Case No. 17-7003 United States Court of Appeals For The District of Columbia
Case No. 17-7003 United States Court of Appeals For The District of Columbia
Case No. 17-7003 United States Court of Appeals For The District of Columbia
Appellant, Relator,
vs.
Appellees.
Joseph A. Black
Robert L. Di Marco Daniel E. Cohen
WALKER & DI MARCO, P.C. THE CULLEN LAW FIRM, PLLC
350 Main Street, First Floor 1101 30th Street NW, Suite 300
Malden, MA 02148 Washington, D.C. 20007
Tel: (781) 322-3700 Tel: (202) 944-8600
Fax: (781) 322-3757 Fax: (202 944-8611
TABLE OF CONTENTS
INTRODUCTION .....................................................................................................1
II. Chase Incurred an Obligation to Pay Money to the Government for Failure
to Modify Loans According to the Terms of the Consent Judgment. ...............12
CONCLUSION ........................................................................................................16
CERTIFICATE OF COMPLIANCE
CERTIFICATE OF SERVICE
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TABLE OF AUTHORITIES
Cases
Barr v. Clinton,
370 F.3d 1196, 1199 (D.C. Cir. 2004) ....................................................................5
Firestone v. Firestone,
76 F.3d 1205 (D.C. Cir. 1996) ..............................................................................17
Momenian v. Davidson,
__ F.3d __, 2017 WL 6629027 *7 (D.C. Cir. Dec. 29, 2017) ..............................15
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INTRODUCTION
Chase Bank, NA, No 17-7003 (Doc. 1710165 Dec. 22, 2017), ADD 1-11, regarding
Count 1 of his Second Amended Complaint related to Chase’s false claims made in
The basis for the Petition for rehearing is that the Panel relied on facts
outside of the complaint, which were asserted by Chase. These facts are not
present in the record and, more importantly, are simply not true. Most of these
facts relate to what the court-appointed Monitor of the NMS knew about Chase’s
clearly and unequivocally that the facts asserted by Chase and taken as true by the
The basis for the Petition for rehearing en banc is that the Panel violated the
rule that on a motion to dismiss district courts and courts of appeal are required to
“construe [the complaint] liberally in the plaintiffs’ favor, and [] grant plaintiffs the
benefit of all inferences that can be derived from the facts alleged.” Kowal v. MCI
Commc’ns Corp. 16 F.3d 1271, 1276. (D.C. Cir. 1994). See also Barr v. Clinton,
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370 F.3d 1196, 1199 (D.C. Cir. 2004). Instead, the Panel relied on Chase’s
Further, to the extent that the Panel found the complaint deficient in pleading
fraud, it should have permitted the plaintiff to amend his complaint to resolve any
ambiguities.
The primary factual errors and presumptions that the Panel relies on are
In that regard, Appellant’s claim that Chase violated the consumer relief
provisions of the Settlement is largely predicated on the notion that the
banks were obliged to conduct an application process in order to
determine who was entitled to receive consumer relief, whereas Chase
made that decision unilaterally. But the Settlement does not require any
application process in its otherwise-detailed guidelines for granting
consumer relief. Indeed, such a reading would place all of Chase’s
fellow lenders in noncompliance with the Settlement, since none of the
other parties used the type of application process that Relator suggests
was necessary. Be that as it may, the decisive point is that the Monitor
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legal determination that Chase complied with the Settlement” is erroneous. His
fundamental allegation is that Chase submitted false claims of compliance with the
determinations were factually erroneous because Chase lied to him, which allowed
Chase to avoid paying money to the government for its failures to comply with the
We are now authorized to state that there are serious questions about
the theory underlying Chase’s argument. Although some of relator’s
factual allegations would establish noncompliance with the agreed-to
terms of the consent judgment, that agreement is also the backdrop of
an alleged fraud. The monitor’s historical conduct may be relevant to
the ultimate merits of relator’s FCA case.
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with the terms of the agreement– not the Monitor’s legal determinations.
determine whether their loans qualified for modifications according to the terms set
out in Exhibit D of the Settlement. Consent Judgment, Ex. D ¶¶ 1-8, ADD 19-26.
Schneider was personally affected by Chase’s fraud against the government. 2nd
in the U.S. District Court for the Southern District of New York, Mortgage
Resolution Servicing, LLC, et al. v. JPMorgan Chase Bank, N.A., et al. 1:15-cv-
from the borrower as an “application process.” The following are portions of that
deposition:
p.60
10· · Q.· · Were there instances in which a lien release
11 was considered a modification?
