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Fourth Circuit Permits DOJ to Reject FCA Settlement After Government Declined to Intervene; Declines to Reach Issue of Statistical Sampling
In an opinion handed down on February 22, the Court of Appeals for the Fourth Circuit decided that the DOJ retains an unreviewable right to object to a proposed settlement agreement between a relator and a defendant even after the Government has declined to intervene in the case. See United States ex rel. Michaels v. Agape Senior Community, Inc., No. 15-2147 (4th Cir. Feb 14, 2017). The case concerned a qui tam relator who had alleged that Agape Senior Community and associated entities violated the FCA by submitting false claims to federal health care programs for nursing home related services that were not provided or provided to patients that were not eligible for them. After the Government declined to intervene in the case, the relator agreed to settle with defendants. However, the DOJ objected to the proposed settlement under 31 U.S.C. § 3730(b)(1)—which provides that an FCA lawsuit “may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting”—arguing, among other things, that “the settlement amount was “appreciably less than . . . the Government’s estimate of total damages.”
The Fourth Circuit concluded that, while a relator has the right to pursue his or her FCA claim after the United States declines to intervene, “the Attorney General possesses an absolute veto power over voluntary settlements in FCA qui tam actions.” In reaching this conclusion, the appellate panel emphasized the fact that, in an FCA case, the United States Government is a real party in interest, and, as such, it suffered damages as a result of the fraudulent conduct at issue. The holding largely aligns with existing Fifth and Sixth Circuit precedent, establishing an absolute veto power for the United States over settlements in declined FCA cases. However, the ruling stands at odds with the Ninth Circuit standard set forth in U.S. ex rel. Killingsworth v. Northrop Corp., 25 F.3d 715 (9th Cir. 1994), which ruled that, once it has declined to intervene, the Government can object to a proposed settlement only for “good cause,” and a settlement agreement may be invalidated only following a hearing to determine if the settlement is fair and reasonable.
On the issue of statistical sampling, the district court had determined that the use of statistical sampling evidence would be improper when a case turns on the medical necessity for individual patients. Though the issue was certified for interlocutory review, the Appellate panel declined to decide this issue because, among other reasons, the use of statistical sampling is not a pure question of law and, as such, interlocutory review had been “improvidently granted.”
Additional information and materials covering the FCA, the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), and the Program Fraud Civil Remedies Act (PFCRA) can also be found in BuckleySandler’s False Claims Act and FIRREA Resource Center.
9th Circuit Panel Reverses and Remands Dismissal of Pro Se Plaintiff’s Breach of Contract Claim in Connection with Bank’s Trial Loan Modification Process
In an opinion filed on March 13, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit reversed and remanded a district court’s dismissal of a homeowner-plaintiff’s breach of contract claim against a major bank for damages allegedly suffered when she unsuccessfully attempted to modify her home loan over a two-year period. Oskoui v. J.P. Morgan Chase Bank, N.A., [Dkt No. 47-1] Case No. 15-55457 (9th Cir. Mar. 13, 2017) (Trott, S.). The court also remanded with instructions to permit the pro-se plaintiff to amend her complaint to allege a right to rescind in connection with her previously-dismissed TILA claim in light of the Supreme Court’s January 2015 decision in Jesinoski v. Countrywide Home Loans, Inc. And, finally, the panel affirmed the district court’s ruling that the facts alleged demonstrated a claim under California’s Unfair Competition Law (“UCL”) because, among other reasons, the factual record supported a determination that the bank knew or should have known that the homeowner was plainly ineligible for a loan modification; yet, the bank encouraged her to apply for modifications (which she did), and collected payments pursuant to trial modification plans.
