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United States ex rel. Grubea v. Rosicki, Rosicki & Associates, P.C.,

United States District Court, S.D. New York

June 26, 2018

UNITED STATES OF AMERICA ex rel. PETER D. GRUBEA, Plaintiff,
v.
ROSICKI, ROSICKI & ASSOCIATES, P.C., PARAMOUNT LAND, INC., THRESHOLD LAND INC., ENTERPRISE PROCESS SERVICE, INC., MCCABE, WEISBERG, & CONWAY, P.C., ATTORNEY OUTSOURCING SUPPORT SERVICES, INC., REO AMERICA ABSTRACT, INC., CENLAR FSB, CITIGROUP, INC., CITIBANK, N.A., CITIMORTGAGE, INC., DITECH FINANCIAL LLC, EVERHOME MORTGAGE COMPANY, EVERBANK FSB, FLAGSTAR BANK, FSB, GREEN TREE CREDIT, JAMES B. NUTTER & CO., METLIFE BANK, N.A., NATIONSTAR MORTGAGE LLC, ONEWEST BANK FSB, PHH MORTGAGE CORPORATION, PNC BANK, FSB, SUNTRUST MORTGAGE, INC., U.S. BANK, N.A., and WELLS FARGO & CO., Defendants. UNITED STATES OF AMERICA, Plaintiff-Intervenor,
v.
ROSICKI, ROSICKI & ASSOCIATES, P.C., ENTERPRISE PROCESS SERVICE, INC., PARAMOUNT LAND, INC., Defendants. UNITED STATES OF AMERICA ex rel. PETER D. GRUBEA, Plaintiff,
v.
BANK OF AMERICA CORPORATION, BANK OF AMERICA, N.A., J.P. MORGAN CHASE & CO., and JPMORGAN CHASE BANK, N .A., Defendants.

          OPINION AND ORDER

          JED S. RAKOFF, U.S. D.J.

         On September 24, 2012, Peter D. Grubea ("Relator") filed a "qui tarn" action on behalf of the United States of America (the "Government") against Rosicki, Rosicki & Associates ("Rosicki"), Enterprise Process Service, Inc. ("Enterprise"), Paramount Land, Inc. ("Paramount"), Threshold Land, Inc. ("Threshold") (collectively, the "Rosicki Defendants") and various mortgage servicers (the "First Suit"). See Complaint, Dkt. 25. On February 28, 2013, Grubea filed a First Amended Complaint naming as additional defendants McCabe, Weisberg & Conway, P.C. ("McCabe"), Attorney Outsourcing Support Services, Inc. ("AOSS"), REO America Abstract, Inc. ("REO") (collectively, the "McCabe Defendants"), and certain additional mortgage services. See Dkt. 27.

         On March 5, 2013, Grubea filed suit against four mortgage servicers: HSBC Bank USA, N.A., HSBC Finance Corporation, HSBC Mortgage Corporation (USA), HSBC Mortgage Services, Inc. (collectively, "HSBC") (the "Second Suit"). See Complaint, Dkt. 22, No. 13 Civ. 1467. Thereafter, in 2014, HSBC admitted to liability and the Court entered judgment in the amount of $10 million. See Stipulation and Order of Settlement and Dismissal, Dkt. 151-1.

         On June 27, 2014, Grubea filed a Second Amended Complaint in the First Suit adding still more servicers as defendants. See Dkt. 28. On July 8, 2014, Grubea filed a First Amended Complaint in the Second Suit naming Bank of America Corporation, Bank of America, N.A. (collectively, "Bank of America"), and J. P. Morgan Chase & Co, and JPMorgan Chase Bank, N.A. (collectively, "JPMorgan Chase") as defendants. See Dkt. 23, No. 13 Civ. 1467.

