FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BARRETT BATES, STATE OF
CALIFORNIA ex rel. Barrett R.
Bates, qui tam plaintiff, on behalf
of real parties in interest, Alameda
County, et al.,
Plaintiff-Appellant,
No. 11-15894
v.
D.C. No.
MORTGAGE ELECTRONIC 2:10-cv-01429-
REGISTRATION SYSTEM, INC.; GEB-CMK
BANK OF AMERICA, NA; BANK OF
OPINION
AMERICA, NA, FKA Countrywide
Home Loans, Inc.; CITIMORTGAGE,
INC.; GMAC MORTGAGE LLC;
JPMORGAN CHASE BANK; WELLS
FARGO BANK, NA,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of California
Garland E. Burrell, Jr., District Judge, Presiding
Submitted August 9, 2012*
San Francisco, California
Filed September 17, 2012
*The panel unanimously finds this case suitable for decision without
oral argument. Fed. R. App. P. 34(a)(2).
11323
11324 BATES v. MORTGAGE ELECTRONIC REGISTRATION
Before: Mary M. Schroeder and Consuelo M. Callahan,
Circuit Judges, and Edward R. Korman, District Judge.**
Opinion by Judge Callahan
**The Honorable Edward R. Korman, District Judge for the United
States District Court for the Eastern District of New York, sitting by des-
ignation.
BATES v. MORTGAGE ELECTRONIC REGISTRATION 11325
COUNSEL
Treva J. Hearne and Robert R. Hager, Hager & Hearne, Reno,
Nevada, and Mark Mausert, Reno, Nevada, for the plaintiff-
appellant.
11326 BATES v. MORTGAGE ELECTRONIC REGISTRATION
Thomas Hefferon and Joseph Yenouskas, Goodwin Procter
LLP, Washington, DC, Robert Padway, Robert James Espo-
sito and Deborah Anne Goldfarb, Bryan Cave LLP, San Fran-
cisco, California, and Robert M. Brochin, Morgan, Lewis &
Bockius LLP, Miami, Florida, for the defendants-appellees.
OPINION
CALLAHAN, Circuit Judge:
Plaintiff Barrett R. Bates, a realtor, filed suit under the Cal-
ifornia False Claims Act (“CFCA”), Cal. Gov’t Code
§§ 12650-12655, against Defendants Mortgage Electronic
Registration System, Inc. (“MERS”), Bank of America, N.A.,
Countrywide Home Loans, Inc., Citimortgage, Inc., GMAC
Mortgage LLC,1 J. P. Morgan Chase Bank, and Wells Fargo,
N.A. (collectively, “Defendants”) on behalf of numerous Cali-
fornia counties. Bates alleged that Defendants made false rep-
resentations in naming MERS as a beneficiary in recorded
mortgage documents in order to avoid paying recording fees.
Defendants moved to dismiss the qui tam action under Fed-
eral Rules of Civil Procedure 12(b)(1) for lack of subject mat-
ter jurisdiction and 12(b)(6) for failure to state a claim upon
which relief may be granted. Following Defendants’ motions,
Bates filed a motion for leave to file a Second Amended
Complaint. The district court concluded that the public disclo-
sure provision in the CFCA required dismissal of the action
for lack of subject matter jurisdiction and, as a result, it did
not analyze the 12(b)(6) motion or the motion to amend.
Because Bates has failed to demonstrate that the district court
erred in dismissing his claims as jurisdictionally barred, we
affirm the district court’s decision.
1
GMAC Mortgage LLC has since filed a Notice of Bankruptcy, and this
appeal is automatically stayed as to GMAC.
BATES v. MORTGAGE ELECTRONIC REGISTRATION 11327
I. BACKGROUND
On July 17, 2009, Bates filed his first complaint in state
court, alleging violations of the CFCA on behalf of the real
parties in interest, the Counties of the State of California. On
May 10, 2010, Bates filed the First Amended Complaint
(“FAC”), which is the subject of this appeal. In the FAC,
Bates alleged that, during the course of his work as a realtor
in the secondary mortgage market business in June 2009, he
discovered that Defendants were making false statements in
order to avoid or decrease recording fees. Specifically, Bates
alleged that Defendants falsely named MERS as a beneficiary
in recorded mortgage documents. Bates’s theory of liability
involves the use of the MERS loan registry system (“MERS
System”), which allows parties to a loan (borrowers and lend-
ers) to agree that MERS can serve as mortgagee on the loan
documents as nominee for the noteholder. Thus, when inter-
ests in the loans are transferred, the mortgage does not need
to be assigned but instead the identity of the secured party is
tracked by the MERS System.2 Bates argues that this system
is fraudulent because the lenders’ decision not to create and
record assignments of a MERS mortgage deprived the Coun-
ties of recording-fee revenues.
