Sur-reply brief (US omnibus) — United States ex rel. Pietschner v. Petralia, Frohwein & Robinson (E.D. Tex.)

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UNITED STATES DISTRICT COURT · No. 4:21-cv-00110-SDJ · Doc. 95 · 2025-05-30 · Docket on CourtListener

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IN THE UNITED STATES DISTRICT COURT 
FOR THE EASTERN DISTRICT OF TEXAS 
SHERMAN DIVISION 
 
UNITED STATES OF AMERICA 
ex rel. PAUL PIETSCHNER, 
 
Plaintiff, 
 
v. 
 
KATHRYN PETRALIA;  
ROBERT FROHWEIN; and  
SPENCER ROBINSON, 
 
Defendants. 
 
 
 
 
 
Civil Action No.: 4:21-cv-110-SDJ 
 
UNITED STATES’ OMNIBUS SUR-REPLY IN OPPOSITION TO DEFENDANTS’ 
MOTIONS TO DISMISS THE UNITED STATES’ COMPLAINT-IN-INTERVENTION 
 
Plaintiff, the United States of America (the “United States” or the “Government”) by and 
through undersigned counsel, hereby submits this sur-reply in opposition to Defendants’ Motions 
to Dismiss (ECF No. 66, the “Joint Motion”; ECF No. 65, the “Petralia Motion”; ECF No. 67, the 
“Robinson Motion”; ECF No. 68, the “Frohwein Motion”).  This sur-reply contains three parts:  
Part I responds to arguments in Defendants’ Reply in Support of their Joint Motion to Dismiss 
(ECF No. 91, the “Joint Reply”); Part II responds to arguments in Defendant Robert Frohwein’s 
Reply Brief in Support of His Motion to Dismiss (ECF No. 93, the “Frohwein Reply”); and Part 
III responds to arguments in Defendant Spencer Robinson’s Reply in Support of His Motion to 
Dismiss (ECF No. 90, the “Robinson Reply”).  The United States has not included a sur-reply to 
Defendant Kathryn Petralia’s Reply in Support of Her Motion to Dismiss (ECF No. 92, the 
“Petralia Reply”) because the arguments therein are sufficiently addressed in the United States’ 
Opposition (ECF No. 72, the “Opposition” or “Opp’n”).  
 
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I. 
GOVERNMENT’S RESPONSE TO THE JOINT REPLY 
In this sur-reply, the United States responds to certain arguments in the Joint Reply relating 
to venue and personal jurisdiction (at 1, 3–5) and materiality (at 9–12).  This sur-reply does not 
address other arguments relating to venue (at 2–3, 6–7), falsity (at 7–9), conspiracy (at 12–13), 
Defendants’ Fifth Amendment invocations (at 13–14), or amendment of the United States’ 
Complaint-in-Intervention (ECF No. 40, the “Complaint”) (at 14–15) because these points are 
sufficiently addressed in the United States’ Opposition.  
A. In Requesting Transfer as an Alternative to Dismissal, the United States Has Not 
Proposed NDGA As An “Alternate Venue.” 
Preliminarily, Defendants misconstrue in the introduction to the Joint Reply (at 1) the 
Government’s request that the Court consider transfer under 28 U.S.C. § 1406(a) as an alternative 
to dismissal as seeking transfer of this case to the U.S. District Court for the Northern District of 
Georgia (“NDGA”).1  That provision authorizes a Court, “in the interest of justice” to transfer an 
action to “any district or division in which it could have been brought.”  Id. (emphasis added).  
Consistent with the arguments in the Government’s Opposition, there are numerous judicial 
districts where venue would be proper under 31 U.S.C. § 3732(a) (in a multi-defendant case, venue 
exists in any district where “any one defendant can be found, resides, transacts business, or in 
which any act proscribed by section 3729 occurred”).   
For example, other judicial districts with venue over this entire action include those in 
which Robinson and Frohwein reside (on information and belief, the Middle District of Florida 
and the Northern District of California, respectively).  Moreover, venue is proper in any judicial 
 
