Case: 17-20720 Document: 00515069049 Page: 1 Date Filed: 08/08/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 17-20720 August 8, 2019
Lyle W. Cayce
UNITED STATES OF AMERICA, Clerk
Plaintiff - Appellee
v.
JIM C. HODGE; ALLQUEST HOME MORTGAGE CORPORATION,
formerly known as Allied Home Mortgage Corporation; AMERICUS
MORTGAGE CORPORATION, formerly known as Allied Home Mortgage
Capital Corporation,
Defendants - Appellants
Appeal from the United States District Court
for the Southern District of Texas
Before BARKSDALE, SOUTHWICK, and HAYNES, Circuit Judges.
LESLIE H. SOUTHWICK, Circuit Judge:
After a five-week trial on False Claims Act and Financial Institutions
Reform, Recovery and Enforcement Act claims, the government secured
judgments and penalties that totaled nearly $300 million. On appeal, the
defendants challenge the sufficiency of the evidence, the admissibility of the
government’s expert evidence, and the district court’s dismissal of a juror
shortly before the remaining jurors reached their verdict. We AFFIRM.
Case: 17-20720 Document: 00515069049 Page: 2 Date Filed: 08/08/2019
No. 17-20720
FACTUAL AND PROCEDURAL BACKGROUND
The Federal Housing Agency (“FHA”) mortgage insurance program
insures participating lenders against any losses on qualifying mortgage loans,
which are primarily loans to first-time homebuyers.
Jim Hodge was the owner and chief executive officer of defendants Allied
Home Mortgage Capital Corporation 1 (“Allied Capital”) and Allied Home
Mortgage Corporation 2 (“Allied Corporation”). Both companies participated in
the FHA insurance program but in different ways.
Allied Capital was a loan correspondent, meaning it could originate loans
but was not permitted to hold loans. 24 C.F.R. § 202.8(a). Instead, information
it collected was forwarded to Allied Corporation, the lender or mortgagee
responsible for underwriting and funding the loan. Id. § 202.7(a). As a loan
correspondent, Allied Capital was required to obtain Department of Housing
and Urban Development (“HUD”) approval for each branch office where it
originated loans.
Participating lenders must submit a loan file to HUD to be endorsed for
FHA insurance. Loan files submitted to HUD for endorsement are
accompanied by Form 92900-A. That form requires the unique registration
number for the originating branch as well as certification that the loan is
eligible for insurance and compliant with HUD underwriting guidelines.
Allied Corporation was a participant in HUD’s “direct endorsement lender”
program, which authorized it to determine eligibility on HUD’s behalf by
certifying that a given loan met FHA guidelines.
In 2011, an Allied Capital branch manager filed a qui tam action under
the False Claims Act (“FCA”) alleging that the defendants had defrauded the
1 Now known as Americus Mortgage Corporation.
2 Now known as Allquest Home Mortgage Corporation.
2
Case: 17-20720 Document: 00515069049 Page: 3 Date Filed: 08/08/2019
No. 17-20720
government by fraudulently obtaining FHA insurance for loans that later
defaulted. See 31 U.S.C. §§ 3729-33. The government exercised its right to
intervene in the lawsuit. See id. § 3730(b)(2).
Over the course of a five-week trial, the government advanced multiple
theories of liability based on alleged violations of the FCA and the Financial
Institutions Reform, Recovery and Enforcement Act (“FIRREA”).
The jury did not immediately return a verdict, which led to a sequence
of events that culminated in the district court excusing one of the jurors. The
day after the juror was excused, the jury returned a verdict finding Allied
Corporation liable under the FCA for misrepresentations about its compliance
with FHA underwriting guidelines. See 31 U.S.C. § 3729(a)(1)(A), (B). The
jury awarded $85.6 million in damages. It likewise found Hodge and Allied
Capital liable under the FCA for misrepresenting that loans actually
originated by unregistered “shadow” branches were loans instead originated
by registered branches. See id. § 3729(a)(1)(B). For that violation of the FCA,
the jury awarded $7.4 million in damages. Finally, the jury also found all three
defendants were liable under FIRREA for false certifications about their
compliance with HUD’s quality control requirements. See 12 U.S.C.
