United States of America et al v. Hsbc Bank USANOTICE OF MOTION AND MOTION to Dismiss CaseC.D. Cal.September 12, 20161 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT Douglas A. Axel, SBN 173814 daxel@sidley.com Anand Singh, SBN 250792 anand.singh@sidley.com SIDLEY AUSTIN LLP 555 West Fifth Street, Suite 4000 Los Angeles, California 90013 Telephone: +1 213 896-6000 Facsimile: +1 213 896-6600 Attorneys for Defendants Bank of America, N.A.; Deutsche Bank National Trust Company; The Bank of New York Mellon.; and The Bank of New York Mellon Trust Company, N.A. In Their Capacities as Alleged Trustees and/or Successor Trustees of Specific Trusts Identified in the Fourth Amended Complaint UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION UNITED STATES, ex rel. SERVE ALL HELP ALL, INC. D/B/A NON-PROFIT ALLIANCE OF CONSUMER ADVOCATES, et al., Plaintiffs, vs. ACE SECURITIES CORP. HOME EQUITY LOAN TRUST 2004-FM1 BY HSBC BANK USA AS TRUSTEE, et al., Defendants. Case No. 14-cv-00210-TJH-DFM DEFENDANTS’ JOINT NOTICE OF MOTION AND MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT Judge: Honorable Terry J. Hatter [Proposed Order and Request for Judicial Notice filed concurrently herewith] Hearing Date: November 21, 2016 Time: UNDER SUBMISSION Place: Courtroom 17 Judge: Hon. Terry J. Hatter, Jr. Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 1 of 45 Page ID #:8504 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT NOTICE OF MOTION AND MOTION TO ALL PARTIES AND THEIR COUNSEL OF RECORD: Please take notice that on November 21, 2016, or as soon thereafter as may be heard, in Courtroom 17 of the above-entitled Court, located at 312 North Spring Street, Los Angeles, California 90012, before the Honorable Terry J. Hatter, Jr., Defendants Bank of America, N.A. (erroneously sued as “LaSalle Bank Succeeded By Bank of America Trustee”), Citibank, N.A. (“Citibank”) (erroneously sued as “Citibank Trustee”), HSBC Bank USA, N.A. (“HSBC”) (erroneously sued as “HSBC Bank USA Trustee”), The Bank of New York Mellon f/k/a The Bank of New York and The Bank of New York Mellon Trust Company, N.A. f/k/a The Bank of New York Trust Company, N.A. (collectively, “BYNM”) (erroneously sued as “Bank of New York Trustee” and “J.P. Morgan Chase Bank Trustee”), Deutsche Bank National Trust Company, (“DBNTC”) (erroneously sued as “Deutsche Bank National Trust Company Trustee”), U.S. Bank National Association (“U.S. Bank”) (erroneously sued as “U.S. Bank Trustee”), and Wells Fargo Bank, N.A. (“Wells Fargo”) (erroneously sued as “Wells Fargo Bank Trustee”) (all defendants, collectively, as “Defendants”), in their capacities as alleged trustees and/or successor trustees of specific residential mortgage-backed securities (“MBS”) trusts referenced in the Fourth Amended Complaint (the “Complaint”) filed by Relators Serve All Help All, Inc. d/b/a Non-Profit Alliance of Consumer Advocates (“SAHA”), Jose Arturo Abad-Vega a/k/a Pepe Abad a/k/a Pepi Abad (“Abad-Vega), Danny Williams (“Williams”), and Moses Hall (“Hall”) (collectively, “Relators”), will and hereby do move the Court for an order dismissing the Complaint.1 1 The accompanying Memorandum of Points and Authorities uses these same abbreviations to identify Defendants and Relators. As explained in the Memorandum, the Complaint purports to assert claims against mortgage-backed securitization trustees based on allegations of servicing conduct of Bank of America, N.A. for itself, as successor by merger to BAC Home Loans Servicing, L.P. and/or other affiliated entities. To avoid confusion, the Memorandum refers to “BANA” when discussing conduct undertaken and/or allegedly undertaken as servicer, and refers to the full name of the relevant Bank of America entity in other discussions. Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 2 of 45 Page ID #:8505 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ii DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT This Motion is made on the following grounds: (1) the Court lacks jurisdiction and should dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(1) because Relators lack standing to pursue their purported cause of action under the Financial Institutions Reform, Recovery and Enforcement Act (“FIRREA”), 12 U.S.C. § 3331 et seq. and their purported cause of action under the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq. is barred under the FCA’s public disclosure bar, id. § 3729(e)(4); (2) the Complaint fails to state a claim for relief and should be dismissed under Federal Rule of Civil Procedure 12(b)(6) because, among other reasons, Relators (a) purport to assert claims against Defendants in their capacities as MBS trustees, but trustees neither submit claims for payment or receive payments from the government; (b) Relators fail to plausibly allege the submission of any fraudulent claim for payment; (c) Relators fail to allege facts sufficient to satisfy the FCA’s materiality requirement; and (d) Bank of America, N.A., Citibank, and Wells Fargo have been released from liability Relators seek to impose pursuant to the terms of Consent Judgments with the United States, 49 States, and the District of Columbia and approved by the United States District Court for the District of Columbia; and (3) the Complaint should be dismissed pursuant to Federal Rules of Civil Procedure 8(a) and 9(b) because it neither provides a short and plain statement of the grounds for the Court’s jurisdiction, nor pleads allegations of fraud with the requisite particularity. This Motion is based on this Notice of Motion and the attached Memorandum of Points and Authorities, the concurrently-filed Request for Judicial Notice (“RJN”), any other matters of which the Court may take judicial notice, all pleadings on file with the Court, any oral argument, and any such matters as may come before the Court and which properly are considered in ruling on this Motion. This Motion is made following conferences of counsel pursuant to Local Rule 7-3 of the United States District Court for the Central District of California, including telephonic discussions and an in-person meeting on August 30, 2016. Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 3 of 45 Page ID #:8506 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 iii DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT Respectfully submitted, Dated: September 12, 2016 SIDLEY AUSTIN LLP By: /s/ Anand Singh Douglas A. Axel daxel@sidley.com Anand Singh anand.singh@sidley.com 555 West Fifth Street, Suite 4000 Los Angeles, California 90013 Telephone: +1 213 896-6000 Facsimile: +1 213 896-6600 Attorneys for Defendants Bank of America, N.A. as alleged successor trustee to LaSalle Bank National Association as trustee, Deutsche Bank National Trust Company as trustee, and The Bank of New York Mellon, N.A. and The Bank of New York Mellon Trust Company, N.A. as tustee and/or successor trustee to JP Morgan Chase Co. as trustee Dated: September 12, 2016 MAYER BROWN LLP By: /s/ Bronwyn F. Pollock Bronwyn F. Pollock BPollock@mayerbrown.com 350 South Grand Ave., 25th Floor Los Angeles, CA 90071 Telephone: +1 213 229-5194 Facsimile: +1 213 625-0248 Attorneys for Defendants Citibank, N.A. as trustee, HSBC Bank USA, N.A. as trustee, Dated: September 12, 2016 BUCKLEY SANDLER LLP By: /Daniel Paluch Daniel Paluch dpaluch@buckleysandler.com 100 Wilshire Boulevard Suite 1000 Santa Monica, CA 90401 Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 4 of 45 Page ID #:8507 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 iv DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT Telephone: +1 310 424-3900 Facsimile: +1 310 424-3960 Attorneys for Defendant U.S. Bank National Association as trustee Dated: September 12, 2016 FAEGRE BAKER DANIELS LLP By: /s/ Howard D. Ruddell Howard D. Ruddell howard.ruddell@FaegreBD.com 1990 S. Bundy Drive Suite 620 Los Angeles, California 90025 Telephone: +1 310 500-2090 Facsimile: +1 310 500-2091 Michael M. Krauss (pro hac vice submitted) michael.krauss@FaegreBD.com Jennifer M. Bisenius (pro hac vice submitted) jennifer.bisenius@FaegreBD.com 2200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402 Telephone: +1 612 766-7000 Facsimile: +1 612 766-1600 Attorneys for Defendant Wells Fargo Bank, N.A. as trustee Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 5 of 45 Page ID #:8508 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 v DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT TABLE OF CONTENTS Page I. INTRODUCTION AND SUMMARY OF ARGUMENT ........................... 1 II. FACTUAL BACKGROUND ......................................................................... 4 A. The Mortgage Loan Securitization Market ........................................ 4 B. The Making Home Affordable Program ............................................ 6 1. The Home Affordable Mortgage Program ............................... 8 2. The Home Affordable Foreclosure Alternatives Program ....................................................................................... 9 A. Extensive Governmental Oversight, Investigations, and Enforcement Actions Concerning Alleged MHA Non-Compliance .................................................................................. 10 1. Oversight Responsibilities and Disclosures Statutorily Mandated Under the EESA ..................................................... 11 2. Additional Oversight, Enforcement, and Litigation ............. 15 III. PROCEDURAL BACKGROUND AND SUMMARY OF RELATORS’ ALLEGATIONS ................................................................... 17 IV. ARGUMENT ................................................................................................. 20 A. The Court Lacks Jurisdiction Over Relators’ Claims .................... 20 1. The Court Lacks Jurisdiction Over Relators’ FIRREA Claim .......................................................................................... 20 2. The Court Lacks Jurisdiction Over Relators’ FCA Claims ......................................................................................... 21 B. The Complaint Fails To State A Claim Under The FCA ................ 25 1. Relators’ Allegations That Trustees Engaged In Fraud Are Not Plausible ...................................................................... 26 2. The Complaint Fails To Allege The Submission Of Any False Claim For Payment ......................................................... 26 3. The Complaint Fails To Allege That the Purported “False Claims” Were Material to the Government’s Decision to Pay MHA Incentives ............................................. 28 4. The NMS Defendants Should Be Dismissed Under The NMS ............................................................................................ 30 C. The Complaint Fails to Satisfy Basic Pleading Requirements ....... 31 Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 6 of 45 Page ID #:8509 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 vi DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT V. CONCLUSION .............................................................................................. 