OPINION AND ORDER
The United States brings this civil fraud action against Defendant Wells Fargo
For the most part, Wells Fargo’s arguments are unavailing. As an initial matter, the consent judgment does not bar any of the Government’s claims. Furthermore, the claims are pleaded with sufficient particularity to satisfy Rule 9(b). In addition, the federal statutory claims are sufficient to allege a plausible basis for relief under Rule 12(b)(6). And, on the current record, there is no basis to dismiss any of the statutory claims as untimely. Therefore, all of the Government’s federal statutory claims may proceed. Many of the Government’s common law claims, however, must be, and are, dismissed. In particular, any tort claims that arose before June 25, 2009, are time barred. Additionally, the Government’s mistake of fact and unjust enrichment claims are dismissed in their entirety: Those arising before 2004 are untimely, and those arising thereafter are barred because the United States Department of Housing and Urban Development was aware of Wells Fargo’s misconduct at the time. Accordingly, as explained in more detail below, Wells Fargo’s motion is DENIED as to the Government’s federal statutory claims and GRANTED in part and DENIED in part with respect to the Government’s common law claims.
BACKGROUND
Unless otherwise stated, the following facts are taken from the Amended Complaint (Docket No. 22) and are assumed, for purposes of this opinion, to be true. See LaFaro v. N.Y. Cardiothoracic Grp., PLLC,
A. The Direct Endorsement Lender Program
The United States Department of Housing and Urban Development (“HUD”),
One program through which FHA insures home mortgages is the Direct Endorsement Lender program. (Id. ¶ 15). Direct Endorsement Lenders (“lenders”) are authorized to evaluate the credit risk of potential borrowers, underwrite mortgage loans, and certify those loans for FHA mortgage insurance “without prior HUD review or approval.” (Id.). In doing so, these lenders are required to comply with regulations — including those found in HUD Handbooks and Mortgagee Letters — governing, among other things, the origination and underwriting of individual loans; the hiring, training, and compensation of underwriters; the monitoring and reporting of the quality of loans originated; and the submission of FHA claims for defaulted loans. (Id. ¶¶ 17-30, 37-43). Each lender is required to make an annual certification of compliance with the program’s requirements. (Id. ¶ 37).
The claims at issue in this case arise from Wells Fargo’s participation in the Direct Endorsement Lender program.
1. Issuance of Individual Mortgages
HUD requires Direct Endorsement Lenders to conduct due diligence before issuing FHA-insured mortgages. (Id. ¶¶ 19-20). In particular, when issuing a loan, an underwriter must “determin[e] a borrower’s ability and willingness to repay a mortgage debt,” and examine any “property offered as security for the loan to determine if it provides sufficient collateral.” (Id. ¶ 19 (citing 24 C.F.R. §§ 203.5(d), (e)(3))). HUD provides specific requirements for how underwriters are to evaluate a borrower’s credit risk and appraise mortgaged property. (Am. Compl. ¶¶ 21-23). These requirements specify, for example, the documents an underwriter must obtain from a potential borrower, the information the underwriter must request from the borrower, and the factors a lender is to consider in determining whether to issue a mortgage. (Id.). In making loan decisions, a Direct Endorsement Lender is required by law to “ ‘exercise the same level of care which it would exercise in obtaining and verifying information for a loan’ ” that was not FHA-insured — that is, a loan where the lender was “ ‘entirely dependent on the property as security to protect its investment.’ ” (Id. ¶ 19 (quoting 24 C.F.R. § 203.5(c))).
After each loan is issued, the lender must make several certifications regarding its compliance with HUD regulations. For example, if the loan was underwritten using an FHA-approved automated underwriting system, the lender must certify to “the integrity of the data” inputted into the system “to determine the quality of the loan,” and it must certify “that a Direct Endorsement Underwriter reviewed the appraisal (if applicable).” (Am. Compl. ¶ 38 (internal quotation marks and brackets omitted)). If the loan was manually underwritten, the lender must certify that “the underwriter personally reviewed the appraisal report (if applicable), credit application, and all associated documents and has used due diligence in underwriting the mortgage.” (Id. (internal quotation marks and brackets omitted)). In all cases, the underwriter must certify that he or she
If HUD discovers that a loan endorsed for FHA insurance is, in fact, ineligible to be insured, “HUD seeks indemnification from the Direct Endorsement Lender that certified the loan via an indemnification agreement whereby the lender agrees to indemnify HUD should claims for FHA insurance be submitted on that loan.” (Id. ¶ 40).
2. Quality Control and Reporting
In order to participate in the Direct Endorsement Lender program, lenders must implement a quality control system that is independent of the lender’s loan origination and servicing departments. (Id. ¶ 24). HUD’s quality control requirements mandate that, among other things, lenders review a random sample of loans each month to ensure they were underwritten in accordance with HUD requirements, and that they review all early payment defaults — that is, loans that default within the first six payments. HUD Handbook 4060.1 REV-2, ¶ 7-6. (See also Am. Compl. ¶ 24).
HUD provides a rating system by which lenders may evaluate the loans they review. (Id. ¶ 26). Loans with only minor or no violations of HUD’s origination and servicing guidelines are rated low risk; those with violations, but none that is “material to creditworthiness, collateral security or insurability of the loan,” are considered acceptable; mortgages with “significant unresolved questions or missing documentation” are labeled a “moderate risk to the mortgagee and FHA”; and mortgages that contain “material violations of FHA or mortgagee requirements ... represent an unacceptable level of risk” and are labeled “material risk” loans. HUD Handbook 4060.1 REV-2, ¶7-4. (See also Am. Compl. ¶ 26). Lenders are required to report to FHA in writing any “material risk” mortgages they identify. HUD Handbook 4060.1 REV-2, ¶7-4. HUD also requires that lenders report any “ ‘[s]erious deficiencies, patterns of non-compliance, or fraud’” they discover “within 60 days.” (Am. Compl. ¶ 28 (quoting HUD Handbook 4060.1 REV-1, CHG-1, ¶ 6-13)). In addition to reporting these violations to HUD, quality control review findings must also be reported to lenders’ “ ‘senior management,’ ” which is required to “ ‘take prompt action to deal appropriately’ ” with the problems. (Id. ¶ 30 (quoting HUD Handbook 4060.1 REV-2, ¶ 7-3(1))).
During the time period relevant to this case, Wells Fargo maintained a quality control program. (Id. ¶¶ 31-36). Through this program, the Bank conducted “monthly reviews of a random sample of loans originated ... within the prior 60 days,” as well as “at least some portion of its [early payment defaults].” (Id. ¶ 31). In reviewing its loans, Wells Fargo largely adopted the rating system provided by the HUD Handbook. (Id. ¶ 32). Although not identical to that provided in the Handbook, Wells Fargo’s definition of “material risk” loans “mirrored HUD’s in substance, and made clear that a loan with that rating contained unacceptable risk and was ineligible for FHA insurance.” (Id.). The findings of Wells Fargo’s quality control
B. Reckless Origination and Underwriting Allegations
The Government alleges that between May 2001 and October 2005, “Wells Fargo engaged in a regular practice of reckless origination and underwriting of its [FHA-insured] loans and falsely certified to HUD that tens of thousands of those loans were eligible for FHA insurance.” (Id. ¶ 44). In particular, the Government alleges that beginning in 2000, Wells Fargo significantly increased its origination of FHA-insured mortgages. (Id. ¶ 46). To do so, the Bank relied on inadequately trained employees (id. ¶¶ 46, 86); impermissibly paid its underwriters a bonus based on the number of loans they approved (id. ¶ 47); “applied heavy pressure on loan officers and underwriters to originate, approve, and close loans” (id. ¶ 48); “required underwriters to make decisions on loans on extremely short turnaround times” (id.); and “employed lax and inconsistent underwriting standards and controls” (id.).
