Heron v. Nationstar Mortgage

• Court: Court of Appeals for the Tenth Circuit
• Decided: August 13, 2024
• Docket: 21-1362
• Status: Unpublished

Opinion

Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 1

FILED United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS August 13, 2024 FOR THE TENTH CIRCUIT _________________________________ Christopher M. Wolpert Clerk of Court UNITED STATES OF AMERICA, ex rel. JAMES HERON,

Plaintiff – Appellant, No. 21-1362 v. (D.C. No. 1:17-CV-03084-PAB-STV) (D. Colo.) NATIONSTAR MORTGAGE, LLC,

Defendant – Appellee. _________________________________

ORDER AND JUDGMENT _________________________________

Before BACHARACH, EID, and ROSSMAN, Circuit Judges.

_________________________________

After James Heron lost his home through foreclosure, he sued

Nationstar Mortgage LLC, Aurora Loan Services, LLC, Aurora Bank FSB,

and Aurora Commercial Corporation in federal district court in Colorado

under the False Claims Act, 31 U.S.C. § 3729 (FCA or Act).1 The FCA

 This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.

1 Mr. Heron originally named several other defendants including individuals and law firms—all were dismissed without prejudice on October Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 2

permits individuals to sue on behalf of the United States—known as “qui

tam” actions—alleging a third party defrauded the government by

submitting fraudulent claims for payment. But the FCA’s public disclosure

bar requires federal courts to dismiss qui tam actions where the complaint’s

allegations closely match information publicly disclosed within the meaning

of the statute unless the plaintiff is “an original source of the information.”

31 U.S.C. § 3730(e)(4)(A). Mr. Heron alleged Nationstar and Aurora, while

receiving federal funds, engaged in a scheme to submit fraudulent

promissory notes in foreclosure proceedings. Defendants moved to dismiss

under Federal Rule of Civil Procedure 12(b)(6), invoking the public

disclosure bar. The district court granted the motion, and Mr. Heron now

appeals. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

I2

We first set out the underlying facts and procedural history. We then

describe the legal standards that guide our review and provide some

background on the False Claims Act. Applying those principles, we then

analyze Mr. Heron’s appellate challenges.

10, 2019. App. I at 16. Aurora was dismissed with prejudice on July 6, 2020. App. I at 17. Nationstar is the only remaining defendant.

2 We take the facts recited here from the well-pleaded allegations in

Mr. Heron’s Second Amended Complaint.

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A

In fall 2008, Congress passed the Emergency Economic Stabilization

Act (EESA)3 to steady housing and credit markets and to assist troubled

homeowners in the midst of the U.S. financial crisis. The EESA authorized

the U.S. Department of the Treasury to establish the Troubled Asset Relief

Program (TARP), which funded programs intended to keep borrowers in

their homes. The Home Affordable Modification Program (HAMP) provided

mortgage servicers with incentive payments—known as TARP funds—to

encourage servicers to permit delinquent borrowers to modify loan terms.

Nationstar and Aurora were two of the country’s largest mortgage

servicers. Nationstar purchased billions of dollars of loan servicing

packages from other entities, including Aurora. On May 28, 2009,

Nationstar contracted with Fannie Mae, a financial agent for the United

States, to participate in HAMP by executing a Commitment to Purchase

Financial Instrument and Servicer Participation Agreement (SPA).

Nationstar accepted incentive payments from the government through

TARP, HAMP, and other federal programs. Nationstar annually certified

its compliance with applicable law, including requirements relating to

foreclosure practices.

3 12 U.S.C. § 5201.

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Nationstar and Aurora claimed they owned Mr. Heron’s home loan (or

the servicing rights associated with the loan). Mr. Heron defaulted on his

mortgage loan payments. Between 2008 and 2011, Aurora initiated

foreclosure proceedings against him in Colorado state court. To prove it

owned Mr. Heron’s loan, Aurora relied on handwritten endorsements to

“Aurora Loan Services” made on various copies of a promissory note Mr.

Heron executed when he originally purchased his house. Mr. Heron

challenged the authenticity of the promissory note and claimed Aurora did

not actually own his loan.

In 2012, Nationstar replaced Aurora as the plaintiff in Mr. Heron’s

state-court foreclosure proceeding. Nationstar produced a different version

of a promissory note related to Mr. Heron’s mortgage. Mr. Heron claimed

Nationstar forged the promissory note and submitted it in state court to

cover up Aurora’s past forgeries about his mortgage. Mr. Heron eventually

lost his home in foreclosure.

B

In December 2017, Mr. Heron filed a qui tam action in federal district

court in Colorado against Nationstar, Aurora, and several other defendants,

claiming they engaged in illegal foreclosure practices and submitted false

claims for payment to the government under the TARP and HAMP

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programs. He filed his Second Amended Complaint—the operative pleading

before us—in late 2020.

Nationstar “wrongfully obtained hundreds of millions of dollars in

government incentive payments,” Mr. Heron alleged, “by fraudulently

submitting claims and inducing the United States to execute mortgage

servicer incentives contracts to allow [it] to participate and recover

incentives” in HAMP. App. I at 26, ¶ 2. Nationstar allegedly submitted

“false Annual Certifications and misrepresentations of past, present[,] and

future compliance with federal and state laws, regulations, rules[,] and

requirements.” App. I at 26, ¶ 3. He claimed “[e]ach and every certification

submitted to the United States in exchange for incentive payments from the

United States was knowingly false when made[] because . . . Nationstar . . .

forged signatures and endorsements on thousands of borrowers’ promissory

notes[.]” App. I at 120, ¶ 205; 122, ¶ 211. And Mr. Heron asserted “the

initial and annual SPA certifications and representations executed by

Nationstar . . . were knowingly false[.]” App. I at 116, ¶ 195.

