Guild Mortgage could be saving a few million dollars after a federal appellate court vacated a big award for attorneys for a whistleblower in a decade-old Academy Mortgage lawsuit.

The lender, which was purchased by Guild in 2024, had agreed in 2022 to a $38.5 settlement to resolve a False Claims Act lawsuit from ex-underwriter Gwen Thrower. A California court in 2024 calculated an award of over $8.5 million for Thrower's attorneys, an amount which the lender appealed. 

In separate opinions Tuesday, justices of the Ninth Circuit Court of Appeals remanded the award calculation to the lower court. In one order, they suggested the lower court couldn't justify its own multiplication of their original award by 1.75 for what they deemed was an extraordinary effort by the underwriter's counsel. The appellate judges also ruled on the timing of interest accumulation for the award, in a favorable finding for the lender.

The update was first reported by Law360.

A California district court must now recalculate the attorneys' award. Tuesday's decisions don't affect the $38.5 million settlement amount, which resolved the claims which arose in 2016. 

Neither attorneys for the parties nor a spokesperson for Guild, which itself was acquired by private servicing giant Bayview last year, returned requests for comment Wednesday. 

The major settlement

In the FCA case filed in 2016, Thrower raised allegations of Academy's improper origination and underwriting practices for Federal Housing Administration-backed mortgages. During the proceedings, Thrower's attorneys from New York-based Thomas & Solomon defeated motions to dismiss from both Academy and from the government, which sought to toss the case based on its own cost-benefit analysis, according to filings. 

Out of the settlement, the U.S. Treasury received $27 million, since Thrower's qui tam action allowed her to sue Academy, on behalf of the government, for defrauding the government. Thrower received $11.5 million, and she paid T&S $1.8 million, or 16% of her award, based on her own contract with her counsel, according to the judges' summary of the proceedings.

Litigating the attorney's fees

In May 2024, the district court awarded Thrower $89,437 in legal expenses, and determined an attorney's award of $8,585,530. That total was based on an award for T&S' work, multiplied by 1.75.  Academy then appealed the higher amount it owed. 

In an oral argument last September, an attorney for Thrower and T&S emphasized to the appellate judges the "rare and exceptional" result they achieved. They claimed Thrower was the first "relator", or private citizen, in the history of the FCA to defeat a federal motion to dismiss. 

The judges in Tuesday's opinions didn't necessarily dispute T&S' effort, but rather found that the court couldn't justify its multiplier. It referred to the lodestar, the court's calculation of billable hours and market rate, in this case for rates in the Northern District of California. According to Tuesday's filings, T&S was awarded for around 7,000 billable hours of work, or 875 work days. 

"While these Herculean efforts clearly led to the denial of the government's motion to dismiss and the eventual settlement of this case, the lodestar calculations adequately account for the investigative work," wrote Judge Patrick J. Bumatay in a majority opinion. 

A second majority opinion found that post-judgment interest should only run from the time of the May 2024 attorney award, rather than from the settlement's approval in 2023 as Thrower's counsel had argued.

Guild's lingering Academy lawsuits

The False Claims Act case is one of two federal civil lawsuits yet to be resolved. 

Academy faces a pending class action lawsuit over a 2023 data breach, which affected over 280,000 customers. Plaintiffs last month asked the court to amend their complaint to add Guild as a defendant, a move Academy's attorneys asked the court to reject. A judge last week referred the motions to a lower magistrate judge for review.