II. DISTRICT COURT PROCEEDINGS
MERS removed the action to the United States District
Court for the Eastern District of California, asserting diversity
jurisdiction under 28 U.S.C. § 1332. On June 18, 2010, Bates
filed a motion to remand to state court, contending that the
State of California was a real party in interest in the lawsuit
2
We recently discussed MERS at length in affirming the dismissal of a
putative class action lawsuit alleging that lenders (some of whom are
Appellees here) used the MERS System to commit fraud and facilitate
wrongful foreclosures. See Cervantes v. Countrywide Home Loans, Inc.,
656 F.3d 1034 (9th Cir. 2011) (explaining that MERS was specifically
created as a solution to streamline the tedious recording process).
11328 BATES v. MORTGAGE ELECTRONIC REGISTRATION
whose presence destroyed diversity. The District Court denied
Bates’s motion, finding that complete diversity existed
between the parties and that the amount in controversy, exclu-
sive of interest and costs, exceeded $75,000. The court held
that the State was a nominal party, whose listing in the cap-
tion of the FAC would be disregarded in determining diver-
sity of citizenship because Bates’s suit only sought to recover
recording fees which, when due, are payable to and usable by
the Counties exclusively. Accordingly, the district court deter-
mined that the only real parties in interest were the Counties,
and Bates had “failed to point to any allegation in his com-
plaint showing that he is also suing on behalf of the State.”
Between August 19 and August 23, 2010, Defendants filed
motions to dismiss the FAC, contending that the claims were
jurisdictionally barred under the CFCA. The district court
granted the motion to dismiss, holding that Bates’s suit was
jurisdictionally barred by the “public disclosure” exception of
the CFCA. In ruling on the motions to dismiss, the district
court reasoned that because Bates’s allegations “are substan-
tially similar to information already in the public domain,” his
action is barred by the CFCA. State ex rel. Grayson v. Pac.
Bell Tel. Co., 142 Cal. App. 4th 741, 749 (2006). The court
further reasoned that Bates could not have been an “original
source” leading to the public disclosure of the fraudulent acts
because he alleged that he became aware of these acts only in
June 2009, which was long after the information was already
in the public domain. Because the district court found this
issue dispositive, it declined to rule on Defendants’ motion to
dismiss for failure to state a claim.
Following the court’s ruling on the motions to dismiss, the
district court entered judgment in favor of Defendants. Bates
timely appealed. We have jurisdiction under 28 U.S.C.
§ 1291.
BATES v. MORTGAGE ELECTRONIC REGISTRATION 11329
III. ANALYSIS
A. Standard of Review
The district court’s dismissal under Federal Rule of Civil
Procedure 12(b)(1) and denial of the motion to remand are
reviewed de novo. A-1 Ambulance Serv., Inc. v. California,
202 F.3d 1238, 1242-43 (9th Cir. 2000). All of the facts
alleged in the complaint are presumed true, and the pleadings
are construed in the light most favorable to the nonmoving
party. Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d 1028,
1029-30 (9th Cir. 2009).
B. The Court Did Not Err in Denying Bates’s Motion to
Remand.
[1] As an initial matter, Bates contends that because the
State of California is a real party in interest, diversity jurisdic-
tion is defeated and the case should have been remanded to
state court. However, the district court properly determined
that Bates “failed to point to any allegation in his complaint
showing that he is also suing on behalf of the State.” Under
Navarro Savings Ass’n v. Lee, 446 U.S. 458, 461 (1980),
courts “must disregard nominal or formal parties and rest
jurisdiction only upon the citizenship of real parties to the
controversy.” Bates cannot resuscitate his motion to remand
through conjecture when his pleadings do not disclose any
ground for treating the State as a real party in interest. If Bates
were successful in his suit, the State would not realize any
benefit as a result. Because the FAC discloses that this suit
was brought to remedy an alleged fraud committed solely
against the Counties, the Counties are the real parties in this
controversy. Accordingly, the district court properly denied
the motion to remand.
C. Bates’s Qui Tam Action is Jurisdictionally Barred by
the CFCA.