In reversing and remanding the district court’s ruling dismissing the breach of contract claim, the Ninth Circuit pointed to the styling on the first-page of the complaint—“BREACH OF CONTRACT”—along with allegations about the explicit offer language contained in the bank’s trial modification documents. The Ninth Circuit relied on the Seventh Circuit’s opinion in Wigod v. Wells Fargo, which it identified as the “leading federal appellate decision on this issue of contract,” to “illuminate the viability” of plaintiff’s breach of contract claim in connection with trial plan documents. 673 F.3d 547 (7th Cir. 2012). The Ninth Circuit remanded the claim with instructions to permit the plaintiff to amend if necessary in order to move forward with her breach of contract claim.
Special Alert: D.C. Circuit Grants Petition For Rehearing in PHH v. CFPB; Vacates Judgment Based on Bureau’s Unconstitutionality
Buckley Sandler Special Alert
On February 16, the U.S. Court of Appeals for the D.C. Circuit granted the CFPB’s petition for rehearing en banc of the October 2015 panel decision in CFPB v. PHH Corporation. Among other things, the panel decision declared the Bureau’s single-Director structure unconstitutional and would have allowed the President to remove the CFPB’s Director at will rather than “for cause” as set forth in the Dodd-Frank Act. As a result of the petition for rehearing being granted, the panel’s judgment is vacated and the full D.C. Circuit will hear PHH’s appeal of the $109 million penalty imposed by the CFPB under the anti-kickback provisions of the Real Estate Settlement Procedures Act (RESPA). Oral argument is scheduled for May 24, 2017.
As discussed in detail in our prior alert, the October panel decision unanimously concluded that the CFPB misinterpreted RESPA, violated due process by disregarding prior interpretations of the statute and applying its own interpretation retroactively, and failed to abide by RESPA’s three-year statute of limitations. However, only two of the three judges on the panel concluded that the CFPB’s status as an independent agency headed by a single Director violated the separation of powers under Article II of the U.S. Constitution. The third panel member, Judge Henderson, dissented from this portion of the opinion on the grounds that it was not necessary to reach the constitutional issue because the panel was already reversing the CFPB’s penalty on other grounds.
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If you have questions about the decision or other related issues, visit our Consumer Financial Protection Bureau practice for more information, or contact a BuckleySandler attorney with whom you have worked in the past.
Trevor McFadden, previously a partner with the law firm Baker McKenzie, was appointed Deputy Assistant Attorney General last month, with oversight over the Fraud and Criminal Appellate Sections. He takes over from Sung-Hee Suh, who was appointed to the role in September 2014.
D.C. Circuit Finds District Court Lacks Jurisdiction in Case Alleging Violations of D.C. Consumer Protection Laws
On July 26, the U.S. Court of Appeals for the D.C. Circuit vacated the district court’s ruling, opining that the plaintiffs in a putative class action failed to establish Article III standing to file suit in federal court. Hancock v. Urban Outfitters, Inc., No. 14-7047, WL 3996710 (D.C. Cir. July 26, 2016). In 2013, the consumer plaintiffs filed a complaint alleging that two D.C. retail stores violated the Identification Information Act, D.C. Code § 47-3151 et seq., and D.C. Consumer Protection Procedure Act, D.C. Code § 28-3901 et seq., by requesting the plaintiffs’ zip codes at the time of purchase. The district court dismissed the complaint, concluding that the plaintiffs had failed to state a claim. As such, the district court ruled that it was unnecessary to address the stores’ jurisdictional argument that the plaintiffs failed to plead an injury sufficient for Article III standing. Citing the recent Spokeo v. Robins Supreme Court ruling, the U.S. Court of Appeals for the D.C. Circuit disagreed: “The Supreme Court’s decision in Spokeo thus closes the door on [the plaintiffs’] claim that the Stores’ mere request for a zip code, standing alone, amounted to an Article III injury.” “Because the plaintiffs have not alleged any concrete injury in fact stemming from alleged violations of D.C. law,” the D.C. Circuit held that “the district court lacked jurisdiction to decide the merits of the case.” The D.C. Circuit vacated the district court’s judgment on the merits and remanded with instructions to dismiss the complaint.
