UNITED STATES OF AMERICA ex rel. PETER D. GRUBEA v. ROSICKI, ROSICKI & ASSOCIATES, P.C., et al.

Filing 200

OPINION AND ORDER re: (182 in 1:12-cv-07199-JSR) MOTION for Reconsideration re: (180) Memorandum & Opinion; (76 in 1:13-cv-01467-JSR) MOTION for Reconsideration re: (75) Memorandum & Opinion: For the foregoing reasons, defendants' motion for reconsideration is denied. The Clerk is directed to close the entry at docket number 182. (Signed by Judge Jed S. Rakoff on 8/14/2018) (jwh)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

------------------------------------x
UNITED STATES OF AMERICA ex rel.
PETER D. GRUBEA,

12-cv-7199 (JSR)

Plaintiff,

-vROSJCKI, ROSICKI & ASSOCIATES,
P.C., PARAMOUNT LAND, INC.,
THRESHOLD LAND INC., ENTERPRISE
PROCESS SERVICE, INC., MCCABE,
WEISBERG, & CONWAY, P.C., ATTORNEY
OUTSOURCING SUPPORT SERVICES, INC.,
REO AMERICA ABSTRACT, INC., CENLAR
FSB, CITIGROUP, INC., CITIBANK,
N.A., CITIMORTGAGE, INC., DITECH
FINANCIAL LLC, EVERHOME MORTGAGE
COMPANY, EVERBANK FSB, FLAGSTAR
BANK, FSB, GREEN TREE CREDIT, JAMES
B. NUTTER & CO., METLIFE BANK,
N.A., NATIONSTAR MORTGAGE LLC,
ONEWEST BANK FSB, PHH MORTGAGE
CORPORATION, PNC BANK, FSB,
SUNTRUST MORTGAGE, INC., U.S.
BANK, N.A., and WELLS FARGO & CO.,

---,
USDC Sl.1 · .
DOCUMENT
ELECTitOr..;1cALLY FILED
DOC#:~~--....+-"71-:~--­

DATE Fll,ED:,

Defendants.
------------------------------------x
UNITED STATES OF AMERICA,
Plaintiff-Intervenor,
-vROSICKI, ROSICKJ & ASSOCIATES,
P.C., ENTERPRISE PROCESS SERVICE,
INC., PARAMOUNT LAND, INC.,
Defendants.

------------------------------------x
UNITED STATES OF AMERICA ex rel.
PETER D. GRUBEA,

13-cv-1467

Plaintiff,

t;l'

1

(JSR)

-vBANK OF AMERICA CORPORATION, BANK
OF AMERICA, N.A., J.P. MORGAN CHASE
& CO., and JPMORGAN CHASE BANK,

OPINION AND ORDER

N .A.,

Defendants.

------------------------------------x
JED S. RAKOFF, U.S.D.J.
By Opinion and Order dated June 23, 2018, this Court, inter
alia, dismissed with prejudice all claims filed in "qui tam"
actions on behalf of the United States of America by Peter D.
Grubea

("Relator")

against mortgage servicers Bank of America

Corporation, Bank of America, N.A.

(collectively, "Bank of

America"); Cenlar FSB; Citigroup Inc., Citibank, N.A., and
CitiMortgage,

Inc.

(collectively, "Citi"); Ditech Financial LLC;

EverHome Mortgage Company and EverBank FSB

(collectively,

"EverBank"); Flagstar Bank, FSB ("Flagstar"); Green Tree Credit;
James B. Nutter & Co.; J.P. Morgan Chase & Co, JPMorgan Chase
Bank, N.A.

(collectively, "JPMorgan Chase");MetLife Bank, N.A.;

Nationstar Mortgage LLC; OneWest Bank FSB
Mortgage Corporation ("PHH"),
Mortgage,

("One West"); PHH

PNC Bank, FSB ("PNC"); SunTrust

Inc.; U.S. Bank N.A.; and Wells Fargo & Co

Fargo"). Dkt.

("Wells

180. Now before the Court is Relator's motion for

reconsideration of the dismissal with prejudice and permission
to replead as to seven of the servicers: Bank of America, Cit1,
Flagstar, JP Morgan Chase, Nationstar, U.S. Bank N.A., and Wells

2

Fargo (collectively, "Servicer Defendants"). Dkt. 182. Servicer
Defendants oppose. Dkt. 188.
The Court here assumes familiarity with the underlying
facts, which are laid out in the Opinion and Order dated June
23, 2018. Dkt. 180. In brief, Relator alleges that Servicer
Defendants submitted claims for reimbursement of foreclosure
expenses to the Federal National Mortgage Association ("Fannie
Mae"), the Federal Horne Loan Mortgage Corporation ("Freddie
Mac") and the Federal Housing Administration ("FHA"), in
violation of those entities' rules prohibiting reimbursement of
unreasonable and unnecessary costs and requiring servicers to
engage in oversight to reduce the risk of such claims.
Specifically, Relator asserts that the Servicer Defendants
violated the False Claims Act
to Fannie Mae,
3729 (a) (1) (A)