[2] The CFCA is a “whistleblower” statute that is designed
to protect public finances by allowing individuals to file suit
11330 BATES v. MORTGAGE ELECTRONIC REGISTRATION
under seal on behalf of the State or Counties. However, to
prevent profiteering, the CFCA provides that “[n]o court shall
have jurisdiction” over a qui tam civil action under the statute
when the action is “based upon the public disclosure” of the
allegations of transactions raised in the action. Cal. Gov’t
Code § 12652(d)(3)(A). This public disclosure provision
“erects a jurisdictional bar to qui tam actions that do not assist
the government in ferreting out fraud because the fraudulent
allegations or transactions are already in the public domain.”
Grayson, 142 Cal. App. 4th at 748 (internal citation omitted).
[3] An action is barred under the public disclosure provi-
sion when the prior public disclosures are “sufficient to place
the government on notice of the alleged fraud” or “practice
prior to the filing of the qui tam action.” Id. at 748, 752. “A
relator’s ability to recognize the legal consequences of a pub-
licly disclosed fraudulent transaction does not alter the fact
that the material elements of the violation already have been
publicly disclosed.” United States ex rel. Findley v. FPC-
Boron Emps. Club, 105 F.3d 675, 688 (D.C. Cir. 1997). As
the court below concluded, the numerous prior public disclo-
sures sufficed to place the government on notice of the factual
allegations in Bates’s FAC.
[4] Bates contends that, under City of Hawthorne v. H&C
Disposal Co., 109 Cal. App. 4th 1668, 1678 (2003), prior to
his litigation, no one “sufficiently alerted the government to
the possibility” fraud was being committed. He further con-
tends that he was the “original source” of the allegations in
the complaint, and that the court “misapplied the law in hold-
ing that [Bates] could not qualify as an ‘original source’ based
solely on the dates of the articles and other information pur-
portedly within the public domain.” However, we conclude
that substantially similar information to Bates’s allegations
already existed in the public domain at the time he filed suit.
Bates’s allegations reveal the equivalent of information
already available to the public through other cases and pub-
lished articles: that MERS is named as a beneficiary in mort-
BATES v. MORTGAGE ELECTRONIC REGISTRATION 11331
gage documents and that the MERS System allows parties to
avoid the recordation of mortgage documents and payment of
the corresponding fees to the Counties. To be considered
“substantially similar” under Grayson, the public disclosures
need not consist of legal conclusions identical to those of the
qui tam plaintiff. Grayson, 142 Cal. App. 4th at 750-52.
Rather, the lawsuit is jurisdictionally barred if the complaint
“substantially repeats” facts that are already known. Id.3
[5] Moreover, Bates cannot escape the public disclosure
bar by arguing that he was the “original source” of the infor-
mation because his alleged discovery of the MERS System
fraud in June 2009 postdated numerous public disclosures. It
is thus temporally impossible for Bates’s discovery of the
information to have been the catalyst for the public disclo-
sures. Bates cannot demonstrate that a causal relationship
exists between himself and the public disclosures. See Cal.
Gov’t Code § 12652(d)(3)(B) (“‘Original source’ means an
individual . . . whose information provided the basis or cata-
lyst for the investigation, hearing, audit, or report that led to
the public disclosure.”). Accordingly, the district court prop-
erly dismissed the action as jurisdictionally barred.4
3
Bates attempts to dissuade us from applying Grayson, arguing that the
California Court of Appeal decision “erroneously applied a federal stan-
dard.” Bates’s argument is not well-taken. This court is bound to follow
the appellate decision from California “in the absence of convincing evi-
dence that the highest court of the state would decide [the issue] different-
ly.” Hubbard v. SoBreck, LLC, 554 F.3d 742, 745 (9th Cir. 2009). Bates
has provided no such convincing evidence in his briefs. Further, Grayson
did not erroneously apply a federal standard. Accordingly, we accept
Grayson as setting forth California law.
4
Because we conclude that the district court did not err in dismissing
Bates’s claims for lack of subject matter jurisdiction, we do not reach
Defendants’ argument that the dismissal may be upheld because Bates
failed to state a claim upon which relief may be granted.
11332 BATES v. MORTGAGE ELECTRONIC REGISTRATION
IV. CONCLUSION
The district court did not err in denying Bates’s motion to
remand the action to state court because Bates did not demon-
strate how the State of California is anything more than a
nominal party. Furthermore, Bates’s factual allegations
regarding the MERS System had already been publicly dis-
closed, and the dates in the FAC foreclose the possibility that
Bates could be an original source of the information. Accord-
ingly, the district court properly found that Bates’s claims are
jurisdictionally barred by the CFCA. The district court’s judg-
ment is AFFIRMED.