Mr. Heron independently investigated foreclosure proceedings

involving Nationstar, including his own. According to Mr. Heron, Aurora

and Nationstar foreclosed on hundreds of other borrowers throughout

Colorado and across the United States, using “forged—indeed, often fake—

promissory notes[.]” App. I at 32, ¶ 24. Nationstar allegedly “accepted

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incentive payments and otherwise benefitted from” federal programs. App.

I at 108, ¶ 173.4

Mr. Heron attached documents to his Second Amended Complaint,

including, publicly available mortgage records and promissory notes, a

transcript of Mr. Heron’s call with an Aurora employee about his home loan,

the SPA between Nationstar and Fannie Mae from 2009, and an amended

version of the SPA from 2010. The complaint also referenced public

information and documents purporting to show the pervasiveness and

illegality of Nationstar’s scheme. Mr. Heron asserted two causes of action:

(1) failure to return government property, in violation of 31

U.S.C. § 3729(a)(1)(D); and (2) conspiracy to violate the FCA, in violation of

31 U.S.C. § 3729(a)(1)(C). App. I at 119–22, ¶¶ 202–13.

4 Mr. Heron did not identify any specific request for incentive payments submitted to the government by Nationstar or paid to Nationstar for its participation in federal programs. But Mr. Heron claimed Nationstar “knowingly presented, or caused to be presented, false or fraudulent claims for payment or approval in violation of 31 U.S.C. § 3729(a)(1)(A)” and “knowingly made, used or caused to be made or used a false record or statement material to a false or fraudulent claim that was material to the United States’ decision to pay insurance claims for insured mortgages in violation of 31 U.S.C. § 3729(a)(1)(B).” App. I at 116, ¶ 195.

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Nationstar moved to dismiss the Second Amended Complaint under

Federal Rule of Civil Procedure 12(b)(6).5 Nationstar invoked the FCA’s

public disclosure bar, 31 U.S.C. § 3730(e)(4)(A), which generally prohibits

FCA suits based on allegations already in the public domain. That section

requires federal courts to dismiss a qui tam action “if substantially the same

allegations or transactions as alleged in the action . . . were publicly

disclosed.” 31 U.S.C. § 3740(e)(4)(A). Mr. Heron’s claims, Nationstar

explained, were “substantially similar” to allegations or transactions in

public disclosures relied on in the Second Amended Complaint. Nationstar

specifically focused on allegations describing

 a consent order between Nationstar and the Massachusetts Division of Banks, for unsound servicing practices and the improper initiation and handling of foreclosure proceedings (the Massachusetts Consent Decree);

5 Nationstar also urged dismissal under Federal Rule of Civil Procedure 9(b). Nationstar contended, to satisfy Rule 9(b) in the qui tam context, a plaintiff must allege with particularity the actual false claim for payment submitted to the government. According to Nationstar, the Second Amended Complaint did not “identify any specific claims or certifications submitted to the government or the specific dates on which those were presented.” Supp. App. at 33. The district court did not reach Nationstar’s Rule 9(b) argument because it concluded the public disclosure bar applied. Nationstar reprises its Rule 9(b) argument on appeal. We also need not reach this alternative ground for affirmance because we conclude, as the district court did, the public disclosure bar applies. 7 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 8

 the federal criminal prosecution of Lee Bentley Farkas for bank and TARP fraud schemes involving the sale of fake mortgages (the Farkas prosecution);

 a consent order between Aurora and the Office of Thrift Supervision for filing improperly notarized documents in foreclosure proceedings and initiating foreclosure without ensuring mortgage documents were properly indorsed (the OTS Consent Decree); and

 a mortgage fraud notice issued by the Federal Bureau of Investigation (FBI) and Mortgage Bankers Association (the FBI Notice).

Supp. App. at 26–28. Nationstar also maintained Mr. Heron could not rely

on the “original source” exception in § 3730(e)(4)(B) because he lacked

“knowledge that is independent of and materially adds to the publicly

disclosed allegations.” Supp. App. at 29. Mr. Heron’s “personal investigation

and summarization of public disclosures,” Nationstar argued, “adds nothing

independent of the information the government admittedly possessed.”

Supp. App. at 30.

Mr. Heron opposed dismissal. He insisted his allegations were not

“substantially the same” as the publicly available information described in

his complaint and, even if the allegations closely matched information

publicly disclosed, he claimed to be an original source. The district court

dismissed Mr. Heron’s complaint under the public disclosure bar. This

timely appeal followed.

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II

“We review de novo the district court’s order granting a motion to

dismiss under Fed. R. Civ. P. 12(b)(6).” Slater v. A.G. Edwards & Sons, Inc.,

719 F.3d 1190, 1196 (10th Cir. 2013). “To defeat a motion to dismiss, a

complaint must plead facts sufficient to state a claim to relief that is

plausible on its face.” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009)). We take “all facts alleged in the complaint . . . as true” and indulge

“all reasonable inferences . . . in favor of the plaintiff[].” GF Gaming Corp.

v. City of Black Hawk, 405 F.3d 876, 881 (10th Cir. 2005). But “the tenet

that a court must accept” well-pleaded factual allegations as true “is

inapplicable to legal conclusions,” so we are not bound by the plaintiff's

recital of legal principles supported by conclusory statements. Iqbal, 556

U.S. at 678. “Generally, the sufficiency of a complaint must rest on its

contents alone.” Gee v. Pacheco, 627 F.3d 1178, 1186 (10th Cir. 2010). But

we have acknowledged some limited “exceptions to this restriction on what

the court can consider” including, as relevant here, documents that the

complaint incorporates by reference.6 Id.

