Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-13-05112/USCOURTS-caDC-13-05112-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 13, 2014 Decided June 10, 2014

No. 13-5112

UNITED STATES OF AMERICA, ET AL.,

APPELLEES

v.

BANK OF AMERICA CORPORATION, ET AL.,

DEFENDANTS

WELLS FARGO BANK, N.A.,

APPELLANT

Appeal from the United States District Court

for the District of Columbia

(No. 1:12-cv-00361)

Douglas W. Baruch argued the cause for appellant. With 

him on the briefs were William F. Johnson and Jennifer M. 

Wollenberg.

Lindsey Powell, Attorney, U.S. Department of Justice, 

argued the cause for appellees. With her on the brief were 

Stuart F. Delery, Assistant Attorney General, Ronald C. 

Machen Jr., U.S. Attorney, and Michael S. Raab, Attorney.

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Before: BROWN, GRIFFITH and MILLETT, Circuit Judges.

Opinion for the Court filed PER CURIAM.

PER CURIAM: Wells Fargo Bank, N.A., appeals from 

an order denying its motion to enforce a consent judgment. 

We affirm.

I

In March 2012, the United States, forty-nine states, and 

the District of Columbia filed suit in the United States District 

Court for the District of Columbia against several mortgage 

servicers, including appellant Wells Fargo. That complaint 

asserted claims under the False Claims Act, 31 U.S.C. 

§§ 3729 et seq., and the Financial Institutions Reform, 

Recovery, and Enforcement Act (FIRREA), 12 U.S.C. 

§ 1833a, based on Wells Fargo’s alleged misconduct in

issuing home mortgage loans insured by the Federal Housing 

Administration (FHA), a division of the United States

Department of Housing and Urban Development (HUD). 

The next month, the parties agreed on a settlement that 

the district court entered as a consent judgment. In exchange 

for roughly $5 billion in consideration from Wells Fargo, the 

United States agreed to release certain claims, including

claims “under FIRREA, the False Claims Act, and the 

Program Fraud Civil Remedies Act[, 31 U.S.C. §§ 3801 et 

seq.,] where the sole basis for such claim or claims is that 

[Wells Fargo] submitted to HUD-FHA * * * a false or 

fraudulent annual certification” that it had complied with “all 

HUD-FHA regulations necessary to maintain HUD-FHA 

approval[.]” Release ¶ 3(b) at F-17; see generally United 

States Dep’t of Housing & Urban Dev., FHA Title II 

Mortgagee Approval Handbook, 4060.1 REV-2 § 4-2 (2006) 

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(“Annually, each mortgagee must complete and return to the 

Department a Title II Yearly Verification Report[.]”). 

Underscoring that “sole basis” language, Paragraph 3(b) 

continued: 

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 * * * renders [Wells Fargo] liable under 

the False Claims Act for any individual loan that does 

not contain a material violation of HUD-FHA 

requirements.

Release ¶ 3(b) at F-17 to F-18.

In the consent judgment, the district court retained 

exclusive jurisdiction to enforce its terms and to resolve “any 

dispute arising out of matters” within the Release’s scope. 

Release ¶ 20 at F-43; Consent J. ¶ 13.

Six months after entry of the consent judgment, the 

United States filed a wide-ranging complaint against Wells 

Fargo in the United States District Court for the Southern 

District of New York. The complaint again pleaded claims 

under the False Claims Act and FIRREA in connection with 

Wells Fargo’s origination and underwriting of thousands of 

individual, federally insured mortgages. Believing that such 

claims were precluded by the Release, Wells Fargo moved the 

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United States District Court for the District of Columbia for 

an injunction enforcing the consent judgment by barring all of 

the United States’ claims in the New York litigation. In Wells 

Fargo’s view, “Paragraph 3(b) release[d] Wells Fargo from 

liability for company-wide conduct that was the subject of 

[its] annual certifications,” United States v. Bank of America, 

922 F. Supp. 2d 1, 9 (D.D.C. 2013), and the New York suit 

based its claims on such conduct. 

The district court denied Wells Fargo’s motion. The 

court ruled that the unambiguous language of Paragraph 3(b)

released Wells Fargo only from claims “the sole basis” of 

which is the submission of a false or fraudulent annual 

certification. Id. (internal quotation marks omitted; emphasis 

added). That limitation, the court explained, expressly 

preserved the United States’ ability to pursue other legal 

claims based on the independent loan origination and 

servicing conduct that underlay those certifications. Id. 

Wells Fargo timely appealed the district court’s judgment. 

II

Reviewing the Release de novo under standard principles 

of contract law, see Segar v. Mukasey, 508 F.3d 16, 22 (D.C. 

Cir. 2007), the Release’s plain text forecloses Wells Fargo’s 

interpretation. First, the “sole basis” sentence expressly 

confines the release of claims to those for which liability is 

predicated on the specific conduct of filing a false annual 

certification. Release ¶ 3(b) at F-17.

Second, the Release’s “for avoidance of doubt” language, 

as advertised, eliminates any further doubt by confining the 

release to (i) claims “based on a false individual loan 

certification where the individual loan did not contain a 

material violation of HUD-FHA requirements,” Bank of 

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America, 922 F. Supp. 2d at 9 & n.8; and (ii) potentially 

sweeping liability for every single one of the thousands of 

loans made while Wells Fargo was operating under a false 

annual certification, regardless of whether each loan 

independently violated the governing federal regulations. 

