D.E. 126-DEFENDANTS' MEMORANDUM IN SUPPORT OF THEIR OPPOSITION TO RELATOR'S MOTION FOR LEAVE TO FILE THIRD AMENDED COMPLAINT, Apr. 27, 2018

Case 1:14-cv-01047-RMC Document 126 Filed 04/27/18 Page 1 of 46
UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA
)
UNITED STATES OF AMERICA, et al., )
ex rel. LAURENCE SCHNEIDER, ) Case No. 1:14-cv-01047-RMC
)
Plaintiff-Relator, ) Judge Rosemary M. Collyer
)
v. )
)
J.P. MORGAN CHASE BANK, N.A., )
et al., )
)
Defendants. )
)
DEFENDANTS’ MEMORANDUM IN SUPPORT OF THEIR OPPOSITION TO

RELATOR’S MOTION FOR LEAVE TO FILE THIRD AMENDED COMPLAINT
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ......................................................................................................... iii
INTRODUCTION .......................................................................................................................... 1
BACKGROUND ............................................................................................................................ 3
A. Chase’s RCV1 System of Record ........................................................................... 3
B. The Home Affordable Modification Program ........................................................ 4
C. Procedural History .................................................................................................. 6
D. The Proposed Third Amended Complaint .............................................................. 8
LEGAL STANDARD..................................................................................................................... 9
ARGUMENT ................................................................................................................................ 10
I. THE PROPOSED HAMP CLAIMS FAIL AS A MATTER OF LAW. .......................... 10
A. Schneider fails to plead that Chase’s alleged conduct was “material” to the
government’s payment decision. .......................................................................... 11
B. Schneider has not adequately alleged that Chase’s compliance

certifications were false. ....................................................................................... 18
C. Schneider has not adequately alleged scienter. ..................................................... 22
D. Schneider has not adequately alleged that the government was damaged............ 27
II. THE PROPOSED SERVICING VIOLATION CLAIMS FAIL AS A MATTER

OF LAW. .......................................................................................................................... 29
III. SCHNEIDER’S REMAINING ALLEGATIONS CANNOT RESUSCITATE HIS

CLAIMS. .......................................................................................................................... 34
IV. CLAIMS BASED UPON PRE-FEBRUARY 9, 2012 CONDUCT FAIL AS A

MATTER OF LAW. ......................................................................................................... 36
CONCLUSION ............................................................................................................................. 38
ii
TABLE OF AUTHORITIES
Page(s)
Cases
Abhe & Svoboda, Inc. v. Chao,

508 F.3d 1052 (D.C. Cir. 2007) ...............................................................................................14
Argentine Republic v. Nat’l Grid Plc,

637 F.3d 365 (D.C. Cir. 2011) .................................................................................................38
Boster v. Reliance Standard Life Ins. Co.,

959 F. Supp. 2d 9 (D.D.C. 2013) .........................................................................................9, 38
Campbell-El v. Dist. of Columbia,

881 F. Supp. 42 (D.D.C. 1995) ................................................................................................38
Cannon v. Dist. of Columbia,

10 F. Supp. 3d 30 (D.D.C. 2014) .............................................................................................35
City of Chicago v. Purdue Pharma L.P.,

211 F. Supp. 3d 1058 (N.D. Ill. 2016) .....................................................................................15
Coleman v. Pension Ben. Guar. Corp.,

196 F.R.D. 193 (D.D.C. 2000).................................................................................................38
Collier v. Dist. of Columbia,

46 F. Supp. 3d 6 (D.D.C. 2014) ...............................................................................................37
Confederate Mem’l Ass’n, Inc. v. Hines,

995 F.2d 295 (D.C. Cir. 1993) ...................................................................................................9
Coyne v. Amgen, Inc.,

2017 WL 6459267 (2d Cir. Dec. 18, 2017) .............................................................................14
D’Agostino v. ev3, Inc.,

845 F.3d 1 (1st Cir. 2016) ........................................................................................................14
Firestone v. Firestone,
76 F.3d 1205 (D.C. Cir. 1996) .................................................................................................18
Fox v. Dist. of Columbia,

851 F. Supp. 2d 20 (D.D.C. 2012) .............................................................................................9
Greggs v. Autism Speaks, Inc.,

987 F. Supp. 2d 51 (D.D.C. 2014) ...........................................................................................35
* Authorities upon which we chiefly rely are marked with asterisks.
iii
Indep. Petroleum Ass’n of Am. v. Babbitt,

235 F.3d 588 (D.C. Cir. 2001) ...........................................................................................34, 35
Kim v. United States,

707 F.3d 335 (D.C. Cir. 2013) .................................................................................................38
Knudsen v. Sprint Commc’n Co.,

2016 WL 4548924 (N.D. Cal. Sept. 1, 2016) ..........................................................................15
Payne v. Dist. of Columbia,

773 F. Supp. 2d 89 (D.D.C. 2011) .............................................................................................9
Role Models Am., Inc. v. Geren,

514 F.3d 1308 (D.C. Cir. 2008) ...............................................................................................35
Safeco Ins. Co. of Am. v. Burr,

551 U.S. 47 (2007) ...................................................................................................................23
U.S. ex rel. Becker v. Westinghouse Savannah River Co.,

305 F.3d 284 (4th Cir. 2002) ...................................................................................................26
U.S. ex rel. Bettis v. Odebrecht Contractors of Cal., Inc.,

297 F. Supp. 2d 272 (D.D.C. 2004) .........................................................................................26
U.S. ex rel. Burke v. Record Press, Inc.,

816 F.3d 878 (D.C. Cir. 2016) .................................................................................................26
*U.S. ex rel. Davis v. Dist. of Columbia,

679 F.3d 832 (D.C. Cir. 2012) ...........................................................................................28, 29
U.S. ex rel. Davis v. Dist. of Columbia,

793 F.3d 120 (D.C. Cir. 2015) ...........................................................................................10, 29
U.S. ex rel. Dress v. Qualium Corp.,

2016 WL 3880763 (N.D. Cal. July 18, 2016) ..........................................................................15
U.S. ex rel. Gage v. Davis S.R. Aviation, LLC,

623 F. App’x 622 (5th Cir. 2015) ............................................................................................30
U.S. ex rel. Greenfield v. Medco Health Sols., Inc.,

880 F.3d 89 (3d Cir. 2018).......................................................................................................33
U.S. ex rel. Hanna v. City of Chicago,

834 F.3d 775 (7th Cir. 2016) ...................................................................................................30
U.S. ex rel. Keaveney v. SRA Int’l, Inc.,

219 F. Supp. 3d 129 (D.D.C. 2016) .........................................................................................31
iv
U.S. ex. rel. Kelly v. Novartis Pharm. Corp.,

827 F.3d 5 (1st Cir. 2016) ........................................................................................................32
U.S. ex rel. Kietzman v. Bethany Circle of King’s Daughters,

2018 WL 1566814 (S.D. Ind. Mar. 30, 2018)..........................................................................30
U.S. ex rel. Kolchinsky v. Moody’s Corp.,

238 F. Supp. 3d 550 (S.D.N.Y. 2017)................................................................................13, 33
U.S. ex rel. Lemmon v. Envirocare of Utah, Inc.,

614 F.3d 1163 (10th Cir. 2010) ...............................................................................................12
*U.S. ex rel. McBride v. Halliburton Co.,

848 F.3d 1027 (D.C. Cir. 2017) .............................................................................12, 13, 16, 17
U.S. ex rel. McGrath v. Microsemi Corp.,

690 F. App’x 551 (9th Cir. 2017) ............................................................................................24
U.S. ex rel. Nargol v. DePuy Orthopaedics, Inc.,

865 F.3d 29 (1st Cir. 2017) ......................................................................................................17
U.S. ex rel. Petratos v. Genentech Inc.,

855 F.3d 481 (3d Cir. 2017)...............................................................................................14, 15
*U.S. ex rel. Purcell v. MWI Corp.,

807 F.3d 281 (D.C. Cir. 2015) .....................................................................................23, 25, 26
U.S. ex rel. Schimelpfenig v. Dr. Reddy’s Labs. Ltd.,

2017 WL 1133956 (E.D. Pa. Mar. 27, 2017) ...........................................................................15
U.S. ex rel. Schneider v. JPMorgan Chase Bank, Nat’l Ass’n,

878 F.3d 309 (D.C. Cir. 2017) .................................................................................8, 27, 35, 36
U.S. ex rel. Siewick v. Jamieson Sci. & Eng’g, Inc.,

214 F.3d 1372 (D.C. Cir. 2000) ...............................................................................................24
U.S. ex rel. Thomas v. Lockheed Martin Aeroparts, Inc.,

2016 WL 47882 (W.D. Pa. Jan. 4, 2016) .................................................................................30
U.S. ex rel. Williams v. Martin-Baker Aircraft Co., Ltd.,

389 F.3d 1251 (D.C. Cir. 2004) ...............................................................................................10
U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc.,

525 F.3d 370 (4th Cir. 2008) ...................................................................................................24
*U.S. v. Comstor Corp.,

2018 WL 1567620 (D.D.C. Mar. 31, 2018)..................................................................... passim
v
*United States v. Sci. Applications Int’l Corp.,

626 F.3d 1257 (D.C. Cir. 2010) ....................................................................................... passim
*Universal Health Servs., Inc. v. U.S. ex rel. Escobar,

136 S. Ct. 1989 (2016) ..................................................................................................... passim
Wyatt v. Syrian Arab Republic,