As a result, “the quality of the bank’s [FHA-insured home mortgage] loans dropped precipitously.” (Id. ¶ 50). Underwriters were certifying as eligible for FHA insurance loans they knew or should have known were not so eligible. (Id. ¶ 140). Between May 2001 and January 2003, an average of 32.9% — that is, nearly a third — of the randomly sampled loans the Bank reviewed every month evidenced material violations of HUD regulations. (Id. ¶ 54).
Wells Fargo’s Quality Assurance department reported these findings to the Bank’s senior management. (Id. ¶ 50). The department warned the Bank’s management that “heavy volume, pressure to approve loans and meet acceptable turn[around] times[,] along with inexperienced staff are key contributing factors overall to the issues leading to material findings.” (Id. ¶ 85). Yet the Bank did almost nothing. (Id. ¶¶ 55, 85). It did not change its focus on high volume loan origination or its tactics for generating such volume; it did not prepare a written action plan to address the loans with material violations; it did little to no follow-up on these loans; it did not report the loans to HUD; and it did not document any corrective action that was taken. (Id. ¶¶ 55, 84-86). Despite knowing that a substantial portion — in some months, nearly half — of its loans issued between 2001 and 2005 evidenced material violations of HUD regulations, Wells Fargo nevertheless “certified its entire portfolio of retail FHA loans for insurance, and thereby falsely certified that thousands of retail FHA loans were eligible for insurance when they were not.” (Id. ¶ 140; see id. ¶¶ 54, 84, 89).
Wells Fargo sold some of these FHA-insured loans to third parties “knowing” that those third parties would submit claims to HUD if the loans defaulted. (Id. ¶¶ 82, 117). But “for the vast majority of its retail FHA loans originated in this period,” the Bank “remained the holder of record,” and thus “was paid on claims for FHA insurance when those loans defaulted.” (Id. ¶ 82; see id. ¶ 117).
HUD requires — and throughout the time period relevant to this lawsuit, required — Direct Endorsement Lenders to report to the agency any loans the lenders identify as materially violating FHA regulations. (Id. ¶ 12 l).
Of the 6,320 loans Wells Fargo failed to report, 1,443 defaulted. (Id. ¶ 135). Although a small fraction of these loans were sold to third parties, Wells Fargo was the holder of record for, and submitted claims for FHA insurance on, 97% of them. (Id.). The Government provides, as exhibits to its Amended Complaint, lists of the 6,320 “material risk” loans it alleges Wells Fargo failed to report; the 1,406 loans that defaulted and for which Wells Fargo submitted a claim for FHA insurance; and the 37 defaulted loans for which third parties submitted claims for FHA insurance. (Id. Exs. A-C).
D. Relief Sought
The Government alleges that, as a result of Wells Fargo’s reckless origination and underwriting, as well as the Bank’s failure to report to HUD loans it identified as materially violating FHA regulations, Wells Fargo submitted claims for FHA insurance on thousands of defaulted mortgage loans that Wells Fargo knew, or should have known, were ineligible for such insurance. (E.g., id. ¶¶ 140, 147, 152, 159). The Government seeks treble its damages and civil penalties pursuant to the FCA, civil penalties under FIRREA, and compensatory damages for its common law claims. (Id. ¶¶ 144, 149, 156, 162, 167, 183, 190, 196, 199, 204, a-g). The specific amount of damages is to be determined at trial, but would presumably total hundreds of millions of dollars. (See id. ¶¶ 3, 5, 83, 119,137).
DISCUSSION
Wells Fargo moves to dismiss the Amended Complaint on four grounds. First, it contends that the Government released the claims at issue here pursuant to a consent judgment entered in the United States District Court for the District of Columbia in a previous lawsuit. Second, the Bank asserts that many of the Government’s FCA and common law claims are time barred. Third, Wells Fargo argues that the Amended Complaint fails to satisfy the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure. And fourth, it contends that the Amended Complaint fails to state a claim upon which relief can be granted pursuant to Rule 12(b)(6). The Court will address each argument in turn.
Wells Fargo argues first that the Government released the claims at issue here pursuant to a consent judgment entered on April 4, 2012, in the United States District Court for the District of Columbia. In that case, the Department of Justice (“DOJ”), forty-nine state attorneys general, and the attorney general for the District of Columbia sued several banks including Wells Fargo, alleging misconduct related to, among other things, the origination and servicing of FHA-insured mortgage loans. See United States v. Bank of America Corp., No. 12-361(RMC). As part of a settlement agreement, the Government and Wells Fargo agreed to the entry of a consent judgment, under which the United States released Wells Fargo from any civil claims under FIRREA or the FCA “where the sole basis for such claim or claims is that [Wells Fargo] ... submitted to HUD-FHA ... a false or fraudulent annual certification that the mortgagee had conformed to all HUD-FHA regulations necessary to maintain its HUD-FHA approval.” (Baruch Deck Ex. D, at F-17 (internal quotation marks and alteration omitted)).
When the Government filed the present lawsuit, Wells Fargo sought an order from the D.C. District Court enjoining this suit as prohibited by the terms of the release. That Court denied Wells Fargo’s motion and rendered an interpretation of the consent judgment, see United States v. Bank of America,
(1) Claims under FIRREA, FCA, and the Program Fraud Civil Remedies Act where the “sole basis” for such claims is that Wells Fargo submitted a false or fraudulent annual certification — without regard to whether any such loan contains a material violation of HUD-FHA requirements; and
(2) Claims under FCA based on a false individual loan certification where the individual loan did not contain a material violation of HUD-FHA requirements.
Id. at 9. The Court clarified that while the Government released Wells Fargo from claims based solely on the annual certifications themselves, it did not release claims based on the underlying conduct that is the subject of such certifications. See id. Having so construed the consent decree, the D.C. Court left it to this Court to interpret the Amended Complaint in this case and to decide whether the Government’s claims here are barred by the consent judgment.
Given the D.C. Court’s construction of the consent decree, this Court easily concludes that the release does not bar the
B. Timeliness
Next, Wells Fargo contends that many of the Government’s FCA and state common law claims are untimely. The Bank is correct with respect to many of the Government’s common law claims, but there is no basis — at this stage of the case — to dismiss the Government’s FCA claims as time barred. As relevant here, FCA claims may be brought within three years of the date that DOJ learned of the relevant facts underlying the claims, so long as they are brought within ten years of the date of the violation. Furthermore, the Wartime Suspension of Limitations Act (the ‘WSLA”), 18 U.S.C. § 3287, which was amended in 2008, tolled the statute of limitations for any claims that were still live at the time of the amendment. The Government alleges that DOJ did not learn of the facts at issue here until 2011. Assuming this allegation to be true — as the Court must — all of the Government’s FCA claims were live as of 2008, were tolled by the WSLA at that point, and thus are timely now.