("FCA") by submitting false claims

Freddie Mac, and FHA in violation of 31 U.S.C.
("False Claims"), making false statements to

Fannie Mae, Freddie Mac, and FHA in violation of 31 U.S.C.
3729 (a)

(1)

(B)

§

§

("False Statements"), and submitting false claims

to Fannie Mae and Freddie Mac "Reverse False Claims"), causing
Fannie Mae and Freddie mac to pay the United States less than
what the United States would have otherwise been entitled to
receive in violation of 31 U.S.C.

§

3729(a) (1) (C)

Conspiracy"). See Third Amended Complaint

3

~~

("False Claims

495-502, 511-513,

Dkt. 29; Second Amended Complaint, ~~ 353-360, 364-366, Dkt. 28,
No 13. Civ. 1467.
Servicer Defendants moved to dismiss with prejudice the
claims against them under Rule 9(b), Fed. R. Civ. P., on the
ground that Relator failed to adequately allege scienter. See
Memorandum of Law in Support of the Servicer Defendants' Motion
to Dismiss the Complaint, Dkt 124; United States ex rel. Tessler
v. City of New York, 14-cv-6455, 2016 WL 7335654, at *5
(S.D.N.Y. Dec. 16, 2016)

("[U]nder Rule 9(b), the proponent of

an FCA claim must allege facts that give rise to a strong
inference of fraudulent intent"), aff'd, 712 F. App'x 27
Cir. 2017). Further, the Court agreed,

(2d

finding that Relator's

allegations of intent were "based on little more than
conjecture." Opinion & Order dated June 23, 2018, at 26, Dkt.
180. Further, the Court dismissed the claims with prejudice,
finding that Relator "has had ample opportunity to plead every
possible factual basis for scienter, and was not able, even at
oral argument, to provide more" than what was found insufficient
to satisfy Rule 9(b).

Id. at 27.

For the reasons set forth below, the Court denies Relator's
motion for reconsideration of this decision.
"Reconsideration of a court's previous order is an
extraordinary remedy to be employed sparingly in the interests
of finality and conservation of scarce judicial resources."

4

Melnitzky v. Rose, 305 F. Supp. 2d 349, 350

(S.D.N.Y. 2004)

.1

Under Local Civil Rule 6.3, which governs motions for
reconsideration, the standard for granting a motion for
reconsideration is "strict" and "reconsideration will generally
be denied unless the moving party can point to controlling
decisions or data that the court overlooked - matters, in other
words, that might reasonably be expected to alter the conclusion
reached by the court." Shrader v. CSX Transp.,
255, 257

Inc., 70 F.3d

(2d Cir. 1995). A motion for reconsideration "is not a

vehicle for relitigating old issues, presenting the case under
new theories, securing a rehearing on the merits, or otherwise
taking a second bite at the apple." Analytical Surveys,
Tonga Partners, L.P., 684 F.3d 36, 52

Inc. v.

(2d Cir. 2012), as amended

(July 13, 2012)
Relator argues that dismissal of his claims with prejudice
"conflict[s] with controlling precedent" as "[c]omplaints
dismissed under Rule 9(b) are almost always dismissed with leave
to amend." Relator's Memorandum of Law in Support of his Motion
for Reconsideration ("Rel. Memo.") at 7 (quoting Pasternack v.
Shrader, 863 F.3d 162, 175 (2d Cir. 2017)), Dkt. 183. The words
"almost always" are key here. While it is true that "where [a]
complaint is deficient under Rule 9(b), leave to amend is

Unless otherwise indicated, case quotations omit all internal
quotation marks, alterations, footnotes, and citations.

1

5

usually afforded," Official Publ'ns,
F.2d 664,

669

(2d Cir. 1989)

Inc. v. Kahle News Co., 884

(emphasis added), "the decision of

whether to allow plaintiffs to amend their complaint is left to
the sound discretion of the district court." Acito v.
Grp.,

47 F.3d 47, 55 (2d Cir. 1995)

IMCERA

(emphasis added). The only

limitation on the district court's discretion is that it acts
w1 th "good reason." Id._ "One good reason to deny leave to amend
is when such leave would be futile." Id.
Courts have regularly found amendment futile and dismissal
with prejudice appropriate where a relator has failed to meet
Rule 9(b)'s requirements despite previous opportunities for
amendment. See, e.g., U.S. ex. rel. Bilotta v. Novartis Pharms.
Corp., 50 F. Supp. 3d 497, 553

(S.D.N.Y. 2014)

(dismissing

relator's claims with prejudice where relator's "failure to
adequately plead false claims in four complaints reflects an
inability to do so"); U.S. ex rel.