§ 1833a(a), (c)(1).
The district court denied the defendants’ motions for judgment as a
matter of law and for a new trial. It also granted the government’s post-trial
motion for treble damages and civil penalties. It awarded treble damages and
penalties under the FCA against Allied Capital and Hodge totaling $23.1
million, against Allied Corporation totaling $268.8 million, and FIRREA
penalties of $2.2 million against each defendant.
3
Case: 17-20720 Document: 00515069049 Page: 4 Date Filed: 08/08/2019
No. 17-20720
DISCUSSION
We start with analysis of the sufficiency of the evidence, then discuss the
admission of expert testimony, and finally address the dismissal of a juror.
I. Sufficiency of the Evidence
“A motion for judgment as a matter of law . . . in an action tried by jury
is a challenge to the legal sufficiency of the evidence supporting the jury’s
verdict.” Flowers v. S. Reg’l Physician Servs. Inc., 247 F.3d 229, 235 (5th Cir.
2001) (citations omitted); see also FED. R. CIV. P. 50. Our review of the ruling
on such a motion is de novo, using the same analysis as the district court that
the motion should be granted if “there is no legally sufficient evidentiary basis
for a reasonable jury to have found for that party with respect to that issue.”
Flowers, 247 F.3d at 235 (citation omitted). Granting the motion requires that
the “facts and inferences point ‘so strongly and overwhelmingly in the movant’s
favor that reasonable jurors could not reach a contrary conclusion.’” Id.
(quoting Omnitech Int’l, Inc. v. Clorox Co., 11 F.3d 1316, 1322 (5th Cir. 1994)).
“The district court’s damages and penalty determinations are reviewed for an
abuse of discretion.” SEC v. Kahlon, 873 F.3d 500, 504 (5th Cir. 2017).
“In determining whether liability attaches under the FCA, this court
asks ‘(1) whether there was a false statement or fraudulent course of conduct;
(2) made . . . with . . . scienter; (3) that was material; and (4) that caused the
government to pay out money.’” United States ex rel. Harman v. Trinity Indus.
Inc., 872 F.3d 645, 653-54 (5th Cir. 2017) (quoting Gonzalez v. Fresenius Med.
Care N. Am., 689 F.3d 470, 475 (5th Cir. 2012)).
A. False Claims Act — Unregistered Branches
The jury found Hodge and Allied Capital liable under the False Claims
Act and awarded $7.4 million in damages for concealing that unregistered
branches had originated many of the loans being endorsed for FHA insurance.
4
Case: 17-20720 Document: 00515069049 Page: 5 Date Filed: 08/08/2019
No. 17-20720
Hodge and Allied Capital argue there was insufficient evidence of scienter,
materiality, and causation to support the jury’s verdict.
i. Scienter
To prove scienter, the government must show “the [d]efendants had (1)
actual knowledge of falsity, (2) acted with deliberate ignorance of the truth or
falsity of the information provided, or (3) acted with reckless disregard of the
truth or falsity of the information provided.” United States ex rel. Longhi v.
United States, 575 F.3d 458, 468 (5th Cir. 2009).
The defendants argue there was no evidence that Hodge “or anyone at
Allied Capital ever had any form of knowledge that these entries concerning
the mere identity of a branch location were ‘material to a false or fraudulent
claim.’” The government, though, identifies evidence that Allied Capital, with
Hodge’s approval, hid the involvement of unregistered branches from HUD and
that Hodge lied about them when the violations were discovered in a state
audit. For example, Allied compliance chief Jeanne Stell Hammond testified
that Hodge decided to continue originating loans from unregistered branches
even after HUD notified them it was not permitted, and that Hodge did not
want to register branches because of “the scrutiny by HUD.”