By contrast, the Government’s common law tort claims are subject to a three year statute of limitations, and its quasi-contract claims are subject to a six year statute of limitations. The parties entered a tolling agreement that permits the Government to bring in this action any claims that were timely as of June 25, 2012. There is no other basis, however, to find that the statutes of limitations with respect to these common law claims was tolled. Accordingly, only those tort claims arising on or after June 25, 2009, and those quasi-contract claims arising on or after June 25, 2006, are timely.
1. The FCA Claims
The Court will begin its analysis with the FCA claims. Title 31, United States Code, Section 3731(b) provides that a claim under the FCA “may not be brought”:
(1) more than 6 years after the date on which the violation ... is committed, or
(2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.
Citing Section 3731(b)(1), Wells Fargo argues that any FCA claims that accrued prior to June 25, 2006 — that is, six years before the parties’ tolling agreement — are
a. The Statute of Limitations Under the FCA
With respect to its first argument, the Government contends that the Attorney General, or his designee within DOJ, is “the official of the United States charged with responsibility to act” on FCA claims. (Gov’t Mem. 40-42). The Amended Complaint alleges that DOJ was unaware of “the facts material to its claims against Wells Fargo” until “2011, the year in which the United States Attorney’s Office for the Southern District of New York ... commenced its investigation.” (Am. Compl. ¶ 118). Therefore, the Government argues, pursuant to Section 3731(b)(2), its FCA claims were timely so long as they were brought within three years of the time the investigation began and within ten years of the parties’ tolling agreement. (Gov’t Mem. 40).
Wells Fargo, however, insists that the HUD Inspector General — who conducted an audit of Wells Fargo’s FHA mortgage loan origination practices in July of 2004 (Baruch Decl. Ex. F) — “certainly” has responsibility to act in the face of mortgage fraud. (Wells Fargo Mem. 15 (Docket No. 27)). Therefore, Wells Fargo argues, the Government was required to bring its FCA claims by July 2007 — three years after the Inspector General became aware of Wells Fargo’s purported misconduct— or six years after the claims arose, whichever is later. (Wells Fargo Mem. 13).
Section 3731(b)(2) was adapted from Title 28, United States Code, Section 2416(c), which provides that the statute of limitations generally applicable to claims brought by the United States shall exclude any time during which “facts material to the right of action are not known and reasonably could not be known by an official of the United States charged with the responsibility to act in the circumstances.” 28 U.S.C. § 2416(c); see 132 Cong. Rec. 20,536 (1986) (statement of Sen. Charles Grassley) (stating that the FCA tolling provision “is adopted directly” from 28 U.S.C. § 2416(c)). Because the FCA has its own statute of limitations, it is not subject to the statute of limitations generally applicable to Government claims or the provisions, including Section 2416, tolling that statute of limitations. See 28 U.S.C. § 2415 (stating that the statute of limitations provided therein applies to claims of the United States “except as otherwise provided by Congress”). Therefore, Congress amended the FCA to provide for similar tolling. See, e.g., False Claims Act Amendments: Hearings Before the Subcomm. on Admin. Law and Governmental Relations of the H. Comm.
Courts have repeatedly held that Section 2416(c) applies to officials other than those at DOJ. See, e.g., United States v. Bollinger Shipyards, Inc., No. 12-920,
Indeed, although other agencies are permitted to settle certain claims, they are expressly prohibited from compromising fraud claims. See 31 U.S.C. § 3711(b)(1). Furthermore, while Section 2416(c) provides for tolling until “an official ... charged with the responsibility to act” is apprised of the material facts, 28 U.S.C. § 2416(c) (emphasis added), Section 3731(b)(2) applies where “the official of the United States charged with responsibility to act” is reasonably unaware of the relevant facts, 31 U.S.C. § 3731(b)(2) (emphasis added). On its face, then, Section 3731(b)(2) contemplates only one relevant official. The law is clear that that official is the Attorney General.
The majority of other courts that have considered this issue have reached the same conclusion. See, e.g., United States v. Carell,
In sum, both the statutory text and the weight of authority support the conclusion that the only government “official ... charged with responsibility to act” under the FCA is the Attorney General (or his designee within DOJ). It follows that the Government’s FCA claims are timely so long as they are: (1) filed within either six years of the underlying violation or three years of the date DOJ knew or reasonably should have known of the facts material to the claim, whichever is later; and (2) filed no later than ten years from the date on which the underlying violation was committed. The Government alleges that DOJ was unaware of the material facts underlying this action until 2011. Given the purported widespread dissemination of the 2004 HUD audit of Wells Fargo and its subsequent report to Congress, Wells Fargo contends that the facts underlying this action “ ‘reasonably should have been known’ to the Justice Department” in 2004, even if DOJ did not have actual knowledge. (Wells Fargo Mem. 15-16 (quoting 31 U.S.C. § 3731(b)(2))). But the extent of the audit’s dissemination and, thus, the question of whether DOJ knew or should have known of its findings is a question of fact that is not properly resolved at this stage. See, e.g., United States v. BNP Paribas SA,
As noted above, the parties entered a tolling agreement that permits the Government to bring any claims that were timely as of June 25, 2012. (Wells Fargo Mem. 13 n. 11) On the current record, then, any claims based on FCA violations arising after June 25, 2002 would appear to be timely. By contrast, any claims based on violations before that date would seem to be untimely, unless there was some basis to toll the statute of limitations.
b. The WSLA
That brings the Court to the WSLA. To the extent relevant here, the WSLA suspends the statute of limitations for offenses involving fraud against the United States when the country is at war or Congress has enacted a specific authorization for the use of the Armed Forces. See 18 U.S.C. § 3287. The Government argues that even if some of its FCA claims arose prior to June 25, 2002, they are nevertheless timely because the WSLA tolled the statute of limitations for claims that were live as of October 14, 2008, the date upon which the WSLA was amended to make clear that the Act applied to congressional authorizations for the use of force. (See Gov’t Mem. 46-48). The Court agrees. Because, as explained above, there is no reason at this stage to believe that the Attorney General knew or should have known of the facts at issue here until 2011, pursuant to Section 3731(b)(2), any claims that arose within ten years of October 14, 2008 — that is, all of the Government’s claims — were presumably live as of that date and thus tolled by WSLA.
Prior to 2008, the WSLA provided as follows:
When the United States is at war the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, or (2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or (3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancelation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress.
18 U.S.C. § 3287 (2006). On October 14, 2008, Congress amended the Act, expanding its application to cover periods “[w]hen the United States is at war or Congress
In light of the 2008 amendment, there is no dispute that the WSLA is now in effect as to offenses “involving fraud or attempted fraud against the United States or any agency thereof.” After all, on September 18, 2001, Congress authorized the use of military force “against those responsible for” for the September 11, 2001 terrorist attacks, see Authorization for Use of Military Force, Pub. L. No. 107-40, 115 Stat. 224 (2001); and on October 16, 2002, Congress authorized the use of military force in Iraq, see Authorization for Use of Military Force Against Iraq Resolution of 2002, Pub. L. No. 107-243, 116 Stat. 1498. Additionally, there has been neither a Presidential proclamation, with notice to Congress, nor a congressional resolution suspending hostilities. Nevertheless, Wells Fargo argues that the WSLA should not be applied to the Government’s claims in this case for four reasons: (1) because the 2008 amendment may not be “retroactive[ ]”; (2) because the claims do not “involv[e] fraud” within the meaning of the WSLA; (3) because the WSLA applies only to criminal offenses, not civil claims; and (4) because the Act does not extend to claims that are unrelated to wartime contracting. (See Reply 8-9 (Docket No. 31); Oral Arg. Tr. 17-24). These arguments are unpersuasive.