32 Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 7 of 45 Page ID #:8510 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ii DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT TABLE OF AUTHORITIES Page(s) FEDERAL CASES Amphastar Pharm. Inc. v. Aventis Pharma, 2012 WL 5512466 (C.D. Cal. Nov. 14, 2012) .............................................................23 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...........................................................................................................26 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .....................................................................................................26, 32 Bolden v. KB Home, 618 F. Supp. 2d 1196 (C.D. Cal. 2008) .........................................................................21 Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047 (9th Cir. 2011) ..............................................................................26, 28, 33 Conley v. Gibson, 355 U.S. 41 (1957) ..............................................................................................................32 F.T.C. v. Kutzner, Case No. 16-cv-00999 (C.D. Cal.) .................................................................................19 Gen-Probe, Inc. v. Amoco Corp., Inc., 926 F. Supp. 948 (S.D. Cal. 1996) ..................................................................................33 Graham Cty. Soil & Water Conservation Dist. v. U.S. ex rel. Wilson, 559 U.S. 280 (2010) ...........................................................................................................22 In re Bank of America Home Affordable Modification Program (HAMP) Contract Litigation, Case No. 10-md-02193 (D. Mass.) .................................................................................18 In re Mitchell, 476 B.R. 33 (D. Mass. 2012) .............................................................................................5 Knudsen v. Sprint Communications Co., 2016 WL 4548924 (N.D. Cal. Sept. 1, 2016) ...............................................................31 Malhotra v. Steinberg, 770 F.3d 853 (9th Cir. 2014) ......................................................................................22, 25 Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 8 of 45 Page ID #:8511 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 iii DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT McHenry v. Renne, 84 F.3d 1172 (9th Cir. 1996) .............................................................................................33 MK Ballistic Sys. v. Simpson, 2009 WL 86699 (N.D. Cal. Jan. 9, 2009) .....................................................................32 Schindler Elevator Corp. v. U.S. ex rel. Kirk, 563 U.S. 401 (2011) ...........................................................................................................22 Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) ...........................................................................................................26 U.S. ex rel. Advocates for Basic Legal Equal., Inc. v. U.S. Bank, N.A., 816 F.3d 428 (6th Cir. 2016) ......................................................................................23, 26 U.S. ex rel. Berge v. Bd. of Trs. of the Univ. of Ala., 104 F.3d 1453 (4th Cir. 1997) ..........................................................................................31 U.S. ex rel. Bogina v. Medline Indus., Inc., 809 F.3d 365 (7th Cir. 2016) ......................................................................................22, 26 U.S. ex rel. Cericola v. Fed. Nat. Mortgage Assoc., 529 F. Supp. 2d 1139 (C.D. Cal. 2007) ...................................................................32, 34 U.S. ex rel. Conner v. Salina Regional Health Center, Inc., 543 F.3d 1211 (10th Cir. 2008) ........................................................................................31 U.S. ex. rel. Friedland v. Environmental Chemical Corp., 2003 WL 23315783 (N.D. Cal. Dec. 30, 2003) ...........................................................28 U.S. ex rel. Hansen v. Cargill, Inc., 107 F. Supp. 2d 1172 (N.D. Cal. 2000) .........................................................................25 U.S. ex rel. Hastings v. Wells Fargo Bank, NA, Inc., -- F.3d --, No. 14-56314, 2016 WL 4011199 (9th Cir. July 27, 2016) ...................26 U.S. ex rel. Kreindler & Kreindler v. United Technologies Corp., 985 F.2d 1148 (2d Cir. 1993) ...........................................................................................25 U.S. ex rel. Mackler v. Bank of America, Case No. 09-cv-02040 (S.D.N.Y.) ..................................................................................18 U.S. ex rel. Marshall v. Woodward, Inc., 812 F.3d 556 (7th Cir. 2015) ............................................................................................31 Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 9 of 45 Page ID #:8512 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 iv DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT U.S. ex. rel. Pecanic v. Sumitomo Elec. Interconnect Products, Inc., 2013 WL 774177 (S.D. Cal. Feb. 28, 2013) .................................................................33 U.S. ex rel. Solis v. Millennium Pharm., Inc., 95 F. Supp. 3d 1208, 1220 (E.D. Cal. 2015) ....................................................22, 23, 26 U.S. ex rel. Stephenson v. Archer Western Contractors, LLC, 548 Fed. Appx. 135 (5th Cir. 2013) ................................................................................31 U.S. v. Alcan Electrical & Engineering, Inc., 197 F.3d 1013 (9th Cir. 1999) ....................................................................................23, 24 U.S. v. Corinthian Colleges, 655 F.3d 984 (9th Cir. 2011) .............................................................................................33 U.S. v. Meisinger, 2011 WL 4526082 (C.D. Cal. Aug. 26, 2011) .............................................................21 U.S. v. University of Phoenix, 2014 WL 3689764 (E.D. Cal. July 24, 2014) ..............................................................22 United States et al. v. Bank of America Corporation, Case No. 12-cv-00361 (D.D.C.) ......................................................................................17 United States ex rel. Aflatooni v. Kitsap Physicians Servs., 314 F.3d 995 (9th Cir. 2002) ......................................................................................27, 28 United States ex rel. Hopper v. Anton, 91 F.3d 1261 (9th Cir. 1996) ............................................................................................28 United States ex rel. Kelly v. Serco Inc., No. 11-cv-2975-WQH-RBB, 2014 WL 4988462 (S.D. Cal. Oct. 6, 2014) ..........27 United States v. Bourseau, 531 F.3d 1159 (9th Cir. 2008) ..........................................................................................27 United States v. ITT Cont’l Baking Co., 420 U.S. 223 (1975) ...........................................................................................................32 Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) .......................................................................................................30 Vongohren v. Citimortgage, Inc., No. JFM-14-3549, 2016 WL 739070 (D. Md. Feb. 25, 2016) ..................................9 Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 10 of 45 Page ID #:8513 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 v DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136 (9th Cir. 2003) ..........................................................................................22 FEDERAL STATUTES 12 U.S.C. § 1833a(e) ................................................................................................................21 12 U .S.C. § 3331 ..................................................................................................................1, 21 12 U.S.C. § 5201 .........................................................................................................................6 12 U.S.C. § 5214(a) .................................................................................................................. 11 12 U.S.C. § 5226 .......................................................................................................................15 12 U.S.C. § 5231 .......................................................................................................................13 12 U.S.C. § 5233(a)-(b) ...........................................................................................................14 31 U.S.C. § 3729(b)(4) ............................................................................................................29 31 U.S.C. § 3729 et seq. ............................................................................................................1 31 U.S.C. § 3730(e)(4) ................................................................................................24, 25, 26 31 U.S.C. § 3730(e)(4)(A) ................................................................................................22, 23 31 U.S.C. § 3729(a)(1)(A) ......................................................................................................26 31 U.S.C. § 3729(a)(1)(B) ......................................................................................................26 RULES Fed. R. Civ. P. 12(b)(1) ............................................................................................................22 Fed. R. Civ. P. 12(b)(6) ......................................................................................................26, 28 Fed. R. Civ. P. 8(a) ......................................................................................................................4 Fed. R. Civ. P. and 9(b) ............................................................................................................32 Fed. R. Civ. P. 8(a)(2) .........................................................................................................32, 33 Fed. R. Civ. P. 9(b) ..............................................................................................................32, 33 Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 11 of 45 Page ID #:8514 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION AND SUMMARY OF ARGUMENT Relators’ Fourth Amended Complaint (“Complaint”) is the third lawsuit filed by Relator Williams based on his personal grievance that BANA1 did not approve a post-default short sale of his home. The allegations in the Complaint concern only BANA’s purported mishandling of Relator Williams’ home loan. Nonetheless, Relators seek billions of dollars in damages and penalties under the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), 12 U .S.C. § 3331 et seq., by alleging that the defendants-as trustees of thousands of mortgage securities trusts-submitted “hundreds of thousands” of unspecified “fraudulent documents” to the government for the purpose of seeking unspecified funds in connection with certain federal mortgage relief programs. As explained below, however, not only does Relators’ Complaint misapprehend the most fundamental aspects of the securitization and loan modification process, it also fails to identify a single false claim for payment submitted by Defendants. Instead of making concrete factual allegations, the Complaint merely repeats two conclusory sentences and attaches an exhibit to the Complaint that vaguely references “upfront fees” and litigation but includes no further details to explain their meaning or import. To the extent it is possible to glean from the Complaint, which is not a model of clarity, it appears that Relators allege a fraudulent scheme related to the Making Home Affordable (“MHA”) program and several subsidiary programs, which the government launched in response to the financial crisis and designed to keep people in their homes by utilizing loan modifications, short-sales, and other alternatives to foreclosure. According to Relators, Defendants submitted claims to the government for incentive payments and/or administrative costs incurred while evaluating borrowers’ eligibility 1 Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Motion Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 12 of 45 Page ID #:8515 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT under these programs. Relators allege that Defendants knew (or should have known) that many loans were not in fact eligible for MHA programs, yet Relators allege that Defendants intentionally strung borrowers along, lost documentation, and failed to communicate with borrowers so they could rack up costs and submit multiple, inflated claims for payment. These assertions fail for a multitude of reasons. Initially, the Court lacks subject matter jurisdiction over Relators’ claims. There is no private right of action under FIRREA-such claims must be brought “by the Attorney General,” and therefore Relators lack standing to pursue this claim. See infra § IV.A.1. Relators’ FCA cause of action is precluded by the statute’s “public disclosure bar,” which is designed to discourage parasitic “me, too” lawsuits that merely echo similar allegations made by others. As explained below, the practices employed by loan servicers are tightly regulated and intensely scrutinized, and there was extensive public reporting of the alleged failure by BANA (the only Defendant specifically identified in the Complaint for alleged servicing issues) and other servicers to comply with MHA servicing requirements well before Relators filed this lawsuit. By the time Relators filed this action, every specific category of servicing errors alleged in the Complaint (including lost documentation, lack of communication, and various delays) had been investigated and reported by Congress, the Department of Treasury, the Government Accountability Office (“GAO”), the Office of the Special Inspector General for the Trouble Assets Relief Program (“SIGTARP”), the Federal Reserve Board (“FRB”), the Office of the Comptroller of the Currency (“OCC”), the Office of Thrift Supervision (“OTS”), the DOJ, and major news outlets. Numerous lawsuits were filed based on similar allegations, including multiple federal lawsuits expressly alleging FCA violations and other fraud claims. Under these circumstances, Relators’ Complaint -which merely alleges that Relator Williams had a similar experience and expressly piggybacks on an earlier DOJ complaint-does not and cannot materially contribute to the information in the public domain. Every report, lawsuit, news