         All of this remained under seal while the Government undertook its own inquiry in order to determine whether to intervene. However, in January of 2018, both suits were reassigned to this Judge, see Dkt. 19; Dkt. 20, No. 13 Civ. 1467, and the Court required the Government to make its election without further delay. On February 13, 2018, the Government elected to intervene in part and to decline intervention in part in the First Suit, see Government's Notice of Election to Intervene in Part and Decline Intervention in Part, Dkt. 33, and to decline any intervention in the Second Suit, see Notice of Election to Decline Intervention, Dkt. 31, No. 13 Civ. 1467.

         Accordingly, on March 27, 2018, the Government filed a three-count complaint against the Rosicki Defendants[1] for violations of the False Claims Act ("FCA"). See Complaint-in-Intervention ("CII"), Dkt. 22. On April 3, Relator filed a five-count Third Amended Complaint ("TAC") in the First Suit against the Rosicki Defendants, the McCabe Defendants, and all of the Servicer Defendants[2] except for JPMorgan Chase and Bank of America, see Dkt. 29, and a five-count Second Amended Complaint ("SAC") in the Second Suit against the remaining Servicer Defendants, JPMorgan Chase and Bank of America, see Dkt. 28, No. 13. Civ. 1467.

         The Servicer Defendants, the Rosicki Defendants, McCabe, and the McCabe Affiliates[3] now move to dismiss the three operative complaints. See Dkts. 123, 132, 135, and 137; Dkt. 56, No. 13 Civ. 1467; Memorandum of Law in Support of the Servicer Defendants' Motion to Dismiss the Complaint ("Servicer Mem."), Dkt. 124; Memorandum of Law in Support of the Rosicki Defendants' Motion to Dismiss ("Rosicki Mem."), Dkt. 134; Memorandum of Law in Support of Motion to Dismiss the Third Amended Complaint by Defendant, McCabe, Weisberg & Conway, P.C. ("McCabe Mem."), Dkt. 138; Memorandum of Law in Support of Attorney Outsourcing Support Services, Inc.'s and REO America Abstract, Inc.'s Motion to Dismiss Third Amended Complaint ("AOSS Mem."), Dkt. 136; Reply Memorandum of Law in Further Support of the Servicer Defendants' Motion to Dismiss the Complaint ("Servicer Reply"), Dkt. 158; Reply Memorandum of Law in Further Support of the Rosicki Defendants' Motion to Dismiss ("Rosicki Reply"), Dkt. 157; Reply in Support of Motion to Dismiss the Third Amended Complaint by Defendant, McCabe, Weisberg & Conway, P.C. ("McCabe Reply"), Dkt. 163; Reply Memorandum of Law in Support of Attorney Outsourcing Support Services, Inc.'s and REO America Abstract, Inc.'s Motion to Dismiss Third Amended Complaint ("AOSS Reply"), Dkt. 162.[4]

         Grubea and the Government oppose. See Memorandum of Law of Plaintiff-Intervenor United States of America in Opposition to the Rosicki Defendants' Motion to Dismiss ("Gov't Mem."), Dkt. 149; Memorandum of Law in Opposition to Defendants' Motions to Dismiss ("Relator Mem."), Dkt. 150; Sur-Reply Memorandum of Law of Plaintiff-Intervenor United States of America in Further Opposition to the Rosicki Defendants' Motion to Dismiss ("Gov't Reply"), Dkt. 167; Relator's Sur-Reply ("Relator Reply"), Dkt. 168.

         Following this extensive briefing, the Court heard oral argument on May 25, 2018. See Transcript dated May 25, 2018 ("Tr."), Dkt. 176. Now, after careful consideration, the Court hereby dismisses with prejudice the claims against the Servicer Defendants; dismisses the claims against McCabe and the McCabe Affiliates without prejudice to Relator amending his complaint to detail further specific examples of McCabe and its Affiliates' allegedly fraudulent conduct; and otherwise denies the motions (in particular, denying the motion to dismiss of the Rosicki Defendants).

