United States v. Wells Fargo & Co.
15-2449
| 2d Cir. | Sep 7, 2017Background
- Relators Paul Bishop and Robert Kraus filed a qui tam action under the False Claims Act (FCA) alleging Wells Fargo (including predecessor banks) made false certifications of legal compliance to obtain favorable Federal Reserve borrowing rates.
- The government declined to intervene; the district court dismissed the complaint for failure to state an FCA claim. The Second Circuit initially affirmed.
- The Second Circuit and district court had relied on this Court’s Mikes v. Straus precedents imposing (1) an "express-designation" rule for implied false certification claims and (2) a "particularity" requirement for express false certification claims.
- The U.S. Supreme Court in Universal Health Services v. Escobar abrogated those Mikes limitations and held that materiality (to the government’s payment decision) is the governing standard for FCA misrepresentation claims.
- Because Escobar’s materiality standard was not applied below, the Second Circuit vacated the district court’s dismissal and remanded for the district court to assess whether the alleged misrepresentations were material.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Mikes’ express-designation requirement limits implied false-certification claims | Mikes required express designation; relators argued their allegations fit implied-certification framework | Wells Fargo relied on Mikes to argue relators’ theory was foreclosed | Escobar abrogated Mikes’ express-designation rule; issue remanded for materiality analysis |
| Whether Mikes’ particularity rule limits express false-certification claims | Relators alleged false certifications sufficient under Mikes’ standards | Wells Fargo argued Mikes’ particularity barred claims | Escobar also abrogated Mikes’ particularity requirement; particularity not required by FCA text; remand for materiality inquiry |
| What standard governs FCA misrepresentation claims | Relators urged existing Second Circuit framework (Mikes) | Wells Fargo urged continued application of Mikes limitations | Court adopts Escobar’s materiality standard: misrepresentation actionable only if material to government’s payment decision |
| How materiality is evaluated under the FCA | Relators urged their facts show materiality | Wells Fargo argued alleged violations were immaterial or minor | Court remanded to district court to determine materiality in the first instance under Escobar’s criteria |
Key Cases Cited
- Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) (establishes FCA materiality standard for misrepresentations)
- Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001) (previously limited implied/express certification theories; abrogated in part by Escobar)
- Bishop v. Wells Fargo & Co., 823 F.3d 35 (2d Cir. 2016) (prior Second Circuit decision vacated by Supreme Court remand)
- Doscher v. Sea Port Grp. Sec., LLC, 832 F.3d 372 (2d Cir. 2016) (discusses effect of intervening Supreme Court decisions on circuit precedent)
- Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (2011) (materiality cannot rest on a single fact or occurrence)