article, and other public disclosure is properly before this Court and subject to judicial notice, and Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 13 of 45 Page ID #:8516 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT collectively they leave no doubt that the public disclosure bar requires dismissal of the Complaint. See infra § IV.A.2. Even if the Court had jurisdiction, the Complaint should be dismissed for at least five independent reasons: First, Relators expressly assert claims against Defendants solely in their capacities as trustees of mortgage-backed securitizations (“MBS”), but trustees neither submit claims nor receive payments under any MHA program. Servicers of loans in the MBS trusts-not trustees-are the entities that participate in MHA programs, are responsible for engaging with borrowers, and are eligible to receive incentive payments if certain MHA requirements are met. Accordingly, Relators’ claims that Defendant trustees engaged in fraud are not plausible. See infra § IV.B.1. Second, Relators do not and cannot plausibly allege the submission of any false claim for payment, which is the sine qua non of an FCA violation. Relators fail to allege any facts to substantiate vague and conclusory assertions that the government was “charged fees and incurred cost for a loan that was never eligible” for relief under MHA. Nor could they plausibly do so. Judicially-noticeable government records confirm that the government does not pay any incentives to servicers unless and until the borrower is enrolled in a permanent modification or has completed a short sale (i.e., until there is no dispute that a borrower is eligible). Furthermore, the government does not reimburse servicers for any administrative costs. Thus, Relators’ assertion that Defendants engaged in a fraudulent scheme to obtain payments for loans that were ineligible for MHA relief is impossible as a matter of law. See infra § IV.B.2. Third, Relators fail to allege any facts to satisfy the FCA’s materiality requirement, which the Supreme Court recently characterized as “rigorous” and “demanding.” The Complaint does not include a single allegation that any government employee reviewed a claim for payment, much less could have been influenced by a misrepresentation made by any Defendant. Indeed, because the government was aware of allegations of servicer non-compliance and nonetheless continued to pay BANA and Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 14 of 45 Page ID #:8517 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT other servicers incentive payments for completed modifications and short sales, Relators cannot plausibly allege that Defendants’ conduct was material to its decision to pay MHA claims. See infra § IV.B.3. Fourth, through the National Mortgage Settlement, Bank of America Corporation, Citibank, and Wells Fargo & Company (and their related entities) have been released from liability stemming from Relators’ claims. The parties to that settlement collectively paid $25 billion to obtain broad releases that expressly encompass the “servicing conduct” activities alleged here. The plain terms of the settlement agreement requires the dismissal of all claims against these Defendants acting in any capacity. See infra § IV.B.4. Fifth, the Complaint should be dismissed because it suffers from numerous stark pleading deficiencies that violate Federal Rules of Civil Procedure 8(a) and 9(b). The generalized allegations in the Complaint impermissibly lump all Defendants together, fail to provide fair notice of the conduct and claims supposedly ascribed to each Defendant, and do not come close to satisfying the heightened specificity requirements for alleging fraud claims. See infra § IV.C. Accordingly, this Court should dismiss Relator’s claims with prejudice. II. FACTUAL BACKGROUND A. The Mortgage Loan Securitization Market Relators’ claims are premised on several incorrect fundamental misunderstandings, including, significantly, their conflation of the roles of the various entities involved in the mortgage loan market, which are clearly delineated by law and contract. The first step in the mortgage loan process is commonly referred to as “loan origination” and involves a lending institution (such as a bank, finance company, or broker) providing a borrower a loan secured by the borrower’s residence. Complaint ¶¶ 42-43. After the loan is originated, the lender can (1) hold the loan in its own portfolio; (2) securitize the loan; or (3) sell the loan to an investor that, in turn, will either hold the loan in its portfolio or securitize it. See id. Regardless of who owns the loan, it requires Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 15 of 45 Page ID #:8518 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT servicing, and those duties traditionally include collecting payments from borrowers and foreclosing on properties in the event of default. See id. ¶ 44. This case involves only loans held in residential MBS issued by various private financial institutions in the mid-2000s, commonly referred to as “private-label” MBS. Relators allege that Defendants served as trustees of the trusts identified in the Complaint’s 299-page caption. In the private-label MBS context, the authority and responsibilities of the servicer, trustee, and other deal parties are defined in Pooling and Servicing Agreements (“PSAs”). See Complaint ¶ 9.2 Relators allege, correctly, that PSAs sometimes prohibit servicers from modifying borrowers’ loans in specified ways. See id.3 However, Relators’ Complaint reflects serious misconceptions concerning the trustee’s role, which is far more circumscribed and often only ministerial. Traditionally, the trustee’s role is limited to distributing payments to investors, and they have no role in day-to-day loan activities, foreclosures, or monitoring servicers.4 Accordingly, as described below, trustees do not participate in, or make claims for payment in 2 Since the housing market crashed, two (publicly-traded) corporations previously created by Congress, Fannie Mae and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), issue the majority of MBS and hold a substantial portion of all U.S. mortgage loans (“GSE loans”). Generally, in GSE securitizations, the GSE serves as the trustee, and master servicer, and they enter into contracts with direct servicers for servicing the MBS loans. See, e.g., RJN, Ex. (Fannie Mae Single Family 2011 Servicing Guide, June 10, 2011) § 2.02. For Fannie Mae loans, the servicer’s duties are set forth in a Mortgage Selling and Servicing Contract and the Fannie Mae Servicing Guide. See, e.g., In re Mitchell, 476 B.R. 33, 49 (D. Mass. 2012). For Freddie Mac loans, the servicer’s duties are set forth in the Freddie Mac Single-Family Seller/Servicer Guide. See id. 3 For example, the only loan specified in the Complaint was allegedly made to Relator Danny Williams and held in Securitized Asset Backed Receivables LLC Trust 2005-FR4 (the “Williams Securitization”). Complaint ¶ 50. Wells Fargo Bank, N. A. (“Wells Fargo”) serves as trustee and executed the PSA “solely as Trustee and not in its individual capacity.” RJN, Ex. 88 at 66. Section 3.01 of the PSA governs the servicer’s duties and provides that the “Servicer . . . shall not . . . permit any modification with respect to any Mortgage Loan that would change the Mortgage Rate, reduce or increase the principal balance.” Id. § 3.01(a), -(c) (PSA, Securitized Asset Backed Receivables LLC Trust 2005-FR4). 4 Section 8.01 of the PSA governing the trust holding the Williams loan sets forth the duties of the Trustee and provides that: “The duties and obligations of the Trustee shall be determined solely by the express provisions of this Agreement, the Trustee shall not be liable except for the performance of the duties and obligations specifically set forth in this Agreement, no implied covenants or obligations shall be read into this Agreement against the Trustee, and the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein.” RJN, Ex. 88 § 8.01. Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 16 of 45 Page ID #:8519 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT connection with, the federal mortgage programs at issue in this case. B. The Making Home Affordable Program In response to the economic collapse, Congress enacted the Emergency Economic Stabilizations Act of 2008 (“EESA”). See 12 U.S.C. §§ 5201 et seq. The centerpiece of the EESA was the Troubled Asset Relief Program (“TARP”), which was designed to “restore liquidity and stability to the financial system of the United States.” 12 U.S.C. § 5201; Complaint ¶ 46. On March 4, 2009, the government announced MHA as the primary vehicle of its multi-part strategy to prevent millions of home foreclosures and issued new Department of Treasury guidelines concerning borrower eligibility and servicer participation in the program. Complaint ¶ 47; RJN, Exs. 18 (U.S. Department of the Treasury, Press Release: Relief for Responsible Homeowners: Treasury Announces Requirements for the Making Home Affordable Program (Mar. 4, 2009) (the “March 4, 2009 Treasury Press Release”)), 39 (MHA Supplemental Directive 09-01).5 The guidelines subsequently were incorporated into the Making Home Affordable Program Handbook for Servicers of Non-GSE Loans (as supplemented and revised, the “MHA Handbook”).6 Over time, the various MHA programs have expanded in number and scope, but the principal mechanism underlying every program has remained the same-namely, providing incentives to borrowers, servicers, and investors, i.e., the “three main 5 MHA consists of several subsidiary programs funded primarily with TARP funds, including the Home Affordable Modification Program (“HAMP”), the Home Affordable Foreclosure Alternatives Program (“HAFA”), and others. Complaint ¶¶ 47-57. 6 See RJN, Exs. 40-44, 49-55, 58, 60-61 (MHA Handbooks, Revs. 1.0-5.1). Relators’ Complaint does not identify any false claim for payment, much less specify when any such claim purportedly was submitted. See infra § IV.B.2. The changes to the MHA Handbook are immaterial to the issues in this case, and Relators’ claims are not viable under any version. Nonetheless, to avoid any doubt, Defendants have concurrently requested that this Court take judicial notice of every version of the MHA Handbook. See MHA Handbooks, Revs. 1.0-5.1. Unless specified otherwise, citations to the “MHA Handbook” refer to the version in effect at the time Relators commenced this lawsuit (Rev. 4.3 (Sept. 16, 2013)). Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 17 of 45 Page ID #:8520 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT participants in the mortgage modification process”-to pursue loan modifications and other foreclosure alternatives. See RJN, Ex. 22 at 5 (SIGTARP, Factors Affecting Implementation of the Home Affordable Modification Program (Mar. 25, 2010) (the “March 2010 SIGTARP Report”)). By contrast, MBS trustees are not “participants in the mortgage modification process”-they are not responsible for collecting loan payments, working with borrowers to explore foreclosure alternatives, or otherwise involved in the day-to-day management of individual loans. Accordingly, MBS trustees neither request nor receive incentives under the MHA programs. See generally MHA Handbooks (Revs. 1.0-5.1); id. Ch. II § 13 (“Borrowers, servicers and investors are eligible for incentive compensation under HAMP.”); accord Complaint ¶¶ 48-57 (describing MHA incentives to “servicers and borrowers”). Indeed, participation in MHA is limited to entities that service loans, and there are generally two scenarios that give rise to servicers’ participation. First, Fannie Mae and Freddie Mac both have their own versions of certain MHA programs, and servicers of those GSE loans (which are not at issue in this action) are required to participate in those programs pursuant to the servicing contracts they enter into with Fannie Mae and Freddie Mac (in their capacities as private mortgage investors). See supra § II.A at n.2. Second, for non-GSE loans (like those encompassed by the Complaint), the Department of Treasury has designated Fannie Mae as its financial agent and MHA Program Administrator, and servicers may voluntarily participate by entering into a Commitment to Purchase Financial Instrument and Servicer Participation Agreement (“SPA”) with Fannie Mae (in its capacity as financial agent of the United States). Complaint ¶ 104; MHA Handbook at 14. The SPA provides that “Servicer wishes to participate in the Program as a Participating Servicer” and is executed by “SERVICER” and “FANNIE MAE, solely as financial agent of the United States.” SPA at 2, 15. For the avoidance of doubt, the first section of the MHA program guidelines explain that: The entity that has the direct contractual obligation to the investor Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 18 of 45 Page ID #:8521 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT to perform the servicing functions is the entity that will formally elect to participate in MHA by signing the SPA. MHA Handbook Ch. I § 1.1. Under the SPA, the Department of Treasury agrees to provide incentive payments to servicers, and servicers agree to service loans, according to the guidelines established in the MHA Handbook. SPA § 1(B).7 Certain servicing requirements, as well as the conditions and amounts of incentive payments, are specific to each MHA program. Here, although the Complaint identifies numerous MHA and other programs, Complaint ¶¶ 49-57, Relators’ factual allegations are limited to HAMP and HAFA, e.g., id. ¶¶ 62-63. Accordingly, these programs are described in more detail below. 