The Ninth Circuit Court of Appeals has reinstated a qui tam lawsuit against CalCon Mutual Mortgage, LLC, and its CEO, Joshua K. Erskine. The court's decision, filed on July 15, 2026, allows the case to proceed after it was previously dismissed by a lower court for failure to state a claim. This ruling impacts whistleblowers and companies involved in government loan programs, particularly those who might be accused of fraud in their loan applications.
The case, Relator, LLC v. Erskine (Docket No. 25-2073), centers on allegations that CalCon made false statements in its application for a Paycheck Protection Program (PPP) loan during the COVID-19 pandemic. The court's ruling is significant as it clarifies the standards for bringing claims under the False Claims Act (FCA) and addresses the public disclosure bar, which can prevent whistleblowers from pursuing claims based on publicly available information.
Relator, LLC, a California limited liability company, is the plaintiff in this case. It filed a qui tam action, which allows private individuals to sue on behalf of the government if they believe fraud has occurred. The defendants are CalCon Mutual Mortgage and its founder, Joshua K. Erskine. The dispute arose when Relator accused CalCon of misrepresenting its eligibility for a PPP loan, which was intended to assist businesses affected by the pandemic. The case reached the Ninth Circuit after the district court dismissed the complaint, ruling that the allegations were barred by the public disclosure bar of the FCA.
The public disclosure bar is designed to prevent individuals from bringing claims based on information that has already been made public. In this case, the district court found that information about CalCon's loan application was publicly disclosed on a government website, PandemicOversight.gov. However, the Ninth Circuit disagreed, stating that the information provided by Relator was not “substantially the same” as what was disclosed on the website. The court emphasized that simply being a mortgage lender does not automatically disqualify a company from receiving PPP funds, as there are exceptions to the eligibility rules.
The court ruled, “The public disclosure bar does not apply because the information Relator pleaded in support of its claim was not ‘substantially the same’ as the information disclosed on that website.” This ruling is crucial for whistleblowers, as it allows them to pursue claims even when some information is publicly available, provided their allegations add new insights or details.
Additionally, the Ninth Circuit found that the district court had abused its discretion by denying Relator the opportunity to amend its complaint. The court stated that a district court should grant leave to amend a dismissed complaint unless it is clear that the complaint could not be saved by amendment. The Ninth Circuit noted that Relator might be able to provide additional facts to support its claims about CalCon's alleged misrepresentation of its employee count, which was another point of contention in the case.
The impact of this ruling is significant for both the parties involved and the broader legal landscape regarding the False Claims Act. It reinforces the idea that whistleblowers can bring claims based on unique insights, even when some information is publicly known. This ruling may encourage more individuals to come forward with allegations of fraud, knowing that their claims can still be valid even if some aspects have been disclosed.
Furthermore, the ruling sends a message to companies participating in government loan programs that they must be diligent in their applications and representations. Misrepresentations, even if unintentional, can lead to serious legal consequences. The decision also highlights the importance of understanding the nuances of eligibility requirements for government assistance programs.
Looking ahead, the case will return to the lower court for further proceedings. The district court will need to consider the allegations made by Relator in light of the Ninth Circuit's ruling, which may involve evaluating whether CalCon's other alleged misrepresentations are subject to the public disclosure bar. There may also be potential for an appeal depending on how the case unfolds in the lower court.
In conclusion, the Ninth Circuit's decision to revive the qui tam action against CalCon Mutual Mortgage not only allows Relator to pursue its claims but also reinforces the protections available to whistleblowers under the False Claims Act. As this case progresses, it will be important to monitor how the lower court addresses the allegations and whether any further appeals arise.