Release ¶ 3(b) at F-17 to F-18; cf. United States ex rel. Main 

v. Oakland City Univ., 426 F.3d 914, 916 (7th Cir. 2005) 

(holding that a university’s initial certification of eligibility to 

participate in a federal subsidy program for college students 

renders a subsequent application for payment under the 

program “false because it [falsely] represents that the student 

is enrolled in an eligible institution”); S. Rep. No. 345, 99th

Cong., 2d Sess. 9 (1986) (claim for Medicare reimbursement 

“may be false even though the services are provided as 

claimed if, for example, the claimant is ineligible to 

participate in the program”). 

The third textual strike against Wells Fargo is that the

Release expressly preserved the United States’ right to pursue 

claims “for conduct with respect to the insurance of 

residential mortgage loans that violates any laws, regulations 

or other HUD-FHA requirements applicable to the insurance 

of residential mortgage loans by HUD.” Release ¶ 3(b) at F18. That same provision further allows the United States to 

introduce evidence of Wells Fargo’s “failure to comply with 

applicable HUD-FHA requirements”—including failures to 

comply with HUD-FHA requirements that underlie annual 

certifications—“in any way” as long as it is “in connection 

with any claim that there was a material violation(s) of 

applicable HUD-FHA requirements with respect to an 

individual loan or loans[.]” Release ¶ 3(b) at F-18. 

Wells Fargo’s efforts to escape those contractual

limitations fail. Wells Fargo argues at length that Paragraph 

3(b) released it from liability for any company-wide conduct 

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that allegedly rendered the annual certification false. The 

short answer is that is not what Paragraph 3(b) says. It 

releases only the far narrower category of Wells Fargo’s 

liability for all of the individual loans made pursuant to the 

false annual certification that did not themselves transgress 

any regulatory directives. Release ¶ 3(b) at F-16 to F-19. By 

contrast, if the same conduct that gave rise to a false annual 

certification also resulted in individual loans that materially 

transgressed HUD or FHA requirements, then the claim was 

not released because the falsity of the annual certification 

would not be the “sole” basis for the claim. Instead, the 

distinct loan-level regulatory violation would provide an 

independent basis for liability. 

On top of that, Wells Fargo’s insistence that the release 

encompassed “conduct” begs the question of precisely which 

“conduct” was released and which was preserved—a question 

that the “for avoidance of doubt” clause conclusively answers. 

Notably, when the settlement agreement meant to release 

categories of origination and servicing conduct, it did so 

expressly. See Release at F-2 to F-3, F-6 to F-9, F-12 to F-15

(defining and then releasing, for other purposes, “Covered 

Servicing Conduct” and “Covered Origination Conduct”). 

Wells Fargo points to a parenthetical phrase in Paragraph 

3(b) that describes the release in conduct-based terms as 

“(including, but not limited to, the requirement that the 

mortgagee implement and maintain a quality control program 

that conforms to HUD-FHA requirements).” Release ¶ 3(b) 

at F-17. Read in context, however, the parenthetical just 

illustrates one type of the false or fraudulent annual 

certifications concerning general compliance with HUD-FHA 

regulations to which the Release applies—i.e., one falsely

certifying compliance with the requirement of maintaining a 

quality-control program. Id. That is because the “use of 

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parentheses,” when “prefaced with the word ‘including,’ ”

simply “emphasizes the fact that that which is within is meant 

simply to be illustrative, hence redundant.” Chickasaw 

Nation v. United States, 534 U.S. 84, 89 (2001). The 

parenthetical, in other words, cannot sweep any further than 

the “sole basis” language it illuminates. 

Finally, it is this court’s task to construe and enforce the 

Release. Release ¶ 20 at F-43; Consent J. ¶ 13. But it is the 

Southern District of New York’s job to construe the United 

States’ complaint and to ensure that the claims are litigated in 

a manner that comports with the Release’s limitations, as 

determined by this court. Wells Fargo is correct that some 

portions of the New York complaint tread on the verge of the 

released claims, referencing false annual certifications 

explicitly. See First Amended Compl. of the United States of 

America ¶¶ 160, 165, United States v. Wells Fargo Bank, 

N.A., No. 12-civ-7527 (JMF) (S.D.N.Y. Dec. 21, 2012). 

Counsel for the United States, however, repeatedly 

conceded at oral argument that, to comport the New York 

litigation with the Release’s terms, “material violations do 

need to be demonstrated with respect to individual loans.” 

Oral Arg. Tr. 25, lines 23–24; see also id. at 26, lines 14–16 

(“[C]laims do depend in each instance on material violations 

with respect to each loan, so they do not rely on that threshold 

certification.”). Should the government’s prosecution of its 

claims depart from that concession, Wells Fargo may seek 

appropriate relief.

1

 1 Relying on the D.C. district court’s interpretation of the Release in 

this case, the District Court for the Southern District of New York 

denied Wells Fargo’s motion to dismiss, concluding that the 

operative complaint in New York does not involve claims based 

“solely” on Wells Fargo’s submission of false or fraudulent annual 

certifications. United States v. Wells Fargo Bank, N.A., 972 F. 

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Accordingly, the judgment of the district court is 

affirmed.

So ordered.

 

Supp. 2d 593, 604–605 (S.D.N.Y. 2013). That decision is not 

before us.

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