United States District Court, E.D. Michigan, Southern Division
OPINION & ORDER DENYING (1) DEFENDANT'S
MOTION TO STRIKE, IN PART, PLAINTIFF'S LOAN SELECTION
FINDINGS (DKT. 75) AND (2) DEFENDANT'S MOTION TO
SUPPLEMENT ITS MOTION TO STRIKE (DKT. 80)
A. GOLDSMITH, UNITED STATES DISTRICT JUDGE.
matter is before the Court on Defendant Quicken Loans,
Inc.'s (“Quicken”) motion to strike, in part,
the Government's loan selection findings (Dkt. 75) and
Quicken's motion to supplement that motion (Dkt. 80). The
issues have been fully briefed and a hearing was held on
January 18, 2018. For the reasons that follow, Quicken's
motions are denied.
Government has brought this action against Quicken, asserting
that Quicken has violated the False Claims Act, 31 U.S.C.
§ 3729 et seq. The Government has also brought
federal common-law claims for breach of fiduciary duty and
negligence. On March 9, 2017, the Court granted in part and
denied in part Quicken's motion to dismiss, dismissing
portions of the suit that related to any claims submitted
before April 23, 2009 and data manipulation. See United
States v. Quicken Loans, 239 F.Supp.3d 1014 (E.D. Mich.
the sprawling nature of the action, the Court instituted a
special process to clarify what exactly would be at issue as
the case progressed. Borrowing a model from patent
litigation, the Court required the Government to prepare a
“memorandum detailing which of the loans in the Loan
Selection it contends support its claims in this
matter.” See 5/26/2017 Order at 2 (Dkt. 44).
The Court also required that this memorandum set forth the
manner in which the selected loans supported the
Government's claims. Id. Thereafter, the
Government submitted a memorandum with attachments totaling
447 pages, detailing which loans purportedly support its
claims. See Loan Selection Findings (Dkts. 67-2 and
has now filed a motion to strike (Dkt. 75), requesting that
the Court strike the loans and findings in the Loan Selection
Findings that go beyond those specific practices alleged in
the complaint. Quicken has also filed a motion to supplement
that motion to strike (Dkt. 80), seeking the same relief for
objects to the Government's findings that allegedly fall
outside of four practices set out in the complaint, which the
Court previously found sufficiently pled. These four
practices are: (i) appraisal value appeals; (ii) management
exceptions to underwriting requirements; (iii) borrower
income miscalculations; and (iv) ignoring “red
flags” of borrower inability to repay. See Quicken
Loans, 239 F.Supp.3d at 1025-1036.
motion to strike, Quicken contends that this case must be
limited to the practices “for which actionable
representative example false claims are pled in the
complaint.” See Mot. to Strike at 3 (Dkt. 75).
The Government responds that, after successfully pleading a
complex scheme with particularity, it may proceed to
discovery on the entire fraudulent scheme, see Resp.
to Mot. at 4 (Dkt. 76), and requests leave, in the
alternative, to file an amended complaint to set forth
additional specific allegations from the Loan Findings,
see id. at 19-20.
requirements for claims of fraudulent schemes brought under
the False Claims Act were discussed in United States ex
rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493
(6th Cir. 2007). The question in that case was “how
broadly or narrowly a court should construe the concept of a
fraudulent scheme.” Id. at 510. The court
rejected the argument that the pleaded scheme should be
construed at a high level of generality, because that would
provide defendants no notice of the “specific conduct
with which they were charged.” Id. For that
reason, broadly defining the scheme as “submitting
false claims to Medicare or Medicaid” was not
acceptable. Id. But the court also saw fault with
construing the scheme too narrowly, as “the policies
promoted by [Federal Rule of Civil Procedure 9(b)] allowing a
relator to plead examples, rather than every false claim,
would be undermined.” Id.
the court in Bledsoe concluded that the pleaded
examples of fraud “will support more generalized
allegations of fraud only to the extent that the
relator's examples are representative samples of
the broader class of claims.” Id. (emphasis in
original). The panel further clarified that the examples
should be similar in “general time frame, substantive
content, and relation to the allegedly fraudulent
scheme” and should “be such that a materially
similar set of claims could have been produced with a
reasonable probability by a random draw from the total pool
of all claims.” Id. at 511. This allows the
defendant to “be able to infer with reasonable accuracy
the precise claims at issue by examining the relator's
representative samples.” Id.
the Government misunderstands the import of Bledsoe.
It is not, as the Government seems to contend, that a
plaintiff is given carte blanche to pursue any fraud claim it
wishes once it passes the motion-to-dismiss stage and moves
into discovery. Such a reading of Bledsoe would
render Rule 9(b) a dead letter: the notice a defendant would
have received at the complaint stage would no longer be
effective, because the guidance provided by the illustrative
examples would cease to be operative. Even though the panel
held that a plaintiff may proceed on the “entire
fraudulent scheme” if it provides examples in the
pleading, it stressed that these examples must be
“representative samples.” Id. at 510.
The Government appears to try to move forward on
Bledsoe's first holding, without paying any mind
to the second. To ignore the “representative
samples” boundaries would render irrelevant the
“paragraph-by-paragraph” review of the complaint
that Bledsoe mandates and which this Court followed.
See Quicken Loans, 239 F.Supp.3d at 1025. Thus, the
Government's approach is at odds both with
Bledsoe and this Court's prior ruling.
successfully pled four specific flavors of fraud, the
Government must now be restricted to those categories, with
the examples provided in the complaint acting as
representative samples of the allegedly fraudulent scheme.
Allegedly fraudulent behavior not comprehended within the
four practices described in the complaint and sustained as
sufficiently pled will not be at issue in this
being said, the Court will deny Quicken's motions. As a
matter of procedure, Quicken has cited no authority - and the
Court is aware of none - that would allow the Court to strike
a discovery response in these circumstances. As the Court has
made clear in this opinion, the case is limited to the four
pleaded practices; if Quicken believes that some of the
Government's claims go beyond those four practices, it
will have an opportunity to raise that argument at later
stages of this action. Typically, the kind of objection
Quicken is raising would be registered by way of a
dispositive motion, or a motion in limine, or in crafting the
joint final pretrial order. Given the ...