398 F. Supp. 2d 131 (D.D.C. 2005) .........................................................................................38
Statutes
12 U.S.C. § 2602(1) .......................................................................................................................31
15 U.S.C. § 1639a ..........................................................................................................................17
31 U.S.C. § 3729(a)(1).............................................................................................................10, 22
Other Authorities
12 C.F.R. § 1024 ............................................................................................................................32
12 C.F.R. § 1026 ............................................................................................................................32
Black’s Law Dictionary (10th ed. 2014)..........................................................................................6
Fed. R. Civ. P. 8 ...................................................................................................................3, 19, 37
Fed. R. Civ. P. 12 ...............................................................................................................31, 37, 38
Fed. R. Civ. P. 15(a)(2) ....................................................................................................................9
Fed. R. Civ. P. 9(b) ................................................................................................................ passim
vi
Defendant JPMorgan Chase Bank, N.A., individually and as successor by merger to
Chase Home Finance LLC, and Defendant JPMorgan Chase & Co. (collectively, “Chase”),
respectfully submit this memorandum in opposition to Relator Laurence Schneider’s Motion for
Leave To File Third Amended Complaint.
INTRODUCTION
Relator Laurence Schneider filed this False Claims Act case against Chase nearly five
years ago, in May 2013. After he twice amended the complaint, this Court granted Chase’s
motion to dismiss, and the D.C. Circuit affirmed, remanding only Schneider’s Home Affordable
Modification Program (“HAMP”) claims for further proceedings. Schneider now seeks to
amend his complaint yet again. For the reasons set forth below, Schneider’s motion should be
denied as futile.
The proposed Third Amended Complaint centers on a group of non-performing mortgage
loans that reside on Chase’s Recovery One (“RCV1”) system of record. As in his prior
complaints, Schneider alleges that Chase made false statements to the government regarding
these loans in order to obtain payments under HAMP. HAMP is a foreclosure relief program
under which the government pays incentives to mortgage servicers in exchange for modifying
first-lien mortgage loans. With certain exceptions, HAMP rules require participating servicers to
solicit all eligible first-lien borrowers to apply for loan modifications. Schneider alleges that
Chase violated this requirement by failing to solicit RCV1 borrowers, but nevertheless certified it
had complied with HAMP program rules. According to Schneider, these “false” certifications
violated the False Claims Act.
This Court previously dismissed Schneider’s HAMP claims because the Second
Amended Complaint failed to allege that Chase’s certifications of compliance were false. Under
applicable Treasury Department rules, Chase was required to disclose in its certifications only
“instances of noncompliance” that Chase believed had “a material effect on its ability to comply
with [HAMP] program requirements.” Dkt. 118 at 6, 18 (emphasis added). The Court therefore
reasoned that Chase’s certifications could be false only “if Chase’s nonsolicitation of [RCV1]
loans for HAMP modification had a material effect on Chase’s ‘ability to comply’” with HAMP.
Id. (emphasis added). Concluding that the Second Amended Complaint made “no such
allegations,” the Court dismissed that complaint, and the Court’s ruling was affirmed by the D.C.
Circuit.
Schneider’s Third Amended Complaint fails to correct the defect that this Court and the
D.C. Circuit identified. The proposed Third Amended Complaint once again fails to allege that a
significant number of RCV1 borrowers even would have been eligible for loan modifications
under HAMP. Only first-lien mortgage loans are eligible for HAMP, yet, as Schneider concedes,
the vast majority of the loans in RCV1 either were never first-lien mortgages or ceased to be
first-lien mortgages after a foreclosure or lien release occurred. Schneider also fails to allege that
any non-solicitation of RCV1 borrowers had an adverse impact on HAMP’s goal of preventing
foreclosures. As Schneider himself has recognized, Chase does not foreclose on RCV1 loans
because it would make no economic sense to do so. See Dkt. 118 at 7. It is therefore
unsurprising that Schneider fails to identify a single RCV1 borrower who was harmed because
he or she was not offered a HAMP loan modification. In short, because Schneider has not
adequately alleged that Chase’s treatment of RCV1 borrowers had a material impact on its ability
to comply with HAMP rules, he once again fails to allege the existence of a false statement by
Chase.
Schneider’s HAMP claims also suffer from additional defects. Most notably, the
proposed Third Amended Complaint fails to allege that Chase’s HAMP solicitation practices
2
were material to the government’s decision to make HAMP incentive payments to Chase. As the
Supreme Court has held, the materiality requirement should be applied rigorously at the
pleadings stage of False Claims Act cases. See Universal Health Servs., Inc. v. U.S. ex rel.
Escobar, 136 S. Ct. 1989, 1996 (2016). Under Escobar and its progeny, a false statement is not
material if the government continues to pay a claim after it learns of the falsity. Here, although
the government has been on notice of Schneider’s allegations since at least 2014, it nevertheless
has continued to make HAMP incentive payments to Chase. Schneider’s proposed Third
Amended Complaint therefore would fail to state a claim under Escobar.
Schneider’s allegation that Chase failed to comply with unspecified mortgage servicing
laws is equally meritless. This Court previously held that Schneider had failed to allege any
“false representation of compliance with an applicable federal statute [or] regulation,” Dkt. 118
at 18, and his proposed Third Amended Complaint fares no better. Among other infirmities, it
does not identify a specific statute or regulation that Chase purportedly violated—let alone the
precise conduct that allegedly gave rise to the violation or how exactly the servicing violation
rendered Chase’s HAMP certifications false. Schneider’s vague and conclusory servicing
allegations therefore fail to satisfy the basic pleading requirements of Rule 8, let alone Rule
9(b)’s heightened pleading standard.
For all these reasons, and as more fully set forth below, the Court should deny
Schneider’s request for a fourth bite at the apple.
BACKGROUND
A. Chase’s RCV1 System of Record
Like his previous complaints, Schneider’s proposed Third Amended Complaint focuses
on a group of non-performing mortgage loans that reside on Chase’s RCV1 system of record.
According to the proposed complaint, when Chase determines that a mortgage loan is
3
“valueless” under Generally Accepted Accounting Principles, it writes off (or in industry
parlance “charges off”) the loan and transfers the loan from its general system of record to
RCV1. See Proposed Third Am. Compl. [Dkt. 125-1] (“TAC”) ¶¶ 20, 102-05. The RCV1
system includes “defaulted and charged off loans in both first and second lien positions” as well
as “mortgages that are subject to bankruptcies” and unsecured “post-foreclosure deficiencies.”
Id. ¶ 102. Because loans in RCV1 are valueless, “it would make no financial sense” to foreclose
on those loans as “the cost to Chase of attempting foreclosure could never be regained.” Dkt.
118 at 7; see also TAC ¶¶ 167-74.
The proposed Third Amended Complaint alleges that the mortgage liens on “many” of
the loans in RCV1 have been released. TAC ¶¶ 117, 165 (“Chase had released of [sic] 400,000
loans in RCV1” as of May 2015.). However, as Schneider acknowledges, releasing a lien is
different than charging off a loan. See id. ¶ 110. A lien release is not an accounting tool; rather,
it is the release of the property interest that served as collateral for the loan. See id. ¶ 172
(describing lien released loans as “unsecured debts”). Thus, once a mortgage lien is released, the
lender can no longer foreclose on the property, and the loan is no longer eligible for a HAMP
mortgage loan modification. See id. ¶ 176.
B. The Home Affordable Modification Program
“Following the burst of the housing bubble in 2008,” the Treasury Department launched
the Making Home Affordable (“MHA”) program to help “stabilize the housing and credit
markets.” Dkt. 118 at 1. To participate in MHA programs, mortgage servicers must enter into a
Servicer Participation Agreement (“SPA”) with Fannie Mae, which serves as the government’s
4
financial agent for MHA programs.1 The SPA governs a servicer’s obligations under MHA
programs and incorporates by reference Treasury Department guidance, such as the MHA
Handbook. See TAC ¶ 10.
MHA is comprised of several distinct programs, including HAMP. The goal of HAMP is
to assist “homeowners who are at risk of foreclosure.”2 HAMP thus “provides eligible
borrowers the opportunity to modify their first-lien mortgage loans to make them more
affordable.” MHA Handbook at 13. Under HAMP, participating servicers receive incentive
payments for each eligible first-lien mortgage loan they modify. See id. at 57-64, 123-24.
Only loans meeting strict eligibility criteria—set forth in the MHA Handbook—are
eligible for HAMP loan modifications. For example, the program is generally limited to “one- to
four-unit owner-occupied single-family properties,” id. at 13, 58, loans originated on or before
January 1, 2009, id. at 57, and borrowers who are natural persons, id. at 60. The MHA
Handbook also sets forth principal balance, liquidity, and income requirements for HAMP
modifications. Id. at 57, 58. In addition, only first-lien mortgage loans—that is, loans secured
by a property lien that has priority over all other liens—are eligible for modification under
HAMP. See, e.g., MHA Handbook at 57, 66.
1
See Commitment to Purchase Financial Instrument and Servicer Participation Agreement,
available at https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/
servicerparticipationagreement.pdf; see also TAC ¶¶ 1, 10, 22-24, 30-33, 38, 47-48, 52-53, 61-
62, 69, 71, 91, 130, 180, 184, 191 (referring to this document).
2
U.S. Dep’t of Treasury, Home Affordable Modification Program, available at
https://www.treasury.gov/initiatives/financial-stability/TARP-
Programs/housing/mha/Pages/hamp.aspx (last visited April 25, 2018); accord MHA Program
Handbook for Servicers of Non-GSE Mortgages (“MHA Handbook”), at 12 (version 4.0, Aug.
17, 2012), available at https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/
mhahandbook_40.pdf. (“In February 2009, the Obama Administration introduced the Making
Home Affordable Program, a plan to stabilize the housing market and help struggling
homeowners get relief and avoid foreclosure.”).
5
With certain exceptions, the MHA Handbook requires servicers to solicit all eligible
borrowers to apply for HAMP modifications. Id. at 66. The Handbook provides an exception to
this requirement for loans subject to bankruptcy proceedings. Id. at 63. Another exception
provides that otherwise eligible borrowers need not be solicited if the borrower’s loan was
“charged off” and the servicer “released the borrower from liability for the debt and provided a
copy of such release to the borrower.” Id. at 60.
Participants in MHA programs are required to submit annual compliance certifications to
a division of Freddie Mac—Making Home Affordable-Compliance (“MHA-C”)—which serves
as the U.S. government’s compliance agent for MHA programs. See MHA Handbook at 1, 41.
These certifications must “report instances of noncompliance that [the servicer] believes have a
material effect on its ability to comply with MHA program requirements.” Id. at 45 (emphasis
added); see also Dkt. 118 at 17-18.
As required by MHA program rules, Chase disclosed to the government the factors it
relied upon in determining whether it believed that any instances of noncompliance had a
material effect on its ability to comply with MHA programs. MHA Handbook at 45; see Dkt.
105-6 (Karwhite Decl. Ex. 2). Those factors included whether the non-compliance “[r]esulted in
substantial injury to a significant number of borrowers” or “[s]ubstantially interfere[d] with the
goals and objectives of the overall program.” Dkt. 105-6 (Karwhite Decl. Ex. 2 at 2).
C. Procedural History
Schneider filed his original complaint on May 6, 2013. Before filing that complaint, he
“voluntarily provided information on which this action is based” to the United States. TAC ¶ 45.
After reviewing Schneider’s allegations, the United States declined to intervene. Dkt. 24.
Schneider then filed a First Amended Complaint (“FAC”) in November 2014, Dkt. 80,
which included allegations that Chase violated the False Claims Act by, among other things,
6
hiding the existence of RCV1 from MHA-C, failing to solicit borrowers in RCV1 to apply for
HAMP loan modifications or comply with related procedural requirements, and failing to service
loans in RCV1. See, e.g., FAC [Dkt. 80] ¶¶ 16-20, 32-39, 174-89, 207, 213, 232, 287. The
United States reviewed those allegations and again declined to intervene. Dkt. 96.
In October 2015, Schneider amended his complaint a second time. In his Second
Amended Complaint (“SAC”), Schneider deleted all allegations that Chase hid RCV1 loans from
MHA-C, see Dkt. 105-8, but reiterated his allegations that Chase failed to solicit RCV1
borrowers for HAMP modifications and inadequately serviced RCV1 loans, see, e.g., SAC [Dkt.
102] ¶¶ 2, 16-20, 36-43, 167-71, 172-99, 197-99, 216, 222, 241.
This Court granted Chase’s motion to dismiss the Second Amended Complaint. With
respect to HAMP, the Court recognized that “noncompliance with HAMP would be shown only
if Chase’s nonsolicitation of RCV1 loans for HAMP modification had a material effect on
Chase’s ‘ability to comply’ with the Making Home Affordable program requirements.” Dkt. 118
at 18. Schneider, however, “ma[d]e[ ] no such allegations.” Id. The Court also found that
Schneider did not allege a “false representation of compliance with an applicable federal statute,
federal regulation, or contractual term.” Id. Although the Court allowed Schneider to amend his
HAMP claims, he chose instead to appeal to the D.C. Circuit.
The D.C. Circuit affirmed. It agreed with this Court that “the Relator ‘fails to state a
claim that Defendant falsely certified HAMP compliance because he does not allege, with factual
allegations in support, that the certifications were materially false.’” U.S. ex rel. Schneider v.
JPMorgan Chase Bank, Nat’l Ass’n, 878 F.3d 309, 315 (D.C. Cir. 2017). The D.C. Circuit
deferred to this Court’s decision to dismiss the HAMP claims without prejudice, and permitted
Schneider to amend those claims “[t]o the extent he is able to.” Id. The D.C. Circuit also
7
affirmed this Court’s dismissal of Schneider’s claims related to the National Mortgage
Settlement with prejudice. Id.
D. The Proposed Third Amended Complaint
The proposed Third Amended Complaint alleges two main claims. First, like Schneider’s
prior complaints, it accuses Chase of failing to solicit RCV1 borrowers for HAMP loan
modifications and failing to comply with related procedural requirements set forth in the MHA
Handbook. See, e.g., TAC ¶¶ 24, 33, 129-30. Once again, however, there are no well-pled
factual allegations that Chase failed to solicit HAMP applications from a material number of
qualified borrowers. Conspicuously absent are any allegations as to how many first-lien loans
were in RCV1, how many of those loans were eligible for HAMP, or that RCV1 borrowers—
who faced no risk of foreclosure even if they made no payments—would have wanted a HAMP
loan modification.
Schneider’s second claim asserts that Chase violated unspecified mortgage servicing
rules and regulations. But the proposed Third Amended Complaint nowhere identifies a specific
statute or regulation that Chase violated or the specific conduct that supposedly constituted a
violation. Nor does it explain how any alleged violations of servicing laws rendered Chase’s
certifications of material compliance with HAMP rules false or misleading.
Noticeably missing from both sets of claims is any allegation that the government has
taken any action against Chase for the purported violations of HAMP. Despite the government’s
receipt of the “information on which this action is based” in 2013, TAC ¶ 45, and
notwithstanding Schneider’s filing of materially similar complaints in 2014 and 2015, Schneider
does not allege that the United States ever withheld any HAMP incentive payments from Chase
as a result of the conduct alleged in his complaints, sought to claw back any incentive payments
8
previously paid, or did anything at all to suggest that it disagreed with Chase’s annual
certifications of compliance.
LEGAL STANDARD
Although courts may “freely give leave [to amend] when justice so requires,” Fed. R.
Civ. P. 15(a)(2), leave to amend a complaint should be denied “[w]here amendment would be
futile,” Payne v. Dist. of Columbia, 773 F. Supp. 2d 89, 95 (D.D.C. 2011). Amendment is futile
“if it merely restates the same facts as the original complaint in different terms, reasserts a claim
on which the court previously ruled, fails to state a legal theory, or could not withstand a motion
to dismiss.” Fox v. Dist. of Columbia, 851 F. Supp. 2d 20, 37 (D.D.C. 2012) (citation omitted);
see also Boster v. Reliance Standard Life Ins. Co., 959 F. Supp. 2d 9, 19 (D.D.C. 2013) (denial
of leave to amend proper where “Court determines . . . that the claim that a plaintiff plans to add
to his or her complaint must fail, as a matter of law”). Denial of leave to amend is especially
appropriate where, as here, the plaintiff has had multiple opportunities to amend. See
Confederate Mem’l Ass’n, Inc. v. Hines, 995 F.2d 295, 299 (D.C. Cir. 1993) (denial of leave to
amend where “appellants effectively have had multiple bites at the apple already”).
Because Schneider alleges that Chase engaged in fraudulent conduct, the proposed Third
Amended Complaint must comply with Federal Rule of Civil Procedure 9(b). See U.S. ex rel.