The jury could have relied on such evidence to find Hodge and Allied
Capital acted with scienter.
ii. Materiality
The defendants argue there is insufficient evidence that the originating
branch information was material. “[T]he term ‘material’ means having a
natural tendency to influence, or be capable of influencing, the payment or
receipt of money or property,” which requires us to evaluate “the effect on the
likely or actual behavior of the recipient of the alleged misrepresentation.”
Trinity Indus. Inc., 872 F.3d at 661 (emphasis omitted) (quoting Universal
5
Case: 17-20720 Document: 00515069049 Page: 6 Date Filed: 08/08/2019
No. 17-20720
Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 2002
(2016)).
The gist of this inquiry is whether false representations about the
originating branch for a loan induced HUD to issue insurance. The defendants
rely on the fact that the form did not list the branch number as a matter
certified to induce insurance; that underwriting certifications were more
directly relevant; that HUD later eliminated the registration requirement; and
that HUD knew about the unregistered branches when it issued insurance.
Though the branch number was not listed as a matter certified to induce
the insurance, there was testimony that the agency would not have insured
loans originated by unregistered branches. The rationale for the rule was the
agency’s experience of higher default rates on loans from unregistered
originators.
The information would not likely have been material if it were true that
HUD knew loans were originated by unregistered branches and insured them
anyway because “continued payment by the federal government after it learns
of the alleged fraud substantially increases the burden on the relator in
establishing materiality.” Trinity Indus. Inc., 872 F.3d at 663. The evidence
at trial, though, showed the opposite. The government’s “actions following its
discovery of [the] fraud support, rather than undercut, a finding of
materiality.” United States v. Luce, 873 F.3d 999, 1008 (7th Cir. 2017).
When HUD discovered a handful of loans originated from unregistered
branches, it demanded the defendants agree to indemnify HUD in the event of
claims “due to the seriousness of the violation.” When the full extent of the
conduct became apparent, HUD promptly acted to suspend and bar Hodge and
Allied Capital from the FHA program entirely. “There was no prolonged period
of acquiescence.” Id. The defendants’ assertion that the evidence showed HUD
6
Case: 17-20720 Document: 00515069049 Page: 7 Date Filed: 08/08/2019
No. 17-20720
advised them to use registered branch numbers for loans originated by
unregistered branches is not supported by the record.
iii. Causation
The defendants also challenge the sufficiency of the evidence to establish
causation. The defendants argue that their incorrectly identifying the
originating branch for a specific loan was not shown to have caused a specific
default by a borrower. The defendants rely on caselaw that in “a federal
housing case, the United States must show that the false statements in the
application were the cause of subsequent defaults.” United States v. Miller,
645 F.2d 473, 476 (5th Cir. Unit A May 1981). In Miller, we acknowledged that
not all false statements have a causal connection to a later default, but “false
statements regarding the ability of purchasers to afford housing could very
well be the major factor for subsequent defaults.” Id.
The defendants insist that a restrictive proximate cause inquiry is
needed that connects specific false statements to individual defaults. There
arguably is support for that proposal in a Miller footnote, where the court
described favorably the facts of another precedent in which “the false
representations . . . arguably had some relevance to the credit worthiness of
the borrower as well as the value of security, and thus causal connection with
the default which later occurred.” Id. at 476 n.3 (quoting United States v.
Hibbs, 568 F.2d 347, 352 (3d Cir. 1977)). Yet the facts of a specific case are not
necessarily a limit on the legal principles.
We agree proximate cause is required. That is a common-law concept
focused on the scope of risk and foreseeability. See Paroline v. United States,
572 U.S. 434, 445 (2014). The Supreme Court has labeled proximate cause as
“a flexible concept.” Id. at 444 (quoting Bridge v. Phoenix Bond & Indem. Co.,
553 U.S. 639, 654 (2008)). It “is often explicated in terms of foreseeability or
7
Case: 17-20720 Document: 00515069049 Page: 8 Date Filed: 08/08/2019
No. 17-20720
the scope of the risk created by the predicate conduct” and “thus serves, inter
alia, to preclude liability in situations where the causal link between conduct
and result is so attenuated that the consequence is more aptly described as
mere fortuity.” Id. at 445.
