UNITED STATES OF AMERICA ex. rel. v. CITIGROUP INC.

Background

Tamika Miller, called the “Relator” in the opinion, alleged that she was employed by the defendants in 2014 to help oversee third-party vendors’ compliance with laws, regulations, and consent orders. She alleged that the defendants concealed compliance failures and falsified reports to avoid disclosing violations. She filed this False Claims Act action in 2019. The Government declined to participate in the action in June 2020.

Miller initially asserted several claims, but she voluntarily dismissed every claim except a reverse false claim. A reverse false claim alleges that a defendant knowingly conceals or improperly avoids an established obligation to pay the Government. Miller also sought a share of a $400 million fine obtained by the Office of the Comptroller of the Currency in a 2020 consent order.

In an opinion issued June 22, 2022, the court granted the defendants’ motion to dismiss, denied Miller’s request for a share of the fine, and denied her request for leave to amend. Miller then moved for reconsideration and submitted proposed amendments to her complaint.

Standard for Reconsideration

The court explained that reconsideration is an exceptional remedy. It is not a way to repeat arguments already considered or to present a case under new theories. Relief generally requires an intervening change in controlling law, newly available evidence, or a need to correct a clear error or prevent serious unfairness.

Obligation to Pay

The court rejected Miller’s argument that the complaint plausibly alleged an obligation to pay under the False Claims Act. The court had previously concluded that alleged violations of laws, regulations, and consent orders did not themselves create an established duty to pay. A penalty does not become an obligation under the Act merely when the conduct supporting the penalty occurs. The obligation arises only after the Government formally establishes the duty to pay the penalty.

The court also rejected Miller’s argument that the defendants’ alleged duty to disclose violations created an obligation to pay. A failure to disclose a violation does not create that obligation because the Government might impose a penalty, but might also choose not to do so. Because Miller had not stated a valid False Claims Act claim, the court concluded that she was not entitled to a share of an alternative remedy.

Heightened Pleading Requirement

The court also upheld its conclusion that the complaint failed to meet Federal Rule of Civil Procedure 9(b), which requires fraud to be pleaded with particularity. For this type of claim, the court stated that the plaintiff ordinarily must identify the allegedly false statements, the speaker, where and when the statements were made, and why they were fraudulent.

The court held that this heightened requirement applies to reverse false claims. Miller’s allegations did not identify specific false records or statements used to avoid an obligation, or specific incidents in which the defendants violated a law, regulation, or consent order and then failed to disclose the violation. The court further stated that the requirement applies to fraudulent omissions as well as false statements.

Evidence Outside the Complaint

The court rejected Miller’s argument that the earlier opinion improperly relied on evidence outside the complaint. It explained that the earlier dismissal relied only on the complaint’s allegations. Although the court discussed facts outside the pleadings when considering Miller’s request for a share of the fine, those facts did not form part of its analysis of the motion to dismiss. The court also stated that the complaint’s defects independently justified both the dismissal and denial of Miller’s request for a share, regardless of the basis for the OCC fine.

Leave to Amend

The court rejected Miller’s argument that she was automatically entitled to another opportunity to amend. It explained that the earlier decision had denied amendment because amendment would be futile, meaning that the proposed changes would not fix the legal defects. Miller’s proposed amended complaint added more detail about the alleged violations but still did not allege conduct creating an obligation to pay under the False Claims Act. The court also noted that she had not previously supported her request to amend with a proposed amendment or an explanation of how amendment would cure the defects.

Disposition

Judge Denise Cote denied Miller’s July 20, 2022 motion for reconsideration. The opinion left in place the earlier dismissal of the complaint, denial of Miller’s request for a share of the OCC fine, and denial of leave to amend.