6 In the qui tam context, courts “routinely have considered undisputed

documents provided by the parties in connection with Rule 12(b)(6) motions based on the public disclosure bar.” United States ex rel. Winkelman v. CVS Caremark Corp., 827 F.3d 201, 208 (1st Cir. 2016) (collecting cases). 9 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 10

Here, the district court treated the Act’s public disclosure bar as an

affirmative defense—an approach unchallenged by the parties on appeal

and endorsed by all circuits to have considered the issue.7 We have

recognized the appropriateness of “dismiss[ing] a claim on the pleadings

based on an affirmative defense. . . . only when the complaint itself admits

all the elements of the affirmative defense by alleging the factual basis for

those elements.” Fernandez v. Clean House, LLC, 883 F.3d 1296, 1299 (10th

Cir. 2018); see also Miller v. Shell Oil Co., 345 F.2d 891, 893 (10th Cir. 1965)

(“If the defense appears plainly on the face of the complaint itself, the

motion [to dismiss for failure to state a claim] may be disposed of under

[Rule 12(b)(6)].”).

7 Congress amended the FCA, effective March 23, 2010, and revised

several parts of the public disclosure bar. Among other changes, the revised statute removed jurisdictional language. In United States ex rel. Reed v. KeyPoint Government Solutions, we observed courts having considered the issue unanimously interpreted the post-amendment public disclosure bar as an affirmative defense—not a jurisdiction-removing provision. See 923 F.3d 729, 737 n.1 (10th Cir. 2019) (collecting cases). Here, the district court, relying on Reed, treated the public disclosure bar as an affirmative defense. The parties endorse that conclusion on appeal. In his reply brief, Mr. Heron stated “[t]he public-disclosure bar is an affirmative defense.” Reply Br. at 12. At oral argument, in response to questioning, Nationstar’s counsel likewise acknowledged the public disclosure bar is an affirmative defense. Under these circumstances, we will assume for purposes of this case the public disclosure bar is an affirmative defense. See Reed, 923 F.3d at 737 n.1 (citing McQueen ex rel. McQueen v. Colorado Springs Sch. Dist., 488 F.3d 868, 873 (10th Cir. 2007)). 10 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 11

The False Claims Act imposes liability on any person who “knowingly

presents, or causes to be presented, a false or fraudulent claim for payment

or approval” to the United States or who “knowingly makes, uses, or causes

to be made or used, a false record or statement material to a false or

fraudulent claim.” See 31 U.S.C. 3729(a)(1)(A), (B). The FCA “covers all

fraudulent attempts to cause the government to pay out sums of money.”

United States ex rel. Reed v. KeyPoint Gov’t Sols., 923 F.3d 729, 737 (10th

Cir. 2019) (quoting United States ex rel. Conner v. Salina Reg’l Health Ctr.,

Inc., 543 F.3d 1211, 1217 (10th Cir. 2008), abrogated in part on other

grounds by Universal Health Servs., Inc. v. United States, 579 U.S. 176

(2016)); see also United States v. Neifert-White Co., 390 U.S. 228, 233 (1968)

(explaining Congress enacted the FCA to “protect the funds and property of

the Government from fraudulent claims” (quoting Rainwater v. United

States, 356 U.S. 590, 592 (1958)). But the FCA is not some “all-purpose

antifraud statute . . . or a vehicle for punishing garden-variety breaches of

contract or regulatory violations.” Universal Health Servs., 579 U.S. at 194

(quoting Allison Engine Co., Inc. v. United States ex rel. Sanders, 553 U.S.

662, 672 (2008)). Instead, it was enacted to stem “massive frauds

perpetrated by large contractors.” United States ex rel. Sorenson v.

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Wadsworth Bros. Constr. Co., Inc., 48 F.4th 1146, 1157 (10th Cir. 2022)

(quoting United States v. Bornstein, 423 U.S. 303, 309 (1976)).

The FCA’s qui tam provisions allow a private individual—known as a

“relator”—to bring a civil action on behalf of the government against the

alleged false claimant. 31 U.S.C. § 3730(b). The FCA “imposes significant

penalties on those who defraud the [g]overnment.” Universal Health Servs.,

Inc., 579 U.S. at 180. “As a bounty for identifying and prosecuting fraud,”

relators get to keep a portion “of any recovery they obtain.” United States

ex rel. Boothe v. Sun Healthcare Grp., Inc., 496 F.3d 1169, 1172 (10th Cir.

2007) (citing 31 U.S.C. § 3730(d)).

One barrier to bringing a qui tam action under the FCA is the “public

disclosure bar.” It provides

The court shall dismiss an action or claims under this section, unless opposed by the [g]overnment, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed--

(i) in a Federal criminal, civil, or administrative hearing in which the [g]overnment or its agent is a party;

(ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or

(iii) from the news media,

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unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

31 U.S.C. § 3730(e)(4)(A). As the statutory text makes plain, courts must

dismiss qui tam actions if there is substantial similarity between the

allegations in the complaint and information publicly disclosed in

statutorily-qualifying disclosures unless the relator is an “original source”

of that information. Id. An “original source” has “knowledge that is

independent of and materially adds to the publicly disclosed allegations or

transactions.” Id. § 3730(e)(4)(B)(2). The public disclosure bar thus

attempts to “strike a balance between encouraging private persons to root

out fraud and stifling parasitic lawsuits.” Graham Cnty. Soil & Water

Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 295 (2010).

III

Mr. Heron urges reversal on three grounds. First, he claims the

district court impermissibly relied on sources that do not qualify as public

disclosures under the Act. Second, he insists his lawsuit is not about

allegations or transactions already in the public domain. And third, he

seeks to avoid the public disclosure bar by claiming to be an “original

source.” Mr. Heron has waived his first argument and his remaining

contentions are unavailing.

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The public disclosure bar requires federal courts to dismiss qui tam

suits where the complaint’s allegations closely match information publicly

disclosed in any of the following specified channels: “(i) in a Federal

criminal, civil or administrative hearing in which the [g]overnment or its

agent is a party,” “(ii) in a congressional, Government Accountability Office,

or other Federal report, hearing, audit, or investigation,” or “(iii) from the

news media.” 31 U.S.C. § 3730(e)(4)(A). The district court, agreeing with

Nationstar on the issue, determined that Mr. Heron’s allegations were

based on information already in the public domain. In reaching this

conclusion, the district court discussed four public disclosures referenced in

the Second Amended Complaint—namely, the Massachusetts Consent

Decree, the Farkas prosecution, the OTS Consent Decree, and the FBI

Fraud Notice (the “Four Sources”).