First, Wells Fargo suggests that “it is by no means clear” that the 2008 amendment “can be applied retroactively.” (Reply 9). “[W]here, as here,” however, a “new rule” does not “alter[] substantive rights,” but rather “announces a period of limitations, the conduct to which it refers is the plaintiffs conduct relating to the filing of the claim and not the defendant’s conduct giving rise to the claim.” Walsche v. First Investors Corp.,
As Wells Fargo conceded at oral argument (Oral Arg. Tr. 15), the 2008 WSLA amendment therefore applies to any claims for which the statute of limitations had not yet run at the time of its passage. See BNP Paribas SA,
Second, Wells Fargo argues that the offenses alleged by the Government do not “involve[e] fraud or attempted fraud against the United States” within the meaning of the WSLA. (Reply 9; Oral Arg. Tr. 19-20). Although its plain text suggests that the Act applies to all frauds, the Supreme Court has held otherwise. See Bridges v. United States,
This argument is foreclosed by the Supreme Court’s decision in United States v. Grainger,
Citing this change, Wells Fargo argues that false statements made in reckless disregard of the truth do not constitute “fraud against the United States” as defined by Bridges. (Reply 9). But the Bank does not cite — and the Court has not found — any authority that would support drawing a distinction between false statements made in reckless disregard for the truth and false statements made with actual knowledge of their falsity. Grainger itself did not make any such distinction. See Grainger,
Third, Wells Fargo contends that the WSLA applies only to criminal offenses. (Reply 8-9). As originally promulgated, the WSLA did indeed apply only to crimes. Specifically, it suspended the statutes of limitations for any “offenses involving the defrauding or attempts to defraud the United States ... now indictable under any existing statutes.” Dugan & McNamara, Inc. v. United States,
Finally, Wells Fargo suggests that, even if the WSLA applies in the civil context to claims of the sort at issue here, it should not apply “to matters involving domestic mortgage loan practices, having nothing to do with wartime contracting.” (Reply 9). At oral argument, the Bank went even further, suggesting that the actual text of the WSLA might limit the statute to offenses related to the war. (Oral Arg. Tr. 22-23). Not so. By its plain terms, the WSLA applies to three kinds of offenses: (1) fraud against the United States; (2) offenses related to “any real or personal property of the United States”; and (3) offenses “committed in connection with ... any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war or directly connected with or related to the authorized use of the Armed Forces, or with any disposition of termination inventory by any war contractor or Government agency.” 18 U.S.C. § 3287. Wells Fargo suggests that the phrase “which is connected with or related to the prosecution of the war” limits not just the third category of offenses to which WSLA applies, but also the two preceding categories. (Oral Arg. Tr. 23). Such an interpretation, however, would violate “the grammatical rule of the last antecedent,” Barnhart v. Thomas,
There is no basis to disregard that rule here. Among other things, applying the WSLA to all frauds against the United States, including those unrelated to the war, accords with the purpose of the Act. The WSLA serves not only to allow the Government to combat fraud related to wartime procurement programs, but also “to give the government sufficient time to investigate and prosecute pecuniary frauds” of any kind “committed while the nation [is] distracted by the demands of war.” Prosperi,
In sum, the WSLA applies to the FCA claims in this case. Accordingly, any claims that were live as of October 14, 2008, when the WSLA was amended to apply to congressional authorizations for the use of military force, are timely. Given the Court’s holding above that the Gov
2. The Common Law Claims
By contrast, many of the Government’s common law claims are time barred. The Government alleges tort claims (breach of fiduciary duty, negligence, and gross negligence) as well as quasi-contract claims (unjust enrichment and mistake of fact). As the Government concedes, the WSLA does not apply to these claims (nor, of course, do the statute of limitations provisions of the FCA). (See Oral Arg. Tr. 33). Instead, the statute of limitations for the Government’s tort claims is three years, and the statute of limitations for its quasi-contract claims is six years. See 28 U.S.C. § 2415. Thus, any of the Government’s breach of fiduciary duty, gross negligence, or negligence claims that arose prior to June 25, 2009 (three years before the tolling agreement) and any of its unjust enrichment or mistake of fact claims that arose prior to June 25, 2006 (six years before the tolling agreement) would appear to be time barred.
In arguing otherwise, the Government relies on Title 28, United States Code, Section 2416(c), which, as noted above, exempts from the statute of limitations for claims brought by the Government “all periods during which ... facts material to the right of action are not known and reasonably could not be known by an official of the United States charged with the responsibility to act in the circumstances.” (Gov’t Mem. 64-65 n. 34). Based on this provision, the Government contends, the common law claims are timely “for the same reasons set forth with respect to the FCA claims.” (Id.).
This argument does not survive scrutiny. As explained above, while the only relevant government official for purposes of the FCA’s tolling provision is the Attorney General, any number of officials may constitute “an official of the United States charged with the responsibility to act” within the meaning of Section 2416(c). As relevant here, the HUD Inspector General is plainly one such official. See, e.g., 5 U.S.C. app. 3 § 4 (charging “each Inspector General” with, among other things, “preventing and detecting fraud and abuse” and aiding in the “identification and prosecution of participants in such fraud and abuse”); Island Park,
Additionally, the 2004 audit report produced by the HUD Inspector General is plainly sufficient to demonstrate that the relevant facts underlying this action were known to him by 2004.
contained at least one of the following deficiencies: unsupported assets, unsupported income, inadequate qualifying ratios, inadequate documentation, unallowable fees charged to the borrowers, derogatory credit information, underreported liabilities, potential fraud indicators, and improper approval method followed when using an automated underwriting system.... The deficiencies occurred because Wells Fargo’s management did not take appropriate action to ensure that staff adhered to HUD/FHA requirements when originating FHA loans.
(Id.). In other, words, the audit discovered precisely the sort of misconduct alleged in this lawsuit. At a minimum, therefore, the HUD Inspector General was privy to “sufficient critical facts to cause a reasonable person to investigate” the possibility of bringing common law claims. United States ex rel. Frascella v. Oracle Corp.,
In short, Section 2416(c) provides no support for the Government’s arguments with respect to the timeliness of its common law claims. Accordingly, any and all of its tort claims that arose prior to June 25, 2009, and any and all of its quasi-contract claims that arose prior to June 25, 2006, are untimely and dismissed.
C. Rule 9(b)
Next, Wells Fargo argues that the Government’s fraud claims should be dismissed for failure to satisfy the requirements of Rule 9(b).