Williams v. Martin-Baker Aircraft Co., Ltd., 389 F.3d 1251, 1256 (D.C. Cir. 2004); Dkt. 118 at
10, 17. In an FCA case, Rule 9(b) requires a relator to allege “the time, place and content of the
false misrepresentations, the fact misrepresented and what was retained or given up as a
consequence of the fraud,” as well as the “individuals allegedly involved in the fraud.” Williams,
389 F.3d at 1256 (internal quotations and citations omitted).
9
ARGUMENT
Schneider asserts that Chase violated Section 3729(a)(1) of the FCA. In order to state a
claim under that section, a relator must allege (1) a false statement to the government,
(2) knowledge by the defendant that the statement was false, and (3) that the statement was
“material” to the government’s decision to pay the claim. See 31 U.S.C. § 3729(a)(1); Escobar,
136 S. Ct. at 1996; U.S. ex rel. Davis v. Dist. of Columbia, 793 F.3d 120, 124 (D.C. Cir. 2015);
Dkt. 118 at 17.
Schneider alleges that Chase violated these requirements by submitting annual
certifications attesting to its compliance with MHA program rules and applicable law.
According to Schneider, these certifications were false because Chase did not solicit RCV1
borrowers for HAMP modifications and did not properly service RCV1 loans. For the reasons
explained below, these claims fail as a matter of law.
In addition, to the extent the proposed Third Amended Complaint purports to assert
independent claims based on (1) the MHA Second Lien Modification Program (“2MP”),
(2) Chase’s purported violations of the National Mortgage Settlement, or (3) Chase’s alleged
conduct in connection with loans that it sold to Schneider, those allegations likewise would fail
to state a claim. Finally, any claim based upon pre-February 9, 2012 conduct would be barred by
the National Mortgage Settlement’s release provisions. For all these reasons, Schneider’s motion
for leave to amend should be denied as futile.
I. THE PROPOSED HAMP CLAIMS FAIL AS A MATTER OF LAW.
The gravamen of Schneider’s proposed Third Amended Complaint is that Chase violated
the FCA by “knowingly” submitting “false or fraudulent” annual certifications that it complied
with MHA program requirements. TAC ¶¶ 204-06. According to Schneider, Chase’s
certifications were false because they failed to disclose that Chase did not solicit RCV1
10
borrowers to apply for HAMP modifications or comply with related procedural obligations set
forth in the MHA Handbook. E.g., id. ¶¶ 33, 67, 76.
Like the prior iterations of Schneider’s HAMP claims, these claims fail as a matter of
law. First, as reflected by the proposed Third Amended Complaint itself, any non-solicitation of
RCV1 borrowers was not material to the government’s decision to make HAMP incentive
payments to Chase. Second, Schneider once again fails to allege that Chase’s certifications of
“material” compliance with HAMP rules were false. Third, the proposed Third Amended
Complaint does not allege that Chase acted with the requisite scienter. And, finally, Schneider
fails to allege that the government suffered any damages as a result of Chase’s alleged violations.
For all these reasons, Schneider’s request for leave to re-assert an FCA claim based on Chase’s
alleged HAMP violations should be denied.
A. Schneider fails to plead that Chase’s alleged conduct was “material” to the
government’s payment decisions.
Schneider’s HAMP claims fail as a matter of law because he once again fails to allege
that Chase made a false or fraudulent statement that satisfies the materiality requirement of the
FCA. A false or fraudulent statement is “material” for purposes of the FCA only if it impacts
“the government’s decision to pay.” United States v. Sci. Applications Int’l Corp., 626 F.3d
1257, 1271 (D.C. Cir. 2010) (“SAIC”); see Dkt. 118 at 18 (citing SAIC). In other words, a “false
certification . . . is actionable . . . only if it leads the government to make a payment which,
absent the falsity, it may not have made.” SAIC, 626 F.3d at 1270 (quoting U.S. ex rel. Lemmon
v. Envirocare of Utah, Inc., 614 F.3d 1163, 1169 (10th Cir. 2010)).
The Supreme Court has held that this materiality standard—which it described as
“demanding” and “rigorous”—should be applied at the pleadings stage. See Escobar, 136 S. Ct.
11
at 2002-03, 2004 n.6.3 Under Escobar, if “the Government pays a particular claim in full despite
its actual knowledge that certain requirements were violated, that is very strong evidence that
those requirements are not material.” Id. at 2003. Relatedly, “if the Government regularly pays
a particular type of claim in full despite actual knowledge that certain requirements were
violated, and has signaled no change in position, that is strong evidence that the requirements are
not material.” Id. at 2003-04.
A relator therefore must do more than simply allege that the government would “have the
option to decline to pay if it knew of the defendant’s noncompliance.” Id.; see also U.S. ex rel.
McBride v. Halliburton Co., 848 F.3d 1027, 1032 (D.C. Cir. 2017) (“[C]ourts should look
beyond the express designation of a requirement as a condition of payment to find it material.”).
Thus, a relator might satisfy the materiality requirement by alleging that “the Government
consistently refuses to pay claims in the mine run of cases based on noncompliance with the
particular statutory, regulatory, or contractual requirement,” see Escobar, 136 S. Ct. at 2003, or
that the government sent notices to the defendant for noncompliance, see U.S. v. Comstor Corp.,
2018 WL 1567620, at *19 (D.D.C. Mar. 31, 2018). By contrast, “materiality is absent at the
pleading stage when the relator’s chronology suggests that the Government knew of the alleged
fraud, yet paid the contractor anyway.” U.S. ex rel. Kolchinsky v. Moody’s Corp., 238 F. Supp.
3d 550, 559 (S.D.N.Y. 2017), reconsideration in part, 2017 WL 3841866 (S.D.N.Y. Sept. 1,
3
Rigorous enforcement of the materiality requirement at the pleadings stage addresses
“concerns about fair notice and open-ended liability” and ensures that the FCA is not used as “a
vehicle for punishing garden-variety breaches of contract or regulatory violations.” Escobar,
136 S. Ct. at 2002-03. “By enforcing this requirement rigorously, courts will ensure that
government contractors will not face onerous and unforeseen FCA liability as the result of
noncompliance with any of potentially hundreds of legal requirements established by contract.”
SAIC, 626 F.3d at 1271 (internal quotation marks omitted).
12
2017); see also McBride, 848 F.3d at 1032 (“[C]ourts need not opine in the abstract when the
record offers insight into the Government’s actual payment decisions.”).
According to Schneider, Chase violated the FCA by certifying its compliance with
HAMP rules even though it was not soliciting RCV1 borrowers to apply for HAMP
modifications. These allegations, however, are futile because Schneider fails to plead facts even
remotely suggesting that Chase’s purported HAMP violations were material to the government’s
payment of HAMP incentives to Chase.
Before filing his original complaint in May 2013, Schneider “voluntarily provided
information on which this action is based [to the United States].” TAC ¶ 45. And, in his First
and Second Amended Complaints, filed in 2014 and 2015, respectively, Schneider alleged the
same basic violations of HAMP rules that form the basis for his Third Amended Complaint,
namely, that Chase (1) failed to solicit RCV1 borrowers to apply for HAMP loan modifications,
and (2) failed to comply with related servicing obligations (such as the obligation to retain
records and to provide HAMP-eligible borrowers with a single point of contact). See, e.g., FAC
¶¶ 14, 133-61, 172-74, 175, 179-80, 187-89; SAC ¶¶ 2, 16-20, 36-43, 131-65, 167-71, 172-99,
197-99, 216, 222, 241. Those complaints were timely served on the United States in 2014 and
2015, which twice declined to intervene in this action. Supra pp. 6-7. But Schneider nowhere
alleges that the government stopped making incentive payments to Chase or clawed back any
incentive payments it had previously made after learning of Chase’s alleged violations. Nor does
he allege that the government refused to make HAMP incentive payments “in the mine run of
cases” in which mortgage servicers failed to solicit charged-off borrowers to apply for HAMP
modifications. Escobar, 136 S. Ct. at 2003.
13
Far from alleging any facts showing that the alleged HAMP violations were material to
the government’s payment decisions, Schneider alleges facts showing that the alleged violations
made no difference to those decisions. For example, the proposed Third Amended Complaint
confirms that the United States has continued to make incentive payments to Chase through and
including February 2018. See TAC ¶ 32 (citing a monthly status report from the Treasury
Department to Congress).4 The government’s continued payment of these incentives for several
years after it learned of the purported misconduct establishes that the alleged misconduct was not
material to the government’s payment decisions. See, e.g., U.S. ex rel. Petratos v. Genentech
Inc., 855 F.3d 481, 490 (3d Cir. 2017) (dismissing for lack of materiality where, in the “years”
since relator disclosed noncompliance to the government, “the Department of Justice has taken
no action against [the defendants] and declined to intervene in this suit”); D’Agostino v. ev3,
Inc., 845 F.3d 1, 7 (1st Cir. 2016) (“The fact that [the government] has not denied reimbursement
. . . in the wake of [the relator’s] allegations casts serious doubt on the materiality of the
fraudulent representations that [relator] alleges.”); Coyne v. Amgen, Inc., 2017 WL 6459267, at
*2 (2d Cir. Dec. 18, 2017) (affirming dismissal where relator did not “present concrete
allegations from which the court may draw the reasonable inference that the misrepresentations .
. . caused the Government to make the reimbursement decision”).
4
A collection of monthly status reports, including the report cited by Schneider, is
available at https://www.treasury.gov/initiatives/financial-stability/reports/Pages/Monthly-
Report-to-Congress.aspx. The Court may take judicial notice of these government reports. See,
e.g., Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007) (“public records [are]
subject to judicial notice on a motion to dismiss”).
14
Since Escobar, courts have routinely dismissed FCA allegations arising under similar
circumstances.5 For example, Judge Howell recently dismissed an FCA case where “the Third
Amended Complaint, which was filed after the government was fully informed for years about
the relator’s allegations regarding the defendants’ purported role in the fraudulent scheme, [wa]s
silent as to whether the government took any action whatsoever against the defendants.”
Comstor, 2018 WL 1567620 at *19. The Court observed that the relator had not alleged that the
government “took steps to cancel the [] contracts at issue upon finding out about” the alleged
non-compliance or had “even sent notices [about the] non-compliance to the defendants.” Id.
Because the relator “provide[d] no allegation that me[t] the examples described by the Supreme
Court [in Escobar],” the Court dismissed the action. Id. at *20.
Schneider’s proposed Third Amended Complaint suffers from the same fatal defects as
the Third Amended Complaint in Comstor. The government has been aware of Schneider’s
allegations for years, yet the complaint “is silent as to whether the government took any action
whatsoever against the defendants.” See id. at *19. There are no allegations that the government
5
See, e.g., Petratos, 855 F.3d at 492 (affirming dismissal where relator “did not
sufficiently plead materiality”); U.S. ex rel. Schimelpfenig v. Dr. Reddy’s Labs. Ltd., 2017 WL
1133956, at *7 (E.D. Pa. Mar. 27, 2017) (dismissing complaint where “Plaintiffs do not allege an
instance wherein the Government refused payment of a claim on the basis of noncompliance
with federal packaging requirements; and Plaintiffs do not allege an instance wherein the
Government initiated an action to recover monies paid for goods noncompliant with federal
packaging requirements”); U.S. ex rel. Dress v. Qualium Corp., 2016 WL 3880763, at *6 (N.D.
Cal. July 18, 2016) (dismissing claims where plaintiff “allege[d] in several places that the
government would not have paid Defendants’ claims had they known of Defendants’ fraudulent
conduct, but d[id] not explain why”); City of Chicago v. Purdue Pharma L.P., 211 F. Supp. 3d
1058, 1079 (N.D. Ill. 2016) (“[P]laintiff has not sufficiently alleged that defendants caused
misrepresentations that were material as defined in [Escobar] and therefore has not stated a claim
for false statements or false claims.”); Knudsen v. Sprint Commc’ns Co., 2016 WL 4548924, at
*13 (N.D. Cal. Sept. 1, 2016) (dismissing because Escobar “rejected a theory of materiality that
any statutory, regulatory, or contractual violation is material just because it can result in the
government’s decision not to pay a claim”).
15
“sent notices” to Chase, withheld any incentive payments to Chase based on its purported failure
to solicit RCV1 borrowers, or took steps to recoup incentive payments previously paid.
Accordingly, under Comstor and the other post-Escobar cases noted above, the allegations of the
proposed Third Amended Complaint fail as a matter of law.
Schneider counters that when Chase released the liens securing certain charged-off RCV1
loans, “it did not forgive the borrowers [sic] debt or inform the borrowers . . . that the liens had
been released,” see TAC ¶¶ 135-36, but that assertion is unavailing. As an initial matter, Chase
had no obligation under HAMP to forgive debts or notify borrowers of lien releases. See infra
pp. 24-25. And in any event, by 2014 at the latest, the government was well aware of
Schneider’s allegation that Chase had released certain liens without notifying the borrower or
forgiving the borrower’s debt. See, e.g., FAC ¶ 180 (“borrowers, whose loans were in the RCV1
population, were not released of the ‘liability for the debt’ [and] were therefore subject to all
HAMP servicing requirements”); FAC ¶ 279 (“thousands of mortgage loans have been, and
continue to be, quietly released, with no notice to any interested parties, no documentation or
correspondence with homeowners or others, and no outside indication of any type to alert
interested parties of this action”). Because the government continued to make incentive
payments to Chase for years after learning of these allegations, Chase’s alleged “failure” to
forgive debts and notify borrowers is immaterial as a matter of law. See, e.g., McBride, 848 F.3d
at 1034 (finding government’s continued payment after learning of relator’s allegations to be
“very strong evidence” of immateriality).
Schneider fares no better with his conclusory allegation that Chase’s “false certifications
of compliance” were “necessarily material.” TAC ¶ 28. The proposed Third Amended
Complaint asserts that materiality is established merely because (1) RCV1 contained a large
16
number of defaulted loans, and (2) the “principal focus of the HAMP were mortgages in which
‘[d]efault on the payment of such mortgage has occurred, is imminent, or is reasonably
foreseeable.’” Id. These assertions are mistaken as both a legal and a factual matter.
As a legal matter, Escobar and its progeny make clear that the touchstone of the
materiality inquiry is whether the alleged violation, when revealed, actually had an impact on the
government’s decision to pay. See supra pp. 11-16; see also, e.g., McBride, 848 F.3d at 1033
(“[W]e have the benefit of hindsight and should not ignore what actually occurred.”); U.S. ex rel.
Nargol v. DePuy Orthopaedics, Inc., 865 F.3d 29, 36 (1st Cir. 2017) (dismissing on materiality
grounds where “[t]he government, having heard what Relators had to say, was still paying
claims”).
As a factual matter, Schneider misapprehends the purpose of HAMP. The language
quoted by Schneider comes from a federal statute that provides servicers with a safe harbor to
modify loans. See MHA Handbook at 20-21 (citing 15 U.S.C. § 1639a). That statute does not
mention HAMP or purport to describe its purposes. Moreover, the Treasury Department has
confirmed that the goal of HAMP is to help homeowners “who are at risk of foreclosure.”6
Because Chase does not foreclose on RCV1 loans, see supra p. 4, any non-solicitation of RCV1
borrowers by definition had no impact on homeowners at risk of foreclosure.
Schneider’s references to prior Chase settlements with the Office of the Comptroller of
the Currency (“OCC”) and the U.S. Trustee Program (“USTP”) likewise fail to salvage his
HAMP claims. In the first place, this Court held in dismissing Schneider’s prior complaint that
his OCC settlement allegations were irrelevant to his HAMP claims. See, e.g., Dkt. 118 at 19
6
U.S. Dep’t of Treasury, Home Affordable Modification Program, available at
https://www.treasury.gov/initiatives/financial-stability/TARP-
Programs/housing/mha/Pages/hamp.aspx (last visited April 25, 2018) (emphasis added).
17
(“Relator does not allege that the OCC Consent Judgment includes a determination that Chase
violated HAMP or failed to comply with the notice requirements of HAMP. Additionally,
Relator fails to allege that any part of the OCC Consent Judgment was substantially similar to
requirements under HAMP and could, therefore, demonstrate material misrepresentations by
Chase under HAMP.”). The proposed Third Amended Complaint does nothing to cure these
defects. Accordingly, Schneider’s settlement-related allegations are insufficient as a matter of
law. See, e.g., Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996) (“repeated failure to
cure deficiencies by [previous] amendments” is a basis to deny leave to amend (internal
quotation marks omitted)).
More fundamentally, even if Schneider were correct that the OCC and USTP settlements
somehow show that Chase committed HAMP violations, his reference to these settlements would
only undermine his efforts to plead materiality. According to the proposed Third Amended
Complaint, the government, which was a party to both settlements, would have been on notice of
the alleged HAMP violations since at least 2015—if not 2011, when the original OCC settlement
was executed. See TAC ¶¶ 98, 99. Thus, under Escobar and the line of cases cited above, the
government’s decision to continue making HAMP incentive payments to Chase for many years
after it entered into the settlements proves that the alleged violations were immaterial to the
government’s payment decisions. See supra pp. 11-17.
B. Schneider has not adequately alleged that Chase’s compliance certifications

