United States ex rel. Rigsby v. State Farm Fire & Cas. Co.

• Decision Date: 26 March 2021
• Docket Number: Civil No. 1:06cv433-HSO-JCG
• Parties: UNITED STATES OF AMERICA ex rel. CORI RIGSBY and KERRI RIGSBY RELATORS/COUNTER-DEFENDANTS v. STATE FARM FIRE AND CASUALTY COMPANY DEFENDANT/COUNTER-CLAIMANT
• Court: U.S. District Court — Southern District of Mississippi

UNITED STATES OF AMERICA ex rel. CORI RIGSBYand KERRI RIGSBY RELATORS/COUNTER-DEFENDANTS v. STATE FARM FIRE AND CASUALTY COMPANY DEFENDANT/COUNTER-CLAIMANT

Civil No. 1:06cv433-HSO-JCG

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI SOUTHERN DIVISION

March 26, 2021

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT STATE FARM FIRE AND CASUALTY COMPANY'S MOTION [1634] TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION AND DENYING DEFENDANT'S MOTION [1632] TO DISMISS RELATORS CORI RIGSBY AND KERRI RIGSBY'S SECOND AMENDED COMPLAINT [1623]

BEFORE THE COURT are Defendant State Farm Fire and Casualty Company's Motion [1634] to Dismiss for Lack of Subject-Matter Jurisdiction and Motion [1632] to Dismiss Relators Cori Rigsby and Kerri Rigsby's Second Amended Complaint [1623], which are fully briefed.

After due consideration of the record, the Motions, the related pleadings, and relevant legal authority, the Court is of the opinion that State Farm's Motion [1634] to Dismiss for Lack of Subject-Matter Jurisdiction should be granted in part and denied in part, and that its Motion [1632] to Dismiss Relators' Second Amended Complaint [1623] should be denied. Relators' claim in Count One of the Second Amended Complaint [1623] that Defendant State Farm Fire and Casualty Company submitted an express false certification by sending bills or statements of withdrawal seeking payment for adjusting fees for conducting line-by-line estimates when it had instead used an expedited procedure will be dismissed for lack of jurisdiction under 31 U.S.C. § 3730(e)(4) (2006). Relators' remaining claims will proceed.

I. BACKGROUND

A. Relevant procedural history

Relators Cori Rigsby and Kerri Rigsby ("Relators") brought this qui tam suit under the False Claims Act, 31 U.S.C. § 3729, et al. ("FCA"), alleging that following Hurricane Katrina in 2005, Defendant State Farm Fire and Casualty Company ("Defendant" or "State Farm") submitted false claims to the United States of America ("United States" or "Government") for payments for flood damage under Standard Flood Insurance Policies ("SFIP") which insured homes on the Mississippi Gulf Coast. A jury trial as to the one property (the "McIntosh property") specifically identified in Relators' Amended Complaint [16] was held in 2013.

The jury found in favor of Relators on their two claims that went to trial, namely that in connection with the McIntosh property State Farm had submitted a false claim in violation of 31 U.S.C. § 3729(a)(1) (1994) (Count I of the Amended Complaint [16]), and that it had submitted a false record material to a false claim in violation of 31 U.S.C. § 3729(a)(1)(B) (2009) (Count II of the Amended Complaint [16]).¹ After the Court resolved the parties' post-trial Motions [1101], [1102], [1104],it entered a Final Judgment [1129] pursuant to Federal Rule of Civil Procedure 54(b),² and Relators and State Farm both appealed. The United States Court of Appeals for the Fifth Circuit affirmed in part, reversed in part, and remanded the case. United States ex rel. Rigsby v. State Farm Fire & Cas. Co., 794 F.3d 457, 480 (5th Cir. 2015), aff'd, 137 S. Ct. 436 (2016). The Fifth Circuit reversed that part of the Court's decision that denied Relators' request for additional discovery but affirmed in all other respects. Id.

On remand, the Court indicated that, as the Fifth Circuit had suggested, the initial scope of discovery for Relators' FCA claims would be limited to the Hurricane Katrina insurance claims identified on a list of certain properties (the "List") for which State Farm had issued both a homeowner's policy covering wind damage and an SFIP covering flood damage, as described in the Court's Order [344] of August 10, 2009. Id.; see also Order [1323] at 3. On June 22, 2017, the Magistrate Judge entered an Order [1324] requiring State Farm to disclose to Relators its wind and flood claim files for the properties identified on the List, see Order [1324] at 1, and that production has occurred.

B. Relators' Second Amended Complaint [1623]

With the Court's permission, on April 30, 2020, Relators filed a Second Amended Complaint [1623] against State Farm. This pleading advances two FCA claims: (1) that State Farm violated 31 U.S.C. § 3279(a)(1) (1994) by knowinglypresenting false claims for payment (Count One); and (2) that State Farm violated 31 U.S.C. § 3729(a)(1)(B) (2009) by knowingly making false records and statements material to false or fraudulent claims for payment (Count Two). See Order [1611]; 2d Am. Compl. [1623] at 25-30.

