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

Filing 70

OPINION AND ORDER re: 64 MOTION for Reconsideration re; 61 Clerk's Judgment, 60 Memorandum & Opinion filed by Tamika Miller. The Relator's July 20, 2022 motion for reconsideration is denied. (Signed by Judge Denise L. Cote on 8/1/2022) (vfr)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
UNITED STATES ex rel. TAMIKA MILLER
:
and TAMIKA MILLER,
:
:
Plaintiffs,
:
:
-v:
CITIGROUP INC., CITIBANK, N.A.,
:
CITIBANK INC., and DOE CORPORATIONS 1– :
10,
:
:
Defendants.
:
:
-------------------------------------- X
APPEARANCES:
For the United States:
Rebecca Sol Tinio
Jeffrey Kenneth Powell
U.S. Attorney’s Office, SDNY
86 Chambers Street
3rd Floor
New York, NY 10007
For Tamika Miller:
Robert John Valli, Jr.
Sara Wyn Kane
Valli Kane & Vagnini, LLP
600 Old Country Rd.
Ste. 519
Garden City, NY 11530
Cleveland Lawrence, III
Ezra Bronstein
Richard Condit
Mehri & Skalet, PLLC
2000 K Street, NW
Ste 325
Washington, DC 20006
For defendants:
Debra Bogo-Ernst
Hans J. Germann

19cv10970 (DLC)
OPINION AND ORDER

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Lucia Nale
Mayer Brown LLP (Chicago)
71 South Wacker Drive
Chicago, IL 60606
Jordan Michael Smith
Akerman LLP
1251 Avenue of the Americas
Ste 37th Floor
New York, NY 10022
DENISE COTE, District Judge:
Tamika Miller (the “Relator”) has moved for
reconsideration of the Opinion of June 22, 2022 granting the
defendants’ motion to dismiss without leave to amend the
complaint and denying the Relator’s motion for a relator’s
share.

For the following reasons, the Relator’s motion for

reconsideration is denied.
Background
This Court assumes familiarity with its June 22 Opinion and
summarizes only the facts necessary to decide this motion.

See

United States ex rel. Miller v. Citigroup Inc., 19CV10970, 2022
WL 2237619 (S.D.N.Y. June 22, 2022).

As alleged in the

Relator’s complaint, the Relator was employed by the defendants
in 2014 to assist in the oversight of their third-party vendors’
compliance with applicable laws, regulations, and consent
orders.

In that position, the Relator observed what she

believes are numerous violations of applicable law, as well as
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violations of two consent orders that the defendants entered in
2015 with the Office of the Comptroller of Currency (“OCC”) and
the Consumer Financial Protection Bureau (“CFPB”).

The Relator

alleges that the defendants had an obligation to accurately
report their compliance to the Government, but that they
deliberately hid compliance failures and falsified reports in
order to avoid disclosing violations.
On November 27, 2019, the Relator filed this qui tam
action, bringing a claim against the defendants for improperly
avoiding payment obligations (a “reverse false claim”) in
violation of the False Claims Act (“FCA”), among other causes of
action.

In June of 2020, the Government declined to intervene

in the action.
On January 31, 2022, the Relator moved for a share of a
$400 million fine the OCC had obtained against the defendants in
a 2020 consent order, arguing that her disclosure of the
defendants’ violations formed the basis for the consent order.
On March 25, while that motion was being briefed, the defendants
moved to dismiss the complaint for failure to state a claim.
The Relator consented to dismissal of the claims against
Citigroup, Inc. and Citibank, Inc., and voluntarily dismissed

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each claim asserted in the complaint except for the reverse
false claim.
On June 22, this Court granted the defendants’ motion to
dismiss, denied the Relator’s motion for a share of the OCC’s
$400 million award, and denied the Relator’s request for leave
to amend her complaint.

Miller, 2022 WL 2237619, at *5.

The

Relator moved for reconsideration of the June 22 Opinion on July
20.

The Relator included with her motion for reconsideration

proposed amendments to her complaint.
Discussion
The standard for granting a motion for reconsideration is
“strict.”

Cho v. Blackberry Ltd., 991 F.3d 155, 170 (2d Cir.

2021) (citation omitted).

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 Surv., Inc. v.

Tonga Partners, L.P., 684 F.3d 36, 52 (2d Cir. 2012) (citation
omitted).

“A party may . . . obtain relief only when the party

identifies an intervening change of controlling law, the
availability of new evidence, or the need to correct a clear
error or prevent manifest injustice.”

Cho, 991 F.3d at 170.

The decision to grant or deny the motion for reconsideration
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rests within “the sound discretion of the district court.”
Aczel v. Labonia, 584 F.3d 52, 61 (2d Cir. 2009) (citation
omitted).
The motion for reconsideration must be denied.