We expect that connecting false statements and defaults with specific
loans is not feasible in a case that relies on sampling and extrapolation, as does
this one. The government fairly reasons that HUD linked unregistered
branches to higher risks of default, and that the expert evidence showed those
loans, as predicted, defaulted at higher rates. It then follows that the false
statements distorted the risk perceived by HUD, which caused it to insure
more loans and incur more losses than it would have otherwise.
This amounts to more than enough evidence for a jury to find that the
false statements were a proximate cause of the losses. Viewing the risks and
effects of the false statements in the aggregate reveals the relationship
between the misconduct and the loss. Even if the defendants did not know
which specific loans would eventually default, it was foreseeable that a higher
percentage of them would result in claims.
B. False Claims Act — Reckless Underwriting
The defendants also challenge the sufficiency of the evidence of scienter,
materiality, and causation for the other FCA claims against Allied Corporation
premised on a theory of reckless underwriting.
i. Scienter
The jury could have found scienter based on, among other things,
testimony that Allied Corporation’s employees were aware of HUD
underwriting guidelines, that the government’s expert identified significant
amounts of obvious and serious defects; and that management imposed
impossible quotas on its underwriters.
8
Case: 17-20720 Document: 00515069049 Page: 9 Date Filed: 08/08/2019
No. 17-20720
Allied Corporation’s brief takes issue only with the expert evidence. For
the reasons described later in our review of challenges to the experts, the
defendants have failed to show that this evidence was unreliable. See Part
II.B, infra. The jury was free to credit that testimony along with the other
evidence not addressed by the defendants. See United States v. 14.38 Acres of
Land, 80 F.3d 1074, 1077 (5th Cir. 1996).
ii. Materiality
The defendants’ brief devoted two sentences to challenging the
sufficiency of the evidence for materiality. The argument is conclusory, which
means it is inadequately briefed and we therefore decline to discuss it further.
United States v. McMillan, 600 F.3d 434, 457 n.75 (5th Cir. 2010).
iii. Causation
The defendants contend that the government put on no evidence that
“reckless underwriting” caused defaults. The government’s expert, though,
testified explicitly about deficiently underwritten loans that resulted in claims.
At the very least, “false statements regarding the ability of purchasers to afford
housing could very well be the major factor for subsequent defaults.” Miller,
645 F.2d at 476. The jury could have found that they were such a factor here.
C. FIRREA Penalties
Hodge challenges the jury’s finding of FIRREA liability for false
certifications and quality control documents. 12 U.S.C. § 1833a(a), (c)
(incorporating 18 U.S.C. §§ 1006, 1014). Hodge argues that the plain language
of the statute requires him to have personally made false entries, not merely
to have caused them to be made.
Hodge waived this issue when he requested a jury instruction providing
for FIRREA liability if he “made, or caused to be made” false certifications or
9
Case: 17-20720 Document: 00515069049 Page: 10 Date Filed: 08/08/2019
No. 17-20720
quality control documents. “A party cannot complain on appeal of errors which
he himself induced the district court to commit.” McCaig v. Wells Fargo Bank
(Texas), N.A., 788 F.3d 463, 476 (5th Cir. 2015) (quoting United States v.
Lopez–Escobar, 920 F.2d 1241, 1246 (5th Cir. 1991)). Even if he had not waived
the point, previous panels already held it is only necessary to have caused false
entries to be made. See United States v. Beuttenmuller, 29 F.3d 973, 982 (5th
Cir. 1994), overruled in part on other grounds by United States v. Gaudin, 515
U.S. 506 (1995). We are required to reach the same result.
II. Experts
Three experts testified for the government at trial. The district court
conducted a pre-trial hearing to examine the admissibility of the expert
testimony pursuant to Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 594-
95 (1993). The defendants argue that reversal is necessary because the district
court failed to develop an adequate record when it denied their Daubert
motions without making findings or stating its reasoning. The defendants also
argue that, regardless, admitting the testimony was an abuse of discretion
because the experts’ methodologies were insufficiently reliable.