1. The Home Affordable Mortgage Program HAMP is the “cornerstone” of MHA, and it is aimed at assisting borrowers who are at risk of default and wish to remain in their home. See, e.g., RJN, Ex. 23 at i (GAO, Troubled Asset Relief Program: Further Actions Needed to Fully and Equitably Implement Foreclosure Mitigation Programs, GAO-10-634, 1-27 (Washington, D.C.: June 24, 2010) (the “June 2010 GAO Report”)); Complaint ¶ 48. Under HAMP, eligible borrowers may enter into a loan modification that lowers the interest rate, extends the term, and/or reduces the unpaid principal balance of the loan. See, e.g., MHA Handbook Ch. II § 6. The loan modification process involves two stages-qualified borrowers first are enrolled in a “Trial Period Plan,” and if they timely make all payments, meet other certain requirements during the trial period, and are qualified, they are offered a permanent modification. MHA Handbook Ch. II §§ 8-9; Vongohren v. Citimortgage, Inc., No. JFM-14-3549, 2016 WL 739070, at *1 (D. Md. Feb. 25, 2016) (describing the HAMP loan modification process). Servicers have never been entitled to any HAMP incentives whatsoever until the 7 In addition, since at least July 2011, the Department of Treasury has published a Compensation Matrix summarizing the specific amounts, timing, and conditions of eligibility for the incentives offered under each MHA program. See RJN, Ex. 46 (January 2014 MHA Compensation Matrix). Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 19 of 45 Page ID #:8522 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT borrower is enrolled in a permanent modification. See MHA Handbook (Revs. 1.0-5.1) Ch. II § 13.1. Every version of the MHA Handbook expressly provides that: “No incentives of any kind will be paid if: [¶] [t]he borrower does not qualify for, or otherwise enter into, a permanent modification.” MHA Handbooks (Revs. 1.0-5.1) Ch. II § 13. HAMP is designed to offset administrative costs incurred by servicers in connection with loan modifications-not provide them a windfall. Accordingly, the government does not reimburse servicers for their actual administrative costs. MHA Handbooks (Revs. 1.0-5.1) Ch. II § 9.3.3 (“The servicer pays and will not be reimbursed for any actual out-of-pocket expenses, including, but not limited to, any required notary fees, recordation fees, title costs, property valuation fees, credit report fees, or other allowable and documented expenses.”). 2. The Home Affordable Foreclosure Alternatives Program On November 30, 2009, the Department of Treasury launched HAFA, which is aimed at borrowers who are at risk of default but cannot afford and/or do not wish to remain in their home. Under HAFA, the government provides incentives to borrowers, servicers, and investors for using a short sale or deed-in-lieu as an alternative to foreclosure. See Complaint ¶ 52; MHA Handbook Ch. IV. The transaction requires the servicer to forfeit the ability to pursue any deficiency judgment against a borrower. See Complaint ¶ 52; MHA Handbook Ch. IV.8 Like HAMP, HAFA does not authorize any incentive payment unless and until the borrower obtains permanent relief. Servicers are eligible for an incentive payment upon each “short sale or DIL [deed-in-lieu] completed in accordance with the requirements of HAFA.” MHA Handbook Ch. IV § 12.2 (emphasis added); see also id. Ch. IV § 12 (“Borrowers servicers, and investors . . . will 8 The Department of Treasury created HAFA to compliment HAMP because “[b]orrowers . . . may benefit from an alternative program that helps the borrower transition to more affordable housing and avoid the substantial costs of foreclosure.” RJN, Ex. 14 at 20 (Hearing Before the House Committee on the Judiciary, Foreclosed Justice: Causes and Effects of the Foreclosure Crisis (Part I & II), 111th Congress, 2d Sess., at 20 (Dec. 2, 2010) (prepared statement of Phyllis Caldwell, Chief of Homeownership Preservation Office, Department of Treasury)). Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 20 of 45 Page ID #:8523 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT be eligible for HAFA incentives . . . upon successful completion of the short sale or DIL”); MHA Compensation Matrix. The payment is made in the month the short sale or deed-in-lieu is reported “after the closing has occurred.” MHA Compensation Matrix. The incentive payment itself is designed to offset the administrative costs that servicers incur in connection with the short sale or deed-in-lieu, and servicers are accordingly not entitled to any additional reimbursement of their actual costs. Id.; see also MHA Handbook Ch. IV § 12.2. C. Extensive Governmental Oversight, Investigations, and Enforcement Actions Concerning Alleged MHA Non-Compliance As explained below, compliance with MHA servicing standards has been subject to extensive regulatory scrutiny, enforcement actions, civil litigation, and public attention. Because the only loan specifically referenced in the Complaint (Relator Williams’ loan) was serviced by BANA and Relators’ allegations center on BANA’s servicing activity, in describing the prior public disclosures of alleged servicing issues in this section, Defendants highlight both industry-wide and BANA-specific allegations.9 Well before (and after) Relators filed this lawsuit, there has been widespread public reporting of alleged “anecdotal stories of servicer errors” just like the ones alleged here. RJN, Ex. 15 at 50 (Congressional Oversight Panel, December Oversight Report: A Review of the Treasury’s Foreclosure Prevention Programs (Dec. 14, 2010)). A mere two weeks before Relators filed this action, SIGTARP reported to Congress a borrower experience virtually identical to Relator Williams’ alleged circumstances, involving an alleged servicing error that “den[ied] him the opportunity to participate in [HAFA] with a short sale of his house . . . [and purportedly] refused to explain the discrepancy.” RJN, Ex. 33 at 263 (January 2014 Quarterly SIGTARP Report). The next day, the Charlotte Observer reported that “borrowers serviced by Bank of America 9 Of course, by identifying earlier allegations, Defendants do not concede that any such allegations have any factual basis. Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 21 of 45 Page ID #:8524 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT and JPMorgan under the TARP-related housing programs complain about lack of communication and misplaced application documents.” RJN, Ex. 9 (Deon Roberts, Watchdog Says Bank of America, JPMorgan have Most Mortgage Complaints under TARP, The Charlotte Observer (Jan. 30, 2014)). Although it would be impossible to catalog the universe of prior public disclosures, Defendants highlight important examples below. 1. Oversight Responsibilities and Disclosures Statutorily Mandated Under the EESA The EESA charged several entities with certain oversight responsibilities, and each has dedicated considerable attention, public reporting, and/or remedial action in response to allegations of servicer non-compliance with MHA requirements. a. The Department Of Treasury And Freddie Mac’s MHA-C Division The EESA established the Financial Stability Oversight Board (“FSOB”) to “review[] the exercise of [TARP] authority” including “the effect of such actions in assisting American families in preserving home ownership.” 12 U.S.C. § 5214(a). FSOB created the Homeownership Preservation Office to serve as the principal MHA program office responsible for audit oversight, data analysis, and program compliance and fraud prevention in conjunction with a designated MHA compliance agent. On February 18, 2009, the Department of Treasury appointed Freddie Mac as its agent for servicer compliance with MHA requirements, including conducting on-site and off-site audits of servicers’ “policies and procedures established . . . to identify eligible borrowers,” “[borrower] outreach efforts,” and “record keeping practices.” RJN, Ex. 34 at Ex. A (Financial Agency Agreement for a Homeowner Preservation Program under the EESA). Freddie Mac created a new compliance division, MHA-C, led by Paul Heran, the former Directing Partner of Ernst and Young’s Bank Audit Practice. RJN, Ex. 12 at 48 (Sept. 22, 2010 Hearing Before the Congressional Oversight Panel, Treasury’s Use of Private Contractors Under TARP (prepared statement of Paul Heran, Program Executive, Making Home Affordable- Compliance, Freddie Mac)). A core Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 22 of 45 Page ID #:8525 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT component of MHA-C’s compliance monitoring is “fraud detection . . . focus[ed] on . . . servicer, and systemic fraud,” including “servicers reporting modifications that have not occurred . . . [and] incorrect determinations of eligibility in HAMP modifications.” RJN, Ex. 10 at 29 (Sept. 24, 2009 Field Hearing Before the Congressional Oversight Panel, Foreclosure Mitigation Under the Troubled Asset Relief Program (prepared statement of Edward Golding, Senior Vice President, Economics and Policy, Freddie Mac)). If a servicer does not materially comply with MHA servicing standards, the government is empowered to “take [] remedial action”-including by withholding incentive payments. See, e.g., RJN, Ex. 45 at 15 (April 2011 Servicer Performance Report). To date, the government has published 68 MHA Performance Reports (“Servicer Performance Reports”) documenting the results of MHA-C’s ongoing audits. See RJN, Ex. 45. Since April 2011, these have included “detailed” quarterly assessments that disclose, describe, and substantiate compliance performance of ten mortgage servicers (including BANA). For example, the quarterly assessment published in January 2014 (the month before Relators filed this lawsuit) included specific performance metrics relating to “the timeliness and accuracy of the servicer’s borrower outreach and eligibility review,” whether the servicer “[c]orrectly communicate[s] reasons for [borrower] non-approval,” and “[d]ata . . . used to calculate the incentives due to servicers” to ensure the accuracy of each servicer’s “system and operational processes.” See, e.g., RJN, Ex. 56 at 29 (January 2014 Servicer Performance Report). In the first detailed servicer assessment issued in April 2011, the government stated that BANA and Wells Fargo were “in need of substantial improvement” and exercised its authority to withhold incentive payments owed to each of them. Id. at 15-16. The decision resulted in widespread media coverage of the allegations of non-compliance and BANA’s response, which acknowledged that “improvements must be made in key areas, particularly those affecting the customer experience.” See, e.g., RJN, Ex. 5 (Mary Podmolik, Bank of America, JPMorgan, and Wells Fargo Bank Cited Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 23 of 45 Page ID #:8526 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT for Poor Performance on HAMP, Chicago Tribune (June 9, 2011)). The government eventually resumed paying incentives to BANA, JPMorgan Chase, and Wells Fargo-and continued to make payments to them and other servicers even after Relators filed this lawsuit (by which time the government had actual knowledge of Relators’ allegations). b. Office of the Special Inspector General for the Trouble Assets Relief Program SIGTARP has the duty to “conduct, supervise, and coordinate audits and investigations” in order to prevent fraud and misuse of TARP funds. 