On appeal, Mr. Heron admits the Four Sources “on which the district

court relied were all mentioned in [his] complaint” and that he “did not

object to the district court’s consideration of them.” Opening Br. at 10 n.15.

However, he now says the district court mistakenly relied on the Four

Sources because they are not qualifying public disclosures under

§ 3730(e)(4)(A). Nationstar insists Mr. Heron waived this argument. We

agree.

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Generally, “a federal appellate court does not consider an issue not

passed upon below.” Singleton v. Wulff, 428 U.S. 106, 120 (1976). The

circumstances surrounding a party’s failure to advance an argument in the

district court impacts whether we exercise our discretion to reach it for the

first time on appeal. “If the theory was intentionally relinquished or

abandoned in the district court we usually deem it waived and refuse to

consider it.” Richison v. Ernest Grp., Inc., 634 F.3d 1123, 1127 (10th Cir.

2011). But if a “theory simply wasn’t raised before the district court, we

usually hold it forfeited.” Id. at 1128.

Mr. Heron’s strategy in the district court was to litigate the merits of

the substantially-the-same standard and failing that, to urge the district

court to exempt his complaint from dismissal under the original-source

exception. Mr. Heron never argued the Four Sources were not statutorily

permissible disclosures under § 3730(e)(4)(A). Just the opposite. Mr.

Heron’s arguments opposing dismissal—the arguments the district court

actually considered and resolved—proceeded from the premise that the

Four Sources were statutorily enumerated public disclosures. In its order

granting Nationstar’s motion to dismiss, the district court confirmed as

much, observing Mr. Heron “does not dispute that the alleged public

disclosures came from a source listed in the FCA or that they were made

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public within the meaning of the FCA.” App. VII at 1805. Mr. Heron never

contested the district court’s stated understanding.

We must conclude Mr. Heron waived, rather than forfeited, his

argument that the Four Sources are not qualifying public disclosures within

the meaning of the Act. Mr. Heron appears to acknowledge the waiver. In

his reply brief, Mr. Heron explains his “district-court briefing did not

develop the separate point that the alleged public disclosures do not qualify

as permissible sources under the text of section 3730(e)(4)(A)” and, instead,

it “focused . . . on denying that the alleged public disclosures were

‘substantially the same’ as the allegations and transactions in his

complaint.” Reply Br. at 1.

Instead, Mr. Heron makes two arguments to excuse the waiver.

Neither is availing.

First, Mr. Heron appears to suggest the permissible-sources issue is

preserved because he challenged other aspects of the public disclosure bar

in the district court. This argument misunderstands the law. It is well

settled “a party may not lose . . . on one theory of the case, and then prevail

on appeal on a different theory.” Lyons v. Jefferson Bank & Tr., 994 F.2d

716, 721 (10th Cir. 1993).

Second, Mr. Heron insists federal courts must correctly interpret and

apply a federal statute notwithstanding a party’s failure to make a

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particular argument. Mr. Heron argues “[a] court’s duty to identify and

apply the proper construction of governing law trumps a litigant’s forfeiture

objections,” meaning this court “must enforce the text of section

3730(e)(4)(A) regardless of whether Mr. Heron addressed the issue in his

district-court-brief—and even if Mr. Heron had omitted the issue from his

briefing in this Court.” Reply Br. at 2. In support, Mr. Heron relies on

Kamen v. Kemper Financial Services, 500 U.S. 90 (1991), but that case does

not help him.

In Kamen, the Supreme Court held, “[w]hen an issue or claim is

properly before the court, the court is not limited to the particular legal

theories advanced by the parties, but rather retains the independent power

to identify and apply the proper construction of governing law.” Id. at 99.

But the Supreme Court noted: “We do not mean to suggest that a court of

appeals should not treat an unasserted claim as waived[.]” Id. at 100 n.5.

As we have explained, Mr. Heron’s particular appellate claim—that the

Four Sources fall outside the statute’s enumerated categories of qualifying

public disclosures—was unasserted in the district court. Mr. Heron actually

urged the opposite position in the district court.8

8 The invited-error doctrine typically bars appellate review in such

circumstances. See United States v. Deberry, 430 F.3d 1294, 1302 (10th Cir. 2005) (“[T]he invited-error doctrine precludes a party from arguing that the district court erred in adopting a proposition that the party had urged the 17 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 18

Kamen reaffirmed federal courts always maintain the authority to

correctly construe the law. But courts are not “self-directed boards of legal

inquiry and research.” State v. U.S. Env’t Prot. Agency, 989 F.3d 874, 885

(10th Cir. 2021) (quoting Nat’l Aeronautics & Space Admin. v. Nelson, 562

U.S. 134, 147 n.10 (2011)). Contrary to Mr. Heron’s suggestion, Kamen does

not obviate a litigant’s obligation to preserve arguments for appeal and

offers no antidote to the waiver in this case.

We now turn to the merits of Mr. Heron’s preserved appellate claims.

Mr. Heron contends the district court erred by concluding, first, that

substantially the same fraud as alleged in his lawsuit was publicly

disclosed, and second, that Mr. Heron had not plausibly alleged he was an

“original source” under the Act. We reject each argument—largely for the

same reasons as the district court.

The public disclosure bar applies only “if substantially the same

allegations or transactions as alleged in the action or claim were publicly

disclosed.” 31 U.S.C. § 3730(e)(4)(A); see also Schindler Elevator Corp. v.