A. District Court Record
The defendants contend that the district court abused its discretion
because it did not make findings or articulate its reasoning when it summarily
denied their Daubert motions. “At a minimum, a district court must create a
record of its Daubert inquiry and ‘articulate its basis for admitting expert
testimony.’” 3 Carlson v. Bioremedi Therapeutic Sys., Inc., 822 F.3d 194, 201
(5th Cir. 2016) (quoting Rodriguez, 242 F.3d at 581).
To invoke this requirement, though, “an expert’s testimony, or its ‘factual basis, data,
3
principles, methods, or their application,’ must be ‘called sufficiently into question.’”
10
Case: 17-20720 Document: 00515069049 Page: 11 Date Filed: 08/08/2019
No. 17-20720
How and when the district court expresses its reasoning can vary. The
record here is sufficiently developed to analyze admissibility. This is not an
instance where “the record reflects that no Daubert inquiry took place.” Id.
The district court was closely engaged with the development of the sampling
methodology relied upon by the government’s experts; it heard arguments on
the defendants’ various Daubert motions; and it at least belatedly elaborated
on its reasons for admitting the expert testimony when it later denied the
defendants’ motion for a new trial. Indeed, this is a particularly inappropriate
case to remand to obtain the district court’s reasoning as it has already been
stated in its later order.
The district court’s reasoning is clear, and we now examine the ruling.
B. Admission of Expert Testimony
We “review the admission of expert testimony for an abuse of discretion,”
which means that it “will be upheld unless it was ‘manifestly erroneous.’” Id.
at 199 (quoting United States v. Valencia, 600 F.3d 389, 423 (5th Cir. 2010)).
Even then, “we still may affirm unless the ruling ‘affected the substantial
rights of the complaining party.’” Id. (quoting Nunez v. Allstate Ins. Co., 604
F.3d 840, 844 (5th Cir. 2010)).
“[E]xpert testimony is admissible only if it is both relevant and reliable.”
Pipitone v. Biomatrix, Inc., 288 F.3d 239, 244 (5th Cir. 2002). Factors that
might inform whether testimony is reliable “include whether the expert’s
theory or technique: (1) can be or has been tested; (2) has been subjected to
peer review and publication; (3) has a known or potential rate of error or
standards controlling its operation; and (4) is generally accepted in the
relevant scientific community.” Id.
Rodriguez v. Riddell Sports, Inc., 242 F.3d 567, 581 (5th Cir. 2001) (quoting Kumho Tire Co.
v. Carmichael, 526 U.S. 137, 149 (1999)).
11
Case: 17-20720 Document: 00515069049 Page: 12 Date Filed: 08/08/2019
No. 17-20720
Even when a court “rules that an expert’s testimony is reliable, this does
not necessarily mean that contradictory expert testimony is unreliable.” FED.
R. EVID. 702 advisory committee’s note to 2000 amendment. Our “focus, of
course, must be solely on principles and methodology, not on the conclusions
that they generate.” Daubert, 509 U.S. at 595. This means “[t]he Daubert
[inquiry] should not supplant trial on the merits.” Mathis v. Exxon Corp., 302
F.3d 448, 461 (5th Cir. 2002). “Vigorous cross-examination, presentation of
contrary evidence, and careful instruction on the burden of proof are the
traditional and appropriate means of attacking shaky but admissible
evidence.” Daubert, 509 U.S. at 596.
The defendants filed four separate Daubert motions in the district court.
On appeal the defendants challenge the reliability of Dr. Katherine Ensor’s
sampling methodology, Dr. Richard Payne’s re-underwriting methodology, and
apparently the admission of any expert testimony about damages.
i. Sampling Methodology
Dr. Ensor testified for the government as a statistical sampling expert.
She described how she generated the stratified random samples of loan files
that were then utilized by the other experts in their own analyses. The
defendants’ Daubert motions disputed the sampling on multiple grounds. At
the Daubert hearing, the government argued that the defendants waived these
challenges when they agreed to sampling during discovery.
