IN THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
UNITED STATES OF AMERICA, EX REL. LAURENCE SCHNEIDER, ET AL.,
Plaintiffs,
LAURENCE SCHNEIDER,
Plaintiff-Appellant,
v.
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION; JPMORGAN
CHASE & CO.; CHASE HOME FINANCE, LLC,
Defendants-Appellees.
On Appeal from the United States District Court for the District of Columbia
<excerpt>
STATEMENT OF THE CASE
I. False Claims Act
The False Claims Act, 31 U.S.C. § 3729 et seq., is used broadly “in defending the
Federal treasury,” and it is a “powerful tool in deterring fraud.” S. Rep. No. 345, 99th
Cong., 2d Sess. 4 (1986). Congress enacted the FCA in 1863 “with the principal goal
of stopping the massive frauds perpetrated by large private contractors during the
Civil War.” Vermont Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 781
(2000) (brackets and internal quotation marks omitted). But the Act was intended to
“reach all types of fraud, without qualification, that might result in financial loss to the
Government.” United States v. Neifert-White Co., 390 U.S. 228, 232 (1968).
Many of the Act’s “prohibitions can be enforced through both criminal and
civil actions by the federal government.” United States ex rel. Heath v. AT&T, Inc., 791
F.3d 112, 116 (D.C. Cir. 2015).1
“In addition, the Act authorizes private individuals—
known as relators—to bring a qui tam civil action ‘in the name of the Government,’
and to share in any damages recovered.” Ibid. (citation omitted); 31 U.S.C.
§ 3730(b)(1), (d); see generally Vermont Agency, 529 U.S. at 781. A civil suit may be
brought either by the Attorney General or a relator seeking civil penalties plus three
times the amount of the government’s damages. 31 U.S.C. § 3729(a), (b)(1).
The FCA imposes civil liability for a variety of deceptive practices involving
government funds and property. Among other things, the Act renders liable any
person who “knowingly presents, or causes to be presented, a false or fraudulent
claim for payment or approval,” 31 U.S.C. § 3729(a)(1)(A); any person who
“knowingly makes, uses, or causes to be made or used, a false record or statement
material to a false or fraudulent claim,” id. § 3729(a)(1)(B); any person who
“knowingly makes, uses, or causes to be made or used, a false record or statement
material to an obligation to pay or transmit money or property to the Government, or
knowingly conceals or knowingly and improperly avoids or decreases an obligation to
pay or transmit money or property to the Government,” id. § 3729(a)(1)(G); and any
person who “conspires” to engage in such acts, id. § 3729(a)(1)(C); see id. § 3729(b)(1)
(defining “knowingly”).
II. Factual Background and Prior Proceedings
A. National Mortgage Settlement
In March 2012, the United States, forty-nine states, and the District of
Columbia filed a complaint and proposed consent judgment in the United States
District Court for the District of Columbia against several mortgage servicers,
including JPMorgan Chase. JA2; United States v. Bank of Am. Corp., 753 F.3d 1335,
1336 (D.C. Cir. 2014) (per curiam).
2
The complaint alleged a variety of misconduct in
the servicers’ home mortgage practices, and the proposed consent judgment
implemented a negotiated settlement. Ibid.; see Dkt. Nos. 10-14, United States v. Bank
of Am., No. 12-cv-361 (D.D.C.).
Under that consent judgment, Chase agreed to pay a penalty; to provide
approximately $3.675 billion in various forms of consumer relief, such as loan
forgiveness; and to comply with certain business practice requirements called
“Servicing Standards.” Consent Judgment, No. 12-cv-361 ¶¶ 3, 5 (D.D.C. Apr. 4,
2012) (Consent J.); Consent J. Ex. D. The United States released a number of claims
but did not release “[a]ny liability based upon obligations created by th[e] Consent
Judgment.” Consent J. Ex. F, § (11)(n).
The consent judgment also contains provisions for monitoring the banks’
compliance. The agreement established a Monitoring Committee, Consent J. Ex. E,
§ B; an Independent Monitor to assess compliance, Consent J. ¶ 7; Consent J. Ex. E
§§ C(1), (5), D; creation of metrics for evaluating compliance with certain servicing
standards, Consent J. Ex. E § C(12), (23) & Sch. E-1; and rules governing
enforcement actions by the parties or Monitoring Committee, id. § J.
