United States v. Wells Fargo Bank, N.A.
972 F. Supp. 2d 593
S.D.N.Y.2013Background
- Government sues Wells Fargo Bank, N.A. for FCA/FIRREA and common-law fraud in FHA loan origination/underwriting.
- HUD/FHA Direct Endorsement Lender program empowers lenders to issue and certify loans for insurance without prior HUD review.
- Allegations: reckless underwriting, high loan origination volume, inadequate QA, and failure to report material violations to HUD.
- Wells Fargo challenges consent-judgment release, timeliness, Rule 9(b) sufficiency, and Rule 12(b)(6) dismissal.[1]
- Court holds consent judgment does not bar claims, FCA claims timely under WSLA and 3731(b)(2), Rule 9(b) satisfied for fraud schemes, and many common-law claims untimely or dismissed; federal statutory claims survive in part; some common-law claims dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Consent judgment bar on claims | Government argues consent judgment does not release underlying conduct claims | Wells Fargo contends release bars claims | Consent judgment does not bar these claims |
| Timeliness of FCA claims | DOJ knowledge alleged in 2011; WSLA tolls; claims timely | Some claims time-barred; only Attorney General is relevant official | FCA claims timely; WSLA tolling applies; many common-law claims dismissed for timeliness, others not |
| Rule 9(b) sufficiency | Scheme-based FCA claims pled with representative examples | Need more granular specificity | Rule 9(b) satisfied for reckless origination and self-reporting schemes |
| FIRREA and common-law claims | FIRREA allegations valid; common-law claims viable | Some FIRREA predicates misapplied; common-law unjust enrichment/mistake claims dismissed | FIRREA claims survive; common-law claims largely dismissed or untimely |
| Rule 12(b)(6) sufficiency of common-law claims | Some common-law claims viable; causation shown | Many common-law claims lack viability | Federal statutory claims survive; common-law unjust enrichment/mistake claims dismissed; breach of fiduciary duty viable per facts at this stage |
Key Cases Cited
- United States v. Grainger, 346 U.S. 235 (Supreme Court 1953) (fraud under WSLA includes deceit in making claims to government)
- Bank of New York Mellon v. United States, 941 F. Supp. 2d 438 (S.D.N.Y. 2013) (courts hold WSLA applies to civil fraud claims against financial institutions)
- Countrywide Fin. Corp. v. United States, 961 F. Supp. 2d 598 (S.D.N.Y. 2013) (FIRREA claims survive where related to fraud affecting federally insured institutions)
- BNP Paribas SA v. United States, 884 F. Supp. 2d 589 (S.D.Tex. 2012) (WSLA and tolling considerations in FCA context)