12· · · · ·A.· · My recollection is that modifications were
13· ·generally done as to first lien loans, and that a
14· ·modification generally did not release a lien, it
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p.61
1· ·I -- yes.
2 Q. Were there instances where an application
3 process was not used.
4 A. I don’t know. I don’t recall.
* * *
p.97
10 Q. Towards the bottom of the page highlighted
11 there for you, sir, there's a statement which states
12 in effect, I'm paraphrasing, that until the lien is
13 released, the requirements of there being a single
14 point of contact is still necessary. Is that your
15 understanding as well?
16 MR. PISTILLI: Objection --
17 THE WITNESS: No, that's what this --
18 MR. PISTILLI: Pardon me -- objection,
19 lacks foundation and calls for a legal
20 conclusion.
21 THE WITNESS: That's what this says.
22 BY MR. TANTILLO:
23 Q. Was that the -- was that the law or was
24 that the provision of the National Mortgage
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p.98
·1· ·Settlement required?
·2· · A.· · It required a single point of contact
·3· ·for -- at the very least, for applications for loan
·4· ·modification. And I don't have it here in front of
·5· ·me, obviously, but it may have well gone beyond that.
·6· ·This also does -- yeah -- yes.· So the short answer,
·7· ·yes.
·8· · Q.· · So for loans that -- but you said that for
·9· ·loans that needed to be modified or -- was there an
10· ·application necessary for that?
11· · A.· · Well, no, it did -- it required -- and,
12· ·again, it's been a while since I've read through the
13· ·SPOC provisions, single point of contact, but the –
14· ·the settlement required the availability of a single
15· ·point of contact.· It was mainly, again, in the
16· ·context of the application for relief.
* * *
p.109
3· · Q.· · So there was no determination on your part
4· ·whether or not a borrower even wanted consumer -- even
5· ·wanted to have their mortgage modified?
6· ·MR. PISTILLI: Object to the form.
7· ·THE WITNESS: Well, if a mortgage --
8· ·again, there were various forms of consumer
9· ·relief. If the form of relief you're talking
10· about is mortgage loan modification, change of
11· the payment terms, we did always have in the --
12· in our review if not -- yes, if not an
13· application, an agreement under which the
14· modification was to be given.· It varied by
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believed that Chase was obtaining information regarding the borrowers through
some form of an application process, which was required by the terms of the
the performance of the Consent Judgment was false. The Panel’s reliance on that
• As set out in the complaint (¶¶ 74, 106-115, JA 45-47, 54, 55) the
incorporated into the Consent Judgment in several places. See Consent Judgment
Ex A § IX.A.I., ADD 16, and Ex. D § 11, ADD 30. When the Monitor was
stated:
Therefore, the Monitor acknowledged that Chase had to comply with requirements
Treasury Note entitled: “HAMP’s Role in the Settlement.” Treasury asked the
https://www.treasury.gov/connect/blog/Pages/HAMPs-Role-in-the-
Settlement.aspx, ADD 40.
This Note confirms, with no room for equivocation, that servicers such as Chase
noncompliance with the Settlement, since none of the other parties used the type of
unsupported assertion contained in Chase’s response brief. Chase Br. at 51. Even
at the stage of summary judgment, this assertion would have to be rejected because
Monitor’s deposition, he in fact believed that all the servicers, including Chase,
were following an application process to determine which loans were eligible for
modification and crediting. Without any form of comment by the other servicers
and parties to the Settlement, the assertion that “fellow lenders” were also acting
the statement: “the decisive point is that the Monitor was aware of the practices
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and concluded that Chase was in compliance.” Slip op, at 9, ADD 9. This
the “application process,” as well as the same unsupported assertion that the
Monitor was aware of Chase’s and the other servicers’ practices. Again, this
It is quite clear that the Monitor did not know that Chase was not obtaining
information from the borrowers to determine that their loans qualified for
It is also possible that the Panel’s statement that the Monitor knew of
Chase’s practices is based on Chase’s false assertion in its opposition brief that the
Monitor knew about Chase’s servicing practices regarding RCV1. Chase Br. at 11.
Again, the Monitor’s deposition is dispositive. He stated that “Grant Thorton (sic)
had determined that Recovery 1 loans were not being included in populations for
metrics testing.” Smith Depo. 34:17-19, ADD 34. This occurred in October 2013.
Thus, for the 18 month period from the beginning of the Consent Judgment in
April 2012 until October 2013 the Monitor and his professional consultants were
not aware that the RCV1loans were included in the population for metrics testing.