Pervez v. Beth Isr. Med.

Ctr., 736 F. Supp. 2d 804, 816 (S.D.N.Y. 2010)

(Dismissing

relator's claims under Rule 9(b) with prejudice for failure to
plead scienter where relator had "previous opportunities to
amend the pleadings.").

In this case, Relator had already

amended his claims against Servicer Defendants three times in
his original action, and brought a second action against
additional Servicer Defendants and amended those claims once as
well. Additionally, at an initial conference before the Court,

6

the Court specifically offered the relator yet another
opportunity to amend to satisfy the particularity requirements
of 9(b). See Apr. 17, 2018 Tr. at 6:25 - 7:1-3 ("[Y]ou know that
they are going to make a motion to dismiss based on 9(b) .... So
if you wanted to replead with particularity, why can't you do it
now?"). Relator declined to amend, and affirmed to the Court
that he "want[ed]
complaints.

to take [his] chances" with his current

Id. at 7:4-10. 2 After these numerous opportunities

for amendment, the Court acted well within its discretion in
finding that Relator's failure to plead scienter suggested an
inability to do so justifying dismissal with prejudice.
Moreover, mere disagreement with a discretionary decision
made for good cause is not equivalent to "an intervening change
of controlling law ... or the need to correct a clear error"
sufficient to justify reconsideration. Virgin Atl. Airways, Ltd.
v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir.

2

1992).

Relator argues that he only declined to amend his claims then
because he believed the Court had guaranteed him an opportunity
to amend later. Specifically, Relator cites the Court's comments
earlier in the colloquy that the Court "would be not quite
compelled - but close to it - to grant leave to file an
additional complaint" and that "the likelihood is extremely high
that I would allow repleading" if the claims were dismissed for
failure to satisfy Rule 9(b). See Rel. Memo at 4 (citing Apr.
17, 2018 Tr. at 4:4-16; 12:14-20). As this language makes clear,
this was an expression of likelihood, not a guarantee, and
thereafter Relator explicitly chose to "take [his] chances" on
the present complaint rather than amend it, as the Court
proposed. Apr. 17, 2018 Tr. at 7:1-10.
7

There has been no such change or error here. The Court acted in
full awareness of circuit precedent governing dismissal of
claims based on Rule 9(b). See Apr. 17, 2018 Tr. at 6:11-16
(discussing the "law of the Second Circuit" on leave to replead
following Rule 9(b) dismissals). While Relator argues that
"[t]he Circuit has frequently reversed denials of leave to
submit amendments aimed at satisfying Rule 9(b) ,"Rel. Memo. at
7, the two cases that Relator relies upon are clearly
distinguishable. In Wight v. BankAmerica Corp., 219 F.3d 79 (2d
Cir. 2000), the Second Circuit did reverse a district court's
dismissal with prejudice for failure to plead scienter
adequately - but upon a finding that the facts pled were
sufficient under Rule 9(b) and that the defendant "had both a
clear opportunity and strong financial motive" for involvement
in the fraud.

Id. at 92.

In Olsen v. Pratt & Whitney Aircraft,

136 F.3d 273, 276 (2d Cir. 1998), the Second Circuit found that,
while the complaint failed to satisfy Rule 9(b), plaintiff
should have the opportunity to amend as the deficiencies in the
complaint "obscure[d] the contours of th[e]

fraud claim" and

"whether [plaintiff] can actually sufficiently plead his claim."
Id. at 276.

In this case, the claim was clear, but Relator could

not adequately plead it.
Relator argues that the Court's decision to dismiss with
prejudice is not entitled to the deferential standard employed

8

on a motion for reconsideration as dismissal with prejudice was
not briefed. Relator cites no Second Circuit case law in support
of this argument. Moreover, Relator was the one who failed to
brief any opposition to dismissal with prejudice or to request
leave to amend. See Memorandum of Law in Opposition to
Defendants' Motions to Dismiss, Dkt. 150. The Second Circuit has
held that it "will not deem it an abuse of the district court's
discretion to order a case closed when leave to amend has not
been sought." Campo v. Sears Holdings Corp., 371 Fed. Appx. 212,
218

(2d Cir. 2010)

(affirming a dismissal with prejudice where

plaintiff did not request leave to amend in their opposition to
the motion to dismiss). Relator failed to do this despite ample
notification that Servicer Defendants sought dismissal with
prejudice.

See Memorandum of Law in Support of the Servicer

Defendants' Motion to Dismiss the Complaint, at 45, Dkt. 124
("Dismissal should be with prejudice because further amendment
would be futile"); Reply Memorandum of Law in Further Support of
the Servicer Defendants' Motion to Dismiss the Complaint, at 20,
Dkt. 158("The Court should dismiss the Complaint as against the
Servicer Defendants with prejudice."). Servicer Defendants had
also previously argued in their joint submission to the Court in
advance of the initial conference that Relator should not be
allowed to file another amended complaint. See Joint Letter to
the Court dated Apr. 12, 2018, at 2.