The relevant chronology as to this issue is that in a November 2014
filing, the defendants objected to the government’s request for all the loan files
and sought to limit discovery to a “random, statistically relevant sample size.”
In December 2014, the parties told the district court they hoped to agree on the
sampling methodology to avoid unnecessary Daubert challenges.
12
Case: 17-20720 Document: 00515069049 Page: 13 Date Filed: 08/08/2019
No. 17-20720
By a January 2015 hearing where the district court heard from both
sides’ experts, the parties had agreed on the mechanics of the sampling
methodology but continued to disagree about the number of loans that would
be included in the sample. At this point, the government had proposed a
sample consisting of 385 loans that resulted in FHA insurance claims (the
“Claim Loans”) and 106 loans that did not result in claims to HUD (the “Non-
Claim Loans”). The defendants countered by proposing “[u]niform sample
sizes of 200 loan files” for each category because they “would be more quickly
analyzed and more easily compared.” The defendants similarly argued that
different amounts of Claim and Non-Claim Loans would make comparisons
between them “very complex, and unnecessarily burdensome.”
In other words, the defendants’ objections were only to the number of
loan files in each category and the burden that imposed, not to relevance or
reliability. The district court then ordered the defendants to produce loan files
“pursuant to the sampling methodology as set forth by the Government.”
On appeal, the defendants complain that Dr. Ensor “failed to control for
obvious causes of loan defaults” or for the date of default, but these issues are
unreviewable because they were waived. See United States v. Rodriguez, 602
F.3d 346, 350-51 (5th Cir. 2010). “Waiver is the ‘intentional relinquishment or
abandonment of a known right.’” United States v. Arviso-Mata, 442 F.3d 382,
384 (5th Cir. 2006) (quoting United States v. Olano, 507 U.S. 725, 733 (1993)).
None of this came up during the extensive negotiations over the sampling
methodology that would be used. The defendants’ own expert informed the
district court that there was no such disagreement:
THE COURT: So the bottom line — so I guess the bottom
line we’re just talking about — you’re not disagreeing with the
methodology, you’re just really disagreeing with the numbers that
are used to come up with the number of files to be sampled?
DR. LASSITER: That is correct, Your Honor.
13
Case: 17-20720 Document: 00515069049 Page: 14 Date Filed: 08/08/2019
No. 17-20720
This testimony identified the argument being made now but it was not
pursued. Any challenge to the sampling other than the number of files selected
was waived.
The defendants do raise the preserved challenge to the number of Claim
and Non-Claim Loans sampled, but they never explain in their brief how the
amounts rendered any of the expert testimony unreliable. 4 “As a general rule,
questions relating to the bases and sources of an expert’s opinion affect the
weight to be assigned that opinion rather than its admissibility and should be
left for the jury’s consideration.” 14.38 Acres of Land, 80 F.3d at 1077 (quoting
Viterbo v. Dow Chem. Co., 826 F.2d 420, 422 (5th Cir. 1987)).
ii. Re-Underwriting Methodology
The government called Dr. Richard Payne to testify about the FCA
claims premised on Allied Corporation “recklessly underwriting” loans that
were ineligible for FHA insurance. Dr. Payne undertook a “re-underwriting
review” of 460 loans contained in the sample generated by Dr. Ensor. Dr.
Payne ultimately concluded that 240 loans were ineligible for FHA insurance
because they were deficient under the applicable HUD guidelines. The
defendants claim that this testimony was unreliable because Dr. Payne
“consciously refused to apply the HUD [underwriting] standard” and
“confect[ed] his own idiosyncratic eligibility standards.” 5
4 It is worth noting that the defendants offered no affirmative evidence in support of
any of the Daubert motions, such as their own expert materials.
5 In their reply brief the defendants assert for the first time that Dr. Payne’s testimony
about eligibility was “not even a relevant inquiry when it is recklessness and proximate cause
that must be proved.” “Needless to say, we do not consider issues raised for the first time in
a reply brief” and “the failure to provide any legal or factual analysis of an issue results in
waiver of that issue.” Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 260 n.9 (5th
Cir. 1995).