12 U.S.C. § 5231. In correspondence, testimony, and numerous reports submitted to Congress-all of which is available to the public-SIGTARP repeatedly has identified allegations of servicer non-compliance and discussed the risk of fraud. See, e.g., RJN, Ex. 21 at Summ., 23, 25, 26, 30 (Mar. 2010 SIGTARP Report) (audit report identifying numerous, systemic program deficiencies, including the lack of “clear guidance from Treasury on . . . determining eligibility,” and “[r]epeated changes to program guidelines [that] cause[] confusion and delay”); RJN, Ex. 17 at 290 (Mar. 17, 2011 Hearing Before the Senate Committee on Banking, Housing, and Urban Affairs, TARP Oversight: Evaluating Returns on Taxpayer Investments, S. Hrg 112-82, 290 (Mar. 17, 2011) (prepared statement of Neil Barofsky, Special Inspector General of TARP)) (noting allegations of “lost documentation, servicer delays, and lack of communication”); RJN, Ex. 27 at 10 (Jan. 2012 Quarterly TARP Report) (noting allegations concerning servicers’ purported compliance issues and threatening to “withhold incentives” from BANA absent improvements); RJN, Ex. 32 at 172 (July 2013 Quarterly TARP Report) (noting reports from “several attorneys at nonprofit organizations” who alleged “mortgage servicer error and lack of communication”); RJN, Ex. 33 at 266-68 (Jan. 2014 SIGTARP Report) (noting allegations related to lack of communication or misplaced application documents). c. The Congressional Oversight Panel Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 24 of 45 Page ID #:8527 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT The EESA established the Congressional Oversight Panel (“COP”) and charged it with the duty to “review the current state of the financial markets and the regulatory system” and report on, among other things, the “effectiveness of foreclosure mitigation efforts.” 12 U.S.C. § 5233(a)-(b). Between December 16, 2008, and the expiration of its authority in March 2011, the Panel held at least 27 hearings and issued 28 reports. “Given the importance of foreclosure mitigation to families and communities and the impact of foreclosures on bank balance sheets and financial stability, the Panel . . . devoted more attention to this topic than any other single area under the TARP.” RJN, Ex. 16 at 86 (COP, March Oversight Report: The Final Report of the Congressional Oversight Panel (Mar. 16, 2011)). Among other things, in April 2010, the Panel convened to address alleged servicing issues in connection with HAMP. RJN, Ex. 11 at 71 (COP, April Oversight Report: Evaluating Progress on TARP Foreclosure Mitigation Programs (Apr. 14, 2010)). In November 2010, the Panel noted the risk of fraud resulting from “banks’ . . . trouble keeping up with the crush of foreclosures.” RJN, Ex. 13 at 7 (COP, November Oversight Report: Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation (Nov. 16, 2010)). See also RJN, Ex. 15 at 50 (COP, December Oversight Report: A Review of the Treasury’s Foreclosure Prevention Programs (Dec. 14, 2010)). The Panel’s final report also discussed HAMP servicing issues. RJN, Ex. 16 at 97 (COP, March Oversight Report: The Final Report of the Congressional Oversight Panel (Mar. 16, 2011)). d. The Government Accountability Office The EESA also vested the GAO with broad oversight over TARP “activities and performance” and requires it to submit a report every 60 days. 12 U.S.C. § 5226. Before this lawsuit was filed, the GAO issued several reports identifying deficiencies in MHA and alleged servicer noncompliance, as well as a survey reflecting borrowers’ experiences with alleged “lost documentation . . . long trial periods . . . wrongful Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 25 of 45 Page ID #:8528 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT denials . . . and difficulty contacting servicer[s].”10 2. Additional Oversight, Enforcement, and Litigation a. The Inter-Agency Review and OCC, FRB, and OTC Consent Orders The federal banking regulators also investigated, disclosed, and addressed the allegations of industry-wide servicing misconduct. In late 2010, FRB, the OCC, and the OTS conducted on-site reviews of fourteen mortgage servicers, including BANA, CitiMorgage, U.S. Bank, and Wells Fargo (the four servicers, collectively referred to as the “OCC Consent Order Servicers”). See RJN, Ex. 25 (Fed. Reserve Sys. et al., Interagency Review of Foreclosure Policies and Practices (Apr. 2011) (the “Inter-Agency Review”)). In April 2011, they issued a joint report announcing enforcement actions against eight servicers-including the OCC Consent Order Servicers-based on allegations related to servicing issues. Id. at 3. Without agreeing with those allegations, the OCC Consent Order Servicers engaged with the OCC and reaffirmed their commitment to “taking all necessary and appropriate steps” to remediate any deficiencies or unsound practices. See, e.g., RJN, Ex. 37 at 1 (OCC Consent Orders). On April 11, 2011, the OCC and FRB entered into consent orders with each Consent Order Servicer that required them to, among other things, take corrective action and engage a third-party independent review of loan files to “ensure compliance with . . . the Home Affordable Modification Program.” RJN, Exs. 37 (OCC 10 See RJN, Exs. 19 at 50 (GAO, Troubled Asset Relief Program: Treasury Actions Needed to Make the Home Affordable Modification Program More Transparent and Accountable, GAO-09-837 (July 23, 2009)), 21 at 12 (GAO, Home Affordable Modification Program Continues to Face Implementation Challenges, (Washington, D.C.: March 25, 2010), 23 at 1-27 (GAO, Troubled Asset Relief Program: Further Actions Needed to Fully and Equitably Implement Foreclosure Mitigation Programs, GAO-10-634 (Washington, D.C.: June 24, 2010)), 24 at 15 (GAO, Troubled Asset Relief Program: Treasury Continues to Face Implementation Challenges and Data Weaknesses in Its Making Home Affordable Program, GAO-11-288 (Washington, D.C.: Mar. 17, 2011)), 30 at 15 (GAO, Troubled Asset Relief Program: Further Actions Needed to Enhance Assessments and Transparency of Housing Programs, GAO-12-783 (Washington, D.C.: July 19, 2012)), 28 at Intr. (GAO, Foreclosure Mitigation: Agencies Could Improve Effectiveness of Federal Efforts with Additional Data Collection and Analysis, GAO-12-296 (Washington, D.C.: June 28, 2012)), Ex. 26 at 4 (GAO, Troubled Asset Relief Program: Results of Housing Counselors Survey on Borrowers’ Experiences with the Home Affordable Modification Program, GAO-11-367R (Washington, D.C.: May 26, 2011)). Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 26 of 45 Page ID #:8529 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT Consent Orders), 36 (FRB Consent Orders), 38 (OCC Amendments to Consent Orders). On February 28, 2013, the OCC and FRB released amendments to their enforcement actions imposing substantial penalties on BANA and other mortgage servicers. The Inter-Agency Review, enforcement actions, Consent Orders, and penalties were the subject of substantial publicity and at least two GAO audits.11 b. The National Mortgage Settlement In 2012, the United States, forty-nine states, and the District of Columbia filed a complaint against several financial institutions including Bank of America Corporation, Citibank, and Wells Fargo & Company (collectively, the “NMS Defendants”). See RJN, Ex. 63 (Dkt. No. 1, United States et al. v. Bank of America Corporation, Case No. 12-cv-00361 (D.D.C.)) (the “NMS Lawsuit”). The complaint in the action alleged that the NMS Defendants engaged in a pattern of servicing conduct that allegedly violated various laws and regulations, as well as “[MHA] program guidelines and servicer participation agreements.” See id. ¶ 54. In February 2012, the parties to the NMS Lawsuit agreed settle for $25 billion (the National Mortgage Settlement (“NMS”)).12 On April 5, 2012, the District Court in the NMS Lawsuit entered consent judgments against each NMS Defendant. See RJN, Exs. 64-66 (the “NMS Consent Judgments”). Under the NMS Consent Judgments, the United States, 49 States, and the District of Columbia have broadly released claims against the NMS Defendants and “any current or former affiliated entity” for all “Covered Servicing Conduct.” See infra 11 See RJN, Exs. 3 (Julie Schmit & Paul Davidson, Major Banks Told to Review Foreclosures, USA Today, Apr. 14, 2011, 1B), 1 (David Streitfeld, Rules for Mortgage Servicers are Criticized as Ineffective, N.Y. Times, Apr. 13, 2011, B4), 2 (Victoria McGrane et al., Big Banks Get Foreclosure Orders, Wall Street J., Apr. 14, 2011), 4 (Alan Zibel, Regulator: Banks Face Costly Foreclosure Fixes, Wall St. J., Apr. 14, 2011), 7 (Jessica Silver-Greenberg, Regulators and 13 Banks Complete $9.3 Billion Deal for Foreclosure Relief, N.Y. Times, Feb. 28, 2013), 31 (GAO, Foreclosure Review: Lessons Learned Could Enhance Continuing Reviews and Activities Under the Amended Consent Orders, GAO-13-277 (Mar. 26, 2013)), 29 (GAO, Foreclosure Review: Opportunities Exist to Further Enhance Borrower Outreach Efforts, GAO-12-776 (June 29, 2012)). 12 The NMS was widely covered by the press. See, e.g., RJN, Ex. 6 (Nelson D. Schwartz and Julie Creswell, Mortgage Plan Gives Billions to Homeowners, But with Exceptions, N.Y. Times, Feb. 10, 2012, B1). Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 27 of 45 Page ID #:8530 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 17 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT § IV.B.4. In addition, the Department of Treasury agreed to release and remit “all outstanding Making Home Affordable servicer incentive payments previously withheld.” RJN, Exs. 64-66 at F-22. Under the NMS, the NMS Defendants agree to abide by numerous new specified servicing standards. An independent compliance monitor (the “NMS Monitor”) submits detailed reports on each NMS Defendant’s performance to the District Court. The NMS Consent Judgments each set forth error thresholds and set forth a comprehensive resolution procedure and expressly provides that they “shall have a right to cure any Potential Violation.” Id., Exs. 64-66 at E-11. c. Civil Litigation Numerous individual cases, class actions, and multidistrict litigation have made allegations substantially similar to Relators’ allegations. This includes lawsuits that mirror Relators’ descriptions of BANA’s alleged servicing conduct. See, e.g., RJN Exs. 62, 68, 70-75, 77. These cases include the multidistrict HAMP litigation (In re Bank of America Home Affordable Modification Program (HAMP) Contract Litigation, Case No. 10-md-02193 (D. Mass.) (“HAMP MDL”)) and one of the first qui tam FCA actions based on BANA’s alleged HAMP servicing (U.S. ex rel. Mackler v. Bank of America, Case No. 09-cv-02040 (S.D.N.Y.)).13 In the HAMP MDL, plaintiffs purported to bring claims on behalf of “many thousands” of borrowers based on BANA’s purported servicing errors in connection with HAMP. RJN, Ex. 62 ¶ 491. In Mackler, relator asserted FCA violations based on the same type of conduct alleged here. RJN, Ex. 67 ¶ 8. III. PROCEDURAL BACKGROUND AND SUMMARY OF RELATORS’ ALLEGATIONS On February 12, 2014, Relators SAHA, Abad-Vega, Hall, and John Mortimer filed this action, and amended complaints were filed on February 25, 2014, September 13 The Mackler complaint and developments and filings in the HAMP MDL were covered by the press See, e.g., RJN, Exs. 8 (Hugh Son, Secret Inside BofA Office CEO Stymied Needy Homeowners, Bloomberg News (Sept. 15, 2013). Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 28 of 45 Page ID #:8531 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT 17, 2015, March 1, 2016, and April 26, 2016. Dkt. Nos. 1, 18, 29, 30. The Second Amended Complaint dropped Mortimer as a Relator, added Williams as a Relator, and was filed by and through Vito Torchia, Jr. as counsel of record. Attorney John Jay LeBron subsequently substituted in as counsel for Relators. Dkt. No. 30. Relators are not “insiders”-they do not allege that they worked for any Defendant. Relator Williams’ loan was serviced by BANA, and this is his third lawsuit based on allegations that BANA improperly declined his request for a short sale. Both of the prior lawsuits were brought in California State Court and were dismissed; one by Williams after BANA filed an answer and the other after the Court issued a ruling that Williams’ complaint failed to state a claim (and granted leave to amend). See RJN, Exs. 81-83, 86. In People v. Jose Arturo Abad-Vega and Dean Eric Toro, Case No. 11-cv-1447 (the “Abad-Vega Action”), the California Department of Justice charged Relator Abad-Vega with 29 criminal counts and alleged that he and others “were engaged in a mortgage loan modification scam.” RJN, Ex. 80 at 2 (Declaration in Support of Order to Return/Destroy Property Seized Pursuant to Search Warrant); RJN, Ex. 79 (Public Docket, Abad-Vega Action). Relator Hall is a former attorney who was disbarred; he stipulated to findings of fact and conclusions of law stating: “By instructing [his clients] to stop making their mortgage payments to the lender[,] which resulted in their home being sold in a foreclosure sale, [Relator Hall] intentionally, recklessly, or repeatedly failed to perform legal services with competence, in willful violation of rule 3-110(A), Rules of Professional Conduct.” RJN, Ex. 78 at 11 (Stipulation Re Facts, Conclusions of law and Disposition and Order Approving; Order of Involuntary Inactive Enrollment, Case Nos. 11-0-15178, 11-0-15397, 1-016183). Mr. Torchia also has been disbarred, and the Federal Trade Commission has filed an action (pending before Judge O’Connell) against