The U.S. Court of the Southern District of Mississippi has signed off on a motion to drop a lawsuit alleging two Mississippi billionaires defrauded a pandemic-era program. The judge’s dismissal on Thursday came after plaintiffs entered a voluntary dismissal with prejudice on May 15.
As reported by Mississippi Today, Judge Kristi H. Johnson signed off on the plaintiff’s motion to withdraw the lawsuit with prejudice after the federal government declined to litigate the case itself.
After the California attorneys moved to withdraw the lawsuit, federal officials said the dismissal aligned with the government’s broader priorities. Baxter Kruger, the U.S. attorney for the Southern District of Mississippi, said acting U.S. Attorney General Todd Blanche consented to the dismissal, citing a determination that ending the case was “commensurate with the public interest” and that it did not justify continued use of government resources.
Kruger—who was appointed by President Donald Trump in 2025—also asked the court to keep all sealed documents in the case under seal, a request that U.S. District Judge Kristi H. Johnson granted.
“Today, I’m pleased to announce that the California trial lawyers who recklessly sued Tommy and Jim Duff with respect to the PPP program have voluntarily dismissed their frivolous and unfounded case. This is a complete and total victory for the Duff brothers,” Matthew Miller, the attorney representing the defendant, told the Daily Signal after the court formally dismissed the case.
“The voluntary dismissal comes just days after the Duffs asked the Court to dismiss the lawsuit for lack of merit,” Miller continued. “From the beginning of this baseless case, we have stated that the facts show that the Duffs, under the guidance of competent accounting and legal professionals, always followed the law in obtaining PPP loans during the COVID-19 pandemic to help protect their employees.”
Relator LLC, the plaintiff, is a group formed by California attorneys Anoush Hakimi and Peter Shahriari, according to the U.S. Department of Justice. In a notice of voluntary dismissal, attorney Kristen Nelson—who represents the pair—cited the federal government’s decision not to litigate the case. The filing also stated that the lawsuit’s factual claims did not factor into the decision to dismiss.
“The dismissal is not the result of any settlement or payment, and no party has paid or agreed to pay any consideration in connection with the dismissal,” Nelson wrote. “No claims have been adjudicated on the merits, and Relator has elected to dismiss its claims without further amendment.”
The case was initially filed in the U.S. District Court for the Northern District of California, but Judge Araceli Martinez-Olguin later transferred to the U.S. District Court for the Southern District of Mississippi after Miller argued in court that the case lacked ties to California.
In his statement to the Daily Signal, Miller also rebutted the allegations of any wrongdoing from the companies when they applied for the loans.
“This lawsuit was a purely meritless attempt by trial lawyers to extract an unwarranted settlement,” the attorney wrote. “The Duffs remained focused throughout COVID on supporting their 16,000 employees, many of whom were kept employed, even when many Duff businesses were forced to cut back.”
Miller also told the Daily Signal that he will “continue to evaluate all legal remedies against the plaintiffs against the plaintiff, Relator LLC, and its California lawyers, due to the incredibly frivolous nature and outrageous false allegations set forth in the lawsuit.””
The lawsuit, filed Feb. 20, 2024, accused Thomas and James Duff and several of their companies—including Duff Capital Investors, Southern Tire Mart, Pine Belt Motors, and Pine Belt CDJR—of improperly obtaining Paycheck Protection Program (PPP) loans. The complaint alleged the companies should not have applied for the loans because they underreported employee counts and had sufficient resources through their broader conglomerate.
In a previous statement to the Mississippi Today, Miller added that the loans were “lawfully obtained, fully disclosed and reviewed by banks, the SBA and federal attorneys,” and described the case as “parasitic, web-scraped lawsuit that courts have repeatedly rejected.”
“The allegations were also independently reviewed by the Department of Justice which, after this review, declined to intervene in this lawsuit,” Miller continued.
Relator LLC, which filed the Qui Tam complaint, claimed Southern Tire Mart had roughly 1,300 employees and $600 million in annual revenue, while Duff Capital Investors allegedly employs more than 10,000 people. As stated by the Mississippi Today, the lawsuit claimed the companies reported having 496 employees to qualify for PPP loans, which were limited to businesses with 500 or fewer employees.
The lawsuit was filed under the False Claims Act, which allows private individuals—known as relators—to bring qui tam actions on behalf of the federal government to recover funds obtained through alleged fraud. The plaintiffs behind the lawsuit in this case, Anoush Hakimi and Peter Shahriar, represented Relator LLC.
A Qui Tam lawsuit is a lawsuit filed by an individual or entity that works on behalf of the federal government alleging the misuse or defrauding of federal loans.
According to the complaint, the Duff companies secured three PPP loans totaling approximately $6.5 million.
The now-dismissed lawsuit claimed that “two billionaire brothers, reported to be the wealthiest two individuals in Mississippi, used a handful of their many companies,” “to misappropriate millions of dollars from the US Federal government’s Paycheck Protection Program.”
As seen in the court filings obtained by Mississippi Today, attorneys for the Duff brothers denied the allegations in court filings, arguing the loans were obtained lawfully and used to keep “hard-working people employed and paid.”
Additionally, as seen in the court filings and in the attorney’s statement to the Daily Signal, the defendants believe Relator LLC leaned on inflammatory rhetoric instead of factual evidence. The defendants claimed that the complaint improperly treated franchisees as affiliated entities, even though federal law expressly allowed franchisees to qualify for PPP loans.
According to the filings, Duff-affiliated franchisees identified themselves as such in their loan applications. Some entities cited in the complaint, including Pine Belt Chevrolet and Pine Belt CDJR, operate as franchised dealerships for major automobile manufacturers.
“The result of section 636(a)(36)(D)(iv)(II) was that an entity with a franchise identifier code could get a PPP loan even if a parent company had thousands of employees spread across subsidiaries,” the defendants say in the filing. “Beneficiaries of this new rule commonly included car-dealership franchisees by auto manufacturers and franchisees of restaurant or hotel chains.”
Furthermore, Miller also moved to dismiss the lawsuit, arguing the plaintiff failed to meet requirements under federal law mandating that whistleblowers possess independent knowledge of alleged violations prior to public disclosure.
The Department of Justice notes the law was strengthened by Congress in 1986 to encourage such actions, allowing private citizens to act as “private attorneys general” in pursuing fraud claims.
Relator LLC has filed similar cases in the past. In one such case, a federal court in California ordered Los Angeles businessman Yosef Y. Manela to pay more than $800,000 after finding he violated the False Claims Act in connection with PPP loans
The Daily Signal contacted Grafton Bragg, one of Relator’s attorneys, the Department of Justice, and U.S. District Judge Kristi Johnson, but did not receive comment.
