United States District Court, District of Columbia
United States of America, et al., ex rel. LAURENCE SCHNEIDER, Plaintiffs,
J.P. MORGAN CHASE BANK, N.A., et al., Defendants.
ROSEMARY M. COLLYER, UNITED STATES DISTRICT JUDGE.
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.
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 rel. Schneider v.
J.P. Morgan Chase Bank, N.A., 224 F.Supp.3d 48, 50-53
(D.D.C. 2016) (Schneider I).
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 filed a Motion for Leave to File a Third Amended
Complaint; Chase opposed; and that Motion is currently ripe
for review. On July 2, 2018, after the briefing on Mr.
Schneider's Motion was completed, the United States filed
a Notice indicating its intent 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.
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, 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).
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).
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 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.
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. 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.
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.