him, Brookstone, and others, that include the following allegations: (1) Mr. Torchia “co-founded” Brookstone, RJN, Ex. 76 ¶ 10 (Dkt. No. 61, F.T.C. v. Kutzner, Case No. 16-cv-00999 (C.D. Cal.); Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 29 of 45 Page ID #:8532 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT “Brookstone is a ‘law firm’ offering mortgage assistance relief services to consumers by representing them in litigation against their lenders,” id. ¶ 6; and “Defendants prey on distressed homeowners, often identifying people who are at risk of foreclosure to send individualized marketing materials. These materials advertise mortgage assistance relief services, including mass joinder lawsuits to void mortgage notes and other actions to stop foreclosures,” id. ¶ 17; and “Defendants have not won a single mass joinder lawsuit on the merits, id. ¶ 54. The Complaint expressly purports to sue Defendants in their capacities as MBS trustees, and Defendants accordingly have appeared in this action only in that specific capacity. Complaint ¶¶ 20-27; Dkt. Nos. 92-100. However, the factual allegations in the Complaint center on supposed servicer misconduct in connection with a single loan-that of Relator Williams. Id. ¶¶ 58-111. Specifically, Relators assert that, before servicing of the loan was transferred to Nationstar on December 16, 2013, BANA lost documentation that it required Relator Williams to re-submit multiple times, delayed consideration of his loan for loss mitigation under HAMP and HAFA, and refused to provide adequate reasons for denying approval of his short sale. Id. ¶¶ 20-27, 61-91. Relators do not allege that BANA or any other entity actually submitted any claim for payment in connection with Relator Williams’ loan. Nonetheless, Relators assert that every Defendant purportedly engaged in a fraudulent scheme involving “hundreds of thousands” of unspecified “false and fraudulent documents.” Id. ¶¶ 14. According to Relators, Defendants knew (or should have known) that certain loans were not eligible for modification under the terms of PSAs, and they allegedly intentionally prolonged evaluating borrowers’ eligibility. Id. ¶ 122. This supposedly allowed Defendants to submit serial claims for unspecified MHA incentive fees and/or claims for reimbursement of unnecessary administrative costs. E.g., id. ¶ 131. To substantiate “proof of each defendant’s false claims,” Relators repeat the same two vague and wholly conclusory assertions that each Defendant purportedly “has Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 30 of 45 Page ID #:8533 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT submitted false claims” and “HAMP was charged fees.” Complaint ¶¶ 113-120. Remarkably, other than those two sentences (and the paragraph identifying them as named defendants), the Complaint does not include a single allegation that even refers to BNYM, Citibank, DBNTC, HSBC, or U.S. Bank (or a Bank of America entity in a trustee capacity). As to Wells Fargo, Relators assert that it “does not participate in the HAMP program,” id. ¶ 102, which of course, belies the allegation that it “has submitted false claims” in connection with HAMP and begs the question of why Relators named Wells Fargo as a defendant. Exhibit B to the Complaint purports to identify various litigation involving Defendants or their affiliates but does not explain how those cases provide any evidence of fraudulent claims. Specifically, Exhibit B does not (i) explain the allegations in those cases; (ii) identify or provide details regarding any particular loans; (iii) explain any defendant’s role in those cases or in connection with any loans at issue in those cases; (iii) identify any specific false claim for federal funds; (iv) specify the type or amount of federal funds sought; (v) state whether those federal funds were paid out (or to whom); or (vi) explain whether or why any loans at issue in those cases were ineligible for HAMP relief. IV. ARGUMENT A. The Court Lacks Jurisdiction Over Relators’ Claims 1. The Court Lacks Jurisdiction Over Relators’ FIRREA Claim FIRREA provides that “[a] civil action to recover a civil penalty under this section shall be commenced by the Attorney General.” 12 U.S.C. § 1833a(e) (emphasis added). Thus, “only the Government . . . has standing to bring an action for civil penalties.” U.S. v. Meisinger, EDCV 11-00896 2011 WL 4526082, at *7 (C.D. Cal. Aug. 26, 2011); see also Bolden v. KB Home, 618 F. Supp. 2d 1196, 1206 (C.D. Cal. 2008). Here, Relators lack standing to pursue the FIRREA claim, and the government has declined to intervene. Accordingly, the Court should dismiss Relators’ FIRREA claim based on lack of subject matter jurisdiction. Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1140 (9th Cir. 2003) (citing Fed. R. Civ. P. 12(b)(1)). Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 31 of 45 Page ID #:8534 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 21 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT 2. The Court Lacks Jurisdiction Over Relators’ FCA Claims Under the public disclosure bar, the Court “shall dismiss an action . . . if substantially the same allegations or transactions . . . were publicly disclosed . . . unless . . . the person bringing the action is an original source of the information.” 31 U.S.C. § 3730(e)(4)(A). If the bar applies, the Court lacks subject-matter jurisdiction over Relators’ claims. See, e.g., U.S. v. University of Phoenix, 10-cv-02478 2014 WL 3689764, *4 (E.D. Cal. July 24, 2014).14 The purpose of the public disclosure bar is to “stifl[e] parasitic lawsuits” by reserving FCA bounties for “whistle-blowing insiders” rather than “opportunistic plaintiffs who have no significant information to contribute of their own.” Graham Cty. Soil & Water Conservation Dist. v. U.S. ex rel. Wilson, 559 U.S. 280, 294-95 (2010) (internal quotation marks omitted); see also U.S. ex rel. Bogina v. Medline Indus., Inc., 809 F.3d 365, 368 (7th Cir. 2016) (explaining that the provision is “aimed at barring ‘me too’ private litigation”) (internal quotation marks omitted); U.S. ex rel. Solis v. Millennium Pharm., Inc., 95 F. Supp. 3d 1208, 1220 (E.D. Cal. 2015) (“A ‘whistleblower’ sounds the alarm; he does not echo it.”) (citations omitted). The “standard for assessing whether facts have already been disclosed is . . . liberal,” and “the standard for applying the bar is not . . . onerous.” U.S. ex rel. Solis, 95 F. Supp. 3d at 1217-18; see also Schindler Elevator Corp. v. U.S. ex rel. Kirk, 563 U.S. 401, 408 (2011) (explaining that the scope of the public disclosure bar is “broad” and “wide-reaching”). 14 The public disclosure bar was amended in 2010. Because the Complaint does not allege the date (or any other details) of the supposed fraud, it is impossible to discern whether the pre-2010 or amended version of the public disclosure bar applies. While certain district courts have concluded the amended version is no longer a jurisdictional bar, the Ninth Circuit has not yet ruled on the issue. In all events, the analysis under both versions is similar, the public disclosures referenced herein (including news articles) are properly subject to judicial notice and considered, and Relators’ claims are barred irrespective or which version applies. See, e.g., Malhotra v. Steinberg, 770 F.3d 853, 858 (9th Cir. 2014). Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 32 of 45 Page ID #:8535 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 22 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT a. The Allegations And Transactions In The Complaint Were Publicly Disclosed “In order to constitute public disclosure, the publicly disclosed facts need not be identical with, but only substantially similar to, the relator’s allegations.” U.S. ex rel. Solis, 95 F. Supp. 3d at 1216 (internal quotation marks and citations omitted). “It is not necessary for the public disclosures to have specifically named a defendant, to have provided explanatory details, or to have alleged overcharging, false-invoicing, false certification, or any other specific fraud.” Amphastar Pharm. Inc. v. Aventis Pharma SA, EDCV-09-0023 2012 WL 5512466, *6 (C.D. Cal. Nov. 14, 2012). The bar is triggered so long as “the prior public disclosures contained enough information to enable the government to pursue an investigation.” U.S. v. Alcan Electrical & Engineering, Inc., 197 F.3d 1013, 1019 (9th Cir. 1999). Here, allegations substantially similar to Relators’ were extensively and repeatedly disclosed before they initiated this action. As explained above, allegations that MBS servicers-including BANA, the only Defendant identified in the Complaint for alleged servicing issues-purportedly violated MHA servicing standards, lost borrower documents, failed to timely communicate with borrowers or communicated in ways that were confusing and/or inaccurate, and otherwise delayed consideration of loss mitigation options were disclosed in: (1) Congressional hearings and reports; (2) SIGTARP reports; (3) FSOB servicer compliance reports; (4) GAO reports; (5) the Inter-Agency Review; (6) the OCC/FRB Consent Orders and NMS Consent Judgment; (7) widespread media coverage; and (8) earlier civil lawsuits, including at least three complaints specifically purporting to assert FCA claims based on alleged servicing issues and HAMP incentive payments. See supra § II.C; 31 U.S.C. § 3730(e)(4)(A); see also, e.g., U.S. ex rel. Advocates for Basic Legal Equal., Inc. v. U.S. Bank, N.A., 816 F.3d 428, 433 (6th Cir. 2016) (holding that the Inter-Agency Review and OCC Consent Order alone were sufficient to bar a subsequent FCA lawsuit filed by a nonprofit organization against U.S. Bank); U.S. ex rel. Szymoniak v. ACE Security Corp., 2014 Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 33 of 45 Page ID #:8536 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 23 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT WL 1910845, at *3 (D.S.C. May 12, 2014) (dismissing FCA lawsuit filed against numerous large financial institutions because allegations of “faulty mortgage assignment documentation” were previously publicly disclosed in a judicial opinion and “by major national media outlets”). Clearly, the information in the government’s possession was sufficient to “enable [it] to pursue an investigation”-Congress, the Department of Treasury, FRB, OTS, OCC, and DOJ each conducted investigations into alleged servicing deficiencies well before this action was filed. See supra § II.C. Moreover, given the level of government oversight and the onerous reporting and monitoring requirements set forth in the MHA guidelines, the OCC Consent Orders, and the NMS Consent Judgment, there is no dispute that the government had (and continues to have) “ready access to documents” that “make[] it highly likely that the government could easily” uncover the potential purported false claims. Alcan Elec. & Engineering, Inc., 197 F.3d at 1019. In addition, the Complaint includes several paragraphs that appear to be copied verbatim from the NMS Complaint. Compare Compl. ¶¶ 41-57 with RJN, Ex. 63 ¶¶ 30-46. Under these circumstances, “[i]t is an unavoidable conclusion” that Relators’ allegations are “at least partly based upon, if not entirely based upon, qualifying public disclosures.” U.S. ex rel. Szymoniak , 2014 WL 1910845, at *3. b. Relators Are Not Original Sources Because substantially similar allegations were made before Relators filed this lawsuit, Relators cannot pursue their FCA claims unless they qualify as an “original source.” 31 U.S.C. § 3730(e)(4). The FCA provides two alternative “original source” definitions, and Relators do not qualify under either. See id. Under the first definition, a relator qualifies as an original source if he or she provided “the information on which allegations or transactions in [the] claim are based” before the information was publicly disclosed. Id. Here, the Complaint asserts that Relators provided information to the government, but it fails to specify when. Complaint ¶ 36. In any event, there were public allegations similar to the Relators Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 34 of 45 Page ID #:8537 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 24 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT assertions as early as 2009-more than four years before Relators filed their first complaint in this action. See supra § II.C. Accordingly, Relators have not alleged facts to qualify as “original sources” under this definition. Under the second (narrower) definition, a relator who files a qui tam action after information was publicly disclosed can still qualify as an original source, but only if the relator “has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions[] and . . . has voluntarily provided the information to the Government before filing [the] action.” 