U.S. ex rel. Kirk, 563 U.S. 401, 408 (2011) (“The phrase ‘allegations or

district court to adopt.”). While we ultimately do not rely on the invited-error rule to resolve the issue here, it is a close call. 18 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 19

transactions’ in § 3730(e)(4)(A) . . . suggests a wide-reaching public

disclosure bar. Congress covered not only the disclosure of ‘allegations’ but

also ‘transactions,’ a term that courts have recognized as having a broad

meaning.”). On this score, we have held “[t]he test is whether substantial

identity exists between the public[] [disclosures] . . . and the qui tam

complaint.” United States ex rel. Fine v. MK-Ferguson Co., 99 F.3d 1538,

1545 (10th Cir. 1996). We have referred to this aspect of the public

disclosure bar as the “substantially-the-same standard.” See Reed, 923 F.3d

at 750.9

The district court concluded Mr. Heron’s complaint relied on the Four

Sources, which disclosed “substantially the same allegations or transactions

as alleged in” his qui tam action. 31 U.S.C. § 3730(e)(4)(A). The district

court ruled

(1) the government was aware of the use of forged and fraudulent promissory notes in furtherance of foreclosures (FBI

9 Before 2010, the public disclosure bar was triggered if the qui tam

action was “based upon” a qualifying public disclosure; but the amended provision of the FCA states a qui tam action is barred if “substantially the same allegations or transactions” were publicly disclosed. Compare 31 U.S.C. § 3730(e)(4)(A)(2006) with id. § 3730(e)(4)(A)(2010); see also Reed, 923 F.3d at 737 n.1 (explaining the changes to the public disclosure bar made in the 2010 amendment of the statute). We have recognized “our pre- 2010-amendment cases guide our substantially-the-same inquiry”—even after the 2010 amendments—because the amended statute adopts a standard “resembl[ing] the standard we already used” when analyzing the connection needed between a relator’s claims and public disclosures. See Reed, 923 F.3d at 743–44. 19 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 20

notice); (2) Aurora (defendant’s predecessor) entered into a consent decree due to litigating foreclosures without ensuring the promissory note and mortgage document were properly endorsed or assigned (Aurora consent decree with OTS); (3) defendant entered into a consent decree similar to Aurora’s with the [Massachusetts] Division of Banks (defendant’s consent decree); and (4) the use of fake promissory notes to secure a loan when the promissory note had already been sold was an issue that had been litigated (United States v. Farkas).

App. VII at 1809. On appeal, Mr. Heron contends reversal is required

because the Four Sources did not name Nationstar specifically, did not

involve the same fraudulent conduct alleged in his complaint, or both. We

are not persuaded for two main reasons.

First, Mr. Heron’s argument proceeds from a hyper-specific

interpretation of the public disclosure bar—an approach our court has

previously rejected. In assessing the substantially-the-same standard, “the

operative question is whether the public disclosures were sufficient to set

the government ‘on the trail of the alleged fraud without [the relator’s]

assistance.’” Reed, 923 F.3d at 745 (quoting U.S. ex rel. Fine v. Sandia

Corp., 70 F.3d 568, 571 (10th Cir. 1995)). But the “substantially-the-same

standard does not demand that the disclosures identify the defendant by

name as the wrongdoer.” Id. at 751 (rejecting an argument that public

disclosure bar cannot apply where a complaint alleged claims against a

different entity than the one accused of wrongdoing in public disclosures);

see also id. at 748 n.12 (rejecting relator’s “hyper-specific reading” of the

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FCA which invited the court to require “near-complete identity of

allegations” between earlier public disclosures and later FCA claims).

Indeed, “we must recognize that the government’s nose for fraud may be

sensitive enough to pick up the scent even if the public disclosures did not

‘identify any specific compan[y].’” Id. at 745 (quoting In re Nat. Gas

Royalties, 562 F.3d 1032, 1039, 1042 (10th Cir. 2009)). And there need not

be “a complete identity of allegations, even as to time, place, and manner”

to implicate the bar. Id. (quoting Boothe, 496 F.3d at 1174). Instead, the

qualifying public disclosures “need only disclose the ‘material elements’ of

the fraudulent transaction.” Id. (quoting Fine, 70 F.3d at 572). The

substantially-the-same standard can be satisfied where public disclosures

allege industry-wide fraud and provide enough information to link the

defendant to the scheme. See id. at 745.

Second, a review of the allegations in Mr. Heron’s complaint leaves

little doubt the information supporting his action was publicly disclosed. In

reaching the same conclusion, the district court focused on the Four Sources

relied on in the Second Amended Complaint. We likewise take that

approach.

The Massachusetts Consent Order

Mr. Heron alleged Nationstar entered into the Massachusetts

Consent Order over improper use of promissory notes in foreclosure

21 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 22

litigation. The Massachusetts Consent Order discloses Nationstar’s alleged

non-compliance with state and federal law applicable to its business as a

mortgage lender. Nationstar’s alleged noncompliance is the material

element of the purported fraud at the heart of Mr. Heron’s allegations in

this case—that Nationstar’s use of promissory notes failed to comply “with

all applicable laws, rules, regulations, requirements and guidelines.” See

e.g., App. I at 120, ¶ 205.

As Nationstar correctly points out, Mr. Heron “does not dispute the

significant overlap between the conduct disclosed in the Massachusetts

Division of Banks Consent order and the conduct he discloses in the

complaint.” Aplee. Br. at 22.10 Mr. Heron raised no substantial-similarity

argument about the Massachusetts Consent Order in his opening brief. In

his reply brief, Mr. Heron disagreed the Massachusetts Consent Order

publicly disclosed information that could trigger the bar. Under the

circumstances, we conclude Mr. Heron has waived any argument

challenging the district court’s reliance on the Massachusetts Consent

Order in dismissing his complaint. See, e.g., Tran v. Trs. Of State Coll. In

10 Mr. Heron’s only appellate argument about the Massachusetts Consent Order in the opening brief focused on whether that source was a qualifying public disclosure under the Act—an argument we have concluded was intentionally relinquished in the district court.