14
Case: 17-20720 Document: 00515069049 Page: 15 Date Filed: 08/08/2019
No. 17-20720
There is nothing in the record to support the defendants’ contention that
Dr. Payne did not apply the HUD underwriting standards. To the contrary,
Dr. Payne’s report explained that he had “instructed the re-underwriting team
to review each Mortgage Loan file and compare the contents to the credit
requirements from the HUD Handbooks in effect at the time, including, but
not limited to, [sections] 4155.1, 4000.4 and 4150.2.” At trial, Dr. Payne
explained that the FHA supplements the HUD Handbooks with “mortgagee
letters, which usually get incorporated in the next version of the applicable
underwriting guideline,” and that any automated underwriting is covered by
an FHA guide called the TOTAL Mortgage Scorecard.
Dr. Payne testified that these documents collectively represent HUD’s
underwriting guidelines, and that he applied them to determine whether the
loans in the sample were eligible for FHA insurance. The government also
introduced into evidence a spreadsheet listing the 240 loans Dr. Payne
concluded had been ineligible for FHA insurance based on his finding “a
deficiency relative to the underwriting guidelines.” For each ineligible loan,
the spreadsheet included “the Allied Home Mortgage loan number, the case
number, a classification of the [deficiency] finding, a narrative describing the
[deficiency] finding, and the applicable guidelines that were used.”
Importantly, the spreadsheet identified on a loan-by-loan basis the specific
HUD guidelines on which Dr. Payne based his deficiency findings and
eligibility conclusions.
The defendants do not question any specific component of Dr. Payne’s
methodology or any ineligibility finding for a specific loan. The defendants
instead refer to a regulation that establishes the underwriting guidelines
published by HUD as the minimum standard for due diligence. See 24 C.F.R.
§ 203.5(c). That regulation is consistent with Dr. Payne’s methodology and
only provides additional support for its reliability.
15
Case: 17-20720 Document: 00515069049 Page: 16 Date Filed: 08/08/2019
No. 17-20720
iii. Damages Methodology
In two sentences the defendants contend that “the challenged expert
testimony on FCA damages” was irrelevant and unreliable because it “failed to
use, or even consider, the correct causation standard.” They failed to identify
specific testimony or even a specific expert they are challenging. “We decline
to review this argument as conclusory and inadequately briefed.” McMillan,
600 F.3d at 457 n.75. 6
III. Juror No. 7
A. The Deliberations and Discharge
On the second day of deliberations, the jury sent a note to the district
court stating that one juror “claim[ed] to have made up his mind,” had stated
that “when the Government has it in for you, they will find a way to get you,”
and was wearing ear plugs to avoid hearing the “remaining jurors try to work
through the case.” The district court instructed the jury to continue
deliberating and not to disclose the contents of deliberations.
On the third day, the jury informed the court it was deadlocked. The
defendants requested a mistrial, but the district court gave a standard Allen
charge instead. See FIFTH CIRCUIT PATTERN JURY INSTRUCTIONS (CIVIL CASES)
§ 2.18. That afternoon, the jury sent a note that they had a “substantial
majority” of eight jurors willing to deliberate, but still had “one juror who
refuse[d] to talk to the group” despite the Allen charge. The note said the juror
had “shown through statements, bias and sympathy . . . direct disregard of the
Court’s Charge.” A second note that afternoon indicated that the juror was
We do note, however, that the government’s damages expert Gordon Klein avoided
6
any double-counting issues, and that the amounts awarded by the jury were clearly derived
from his testimony.
16
Case: 17-20720 Document: 00515069049 Page: 17 Date Filed: 08/08/2019
No. 17-20720
“starting to make threats to peoples’ (fellow jurors’) physical safety,” and that
jurors were “feeling insecure and threatened.”
At this point the district court resolved to question the foreperson under
oath. The foreperson explained:
One juror is – says that that person is – is – has made their
mind up. They’re not changing. And when other jurors try to
engage and ask them – ask that person, Well, what is it – why do
you think this way? That juror says, you know, You get a vote. I
get a vote. You’re not going to change my mind, and – and – and
that person clams up.
