D.C. Federal Court Holds Government False Claims Case Not Precluded by National Servicing Settlement

False Claims Act / FIRREA

On February 12, the U.S. District Court for the District of Columbia declined to enjoin the government from pursuing alleged False Claims Act violations against a bank that argued such claims were precluded by the terms of the national servicing settlement. United States v. Bank of Am. Corp., No 12-361, 2013 WL 504156 (D.D.C. Feb. 12, 2013). The bank petitioned the court to halt a suit filed by the government in the Southern District of New York, in which the government alleges that the bank's certification of loans under the FHA's Direct Endorsement Lender Program violated the False Claims Act. The bank argued that the national mortgage servicing settlement contains a comprehensive release for certain liability with respect to its alleged FHA mortgage lending conduct. Finding the consent judgment effectuating the settlement to be clear and unambiguous, the court rejected the bank's interpretation of the settlement. The court left it to the Southern District of New York to determine the nature of the claims at issue, but held that the release does not cover the claims as described by the bank. The court therefore denied the bank's motion to enforce the consent judgment and enjoin the New York action.