were false.
Schneider’s proposed HAMP claims also fail as a matter of law because he does not
adequately allege that Chase’s compliance certifications were “false” under Rule 8(a), let alone
under the heightened pleading requirements of Rule 9(b) applicable here.
18
Under Treasury Department rules, MHA certifications must “report instances of
noncompliance that [the servicer] believes have a material effect on its ability to comply with
MHA program requirements.” MHA Handbook at 45 (emphasis added). Consistent with that
requirement, Chase did not need to certify perfect compliance with HAMP rules; it was required
to certify only that it believed it was in “material compliance.” See Dkt. 105-5 at 1-2 (Karwhite
Decl. Ex. 1 at 1-2) (emphasis added). Chase also had an obligation to disclose the criteria that it
used to determine whether it believed that any instances of non-compliance were material. See
MHA Handbook at 45. Accordingly, Chase provided a list of “subjective factors” it considered
in making its annual certifications, which included whether any non-compliance “[r]esulted in
substantial injury to a significant number of borrowers” or “[s]ubstantially interfere[d] with the
goals and objectives of the overall program.” See Dkt. 105-6 at 2 (Karwhite Decl. Ex. 2 at 2).
As this Court previously recognized, in order to allege that Chase’s certifications were
false, Schneider must plead facts showing that any alleged noncompliance with HAMP “had a
material effect on Chase’s ‘ability to comply’ with [MHA] program requirements.” Dkt. 118 at
18 (emphasis added). Like the Second Amended Complaint, the proposed Third Amended
Complaint contains “no such allegations.” Id.
No impact on a substantial number of eligible borrowers. As an initial matter,
Schneider does not plausibly allege that Chase’s purported HAMP violations harmed a
substantial number of qualified borrowers. In fact, Schneider does not identify a single RCV1
borrower who supposedly would have qualified for HAMP but was not solicited to apply.
Although Schneider alleges that Chase failed to solicit charged-off borrowers to apply for
HAMP modifications after their loans were transferred to RCV1, he does not allege that Chase
failed to solicit those borrowers before their loans were transferred. See, e.g., TAC ¶¶ 33, 135-
19
36. To the contrary, the proposed Third Amended Complaint acknowledges that Chase did offer
loan modifications to eligible borrowers prior to charge-off. See id. ¶ 20 (acknowledging that
Chase serviced loans in “its primary System of Records . . . according to the requirements of . . .
the MHA programs”); id. ¶ 129 (acknowledging that “proprietary or government loan
modification programs” were “offered to borrowers in the primary system of records”). Under
the MHA Handbook, servicers generally were not required to re-solicit borrowers who had
already been solicited. See MHA Handbook at 66. Accordingly, Schneider’s allegation that
borrowers were not solicited after their loans were transferred to RCV1, without more, does not
establish that Chase violated HAMP’s solicitation requirements with respect to these borrowers.
The proposed Third Amended Complaint likewise fails to allege that a substantial
number of RCV1 borrowers would have qualified for HAMP modifications. Indeed, Schneider
alleges that numerous RCV1 borrowers were in bankruptcy and/or had loans that were owned by
government-sponsored entities, see TAC ¶¶ 102, 112, but all such loans are ineligible for HAMP
modifications under the MHA Handbook. See MHA Handbook at 12, 57, 58, 63.
Even more significantly, the proposed Third Amended Complaint fails to allege that a
substantial number of RCV1 loans were secured by first-lien mortgages. As noted above, only
first-lien mortgages are eligible for HAMP. E.g., id. at 57 (setting forth “Basic HAMP
Eligibility Criteria,” including the requirement that “[t]he mortgage loan [be] a first lien
mortgage loan”). Yet, as Schneider acknowledges, the vast majority of the loans in RCV1 were
not secured by first liens. See TAC ¶ 102 (alleging that RCV1 included numerous loans in
“second lien positions” and unsecured “post-foreclosure deficiencies”). And, as Schneider
further acknowledges, it was Chase’s practice to release the liens associated with charged-off
first-lien mortgages. See, e.g., id. ¶¶ 117, 133, 166. Accordingly, the proposed Third Amended
20
Complaint contradicts any suggestion by Schneider that the RCV1 population of loans contained
a significant number of first-lien loans eligible for HAMP modification.
Although the proposed Third Amended Complaint announces that it will “treat”
Schneider’s “allegations of violations related to second liens . . . as violations of the HAMP,”
TAC ¶ 8 (emphasis added), this allegation disregards the fact that HAMP applies only to loans
secured by first liens. Thus, by definition, allegations concerning second-lien loans have no
bearing on HAMP. Moreover, the MHA program that does apply to second liens—2MP—has
substantially different requirements than HAMP. For example, 2MP requires neither borrower
solicitation nor the establishment of a single point of contact for potentially eligible borrowers.
See MHA Handbook at 157-79. Accordingly, Schneider’s effort to establish HAMP violations
on the basis of second-lien loans contained in RCV1 is unavailing.7
No harm to borrowers or HAMP program objectives. Schneider also fails to allege
that the purported non-solicitation of RCV1 borrowers injured those borrowers or interfered with
HAMP’s goal of avoiding unnecessary foreclosures. As this Court recognized, Chase does not
foreclose on RCV1 loans “because it would make no financial sense to foreclose on a valueless
loan; the cost to Chase of attempting foreclosure could never be regained.” Dkt. 118 at 7; see
also TAC ¶¶ 167-74. As Schneider acknowledges, moreover, Chase had a practice of releasing
the liens that secured first-lien loans in RCV1, TAC ¶¶ 131, 133, 166—thereby removing
entirely the risk of foreclosure. The proposed Third Amended Complaint thus does not properly
allege that any non-solicitation by Chase (1) harmed RCV1 borrowers, who face no risk of
7
For the reasons explained below, the proposed Third Amended Complaint also fails to
state a claim that Chase violated the terms of the 2MP program. See infra p. 35.
21
foreclosure even if they make no payments on their loans, or (2) interfered with the foreclosure-
prevention goals of HAMP.
In sum, the allegations in the proposed Third Amended Complaint fail to state a claim
that Chase made a false statement regarding its compliance with MHA program requirements.
Chase certified only “material” compliance with those requirements. Because Schneider has
again failed to allege facts showing material non-compliance by Chase—such as non-
compliance that injured a significant number of borrowers or substantially interfered with
HAMP’s foreclosure-prevention goals—he has again failed to allege that Chase’s compliance
certifications were false.
C. Schneider has not adequately alleged scienter.
Schneider’s HAMP claims also fail because he has not adequately alleged that Chase
knowingly made a false statement or claim, as the FCA requires. See 31 U.S.C. § 3729(a)(1)(A)-
(B).
To satisfy the FCA’s scienter requirement, a relator must allege that the “defendant
knowingly violated a requirement that the defendant knows is material to the Government’s
payment decision.” Escobar, 136 S. Ct. at 1996 (emphasis added). Put another way, the relator
must plead “that the defendant knows (1) that it violated a contractual obligation, and (2) that its
compliance with that obligation was material to the government’s decision to pay.” SAIC, 626
F.3d at 1271.8 This requirement is designed to avoid “punish[ing] honest mistakes or incorrect
claims submitted through mere negligence.” Id. at 1274. As with materiality, scienter under the
8
Although SAIC’s two-prong scienter test applied to implied false certifications, Escobar
made clear that the two-prong test applies regardless of the type of certification. Escobar, 136 S.
Ct. at 1996 (“What matters is not the label the Government attaches to a requirement, but
whether the defendant knowingly violated a requirement that the defendant knows is material to
the Government’s payment decision.” ).
22
FCA is a “rigorous” requirement, Escobar, 136 S. Ct. at 2002, that courts must “strict[ly]
enforce[],” SAIC, 626 F.3d at 1270. Through strict enforcement, courts “ensure that ordinary
breaches of contract are not converted into FCA liability.” Id.
The proposed Third Amended Complaint fails adequately to allege scienter for three
reasons. First, Schneider cannot plead scienter because Chase reasonably interpreted its
contractual reporting obligations (as set out in the SPA and the MHA Handbook) to the
government. The FCA does not “reach those claims made based on reasonable but erroneous
interpretations of a defendant’s legal obligations.” U.S. ex rel. Purcell v. MWI Corp., 807 F.3d
281, 290 (D.C. Cir. 2015). Where a contractual requirement is ambiguous, “the court’s focus is
on the objective reasonableness of the defendant’s interpretation of an ambiguous term and
whether there is any evidence that the agency warned the defendant away from that
interpretation.” Id.; see John T. Boese, Civil False Claims and Qui Tam Actions § 2.06 (4th ed.,
2018-1 Supp. 2010) (“[T]he D.C. Circuit reaffirmed that there can be no FCA violation where:
(1) the law or regulation at issue is ambiguous; (2) the defendant’s interpretation of that language
is reasonable[;] and (3) the agency issued no formal guidance indicating that the defendant’s
interpretation was wrong.”).9
Under the MHA Handbook, Chase was required to disclose instances of non-compliance
with HAMP requirements only if it “believed” that the non-compliance was “material.” See
MHA Handbook at 45. Accordingly, in order to plead the scienter element of his FCA claim,
Schneider was obliged to plead facts supporting the conclusion that Chase believed that it was in
9
Under a statute with a similar scienter requirement, the Supreme Court held that
“[w]here, as here, the statutory text and relevant court and agency guidance allow for more than
one reasonable interpretation, it would defy history and current thinking to treat a defendant who
merely adopts one such interpretation as a knowing or reckless violator.” Safeco Ins. Co. of Am.
v. Burr, 551 U.S. 47, 70 n.20 (2007).
23
material non-compliance with HAMP’s requirements at the time it made its certifications to the
government. See SAIC, 626 F.3d at 1271. The proposed Third Amended Complaint, however, is
devoid of factual allegations showing that Chase had any such belief. At most, Schneider has
alleged a difference of opinion regarding a debatable question: whether Chase’s alleged failure
to solicit an unquantified number of charged-off borrowers who concededly faced no risk of
foreclosure constituted a “material” violation of HAMP rules that Chase was obliged to report.
In the absence of any well-pled facts indicating that Chase believed that its alleged violations
were material, Schneider has not met the FCA’s scienter requirement. See U.S. ex rel. Siewick v.
Jamieson Sci. & Eng’g, Inc., 214 F.3d 1372, 1378 (D.C. Cir. 2000) (no scienter where there is
“only legal argumentation and possibility” as opposed to statements “that the speaking party
could reasonably classify as true or false”); U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc.,
525 F.3d 370, 377 (4th Cir. 2008) (denying leave to amend where relators’ allegation “rests not
on an objective falsehood, as required by the FCA, but rather on Relators’ subjective
interpretation of [defendant’s] contractual duties”); see also U.S. ex rel. McGrath v. Microsemi
Corp., 690 F. App’x 551, 552 (9th Cir. 2017) (affirming dismissal on scienter grounds where
defendant’s “good faith interpretation of the term ‘disclose’” in a regulation “was reasonable”);
Comstor, 2018 WL 1567620 at *22-23 (dismissing for lack of scienter).
This conclusion is unaltered by Schneider’s citation to an MHA Handbook provision
stating that charged-off borrowers need not be solicited under HAMP “if the servicer has
released the borrower from liability for the debt and provided a copy of such release to the
borrower.” TAC ¶ 109 (quoting MHA Handbook at 60). Schneider suggests that Chase violated
this Handbook provision when it allegedly released the liens on certain RCV1 loans without
forgiving the associated debt or notifying the borrower, see id. ¶¶ 109-10, 135, but that
24
suggestion rests on a misunderstanding of the provision. The Handbook provision does not
create a general obligation to forgive debts or notify homeowners whenever a servicer releases a
mortgage lien; indeed, the text of the provision does not even mention lien releases as opposed to
debt forgiveness. Rather, the Handbook provision merely provides an exception to the general
requirement to solicit eligible borrowers to apply for HAMP modifications: an otherwise-
eligible charged-off borrower need not be solicited if the servicer follows the procedures set forth
in the exception. Here, however, Chase allegedly released the liens securing the loans in
question. By definition, when the lien securing a loan has been released, the loan is no longer a
mortgage loan eligible for HAMP modification. See, e.g., MHA Handbook at 57 (only “first lien
mortgage loan[s]” eligible for HAMP); id. at 66 (limiting the universe of loans that must be pre-
screened for “[b]orrower [s]olicitation” to “first lien mortgage loans”). Accordingly, Chase
would have had no need to rely on the Handbook provision in the case of a lien release: the lien
release alone would render the loan ineligible for HAMP, and Chase would therefore have no
obligation to solicit the borrower in the first place.10
Second, Schneider fails to allege any facts showing that Chase knew that the alleged non-
solicitation of RCV1 borrowers was material to the government’s payment decisions. See, e.g.,
SAIC, 626 F.3d at 1271 (relator must plead that the defendant knew that its compliance with an
obligation was material to the government’s decision to pay in order to state a claim under the
FCA). Schneider does not allege, for example, any facts suggesting that Chase was “warned
away” from its interpretation of its reporting obligations. See Purcell, 807 F.3d at 290. To the
10
At a minimum, this interpretation of the MHA Handbook is reasonable, and therefore
cannot form the basis for liability under the FCA. See, e.g., Purcell, 807 F.3d at 290 (“[T]he
FCA does not reach an innocent, good-faith mistake about the meaning of an applicable rule or
regulation.”); see also supra pp. 23-24.
25
contrary, the well-pled allegations of the proposed Third Amended Complaint make clear that
the government has known about Chase’s HAMP solicitation practices for years, yet has
continued to make incentive payments to Chase. See supra pp. 11-18. These allegations
thoroughly undermine any assertion that Chase knew that its treatment of RCV1 loans was
material to the government’s decision to pay HAMP incentives to Chase.
Third, Schneider’s implicit recognition that the government was aware of Chase’s
solicitation practices for RCV1 borrowers demonstrates the infirmity of his scienter allegations.
It is well-established that “the knowledge possessed by officials of the United States may be
highly relevant under the False Claims Act because it may show that the defendant did not
submit its claim in deliberate ignorance or reckless disregard of the truth.” U.S. ex rel. Burke v.
Record Press, Inc., 816 F.3d 878, 881 (D.C. Cir. 2016) (internal quotation marks omitted); see
also U.S. ex rel. Becker v. Westinghouse Savannah River Co., 305 F.3d 284, 289 (4th Cir. 2002)
(“prior government knowledge of an allegedly false claim can negate the scienter required for an
FCA violation”) (collecting cases); U.S. ex rel. Bettis v. Odebrecht Contractors of Cal., Inc., 297
F. Supp. 2d 272, 286 n.22 (D.D.C. 2004) (explaining that government knowledge “is a
circumstance that is relevant to determining whether defendant lacked the requisite scienter”),
aff’d, 393 F.3d 1321 (D.C. Cir. 2005).
Schneider not only fails to allege that the government was unaware of Chase’s
solicitation practices, but he also deleted his earlier allegations that Chase failed to disclose those
practices to the government. Schneider’s First Amended Complaint asserted that Chase
concealed from the government “both the existence of the RCV1 charged-off [loans] and the way
those loans were treated for purposes of HAMP solicitations.” SAC ¶ 16 n.2; see also FAC
¶ 163 (RCV1 “was not disclosed or reported to Freddie Mac”). Those allegations, however,
26
were (rightly) purged from Schneider’s subsequent complaints. See Dkt. 105-8 (Maya Decl. Ex.
1). It would defy common sense to suggest that Chase was attempting to deceive the
government in its annual HAMP certifications while Chase was elsewhere freely disclosing to
the government that it was not soliciting RCV1 borrowers under HAMP.
It makes no difference that Chase allegedly failed to inform the government that, when it
released the liens on certain charged-off loans, it did not forgive the debt or inform the borrower.
See TAC ¶ 136. As explained above, these allegations have no bearing on Chase’s obligations
under HAMP: because Chase released the liens on the loans at issue, the loans were necessarily
ineligible for HAMP modifications, and therefore were not subject to HAMP solicitation rules at
all. See supra pp. 24-25.11
D. Schneider has not adequately alleged that the government was damaged.
The proposed Third Amended Complaint also fails to allege that Chase’s supposed false
certifications harmed the United States. To successfully state a claim for damages under the
FCA, a relator “must show not only that the defendant’s false claims caused the government to
make payments that it would have otherwise withheld, but also that the performance the
government received was worth less than what it believed it had purchased.” U.S. ex rel. Davis
v. Dist. of Columbia, 679 F.3d 832, 840 (D.C. Cir. 2012) (affirming dismissal of treble damages
claim). Schneider’s proposed Third Amended Complaint fails to make this necessary showing.
Schneider’s own allegations confirm that the performance the government paid for was
Chase’s modification of certain mortgage loans—not the solicitation or “servicing” of loans that
11
As described above, moreover, the government has plainly been aware of Schneider’s
allegation that Chase did not inform borrowers or forgive debts when it released liens since at
least 2014, and yet has continued to make HAMP incentive payments to Chase. See supra pp.
11-18. Chase’s alleged failure to disclose these facts to the government was therefore immaterial
to the government’s decision to make HAMP incentive payments to Chase as a matter of law.
See id.
27
were not modified. According to Schneider, “Chase received incentive compensation for each
eligible loan modification” based on the “delinquency period of the loan and the continued
success of the loan modification effort.” TAC ¶ 94. Specifically, servicers would receive a
“one-time payment from the Government for each completed permanent HAMP modification of
a first lien,” ranging from $400 to $2,000. Id. ¶ 95. Servicers could further obtain incentive
payments “annually on the anniversary date of the permanent HAMP loan modification for a
period of thirty six (36) months for modified loans that remain in good standing.” Id. ¶ 96.
The proposed Third Amended Complaint fails to plead “that the performance the
government received was worth less than what it believed it had purchased.” Davis, 679 F.3d at
840. It does not allege that the loans Chase modified were ineligible for modification or that
Chase sought incentive payments for loans that were not modified in accordance with HAMP
requirements. Rather, Schneider alleges only that Chase should have made HAMP loan
modifications available to additional borrowers with loans in RCV1. Whether or not non-
modified RCV1 loans were serviced or solicited under HAMP, however, has no bearing on
whether the United States received the benefit of its bargain with Chase when it paid for loan
modifications.
The D.C. Circuit’s decision in Davis is instructive. The relator there alleged that a
Medicaid provider violated rules requiring providers to retain documentation of the services
provided. Davis, 679 F.3d at 840. The court held that such allegations were insufficient to
establish that the government had been damaged under the FCA. Id. It explained that, under
Medicaid, “the federal government pays for specified services to be provided to eligible
recipients” and the relator did “not allege that any services paid for were not provided.” Id.
28
Because “the defect in th[e] case in no way call[ed] into question the value of the medical care
provided by [the defendant],” the government was not damaged. Id.
As in Davis, the federal government in this case paid “for specified services”— HAMP
modifications. See id. And Schneider here “does not allege that” the HAMP modifications
“paid for were not provided.” See id. Thus, the alleged “defect in this case”—failing to solicit
or service non-modified RCV1 loans—“in no way calls into the question the value” of the
HAMP modifications “provided by” Chase. See id. Because the United States received the
“services” it paid for, Schneider’s claim for treble damages cannot succeed.
II. THE PROPOSED SERVICING VIOLATION CLAIMS FAIL AS A MATTER OF