And then other jurors start to try to ask, Well, what – what
– you know, what is it you think? How is it you think? And that
person says, you know, Don’t – don’t push me. I believe that person
said, “Don’t push me.” But I do remember that person saying
“Hush. Hush or else.” And I asked him – I said, “Or else what?
Are you going to do physical violence?” And the ladies in the room
took that as a threat of physical violence, that if we did not back
off, this person would get violent. And they consider this person to
be – one of the jurors said this person is unstable, and it – it’s not
a good situation.
At this point, the district court determined that further investigation
was warranted because there was credible evidence a juror was not complying
with its Allen instruction on the duty-to-deliberate. It then proceeded to
question each juror individually and under oath.
Most of the jurors testified that they were not personally threatened but
felt that another juror had been specifically threatened. One juror answered
that she felt threatened or uncomfortable after someone started “downright
shouting that they didn’t have to [collaborate], that they were going to sit there
as long as it took, that nothing was going to change their mind,” and would
“become irate and yell . . . to the point that it made [her] shaky.”
When the district court posed the standard questions to Juror No. 7,
there were clear echoes of the alleged refusal to deliberate:
17
Case: 17-20720 Document: 00515069049 Page: 18 Date Filed: 08/08/2019
No. 17-20720
THE COURT: Are you willing to consider whether – if a
substantial majority of fellow jurors disagrees with you, whether
or not your position on the evidence is reasonable? That is, are you
willing –
JUROR: Yes. My – my decision is reasonable, yes.
THE COURT: Okay. But are you willing to consider if – if –
are you willing to consider whether – if a substantial majority of
fellow jurors disagrees with you, whether or not your position is in
fact reasonable?
JUROR: I say yes, my decision is reasonable.
Juror No. 7 denied threatening anybody but admitted to wearing
earplugs. After the jurors had each been questioned, the defendants renewed
their motion for a mistrial. The district court denied the motion because it
disagreed that the issue was “about one lone holdout” or “a disagreement over
the evidence” but instead was about the juror’s “failure to follow the Court’s
instructions.” It found there was credible evidence the juror had “not
participated in the deliberations” and that “he threatened at least one fellow
juror who attempted to follow the court’s instructions to deliberate.” It pointed
out that fellow jurors “used words like ‘scary,’ ‘felt threatened,’ ‘unstable’” to
describe the individual and concluded it did not “believe [he was] telling the
truth with respect to his deliberations and his compliance with the Court’s
order.”
B. Analysis
The defendants argue that the district court erred by denying their
request for a mistrial and discharging the juror. A district court “may excuse
a juror for good cause.” FED. R. CIV. P. 47(C). “We review a district court’s
response to juror misconduct for abuse of discretion.” United States v. Ebron,
683 F.3d 105, 125 (5th Cir. 2012).
18
Case: 17-20720 Document: 00515069049 Page: 19 Date Filed: 08/08/2019
No. 17-20720
Based on “the clear and credible nature of the foreperson’s allegations,
the district court had a sufficient basis for initiating an investigation to
uncover whether a juror was in fact refusing to follow instructions.” Id. at 126.
The district court also did not abuse its discretion when it removed Juror No.
7 following that investigation.
We have previously declined to apply the rule used by some circuits that
prohibits dismissing a juror unless there is “no possibility” that the failure to
deliberate arises from their view of the evidence. Id. at 128. We observed that
when the dismissal is due to a failure to be candid or a refusal to follow
instructions, those are grounds that “do not implicate the deliberative process.”
Id.
Here, the district court found that Juror No. 7 had failed to follow
instructions, exhibited a lack of candor during questioning, and had engaged
in threatening behavior towards other jurors. Though defendants argue that
this juror was removed for reasons that involve the deliberative process, there
were sufficient independent reasons for his removal, namely, his lack of candor
and his threatening behavior. No new rule about “no possibility” needs to be
adopted or rejected in this case.
AFFIRMED.
19