Generally, to satisfy Rule 9(b), a complaint must “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements
Applying these standards here, the allegations in the Amended Complaint are sufficient to satisfy Rule 9(b). The Government in this case alleges that Wells Fargo engaged in two schemes involving thousands of false or fraudulent claims over a period of almost ten years: (1) ‘Wells Fargo’s reckless underwriting and certification of loans for FHA insurance from May 2001 through October 2005”; and (2) “the bank’s knowing failure to report to HUD as required FHA loans with material underwriting violations from 2002 through 2010.” (Gov’t Mem. 19; see Am. Compl. ¶¶ 45, 82, 147, 170). In these circumstances, it would be impractical, if not impossible, to require that the Government plead the details of each and every false claim.
Instead, the Government may plead each scheme “with particularity, and provide!] examples of specific false claims submitted to the government pursuant to that scheme.” Bledsoe,
The Government’s allegations satisfy these standards. With respect to the reckless origination scheme, the Government specifically alleges the practices by which Wells Fargo sought to increase its loan originations without regard to whether the practices or the loans themselves complied with HUD regulations (Am. Compl. ¶¶ 44-49, 85-86); the resulting increase in loans that evidenced material violations of these regulations (id. ¶¶ 50, 52-54, 84, 87-89); Wells Fargo’s decision
These examples, drawn from throughout the time period the Government alleges the reckless origination scheme occurred, appear sufficient “in all material respects, including general time frame, substantive content, and relation to the allegedly fraudulent scheme, ... such that a materially similar set of claims could have been produced with a reasonable probability by a random draw from the total pool of all claims.” Bledsoe,
The allegations regarding the second scheme — the Bank’s alleged failure between 2002 and 2010 to report loans •with material underwriting violations to HUD — even more clearly satisfy Rule 9(b). The Government has pleaded with particularity HUD’s quality control and self-reporting requirements (Am. Compl. ¶¶ 24-
Wells Fargo’s counterarguments are unavailing. First, Wells Fargo suggests that in order to meet the requirements of Rule 9(b), the Government must identify, among other things, each loan for which a false or fraudulent claim for payment was allegedly submitted, the relevant material violation of HUD-FHA requirements contained in the loan, and the Wells Fargo staff member who submitted or certified the loan. (Wells Fargo Mem. 21-22; Reply 11). But, as explained above, given the breadth and length of the schemes alleged in the Amended Complaint, the Government need not plead the details of every false or fraudulent claim Wells Fargo allegedly submitted. Instead, it need only plead the schemes with particularity and provide representative examples of claims submitted as a result. It has done so. The contention that the Government must identify the particular employee responsible for submitting or certifying each loan is also incorrect. Where a plaintiff “has alleged that [a] corporation has committed ... fraudulent acts, it is the identity of the corporation, not the identity of the natural person, that the [plaintiff] must necessarily plead with particularity.” Bledsoe,
Next, citing Black’s Law Dictionary, the Bank contends that the reckless underwriting and origination scheme cannot be considered a “scheme” at all, because a scheme is an “artful plot,” intentionally planned, and cannot be undertaken recklessly. (Reply 10). This argument is little more than sophistry. The Government does allege that Wells Fargo intentionally increased its volume of loan origination, in part through conduct that violated HUD regulations, recklessly disregarding the consequences — a substantial quantity of loans that contained material violations of HUD regulations and therefore were ineligible for FHA insurance. (Am. Compl.
United States ex rel. Cericola v. Fed. Nat’l Mortg. Assoc.,
For similar reasons, United States v. Countrywide Fin. Corp.,
Thus, with respect to both the reckless origination and the failure to self-report schemes, the Amended Complaint alleges the circumstances constituting fraud with sufficient particularity to satisfy Rule 9(b). Wells Fargo, however, contends that even if the Government has sufficiently alleged the fraud itself, it has failed to allege scienter with the requisite particularity. (Wells Fargo Mem. 22). Under Rule 9(b), “plaintiffs must allege facts that give rise to a strong inference of fraudulent intent.” Acito v. IMCERA Grp., Inc.
D. Rule 12(b)(6)
Finally, Wells Fargo argues that most of the Government’s claims should be dismissed, pursuant to Rule 12(b)(6), for failure to state a claim upon which relief can be granted. (Wells Fargo Mem. 24, 35, 46). First, the Bank argues that the Government’s FCA claims fail because none of the regulations with which the Government alleges Wells Fargo falsely certified compliance are, according to Wells Fargo, conditions of receiving payment on FHA insurance claims. Furthermore, Wells Fargo contends that even if the Government has adequately alleged that the Bank submitted false or fraudulent claims, it has not sufficiently pleaded that such claims caused the Government’s damages in the form of FHA insurance payments on defaulted loans. As explained below, the Court rejects both of these arguments. The Government has sufficiently pleaded that Wells Fargo falsely certified compliance with FHA regulations upon which
Next, Wells Fargo contends that most of the Government’s FIRREA claims should be dismissed because the statute does not prohibit the kind of misconduct the Government alleges. In particular, Wells Fargo argues that Title 18, United States Code, Section 1005, upon which the Government bases one of its FIRREA claims, prohibits only fraud committed by bank insiders, not that committed by a bank itself. And Title 12, United States Code, Section 1833a(e)(2), which prohibits certain false statements and fraud that “affect[ ] a federally insured financial institution,” the Bank contends, cannot be applied to the conduct alleged here because the statute does not contemplate liability where the affected financial institution and the institution alleged to have perpetuated the fraud are the same entity. Both of these arguments fail. For the reasons articulated below, a plain reading of the text of FIRREA makes clear that the provisions the Government alleges Wells Fargo has violated do indeed prohibit the alleged misconduct.
Finally, Wells Fargo argues that the Government’s common law claims fail as a matter of law. The Government’s breach of fiduciary duty claim, the Bank contends, must fail because there was no fiduciary duty between Wells Fargo and HUD. But whether such a duty existed is a question of fact. Therefore, the breach of fiduciary duty claim cannot be dismissed at this stage of the litigation. By contrast, the Government’s quasi-contract claims, for unjust enrichment and mistake of fact, are dismissed, because the HUD Inspector General was aware of the facts underlying the claims at issue when HUD paid the relevant FHA insurance claims.
1. The Standard of Review
To survive a Rule 12(b)(6) motion, a plaintiff must generally plead sufficient facts “to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly,
2. The FCA Claims
Wells Fargo argues, first, that the Government has failed to state an FCA claim because none of the false or fraudulent claims alleged in the Amended Complaint is cognizable under the FCA, and because the Government has not sufficiently alleged that any false or fraudulent claim caused the Government’s loss. Neither argument is availing.
As relevant here, the FCA imposes liability upon any person who “knowingly presents, or causes to be presented, a false or fraudulent claim” to the Government or “knowingly makes, uses, or causes to be made or used, a false record or statement material” to such a claim. 31 U.S.C. § 3729(a)(1) (2006); 31 U.S.C. § 3729(a)(1)(A); id. § 3729(a)(1)(B).
More specifically, two theories of FCA liability are relevant here: false certifications and fraudulent inducement. Under the former — which is the principal focus of the parties in their briefing — there are three kinds of false certifications that can lead to liability under the Act. The most straightforward is a certification that is factually false, “which involves an incorrect description of goods or services provided or a request for reimbursement for goods or services never provided.” Mikes,
The second theory of liability — fraudulent inducement — stems from United States ex rel. Marcus v. Hess,
The Government has adequately alleged liability under both theories. Turning first to the reckless underwriting
Alternatively, the reckless underwriting and origination claim may also be understood as a legally false certification claim.