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The United States has not identified NDGA as its “second-choice” venue among 
these various options.  Further, no Defendant has proposed to meet and confer with the 
Government to determine whether there is a single, alternative venue for this action that would be 
satisfactory to all parties.   
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district where the Complaint alleges that a False Claims Act (“FCA”) violation caused by 
Defendants occurred, or any overt act in furtherance of Defendants’ alleged conspiracy occurred 
(Opp’n 16–17), a list that includes the District of New Jersey (Compl. ¶ 302), the Northern District 
of Illinois (Compl. ¶ 326), the Southern District of Texas (Compl. ¶ 328), the District of Columbia, 
where each one of the alleged false claims and statements in this action was presented to the U.S. 
Small Business Administration (“SBA”), and the Eastern District of Virginia, where SBA 
maintained servers that accepted PPP applications and processing fee requests from lenders and 
transmitted processing fees to lenders.  Were the United States to amend its Complaint to allege 
the specific location of any other thousands of violations of the FCA caused by Defendants’ 
conduct referenced in the Complaint, venue for this entire action would be proper in those myriad 
judicial districts as well.   
Nonetheless, for the reasons set forth in the United States’ Opposition and in this sur-reply, 
the Court need not consider transfer or the numerous venue alternatives because venue is proper 
in this District.   
B. All Allegations in the Complaint Are Relevant to Venue. 
Defendants’ continued reliance (Joint Reply 4) on the venue allegation stated in the 
Complaint (¶ 7) is misplaced.  As the very case law on which Defendants rely makes clear, if a 
court decides venue on the papers, it does so based on all facts alleged in the Complaint taken as 
true.  See, e.g., Tobien v. Nationwide Gen. Ins. Co., 133 F. 4th 613, 621 (6th Cir. 2025) (where 
district court “decided a 12(b)(3) motion on the papers alone,” plaintiff was required to “show that 
his pleadings and affidavits, if accepted as true, would establish that venue was proper”).  
Alternatively, a plaintiff may be entitled to present evidence or obtain venue discovery to create a 
factual record in support of its theory of venue.  Id. at 621−22.  In fact, a plaintiff need not allege 
venue in its Complaint at all.  Id. at 621.  
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C. Venue is Proper Wherever Any Single “Act Proscribed by Section 3729” 
Occurred. 
Causing another to make a false statement or to submit false claims is an FCA violation.  
31 U.S.C. § 3729.  It follows then, that the acts constituting an FCA violation occurred where 
actions were taken to cause false statement and claims, as well as where false statements were 
made or false claims were submitted by another.  Here, Defendants took actions that caused others 
located in the Eastern District of Texas to submit false claims or to make false statements.  Thus, 
the Government alleges that Defendants not only presented false claims and made false statements, 
but also caused and conspired to cause the submission of false claims and false statements in 
violation of the FCA.  See, e.g., Compl. ¶¶ 332−334; 339, 346.  Thus, § 3732 creates venue in the 
Eastern District of Texas because the false claims and statements made in that location are “act[s] 
proscribed by section 3729.” 
Defendants similarly miss the point (at Joint Reply 5) of the conspiracy case law cited in 
the Opposition (at 17), which is persuasive authority about how courts determine where the acts 
constituting a conspiracy occurred.  Just like the conspiracy provision of the FCA, 31 U.S.C. 
§ 3729(a)(1)(C), the elements of criminal conspiracy offenses include an agreement and overt acts 
in furtherance of the conspiracy.  Compare United States v. Romans, 823 F.3d 299, 309–10 (5th 
Cir. 2016) (criminal conspiracy elements), with United States ex rel. Grubbs v. Kanneganti, 565 
F.3d 180, 193 (5th Cir. 2009) (FCA conspiracy elements).  As explained in Romans, a criminal 
conspiracy occurs where the agreement is formed and where the overt acts take place, and that is 
why venue exists in any of those locations.  823 F.3d at 309–10.  Defendants offer no rationale or 
analysis as to why, in the FCA context, the location of the conspiracy should be approached 
differently.  To the contrary, all elements of an FCA conspiracy offense, including the agreement 
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and the overt acts, are “act[s] proscribed by section 3729.”  Therefore § 3732 creates venue 
wherever any one of those acts occurred.  
Further, Defendants are wrong that the Government’s theory of venue would “overrun 
§ 3732(a), leading to nationwide venue . . . wherever an individual works for a company with 
customers nationwide.”  Joint Reply 5.  Where, as here, the Government alleges that individuals, 
through their direction and control over a company, caused the submission, or conspired to cause 
the submission, of false claims in multiple locations throughout the United States, the plain 
language of 31 U.S.C. § 3732(a) establishes venue in any one of those locations.  The touchstone 
of § 3732(a) is where FCA violations occurred.  If a defendant’s fraud is truly nationwide in scope, 
