A California federal judge has dismissed a whistleblower lawsuit accusing a residential mortgage lender of improperly obtaining millions of dollars in pandemic relief funds, while leaving the door open for the case to be refiled with additional detail.

In a ruling issued Monday in Los Angeles, U.S. District Judge Sherilyn Peace Garnett found that the claims against Nations Direct Mortgage LLC were blocked by the False Claims Act’s public disclosure rule. The judge concluded that the core allegations — that the company sought Paycheck Protection Program loans despite being ineligible as a mortgage lender — were already publicly available before the lawsuit was filed.

Judge Garnett pointed to information posted on the federal oversight website PandemicOversight.gov and data published by investigative outlet ProPublica, noting that those sources disclosed the key elements underlying the lawsuit.

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“The court finds that the material elements of plaintiff’s alleged fraud claim were publicly disclosed,” the judge wrote.

Although the claims were dismissed, the court granted the plaintiff, Relator LLC, permission to amend its complaint. Judge Garnett said it was not yet clear that any revised filing would necessarily fail, particularly if the plaintiff can show it qualifies as an “original source” of nonpublic information — a requirement for overcoming the public disclosure bar.

The court noted that the current complaint does not...

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