KARTOZIA et al v. SERVICE 1ST MORTGAGE INC et al
ORDER granting 184 Motion for Reconsideration re 183 Order on Motion for Leave to File, VACATING 183 Order filed 1/5/2022 and replacing that order with this one granting 156 Motion for Leave to File. Ordered by US DISTRICT JUDGE CLAY D LAND on 1/7/2022 (esl)
Case 4:18-cv-00194-CDL Document 185 Filed 01/07/22 Page 1 of 7
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
UNITED STATES OF AMERICA, ex
rel. GEORGE KARTOZIA,
CASE NO. 4:18-CV-194 (CDL)
RMK FINANCIAL CORPORATION, et
O R D E R
The Court grants Relator’s motion for reconsideration (ECF
No. 184), vacates its order dated January 5, 2022 (ECF No. 183),
and replaces that order with this one.1
Relator George Kartozia brought this qui tam action against
Defendants under the False Claims Act (“FCA”).
He claims that
loans called Interest Rate Reduction Refinance Loans (“IRRRL”)
to veterans but charged the veterans fees that were prohibited
Relator further claims that the lenders falsely certified to the
VA that they were charging only permissible fees, thus inducing
The Court inadvertently overlooked Relator’s notice of corrected
exhibit, in large part because Relator did not attach the exhibit to a
brief, highlight the corrected exhibit in a brief, or clearly and
succinctly explain the impact of the corrected exhibit in his
Case 4:18-cv-00194-CDL Document 185 Filed 01/07/22 Page 2 of 7
the VA to guarantee 25% of the amount of each IRRRL, and that
some of the IRRRL borrowers who paid prohibited fees defaulted
on their loans.
Each Defendant filed a motion to dismiss.
October 8, 2021, the Court granted the motions to dismiss filed
Mortgage Solutions of Colorado, LLC, Sun West Mortgage Company,
adequately allege the “submission of a claim” in connection with
Kartozia v. Freedom Mortg. Corp., No. 4:18-CV-194 (CDL), 2021 WL
4721066, at *6, *8 (M.D. Ga. Oct. 8, 2021).
The Court found,
though, that Relator sufficiently alleged FCA claims against RMK
Services, LLC, Service 1st Mortgage, Inc., and Robert Cole, and
it denied their motions to dismiss.
Id. at *8-*10.
Now, Relator wants to amend his complaint to add additional
factual allegations regarding IRRRLs made by Loandepot.com, LLC
(“Loan Depot”) and Freedom Mortgage Corp. (“Freedom”).
contends that these additional factual allegations will cure the
below, Relator’s motion for leave to amend (ECF No. 156) is
Case 4:18-cv-00194-CDL Document 185 Filed 01/07/22 Page 3 of 7
Federal Rule of Civil Procedure 15(a)(2) provides that “a
written consent or the court’s leave” and that the “court should
freely give leave when justice so requires.”
Fed. R. Civ. P.
A court may refuse to grant leave to amend if the
amendment would be futile.
L.S. ex rel. Hernandez v. Peterson,
982 F.3d 1323, 1332 (11th Cir. 2020).
“Leave to amend would be
futile if an amended complaint would still fail the motion to
dismiss . . . stage.”
In its prior order, the Court concluded that Relator’s FCA
claims required an actual false claim for payment, which in turn
presentation to the VA of a claim under its guaranty, which
Kartozia, 2021 WL 4721066, at *6, *8.
The problem with
against Freedom and Loan Depot, was that Relator did not allege
with particularity and the required indicia of reliability that
any IRRRLs made by Freedom or Loan Depot “went into default or
that the VA ha[d] otherwise paid anything in reliance upon the
alleged false certifications.”
Kartozia, 2021 WL 4721066, at
In contrast, Relator did adequately allege an actual false
claim by another lender because Relator alleged that the lender
Case 4:18-cv-00194-CDL Document 185 Filed 01/07/22 Page 4 of 7
falsely certified that it only charged the borrowers permissible
guaranty of the loans in reliance upon the false certification,
that the borrowers defaulted, and that the VA, as guarantor of
Id. at *10.
