Court Opinion

ID: 4374401
Source: CourtListenerOpinion
Date Created: 2019-03-06 18:00:56.435584+00
Date Added: 2024-06-11T14:22:18.782227
License: Public Domain

UNITED STATES DISTRICT COURT
                          FOR THE DISTRICT OF COLUMBIA
__________________________________
                                      )
United States of America, et al.,     )
ex rel. LAURENCE SCHNEIDER,           )
                                      )
              Plaintiffs,             )
                                      )
        v.                            )    Civil Action No. 14-1047 (RMC)
                                      )
J.P. MORGAN CHASE BANK,               )
N.A., et al.,                         )
                                      )
              Defendants.             )
_________________________________     )

                                  MEMORANDUM OPINION

               Pursuant to the Federal False Claims Act and similar State and District of

Columbia laws, Relator Laurence Schneider sued J.P. Morgan Chase Bank, N.A., J.P. Morgan

Chase & Co., and Chase Home Finance LLC (collectively “Chase”) and argued Chase submitted

false claims relating to the National Mortgage Settlement and false claims relating to the Home

Affordable Modification Program (HAMP) to decrease its liability to the Federal Government.

After over five years in litigation both in front of this Court and the D.C. Circuit, the United

States has moved to dismiss the case pursuant to 31 U.S.C. § 3730(c)(2)(A), which permits the

United States to dismiss a qui tam action “notwithstanding the objections of the person initiating

the action.” The Court held a hearing on the motion, as required by the statute, and based on the

representations made in the briefs and at the hearing will grant the motion.

                                             I. FACTS

               The general background and facts of this case are set forth in detail in this Court’s

opinion on Chase’s Motion to Dismiss the Second Amended Complaint and will not be repeated

here except as necessary to understand the posture of the current motion. See United States ex

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rel. Schneider v. J.P. Morgan Chase Bank, N.A., 224 F. Supp. 3d 48, 50-53 (D.D.C. 2016)

(Schneider I).

                 On May 6, 2013, Mr. Schneider filed his initial Complaint as Relator under the

False Claims Act, see 31 U.S.C. § 3730(b)(1), in the United States District Court for the District

of South Carolina. See Compl. [Dkt. 1]. The Federal Government declined to intervene on

January 13, 2014. See Notice [Dkt. 24]. The case was transferred to this Court on June 19,

2014. See Transfer Order [Dkt. 58]. Relator filed his First Amended Complaint on November

17, 2014. See FAC [Dkt. 80]. On August 31, 2015, the Federal Government again declined to

intervene. See FAC Notice [Dkt. 96]. Relator filed a Second Amended Complaint on October 2,

2015. See SAC [Dkt. 102]. Defendants moved to dismiss on November 12, 2015. See Mot.

[Dkt. 105]. The Court granted the motion to dismiss and dismissed Mr. Schneider’s HAMP

claim without prejudice and all other claims with prejudice. See Schneider I, 224 F. Supp. 3d 48.

The D.C. Circuit affirmed and remanded the case to this Court to allow Mr. Schneider an

opportunity to file a motion to amend his complaint to modify the claim that had been dismissed

without prejudice. See United States ex rel. Schneider v. JPMorgan Chase Bank, Nat’l Ass’n,

878 F.3d 309 (D.C. Cir. 2017) (Schneider II).

                 Mr. Schneider filed a Motion for Leave to File a Third Amended Complaint;

Chase opposed; and that Motion is currently ripe for review. 1 On July 2, 2018, after the briefing

on Mr. Schneider’s Motion was completed, the United States filed a Notice indicating its intent

1
 See Relator’s Mot. for Leave to File Third Am. Compl. [Dkt. 124]; Defs.’ Mem. in Supp. of
Their Opp’n to Relator’s Mot. for Leave to File Third Am. Compl. [Dkt. 126]; Relator’s Reply to
Defs.’ Opp’n to Relator’s Mot. for Leave to File Third Am. Compl. [Dkt. 127]; Defs.’ Mot. for
Leave to File Surreply in Opp’n to Relator’s Mot. for Leave to File Third Am. Compl. [Dkt.
128]; Defs.’ Surreply in Opp’n to Relator’s Mot. for Leave to File Third Am. Compl. [Dkt. 128-
1]; Relator’s Opp’n to Defs.’ Mot. for Leave to File Surreply in Opp’n to Relator’s Mot. for
Leave to File Third Am. Compl. [Dkt. 129].

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to evaluate the proposed amendments to determine if dismissal is appropriate. See Notice of

Intent to Evaluate Proposed Am. Compl. and Request to Abstain Ruling on Mot. for Leave to

Amend [Dkt. 130]. The Court stayed the Motion and granted three extensions of time to the

United States as it considered whether to move to dismiss. See 9/18/2018 Minute Order;

10/10/2018 Minute Order; 10/23/2018 Minute Order. On November 13, 2018, the United States

moved to dismiss the case pursuant to 31 U.S.C. § 3730(c)(2)(A). See United States’ Mot. to

Dismiss [Dkt. 135]. Mr. Schneider opposed and requested a hearing on the motion. See Relator

Laurence Schneider’s Notice of Request for Hearing Regarding United States’ Mot. to Dismiss

[Dkt. 136]. The Court conducted that hearing on February 27, 2019.