The Second Amended Complaint [1623] refers to Directive W-5054, which was issued by the Federal Emergency Management Agency ("FEMA") following Hurricane Katrina. See, e.g., id. at 10, 25; see also Ex. "4" [1634-4] (W-5054). According to Relators, FEMA had previously required insurers to perform line-by-line estimates when adjusting flood claims, but W-5054 permitted them to utilize an expedited procedure, such as State Farm's XacTotal software, to pay claims when a home: "(1) had standing water in it for an extended period of time (more than five days); or (2) was washed off its foundation by flood water." 2d Am. Compl. [1623] at 10 (quotations omitted). Any other homes were placed in a catchall "Category 3," for which FEMA required insurers to use normal claim procedures. See id. at 11.

Relators allege that, for Category 3 homes, State Farm was required to employ the line-by-line estimate procedure that it had always used for estimating hurricane damage. See id. Instead of complying with W-5054's line-by-line requirement, State Farm submitted flood claims on Category 3 homes for payment using its expedited procedure, XacTotal, without performing the required line-by-line estimate. See id. at 16. Relators assert that, in order to conceal its non-compliance, State Farm generated so-called "long-form" XacTotal reports that closely resembled a line-by-line estimate. See id. at 17.

According to the Second Amended Complaint, W-5054 also set forth a lower fee schedule for the adjustment of flood claims with respect to homes in Categories 1 and 2, because the expedited procedures for adjusting claims in those categories required substantially less time and effort. See id. at 11. However, the existing fee schedule remained in place for the adjustment of Category 3 homes. See id. at 12. Relators claim that, on numerous occasions, State Farm billed for a line-by-line estimate for adjusting Category 1 and 2 homes, even though it had not performed line-by-line estimates for homes in Category 1 or 2. See id. at 22-23.

Based upon these factual allegations, Count One of the Second Amended Complaint [1623] charges that State Farm violated 31 U.S.C. § 3279(a)(1) (1994). See 2d Am. Compl. [1623] at 25-28. Specifically, Relators allege that State Farm:

(1) submitted an implied false certification for at least every property on the List when it represented to FEMA that each property incurred flood damage equal to or exceeding the limits of the applicable SFIP because State Farm was required to perform line-by-line estimates for each, but did not;

(2) submitted an express false certification for at least every property on the List by placing the long-form XacTotal report in the flood file when it did not perform a line-by-line estimate;

(3) submitted an express false certification by sending bills or statements of withdrawal seeking payment for conducting line-by-line estimates under FEMA's normal fee schedule when in fact State Farm had usedan expedited procedure; and

(4) submitted false or fraudulent claims by mischaracterizing wind damage, which should have been covered by State Farm's homeowners' policies, as flood damage, which was covered by the SFIP, in order to foist losses caused by wind upon the federal government.

See id. Count Two alleges that State Farm violated 31 U.S.C. § 3729(a)(1)(B) (2009) by submitting false records and statements material to false or fraudulent claims. See 2d Am. Compl. [1623] at 28-30.

State Farm has now filed two Motions [1632], [1634] to Dismiss, one of which implicates the Court's jurisdiction. The Court will consider the jurisdictional Motion [1634] first.

II. DISCUSSION

A. State Farm's Motion [1634] to Dismiss for Lack of Subject-Matter Jurisdiction

1. The parties' arguments

State Farm argues that the Court lacks jurisdiction over the first three "false certification" claims in Count One based upon the FCA's public-disclosure bar, and seeks dismissal of these claims under Federal Rule of Civil Procedure 12(b)(1).³ SeeMot. [1634] at 1 (citing Fed. R. Civ. P. 12(b)(1)); Mem. [1635] at 1 (citing 31 U.S.C. § 3730(e)(4)(A) (2006)). According State Farm, Relators' new pleading "emphasizes . . . two entirely new 'false certification' theories of liability that amount to, at most, purported regulatory non-compliance independent of any claim or finding that the underlying property damage was caused by wind instead of flood." Mem. [1635] at 2.

State Farm maintains that Relators' new express and implied false certification claims are based upon its alleged non-compliance with W-5054, specifically by: (1) failing to comply with W-5054 "guidance" to use normal claims handling procedures for certain types of Hurricane Katrina flood claims by improperly using the expedited XacTotal adjusting program for certain properties when not permitted to do so; and (2) failing to comply with W-5054 by charging adjusting fees based on a percentage of the flood claim amount, rather than charging the lower fee that applied to expedited adjustments. Id. at 2-3 (footnote omitted). State Farm argues that, although Relators "lump[ ] the new claims into the same 'Count One' cause of action," their "artful pleading attempts cannot prevent application of the public disclosure bar," as these new claims differ from Relators' previous allegations. Id. at 3. State Farm contends that these new allegations were publicly disclosed and...