Wells Fargo’s arguments to the contrary are premised on a misunderstanding of the Government’s claim. In the Bank’s view, the Government’s claim is that implied in the individual loan applications are certifications of company-wide compliance with the quality control and self-reporting requirements for participation in the Direct Endorsement Lender program. (See Wells Fargo Mem. 25-29). Even if false, the Bank contends, such implied certifications cannot be the basis for FCA liability
The Government’s second set of allegations — that Wells Fargo knowingly failed to report to HUD as required FHA loans with material underwriting violations — state a claim based on the implied legal certification theory of FCA liability. After all, implicit in the submission of a claim for payment on a defaulted loan is a certification that the loan complies with the core eligibility requirements of HUD insurance. See Feldman,
b. Causation
Wells Fargo’s second argument with respect to the FCA claims — that the Government has not sufficiently alleged that any false or fraudulent claim caused the Government’s loss — is even more easily rejected. Courts disagree about the proper standard governing causation in FCA cases. While the Seventh Circuit has held
At this stage, this Court need not determine which standard should govern here, because the Government has sufficiently alleged causation under either test. The Government alleges that Wells Fargo’s false statements that it complied with HUD regulations induced the Government to insure loans it otherwise would not insure — that is, that HUD would not have guaranteed the loan but for the Bank’s misstatements. (See Am. Compl. ¶¶ 147, 153). The Government has also satisfied the more stringent causation requirements of the Third and Fifth Circuits. The regulations the Government argues Wells Fargo violated are those meant to ensure that borrowers are able to afford their homes; failure to uphold these regulations “could very well be the major factor for subsequent defaults,” and thus satisfy the requirement that “the defaults were related to the false statements in the application.” Miller,
3. FIRREA
The Court turns next to Wells Fargo’s arguments about the Government’s FIR-REA claims. Congress enacted FIRREA in response to the savings and loan crisis of the 1980s. See Bank of New York Mellon,
c. Title 18, United States Code, Section 1005
First, the Government claims that Wells Fargo violated the fourth paragraph of Title 18, United States Code, Section 1005. Section 1005 provides in full as follows:
Whoever, being an officer, director, agent or employee of any Federal Reserve bank, member bank, depository institution holding company, national bank, insured bank, branch or agency of a foreign bank, or organization operating under section 25 or section 25(a) of the Federal Reserve Act, without authority from the directors of such bank, branch, agency, or organization or company, issues or puts in circulation any notes of such bank, branch, agency, or organization or company; or
Whoever, without such authority, makes, draws, issues, puts forth, or assigns any certificate of deposit, draft, order, bill of exchange, acceptance, note, debenture, bond, or other obligation, or mortgage, judgment or decree; or
Whoever makes any false entry in any book, report, or statement of such bank, company, branch, agency, or organization with intent to injure or defraud such bank, company, branch, agency, or organization, or any other company, body politic or corporate, or any individual person, or to deceive any officer of such bank, company, branch, agency, or organization, or the Comptroller of the Currency, or the Federal Deposit Insurance Corporation, or any agent or examiner appointed to examine the affairs of such bank, company, branch, agency, or organization, or the Board of Governors of the Federal Reserve System; or
Whoever with intent to defraud the United States or any agency thereof or any financial institution referred to in this section, participates or shares in or receives (directly or indirectly) any money, profit, property, or benefits through any transaction, loan, commission, contract, or any other act of any such financial institution—
Shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
18 U.S.C. § 1005 (emphasis added).
Notably, only the first paragraph of the Section expressly limits liability to officers, directors, agents, or employees — that is, insiders — of a bank. Nevertheless, some — although not all — courts to consider the question have extended that limitation to paragraphs two and three of the Section. See, e.g., United States v. Barel,
This Court agrees with the Government that paragraph four of Section 1005 is not limited to bank insiders. It nearly goes without saying that, “when [a] statute’s language is plain, the sole function of the courts — at least where the disposition required by the text is not absurd — is to enforce it according to its
The fourth paragraph of Section 1005, however, was enacted nearly fifty years later, in 1989, as part of FIRREA. See Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), Pub. L. No. 101-73, § 961(d)(3), 103 Stat. 183, 499 (1989). In adding paragraph four to the Section, Congress gave no indication that the word “whoever” should be limited to bank insiders. Moreover, Congress used the word “whoever” in several other provisions of FIRREA, and there is no dispute that, in those provisions at least, the word is not limited to bank insiders. See, e.g., 18 U.S.C. §§ 1007, 1344; see also 1 U.S.C. § 1 (defining the word “whoever,” when used in the United States Code, to “include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals”); United States v. A & P Trucking Co.,
In declining to interpret paragraph four by its terms, the Rubin Court relied in part on the legislative history of FIRREA, citing a statement in the Committee Report that “one of the ‘primary purposes of [FIRREA was to] ... enhance the regulatory enforcement powers of the depository institution regulatory agencies to protect against fraud, waste and insider abuse.’ ”
In light of this ambiguity, whatever the merits of limiting paragraphs two and three of Section 1005 to bank insiders (a question this Court need not decide), there is no basis to deviate from the plain language of paragraph four by limiting it in a similar manner. That is, paragraph four plainly does not present the “rare” or “exceptional” case in which “literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters” or “thwart the obvious purpose of the statute.” Griffin,
d. Title 18, United States Code, Sections 1001, 1341, and 1343
Next, Wells Fargo seeks to dismiss the Government’s FIRREA claims to the extent they are predicated on violations of Title 18, United States Code, Sections 1001, 1341, or 1343, statutes prohibiting false statements to the Government and mail and wire fraud. FIRREA imposes civil liability on “whoever” violates these provisions, where such conduct “affect[s] a federally insured financial institution.” 12 U.S.C. § 1833a(c)(2). Wells Fargo argues that the Government’s claims under these provisions fail because the only financial institution the Government has alleged was affected is Wells Fargo itself. (Wells Fargo Mem. 38-39). Such self-affecting misconduct, Wells Fargo contends, is not contemplated by the statute. (Id. at 39).
Since oral argument in this case, two other courts in this District have considered, and rejected, precisely the same argument. See Bank of New York Mellon,
Wells Fargo correctly notes that in each of the cases addressing Section 961(1), the affected financial institution— although a participant in the alleged fraud — was not the defendant. (The financial institutions had generally either pleaded guilty or entered into civil settlements). That distinction, however, does not alter the analysis. The question considered by the courts in these cases was whether a financial institution, through its own misconduct, can affect itself within the meaning of FIRREA. Courts have repeatedly held that it can. There is no reason to deviate from that interpretation here. See Desert Palace, Inc. v. Costa,
As Wells Fargo concedes (see Oral Arg. Tr. 80-81), Courts have repeatedly held that in order to allege such an effect, the Government need not allege actual harm, but only facts that would demonstrate that the bank suffered an increased risk of loss due to its conduct. See, e.g., United States v. Serpico,
4. Common Law Claims
Finally, Wells Fargo argues that the Government’s breach of fiduciary duty, unjust enrichment, and mistake of fact claims are insufficient under Rule 12(b)(6).