then nationwide venue is entirely consistent with § 3732(a). 
D. Defendants’ Mischaracterization of FCA Materiality Would Render FCA 
Enforcement Meaningless. 
The Defendants’ arguments about materiality are flawed and should be rejected.  It is 
ostensibly Defendants’ position that because the SBA acknowledged from the outset that there was 
some risk of fraud in the PPP, Defendants’ and Kabbage’s knowing approval of fraudulent PPP 
loans could not have been material to SBA’s payment decision.  Joint Reply 10–11.  First and 
foremost, courts have acknowledged that “[t]he potential for fraud exists in any government 
program and, certainly, in [a] situation . . . where mass amounts of federal funds were expended 
in emergency and less-controlled conditions.”  United States ex rel. Branch Consultants v. Allstate 
Ins. Co., 560 F.3d 371, 380 (5th Cir. 2009).  There is no exception to FCA liability for those who 
defraud the government during a national emergency, nor should the Government be foreclosed 
from pursuing those who commit fraud on a government program where the government was 
required to take immediate action to provide emergency assistance.  Second, Defendants  
mischaracterize both the allegations of the Government’s Complaint and the arguments in its 
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Opposition.  See  Compl. ¶¶ 297, 310, 322, 343; Opp’n 73–82.  The Government’s FCA action has 
never been premised on Kabbage’s failure to stop 100 percent of borrower fraud.  Instead, the 
Government asserts that Kabbage, under Defendants’ direction and control, falsely certified that it 
would and did comply with PPP lender requirements; that Kabbage failed to do so; and that this 
very failure was material to SBA’s decision to pay Kabbage processing fees, to forgive loans, and 
make guaranty purchase payments.  Compl. ¶¶ 297, 310, 322, 343.  SBA’s recognition that there 
would be a risk of fraud by borrowers in the PPP is not acceptance of Kabbage’s, and Defendants’, 
knowing failure to comply with lender requirements.   
Equally as troubling is Defendants’ claim that Kabbage was not required to certify the 
accuracy of the loan amount.  Joint Reply 12.  This is incorrect.  The April 15, 2020, Interim Final 
Rule specifically requires that the lender “[c]onfirm the dollar amount of average monthly payroll 
costs for the preceding calendar year by reviewing the payroll documentation submitted with the 
borrower’s application.”  85 Fed. Reg. 20811, 20815 (Apr. 15, 2020); Compl. ¶ 40.  Kabbage was 
further required to certify that it had done so by executing SBA Form 2484.  See Compl. ¶ 41. 
Under Defendants’ logic, a PPP lender, such as Kabbage, would serve as merely a repository for 
borrower documentation and certifications without any further responsibility or accountability.  
But the PPP required lenders to do more than merely collect borrower documentation and 
certifications.  SBA and Congress delegated to lenders the responsibility for making PPP loans, 
imposed requirements for how it expected lenders to perform that function, and paid lenders a 
processing fee in exchange for their performance of the required functions.  See 15 U.S.C. 
§ 636(a)(36)(F)(ii), (a)(36)(P); 85 Fed. Reg. 20811, 20815 (Apr. 15, 2020).  If there were no such 
requirements as Defendants claim, SBA need not have delegated any responsibility to PPP lenders, 
and borrowers would have directly submitted their PPP loan applications to SBA.  The 
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Government alleges that Defendants caused the certifications Kabbage and its lender partners 
made on SBA Form 2824 to be false, and thus, Defendants violated the FCA.   
II. 
GOVERNMENT’S RESPONSE TO THE FROHWEIN REPLY 
Frohwein’s reply raises for the first time the argument that the Government’s common law 
claims should be dismissed “because any recovery under them would be duplicative.”  Frohwein 
Reply 9−10 (citing United States ex rel. Drummond v. BestCare Lab’y Servs., LLC, 950 F.3d 277, 
284 (5th Cir. 2020) and United States ex rel. Chang v. Child.’s Advocacy Ctr. of Del., No. 15-442, 
2017 WL 4161975, at *3 (D. Del. Sept. 20, 2017)).  This argument fails because it is both untimely 
and legally incorrect.2   
First, arguments raised in a reply brief for the first time are not properly before the Court 
and are waived.  Dugger v. Stephen F. Austin State Univ., 232 F. Supp. 3d 938, 957 (E.D. Tex. 
2017).  Frohwein failed to raise this argument in his motion and thus, it is waived and need not be 
considered.   
Second, even if it is considered, neither case cited by Frohwein supports dismissal of the 
government’s common law claims.  As an initial matter, “it is common for FCA plaintiffs to pursue 
related common law claims . . . based on the same set of facts.”  United States v. Medoc Health 
Servs. LLC, 470 F. Supp. 3d 638, 659 (N.D. Tex. 2020).  Frohwein’s own parenthetical describing 
Drummond shows that Drummond speaks to the ultimate recovery of damages and its calculation.  
See Frohwein Reply 9–10 (describing Drummond as holding that “a damages award for unjust 
enrichment and payment by mistake was subsumed within a judgment under the FCA”).  And 
Drummond does not stand for the proposition that the government is precluded from pursuing 
alternative theories of recoveries at the pleadings stage.  See  950 F.3d at 284.  Indeed, it recognizes 
 