31 U.S.C. § 3730(e)(4). Here, notwithstanding Relators’ own supposed personal and professional experience with foreclosure lawsuits (Complaint ¶¶ 15-19), they demonstrably do not have “knowledge that is independent.” 31 U.S.C. § 3730(e)(4); Malhotra v. Steinberg, 770 F.3d 853, 860 (9th Cir. 2014) (explaining that knowledge is deemed “independent” under the FCA if it “preceded the public disclosure”); U.S. ex rel. Kreindler & Kreindler v. United Technologies Corp., 985 F.2d 1148, 1159 (2d Cir. 1993); U.S. ex. rel. Szymoniak, 2014 WL 1910845, at *3 (concluding that relator’s allegations that she was the victim of an alleged fraudulent mortgage scheme and the attorney who uncovered it were insufficient to qualify her as an original source because, among other reasons, she “did not work for any entity involved” and “can point to no other relationship, fiduciary, or otherwise, to show that she is the type of insider or whistleblower that the [FCA] is intended to reward”); U.S. ex rel. Hansen v. Cargill, Inc., 107 F. Supp. 2d 1172, 1185 (N.D. Cal. 2000) (concluding that the director of a non-profit watchdog organization was not an original source). Furthermore, Relators’ allegations-which focus on alleged servicing issues in connection with a single loan and are indistinguishable from reported allegations involving other borrowers-do not “materially add[]” to information in public domain. The Complaint merely repeats alleged experiences described by numerous other borrowers. See supra § II.C; 31 U.S.C. § 3730(e)(4); U.S. ex rel. Hastings v. Wells Fargo Bank, NA, Inc., -- F.3d --, No. 14-56314, 2016 WL 4011199, at *2 (9th Cir. July 27, 2016) (“Allegations do not materially add to public Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 35 of 45 Page ID #:8538 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 25 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT disclosures when they provide only background information and details relating to the alleged fraud-they must add value to what the government already knew.”); see also, e.g., U.S. ex rel. Winkelman v. CVS Caremark Corp., -- F.3d --, No. 15-1991, 2016 WL 3568145, *8 (1st Cir. June 30, 2016); U.S. ex rel. Advocates for Basic Legal Equal., Inc., 816 F.3d at 432; U.S. ex rel. Bogina, 809 F.3d at 370; U.S. ex rel. Solis, 95 F. Supp. 3d at 1218. Accordingly, for all the foregoing reasons, the Court should dismiss Relators’ FCA claims pursuant to the public disclosure bar. B. The Complaint Fails To State A Claim Under The FCA Under Federal Rule of Civil Procedure 12(b)(6), an FCA complaint must “plead plausible allegations.” Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). To meet this standard, relators must allege “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice,” as the Court is not bound to accept the truth of legal conclusions couched as factual allegations. Id.; see also Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In ruling on a motion to dismiss, the Court should consider the well-pled allegations of the complaint, documents incorporated by reference, and other matters properly subject to judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23 (2007). The Complaint asserts claims under the FCA’s presentment clause, 31 U.S.C. § 3729(a)(1)(A), as well as the use clause, 31 U.S.C. § 3729(a)(1)(B). To state a claim under the presentment clause, relators must allege sufficient, particularized facts that a defendant (1) made or caused to be made “a claim against the United States (2) that was false or fraudulent (3) with knowledge of the falsity or fraud.” United States ex rel. Aflatooni v. Kitsap Physicians Servs., 314 F.3d 995, 1000 (9th Cir. 2002). Relators must also sufficiently plead that the alleged false claims were material to the payment of Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 36 of 45 Page ID #:8539 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 26 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT government funds. See United States v. Bourseau, 531 F.3d 1159, 1170−71 (9th Cir. 2008) (outlining FCA materiality requirement). To state a claim under the use clause, relators must allege facts showing that the defendant knowingly used a false record or made a false statement material to a false claim. See United States ex rel. Kelly v. Serco Inc., No. 11-cv-2975, 2014 WL 4988462, at *10 (S.D. Cal. Oct. 6, 2014). 1. Relators’ Allegations That Trustees Engaged In Fraud Are Not Plausible The entire Complaint rests on a fundamental misconception respecting the role of trustees. The case caption identifies thousands of individual trusts, and the body of the Complaint expressly purports to assert claims against each Defendant as “Trustee” of certain specified trusts. Complaint ¶¶ 20-27. Accordingly, each Defendant has appeared solely in its capacity as alleged trustee of certain specified trusts. See Dkt. Nos. 92-100. As explained above, trustees have a very limited role in administering MBS, and they do not participate in MHA. See supra § II.A-B. Trustees are not parties to the SPAs with Fannie Mae, do not submit MHA claims to the Department of Treasury, and do not receive any MHA incentive payments. See id. Indeed, under the express terms of the SPA and MHA guidelines, servicers-not trustees-are responsible for reporting loss mitigation to the Department of Treasury, as well as collecting all incentive payments. This is a basic proposition, confirmed by Relators’ own pleading. See Complaint ¶ 132 (alleging that the purpose of HAMP is to “incentivize servicers”) (emphasis added). As a result, Relators’ assertions that Defendants, as trustees of certain MBS trusts, somehow defrauded the government are not plausible. 2. The Complaint Fails To Allege The Submission Of Any False Claim For Payment The FCA “attaches liability, not to underlying fraudulent activity, but to the ‘claim for payment.’” United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir. 1996) (internal citation omitted). It is not enough to “to describe a private scheme in detail but then to allege simply and without any stated reason for his belief that claims Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 37 of 45 Page ID #:8540 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 27 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT requesting illegal payments must have been submitted.” Kitsap, 314 F.3d at 1002 (emphasis omitted) (internal citation and quotation marks omitted). Thus, “unsavory conduct is not, without more, actionable under the FCA.” U.S. ex rel. Cafasso, 637 F.3d at 1058, and Relators must link Defendants’ alleged practices to an actual submission of a purportedly false claim. Here, assuming for the sake of argument15 that servicers “submitted claims” for payment under MHA, Relators’ claims would still be defective because they have not alleged facts demonstrating that any such claims were false.16 As explained above, Relators’ theory is that Defendants submitted claims for incentive payments and/or cost reimbursement for loans that are not eligible for relief under HAMP or HAFA. But the Complaint does not include a single allegation that even attempts to explain how it would even be possible to accomplish that. The only “proof” that a false claim was submitted consists of (1) Relators’ conclusory and unintelligible assertion that “HAMP was charged fees and incurred cost for a loan that was never eligible for the HAMP program” and (2) Exhibit B to the Complaint, which merely lists MBS trusts, refers to unspecified “upfront fees,” and purportedly identifies other litigation with no case number or explanation as to the supposed import of those cases. Complaint ¶¶ 112-120 & Ex. B. This is insufficient. Relators’ failure to allege any false claim is unsurprising. They base their case on a fundamentally incorrect premise-that incentive payments and administrative costs “are not limited to actual eligibility, but are also available if eligibility is denied.” 15 Relators’ generalized assertion that Defendants “violated the rules of the HAMP Program,” Complaint ¶ 4, is not sufficient to establish an express or implied false certification; indeed, nowhere does the Complaint even purport to identify a single specific HAMP rule that could form the basis of this assertion. See infra § IV.B.3. Likewise, the Complaint’s assertion that “Defendant lenders” supposedly “fraudulently induced” HUD is a legal conclusion unsubstantiated by any facts that even identify a contract between Defendants and HUD or any provision that Defendants supposedly did not intend to abide by at the time it was entered. See, e.g., U.S. ex. rel. Friedland v. Environmental Chemical Corp., No. C 00-3075, 2003 WL 23315783, at *9 (N.D. Cal. Dec. 30, 2003) (dismissing complaint under Rule 12(b)(6) because “[t]he allegations of fraud in the inducement. . . are unsupported by particularized facts regarding the alleged fraudulent activity”). 16 As explained above, trustees do not request or receive payments under MHA. See supra § II.B. Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 38 of 45 Page ID #:8541 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 28 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT Complaint ¶ 105. Contrary to Relators’ assertion, MHA guidelines and procedures do not allow servicers to seek any incentive payments until after the borrower has obtained loss mitigation relief. See supra § II.B. Accordingly, as to HAMP, incentives are paid, at the earliest, after the servicer reports that the borrower has entered into a permanent loan modification-typically months after the borrower has been approved under HAMP and only after the borrower has completed his or her Trial Period Plan. See supra § II.B. As to HAFA, incentives are paid after the servicer has reported “successful completion of the short sale or [deed-in-lieu].” See id. Finally, under MHA, servicers cannot submit claims for administrative costs because the Department of Treasury does not provide reimbursement for such costs (even if the borrower obtains a permanent loan modification or completes a short sale or deed-in-lieu).17 See id. Accordingly, Relators’ entire theory-that Defendants submitted and received claims for payment in connection with loans that were ineligible for MHA loss mitigation-is not plausible. 3. The Complaint Fails To Allege That the Purported “False Claims” Were Material to the Government’s Decision to Pay MHA Incentives The FCA defines “material” as “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” 31 U.S.C. § 3729(b)(4). Because the FCA is not “‘an all-purpose antifraud statute,’ . . . or a vehicle for punishing garden-variety breaches of contract or regulatory violations,” the materiality requirement is “rigorous,” “demanding,” and can only be satisfied by alleging particularized facts. Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 1996, 2003, 2004 n.6 (2016). Generally, materiality focuses on the “effect on the likely or actual behavior of the recipient of the alleged 17 The Complaint repeatedly refers to Form 571 and indeed attaches a blank Form 571 as Exhibit A; however, that form has no application to this action, which solely concerns non-GSE loans. See, e.g. RJN, Ex. 89 (Fannie Mae Single Family 2011 Servicing Guide, June 10, 2011) § 609.09.03 (discussing Form 571), Foreword at iii (noting that the Guide “covers our standard requirements for servicing all Fannie Mae-owned or Fannie Mae-securitized . . . mortgages”) (emphasis added). Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 39 of 45 Page ID #:8542 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT misrepresentation.” Id. at 2002. By contrast, allegations that the government had “the option to decline to pay” are not sufficient. Id. at 2003. Furthermore, if the government pays claims despite knowing that certain requirements were violated, “that is very strong evidence that those requirements are not material.” Id. at 2003-04. Here, Relators’ allegations do not come close to satisfying the FCA’s rigorous materiality requirement. The Complaint includes two paragraphs of vague and conclusory assertions that “[t]ruthful and accurate claims and statements are a condition precedent to both issuance of and payment under federal statues,” and the government would not have paid “upfront fees” “had [it] known that the federal regulations and HAMP guidelines were violated or that Defendants’ express claims were false.” Complaint ¶¶ 128-129. Relators fail to identify a single specific representation or claim for payment made by any Defendant, fail to allege that any government employee reviewed any such claim or would have been influenced by the accuracy of any representation made by any Defendant, fail to allege that the government was unaware of the alleged servicing issues, and do not even identify the “federal statutes” or “regulations” that Defendants supposedly violated. These deficiencies are not curable. As explained above, the government’s decision to issue or withhold incentives from BANA (and other servicers) is based on its overall assessment of compliance with specified servicing standards, and it is inconceivable that Relators’ allegations (which focus entirely on Relator Williams’ loan) could have influenced that decision. See supra § III. The government has been aware of similar allegations since 2009. See supra § II.C. Just two weeks before this lawsuit was filed, SIGTARP advised Congress that the government was continuing to pay servicer incentive fees (amounting to $2.1 billion by that point) despite numerous allegations of servicer non-compliance. See RJN, Ex. 33 at 65, 265-66. Perhaps most fundamentally, the fact that the government continued to pay servicer incentives even after Relators filed this action negates any assertion that the alleged conduct was material. See supra § II.C.1; U.S. ex rel. Marshall v. Woodward, Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 40 of 45 Page ID #:8543 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 30 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT Inc., 812 F.3d 556, 563 (7th Cir. 2015) (dismissing FCA claim, in part, because “[t]o this day, the government continues to pay [claims]”); U.S. ex rel. Berge v. Bd. of Trs. of the Univ. of Ala., 104 F.3d 1453, 1462 n.3 (4th Cir. 1997) (dismissing FCA claim, in part, because “well after all of [the relator’s] allegations had been repeatedly probed, [the government] continued to [pay claims]”); Knudsen v. Sprint Communications Co., 2016 WL 4548924, *13 (N.D. Cal. Sept. 1, 2016) (dismissing FCA complaint because relator did not allege “that the government was unaware of the alleged violations” and the complaint’s “single, conclusory paragraph alleging materiality [was] insufficient”); see also U.S. ex rel. Stephenson v. Archer Western Contractors, LLC, 548 Fed. Appx. 135, 138 (5th Cir. 2013) (“How could such ‘fraud’ be material to payment if the defrauded party knows about it and remains satisfied with the work?”); U.S. ex rel. Conner v. Salina Regional Health Center, Inc., 543 F.3d 1211, 1219-20 (10th Cir. 2008) (“If the government would have paid the claims despite knowing that the contractor has failed to comply with certain regulations, then there is no false claim for purposes of the FCA.”). 4. The NMS Defendants Should Be Dismissed Under The NMS The National Mortgage Settlement released Bank of America, Citibank, and Wells Fargo from all liability-including under the FCA and FIRREA-based on “Covered Servicing Conduct,” which is broadly defined to “encompass[] all activities . . . directed toward servicing . . . from and after the closing of a borrower’s mortgage loan.” RJN, Exs. 64-66 at F-2-12. This specifically includes alleged “[d]eficiencies in performing loan modification and other loss mitigation activities, including . . . short sales and deeds in lieu . . . communication with borrowers . . . and [¶] [d]eficiencies in COMPANY’s or any of its affiliates’ participation in and implementation of the . . . Making Home Affordable Program, including all of its component programs.” Id., Ex. 65 at F2-F6 (emphasis added). The release extends to conduct undertaken by the NMS Defendants and their affiliates, in all capacities. See id. The NMS Defendants each bargained for and collectively paid billions of dollars to Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 41 of 45 Page ID #:8544 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 31 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT settle these claims. The Consent Judgments are properly before this Court, and the Court should enforce their plain terms and dismiss all claims against the NMS Defendants with prejudice (in any capacity). See United States v. ITT Cont’l Baking Co., 420 U.S. 223, 238 (1975) (consent judgment, and any release contained therein, are enforceable under basic principles of contract interpretation); see also, e.g., MK Ballistic Sys. v. Simpson, No. 07-C-00688, 2009 WL 86699, at *4 (N.D. Cal. Jan. 9, 2009) (dismissing complaint based on a consent order). C. The Complaint Fails to Satisfy Basic Pleading Requirements Even assuming that this Court has jurisdiction over Relators’ FIRREA and FCA claims and Relators had pled facts to meet the elements, the Complaint should be dismissed for its failure to comply with Federal Rules of Civil Procedure 8(a) and 9(b). Rule 8(a)(2) requires “‘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.’” Twombly, 550 U.S. at 555 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). “Rule 9(b) requires allegations of fraud to state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation.” U.S. ex rel. Cericola v. Fed. Nat. Mortgage Assoc., 529 F. Supp. 2d 1139, 1145 (C.D. Cal. 2007) (internal quotation marks omitted). Thus, Rules 8(a) and 9(b) both prohibit “lumping” multiple defendants together and require relators to allege particularized facts as to each defendant. See Gen-Probe, Inc. v. Amoco Corp., Inc., 926 F. Supp. 948, 961 (S.D. Cal. 1996) (explaining that a complaint that “lump[s] together . . . multiple defendants in one broad allegation fails to satisfy [the] notice requirement of Rule 8(a)(2)”) (citations omitted); U.S. v. Corinthian Colleges, 655 F.3d 984, 997-98 (9th Cir. 2011) (“Rule 9(b) does not allow a complaint to merely lump multiple defendants together . . . .”). Here, the Complaint suffers from a multitude of pleading deficiencies. As explained above, it wholly fails to identify a single claim for payment or other material false statement, much less provide details concerning the parties, timing, location, and Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 42 of 45 Page ID #:8545 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 32 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT content of the supposed fraud. See supra § IV.B.2; Cafasso, 637 F.3d at 1057 (explaining that complaints that merely “identif[y] a general sort of fraudulent conduct but specif[y] no particular circumstances of any discrete fraudulent statement” are “precisely what Rule 9(b) aims to preclude”). Based exclusively on allegations centered on BANA’ servicing of Relator Williams’ loan, the Complaint makes the leap that Defendants somehow submitted “tens of thousands” of false claims. Complaint ¶ 14. It is impossible to discern the conduct that Relators purportedly ascribe to each Defendant because the Complaint impermissibly describes them collectively and repeats identical, conclusory assertions against each of them. See Complaint ¶¶ 14, 112-120; U.S. ex. rel. Pecanic v. Sumitomo Elec. Interconnect Products, Inc., 2013 WL 774177, *4 (S.D. Cal. Feb. 28, 2013) (dismissing complaint that “aggregated allegations against multiple Defendants”). These deficiencies are compounded by Relators’ failure to identify any specific “laws” or “regulations” and their sweeping, vague, and conflicting descriptions of the unspecified “fees,” and “costs” that purportedly form the basis of Relators’ claims. See supra § IV.B.3; McHenry v. Renne, 84 F.3d 1172, 1175 (9th Cir. 1996) (affirming dismissal of a complaint based on its “vague wording” that made it “excessively difficult for individual defendants to formulate proper defenses”). At most, the Complaint’s “allegations . . . amount to an assertion that, because [Defendants] participated in the relevant market [i.e., the RMBS mortgage market] and the pertinent governmental program [i.e., HAMP], [each Defendant] must have been engaged in fraudulent activity.” Cericola, 529 F.Supp.2d at 1146. Such allegations are “not enough to require an answer.” Id. V. CONCLUSION For all the foregoing reasons, the Court should dismiss the Complaint with prejudice. Respectfully submitted, Dated: September 12, 2016 SIDLEY AUSTIN LLP Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 43 of 45 Page ID #:8546 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 33 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT By: /s/ Anand Singh Douglas A. Axel daxel@sidley.com Anand Singh anand.singh@sidley.com 555 West Fifth Street, Suite 4000 Los Angeles, California 90013 Telephone: +1 213 896-6000 Facsimile: +1 213 896-6600 Attorneys for Defendants Bank of America, N.A. as alleged successor trustee to LaSalle Bank National Association as trustee, Deutsche Bank National Trust Company as trustee, and The Bank of New York Mellon, and The Bank of New York Mellon Trust Company, N.A. as trustee and/or successor trustee to JP Morgan Chase Co. as trustee Dated: September 12, 2016 MAYER BROWN LLP By: /Bronwyn F. Pollock Bronwyn F. Pollock BPollock@mayerbrown.com 350 South Grand Ave., 25th Floor Los Angeles, CA 90071 Telephone: +1 213 229-5194 Facsimile: +1 213 625-0248 Attorneys for Defendants Citibank, N.A. as trustee, HSBC Bank USA, N.A. as trustee, Dated: September 12, 2016 BUCKLEY SANDLER LLP By: /s/ Daniel Paluch Daniel Paluch dpaluch@buckleysandler.com 100 Wilshire Boulevard Suite 1000 Santa Monica, CA 90401 Telephone: +1 310 424-3900 Facsimile: +1 310 424-3960 Attorneys for Defendant U.S. Bank National Association as trustee Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 44 of 45 Page ID #:8547 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 34 DEFENDANTS’ JOINT MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT Dated: September 12, 2016 FAEGRE BAKER DANIELS LLP By: /s/ Howard D. Ruddell Howard D. Ruddell howard.ruddell@FaegreBD.com 1990 S. Bundy Drive Suite 620 Los Angeles, California 90025 Telephone: +1 310 500-2090 Facsimile: +1 310 500-2091 Michael M. Krauss (pro hac vice submitted) michael.krauss@FaegreBD.com Jennifer M. Bisenius (pro hac vice submitted ) jennifer.bisenius@FaegreBD.com 2200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402 Telephone: +1 612 766-7000 Facsimile: +1 612 766-1600 Attorneys for Defendant Wells Fargo Bank, N.A. as trustee FILER’S ATTESTATION Pursuant to L.R. 5-4.3.4(a)(2)(i), I, Anand Singh, attest that all other signatories listed, and on whose behalf this document is submitted, concur in the document’s content and have authorized its filing and the placement of their electronic signatures above. By: /s/s Anand Singh Anand Singh Case 8:14-cv-00210-TJH-DFM Document 115 Filed 09/12/16 Page 45 of 45 Page ID #:8548 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 [PROPOSED] ORDER GRANTING DEFENDANTS’ JOINT MOTION TO DISMISS UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION UNITED STATES, ex rel. SERVE ALL HELP ALL, INC. D/B/A NON-PROFIT ALLIANCE OF CONSUMER ADVOCATES, et al., Plaintiffs, vs. ACE SECURITIES CORP. HOME EQUITY LOAN TRUST 2004-FM1 BY HSBC BANK USA AS TRUSTEE, et al., Defendants. Case No. 14-cv-00210-TJH-DFM [PROPOSED] ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS RELATORS’ FOURTH AMENDED COMPLAINT Judge: Honorable Terry J. Hatter Hearing Date: November 21, 2016 Time: UNDER SUBMISSION Place: Courtroom 17 Judge: Hon. Terry J. Hatter, Jr. Case 8:14-cv-00210-TJH-DFM Document 115-1 Filed 09/12/16 Page 1 of 2 Page ID #:8549 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 [PROPOSED] ORDER GRANTING DEFENDANTS’ JOINT MOTION TO DISMISS ORDER The matter before the Court is Defendants’1 Joint Motion to Dismiss (“Motion”) the Fourth Amended Complaint filed by Relators Serve All Help All, Inc. d/b/a Non-Profit Alliance of Consumer Advocates, Jose Arturo Abad-Vega, Danny Williams, and Moses Hall (collectively, “Relators”). The Motion was filed pursuant to Federal Rules of Civil Procedure 8, 9, 12(b)(1), and 12(b)(6), and it came on regularly for hearing on November 21, 2016. The Court, having considered the parties submissions as well as oral argument, hereby rules as follows: Defendants’ Motion is GRANTED with prejudice. The Fourth Amended Complaint does not comply with Federal Rule[s] of Civil Procedure [8, 9, 12(b)(1), 12(b)(6)]. The Court also finds that any amendment would be futile. The clerk shall close the file. IT IS SO ORDERED. Dated: ______________ By: Honorable Terry J. Hatter United States District Judge 1 The Defendants in this action are: Bank of America, N.A. (erroneously sued as “LaSalle Bank Succeeded By Bank of America Trustee”), Citibank, N.A. (“Citibank”) (erroneously sued as “Citibank Trustee”), HSBC Bank USA, N.A. (“HSBC”) (erroneously sued as “HSBC Bank USA Trustee”), The Bank of New York Mellon f/k/a The Bank of New York and the Bank of New York Mellon Trust Company, N.A. f/k/a the Bank of New York Mellon Trust Company, N.A. (collectively, “BYNM”) (erroneously sued as “Bank of New York Trustee” and “J.P. Morgan Chase Bank Trustee”), Deutsche Bank National Trust Company, (“DBNTC”) (erroneously sued as “Deutsche Bank National Trust Company Trustee”), U.S. Bank National Association (“U.S. Bank”) (erroneously sued as “U.S. Bank Trustee”), and Wells Fargo Bank, N.A. (“Wells Fargo”) (erroneously sued as “Wells Fargo Bank Trustee”). Case 8:14-cv-00210-TJH-DFM Document 115-1 Filed 09/12/16 Page 2 of 2 Page ID #:8550