It does not

identify any issue overlooked by the Court or any change in
controlling law.

Instead, it repeats at greater length

arguments already considered and rejected.
I.

Obligation to Pay
To state a claim under the reverse false claims provision,

a relator must adequately allege the existence of an
“obligation” to pay the Government that the defendant “knowingly
conceals or knowingly and improperly avoids or decreases.”
U.S.C. § 3729(a)(1)(G).

31

An “obligation” refers to “an

established duty, whether or not fixed,” and may arise from a
contractual relationship or statutory or regulatory obligation.
Id. § 3729(b)(3).

“Where a complaint makes no mention of any

financial obligation that the defendants owed to the government,
and does not specifically reference any false records or
statements used to decrease such an obligation, a court should
dismiss the reverse false claim.”

United States ex rel. Foreman

v. AECOM, 19 F.4th 85, 119 (2d Cir. 2021) (citation omitted).

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The Opinion of June 22 found that the Relator had not
plausibly alleged conduct giving rise to an “obligation” to pay
within the meaning of the FCA.
4.

Miller, 2022 WL 2237619, at *3–

The Relator alleged that the defendants had violated

applicable laws, regulations, and consent orders, and then
concealed those violations from the Government.

As several

courts of appeals have held, however, unassessed liability for a
violation of regulation or a consent order does not create an
“established duty” to pay.

See id. at *3 (collecting cases).

Accordingly, the Relator had not plausibly alleged a reverse
false claim under the FCA.

And because she had not stated a

valid claim under the FCA, she was not entitled to a share of
any alternate remedy.

See L-3 Commc’ns EOTech, Inc., 921 F.3d

11, 29–30 (2d Cir. 2019) (relator had no right to an alternate
remedy for a qui tam claim brought in a complaint that had been
voluntarily dismissed); see also United States ex rel. Bledsoe
v. Cmty. Health Sys., Inc., 501 F.3d 493, 522 (6th Cir. 2007)
(relator must allege a valid qui tam claim to be entitled to a
share of an alternate remedy).
The Relator argues that she plausibly alleged an obligation
to pay because applicable federal statutes impose mandatory
penalties for violations.

This argument was raised in
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opposition to the defendants’ motion to dismiss, however, and it
need not be reconsidered.
at 52.

See Analytical Surv., Inc., 684 F.3d

As the June 22 Opinion explained, a violation of a law

does not automatically give rise to an “obligation” within the
meaning of the FCA, even if that violation comes with a monetary
penalty.

Miller, 2022 WL 2237619, at *3.

An “obligation” to

pay does not arise “as soon as the conduct that is the basis for
the fine has occurred” -- it attaches only when the “duty to pay
that fine has been formally established.”

See United States ex

rel. Simoneaux v. E.I. duPont de Nemours & Co., 843 F.3d 1033,
1038 (5th Cir. 2016) (quoting legislative history).
The Relator argues that her case is distinguishable from
decisions finding no obligation to pay because the defendants in
this case had a duty to disclose their compliance with
applicable laws, regulations, and consent orders.

But breach of

a duty to disclose a violation does not give rise to an
“obligation” to pay any more than the violation itself does.

A

person who complies with the duty to disclose is left in the
same position as any other lawbreaker: the Government may choose
to assess a penalty, or it may not.

7

An obligation to pay arises

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only if the Government takes the former route.

See Simoneaux at

1039. 1
II.

Heightened Pleading Standard
The Opinion of June 22 also dismissed the Relator’s claim

because it did not satisfy Rule 9(b)’s heightened pleading
standard.

A relator alleging a claim subject to this heightened

pleading standard must “state with particularity the
circumstances constituting fraud.”

Fed. R. Civ. P. 9(b).

A

claim under the FCA must therefore ordinarily “(1) specify the
statements that the plaintiff contends were fraudulent, (2)
identify the speaker, (3) state where and when the statements
were made, and (4) explain why the statements were fraudulent.”
United States ex rel. Chorches v. Am. Med. Response, Inc., 865
F.3d 71, 81 (2d Cir. 2017) (citation omitted).
The Relator argues that this standard is applicable only to
conventional false claims under the FCA, and not to reverse

The Relator cites United States ex rel. Customs Fraud
Investigations, LLC v. Victaulic Co., 839 F.3d 242 (3d Cir.
2016), for the proposition that noncompliance with a duty to
disclose information giving rise to liability creates an
“obligation” under the FCA. The Relator did not cite to this
decision in briefing on either the motion to dismiss or the
motion for a relator’s share, and therefore it need not be
considered here. Regardless, the case is distinguishable
because it dealt with an obligation made immediately payable by
statute. See id. at 246, 254 (quoting 19 U.S.C. § 1304(i)).
1

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false claims, which may impose liability on a defendant even
when the defendant does not make any affirmative
misrepresentation.

The Relator raised this argument in

opposition to the motion dismiss, however, and it remains
unavailing.

The Second Circuit has held that “Rule 9(b)’s

heightened pleading standard applies to reverse false claims.”
Foreman, 19 F.4th at 119.

Accordingly, the Relator was required

to allege “with particularity” the circumstances giving rise to
the reverse false claim.

Fed. R. Civ. P. 9(b).

Moreover, although a reverse false claim need not involve
any affirmative misrepresentation, the Relator alleged that the
defendants made such misrepresentations by falsifying audit
reports.

To the extent that the Relator’s claim depends on that

misrepresentation, it must be alleged with particularity.
Foreman, 19 F.4th at 119.

See

Nor may the Relator avoid Rule 9(b)’s

heightened pleading standard by basing liability on a failure to
disclose violations.

Rule 9(b) applies to claims involving

fraudulent omissions just as it applies to claims involving
fraudulent misstatements.

See Employees’ Ret. Sys. of Gov’t of

V.I. v. Blanford, 794 F.3d 297, 305 (2d Cir. 2015).
The Relator’s complaint did not describe or identify “any
specific false record or statement that [the defendants] made to
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avoid” any obligation.

Foreman, 19 F.4th at 119.

Nor did it

discuss any specific incident in which the defendants violated
an applicable law, regulation, or consent order and then failed
to disclose the violation.

Accordingly, the complaint was

appropriately dismissed under Rule 9(b).
III. Evidence Outside the Pleadings
The Relator argues that the June 22 Opinion improperly
relied on facts outside of the complaint when granting the
defendants’ motion to dismiss.

When considering a motion to

dismiss under Fed. R. Civ. P. 12(b)(6), a court must “accept as
true the factual allegations in the complaint and draw all
inferences in the plaintiff’s favor.”
(citation omitted).

Foreman, 19 F.4th at 104

Accordingly, a court may not normally rely

on evidence not alleged, attached, or incorporated into the
pleadings when deciding a motion to dismiss.

Id. at 107.

The June 22 Opinion did not rely on evidence outside of the
pleadings in dismissing the Relator’s complaint.

The Relator’s

complaint was dismissed because it failed to allege any
fraudulent misstatements or omissions with the requisite
particularity, and because its allegations did not give rise to
an obligation to pay within the meaning of the FCA.
2022 WL 2237619, at *3–4.

Miller,

In its discussion of the case’s
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factual background, the Opinion mentioned matters outside of the
pleadings because the Opinion considered not only the
defendants’ motion to dismiss but also the Relator’s motion for
a share of the OCC’s $400 million fine.

See id. at *1–2.

The

motion for a relator’s share depended on facts outside the
pleadings -- indeed, the OCC had not issued the fine until after
the complaint was filed.

Id.

But these facts formed no part of

the Opinion’s analysis of the motion to dismiss, which relied
only upon the allegations pled in the Relator’s complaint.
The Relator also argues that the June 22 Opinion improperly
determined the basis for the OCC’s 2020 consent order without
allowing for sufficient discovery on the issue.

The Relator,

however, chose to move for a share of the OCC’s fine before she
had obtained discovery.

Moreover, the content of the consent

order would have been subject to judicial notice even if it had
not been submitted with the parties’ briefs.

See Niagara Mohawk

Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112, 124 n.12 (2d
Cir. 2010).

As the June 22 Opinion explained, however, the

Relator’s request for a share of the award “must be denied
regardless . . . because she has failed to state a claim.”
Miller, 2022 WL 2237619, at *2.

Accordingly, the complaint was

correctly dismissed, and the Relator’s request for a relator’s
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share correctly denied, regardless of the basis for the OCC’s
fine.

The deficiencies in the Relator’s complaint provided

sufficient justification for the June 22 Opinion’s disposition
of the motions before the Court.
IV.

Leave to Amend
Finally, the Relator argues that the June 22 Opinion

improperly denied her leave to amend the complaint.

The Relator

cites Loreley Financing (Jersey) No. 3. Ltd. v. Wells Fargo
Securities, LLC, 797 F.3d 160, 189–91 (2d Cir. 2015), for the
proposition that a plaintiff must always be given at least one
opportunity to amend a complaint after there has been a
definitive ruling on a motion to dismiss.

As the June 22

Opinion explained, however, Loreley Financing does not announce
such a rule.

In that decision, the Second Circuit held that

plaintiffs do not “forfeit” any opportunity to amend their
complaint when they decline to amend it at a pre-motion
conference.

Id. at 190.

Here, the plaintiff had the

opportunity to review the defendants’ motion to dismiss when she
declined to amend her complaint.

In any event, the decision in

Loreley Financing “le[ft] unaltered the grounds on which denial
of leave to amend has long been held proper, such as undue
delay, bad faith, dilatory motive, and futility.”
12

Id.

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