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This sur-reply does not address other arguments in the Frohwein Reply because 
they are sufficiently addressed in the Government’s Opposition.  
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the contrary.  See id. at 279.  Chang is also inapposite because it involves the cursory dismissal of 
a Delaware state law claim of unjust enrichment asserted by a qui tam relator along with the 
relator’s FCA claim.  See 2017 WL 4161975, at *3.  Among other issues, the court in Chang held 
that the relator had failed to plead “the absence of a remedy provided by law,” which is one of the 
required elements of a Delaware unjust enrichment claim.  Id.  By contrast, here the Government’s 
unjust enrichment claim arises under federal common law, which does not require that element.  
See Opp’n 98−99 (listing elements of federal common law unjust enrichment claim, citing United 
States ex rel. Silva v. VICI Mktg., LLC, 361 F. Supp. 3d 1245, 1257 (M.D. Fla. 2019)). 
III. 
GOVERNMENT’S RESPONSE TO THE ROBINSON REPLY 
This sur-reply responds to various factual arguments and assertions in the Robinson Reply 
(at 1−3, 4−5, and 7–10), including new arguments about materiality based on SBA’s parallel 
administrative settlement with Kabbage, attached to the Robinson Reply as Exhibit 1, ECF No. 
90-1.  This sur-reply does not respond specifically to the remaining arguments in the Robinson 
Reply because they are adequately addressed in the Government’s Opposition.  
A. 
PPP Lenders Were Required to Comply with Lender Requirements 
Notwithstanding Borrower Certifications. 
In his Reply, Robinson suggests that because Kabbage received borrower certifications in 
their PPP loan applications, Kabbage’s loan review process, as described in the Government’s 
Complaint, complied with the requirements of the SBA regulations, see 85 Fed. Reg. 20811, 20815 
(Apr. 15, 2020).  See Robinson Reply 1–3.  In essence, Robinson argues that borrower 
certifications preclude liability for PPP lenders and Defendants.  This is inaccurate.  As described 
above in Part I.D, the borrowers’ certifications did not relieve Defendants from their obligations 
to comply with all PPP lender requirements.  See Compl. ¶ 22.  Those obligations included 
“[c]onfirm[ing] receipt of information demonstrating that a borrower had employees for whom the 
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borrower paid salary and payroll taxes on or around February 15, 2020,” “[c]onfirm[ing] the dollar 
amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll 
documentation submitted with the borrower’s application,” and “[f]ollow[ing] applicable BSA 
requirements,” in addition to “[c]onfirm[ing] receipt of borrower certifications.”  85 Fed. Reg. 
20811, 20815 (Apr. 15, 2020).  As explained in the Opposition (at 34−35), Kabbage, under 
Defendants’ control and direction, knowingly failed to follow those requirements, resulting in 
loans where Kabbage double-counted state and local income taxes (the “SALT Error”) and failed 
to exclude annual per-employee compensation over $100,000 (the “$100K Error”) when 
calculating borrowers’ eligible payroll costs, resulting in the fraudulent inflation of PPP loan 
amounts. 
B. 
The Government Has Alleged That Defendants Caused Kabbage to Breach Its 
Obligations as a Lender. 
Robinson argues that the Government is wrongly requiring “more” of Kabbage than was 
legally required and dismissively refers to the Government’s allegations as “jury bait.”  Robinson 
Reply 4–5.  This is inaccurate.  For every loan processed and approved by Kabbage, Kabbage and 
its lender partners certified that Kabbage had “[c]onfirm[ed] receipt of borrower certifications,” 
“[c]onfirm[ed] receipt of information demonstrating that a borrower had employees for whom the 
borrower paid salary and payroll taxes on or around February 15, 2020,” “[c]onfirm[ed] the dollar 
amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll 
documentation submitted with the borrower’s application,” and “obtained and reviewed the 
required application (including documents demonstrating qualifying payroll amounts).”  85 Fed. 
Reg. 20811, 20815 (Apr. 15, 2020); SBA Form 2484; see Compl. ¶¶ 26–27.  PPP regulations also 
required Kabbage to “[f]ollow applicable BSA requirements.”  85 Fed. Reg. 20811, 20815 (Apr. 
15, 2020); see Compl. ¶ 44.  Notwithstanding Robinson’s contentions, which invite the Court to 
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draw inferences in his favor, the Government seeks to hold Defendants accountable for their failure 
to comply with these requirements.    
C. 
The Court Should Not Consider Exhibit 1 Attached to Robinson’s Reply, and 
Exhibit 1 Does Not Support Robinson’s Arguments Regarding Materiality, 
Falsity, or Scienter. 
Robinson attaches to his reply brief a 2021 agreement between Kabbage and the SBA 
(“2021 agreement”) to support his arguments that the Government has not plausibly alleged 
materiality as to the $100k Error, Robinson Reply 7–8, and that the Government has not alleged 
falsity as to either the SALT or $100k Errors, Robinson Reply 8–10.  Consideration of the 
attachment is procedurally improper and the attachment itself does not support Robinson’s 
arguments. 
First, Robinson offers no legal authority to support this Court’s consideration of an 
attachment to a reply brief in support of a motion to dismiss.  See Scanlan v. Tex. A&M Univ., 343 
F.3d 533, 536 (5th Cir. 2003) (holding that a court may only consider “documents attached to the 
motion to dismiss” if they are “referred to in the plaintiff’s complaint and are central to the 
plaintiff’s claim” (emphasis added)).   
Second, the 2021 agreement is not “central” to the Government’s claims as defined by 
Scanlan such that it should be considered here, even if it had been attached it to one of the 
Defendants’ motions to dismiss.  Generally, courts consider documents attached to a motion to 
dismiss that are referred to in the complaint to be “central” to the claims when they form the basis 
of the dispute at issue.  See PHI Grp., Inc. v. Zurich Am. Ins. Co., 58 F.4th 838, 841 (5th Cir. 2023) 
(considering insurance policy attached to motion to dismiss in resolving dispute over losses 
covered by policy); In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (finding 
in insurance dispute that insurance contracts not attached to the complaints should be considered 
because they were (1) “attached . . . to their motions to dismiss,” (2) “referred to in the complaints,” 
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and (3) “central to the plaintiffs’ claims”); Russell v. Allianz Life Ins. Co. of N. Am., No. 3:13-CV-
00030, 2014 WL 4545807, at *2 n.2 (N.D. Miss. Sept. 12, 2014) (considering rules and regulations 
of insurance company that were referenced in complaint and at issue in breach of contract action 
between insurance company and agent).   
The single reference to the 2021 agreement in the Government’s 364-paragraph Complaint 
(at ¶ 145) and the references to that Complaint paragraph in the Government’s Opposition (at 34, 
47, 77) do not make the 2021 agreement “central” to the Government’s claim.  See Scanlan, 343 
F.3d at 536–37 (holding that district court erroneously considered a report that defendants attached 
to their motion to dismiss because the plaintiffs referred to the report in their complaints).  And, 
unlike in PHI Grp., In re Katrina Canal Beaches Litig., and Russell, this action does not seek to 
enforce or adjudicate the terms of the 2021 agreement.  Rather, the reference to the 2021 agreement 
in the Complaint is just one of many facts supporting the United States’ allegations of materiality 
and falsity as to the SALT Error.  
Third, the 2021 agreement, which resolves administrative claims relating to the SALT 
Error, does not support Robinson’s arguments about materiality.  It does not tell “a story of 
Government inaction on the 100k error,” as Robinson claims.  Robinson Reply 7.  The agreement 
states it is “a resolution of the Excess Loan Amounts on the Affected PPP Loans,” Robinson Reply 
Ex. 1, Recital N, which are defined as loans “involving duplication of state and local income 
taxes,” id. at Recital C.  It specifically reserves claims for liability under the FCA and for “any 
conduct other than that relating to the Excess Loan Amounts.”  Id. ¶¶ 3, 7–8, 14.  The terms of the 
2021 agreement therefore make clear that it resolves certain administrative claims regarding excess 
loan amounts relating to SALT only.  It does not address the $100k Error and does not support 
Robinson’s contention that SBA agreed to accept Kabbage’s forgiveness applications in full 
knowledge of the $100k Error.  In fact, the agreement provides that “Kabbage represented and 
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warranted . . . that the Non-Affected PPP Loans . . . were processed, made, and originated in 
accordance with all PPP Loan Program Requirements.”  Id. at Recital E.  Given this express 
representation, it is reasonably inferable that the 2021 agreement preceded any awareness on the 