                                    II. LEGAL STANDARD

               The False Claims Act’s “chief purpose . . . is to prevent the commission of fraud

against the federal government and to provide for the restitution of money that was taken from

the federal government by fraudulent means.” United States ex rel. Purcell v. MWI Corp., 824 F.

Supp. 2d 12, 15 (D.D.C. 2011). The FCA imposes civil penalties for the submission of false

claims to the United States government. Private parties, called relators, can sue for violations of

the FCA in the name of the United States. See 31 U.S.C. § 3730(b)(1). Special procedures apply

in such cases, which are called qui tam actions—“short for the Latin phrase qui tam pro domino

rege quam pro se ipso in hac parte sequitur, which means ‘who pursues this action on our Lord

the King’s behalf as well as his own.’” Vt. Agency of Nat’l Res. v. United States ex rel. Stevens,

529 U.S. 765, 768 n.1 (2000). When a plaintiff-relator files an initial complaint, it is not

immediately served on the defendant, but is instead served on the United States along with

“written disclosure of substantially all material evidence and information the [plaintiff]

possesses.” 31 U.S.C. § 3730(b)(2). Thereafter, the case is stayed for a minimum of sixty days,

plus any extensions, while the United States determines whether it will intervene—that is,

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whether it will “proceed with the action, in which case the action shall be conducted by the

Government; or . . . decline[ ] to take over the action, in which case the person bringing the

action shall have the right to conduct the action.” Id. § 3730(b)(4)(A)-(B). If the government

declines to intervene, as happened here, the complaint is unsealed, and the plaintiff-relator may

proceed with the case. Even in cases in which the government has declined to intervene, the

government retains special rights atypical in traditional civil actions, such as the right to receive

all pleadings, intervene at any time for good cause, see id. § 3730(c)(3), and petition the Court

for a stay of discovery, see id. § 3730(c)(4).

               Section 3730(c)(2)(A) also permits the government to “dismiss the action

notwithstanding the objections of the person initiating the action if the person has been notified

by the Government of the filing of the motion and the court has provided the person with an

opportunity for a hearing on the motion.” Id. § 3730(c)(2)(A). The D.C. Circuit has interpreted

that provision to provide the government “unfettered right to dismiss” a qui tam action. Swift v.

United States, 318 F.3d 250, 252-53 (D.C. Cir. 2003) (“Nothing in § 3730(c)(2)(A) purports to

deprive the Executive Branch of its historical prerogative to decide which cases should go

forward in the name of the United States. The provision neither sets ‘substantive priorities’ nor

circumscribes the government’s ‘power to discriminate among issues or cases it will pursue.’”);

see also Hoyte v. Am. Nat’l Red Cross, 518 F.3d 61, 65 (D.C. Cir. 2008).

                                          III. ANALYSIS2

               The United States moves this Court to dismiss Relator’s action under 31 U.S.C.

§ 3730(c)(2)(A). Mr. Schneider opposes, arguing that the United States does not have unfettered

2
  This Court’s jurisdiction remains as described in the opinion on Defendants’ motion to dismiss
the second amended complaint. See Schneider I, 224 F. Supp. 3d at 56. This Court has subject
matter jurisdiction pursuant to 28 U.S.C. § 1331 and 31 U.S.C. § 3730(a). This Court is the

                                                  4
discretion to dismiss qui tam actions because the Department of Justice created internal rules to

govern when to dismiss actions under § 3730(c)(2)(B) and in this case none of the necessary

conditions applies. Mr. Schneider spends considerable pages to demonstrate the strength of his

qui tam case against Chase.

               Despite DOJ’s internal procedures and Mr. Schneider’s argument about the

strength of his allegations, this Court is bound by Circuit precedent which holds that the United

States may, without the consent of the Relator, dismiss actions brought on its behalf. See Hoyte,
518 F.3d at 65; Swift, 318 F.3d at 252-53.3 Before dismissing a case on such a motion from the

United States, the Court must give the Relator an opportunity to be heard and to attempt to

convince the United States why it should allow the case to continue. Mr. Schneider made that

attempt in writing and through counsel’s presentation at the motion hearing on February 27,

2019. Having not been persuaded, the United States reaffirmed its desire to dismiss this action.

               The Court finds that, consistent with Smith and Hoyte, the United States has

“unfettered discretion” to dismiss qui tam actions, Hoyte, 518 F.3d at 65, and having heard from

Relator on the issue, the Court will dismiss the case.

                                       IV. CONCLUSION

               For the reasons set forth above, United States’ Motion to Dismiss, Dkt. 135, will

be granted. The case will be dismissed and Relator’s Motion for Leave to File a Third Amended

proper venue because the underlying National Mortgage Settlement was approved by this Court
and Defendants conduct business in the District of Columbia. See 31 U.S.C. § 3732(a).
3
  Both Swift and Hoyte mention “fraud on the court” as a possible exception to the unfettered
deference provided to the government to dismiss qui tam suits. See Swift, 318 F.3d at 253;
Hoyte, 518 F.3d at 65. However, as in Swift and Hoyte, there is no evidence here to suggest any
fraud or any other “exceptional circumstance to warrant departure from the usual deference we
owe the Government’s determination whether an action should proceed in the Government’s
name.” Hoyte, 518 F.3d at 65.

                                                 5
Complaint and Defendants’ Motion for Leave to File Surreply will be denied as moot. A

memorializing Order accompanies this Memorandum Opinion.

Date: March 6, 2019
                                                  ROSEMARY M. COLLYER
                                                  United States District Judge

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