Applying these standards here, there is no basis to dismiss the Government’s claims. To be sure, the Government’s allegation that the “Direct Endorsement Lender program empowered Wells Fargo to obligate HUD to insure mortgages it issued” (Am. Compl. ¶ 176), is, as the Bank points out (Wells Fargo Mem. 48), somewhat overstated. After all, a lender submits to HUD applications for insurance to be reviewed and approved by the agency. See 24 C.F.R. § 203.255. Upon receipt of an application for insurance, HUD reviews the application to determine, among other things, that the mortgage is executed on the correct form; that all of the requisite documents were submitted; and that the lender made all the necessary certifications. See 24 C.F.R. § 203.255(c). Only once this pre-endorsement review is complete does HUD certify a mortgage for insurance.
Nevertheless, under the Direct Endorsement program, HUD “does not review applications for mortgage insurance before the mortgage is executed.” 24 C.F.R. § 203.5(a). Nor does it ensure that the borrower meets the requirements for the
The Government’s unjust enrichment and mistake of fact claims are a different story. Under New York law, “the voluntary payment doctrine precludes a party from recovering voluntary payments ‘made with full knowledge of the facts’ if the party’s ignorance of its contractual rights and obligations resulted from a ‘lack of diligence.’ ” United States ex rel. Feldman v. City of New York,
CONCLUSION
For the reasons stated above, there is no basis to dismiss any of the Government’s federal statutory claims. Wells Fargo’s motion to dismiss is therefore DENIED as to these claims. Any tort claims arising before June 25, 2009, however, are untimely and therefore dismissed. In addition, the Government’s mistake of fact and unjust enrichment claims are dismissed in their entirety. Wells Fargo’s motion is therefore GRANTED as to these claims.
The Clerk of Court is directed to terminate the motion (Docket No. 26). In addition, the Clerk of Court is directed to terminate Wells Fargo’s previous motion to dismiss (Docket No. 14) as moot.
SO ORDERED.
Notes
. Wells Fargo also asserts that, "for several of the years at issue,” the relevant mortgage loan business was conducted by Wells Fargo Home Mortgage, Inc., "a separate and distinct legal entity." (Wells Fargo Mem. 18). At this stage of the litigation, however, there is no evidence to support this assertion. The Amended Complaint, the truth of which the Court is required to assume for purposes of considering the Bank’s motion to dismiss, alleges that Defendant Wells Fargo Bank, N.A. committed all of the alleged misconduct at issue. If, after discovery, the evidence indicates that another entity was responsible for some or all of the loans at issue here, the Government may move for leave to amend its complaint to allege successor liability, if applicable, or Wells Fargo may move to dismiss the claims that do not pertain to it.
. Following oral argument on this motion, the Government withdrew the Fifth Claim alleged in its Amended Complaint, a claim for relief based on "reverse false claims.” (Docket No. 35). By memorandum endorsement, that claim was dismissed and is not at issue here.
. This calculation excludes the months of September 2001, September 2002, and October 2002, for which data are not available.
. The precise formulation of this requirement changed during the relevant time period, but in all versions, it required the reporting of material violations to HUD. (Am. Compl. ¶ 121 (citing HUD Handbook 4060.1 REV-1, ¶ 6-1(H) (1993); HUD Handbook 4060.1 REV-1, CHG-1, ¶ 6-3 (J), 6-13 (2003); HUD Handbook 4060.1 REV-2, ¶¶ 7-3(J), 7-4(D) (2006))).
. The release further provided:
For avoidance of doubt, this Paragraph means that the United States is barred from asserting that a false annual certification renders [Wells Fargo] ... liable under the False Claims Act and the other laws cited above for loans endorsed by [Wells Fargo] ... for FHA insurance during the period of time applicable to the annual certification without regard to whether any such loans contain material violations of HUD-FHA requirements, or that a false individual loan certification that "this mortgage is eligible for HUD mortgage insurance under the Direct Endorsement program" renders [Wells Fargo] ... liable under the False Claims Act for any individual loan that does not contain a material violation of HUDFHA requirements.
(Baruch Decl Ex. D, at F-17, F-18).
. There is at least one case in which an FCA suit was brought by a federal corporation, rather than by the Attorney General acting on behalf of the United States, see Federal Crop Ins. Corp. v. Hester,
. At oral argument, Wells Fargo's counsel stated that United States v. Kensington Hospital, Civ. A. No. 90-5430,
. It is not actually clear whether any of the Government’s claims arose before June 25, 2002. Although the Government alleges misconduct beginning in May 2001 (Am. Compl. ¶ 44), the statute of limitations period on FCA claims “begins to run on the date the claim [for payment from the Government] is made, or, if the claim is paid, on the date of payment.” Kreindler & Kreindler,
. According to the Senate Report accompanying the bill, Congress amended the WSLA for three reasons: (1) to harmonize it with the general criminal statute of limitations, which had been extended from three years to five years; (2) to "make[ ] clear ...., so courts, prosecutors, and litigants c[ould] be sure when the statute of limitations starts to run,” that only "an official act of the President with notice to Congress, or a concurrent resolution of Congress” would end the tolling of the statute of limitations period under the WSLA; and (3) to "clarif[y] that for purposes of" the WSLA, "the term 'war' shall include Congressional authorizations for the use of military force pursuant to the War Powers resolution.” S. Rep. 110-431, at 5 (2008).
. As noted, before the 2008 amendment, the WSLA applied only when the United States was "at war.” Courts have disagreed about whether the conflicts in Afghanistan and Iraq put the United States "at war” within the meaning of the Act given the absence of a congressional declaration of war pursuant to Article I, Section 8, Clause 11 of the United States Constitution. Compare, e.g., United States v. Shelton,
. By contrast, Wells Fargo concedes that the Government's other FCA claims — based on allegations that, in order to secure payment from the United States for defaulted loans, Wells Fargo knowingly failed to report loans that materially violated the conditions for insuring such loans — constitute fraud within the meaning of the WSLA. (Oral Arg. Tr. 21).
. Even assuming Wells Fargo can demonstrate after discovery that DOJ was or reasonably should have been aware of the facts underlying this action after the publication of the HUD Inspector General’s report in 2004, most of the Government’s claims would still be timely. Pursuant to the FCA statute of limitations found in Section 3731(b)(1), any FCA claims that arose on or after October 14, 2002 would have been live when WSLA was amended. The applicable statutes of limitations for those claims would therefore have been suspended by the Act, and they would be timely now.
