregistered
branches. The rationale for the rule was the agency's
experience of higher default rates on loans from unregistered
information would not likely have been material if it were
true that HUD knew loans were originated by unregistered
branches and insured them anyway because "continued
payment by the federal government after it learns of the
alleged fraud substantially increases the burden on the
relator in establishing materiality." Trinity Indus.
Inc., 872 F.3d at 663. The evidence at trial, though,
showed the opposite. The government's "actions
following its discovery of [the] fraud support, rather than
undercut, a finding of materiality." United States
v. Luce, 873 F.3d 999, 1008 (7th Cir. 2017).
HUD discovered a handful of loans originated from
unregistered branches, it demanded the defendants agree to
indemnify HUD in the event of claims "due to the
seriousness of the violation." When the full extent of
the conduct became apparent, HUD promptly acted to suspend
and bar Hodge and Allied Capital from the FHA program
entirely. "There was no prolonged period of
acquiescence." Id. The defendants'
assertion that the evidence showed HUD advised them ...