In his motion for leave to amend, Relator asserts that his
nearly identical to the allegations regarding the lender that
survived the motion to dismiss.
Relator alleges that Loan Depot
and Freedom charged impermissible fees to IRRRL borrowers L.W.
and J.S., that Loan Depot and Freedom falsely certified that
they only charged permissible fees to these two borrowers, that
the VA issued a guaranty of the loans in reliance on the false
Leave to Am. Ex. 1, Proposed 3d Am. Compl. ¶¶ 182, 188, 430-473,
ECF No. 156-1.
Relator also alleged with specificity that the VA expended
First, Relator sufficiently alleges that the VA
Case 4:18-cv-00194-CDL Document 185 Filed 01/07/22 Page 5 of 7
highest bidder, that Freedom as high bidder assigned its bid to
the Secretary of Veterans Affairs, c/o Loan Guaranty Service,
Proposed 3d Am. Compl. Ex. 23, Trustee’s Deed (Dec. 31, 2019),
ECF No. 156-1 at 507-511.
Thus, Relator alleges that the VA
purchased J.S.’s home following foreclosure.
sufficiently alleges that the VA expended funds in connection
with L.W.’s loan from Loan Depot.
Relator submitted a corrected
exhibit demonstrating that L.W.’s home was offered for sale to
the highest bidder, that Loan Depot was the highest bidder, and
that Loan Depot immediately deeded the property to the Secretary
Corrected Ex. No. 20, Deeds (Oct. 2, 2018), ECF No. 179-1.
allegations, taken as true and drawing all reasonable inferences
in Relator’s favor, suggest that Loan Depot and Freedom’s “false
Government to pay out money it would not otherwise have paid.”
Kartozia, 2021 WL 4721066, at *10.
Third Amended Complaint adequately alleges an FCA claim against
Case 4:18-cv-00194-CDL Document 185 Filed 01/07/22 Page 6 of 7
recognizes that leave to amend is not required “where there has
failure to cure deficiencies by amendments previously allowed.”
Corsello, 428 F.3d at 1014 (quoting Bryant v. Dupree, 252 F.3d
1161, 1163 (11th Cir. 2001)).
In Corsello, for example, the
beginning that he must plead fraud with particularity.”
Here, Relator has not repeatedly failed to cure deficiencies by
previously allowed amendments. 2
Relator sought leave to amend
almost immediately after the Court issued its October 8, 2021
And, neither Freedom nor Loan Depot has demonstrated any
For all these reasons, the Court finds that
Relator should be permitted to amend his complaint to add the
proposed factual allegations regarding Freedom and Loan Depot.
Relator filed his original complaint under seal and did not serve it
on any Defendants. Relator filed an amended complaint shortly before
the Government declined intervention, and he served the amended
complaint on Defendants.
Defendants filed motions to dismiss the
In response, Relator filed his second amended
complaint. The Clerk issued an error notice stating that leave of the
Court was required even though Relator had never served the original
complaint on Defendants and he filed the second amended complaint
within 21 days after service of Defendants’ 12(b) motions. Based on
the error notice, Relator filed a motion for leave to file the second
amended complaint, which the Court granted in a text order without
examining the substance of the second amended complaint or pointing
out deficiencies. Text Order (Aug. 17, 2020), ECF No. 97.
Case 4:18-cv-00194-CDL Document 185 Filed 01/07/22 Page 7 of 7
For the reasons set forth above, the Court grants Relator’s
Third Amended Complaint
within five days of the date of this order.
After Relator files
his Third Amended Complaint, the Court will issue an amendment
to its previous order in light of today’s ruling.
At that time,
the Court will rule on the pending motions for certification for
immediate appeal (ECF Nos. 154 & 157).
IT IS SO ORDERED, this 7th day of January, 2022.
S/Clay D. Land
CLAY D. LAND
U.S. DISTRICT COURT JUDGE
MIDDLE DISTRICT OF GEORGIA
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