753 F.3d 1335
D.C. Cir.2014Background
- In 2012 the US and multiple states sued Wells Fargo under FCA and FIRREA over FHA-insured loan practices.
- The parties settled in March 2012 with a consent judgment; Wells Fargo paid about $5 billion in exchange for a broad release of certain claims.
- Release paragraph 3(b) stated the release applied to claims whose sole basis was a false or fraudulent annual HUD-FHA certification of compliance.
- The release included an explicit 'for avoidance of doubt' clause narrowing the scope to claims based on false annual certifications and restricting claims based on per-loan transgressions.
- The district court held the release was narrow, preserving other independent loan-level claims not solely predicated on the annual certification.
- The US later sued Wells Fargo in SDNY for numerous loan origination and underwriting claims; Wells Fargo sought to enforce the consent judgment to bar those claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does 3(b) release bar only claims based on a false annual certification? | Wells Fargo argues the release encompasses broader, company-wide conduct. | United States contends the release is limited to the sole-basis concept tied to the annual certification. | Release is limited to the sole-basis claims. |
| Does the 'for avoidance of doubt' clause expand or limit the released claims? | Wells Fargo contends broader scope beyond the sole-basis claim. | United States asserts the clause confirms the narrow scope to sole-basis claims. | Clause confirms narrow, sole-basis release. |
| Does the release preserve government claims based on loan-level HUD-FHA violations? | Wells Fargo contends all such conduct is released if tied to certifications. | United States maintains it can pursue loan-level violations as separate bases for liability. | Release preserves claims based on loan-level HUD-FHA violations; not released if tied to material loan-level violations. |
Key Cases Cited
- Bank of America v. United States, 922 F. Supp. 2d 1 (D.D.C. 2013) (illustrates interpretation of 'sole basis' and release scope)
- Main v. Oakland City Univ., 426 F.3d 914 (7th Cir. 2005) (false eligibility certifications may create liability independent of services provided)
- Chickasaw Nation v. United States, 534 U.S. 84 (Supreme Court 2001) (parenthetical usage of 'including' as illustrative, not expansive)
- Segar v. Mukasey, 508 F.3d 16 (D.C. Cir. 2007) (de novo contract interpretation standards applied)