9

Separately, Relator's motion for reconsideration lacks
merit because it is essentially a renewal of a request for
discovery that this Court has already denied. Relator's motion
provides no information illustrating how he could replead with
suff 1cient specificity to meet the particularity requirement;
instead, Relator argues that he could replead with sufficient
specificity for Rule 9(b)

if he can obtain limited discovery

from the Government related to the Servicer Defendants. Relator
made the same request for limited discovery before the initial
conference with the Court. See Apr.

17, 2018 Tr. at 16:6-17. The

Court denied it then, staying all discovery pending a decision
on the motions to dismiss.

Id. at 19:20-21. Relator acknowledges

that he "did not press the issue further at the time," but now,
in hindsight, argues that he "would have made a formal motion
then for a limited exception to the discovery stay" if he had
realized his claims might be dismissed with prejudice. Rel.
Memo. at 4. However, hindsight is not a ground for
reconsideration; it is an instance of the exact type of "taking
a second bite at the apple" that the Second Circuit has
emphasized does not justify reconsideration. Analytical Surveys,
684 F.3d at 52.
Relator argues that he is entitled to use government
information to amend his complaint. However,

in each of these

cases he cites to in support of this argument,

10

the relator's

claims had not been dismissed and relator already possessed the
information from the government to be used in the amendment. See
Vasallo v. Rural/Metro Corp., No. 15-cv-00119, 2017 U.S. Dist.
LEXIS 175085 (D. Ariz. Oct. 5, 2017)

(allowing use of government

information that was not obtained through discovery to amend a
complaint where no Rule 9(b) dismissal was pending); United
States ex rel. Banigan v. Organon USA,

Inc., No. 07-cv-12153,

2011 U.S. Dist. LEXIS 26159 (D. Mass. Feb. 28, 2011)

(finding no

general rule against amending a complaint with government
information where no discovery is required but not ruling on it
in the case at issue); U.S. ex rel. Underwood v. Genentech,
Inc., 720 F. Supp. 2d 671

(E.D. Pa. 2010)

(allowing amendment

based on subpoena to government that court had approved where
information received before motion to dismiss filed and
complaint found sufficient under Rule 9(b)).
None of these cases stands for the principle that a relator
can seek discovery in order to amend claims that have been
dismissed. To the contrary, the Second Circuit has held that
relators are not entitled to discovery to cure inability to meet
Rule 9(b)'s particularity requirements. See Wood ex rel. U.S. v.
Applied Research Assocs.,
2009)

Inc., 328 F. App'x 744, 747

(2d Cir.

("A relator's contention, that discovery will unearth

information tending to prove his contention of fraud,

is

precisely what Rule 9(b) attempts to discourage."); see also

11

U.S. ex rel. Raff1ngton v. Bon Secours Health Sys., 285 F. Supp.
3d 759, 774

(S.D.N.Y. 2018)

("[A] party who cannot meet the

pleading requirements of Rule 9(b)

is not entitled to discovery

in order to flesh out the missing elements.")

.3

Relator's separate argument that he should be given leave
to amend as to JPMorgan Chase similarly fails. Relator seeks to
amend on the basis of conversations he had with outside counsel
for Chase surrounding a brief that relator submitted in a
bankruptcy case in January 2012. To qualify as a ground for
reconsideration, new evidence must have been "not previously
available" to the movant. Almaty, Kaz. v. Ablyazov, No. 15-cv5345, 2017 U.S.

Dist. LEXIS 138231, at *8

(S.D.N.Y. Aug. 7,

2017). Relator does not offer any explanation of why the Court
should reconsider its decision to dismiss with prejudice based
on evidence that relator had available to him since 2012, and
could have included in his earlier amendments.

Moreover, Relator fails even to satisfactorily establish that
discovery could enable him to cure the defects of his complaint,
beyond making conclusory statements, such as that he
"understands the Government to possess" "facts regarding
Defendants actual servicing practices" that would make amendment
"not be futile." Rel. Memo. at 11. These statements are
insufficient to explain how amendment could affect the Court's
conclusion that relator could not establish a basis to infer
scienter such that leave to amend would be warranted, even if
discovery was permissible. See Campo, 371 Fed. Appx. at 218
(holding plaintiffs' "conclusory" assertions that they could
plead scienter based on new testimony and evidence did not
provide adequate "explanation of what they would allege in an
amended complaint to save their claims").

3

12

For the foregoing reasons, defendants' motion for
reconsideration is denied. The Clerk is directed to close the
entry at docket number 182.

SO ORDERED.

Dated:

JE~~D.J.

New York, NY
August l!{_, 2018

13