         The pertinent allegations, as set forth in the operative complaints, [5] are as follows:

         Grubea is an experienced consumer bankruptcy attorney residing in Erie County, New York. See TAC ¶ 18. Rosicki is a New York professional corporation specializing in mortgage law, with offices in Plainview, Batavia, and Fishkill, New York. Id. ¶ 19. Threshold is a New York business corporation, incorporated on May 30, 2003, and dissolved on July 11, 2011, with its principal office in Plainview, New York. Id. ¶ 21. Paramount is the successor-in-interest to Threshold and a New York business corporation, with its principal office in Plainview, New York. Id. ¶¶ 20-21. Enterprise is a New York business corporation, with its principal office in Plainview, New York. Id. ¶ 22.

         McCabe is a New York professional corporation with locations in New York and Pennsylvania. Id. ¶ 23. AOSS is a Pennsylvania corporation with its principal office in Philadelphia, Pennsylvania. Id. ¶ 24. REO is a Pennsylvania corporation with its principal office in Philadelphia, Pennsylvania. Id. ¶ 25.

         Cenlar FSB ("Cenlar") is a federal savings bank, with its principal office in Trenton, New Jersey. Id. ¶ 26. Citigroup, Inc. is a Delaware corporation, with its principal office in New York; Citibank, N.A. is a subsidiary of Citigroup; and CitiMortgage, Inc. is a New York corporation and a subsidiary of Citigroup (collectively, "Citi"). Id. ¶ 27. EverHome Mortgage Company is a Florida corporation, with its principal office in Jacksonville, Florida and EverBank FSB is a federal savings bank, with its principal office in Jacksonville, Florida. Id. ¶ 28. Flagstar Bank, FSB ("Flagstar") is a federal savings bank, with its principal office in Troy, Michigan. Id. ¶ 29. Green Tree Credit ("Green Tree") is a Delaware limited liability company, with its principal office in St. Paul, Minnesota. Id. ¶ 30. James B. Nutter & Co. ("Nutter") is a Missouri corporation, with its principal office in Kansas City, Missouri. IcL ¶ 31. MetLife Bank, N.A. ("MetLife") is a national banking association, with its principal office in Morristown, New Jersey. Id. ¶ 32. Nationstar Mortgage LLC ("Nationstar") is a Delaware limited liability company, with its principal office in Dallas, Texas. Id. ¶ 33. OneWest Bank FSB ("OneWest") is a federal savings bank, with its principal office in Pasadena, California. Id. ¶ 34. PHH Mortgage Corporation ("PHH") is a New Jersey business corporation, with its principal office in Mount Laurel, New Jersey. Id. ¶ 35. PNC Bank, FSB ("PNC") is a federal savings bank, with its principal office in Pittsburgh, Pennsylvania. Id. ¶ 36. SunTrust Mortgage, Inc. ("SunTrust") is a Virginia business corporation, with its principal office in Richmond, Virginia. Id. ¶ 37. U.S. Bank, N.A., ("U.S. Bank") is a national banking association, with its principal office in Minneapolis, Minnesota. Id. ¶ 38. Wells Fargo & Co. ("Wells Fargo") is a Delaware corporation, with its principal office in San Francisco, California. Id. ¶ 39.

         Bank of America Corporation is a Delaware corporation headquartered in Charlotte, North Carolina; Bank of America, N.A. is a national banking association and subsidiary of Bank of America Corporation, with a principal place of business in Charlotte, North Carolina. See SAC ¶ 20. J.P. Morgan Chase & Co. is a Delaware corporation headquartered in New York, New York, and JPMorgan Chase Bank, N.A. is a national banking association with a principal place of business in Columbus, Ohio (collectively, "JPMorgan Chase") . Id. ¶ 22.