On May 16, the United States Supreme Court issued an opinion vacating the Ninth Circuit’s 2014 ruling that a plaintiff had standing under Article III of the Constitution to sue an alleged consumer reporting agency as defined by the Fair Credit Reporting Act (FCRA), for alleged procedural violations of the FCRA, 15 U.S.C § 1681 et seq. Spokeo v. Robins, No. 13-1339 (U.S. May 16, 2016). According to plaintiff Thomas Robins, the reporting agency violated his individualized (rather than collective) statutory rights by reporting inaccurate credit information regarding Robins’s wealth, job status, graduate degree, and marital status in willful noncompliance with certain FCRA requirements. In a 6-2 opinion delivered by Justice Alito, the Court ruled that Robins could not establish standing by alleging a bare procedural violation because Article III requires a concrete injury even in the context of statutory violation. Here, the Ninth Circuit erred in failing to consider separately both the “concrete and particularized” aspects of the injury-in-fact component of standing. The Court opined that the Ninth Circuit’s analysis was incomplete:
[T]he injury-in-fact requirement requires a plaintiff to allege an injury that is both “concrete and particularized.” Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 180-181 (2000) (emphasis added). The Ninth Circuit’s analysis focused on the second characteristic (particularity), but it overlooked the first (concreteness). We therefore…remand for the Ninth Circuit to consider both aspects of the injury-in-fact requirement.
Relying on case law, the Court emphasized that the “irreducible constitutional minimum” of Article III’s standing to sue relies on the plaintiff demonstrating (i) an injury-in-fact; (ii) that the injury is fairly traceable to the challenged conduct of the defendant; and (iii) that the injury is likely to be redressed by a favorable judicial decision. Lujan v. Defenders of Wildlife, 504 U.S., 560-561 (U.S. June 12, 1992); Friends of the Earth, Inc., 528 U.S., at 180-181. Spokeo primarily revolves around the first element, establishing an injury-in-fact. Again relying on Lujan, the Court reasoned that to establish injury-in-fact, the plaintiff must “show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’” Lujan, at 560. According to the Court, the Ninth Circuit’s discussion of Robins’s standing to sue, and in particular its discussion of whether Robins had articulated an individualized statutory right rather than a collective right, concerned only the particularization element of establishing an injury-in-fact. The Court stated that the Ninth Circuit’s standing analysis was incomplete because it had failed to consider whether the “concreteness” requirement for an injury-in-fact—whether Robins had a “real” and “not abstract” injury—also had been satisfied. While the Court did make clear that a concrete injury could be intangible and that Congress may identify intangible harms that meet minimum Article III requirements, it noted that “Congress’ role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.”
The Court noted that because the Ninth Circuit had not fully distinguished concreteness from particularization, it had failed to consider whether the reporting agency’s procedural violations of the FCRA constituted a sufficient degree of risk to Robins to meet the concreteness standard. The Court observed that while a procedural violation of the FCRA may, in some cases, be sufficient to establish a concrete injury-in-fact, not all inaccuracies in consumer information, i.e. an incorrect zip code, cause harm or a material risk of harm. Further, because “Article III standing requires a concrete injury even in the context of a statutory violation” the Court explained that “Robins cannot satisfy the demands of Article III by alleging a bare procedural violation.”
The Court vacated the Ninth Circuit’s judgment, and remanded the case for the Ninth Circuit to consider both aspects of the injury-in-fact requirement.
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Questions regarding the matters discussed in this Alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.
