Update: Judge Johnson dismisses lawsuit with prejudice.
A California company withdrew its False Claims Act lawsuit that accused Mississippi billionaires Thomas and James Duff of committing PPP fraud today in U.S. District Court.
Anoush Hakimi and Peter Shahriari formed Relator, LLC to act as a qui tam whistleblower under the False Claims Act. A qui tam plaintiff is one who files lawsuits on behalf of the federal government to reclaim misused government funds, sort of a privateering for lawyers.Relator, LLC sued Thomas Duff, James Duff, and their companies Duff Capital Investors, Southern Tire Mart, Pine Belt Motors, and Pine Belt CDJR in U.S. District Court in California on February 20, 2024.
The plaintiff filed a notice of voluntary dismissal (with prejudice) of the lawsuit. The notice states the government "declined to intervene." The federal government agreed to the dismissal of the lawsuit. The Court has not yet dismissed the lawsuit.
Synopsis of the Case
The lawsuit accused the Duff brothers of defrauding the U.S. government out of millions of dollars in PPP funds. The plaintiff charged the Duff companies had no need of such relief because their businesses did not suffer any losses during the pandemic. Thus, they allegedly submitted phony claims to obtain PPP funds. The federal government forgave the PPP loans.
The plaintiff argued the company and its affiliates had many more employees than the PPP's limit of 500 employees. The complaint claims STM had 1,300 employees and annual revenue of $600 million while Duff Capital Investors has over 10,000 employees.
The complaint alleges the Duff companies obtained three PPP loans of $803,048, $458,200, and $5.2 million.
Relator charged the defendants with violating the False Claims Act and False or Fraudulent Claims. The complaint concluded with some rather colorful language:
This is a glaring example of two wealthy billionaires taking advantage of the system. The Duff brothers and their companies looted the government.... The disparity and level of greed is shocking. The American people have a right to reconciliation.
The plaintiff asked for treble damages and a civil penalty between $12,537 and $25,076 for each violation.
The Duffs accused the Relator of using "inflammatory rhetoric" than getting its facts straight. Relator allegedly counted franchisees as company affiliates even though a federal statute specifically authorized PPP loans to franschisees. Duff franchisees stated in their PPP applications they were indeed franchisees. Some, such as Pine Belt Chevrolet and Pine Belt CDJR were franchises for car manufacturers:
The result of section 636(a)(36)(D)(iv)(II) was that an entity with a franchise identifier code could get a PPP loan even if a parent company had thousands of employees spread across subsidiaries. Beneficiaries of this new rule commonly included car-dealership franchisees by auto manufacturers and franchisees of restaurant or hotel chains.
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Relator, claim the Duffs, is merely a LLC owned by one attorney who gleans public records and the internet to find targets for his PPP lawsuits as he did in this case. Similar lawsuits have been dismissed as the attorney is merely trawling for lawsuits:
Courts have repeatedly barred Relator LLC suits on original-source grounds. In United States ex rel. Relator LLC v. Kellog, No. 23-cv-118-CAB-BLM, 2024 WL 4887531, at *3 (S.D. Cal. Nov. 25, 2024), the court found that the “allegations appear to be based entirely on public information. Relator does not cite any information in the FAC that materially adds to the public disclosures or shows that Relator had any independent knowledge of the alleged fraud,” and so Relator LLC could not “circumvent[] the public disclosure bar.” In Kootstra, 2024 WL 3666470, at *5, the court found that Relator LLC’s “allegations appear to be based entirely on public information. Relator does not cite — nor can the Court locate — any information in the Complaint that materially adds to the public disclosures or shows that Relator had any independent knowledge of the alleged fraud.”
The motion to dismiss states federal law requires the plaintiff have knowledge of violation independent of and prior to public disclosures. Since Relator had no such knowledge, the lawsuit must be dismissed.
The defendants successfully argued the case should be transferred to federal court in Mississippi since they had no connection to California. The Court agreed and sent the case to the Southern District of Mississippi.
The case was assigned to U.S. District Judge Kristi Johnson. Attorney Grafton Bragg represents Relator while attorney Matthew Miller represents the Duffs.
15 comments:
Sanctions would be appropriate.
What the heck. The U.S. dollar is not worth much more than Monopoly money. Shoot the moon.
They were just using the tactic of Jesse "Jackpot" Jackson.
Frivolous as hell fo sho
California go to hell.
Sound a lot like the attorney/s who goes after small businesses for technical violations of the ADA (Americans with Disability Act).
P attorney- internet scavenger decided he didn’t want the cheese after all.
"Declined to intervene" here is a term of art under the federal False Claims Act. Simply put, DOJ declined to take up the case and carry the water for Relator, LLC, so they dropped the case. Happens all the time: big splash around filing, government views the complaint as garbage, and the relator dismisses instead of litigating the case.
With AI you can now much more easily research whistleblower claims….the govt has intervened in a surprisingly low % of cases over the years and that probably accounts for the fact that if the govt does intervene - it’s over for the defendants. I’ve been through these and the reason the govt wins? They have all the evidence to get the win. Rarely do they lose.
Last thing MS needs is California coming in & attempting to stir up some false @#"% here.
In the words of one fine councilman "Mind yo bidness" California.
Back to getting prepared for the Governor's race.
Just one person's opinion, but this litigation standing on its own should not figure into opinions about the Duffs (or the would-be Plaintiffs), good or bad. If you do not already understand why, it is unlikely that a reply here will explain all facets of it for you. I don't mean that with any snark - it's just a very complicated issue.
Quote: “The plaintiff charged the Duff companies had no need of such relief because their businesses did not suffer any losses during the pandemic.”
“Had no need?’ What the ____ did “need” have to do with the PPP scam?
Did utility contractors not missing one single dime of income, but still received the better part of 8 figures, “have a need?”
Did private schools collecting 7 figures of PPP while parents kept paying 100% tuition, have a need?
The list could on and on and on and on and on. If every American company and every American receiving Covid stimulus that “had no need” were held accountable, the country would collapse. As an American you were either in on this scam, or you got scammed.
The 2008 bailouts were shocking, but pale in comparison to the Covid stimulus scams that poured money into the bank accounts of companies and businesses that “had no need.” And since so many on all sides benefited from the stimulus scams, CRICKETS. Crickets from the pretend journalism profession. Crickets from the pretend intellectuals so-called educating our children at these kingdoms posing as teaching universities. Crickets from the self-serving politicians. Nobody has the guts to expose the unimaginable wealth handed over to people that “had no need.”
There was a time, not that long ago, when our nation’s electorate had enough God given common sense to understand that actions have reactions. But not today. They just look at each other with literally no clue at all why the inflation (including starter homes in our area priced at 50% to even 100% more than pre-covid) wasn’t “transitory” after all.
"Privateering," I like that. Oh, but why does the term "qui tam plaintiff" have to be reserved solely for government lawsuit-ery?
Should have never been filed in the first place. I agree with the first comment, sanctions for filing frivolous lawsuit.
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