         The Federal Housing Administration ("FHA") is a division of the United States Department of Housing and Urban Development ("HUD") that insures approved lenders against losses on mortgage loans, including losses incurred in foreclosure proceedings. See TAC ¶¶ 1, 5. The Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") are government-sponsored enterprises ("GSEs"), chartered by Congress to help lenders originate single-family mortgages by purchasing and guaranteeing mortgage loans and by issuing mortgage debt securities, Id. ¶¶ 44, 72. Since 2008, the GSEs have been under U.S. Government conservatorship. CII ¶¶ 13-14. Between 2008 and 2012, the GSEs received nearly $200 billion in federal funding. See TAC ¶ 1. During that time, the GSEs paid quarterly dividends to the U.S. Treasury equal to 10% of the total amount of federal funds received. Thereafter, the GSEs paid the U.S. Treasury quarterly amounts equal to their net worth less a $3 billion capital reserve. See Id. ¶¶ 50, 76.

         In the ordinary course of conducting their affairs, FHA and the GSEs pay financial institutions called "servicers" to "service" mortgages they own or insure by, for example, collecting payments from borrowers, pursuing delinquent loans, and prosecuting foreclosures. Id. ¶ 4. In their contracts with servicers, the GSEs and FHA agree to reimburse various costs and expenses related to foreclosure actions. The servicers, in turn, typically contract with law firms to prosecute these actions. Id. ¶ 6. The GSEs and FHA agree to pay these attorneys a flat fee for their legal work. Separately, the GSEs and FHA reimburse so-called "default-related legal expenses," which typically include title searches, service of process, and publication and posting costs. Id. Any overhead related to these activities, however, must be included in legal fees and not as expenses.

         FHA and the GSEs permit reimbursement only of those default-related legal expenses that are actual, reasonable, and necessary. The FHA, for example, requires that its servicers certify that "with the submission of each loan for insurance or request for insurance benefits, the applicant has and will comply with the requirements of the Secretary of Housing and Urban Development ["HUD"], which include, but are not limited to . . . HUD's regulations, FHA handbooks, mortgagee letters, and Title I letters and policies." Id. ¶ 98 (quotations omitted). To maintain FHA approval, a servicer must submit an annual certification that states, inter alia, "I know or am in the position to know, whether the operations of the above named mortgagee to conform to HUD-FHA regulations, handbook, and policies," and certifies to conformance with the same. Id. ¶ 99. Among other things, HUD and the FHA require servicers to have in place a quality control plan, see id. ¶¶ 101-103, to review all claims for insurance benefits, Id. ¶ 104, and to ensure that unallowable foreclosure processing fees are not included in insurance claims, Id. ¶ 105.

         Servicers must further ensure that their "contractors" and "agents" complied with certain specific FHA requirements. Id. ¶ 106 (quoting HUD Handbook 4060.1, 7-3). Among these is the requirement that, in the event a borrower defaults on an FHA-insured mortgage and the servicer prosecutes a foreclosure on the mortgage, "fees and costs that exceed reasonable and customary-fees for the area" are not to be submitted for reimbursement. Id. ¶ 110. Also unallowable are costs "not necessarily incurred or required because of dilatory service," and costs that are "overhead items such as postage, telephone, or duplicating or collection services, all of which should be included in the attorney's or trustee's fees." Id. HUD rules expressly prohibit banks from listing any unallowable costs on any application for insurance benefits as either fees or costs. Id. ¶ 111. HUD rules further require banks to "promptly reimburse HUD for any amount overpaid [by HUD] because of incorrect, unsupported or inappropriate information" provided by the servicers or their agents. Id. ¶ 112 (quoting HUD Handbook 4330.4, 1-28).