part of the SBA relating to the $100k Error, consistent with the allegations of the Government’s 
Complaint that SBA stopped processing guaranty and forgiveness payments for affected loans 
when informed of the $100k Error.  Compl. ¶ 184.   
Fourth, Robinson argues that the 2021 agreement supports his contention that the 
Government has not plausibly alleged falsity with respect to the SALT Error and the $100k Error 
because other calculation errors by Kabbage understated the loan amount, such that the loan 
amount was not falsely stated when the several errors are offset.  Robinson Reply 8–9.  He further 
contends that the Government did not dispute that Kabbage’s calculation as a whole understated 
the loan amounts, though the Government did dispute this in its Opposition.  See Opp’n 70.  By 
including ineligible payroll costs in the loan calculation, Kabbage, through Defendants’ actions, 
falsely stated the loan amount and falsely certified that it had “confirm[ed] the dollar amount of 
average monthly payroll . . . by reviewing the payroll documentation.”  USG Compl. ¶¶ 26–27, 
287; see Opp’n 66.  Furthermore, the 2021 agreement that Robinson relies on now does not support 
his argument that the loan amounts were not falsely inflated due to his ‘offset’ theory.  Rather, the 
2021 agreement states that “on a loan-by-loan basis, the Payroll Cost Methodology [developed by 
Kabbage] does not fully offset the Excess Loan Amounts [resulting from duplication of SALT] 
because for approximately 4,000 Affected PPP Loans, the estimated payroll costs as a percentage 
of total compensation are less than the Excess Loan Amounts as a percentage of the PPP loan 
amount.”  Robinson Reply Ex. 1, Recital M (emphasis added).  The parties to the agreement 
estimated the amount “not offset by the Payroll Cost Methodology is approximately $13.5 
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million.”  Id.  Even accepting Robinson’s argument, that one of Kabbage’s calculation errors was 
offset by another, the Government has plausibly alleged falsity.   
Moreover, Robinson argues that he and the other Defendants could not have known that 
any individual loan was inflated despite the offset because it is a loan-by-loan inquiry.  Robinson 
Reply 10.  This argument fails because it asks for inferences to be drawn in his favor, contrary to 
the well-settled review standard for a motion to dismiss.  Opp’n 44.  As alleged in the Complaint, 
Defendants, and Kabbage, decided to calculate the loan amount for borrowers.  Compl. ¶¶ 86–87.  
They knowingly included amounts that were not eligible payroll costs and that fraudulently 
inflated PPP loan amounts.  Compl. ¶¶ 110–111, 150, 152.  They also knowingly chose not to 
include some costs because it did not suit their purposes of processing as many loans as quickly as 
possible to increase their processing fees.  Compl. ¶¶ 82, 86, 153, 203.  Now, Robinson argues that 
Defendants could not have known that the loan amount was inflated due to their numerous, 
knowing errors.  Rather than weighing in favor of dismissal, this argument shows that the 
Government has plausibly alleged that Robinson and Defendants were at the very least deliberately 
ignorant or reckless as to the truth of the loan amount when they approved the PPP loan calculation.  
See United States ex rel. Schutte v. SuperValu Inc., 598 U.S. 739, 751 (2023). 
D. The Government Alleged That Defendants Caused Kabbage to Miscalculate the 
Borrower’s Loan Amount. 
Lastly, Robinson argues that the Government uses “the wrong falsity predicate to support 
materiality,” because the “inflated loan amount” is the “borrower’s falsity,” while a “review 
failure” is “Kabbage’s alleged falsity.”  Robinson Reply 8.  This mischaracterizes the 
Government’s Complaint.  As described in the Complaint, the Government has alleged that 
through Defendants’ knowing direction and control, Kabbage calculated the loan amount and 
informed borrowers which costs it would and would not include.  Compl. ¶¶ 86–87.  Kabbage did 
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so incorrectly, and Defendants knew it.  Compl. ¶¶ 110–112, 150, 152; see also Opp’n 70.  
Kabbage, as a result of Defendants’ knowing conduct, both falsely stated the loan amount, and 
caused the borrower to do so.  
This Court should decline Robinson’s procedurally improper arguments, which ask that 
this Court adjudicate facts without proper context and make inferences in his favor.  See United 
States v. Bollinger Shipyards, Inc., 775 F.3d 255, 260 (5th Cir. 2014). 
*  *  * 
 
