United States District Court, E.D. Texas, Sherman Division
UNITED STATES OF AMERICA, ex rel., MICHAEL J. FISHER, KEITH FRANKLIN, CHEZZA HARTFIELD, and REGINA MCPHAUL
JPMORGAN CHASE BANK N.A.
MEMORANDUM OPINION AND ORDER
L. MAZZANT UNITED STATES DISTRICT JUDGE.
before the Court is Defendant JP Morgan Chase Bank N.A.'s
Motion for Summary Judgment Under the Public Disclosure Bar
(Dkt. #106). Having considered the motion and the relevant
pleadings, the Court finds that the motion should be denied.
2008, the United States faced a housing crisis caused, in
part, by mortgage fraud and predatory lending. The crisis
caused home prices to plummet and foreclosures to skyrocket,
leaving homeowners with negative equity in their homes.
Distressed homeowners were unable to sell or refinance their
homes to meet their mortgage obligations. In response to this
crisis, the Government enacted the Emergency Economic
Stabilization Act of 2008 (“EESA”). Fannie Mae
entered a Financial Agency Agreement for a Homeownership
Preservation under the EESA with the U.S. Department of
Treasury (“Treasury”), whereby the Treasury
authorized Fannie Mae to act as a financial agent of the
United States for EESA programs.
Home Affordable Modification Program (“HAMP”),
administered by the Treasury Department, was a voluntary
program under EESA designed to prevent avoidable foreclosures
by providing homeowners with affordable mortgage-loan
modifications and other alternatives to eligible buyers.
HAMP's primary goal was to relieve the burden on
homeowners by lowering their mortgage payments to 31% or less
of their gross monthly income. Investors would receive
payments and a guarantee that no modification would result in
a mortgage worth less than the net-present value of the
property. In return, mortgage servicers, in addition to their
annual servicing fees, received HAMP incentive payments to
complete the modifications. Each successful modification
entitled the servicer from $1, 200-2, 000 depending on how
long the mortgage was delinquent. From the program's
start in 2009 through the second quarter of 2016, HAMP
generated more than 1.6 million permanent modifications.
2009, Defendant-one of the country's largest mortgage
servicers by volume-enrolled in HAMP. On July 31, 2009,
Defendant expressly certified its compliance with HAMP
guidelines and applicable federal laws in signing the initial
Servicer Participation Agreement (“SPA”). The SPA
names Defendant as the servicer and “Fannie Mae, solely
as Financial Agent of the United States, ” as the
administrator. The SPA also names Freddie Mac as a compliance
agent. The parties signed a Financial Instrument on the same
day, which details the representations, warranties, and
covenants that Defendant is obligated to make in connection
with its participation in HAMP. The Financial Instrument was
fully incorporated into the SPA. On March 24, 2010, Defendant
signed an Amended SPA. Defendant also signed annual
certifications, a prerequisite to receiving HAMP payments.
expressly represented in the SPAs and annual certifications
that: (1) it was in compliance with the terms and guidelines
of HAMP; (2) it was in compliance with all applicable laws
and requirements; (3) it created and maintained an effective
HAMP program and committed the resources needed to employ
enough trained, experienced personnel with the tools and
technology necessary to provide quality service to
homeowners; and (4) it had adequately documented and
monitored its compliance and immediately reported to the
Government any credible evidence of material violations of
February 8, 2012, Defendant and the Department of Justice,
Department of Housing and Urban Development, and 49 state
attorneys general entered into a $25 billion settlement
agreement to address allegations of loan-servicing
deficiencies, including HAMP violations. The Government
brought suit, and the parties submitted a consent order that
United States District Judge Rosemary M. Collyer of the
United States District Court for the District of Columbia
entered in April 2012. The consent order released Defendant
from liability arising out of “Covered Servicing
Conduct, ” including HAMP participation and
implementation, occurring on or before February 8, 2012.
September 27, 2013, relator Michael J. Fisher filed a
complaint against Defendant in the Southern District of New
York on behalf of the United States, alleging multiple
violations of the False Claims Act, 31 U.S.C. §§
3729-3732 (“FCA”). On November 3, 2015, Keith
Franklin, Reginald McPhaul, and Chezza Hartfield joined
Michael J. Fisher as relators (collectively,
“Relators”). On June 2, 2016, the Southern
District of New York transferred the case to this Court.
January 30, 2019, Relators filed their operative
complaint-Qui Tam Plaintiffs/Relators' Sixth
Amended Complaint (Dkt. #115)-alleging that after February 8,
2012, Defendant systematically violated HAMP guidelines and
knowingly presented false or fraudulent claims to the
Government in order to obtain more than $430 million in HAMP
payments. On December 13, 2018, Defendant filed its Motion
for Summary Judgment Under the Public Disclosure Bar (Dkt.
#106). Relators filed a response in opposition to
Defendant's motion on February 6, 2019 (Dkt. #117).
Defendant filed a reply in support of the motion on February
22, 2019, and Relators filed a sur-reply to the motion on
March 8, 2019 (Dkt. #122; Dkt. #126).
purpose of summary judgment is to isolate and dispose of
factually unsupported claims or defenses. Celotex Corp.
v. Catrett, 477 U.S. 317, 323-24 (1986). Summary
judgment is proper under Rule 56(a) of the Federal Rules of
Civil Procedure “if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). A dispute about a material fact is genuine when
“the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson
v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986).
Substantive law identifies which facts are material.
Id. The trial court “must resolve all
reasonable doubts in favor of the party opposing the motion
for summary judgment.” Casey Enters., Inc. v. Am.
Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir.
party seeking summary judgment bears the initial burden of
informing the Court of its motion and identifying
“depositions, documents, electronically stored
information, affidavits or declarations, stipulations
(including those made for purposes of the motion only),
admissions, interrogatory answers, or other materials”
that demonstrate the absence of a genuine issue of material
fact. Fed.R.Civ.P. 56(c)(1)(A); Celotex, 477 U.S. at
323. If the movant bears the burden of proof on a claim or
defense for which it is moving for summary judgment, it must
come forward with evidence that establishes “beyond
peradventure all of the essential elements of the
claim or defense.” Fontenot v. Upjohn Co., 780
F.2d 1190, 1194 (5th Cir. 1986) (emphasis in original). Where
the nonmovant bears the burden of proof, the movant may
discharge the burden by showing that there is an absence of
evidence to support the nonmovant's case.
Celotex, 477 U.S. at 325; Byers v. Dall. Morning
News, Inc., 209 F.3d 419, 424 (5th Cir. 2000).
the movant has carried its burden, the nonmovant must
“respond to the motion for summary judgment by setting
forth particular facts indicating there is a genuine issue
for trial.” Byers, 209 F.3d at 424 (citing
Anderson, 477 U.S. at 248-49). A nonmovant must
present affirmative evidence to defeat a properly supported
motion for summary judgment. Anderson, 477 U.S. at
257. Mere denials of material facts, unsworn allegations, or
arguments and assertions in briefs or legal memoranda will
not suffice to carry this burden. Rather, the Court requires
“significant probative evidence” from the
nonmovant to dismiss a request for summary judgment. In
re Mun. Bond Reporting Antitrust Litig., 672 F.2d 436,
440 (5th Cir. 1982) (quoting Ferguson v. Nat'l Broad.
Co., 584 F.2d 111, 114 (5th Cir. 1978)). The Court must
consider all of the evidence but “refrain from making
any credibility determinations or weighing the
evidence.” Turner v. Baylor Richardson Med.
Ctr., 476 F.3d 337, 343 (5th Cir. 2007).
bring this qui tam action pursuant to the False
Claims Act. 31 U.S.C. § 3729(a)(1)(A)-(B). Defendant
moves the Court to enter summary judgment against Relators
under the FCA's public-disclosure bar. The
public-disclosure bar “applies ‘whenever qui
tam relators bring a suit based on publically available
information.'” United States ex rel. Colquitt
v. Abbott Labs., 858 F.3d 365, 373 (5th Cir. 2017)
(quoting United States ex rel. Jamison v. McKesson
Corp., 649 F.3d 322, 327 (5th Cir. 2011)). There is an
exception to the public-disclosure bar if the relator is the
original source of the information. Id. (citing 31
U.S.C. § 3730(e)(4)(A)). The Fifth Circuit has explained
the purpose of the public-disclosure bar and the
Together, the public disclosure bar and its original source
exception calibrate the incentives for individuals to bring
qui tam suits under the False Claims Act. When the
facts showing fraud are veiled, relators who discover them
should receive a reward for bringing claims. Even when the
facts are publicly disclosed, a relator who is an original
source may still bring something of value to the table and
thus deserves to benefit. In other cases, the government-for
whom the public disclosure bar is not an impediment to
suit-either has notice of the wrongdoing or gains nothing
from a relator with indirect knowledge of the same facts.
Allowing private individuals to sue in those situations would
provide an unnecessary windfall.
Id. (citing United States ex rel. Branch
Consultants v. Allstate Ins. Co., 560 F.3d 371, 376 (5th
Cir. 2009); United States ex rel. Springfield Terminal
Ry. Co. v. Quinn, 14 F.3d 645, 649-51 (D.C. Cir. 1994)).
in the Fifth Circuit ask three questions to determine whether
the public-disclosure bar applies: “(1) whether there
has been a ‘public disclosure' of allegations or
transactions, (2) whether the qui tam action is
‘based upon' such publicly disclosed allegations,
and (3) if so, whether the relator is the ‘original
source' of the information.” United States ex
rel. Reagan v. E. Tex. Med. Ctr. Reg'l Healthcare
Sys., 384 F.3d 168, 173 (5th Cir. 2004) (quotation
omitted). The Court is not required to rigidly follow the
three steps. Jamison, 649 F.3d at 327
(“[C]ombining the first two steps can be useful,
because it allows the scope of the relators' action in
step two to define the ‘allegations or
transactions' that must be publicly disclosed in step
one.”); see United States ex rel. Fried v.
W. Indep. Sch. Dist., 527 F.3d 439, 442 (5th Cir. 2008).
When determining if an action is barred by the
public-disclosure provision, the defendant bears the burden
to point to documents or transactions on which the
relator's complaint is based. See Id.
“[O]nce the opposing party has identified public
documents that could plausibly contain allegations or
transactions upon which the relator's action is based,
the relator bears the burden of demonstrating that they do
argues that the public-disclosure bar applies because: (1)
the allegations in the complaint are based on public
disclosures; and (2) none of the relators are original
sources (Dkt. #106). Relators disagree with Defendant on both
points (Dkt. #117). Because the Court finds that all Relators
are original sources, the Court need only address
Defendant's second argument.
All Relators Are Original Sources
Relators fall under the original-source exception to the
public-disclosure bar for their separate allegations of fraud
against Defendant. “Original source” is defined
For purposes of this paragraph, “original source”
means an individual who either (i) prior to a public
disclosure under subsection (e)(4)(a), has voluntarily
disclosed to the Government the information on which
allegations or transactions in a claim are based, or (2) who
has knowledge that is independent of and materially adds to
the publicly disclosed allegations or transactions, and who