         Fannie Mae likewise requires its servicers to retain competent, diligent legal counsel and to "make every effort to reduce default-related foreclosure expenses." Id. ¶ 62 (quoting Fannie Mae Servicing Guide E5-07 (Dec. 13, 2017)). Among other things, Fannie Mae servicers "must attempt to minimize the costs incurred from vendors utilized by law firms - such as auctioneers, process servers, title companies, posting companies, and newspapers or other publications - by ensuring that all costs are actual, reasonable, and necessary." Id.; see also Id. ¶ 64 ("Fannie Mae will reimburse the servicer [for out-of-pocket costs that it pays to third-party vendors of the courts], as long as the costs are actual, reasonable and necessary"). Further, Fannie Mae servicers and law firms must "regularly examine the pricing offered by alternative vendors and negotiate for the best value from the vendor and other qualified service providers." Id. ¶ 62. Where attorneys have an economic interest in other companies involved in the foreclosure process, Fannie Mae requires that such relationships be disclosed and that "any fees or expenses for such services" not "exceed the customary and reasonable fees for comparable services in" the jurisdiction. Id. ¶ 63 (quoting the Fannie Mae Servicing Guide, Part VIII, § 106.03 (Mar. 14, 2012)). Fannie Mae further prohibits reimbursement of costs that are unnecessary or costs that are not reasonable, see Id. ¶¶ 65-66, and requires that servicers monitor fees and expenses and reimburse Fannie Mae for "any unreasonable or excessive fees or costs," Id. ¶ 63; id. ¶ 71.

         Freddie Mac imposes requirements akin to those just discussed. For example, Freddie Mac requires that its servicers submit annual eligibility certifications attesting to compliance with Freddie Mac requirements, Id. ¶ 88, including the requirement that servicers manage the foreclosure process "in a cost-effective, expeditious, and efficient manner," Id. ¶ 89, "create and implement a quality control program" to ensure the same, Id. ¶ 90, and impose "policies and procedures reasonably designed to ensure that firms handling Freddie Mac Default Matters are in compliance with [] tile applicable provisions of the Guide, and applicable law," Id. ¶ 93. Freddie Mac also requires that servicers require law firms to "disclose the identity of, and relationship with any entities the firm relies upon to provide third-party support functions performed on the Servicer's behalf, including, but not limited to, title searches, title insurance, posting, publication, and process services." Id. ¶ 92. Servicers must also require firms to disclose whether they have "a process to select and regularly review costs and performance of vendors of related sources to ensure competitive pricing and high quality." Id. Freddie Mac permits reimbursement only of those costs that are "reasonable and comparable to those customarily charged in the area where the property is located." Id. ¶ 94; see also Id. ("Servicers must ensure that attorney fees and costs incurred are reasonable and comparable to those charged in the area where the property is located.") (quoting Freddie Mac Single-Family Seller/Servicer Guide Bulletin No. 2013-6 (Apr. 15, 2013)).

         Against this background, Cenlar, Citi, Everbank, Flagstar, Green Tree, Nutter, MetLife, Nationstar, OneWest, PHH, PNC, SunTrust, U.S. Bank, Wells Fargo, Bank of America, and JPMorgan Chase overcharged Fannie Mae, Freddie Mac, and the FHA hundreds of millions of dollars. See TAC ¶¶ 1-3, 11. Specifically, these servicers submitted claims for reimbursement of foreclosure expenses without regard to how unnecessary or unreasonable the expenses were.

         Rosicki and McCabe are law firms. To handle title searches, service of process, and the arrangement of publication of legal notices, Rosicki created Threshold, Paramount, and Enterprise and McCabe created AOSS and REO. Id. ¶¶ 114, 122, 139. These affiliates, it is alleged, were designed to generate invoices for unnecessary services and charge excessive rates. See Id. The affiliates passed these costs on to the law firms, the law firms passed them on to the servicers, and, upon information and belief, the servicers passed them on to the Government. Id.

         Rosicki, for example, controls Enterprise - a service-of-process affiliate. See CII ¶ 54. Rather than actually serve process, however, Enterprise allegedly hired third-party vendors to serve process. Id. ¶ 70. These vendors charged Enterprise approximately $15-25 for each individual served. Id. ¶ 71. Enterprise then generated invoices for service of process charging between $75 and $125. Id. ¶ 72. These invoices exceeded competitive market rates. Id. ¶ 73. Enterprise charged these amounts to Rosicki, which charged them to the Servicers. Enterprise also regularly billed for unnecessary expenses including service upon the New York State Department of Taxation and Finance despite the absence of any tax lien; service upon judgment debtors with names similar to the foreclosure defendant even though the relevant names were irreconcilable; ineffective and worthless service upon "John Doe" defendants; and services that were part of law firm overhead expenses such as court filings. See TAC ¶ 124. Similarly, Rosicki used Paramount to conduct title searches. Rather than do the work itself, however, Paramount engaged third-party abstractors at market rates to provide title documents and marked up their bills substantially (e.g. to $495 where market rates were between $100 and $250) before submitting them to Rosicki and the Servicers. See Id. ¶ 131; CII ¶¶ 79-82.