LAW.
The proposed Third Amended Complaint asserts that Chase failed to service loans that
had been charged off and transferred to RCV1 “according to the requirements of Federal law.”
E.g., TAC ¶ 20. Any claim that these purported servicing violations rendered Chase’s annual
certifications of compliance with the terms of the MHA program false fails as a matter of law for
at least three reasons. First, the proposed Third Amended Complaint fails to allege with
particularity which statutes or regulations Chase purportedly violated, or how Chase allegedly
violated them. Second, Chase’s annual certifications of material compliance with “all applicable
. . . laws” pertained only to activities undertaken by Chase pursuant to MHA programs, and the
proposed Third Amended Complaint fails to allege that Chase violated any applicable servicing
laws in connection with MHA programs. Third, Schneider’s vague assertion that Chase failed to
comply with applicable servicing laws fails for all of the same reasons that his HAMP claims
fail.
Failure to plead with particularity. Under Rule 9(b), an FCA claim premised upon
allegedly false certifications of compliance with law fails where the complaint does not identify
29
with particularity which statutes or regulations the defendant violated and how it violated them.
See, e.g., U.S. ex rel. Hanna v. City of Chicago, 834 F.3d 775, 779-80 (7th Cir. 2016) (“Where
the allegedly false certification relates to a failure to comply with certain statutory and regulatory
provisions, the plaintiff should be able to tell the [defendant] which ones it flouted, and how and
when.”); U.S. ex rel. Gage v. Davis S.R. Aviation, LLC, 623 F. App’x 622, 625-26 (5th Cir.
2015) (“To plead the ‘what’ of a claim in a [false certification case], a plaintiff must state with
particularity the statute, regulation, or contract provision with which defendants have certified
compliance.”); U.S. ex rel. Kietzman v. Bethany Circle of King’s Daughters, 2018 WL 1566814,
at *9 (S.D. Ind. Mar. 30, 2018) (dismissing FCA claims where “complaint fault[ed] [defendant]
for failing to comply with applicable federal regulations,” but failed to “identif[y] with
particularity a single federal regulation allegedly violated”); U.S. ex rel. Thomas v. Lockheed
Martin Aeroparts, Inc., 2016 WL 47882, at *7 (W.D. Pa. Jan. 4, 2016) (dismissing FCA claim
where plaintiff “failed to identify any contracts, regulations, or statutes that apply to his
allegations”); see also U.S. ex rel. Keaveney v. SRA Int’l, Inc., 219 F. Supp. 3d 129, 150 (D.D.C.
2016) (dismissing FCA claims under Rule 12(b)(6), and thus declining to reach analysis under
Rule 9(b), where “[r]elators have not identified any contractual, statutory or regulatory authority
that require the level of detail [r]elators contend was necessary”).
Here, the proposed Third Amended Complaint contains only a few stray allegations that
Chase violated unspecified laws and regulations relating to mortgage servicing. See, e.g., TAC
¶ 14 (“violations of past and present regulations, statutes and other governmental requirements
for first and second federally related home mortgage loans”); id. ¶ 17 (“illegal and discriminatory
loan servicing policies and procedures”); id. ¶ 122 (“violations of federal banking law and
regulations”). Nowhere does Schneider identify any specific statutory provision or regulation
30
that Chase purportedly violated, nor does he concretely identify the precise conduct that
purportedly violated the law. Accordingly, any claim premised upon Chase’s alleged violations
of state and federal mortgage servicing statutes fails as a matter of law.
Schneider’s reference to 12 U.S.C. § 2602(1) is inapposite. Although Schneider asserts
in passing that Chase violated “servicing requirements” purportedly set out in 12 U.S.C.
§ 2602(1), see TAC ¶¶ 107-08, that statute does not impose any servicing requirements
whatsoever. Instead, it merely defines the term “federally related mortgage loan” for purposes of
the Real Estate Settlement Procedures Act (“RESPA”). See 12 U.S.C. § 2602(1).
Schneider’s offhand references to the “Dodd-Frank legislation” and “Regulation X,” see
TAC ¶¶ 128, 190-91, are likewise unavailing. In 2013, as part of its response to the Great
Recession, Congress passed the Dodd-Frank Act. See Pub. L. No. 111-203. Regulations
promulgated pursuant to that statute—including Regulation X and its companion, Regulation Z,
12 C.F.R. §§ 1024, 1026—imposed several new requirements on mortgage servicers, including a
requirement that periodic statements be sent to borrowers for all closed-end, first-lien mortgage
loans, irrespective of whether the loan had been charged off, see, e.g., 12 C.F.R. § 1026.41.
Importantly, however, no comparable requirement existed prior to January 10, 2014, and—as the
Chase documents cited in the proposed Third Amended Complaint make clear—Chase took
steps to ensure compliance with these regulations after they were adopted. See TAC ¶¶ 190-91.12
12
The new requirements imposed under Regulation X and Regulation Z applied only to
secured mortgage loan debt. See 12 C.F.R. § 1024.2(b) (defining “federally related mortgage
loan” as “[a]ny loan . . . secured by a first or subordinate lien on residential real property,”
subject to other requirements); id. § 1026.2(a)(24) (defining residential mortgage transaction).
As evidenced by the document referenced in paragraph 190 of the proposed Third Amended
Complaint, Chase undertook to release the liens on all charged-off loans that would otherwise
have been subject to these regulations. TAC ¶ 190.
31
Simply put, Schneider fails to allege any violations of the Dodd-Frank Act or the regulations
promulgated thereunder.
No nexus to MHA Programs. Schneider’s allegation that Chase did not comply with
mortgage servicing laws also fails to state a claim because the proposed Third Amended
Complaint does not identify any purported servicing violations that occurred “in connection
with” Chase’s participation in MHA programs. In its MHA compliance certifications, Chase
certified only that it materially complied with applicable mortgage servicing laws and regulations
“[i]n connection with the [MHA] Programs.” TAC ¶ 23 (emphasis added). Schneider must
therefore allege a nexus between any purported servicing violations and Chase’s participation in
an MHA program, such as HAMP.
Numerous courts have recognized this common-sense conclusion, holding that there must
be a connection between an allegedly false statement and the government program at issue in
order to state a claim under the FCA. See U.S. ex. rel. Kelly v. Novartis Pharm. Corp., 827 F.3d
5, 14 (1st Cir. 2016) (“FCA liability does not attach to violations of federal law or regulations . . .
that are independent of any false claim.”); U.S. ex rel. Greenfield v. Medco Health Sols., Inc.,
880 F.3d 89, 100 (3d Cir. 2018) (concluding that FCA claims failed because there was no “link”
between alleged kickbacks and federal program); U.S. ex rel. Kolchinsky v. Moody’s Corp., 238
F. Supp. 3d 550, 558 (S.D.N.Y. 2017) (“[W]hile a defendant’s non-compliance with a
government regulation may give rise to other forms of liability, or civil or criminal violations, it
does not give rise to an FCA claim unless violation of the regulation has some relevant
connection to the contract at issue.”). As the Supreme Court explained in Escobar, the FCA
“does not adopt” an “extraordinarily expansive view of liability” according to which the
32
government can require those who do business with it to “aver their compliance with the entire
U.S. Code and Code of Federal Regulations.” 136 S. Ct. at 2004.
Here, Schneider fails to plead the required connection between Chase’s alleged servicing
violations and its participation in HAMP or other MHA program activity. For instance,
Schneider does not allege a servicing violation relating to any of the loans for which Chase
actually sought or received HAMP incentive payments. See supra pp. 30-32. To the contrary,
the only specific servicing violation alleged in the complaint—that Chase “failed to send transfer
letters . . . as required by RESPA” after it sold a portfolio of loans to one of Schneider’s
companies in early 2009, see TAC ¶ 127—lacks any connection whatsoever to Chase’s
participation in MHA programs. Accordingly, the proposed Third Amended Complaint fails to
allege that Chase materially violated any applicable legal requirements in connection with MHA
program activity, and thus fails to plead that Chase’s annual certifications of compliance were
false.
General failure to meet FCA requirements. Finally, Schneider’s vague allegations that
Chase violated applicable servicing laws fail to state a viable FCA claim for substantially the
same reasons as his HAMP claims. According to the allegations in the proposed Third Amended
Complaint, the government has continued making HAMP payments to Chase even though the
government knew, by 2014 at the latest, of Schneider’s allegations that “the loans in the RCV1
were not serviced according to the requirements of Federal law.” FAC ¶ 16; see also id. ¶¶ 172,
174-75, 187, 207, 213. Schneider therefore fails to allege that the purported servicing violations
were “material” to the government’s payment decision. See supra pp. 11-18. Similarly, the
proposed Third Amended Complaint fails to allege that Chase’s annual certifications were
knowingly false or that the government did not receive the benefit of its bargain with Chase due
33
to its alleged servicing violations. See supra pp. 22-29. For these reasons too, Schneider’s
servicing claims fail as a matter of law.
III. SCHNEIDER’S REMAINING ALLEGATIONS CANNOT RESUSCITATE HIS

