A plaintiff, or relator, in whistleblower litigation must establish causation. Causation requires the whistleblower show that the false statement or certification by the defendant was the actual cause of the government’s payment of the false claim. The Ninth Circuit Court of Appeals addressed causation in a whistleblower context in U.S. v. Eghbal, 548 F.3d 1281 (9th Cir. 2008). Eghbal arose from the sale of homes by real estate investors who falsely certified to the U.S. Department of Housing and Urban Development (HUD) that the sellers would not pay any part of the buyers’ down payments. The investor/defendants fraudulently signed HUD addendums which ultimately resulted in HUD paying out $2.8 million in balances owed on defaulted mortgages. Id. at 1282-83.

The trial court in Eghbal entered summary judgment against the defendants and the defendants appealed. On appeal, the defendants argued that the false statements which they signed on the HUD certifications for loan applications did not constitute a “claim” under the False Claims Act.

In considering the Eghbal appeal, the Ninth Circuit examined two tests for causation under the False Claims Act – the proximate causation standard and the “but for” standard. Courts view the proximate causation standard of liability as the more narrower approach, meaning it is more difficult to establish. The “but for” standard of causation is viewed as the “less stringent view of causation.” Id. at 1284.

Causation is what connects a defendant’s conduct to liability under the False Claims Act. If false information furnished to the government “bore upon the likelihood of the applicants meeting mortgage payments, [then] the misrepresentation had a causal connection with the subsequent defaults.” Id. at 1284. (citations omitted). Even applying the more narrow approach to causal, Eghbal recognizes that courts have found a causal connection between false statements regarding the creditworthiness of loan applicants and the connection to the payments by the government. Id. at 1284.

Applying the facts in Eghbal, the Ninth Circuit agreed with the district court that the false statements in the HUD addendum bore directly on the likelihood that the home buyers would be unable to make their mortgage payments. The defendants’ misrepresentations had a causal connection to the subsequent defaults, therefore creating sufficient causation to establish liability under the False Claims Act. Id. at 1284.

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Jason Cornell is an attorney who represents whistleblowers with the law firm Clark Fountain LaVista Prather Keen & Littky-Rubin. Clark Fountain represents plaintiffs in various matters throughout the United States. If you have questions regarding the issues addressed in this or other posts, you can reach Jason at jcornell@clarkfountain.com.