         McCabe also used affiliates - AOSS and REO - to conduct title searches and serve process. See TAC ¶¶ 139-40. AOSS and REO billed McCabe and ultimately the FHA and the GSEs at excessive rates including at more than $450 for title searches despite market rates between $100 and $250, and for personal service at more than $200 despite market rates of approximately $20 to $40. Id. ¶ 141. Like Paramount and Enterprise, AOSS and REO often contracted with other entities to conduct the actual work and marked up the bills before seeking reimbursement from McCabe and thereafter from the Servicers. Although McCabe could have contracted with these entities directly, McCabe chose instead to contract with its affiliates in order to mark up the bills and generate profits. Id. ¶ 145.

         Upon information and belief, the Servicer Defendants submitted these false claims to the GSEs and FHA in order to save resources that they would otherwise have had to expend on compliance, quality control, and efforts to negotiate better prices. Id. ¶ 11. If the Servicers had monitored and refused to pay unreasonable and unnecessary fees, Relator posits, neither Rosicki's affiliates, McCabe's affiliates, or the other vendors mentioned in the complaints would have been able to continue billing for unnecessary and unreasonable foreclosure expenses. Id. ¶ 118. The Servicers Defendants perpetuated this scheme over many years by falsely certifying to the GSEs and to the FHA that their claims were accurate and that they were in compliance with their contractual commitments to monitor foreclosure costs. Id. ¶ 120. To this day, upon information and belief, the Servicer Defendants have improperly retained the overpayments. Id. ¶¶ 3, 12. And they have done so despite contractual obligations to refund the GSEs and FHA and despite red flags including knowledge that the Justice Department was investigating the overpayments. Id. ¶ 486.

         The operative complaints include over sixty specific examples of foreclosure actions in which Rosicki, McCabe, and other law firms charged unreasonable or unnecessary expenses, which the Servicer Defendants, upon information and belief, submitted for reimbursement to FHA, Fannie Mae, and Freddie Mac. See Id. ¶¶ 170-474; SAC ¶¶ 163-332; CII ¶¶ 87-123. In one instance, Rosicki foreclosed on a property on Lake Street in Angola, New York. Id. ¶ 87. Rosicki contracted with Enterprise to effect service of process on the two named foreclosure defendants. Id. ¶ 88. Enterprise, however, did not serve the process; instead it contracted with a third-party to do so. Id. The third-party process server charged $20 for one of the named defendants, $10 for the other, and $33.50 for four Doe defendants. Id. ¶ 89. Enterprise then charged Rosicki $50 for attempted service on each named defendant, $125 for service on each named defendant, and $300 for the four Doe defendants. Id. ¶ 90. Thus, while service of process actually cost $63.50, Fannie Mae ultimately paid $650. Id. ¶¶ 89-90. Rosicki also contracted with Paramount to perform a title search for the Lake Street property. Rather than do the work itself, Paramount engaged a third-party vendor. Thereafter, Paramount submitted a bill for $275, the maximum amount allowed by Fannie Mae, as well as a $35 document retrieval fee. Id. ¶ 91.

         In another instance, Flagstar foreclosed on a Fannie Mae mortgage secured by a property on East 45th Street in Brooklyn, New York. See TAC ¶ 206. Flagstar engaged Rosicki to handle the legal proceedings. Id. ¶ 207. Rosicki contracted with Enterprise to bill for service of process. Id. ¶ 208. Enterprise invoiced Rosicki approximately $125 per defendant for each of the defendants at the property, well above market rates of $20-$40 per person, which, upon information and belief, Enterprise itself paid to a third-party process server who actually performed the work. Id. ¶ 209. Similarly, Paramount billed $495 for title searches related to that property, well above the market rate of between $100 and $250, which, upon information and belief, is what Paramount paid to the third-party company that actually conducted the title search. Id. ¶ 211.

