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Robert Edward Hager, et al., Plaintiffs v. Federal National Mortgage Association

August 9, 2012


The opinion of the court was delivered by: John D. Bates United States District Judge


Robert E. Hager and Andrew Ludel ("plaintiffs") brought this qui tam action on behalf of the District of Columbia under the D.C. False Claims Act ("D.C. FCA"). Federal National Mortgage Association ("Fannie Mae"), Federal Loan Mortgage Corporation ("Freddie Mac," and, together with Fannie Mae, the "Enterprises"), and Intervenor-Defendant Federal Housing Finance Agency ("FHFA") in its capacity as Conservator (collectively, "defendants"), have filed a motion to dismiss [Docket Entry 17]. Defendant Wells Fargo Home Mortgage, Inc. has joined the motion [Docket Entry 19]. For the reasons set forth below, defendants' motion to dismiss will be granted.

I. Background

D.C imposes a tax ("recordation tax") when "[a] deed that conveys title to real property" or "a security interest instrument is submitted for recordation." D.C. Code § 42-1103(a)(1)(A), (3). The recordation tax is an excise tax: it is "levied upon the use or transfer of property," unlike a direct tax "levied upon the property itself." See United States v. Wells Fargo Bank, 485 U.S. 351, 355 (1988); see alsoSecond Am. Compl. [Docket Entry 1-2] ¶ 10 ("these obligations are considered excise taxes, levied upon the transfer and perfection of real property interests . . . [t]hey are not a tax directly upon the property itself").

Plaintiffs allege that when filing documents with the D.C. Recorder's Office, defendants falsely claimed to be exempt from the recordation tax, knowingly invoking exemptions to which they were not entitled. Second Am. Compl. ¶ 26; see also id. at 1-2. In their opposition to defendants' motion, plaintiffs further allege that the Enterprises paid recordation and transfer taxes in other states. Pls.' Opp'n to Mot. to Dismiss (Feb. 21, 2012) [Docket Entry 23] at 14 ("Pls.' Opp'n").

Plaintiffs filed this qui tam complaint in D.C. Superior Court, alleging that defendants' actions violate the D.C. FCA, D.C. Code §§ 2-381.01 et seq.*fn1 On March 8, 2011, plaintiffs filed a second amended complaint. Defendants removed this action to federal court on November 23, 2011, and filed this motion to dismiss on January 13, 2012. This Court subsequently granted FHFA's motion to intervene. The District of Columbia has not notified the Court of its intent to intervene in this action.

Plaintiffs had filed a similar action in the U.S. District Court for the District of Nevada under Nevada's False Claims Act. That court dismissed plaintiffs' action. SeeNevada ex rel. Hager v. Countrywide Home Loans Servicing, LP, 812 F. Supp. 2d 1211, 1220 (D. Nev. 2011).

II.Standard of Review

"[I]n passing on a motion to dismiss, whether on the ground of lack of jurisdiction over the subject matter or for failure to state a cause of action, the allegations of the complaint should be construed favorably to the pleader." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); see also Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993). Therefore, the factual allegations must be presumed true, and plaintiffs must be given every favorable inference that may be drawn from the allegations of fact. See Scheuer, 416 U.S. at 236; Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000). However, the Court need not accept as true "a legal conclusion couched as a factual allegation," nor inferences that are unsupported by the facts set out in the complaint. Trudeau v. Federal Trade Comm'n, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)).

Under Rule 12(b)(1), the party seeking to invoke the jurisdiction of a federal court- plaintiffs here-bears the burden of establishing that the court has jurisdiction. See US Ecology, Inc. v. U.S. Dep't of the Interior, 231 F.3d 20, 24 (D.C. Cir. 2000); see also Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 13 (D.D.C. 2001) (a court has an "affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority"). "'[P]laintiff's factual allegations in the complaint . . . will bear closer scrutiny in resolving a 12(b)(1) motion' than in resolving a 12(b)(6) motion for failure to state a claim." Grand Lodge, 185 F. Supp. 2d at 13-14 (omission in original) (quoting 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1350 (2d ed. 1987)). Additionally, a court may consider material other than the allegations of the complaint in determining whether it has jurisdiction to hear the case, as long as it still accepts the factual allegations in the complaint as true. See Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005); EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 n.3 (D.C. Cir. 1997); Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir. 1992).

To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain "'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); accord Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam). Although "detailed factual allegations" are not necessary, to provide the "grounds" of "entitle[ment] to relief," plaintiffs must furnish "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555-56 (internal quotation marks omitted). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570); accord Atherton v. D.C. Office of the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009).


1.Subject Matter Jurisdiction

Defendants first seek dismissal under Rule 12(b)(1) for lack of subject matter jurisdiction. They contend that whether a qui tam relator is barred from proceeding under the public disclosure bar is a jurisdictional question. While that question is, indeed, jurisdictional under the federal False Claims Act, see Rockwell Int'l Corp. v. United States, 549 U.S. 457, 467 (2007), the similar provision in the D.C. FCA, at issue here, establishes an element of the plaintiffs' claim for relief rather than a jurisdictional requirement. "[O]nly Congress may determine a lower federal court's subject-matter jurisdiction." Bowles v. Russell, 551 U.S. 205, 211 (2007) (internal quotation marks omitted). The D.C. Council thus could not impose a jurisdictional bar to suit in federal court. Nor did it purport to do so: while the version of the federal statute interpreted in Rockwell spoke in jurisdictional terms, see Rockwell Int'l Corp., 549 U.S. at 467 ("'[n]o court shall have jurisdiction over an action [that runs afoul of the public disclosure bar]'" (quoting 31 U.S.C. § 3730(e)(4)(A) (2006))), the D.C. statute says nothing about a court's power, see D.C. Code § 2-381.03(c)(2)(A) ("[n]o person may bring an action ...

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