United States Ex Rel. Schneider v. JPMorgan Chase Bank, National Ass'n
878 F.3d 309
D.C. Cir.2017Background
- Appellant Relator Laurence Schneider (qui tam) sued JPMorgan Chase under the False Claims Act (FCA), alleging Chase falsely certified compliance with the 2012 National Mortgage Settlement and with the Treasury’s HAMP program.
- The National Mortgage Settlement required large banks to provide consumer relief and comply with 300+ servicing standards; a court-appointed Monitor used statistical “Metric” testing and certified Chase’s compliance; the district court approved the Settlement.
- Schneider, a purchaser/servicer of many loans, alleged servicing and consumer-relief defects (including issues with Chase’s “Recovery One” written-off loan population and alleged improper credit-claims), but did not identify specific ineligible loans exceeding the Monitor’s reported $250 million cushion.
- The government declined to intervene in the qui tam suit; Schneider filed amended complaints alleging Chase falsely certified compliance to the Monitor and to HAMP.
- District court dismissed Settlement-related claims for failure to exhaust the Settlement’s dispute procedures (and as a collateral attack on the Monitor’s determination) and dismissed HAMP claims without prejudice for failure to plead material falsity; Schneider appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Relator had to exhaust Settlement dispute procedures before bringing an FCA suit | Schneider: he could bring FCA suit; exhaustion not required because he had no standing pre-suit and couldn’t have exhausted | Chase: Relator must exhaust the Settlement’s exclusive dispute-resolution procedures; otherwise a collateral attack on the Monitor’s decision | Court: Exhaustion requirement was wrongly applied — relator couldn’t have exhausted pre-suit — but dismissal affirmed on other grounds (see below) |
| Whether the suit impermissibly collaterally attacks the Monitor’s compliance determination | Schneider: FCA suit can proceed independent of Settlement enforcement; FCA reaches different misconduct | Chase: Suit is a collateral attack on the Monitor’s discretionary legal determination and thus barred by Settlement procedures | Court: Schneider’s operative complaint challenges the Monitor’s legal determination (not specific false statements); that challenge cannot sustain an FCA claim here, so dismissal affirmed |
| Whether alleged misrepresentations about Settlement compliance are "material" obligations under FCA given contingent enforcement and penalties | Schneider: violations of Settlement servicing standards are material to government obligations | Chase: Potential penalties are contingent (monitoring, cure, court discretion), so no established obligation under FCA | Court: Contingent possibility of penalties does not create an "obligation" under FCA; therefore claims fail (cites precedent) |
| Whether Schneider adequately pleaded HAMP claims (material falsity) | Schneider: allegations and reasonable inferences support material false certification of HAMP compliance | Chase: Complaint fails to allege material violations of HAMP rules | Held: Complaint does not plausibly allege material falsity; HAMP dismissal without prejudice (may amend) |
Key Cases Cited
- United States v. Bank of America, 78 F. Supp. 3d 520 (D.D.C. 2015) (describing Settlement standards and Monitor procedures)
- Hoyte v. American National Red Cross, 518 F.3d 61 (D.C. Cir.) (unassessed potential penalties are not FCA obligations)
- Simoneaux v. E.I. duPont de Nemours & Co., 843 F.3d 1033 (5th Cir. 2016) (confirming that contingent penalties are not obligations under the FCA)
- United States ex rel. Petras v. Simparel, Inc., 857 F.3d 497 (3d Cir. 2017) (same principle regarding contingent penalties)