United States ex rel. Bibby v. Wells Fargo Bank, N.A.
906 F. Supp. 2d 1288
N.D. Ga.2012Background
- Relators Bibby and Donnelly are mortgage brokers who originate VA IRRRL loans through U.S. Financial Services, Inc. (Veteran’s Mortgage).
- VA IRRRL closing costs are tightly regulated; permissible costs include a 1% origination fee, with attorney’s fees generally prohibited and to be borne by lenders.
- Relators allege Wells Fargo routinely inflated title search/examination fees and concealed attorney’s fees, violating VA rules and certifying compliance to obtain VA guarantees.
- Relators allege the concealment and false VA certifications caused the VA to pay on guarantees for noncompliant loans.
- Relators argue false certifications and use of false documents caused government payments; the case involves claims pre- and post-FERA, and foreclosure-related consequences show government expenditure.
- Wells Fargo moved to dismiss on Rule 9(b) grounds, materiality arguments, FERA retroactivity, and Donnelly’s bankruptcy standing/judicial estoppel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| FERA retroactivity governs claims | Relators’ SAC should apply post-FERA language | FERA retroactivity forecloses pre-2008 claims | FERA not retroactive to pending pre-2008 claims in SAC |
| Rule 9(b) sufficiency for presentment vs use | Allegations show false documents and intent to obtain guaranty | Lack of particularity for presentment; use lacks detail | Sufficient for § 3729(a)(2) (use of false documents); insufficient for § 3729(a)(1) presentment |
| Collective pleading vs individual defendant | Allegations tailor-made to Wells Fargo; not a generic lumping | Lumping of lenders occurred but clarified by specific acts | Not fatal; Rule 9(b) not violated given indicia of reliability and individual conduct per defendant |
| Materiality of certifications to VA | Certifications could influence VA decision to honor guaranty | Handbook reins not binding; materiality uncertain | Materiality pled; VA regulations make certifications a condition precedent, so issue remains fact-dependent |
| Donnelly bankruptcy standing/Judicial estoppel | Trustee ratified interest; Donnelly can pursue claims | Donnelly’s pre-petition asset disclosure issue may bar claims | Trustee ratified; standing issues unresolved but not fatal; judicial estoppel not applied |
Key Cases Cited
- Hopper v. Solvay Pharm., Inc., 588 F.3d 1318 (11th Cir. 2009) (FERA retroactivity; presentment vs. use distinctions; indicia of reliability)
- Clausen v. Lab. Corp. of Am., 290 F.3d 1301 (11th Cir. 2002) (Rule 9(b) particularity applies to presentment and falsity in FCA)
- Rivera v. United States, 55 F.3d 703 (1st Cir. 1995) (viability of FCA claim where false paperwork leads to government guaranty)
- Fago v. M&T Mortg. Corp., 518 F. Supp. 2d 108 (D.D.C. 2007) (materiality of forged HUD documents; agency discretion to review fraud)
- McNinch v. U.S., 356 U.S. 595 (U.S. 1958) (FCA scope of claims in guaranteed loan context)
- Parker v. Wendy’s Int’l, Inc., 365 F.3d 1268 (11th Cir. 2004) (standing; bankruptcy estate principles)