         Grubea discovered defendants' fraudulent scheme in the course of his bankruptcy practice when he noticed a pattern of foreclosure-related proofs-of-claims presenting unreasonable costs. Id. ¶ 489. Frequently, when he challenged servicers on these costs in his clients' bankruptcy proceedings, the servicers or their agents, the law firms, reduced the claim amounts. Id. Thereafter, Grubea conducted additional market research, id., and obtained direct and independent knowledge of the schemes through communications with lawyers from foreclosure law firms, Id. ¶ 490, including a partner at Steven J. Baum, P.C., formerly the largest foreclosure firm in New York, lawyers at Rosicki, and lawyers at other firms around the country that use affiliate vendors, Id. ¶ 491. Among other things, Grubea learned that the Servicer Defendants paid these inflated and unnecessary foreclosure expenses without making any real effort to obtain the best value or to exercise quality control over fees and costs. Id. ¶ 492. Prior to Grubea's disclosures to the Government, see Id. ¶ 493, no one had previously identified these mass overbillings, Id. ¶ 494.

         In connection with these allegations, Relator asserts that the McCabe Defendants and the Servicer Defendants submitted false claims to Fannie Mae, Freddie Mac, and FHA in violation of 31 U.S.C. § 3729(a)(1)(A) ("False Claims"), made false statements to Fannie Mae, Freddie Mac, and FHA in violation of 31 U.S.C. § 3729(a)(1)(B) ("False Statements"), and submitted false claims to Fannie Mae and Freddie Mac, which caused Fannie Mae and Freddie Mac to pay the United States less than what the United States would have otherwise been entitled to receive in violation of 31 U.S.C. § 3729(a) (1) (G) ("Reverse False Claims") . See TAC ¶¶ 495-502, 511-513; SAC ¶¶ 353-360, 364-366. Relator also asserts that the McCabe Defendants conspired to submit false claims and make false statements to Fannie Mae, Freddie Mac, and FHA in violation of 31 U.S.C. § 3729(a)(1)(C) ("False Claims Conspiracy"), see TAC ¶¶ 503-507, and that the Servicer Defendants used or caused to be made false records or statements material to an obligation to pay or transmit money to the United States or knowingly concealed, avoided, or decreased an obligation to pay or transmit money to the United States in violation of 31 U.S.C. § 3729(a)(1)(G) ("Reverse False Claims"), see Id. ¶¶ 508-510; SAC ¶¶ 361-363.

         The Government, intervening in part, asserts that the Rosicki Defendants submitted: (1) false claims to Fannie Mae in violation of 31 U.S.C. § 3729(a) (1) (A) ("False Claims"), (2) false statements to Fannie Mae in violation of 31 U.S.C. § 3729(a)(1)(B) ("False Statements"), and (3) false claims to Fannie Mae, which caused Fannie Mae to pay the United States less than what the United States would have otherwise been entitled to receive in violation of 31 U.S.C. § 3729(a)(1)(G) ("Reverse False Claims"). See CII ¶¶ 128-146. Relator also asserts False Claims, False Statements, Reverse False Claims, and False Claims Conspiracy counts against the Rosicki Defendants with respect to Freddie Mac and FHA.

         As mentioned, defendants move, pursuant to Rule 12(b)(6) and Rule 9(b), to dismiss the above-mentioned claims. To survive a Rule 12(b)(6) motion, a complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007) . A claim is plausible if it is supported by "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In analyzing a complaint, the court "accept[s] all factual allegations as true and draw[s] all reasonable inferences in favor of the plaintiff." Trs. of Upstate N.Y. Eng'rs Pension Fund v. Ivy Asset Mgmt., 843 F.3d 561, 566 (2d Cir. 2016).