22 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 23

Colo., 355 F.3d 1263, 1266 (10th Cir. 2004) (“Issues not raised in the

opening brief are deemed abandoned or waived.” (quoting Coleman v. B-G

Maint. Mgmt. of Colo., Inc., 108 F.3d 1199, 1205 (10th Cir. 1997), abrogated

in part on other grounds by Bostock v. Clayton Cnty., Georgia, 590 U.S. 644

(2020))); Bronson v. Swensen, 500 F.3d 1099, 1104 (10th Cir. 2007) (“[W]e

routinely have declined to consider arguments that are not raised, or are

inadequately presented, in an appellant’s opening brief.”).

The Farkas prosecution

Mr. Heron’s complaint discussed the prosecution of Lee Farkas. App.

I at 55, ¶ 76. The government in United States v. Farkas prosecuted

executives of a mortgage lender, Mr. Heron alleged, for making “false

ownership claims on fake promissory notes . . . in connection with one of the

largest and longest-running bank fraud and TARP fraud schemes,” and the

“double- and triple-selling [of] mortgage loans.” App. I at 55, ¶ 76. The

district court determined the Farkas prosecution disclosed a federal

criminal action about “the use of fake promissory notes to secure a loan

when the promissory note had already been sold.” App. VII at 1809.

According to the district court, the disclosure in Farkas about using “fake

promissory notes to secure a loan” when the note already had been sold was

substantially similar to the allegations in Mr. Heron’s complaint of

Nationstar’s scheme to “use[] fraudulent promissory notes to effectuate

23 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 24

foreclosures.” App. VII at 1806, 1809. The district court acknowledged the

“purpose” for which the promissory notes in Farkas were used was

“different” than the purpose of Nationstar’s alleged fraudulent scheme here.

App. VII at 1807. But, the district court reasoned, the “allegation of the use

of fake notes [was] the same in Farkas and this case” such that the Farkas

disclosure was substantially similar to Mr. Heron’s allegations. App. VII at

1807.

Mr. Heron contends the Farkas prosecution does not support the

district court’s substantially-the-same conclusion because the scheme in

Farkas is unlike the conduct challenged in his qui tam action. According to

Mr. Heron, Nationstar used fake promissory notes to effectuate foreclosures

and thus fraudulently obtain TARP benefits. But the scheme in Farkas, he

explains, was different because it involved “fake notes” and “dummy loans.”

Id. at 56, ¶ 77.

While we acknowledge the differences Mr. Heron identifies, our

precedent interpreting the public disclosure bar does not demand complete

identity between an earlier public disclosure and allegations in a later qui

tam action—even as to the “manner” of fraud. Reed, 923 F.3d at 745

(quoting Boothe, 496 F.3d at 1174). We also reject Mr. Heron’s argument

that the Farkas prosecution does not support the district court’s

substantially-the-same determination because Nationstar was not a named

24 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 25

defendant. As we explained, a public disclosure need not identify a

particular defendant to meet the substantially-the-same standard. Id. at

744.

Reviewing de novo, we agree with the district court that Mr. Heron’s

allegations about the Farkas prosecution demonstrate the government’s

awareness of fake promissory notes in mortgage fraud schemes perpetuated

by recipients of federal TARP funds. Mr. Heron offers no persuasive reason

to disturb the district court’s conclusion that the essential nature of his

claims against Nationstar was already in the public domain. Cf. Boothe, 496

F.3d at 1174 (explaining it is enough if “the essence of” the relator’s

allegations was “derived from a prior public disclosure” (internal quotation

marks omitted)); Reed, 923 F.3d at 745 (explaining public disclosures “need

only disclose the material elements of the fraudulent transaction” to trigger

the public disclosure bar (quoting Fine, 70 F.3d at 571)).

The OTS Consent Order

Mr. Heron’s complaint alleges Aurora’s consent order with OTS

concerned Aurora’s “unsafe or unsound” practices in foreclosure

proceedings. App. I at 117–18, ¶ 199. According to the complaint, the

consent order addressed Aurora’s practice of filing affidavits and other

mortgage related documents without proper notarization and litigating

foreclosure proceedings without always ensuring promissory notes and

25 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 26

mortgage documents had been endorsed or assigned. The district court

found the OTS order disclosed “Aurora (defendant’s predecessor) entered

into a consent decree due to litigating foreclosures without ensuring the

promissory note and mortgage document were properly endorsed or

assigned.” App. VII at 1809. The OTS consent order, the district court ruled,

“set the government on the trail” of Nationstar’s alleged fraud without Mr.

Heron’s assistance. See App. VII at 1809.

Mr. Heron contends the OTS order does not specifically mention fraud

or forgery and only publicly discloses misconduct by Aurora, not Nationstar.

According to Mr. Heron, the district court failed to explain how a public

disclosure of Aurora’s negligence would set the government on the trail of

Nationstar’s criminal forgeries. We are not persuaded.

Mr. Heron alleged Nationstar’s purchase of loan servicing rights from

Aurora included purported rights to service his loan. Nationstar was

Aurora’s “successor” that “often [took] over foreclosure proceedings initiated

by or on behalf of Aurora,” and Nationstar continued Aurora’s practice of

using forged or fraudulent promissory notes in foreclosure proceedings

against borrowers. App. I at 64, ¶ 90; 33, ¶ 25; 42–48. Even if the consent

order between Aurora and the OTS did not name Nationstar directly, we

have explained complete identity is unnecessary to trigger the public

disclosure bar. Reed, 923 F.3d at 744–45. This is especially so when “the

26 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 27

government has already identified the problem and has an easily

identifiable group of probable offenders.” Fine, 70 F.3d at 572.

The government would not need to look far from Aurora’s identified

wrongdoing to investigate whether Nationstar also used improperly

endorsed promissory notes in foreclosure proceedings—particularly in

proceedings involving servicing rights it acquired from Aurora. The OTS

consent order thus reflects the “essence,” Boothe, 496 F.3d at 1174, and

“material elements,” Reed, 923 F.3d at 745, of the fraudulent conduct

allegedly committed by Nationstar.

