Citibank Secures Dismissal in Florida False Claims Act Case

Paul, Weiss achieved a significant victory for Citibank, N.A., securing the dismissal of a qui tam action brought in Florida state court under the Florida False Claims Act (FFCA). The case was brought in connection with two synthetic fixed-rate transactions with a notional value of $1 billion entered into in 2003 and 2005 by the Central Florida Expressway Authority with Citibank, JPMorgan, Morgan Stanley, RBC and UBS AG.

The relator alleged that the defendant banks fraudulently induced the Authority to enter into the at-issue swap agreements by, among other things, failing to disclose certain “industry standard” items to the Authority. As a result of the alleged fraudulent inducement, the relator claimed that all subsequent payments made to the defendant banks—including monthly payments amounting to “tens of millions of dollars” and swap termination fees of approximately $300 million—constituted “false claims,” giving rise to liability under the FFCA.

Following motion to dismiss briefings, Judge Angela Dempsey of the Second Judicial Circuit of Florida in Leon County dismissed the action at the conclusion of the parties’ two-hour oral argument “for all of the reasons noted by Defendants in their papers and at the hearing.” Judge Dempsey agreed with the defendants’ arguments that the complaint was based on publicly available information that had long been discernable and framed the relator’s action as a case of a “bad deal” that the Authority later regretted due to subsequent economic upheaval. Judge Dempsey also noted that a failure to disclose theory is not actionable under the FFCA, and held that the relator’s complaint failed to meet the requisite degree of particularity necessary for a claim of fraud.

The Paul, Weiss team included litigation partners Susanna Buergel and Jane O’Brien.