 
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CONCLUSION 
 
For these reasons, and for the reasons set forth in the United States’ Opposition, we 
respectfully request that this Court deny in full Defendants’ Motions to Dismiss under Rules 
12(b)(2), (b)(3), (b)(6) and 9(b).  
Dated: May 30, 2025  
 
 
 
Respectfully submitted,  
BRENNA E. JENNY 
Deputy Assistant Attorney General 
 
JAY R. COMBS 
Acting United States Attorney 
Eastern District of Texas 
 
/s/ Betty Young____________________ 
JAMES G. GILLINGHAM, Texas Bar 
#24065295 
BETTY S. YOUNG, Texas Bar #24102498 
Assistant U.S. Attorneys 
Eastern District of Texas 
110 N. College Street, Suite 700 
Tyler, Texas 75702 
E-mail: James.Gillingham@usdoj.gov  
E-mail: Betty.Young@usdoj.gov  
(903) 590-1400 
(903) 590-1436 (facsimile) 
 
 
JAMIE ANN YAVELBERG 
COLIN M. HUNTLEY 
SARAH E. LOUCKS 
KELLY E. PHIPPS 
Attorneys, Civil Division 
United States Department of Justice 
P.O. Box 261 
Ben Franklin Station 
Washington, D.C. 20044 
E-mail: Sarah.E.Loucks@usdoj.gov  
E-mail: Kelly.E.Phipps@usdoj.gov  
(202) 616-4203 
(202) 514-0280 (facsimile) 
ATTORNEYS FOR THE 
UNITED STATES OF AMERICA 
 
 
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CERTIFICATE OF SERVICE 
 
I hereby certify that on May 30, 2025, I caused a true and correct copy of the foregoing 
document to be transmitted through the Court’s electronic mailing service (CM/ECF) to all counsel 
of record who have consented to electronic service by the Court’s electronic mailing service 
(CM/ECF). 
 
 
 
 
 
 
/s/ Betty Young__________  
 
 
 
 
 
 
BETTY S. YOUNG 
 
Case 4:21-cv-00110-SDJ     Document 95     Filed 05/30/25     Page 16 of 16 PageID #: 
1028

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