- Amanda Raines Lawrence, (202) 349-8089
- Fredrick Levin, (310) 424-3984
- Andrew Louis, (202) 349-8061
- Matthew Previn, (212) 600-2310
- Katherine Halliday, (202) 461-2996
On February 4, the U.S. Court of Appeals for the Ninth Circuit held that a plaintiff’s claim against a data broker alleged to have published inaccurate information about him has standing by virtue of the alleged violation of his statutory rights and need not demonstrate injury. Robins v. Spokeo, Inc., No. 11-56843, 2014 WL 407366, (9th Cir. Feb. 4, 2014). The district court held that the plaintiff failed to allege an injury in fact because his claims that the inaccurate information harmed, among other things, his ability to obtain employment did not sufficiently allege any actual or imminent harm. Applying its own precedent established in a long-running RESPA case that the U.S. Supreme Court declined to review in 2012, the court held that the violation of a statutory right usually is a sufficient injury to confer standing and that statutory causes of action do not require a showing of actual harm. The court determined that violations of statutory rights created by FCRA are concrete injuries that Congress can elevate to the status of legally cognizable injuries and are therefore sufficient to satisfy Article III’s injury-in-fact requirement. Further, the plaintiff adequately pled causation and redressability because (i) an alleged violation of a statutory provision caused the violation of a right created by that provision; and (ii) FCRA provides for monetary damages to redress the violation. The court reversed the trial court and remanded.
On November 21, the U.S. Court of Appeals for the Seventh Circuit held that the federal Telephone Consumer Protection Act (TCPA) does not preempt an Indiana statute that bans most robocalls without exempting calls that are not made for a commercial purpose. Patriotic Veterans, Inc. v. State of Indiana, No. 11-3265, 2013 WL 6114836 (7th Cir. Nov. 21, 2013). A not-for-profit Illinois corporation seeking to use automatically dialed interstate phone calls to deliver political messages to Indiana residents sought a declaration that the Indiana Automated Dialing Machine Statute (IADMS) violates the First Amendment, at least as it applies to political messages, and also is preempted by the TCPA, which expressly exempts non-commercial calls such as political calls from the TCPA’s regulation of autodialers. Overturning the district court’s decision, the Seventh Circuit found that the Indiana statute is not expressly preempted by the TCPA because the plain language of the TCPA’s savings clause states that the federal law does not preempt any state law that prohibits the use of automatic telephone dialing systems and, even if the IADMS is considered a regulation of, rather than a prohibition on, the use of autodialers, the savings clause does not at all address state laws that impose interstate regulations on their use. The court further found that the IADMS is not impliedly preempted by the TCPA because it is possible to comply with the state statute without violating the TCPA, the state statute furthers the TCPA’s purpose of protecting the privacy interests of residential telephone subscribers, and Congress did not intend to create field preemption when it enacted the TCPA. The court, however, remanded the case to the district court to consider whether the statute violates the First Amendment.
- Daniel P. Stipano to discuss "High standards: Best practices for banking marijuana-related businesses" at the ACAMS AML & Anti-Financial Crime Conference
- Daniel P. Stipano to discuss "Wait wait ... do tell me! Where the panelists answer to you" at the ACAMS AML & Anti-Financial Crime Conference
- Matthew P. Previn and Walter E. Zalenski to discuss "Is valid when made ... valid?" at the Women in Housing & Finance Partner Series webinar
- Warren W. Traiger and Caroline K. Eisner to discuss "CRA modernization and the OCC final rule" at CBA Live
- Daniel R. Alonso to discuss "Transnational corruption: A chat with former U.S. federal prosecutors in New York" at Marval Live Talks
- Sherry-Maria Safchuk and Lauren Frank to discuss "New CFPB interpretation on UDAAP" at a California Mortgage Bankers Association Mortgage Quality and Compliance Committee webinar
- Thomas A. Sporkin to discuss "Managing internal investigations and advanced government defense" at the Securities Enforcement Forum
- H Joshua Kotin to discuss "Mortgage servicing in a recession: Early intervention, loss mitigation and more" at the NAFCU Virtual Regulatory Compliance Seminar
- Daniel R. Alonso to discuss "Independent monitoring in the United States" at the World Compliance Association Peru Chapter IV International Conference on Compliance and the Fight Against Corruption
- Jonice Gray Tucker to discuss "The future of fair lending" at the Mortgage Bankers Association Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Pandemic fallout – Navigating practical operational challenges" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute