U.S. ex rel. Branch Consultants v. Allstate Ins.

• Decision Date: 18 February 2009
• Docket Number: No. 07-31191.,07-31191.
• Parties: UNITED STATES of America, ex rel. BRANCH CONSULTANTS, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY; State Farm Fire and Casualty Company; Liberty Mutual Fire Insurance Company; Fidelity National Insurance Company; Fidelity National Property and Casualty Insurance Company; American National Property & Casualty Company; Pilot Catastrophe Services, Inc.; Crawford & Company, Allied Claims; NCA Group, Inc.; Simsol Insurance Services, Inc.; Unidentified Parties; American Reliable Insurance Company; Colonial Claims Corp.; Standard Fire Insurance Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

560 F.3d 371

UNITED STATES of America, ex rel. BRANCH CONSULTANTS, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY; State Farm Fire and Casualty Company; Liberty Mutual Fire Insurance Company; Fidelity National Insurance Company; Fidelity National Property and Casualty Insurance Company; American National Property & Casualty Company; Pilot Catastrophe Services, Inc.; Crawford & Company, Allied Claims; NCA Group, Inc.; Simsol Insurance Services, Inc.; Unidentified Parties; American Reliable Insurance Company; Colonial Claims Corp.; Standard Fire Insurance Company, Defendants-Appellees.

No. 07-31191.

United States Court of Appeals, Fifth Circuit.

February 18, 2009.

Allan L. Kanner (argued), Cynthia Green St. Amant, Kanner & Whiteley, LLC, New Orleans, LA, for Plaintiff-Appellant.

Brad D. Brian, Gregory John Weingart, Munger, Tolles & Olson, Los Angeles, CA, Judy Y. Barrasso, Stephen H. Kupperman, Barrassso, Usdin, Kupperman, Freeman & Sarver, New Orleans, LA, Genevieve Cox, Munger, Tolles & Olson, San Francisco, CA, Richard L. Fenton, Steven M. Levy, Sonnenschein, Nath & Rosenthal, Chicago, IL, for Allstate Ins. Co.

Phillip A. Wittmann (argued), Daria Burgess Diaz, Stone, Pigman, Walther & Wittmann, New Orleans, LA, for State Farm Fire & Cas. Co.

Russell Yager, Vinson & Elkins, Dallas, TX, for Liberty Mut. Fire Ins. Co.

Gerald Joseph Nielsen, William Truman Treas, Nielsen Law Firm, Metairie, LA, for Fidelity Nat. Ins. Co. and Fidelity Nat. Prop. & Cas. Ins. Co.

Jay M. Lonero, Christopher Raymond Pennison, Larzelere, Picou, Wells, Simpson, Lonero, Metairie, LA, for Am. Nat. Prop. & Cas. Co.

Robert A. Kutcher, Chopin, Wagar, Richard & Kutcher, Metairie, LA, James H. Crosby, Crosby Saad, LLC, Mobile, AL, Timothy J. Hatch, Gibson, Dunn & Crutcher, LLP, Washington, DC, for Pilot Catastrophe Services, Inc.

Richard B. Eason, II, Raymond Peter Ward, Adams & Reese, New Orleans, LA, for Crawford & Co.

William Glenn Burns, Dominic J. Ovella, Darren A. Patin, Richard T. Simmons, Jr., Hailey, McNamara, Hall, Larmann & Papale, Metairie, LA, for NCA Group, Inc.

Andre Jude Lagarde, McCranie, Sistrunk, Anzelmo, Hardy, Maxwell & McDaniel, Metairie, LA, for Simsol Ins. Services, Inc.

Gordon Paul Serou, Jr., Law Offices of Gordon P. Serou, Jr., New Orleans, LA, for Am. Reliable Ins. Co.

Peter S. Koeppel, Michael Louis Martin, Best Koeppel, New Orleans, LA, for Colonial Claims Corp.

Harry A. Rosenberg, Phelps Dunbar, New Orleans, LA, Bryce L. Friedman (argued), Simpson, Thacher & Bartlett, LLP, New York City, Deborah L. Stein, Simpson, Thacher & Bartlett, LLP, Los Angeles, CA, for Standard Fire Ins. Co.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before BENAVIDES, SOUTHWICK and HAYNES, Circuit Judges.

HAYNES, Circuit Judge:

Relator Branch Consultants appeals the district court's dismissal of its False Claims Act (FCA) complaint under the FCA's first-to-file jurisdictional bar. See 31 U.S.C. § 3730(b)(5) (1994). The district court found the bar applicable because Branch's complaint alleges "the same general conduct and theory" of Katrina-related insurance fraud as the previously-filed FCA action in United States ex rel. Rigsby v. State Farm Insurance Co. (Rigsby),¹ despite the fact that Branch focuses on different details, geographic locations, and other insurer defendants.

We agree with the district court that Branch cannot avoid § 3730(b)(5)'s jurisdictional bar by merely adding details and geographic locations to the material allegations contained in Rigsby. Thus, we affirm the district court's dismissal as to Defendant State Farm Fire and Casualty Company and Allstate Insurance Company —the only Branch Defendants that Rigsby names. But, under the facts of this case, we cannot hold that "suit as to one is suit as to all." Thus, we disagree with the district court that Rigsby's State Farm and Allstate allegations and generic naming of two other insurers, by itself, triggers the first-to-file bar as to Branch's specific allegations against other insurers that Rigsby did not name. Accordingly, we affirm the district court's dismissal as to State Farm and Allstate and reverse the dismissal as to all other Defendants. Because factual findings may be appropriate with respect to the public disclosure ground urged by the remaining Defendants in the alternative, we remand the cause so the district court can consider that ground in the first instance. We also remand so the district court can consider in the first instance the remaining Defendants' argument that Branch's pleading is deficient under FED.R.CIV.P. 9(b).

I. FACTS

Relator Branch brought this action against eight insurance companies and six adjusting firms on behalf of the United States under the qui tam provisions of the FCA.² The insurer Defendants are participants in FEMA's Write-Your-Own flood insurance program (the WYO program). This program allows private insurance companies to write and service, in their own names, the federally backed Standard Flood Insurance Policy (SFIP). Participants in the WYO program are responsible for determining the extent of an insured's flood damage, which in turn determines the amount of benefit ultimately paid out by the Federal Treasury. See Wright v. Allstate Ins. Co., 415 F.3d 384, 386 (5th Cir.2005) (noting that payments on SFIP claims are a direct charge on the United States Treasury). While the program has rules applicable to all insurers in the program, the program does not involve coordinated efforts by or joint cooperation among the participating insurers.

To ensure accurate estimates of flood damage, WYO insurers are generally required to comply with certain conditions, such as submitting a proof of loss. Following Hurricane Katrina, however, FEMA was forced to waive certain of these requirements in order to expedite payments to insureds. According to Branch, this created a perverse incentive for WYO insurers to understate losses due to wind (which an insurer would be required to pay under the insured's homeowner's policy) and overstate losses due to flood, thereby shifting the loss from the WYO insurers to the federal government.

A. The Rigsby Complaint

On April 2, 2006, prior to the filing of Branch, Cori and Kerri Rigsby, employees of a company that provides disaster claims management services for several WYO insurers, filed an FCA claim alleging that four insurance companies defrauded the federal government by mischaracterizing wind damage as flood damage in the wake of Hurricane Katrina.³ Specifically, the Rigsbys alleged that, while adjusting claims for certain WYO insurers, they learned that the insurers "made a corporate decision to misdirect and misallocate claims from those of hurricane coverage to flood claims" payable by the federal government. While the Rigsbys lodged these general allegations of wind/water fraud against four WYO insurers,⁴ the only specific instances of fraud alleged in their complaint concerned defendant State Farm. The Rigsbys alleged that "State Farm directed its employee adjusters and independent contractor adjusters to show flood damage whenever and wherever there was any amount of water damage, and to adjust the claim as flood insurance rather than hurricane insurance even though the primary mechanism for damage was wind, not flood waters." "[A]djusters were told that if they initially analyzed a claim and found that the insured had less damage under flood coverage than policy limits allowed, the adjuster was told to go back through the claim a second time to ensure that the flood claim `hit limits.'" The Rigsby's complaint alleged two specific instances where State Farm put this fraudulent policy into practice, both dealing with Katrina damage to homes in Mississippi, and also alleged that they provided adjusting services for Allstate.

B. Branch's Complaint

With Rigsby under seal, Branch filed this FCA action on August 2, 2006 and amended its complaint on June 22, 2007.⁵ Like Rigsby, Branch alleges that the WYO insurer Defendants "defrauded NFIP by misattributing wind damage and other non-flood losses to the flood policies subsidized or underwritten by the Government rather than correctly attributing such losses to causes that are covered by homeowners policies largely underwritten by themselves." But unlike Rigsby, Branch goes beyond these general allegations of wind/water fraud by detailing fifty-seven specific instances where Defendants allegedly overestimated flood damage on Louisiana properties. Branch contends that it discovered these specific instances of fraud when various insureds hired Branch to re-examine the adjustments conducted by Defendants. During the course of this employment, Branch alleges it discovered:

a. numerous examples of minimal if any flood damage and obvious wind damage, with a WYO adjustment of 100% flood damage,

b. buildings with substantial roof and other damage obviously caused by wind, and a high-water mark only inches off the floor, with all damage nonetheless attributed only to flood, and

c. buildings with a substantial amount of flood damage but even more wind damage adjusted at or near flood policy limits with a relatively small portion of the loss attributed to wind.

For each of the fifty-seven claimed instances of fraud, Branch lists the homeowner's address, his or her insurance company and policy number, the amount of flood damage paid by the federal government, and a dollar amount and explanation of the "true" flood damage to the properties. While Branch, like Rigsby, names State Farm and Allstate, it also names a host of WYO insurers that the Rigsbys did not sue.⁶ Branch lodges specific factual allegations against each of the WYO insurers it sued.

C. District Court Proceedings

Defendants filed a motion to dismiss Branch's complaint, arguing that the district court lacked subject matter jurisdiction because (a) Branch's allegations were based on publicly disclosed information,...