CLAIMS.
The proposed Third Amended Complaint contains scattered references to (1) alleged
violations of the National Mortgage Settlement, (2) a different MHA program known as 2MP,
and (3) actions purportedly taken by Chase with respect to loans that Schneider purchased from
Chase. For the reasons stated below, all of these allegations are irrelevant to Schneider’s claims
and should be disregarded.
NMS claims. Schneider’s allegations regarding the National Mortgage Settlement
(“NMS”) are futile. Under the law-of-the-case doctrine, courts may not reconsider “issues that
have already been decided in the same case.” Indep. Petroleum Ass’n of Am. v. Babbitt, 235
F.3d 588, 596-97 (D.C. Cir. 2001). Moreover, the mandate rule, which is “a more powerful
version of the law-of-the-case doctrine,” directs that “an inferior court has no power or authority
to deviate from the mandate issued by an appellate court.” Id. (citation omitted); see also Role
Models Am., Inc. v. Geren, 514 F.3d 1308, 1311 (D.C. Cir. 2008). Furthermore, an amended
complaint will be deemed futile if it “reasserts a claim on which the court previously ruled.”
Greggs v. Autism Speaks, Inc., 987 F. Supp. 2d 51, 54 (D.D.C. 2014).
This Court already dismissed Schneider’s NMS claims with prejudice. See Dkt. 118 at 1,
14, 22; Dkt. 119. That dismissal was affirmed by the D.C. Circuit on appeal. See Schneider, 878
F.3d at 316. The D.C. Circuit explicitly held that it was remanding only “the HAMP claims” for
further proceedings. Id. Accordingly, any attempt by Schneider to reassert claims based on
Chase’s alleged NMS violations would be futile. See Cannon v. Dist. of Columbia, 10 F. Supp.
3d 30, 36 (D.D.C. 2014) (rejecting “plaintiffs’ unjustified attempt to reopen these claims on
34
remand,” where claims had already been dismissed and dismissal had been affirmed on appeal).
The Court should therefore disregard the numerous allegations in the proposed Third Amended
Complaint relating to alleged violations of the NMS. See, e.g., TAC ¶¶ 14-17, 20-21, 137, 142,
144, 153-54, 168, 175.
2MP claims. Any 2MP-related claim would fail as a matter of law because the proposed
Third Amended Complaint does not allege a concrete violation of that program’s terms. The
government implemented 2MP to offer relief to borrowers on second-lien loans where the
borrowers’ first liens had been modified under HAMP. MHA Handbook at 158. Although
“designed to work in tandem with HAMP,” 2MP is a distinct program governed by its own
procedures. Id. For example, 2MP does not involve an application or solicitation process.
Instead, borrowers are automatically offered 2MP modifications when a loan meets the
program’s eligibility criteria. See id. at 158, 160. Schneider’s allegations regarding Chase’s
purported non-compliance with HAMP requirements therefore provide no support for any
assertion that Chase violated the distinct requirements of 2MP. Because the proposed Third
Amended Complaint fails to identify a concrete violation of a specific 2MP requirement by
Chase, any claim based on an alleged violation of 2MP program rules cannot satisfy Rule 9(b)
and would fail as a matter of law.
Claims relating to Schneider loans. Finally, the proposed Third Amended Complaint
refers on occasion to alleged wrongdoing by Chase in connection with loans owned by
Schneider’s companies. See, e.g., TAC ¶¶ 15, 127, 165. These allegations are entirely
irrelevant, as Chase’s annual compliance certifications did not encompass loans that Chase had
sold to a third party years before the certifications were made. The Court should therefore ignore
these allegations in evaluating the sufficiency of the proposed Third Amended Complaint.
35
IV. CLAIMS BASED UPON PRE-FEBRUARY 9, 2012 CONDUCT FAIL AS A

