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
1 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].
2 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,
3 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
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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
1 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].
2 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,
3 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