         As the FCA is an antifraud statute, FCA claims must also satisfy Rule 9(b) of the Federal Rules of Civil Procedure. See U.S. ex rel. Ladas v. Exelis, Inc., 824 F.3d 16, 26 (2d Cir. 2017) . Rule 9(b) requires a plaintiff to "state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). "[T]he adequacy of particularized allegations under Rule 9(b) is case- and context-specific." U.S. ex rel. Chorches v. Am. Med. Response, 865 F.3d 71, 81 (2d Cir. 2017).[6] "Ultimately, whether a complaint satisfies Rule 9(b) depends upon the nature of the case, the complexity or simplicity of the transaction or occurrence, the relationship of the parties and the determination of how much circumstantial detail is necessary to give notice to the adverse party and enable him to prepare a responsive pleading." United States v. TEVA Pharms. USA, Inc., 13-CV-3702, 2016 WL 750720, at *15 (S.D.N.Y. Feb. 22, 2016).

         I. THE SERVICER DEFENDANTS

         The Servicer Defendants argue that Grubea's claims fail because, inter alia, the operative complaints do not adequately allege scienter. See Servicer Mem. at 26-28, 31-32.

         To state a False Claims or False Statements claim under the FCA, Grubea must plausibly allege, inter alia, that the Servicer Defendants "knowingly" presented or caused to be presented false or fraudulent claims. 31 U.S.C. § 3729(a) . To state a Reverse False Claims claim under the FCA, Grubea must plausibly allege, inter alia, that the Servicer Defendants "knowingly" concealed or "knowingly" and improperly avoided or decreased an obligation to reimburse the Government. Id. § 3729(a)(1)(G).

         The FCA defines "knowingly" to include a person who acts recklessly. See Id. § 3729(b)(1)(A). Recklessness entails conduct that is "highly unreasonable and which represents an extreme departure from the standards of ordinary care." Chill v. Gen. Elec. Co., 101 F.3d 263, 269 (2d Cir. 1996). See also S. Rep. No. 96-615, at 5 (1980) (recklessness "encompass[es] the person who seeks payment from the Government without regard to his eligibility and with indifference to its requirements").

         The FCA's scienter requirement is "rigorous," Universal Health Servs., Inc. v. United States ("Escobar"), 136 S.Ct. 1989, 2002 (2016), because, "under Rule 9(b), the proponent of an FCA claim must allege facts that give rise to a strong inference of fraudulent intent," United States ex rel. Tessler v. City of New York, 14-cv-6455, 2016 WL 7335654, at *5 (S.D.N.Y. Dec. 16, 2016), aff'd, 712 Fed.Appx. 27 (2d Cir. 2017); see also O'Brien v. Nat'l Prop. Analysts Partners, 936 F.2d 674, 676 (2d Cir. 1991). Conclusory allegations that defendants "'knew or were reckless in not knowing' ... do not satisfy the requirements of Rule 9(b)." Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1129 (2d Cir. 1994).

         Here Grubea alleges "upon information and belief" that the Servicer Defendants: "failed to 'make every effort' to reduce default-related legal expenses" as required by Fannie Mae, TAC ¶ 149; "did not exercise quality control over foreclosure expenses," Id. ¶ 151; and "submitted false claims without undertaking any process to assess whether foreclosure expenses were reasonable or necessary," Id. ¶ 153.[7] But when at oral argument on the instant motions, the Court inquired into the "information" that supported these "beliefs," Grubea's counsel specified only that Grubea had had conversations with people at various law firms. See Tr. at 41 (Buchdahl) ("the information primarily is that our Relator heard and saw directly evidence of inflated charges of these various foreclosure expenses" and had conversations with "people at the law firms involved in these foreclosures"). Although counsel also alleged at oral argument that Grubea had raised the issue of inflated charges with more than one Servicer Defendant, his counsel failed to name even one or to provide the particulars of any such conversation. See Id. at 43. Moreover, these alleged conversations seem to have ...


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