MATTER OF LAW.
Any claim based on alleged conduct occurring prior to February 9, 2012 would fail as a
matter of law because the United States has released Chase from liability for all such claims. As
part of the NMS Consent Judgment, the United States agreed to
“fully and finally release[ ] [Chase] . . . from any civil or

administrative claims the United States has or may have, and from
any civil or administrative remedies or penalties (expressly
including punitive or exemplary damages) it may seek or impose,
based on the Covered Servicing Conduct that has taken place as of
11:59 p.m., Eastern Standard Time, on February 8, 2012 . . . , under
. . . the False Claims Act. . . .”
Consent Judgment Ex. F at F-12-13 (emphasis added); see also id. Ex. F at F-38-39 (confirming
that the release extends to claims asserted by FCA relators). “Covered Servicing Conduct” is
defined as “encompass[ing] all activities of” Chase “directed toward servicing . . . of mortgage
loans . . . from and after the closing of a borrower’s mortgage loan.” Id. Ex. F at F-2. These
activities expressly include “[d]eficiencies in [Chase]’s or any of its affiliates’ participation in
and implementation of the . . . Making Home Affordable Program, including all of its component
programs.” Id. Ex. F at F-6 (emphasis added).13
Schneider’s proposed Third Amended Complaint purports to assert claims on the basis of
alleged conduct that occurred on or before February 8, 2012. See TAC ¶¶ 195-97 (alleging false
certifications on September 29, 2010, and September 29, 2011). Those claims, however, fall
squarely within the scope of the NMS release provision: they relate to Chase’s mortgage
13
The Court may take judicial notice of the NMS release provisions because they were
contained in an order entered by this Court and are incorporated by reference on page four of the
proposed Third Amended Complaint. See Collier v. Dist. of Columbia, 46 F. Supp. 3d 6, 13
(D.D.C. 2014) (Collyer, J.) (“a court may consider . . . documents attached to the complaint as
exhibits or incorporated by reference”). The Consent Judgment and release provisions are
available at https://d9klfgibkcquc.cloudfront.net/Consent_Judgment_Chase-4-11-12.pdf.
36
servicing activities and its conduct in connection with MHA programs. Accordingly, leave to
amend the complaint should be denied as futile insofar as Schneider seeks to assert claims based
upon pre-February 9, 2012 conduct.
Schneider does not meaningfully dispute that the NMS release applies to his claims.
Instead, he argues that Chase “waived this release as a defense” by failing to raise it in its prior
motion to dismiss. See TAC ¶ 13 n.2. That argument, however, is wrong as a matter of law.
Contrary to Schneider’s assertion, a release is not among the handful of procedural defenses
(such as insufficient service of process and improper venue) that are waived if not asserted in a
motion to dismiss. See Fed. R. Civ. P. 12(b), (h). Although the Federal Rules require that
certain defenses, including a release, be raised in a responsive pleading, see Fed. R. Civ. P.
8(c)(1), a motion to dismiss is not a responsive pleading, see Wright & Miller, Fed. Prac. & Proc.
§ 1277 (3d ed. 2002) (“[T]he failure to raise an affirmative defense by motion will not result in a
waiver as long as it is interposed in the answer.”); see also Argentine Republic v. Nat’l Grid Plc,
637 F.3d 365, 367 (D.C. Cir. 2011) (“[Defendant] had no obligation to raise its timeliness
defense via a Rule 12(b) motion to dismiss.”). Because Chase has not yet filed an answer in this
case, it has not waived its right to invoke the NMS release.
Schneider might argue that Chase would be precluded from asserting its release defense
on a motion made under Rule 12(b)(6), but any such argument would be both irrelevant and
incorrect. The argument is irrelevant because Chase indisputably would be entitled to raise this
defense in a Rule 12(c) motion for judgment on the pleadings or a Rule 56 summary judgment
motion. As a result, Schneider’s pre-February 9, 2012 claims would still be futile. See Boster v.
Reliance Standard Life Ins. Co., 959 F. Supp. 2d 9, 19 (D.D.C. 2013) (denial of leave to amend
37
proper where “Court determines . . . that the claim that a plaintiff plans to add to his or her
complaint must fail, as a matter of law”).
Schneider’s argument is also incorrect because courts have discretion to allow defendants
to raise new arguments in subsequent motions to dismiss. See Wyatt v. Syrian Arab Republic,
398 F. Supp. 2d 131, 141 n.7 (D.D.C. 2005) (considering defense not raised in earlier motions);
Coleman v. Pension Ben. Guar. Corp., 196 F.R.D. 193, 196-97 (D.D.C. 2000) (considering
argument raised in subsequent motion “[i]n the absence of any apparent bad faith, and in the
interest of promoting the efficient resolution of this case”); Campbell-El v. Dist. of Columbia,
881 F. Supp. 42, 43 (D.D.C. 1995) (entertaining renewed motion “in order to avoid undue
delay”); see also Kim v. United States, 707 F.3d 335, 336-37 (D.C. Cir. 2013) (affirming district
court’s dismissal based on argument first raised in government’s second motion to dismiss where
“resolution of the issue does not depend on any facts not in the record, [and] addressing the issue
here and now in no way prejudices the [plaintiffs]”). Allowing Chase to raise additional grounds
for the dismissal of Schneider’s HAMP claims, moreover, would be especially appropriate given
(i) the intervening D.C. Circuit opinion and (ii) that Schneider’s prior complaint (and thus
Chase’s prior motion to dismiss) focused principally on Schneider’s (now-dismissed) claim that
Chase violated the terms of the NMS.
In short, any claims based on pre-February 9, 2012 conduct would fail as a matter of law.
Leave to assert such claims should therefore be denied as futile.
CONCLUSION
For the reasons set forth above, Schneider’s request for leave to amend his complaint for
the third time should be denied as futile.
38
Respectfully submitted,
April 27, 2018 /s/ Robert D. Wick