The FBI Fraud Notice

Mr. Heron’s complaint alleged, “[a]ccording to a mortgage fraud notice

prepared jointly by the Federal Bureau of Investigation and the Mortgage

Bankers Association,” Nationstar’s “submission of forged and otherwise

fraudulent promissory notes in furtherance of foreclosure violates at least

eight federal criminal statutes.” App. I at 119, ¶ 204; 121, ¶ 210. In its

motion to dismiss, Nationstar emphasized “[t]he FBI mortgage fraud notice

goes as far as stating Nationstar ‘forged and submitted fraudulent

promissory notes’ in violation of federal law.” Supp. App. at 29. Mr. Heron,

in opposing dismissal under the public disclosure bar, insisted his complaint

never alleged the FBI Fraud Notice actually identified Nationstar; rather,

27 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 28

he maintained the notice generally warned mortgage fraud is illegal. He

argued

The “mortgage fraud notice” prepared jointly by the FBI and the Mortgage Bankers Association that generically listed “eight criminal statutes” is not alleged to actually identify Nationstar (Motion at 7-8, misleadingly characterizing this notice) but rather simply a warning of the applicable criminal statutes under which anyone engaged in mortgage f[r]aud may be held liable—a generic warning Nationstar has failed to heed and nothing more.

Supp. App. at 44.

The district court acknowledged, but did not resolve, the parties’

disagreement about whether the FBI Fraud Notice actually named

Nationstar. The court explained Mr. Heron’s complaint included a non-

working hyperlink,11 which left the court “unable to determine whether the

[FBI] notice identifies [Nationstar] or not.” App. VII at 1808.12 Still, the

district court determined, based on the complaint’s allegations about the

FBI notice, “the government was aware of the use of forged and fraudulent

11 The court observed “[t]he link relator provides for the notice goes to

‘page not found’ on the FBI website, see Page not found, Fed. Bureau of Investigation, https://goo.gl/qaNWIX (last visited Sept. 15, 2021, 10:47 a.m.) . . . .” App. VII at 1808.

12 Mr. Heron does not challenge this component of the district court’s

ruling. In any event, a public disclosure need not specifically name an entity for later qui tam claims to trigger the public disclosure bar with respect to that entity. See Reed, 923 F.3d at 744–45. 28 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 29

promissory notes in furtherance of foreclosures (FBI notice).” App. VII at

1809.

On appeal, Mr. Heron says the district court erroneously relied on the

FBI Fraud Notice in applying the public disclosure bar. He appears to make

two arguments supporting reversal, but neither is successful.

First, Mr. Heron contends the district court erred by making findings

about the FBI Fraud Notice when it admitted it had not reviewed the

document. This point is well taken as a general matter, but it is not

particularly relevant here. When deciding a Rule 12(b)(6) motion, a district

court must accept as true all well-pleaded factual allegations. See, e.g., GFF

Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1385 (10th Cir.

1997). To be sure, a district court may not accept as true “factual allegations

that contradict . . . a properly considered document[.]” Id. (emphasis added).

Mr. Heron’s complaint did not attach the FBI Fraud Notice, and as

discussed, the link provided in the complaint was inoperable. Under the

circumstances, the district court understandably relied on the complaint’s

allegations about the Notice.

Second, Mr. Heron argued the FBI Fraud Notice, properly construed,

does not trigger the public disclosure bar. In his opening brief, Mr. Heron

includes an image of what he claims is the FBI Fraud Notice actually

described in his complaint, along with an updated hyperlink. Opening Br.

29 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 30

at 12–13, 19. Mr. Heron maintains this FBI Notice does not mention forgery,

promissory notes, or foreclosures, so it could not show—as the district court

found—the government was aware of forged and fraudulent promissory

notes in foreclosure proceedings.

Nationstar insists the Notice depicted in Mr. Heron’s opening brief

cannot be the same one referenced in his complaint. The complaint alleged

the FBI and the Mortgage Bankers Association prepared the Notice,

Nationstar explains, but the image in Mr. Heron’s opening brief “does not

mention the Mortgage Bankers Association at all and simply explains it is

illegal for a ‘person’ to make false statements in a loan or credit application

to a ‘financial institution.’” Aplee. Br. at 21.

Even if we assume, as Mr. Heron insists, the FBI Notice he references

on appeal is the one actually discussed in his complaint, we still see no

reason to reverse. Mr. Heron acknowledged the FBI Notice referenced in his

complaint, like the one in his opening brief, shows the government’s

awareness of fraud in the mortgage industry generally. And the district

court’s application of the public disclosure bar did not rest solely on

allegations about the FBI Fraud Notice. Rather, the district court concluded

the Four Sources, taken together, met the Act’s substantially-the-same

standard. At minimum, the FBI Fraud Notice, if interpreted in the manner

30 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 31

urged by Mr. Heron on appeal, does not disturb the district court’s ultimate

conclusion that the bar was triggered here.

Accordingly, we affirm the district court’s determination that Mr.

Heron’s qui tam action involved substantially the same allegations as those

already in the public domain, thereby triggering the public disclosure bar

under § 3730(e)(4)(A).

We next consider Mr. Heron’s argument that he is an original source

of the information supporting his claims. Even where prior disclosures

trigger the public disclosure bar, a claim can nonetheless avoid dismissal if

the relator qualifies as an original source. See 31 U.S.C. § 3730(e)(4)(A).

Before considering Mr. Heron’s arguments, it is instructive to further

consider precisely what the original source exception requires.

An original source “has knowledge that is independent of and

materially adds to the publicly disclosed allegations or transactions.” Id.

§ 3730(e)(4)(B)(2).13 The “independent knowledge” required under

13The Act provides two definitions for “original source.” See id. § 3730(e)(4)(B). An original source:

means an individual who either (i) prior to a public disclosure under subsection (e)(4)(a), has voluntarily disclosed to the [g]overnment the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has 31 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 32

§ 3730(e)(4)(B)(2) means “knowledge which is not secondhand knowledge.”