The parties agreed that if Chase fails to meet its consumer relief obligations,
Chase would “pay an amount equal to 125% of the unmet commitment,” or 140% in
specific circumstances. Consent J. Ex. D(10)(d).3 With respect to servicing standards
for which there are established metrics, if the Monitor concludes that Chase is
exceeding the allowable error rate, the Monitor notifies Chase of a “Potential
Violation,” and Chase has a right to cure within a set time frame. Consent J. Ex. E,
§§ D(3), (5), E(1)-(6). If Chase cures, there is no other “remedy under th[e] Consent
Judgment . . . with respect to such Potential Violation.” Id. § E(6). If Chase does not
timely cure such a “Potential Violation,” “[i]n the event of an action to enforce
[Chase’s] obligations,” the court can order “non-monetary equitable relief, including
injunctive relief, directing specific performance under the terms of th[e] Consent
Judgment, or other non-monetary corrective action,” and the court “may award”
agreed-to “civil penalties.”4
Id. § J(3)(a), (b). With respect to other alleged
noncompliance—such as violation of servicing standards not subject to a metric or
other obligations—the court may order only non-monetary injunctive relief. Id.
§ J(3), (a); see United States v. Bank of Am., 78 F. Supp. 3d 520, 530 (D.D.C. 2015).
The “Enforcement Terms” also state that Chase’s “obligations under this
Consent Judgment shall be enforceable solely in the U.S. District Court for the
District of Columbia” and that “[a]n enforcement action under th[e] Consent
Judgment may be brought by any Party to this Consent Judgment or the Monitoring
Committee.” Consent J. Ex. E, § J(2). Ordinarily “prior to commencing any
enforcement action, a Party must provide notice to the Monitoring Committee of its
intent to bring an action to enforce th[e] Consent Judgment.” Ibid. The committee
then has “21 days to determine whether to bring an enforcement action.” Ibid. If the
committee declines to do so, “the Party must wait 21 additional days . . . before
commencing an enforcement action.” Ibid.
The United States has not invoked the consent judgment’s procedures or
otherwise asked the district court to enforce the terms of the judgment against Chase.
Based on the information currently available to it, including the reports filed by the
Monitor, the United States is unaware of any violation of the agreed-to terms.
B. Factual Background and Procedural History
1. The plaintiff in this case is a relator who filed a qui tam suit against
JPMorgan Chase under the False Claims Act and similar state laws. JA27, JA39,
JA94-JA116 (Second Am. Compl.). As relevant here, relator alleges that Chase
violated the so-called “reverse” provision of the False Claims Act when Chase claimed
to have complied with various aspects of the National Mortgage Settlement, thereby
avoiding additional payments and penalties required under the consent judgment.
JA27, JA35, JA70-JA75, JA80-JA95. That FCA provision imposes liability on any
person who, among other things, “knowingly makes, uses, or causes to be made or
used, a false record or statement material to an obligation to pay or transmit money or
property to the Government” or who “knowingly conceals or knowingly and
improperly avoids or decreases an obligation to pay or transmit money or property to
the Government.” 31 U.S.C. § 3729(a)(l)(G).5
2. The district court granted Chase’s motion to dismiss. JA1-JA22 (opinion);
JA23 (order). As relevant here, the court held that relator could not sue because he
“failed to exhaust the dispute resolution procedures required by the National
Mortgage Settlement before filing suit.” JA12-JA14. The court reasoned that in a
False Claims Act suit, “Relator stands in the position of the Federal Government,”
and the federal government could not sue Chase before following the consent
judgment’s “mandatory pre-litigation steps.” JA13. In the court’s view, these
included “notice to the allegedly noncompliant bank, the Monitor, and the
Monitoring Committee,” “good faith efforts to reach agreement,” notification of the
Monitoring Committee of intent to file an enforcement action, waiting twenty-one
days for the Monitoring Committee to consider whether it would sue, and then
waiting an additional twenty-one days. Ibid
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