Robert D. Wick (D.C. Bar No. 440817)
Christian J. Pistilli (D.C. Bar No. 496157)
Ivano M. Ventresca (D.C. Bar No. 1045769)
COVINGTON & BURLING LLP
One CityCenter
850 Tenth Street NW
Washington, DC 20001
Tel: (202) 662-6000
Fax: (202) 662-6291
Attorneys for Defendants
39
CERTIFICATE OF SERVICE
I hereby certify that on April 27, 2018, a true and correct copy of the foregoing
opposition and an accompanying proposed order were served electronically on all registered
counsel of record via ECF and are available for viewing and downloading from the ECF system.
/s/ Robert D. Wick

Robert D. Wick
COVINGTON & BURLING LLP
One CityCenter
850 Tenth Street NW
Washington, DC 20001
Tel: (202) 662-6000
Fax: (202) 662-6291
Email: rwick@cov.com
Attorney for Defendants

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Case 1:14-cv-01047-RMC Document 126 Filed 04/27/18 Page 1 of 46

UNITED STATES DISTRICT COURT

DEFENDANTS’ MEMORANDUM IN SUPPORT OF THEIR OPPOSITION TO

TABLE OF AUTHORITIES ......................................................................................................... iii

A. Chase’s RCV1 System of Record ........................................................................... 3

B. The Home Affordable Modification Program ........................................................ 4

C. Procedural History .................................................................................................. 6

D. The Proposed Third Amended Complaint .............................................................. 8

I. THE PROPOSED HAMP CLAIMS FAIL AS A MATTER OF LAW. .......................... 10

B. Schneider has not adequately alleged that Chase’s compliance

C. Schneider has not adequately alleged scienter. ..................................................... 22

II. THE PROPOSED SERVICING VIOLATION CLAIMS FAIL AS A MATTER

III. SCHNEIDER’S REMAINING ALLEGATIONS CANNOT RESUSCITATE HIS

IV. CLAIMS BASED UPON PRE-FEBRUARY 9, 2012 CONDUCT FAIL AS A

Abhe & Svoboda, Inc. v. Chao,

Argentine Republic v. Nat’l Grid Plc,

Boster v. Reliance Standard Life Ins. Co.,

Campbell-El v. Dist. of Columbia,

Cannon v. Dist. of Columbia,

City of Chicago v. Purdue Pharma L.P.,

Coleman v. Pension Ben. Guar. Corp.,

Collier v. Dist. of Columbia,

Confederate Mem’l Ass’n, Inc. v. Hines,

Coyne v. Amgen, Inc.,

D’Agostino v. ev3, Inc.,

Fox v. Dist. of Columbia,

Greggs v. Autism Speaks, Inc.,

* Authorities upon which we chiefly rely are marked with asterisks.

Indep. Petroleum Ass’n of Am. v. Babbitt,

Kim v. United States,

Knudsen v. Sprint Commc’n Co.,

Payne v. Dist. of Columbia,

Role Models Am., Inc. v. Geren,

Safeco Ins. Co. of Am. v. Burr,

U.S. ex rel. Becker v. Westinghouse Savannah River Co.,

U.S. ex rel. Bettis v. Odebrecht Contractors of Cal., Inc.,

U.S. ex rel. Burke v. Record Press, Inc.,

*U.S. ex rel. Davis v. Dist. of Columbia,

U.S. ex rel. Davis v. Dist. of Columbia,

U.S. ex rel. Dress v. Qualium Corp.,

U.S. ex rel. Gage v. Davis S.R. Aviation, LLC,

U.S. ex rel. Greenfield v. Medco Health Sols., Inc.,

U.S. ex rel. Hanna v. City of Chicago,

U.S. ex rel. Keaveney v. SRA Int’l, Inc.,

U.S. ex. rel. Kelly v. Novartis Pharm. Corp.,

U.S. ex rel. Kietzman v. Bethany Circle of King’s Daughters,

U.S. ex rel. Kolchinsky v. Moody’s Corp.,

U.S. ex rel. Lemmon v. Envirocare of Utah, Inc.,

*U.S. ex rel. McBride v. Halliburton Co.,

U.S. ex rel. McGrath v. Microsemi Corp.,

U.S. ex rel. Nargol v. DePuy Orthopaedics, Inc.,

U.S. ex rel. Petratos v. Genentech Inc.,

*U.S. ex rel. Purcell v. MWI Corp.,

U.S. ex rel. Schimelpfenig v. Dr. Reddy’s Labs. Ltd.,

U.S. ex rel. Schneider v. JPMorgan Chase Bank, Nat’l Ass’n,

U.S. ex rel. Siewick v. Jamieson Sci. & Eng’g, Inc.,

U.S. ex rel. Thomas v. Lockheed Martin Aeroparts, Inc.,

U.S. ex rel. Williams v. Martin-Baker Aircraft Co., Ltd.,