MK-Ferguson Co., 99 F.3d at 1547. The “materially adds” requirement will

ordinarily be satisfied by a “relator who discloses new information that is

sufficiently significant or important that it would be capable of influenc[ing]

the behavior” of the government. Reed, 923 F.3d at 757 (quoting United

States ex rel. Winkelman v. CVS Caremark Corp., 827 F.3d 201, 211 (1st

Cir. 2016)). As we have explained, a relator who “merely adds background

information or details about a known fraudulent scheme” does not

materially add to the publicly disclosed allegations or transactions under

§ 3730(e)(4)(B)(2). Id. A source supplying cumulative information is not an

“original source” under the Act.

In his complaint, Mr. Heron alleged he “has knowledge that is

independent of and materially adds to any publicly disclosed information

relating to the allegations herein.” Opening Br. at 35. Mr. Heron contends

he qualified as an original source under § 3730(e)(4)(B)(2) because the

allegations in his complaint included 45 pages of material evidence of

Nationstar’s fraud in filings from Nationstar’s foreclosure proceedings

voluntarily provided the information to the [g]overnment before filing an action under this section.”

Id. Only the second definition is at issue here. 32 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 33

against other borrowers. Mr. Heron also claimed personal knowledge of

material non-public information about Nationstar’s alleged fraud.

In considering whether Mr. Heron satisfied the original source

exception, the district court specifically evaluated eight allegations in the

complaint which arguably could demonstrate Mr. Heron’s independent

knowledge of non-public information:

(1) a private call with an Aurora “Executive Communications” employee where the employee disclosed that Aurora did not own relator’s loan and never intended to modify the loan because the investor was not accepting modifications;

(2) that Aurora and defendant produced three contradictory versions of plaintiff’s promissory note in foreclosure proceedings that were each allegedly endorsed by Lorraine Dodson;

(3) the existence of a third version of relator’s promissory note that had never been filed in public records or filed with the court;

(4) the exposure of defendant’s argument that it had no records or knowledge of any forgeries or how the endorsements came into existence;

(5) an affidavit obtained by relator from Lorraine Dodson, the endorser on relator’s original loan documents, stating that she did not endorse the note to “Aurora Loan Services” or “Residential Funding Corporation”;

(6) relator’s experience in the mortgage industry;

(7) an internal nonpublic record obtained by relator that showed that Aurora paid to endorse a note several days before filing a forged handwritten endorsed note on Aurora’s behalf; and

33 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 34

(8) an internal Nationstar agreement used to hold outside counsel accountable for taking and receiving original notes and allonges that defendant sent to counsel.

App. VII at 1811.

The district court concluded the complaint showed Mr. Heron

aggregated already-public information about Nationstar’s use of promissory

notes in foreclosure proceedings. Mr. Heron’s knowledge about his own

foreclosure proceeding, the district court reasoned, was not capable of

influencing the government’s behavior. The district court reached the same

conclusion about allegations describing Mr. Heron’s general familiarity

with industry practices, an internal Aurora record about an attorney

endorsing a promissory note, and an internal Nationstar document about

procedures relating to outside counsel. The district court determined Mr.

Heron did not qualify as an original source under the Act because “a relator

who merely adds background information or details about a known

fraudulent scheme will typically be found not to have materially added to

the publicly disclosed information.” App. VII at 1813 (quoting Reed, 923

F.3d at 757).

Mr. Heron challenges the district court’s conclusion on two grounds,

but neither is availing.

According to Mr. Heron, he “needs only to allege that he has the

knowledge required by section 3730(e)(4)(B)(2)” and the “mere allegation of

34 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 35

knowledge is all that is needed to survive a Rule 12(b)(6) motion.” Opening

Br. at 37–38. We disagree. Mr. Heron advances no authority, nor are we

aware of any, requiring a district court to accept the truth of his conclusory

legal assertion. See United States ex rel. Hafter v. Spectrum Emergency

Care, Inc., 190 F.3d 1156, 1162 (10th Cir. 1999) (explaining, at the motion

to dismiss stage, a qui tam plaintiff “must allege specific facts—as opposed

to mere conclusions” supporting their original source status); see also Bell

Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (explaining courts are

not bound to accept as true a legal conclusion couched as a factual allegation

when assessing a motion to dismiss under Rule 12(b)(6)).

Next, Mr. Heron insists the complaint’s factual allegations show he

has the requisite knowledge to qualify as an original source. Reviewing de

novo, we perceive no error in the district court’s analysis or its conclusion

that the complaint fails to plausibly allege Mr. Heron had knowledge “that

is independent of and materially adds to the publicly disclosed allegations

or transactions,” as required by the Act’s original source provision. 31

U.S.C. § 3730(e)(4)(B)(2).

The complaint demonstrates Mr. Heron grouped together public

information collected from other foreclosure proceedings involving

Nationstar. This amalgamation of public information is precisely the

“secondhand knowledge” that will not qualify a relator as an original source

35 Appellate Case: 21-1362 Document: 010111093819 Date Filed: 08/13/2024 Page: 36

under the Act. See MK-Ferguson Co., 99 F.3d at 1547; see also In re Nat.

Gas Royalties, 562 F.3d at 1045 (explaining the original source provision’s

independent knowledge requirement is satisfied where a relator’s

knowledge is unmediated by anything but their own efforts). Mr. Heron can

identify no allegations—other than pointing to his collection of public

records—showing his independent knowledge of “new information that is

sufficiently significant or important that it would be capable of

influenc[ing]” the government’s behavior regarding Nationstar. Reed, 923

F.3d at 757 (quoting Winkelman, 827 F.3d at 211). And Mr. Heron’s

appellate briefing does not address the district court’s thorough analysis of

the eight non-public facts alleged in the complaint about which Mr. Heron

claims to have independent knowledge.

Accordingly, we conclude, as the district court did, the FCA’s original

source provision does not save Mr. Heron’s qui tam complaint from

dismissal.

IV

We AFFIRM the district court’s dismissal of the Second Amended

Complaint.

Entered for the Court

Veronica S. Rossman Circuit Judge