Further, when the Monitor was asked whether he knew that loans in RCV1 were
being serviced he explicitly stated: “your question is about did I know they weren't
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being serviced, and the answer is I didn't know that.” Smith Depo. 70:14-16, ADD
36. Obviously, there was much about Chase’s practices, which violated the
ineligible loan Chase submitted for credit” appears to suggest that Schneider failed
to meet the particularity requirements of Rule 9(b). However, since Chase did not
make this argument, it cannot be a basis for dismissal. The principal thrust of the
complaint is that Chase failed to obtain information from the borrowers that would
give it the information to determine if a specific loan qualified for modification and
crediting. Since it failed to follow the requirements of the Consent Judgment, all
of its certifications of compliance were false claims. Those false claims were
• Finally, the Panel seems to find some significance in the fact that
Chase received credits of $250 million in excess of its total requirement. This fact
fails to recognize that Chase’s fraud likely exceeded $250 million. If the damages
were just confined to the 2nd lien credits, which equaled $308 million, Monitor’s
Final Consumer Relief Report Regarding Defendant J.P. Morgan Chase Bank,
N.A. [ECF 143] at 22, United States v. Bank of Am., No. 12-361(D.D.C. Mar. 18,
2014), there still would be over $50 million in damages just in 2nd liens. Since the
that the Monitor was completely aware of Chase’s practices is completely bogus.
Moreover, the Panel’s conclusion that the Settlement did not require an
Chase was following such a practice. If there is any doubt about the interplay
between the Settlement, the Servicer Participation Agreement and the HAMP, the
Court to consider the alternative grounds for dismissal in the first instance.”
Momenian v. Davidson,__ F.3d __, 2017 WL 6629027 *7 (D.C. Cir. Dec. 29,
2017).
In its discussion of the reverse false claims provision of the FCA the Panel
and not on the crediting allegations related to Exhibit D. While there is some
authority for dismissing the servicing allegations, because the Monitor may have
had some discretion in assessing the penalties set out in the Consent Judgment
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(although there is still a factual issue as to whether the Monitor had full knowledge
when he took action), the same is not true for the crediting payments. Exhibit D of
money if Chase fails to meet its commitment under the Consent Judgment.
Obviously, the words “shall pay” create such an obligation, which the Monitor
does not have the discretion to forgive. Therefore, it represents an obligation that
obligation under the False Claims Act, it would be difficult to imagine under what
Moreover, as the Panel recognized, Chase did not raise the issue of whether
the crediting provisions of Exhibit D created the potential for a reverse false claim
in the district court, nor in this court, in any of its briefs. Slip op. at 10. Therefore,
under this Court’s strict rule concerning arguments made on appeal for the first
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time, this argument should be rejected. District of Columbia v. Air Florida, Inc.,
750 F.2d 1077 (D.C. Cir. 1984) (“Decisions in this Circuit have consistently
As noted by the district court “‘[T]he D.C. Circuit has cautioned that ‘failure
to plead fraud with particularity . . . does not support a dismissal with prejudice; to
pleading fraud.’ citing Pencheng Si v.Laogai Research Found., No. 09-2388, 2013
F.3d 1205, 1209 (D.C. Cir. 1996)).” Based on this authority, the district court
would have been futile given the court’s rationale for dismissal. Since that
rationale has been rejected by this Court, such an amendment would no longer be
futile.
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RCV1 did not meet banking regulations; therefore, any certifications that
• The Monitor did not know about Chase’s servicing practices regarding
RCV1;
• The Monitor did not know that RCV1 loans were not being serviced;
• The Monitor did not know that RCV1 loans were not included in the metrics
• Chase was not capable of determining which houses with loans in the RCV1
• When Chase released a liens on loans that it took for credit it did not release
the debt. Chase still pursued the debt even though the lien was released and
after it took credit for the release of the loan under the NMS.
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evidence. Assuming that these additional allegations are true, as any court must at
the motion to dismiss stage, they, together with the existing complaint, clearly
Settlement were false. Therefore, if the Court believes that Petitioner’s complaint
is in any way defective, it should permit him to amend his complaint with these
new allegations.
CONCLUSION
For the foregoing reasons, Petitioner Laurence Schneider requests that this
ROBERT L. DI MARCO
WALKER & DI MARCO, P.C.
350 Main Street, First Floor
Malden, MA 02148
Tel: (781) 322-3700
Fax: (781) 322-3757
325(b)(2)(A) in that the brief contains 3,631 words excluding those parts exempted
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CERTIFICATE OF SERVICE
I hereby certify that on this 17th day of January, 2018 an electronic copy
of Petition for Rehearing and Rehearing En Banc, was served via CM/ECF system
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