. The Court considers the HUD audit report, which is cited in the Amended Complaint (Am. Compl. ¶ 123) and available on HUD’s website (see Wells Fargo Mem. 14 n. 13 (noting that the report is available at http://
. There is no dispute that Rule 9(b) applies to the Government’s fraud claims. (Wells Fargo Mem. 17; Gov’t Mem. 18). See also Gold v. Morrison-Knudsen Co.,
. Wells Fargo argues that the examples the Government provides are particularly insufficient to support the Government’s FIRREA claim that is premised on the Bank’s violation of Title 18, United States Code, Section 1014. (Wells Fargo Mem. 37-38). That statute prohibits “knowingly mak[ing] any false statement or report ... for the purpose of influencing in any way the action of the Federal Housing Administration." Because that provision applies only to false statements made after July 30, 2008, the parties agree that Wells Fargo may only be held liable for FIR-REA violations based on that provision for conduct after that date. (Am. Compl. ¶ 169 n. 4; Wells Fargo Mem. 37; Gov’t Mem. 54). Wells Fargo contends that the Amended Complaint "never identifies any alleged false statement or report made” after July 30, 2008, and therefore this claim does not satisfy the pleading requirements of Rule 9(b). (Wells Fargo Mem. 37). Although a plaintiff may not save allegations that do not comply with Rule 9(b) simply by placing them alongside allegations that do, where allegations are related to a scheme of fraudulent conduct, Rule 9(b) should only be "construed as narrowly as is necessary to protect the policies promoted by” that Rule. Bledsoe,
. Furthermore, at least with respect to the self-reporting scheme, the Government has, effectively, provided Wells Fargo with the names of the employees responsible for the alleged false claims. Because the Government provided the Bank with the loan numbers of each claim it alleges was fraudulently submitted as a result of the scheme, the Bank should be able to identify the employees that worked on each loan. (See Oral Arg. Tr. 54). The Bank can obviously determine the names of the employees that worked on the ten loans cited as examples of the reckless origination scheme as well. (See id.).
. Wells Fargo also contends that the Government should not be permitted to "hide behind the relaxed pleading standard courts sometimes apply to qui tam relators who rely on inferences rather than facts.” (Wells Fargo Mem. 23 (internal quotation marks omitted)). See United States ex rel. Grubbs v. Kanneganti,
. In its discussion of scienter Wells Fargo repeats its contention, discussed above, that in order to satisfy Rule 9(b), the Government must allege that “[e]ach mortgage loan origination certification” was "signed by an identified person who knew that it was false at the time of the certification.” (Wells Fargo Mem. 22 (internal emphasis omitted)). As explained above, however, this is not the case. Because the Government alleges that Wells Fargo has committed fraudulent acts, it is the Bank's intent, not that of the Bank's employees, that must be pleaded with sufficient particularity to satisfy Rule 9(b). See Bledsoe,
. In 2009, Congress passed the Fraud Enforcement and Recovery Act ("FERA”), which amended and renumbered the relevant provisions of the FCA. See Pub. L. No. 111-21, 123 Stat. 1617 (2009). The amendments are not relevant to the disputed issues in this motion. For clarity's sake, however, the Court notes for false claims submitted prior to the passage of FERA, the provisions governing the FCA claims at issue in this case are the pre-amendment 31 U.S.C. § 3729(a)(1) (2006), providing liability for the submission of false claims, and current 31 U.S.C. § 3729(a)(1)(B), imposing liability for false statements. See U.S. ex rel. Kirk v. Schindler Elevator Corp.,
. The Government argues that this requirement applies only to implied false certifications. (Gov’t Mem. 29). That is not the case. See Mikes,
. Wells Fargo argues that, under Second Circuit precedent, in order to incur liability for an implied false certification, the underlying regulation must expressly state that payment depends upon compliance. (Wells Fargo Mem. 26-27). The Court of Appeals did hold in the healthcare context that "implied false certification is appropriately applied only when the underlying statute or regulation upon which the plaintiff relies expressly states the provider must comply in order to be paid.” Mikes,
. The Government contends that the individual loan certifications were factually false. (See Gov't Mem. 28). Because Wells Fargo failed to comply with HUD regulations designed to minimize the risk of default, the Government argues, the Bank's certifications to the contrary amounted to a certification that the loans were of higher quality than they actually were, which in the Government’s view, is a claim of factual falsehood. (See id.). The Government's allegations, however, are better understood as a claim of legal falsehood: The Bank did not attest to the quality of its mortgages per se. Instead, it falsely certified compliance with regulations with which it did not in fact comply. Although such false certifications do, indeed, decrease the quality of the loan, to understand them as factually false would conflate the two categories and transform all claims of legal falsehood in this context into factually false certification claims.
. There is no relevant difference between the possibility that HUD may require a lender to indemnify a claim and the possibility that HUD may refuse to pay the claim. Wells Fargo does not argue otherwise.
. Wells Fargo contends that the Section 1014 claim is insufficient under Rule 9(b). As explained above in footnote 15, this argument is without merit.
. Some courts have suggested that the relevant effect on a financial institution need not be negative at all, but rather any impact— positive or negative — may constitute an effect within the meaning of FIRREA. See, e.g., Bank of New York Mellon,
. Wells Fargo complains that allowing the Government to allege that this lawsuit is itself an effect cognizable under FIRREA would allow the Government "to manufacture [an] ‘effect’ — and therefore [a] FIRREA violation— simply by bringing suit against a federally insured financial institution.” (Wells Fargo Mem. 45). This argument misunderstands the effect alleged in the Amended Complaint. The negative effect the Government alleges is not this lawsuit per se, but rather Wells Fargo’s exposure to potential legal liability more generally. (Am. Compl. ¶ 171). This effect is cognizable under FIRREA. See Bank of New York Mellon,
. Wells Fargo argues that the Government's common law claims should be dismissed for several other reasons as well. In particular, the Bank contends that the statute of limitations has expired on many of the claims; that the claims do not satisfy Rule 9(b); that the Government has failed to adequately plead causation; and that, to the extent the Government alleges claims for "future losses,” such claims are "no more than an impermissible attempt to seek future indemnification.” (Wells Fargo Mem. 46-47). Each of these arguments is cursory, offering little factual or legal analysis. Nevertheless, the Court has considered them. With respect to the first two arguments, as explained above, many of the Government's common law claims are untimely, but the claims are sufficient to satisfy the requirements of Rule 9(b). As to the third argument, for the same reasons the Government has adequately pleaded causation under the FCA, causation is also adequately pleaded for the common law claims.
Wells Fargo’s final argument is less than clear. The argument appears to be that the Government’s allegations with respect to FHA claims for loans that have not yet defaulted are not ripe. But "under general principles of tort law, a cause of action accrues when conduct that invades the rights of another has caused injury. When the injury occurs, the injured party has the right to bring suit for all of the damages, past, present and future, caused by the defendant’s acts.” Davis v. Blige,
. It is unclear which state’s law applies to the Government's common law claims. In its memorandum of law, the Government relies on New York state law when discussing the common law claims. (See Gov't Mem. 64-67). Wells Fargo cites New York state law, as well as the law of Iowa, where it is headquartered, and Minnesota, where the Bank asserts it "has significant operations.” (Wells Fargo Mem. 47). The parties have not identified, and the Court has not found, any conflict between the laws of these states relevant to the disputes at issue here. Therefore, the Court need not determine which body of law applies at this time. See, e.g., Fin. One Pub. Co. v. Lehman Bros. Special Fin., Inc.,
. The Government disputes that the audit report was sufficient to put it on notice of the misconduct alleged in the Amended Complaint, but it does not contest the proposition that if the report was indeed sufficient to put the Government on notice, the quasi-contract common law claims must be dismissed. (Gov’t Mem. 67). It has therefore waived any argument to the contrary. See, e.g., First Capital Asset Mgmt. v. Brickellbush, Inc.,