In U.S. ex rel. Bibby v. Wells Fargo Bank, N.A., 369 F. Supp. 3d 1346 (N.D. Ga. 2019), the district court that had handled the False Claims Act (“FCA”) litigation for the last seven years of its thirteen-year history rejected the Government’s attempt to limit relators to the minimum statutory share and instead awarded an amount closer to the maximum. The ruling occurred on March 29, 2019.
Since the Government had declined to intervene in the case, leaving the litigation to Relators, the statutory range for a relator share award was 25-30%. See 31 U.S.C. § 3730(d)(2). The court intimated that it might have awarded the maximum 30% share but for an earlier breach of the seal by the Relators that resulted in extensive litigation, delay and resources.
As the court described:
The gravamen of Relators’ claims was that Wells Fargo, as well as other banks and mortgage lenders, “repeatedly violated the rules of the [Interest Rate Reduction Refinancing Loan] program” by “over-charg[ing] veterans, charg[ing] unallowable fees, and then deliberately conceal[ing] those facts from the [Veterans Administration] to obtain taxpayer-backed guarantees for the loans” while at “the same time … falsely certif[ying] to the VA, in writing, that they were not charging unallowable fees.”
Id. at 1347. After five years of investigation and 18 extensions of the seal, the Government declined to intervene to litigate the case. Multiple defendants then settled within a year, for substantial recovery to the Government, and Relators were awarded shares of those recoveries pursuant to the FCA. Two defendants, however, continued to litigate strenuously against the claims.
Relators Violate the Seal Requirement
In March 2014, approximately 2 ½ years after the court unsealed the matter, Relators informed the court that they had previously violated the court’s seal orders in multiple communications with members of the media starting in 2009. Both Relators acknowledged that they knew they had impermissibly violated the seal orders, but that they had done so out of frustration at how long the investigation was taking and the fact that veterans were continuing to be defrauded by the defendants’ illegal conduct. U.S. ex rel. Bibby v. Wells Fargo Home Mortg. Inc., 76 F. Supp. 3d 1399, 1404 (N.D. Ga. 2015). Indeed, one Relator testified that “he was instructed by the Government to continue brokering IRRRL loans for years after this qui tam suit was first filed, even though the alleged fraud had not been resolved.” Id.
Relator’s admission of the seal breach led to a motion to dismiss filed by Defendant Wells Fargo. After extensive briefing and an evidentiary hearing, the court denied Wells Fargo’s motion and instead imposed monetary sanctions totaling $1.61 million on the Relators. U.S. ex rel. Bibby v. Wells Fargo Bank, N.A., 2015 WL 12850572, at *1 (N.D. Ga. Feb. 26, 2015).
Government Opposes Relators’ Share Request
After reaching a settlement of $108 million from the remaining two defendants, the Relators moved for a maximum relator’s share of 30%. The Government opposed, arguing that the Relator’s award should be the minimum of 25%, in large part because the Relators had violated the seal.
The Government argued that the maximum award “should be reserved for only those individuals whose conduct in disclosing the fraud is virtually flawless,” U.S. ex rel. Bibby v. Wells Fargo Bank, N.A., 369 F. Supp. 3d 1346, 1350 (N.D. Ga. 2019). Additionally, the Government criticized the Relators for not parsing each of the 25 internal guidelines the Department of Justice has articulated in a series of pronouncements and contended that the relator share should be kept at the lower end because of the large size of the recovery. Id.
District Court Rejects Government’s Argument
The court rejected the Government’s argument that the Relators’ share should be minimized because of the large amount of money at stake, explaining that the “primary ‘measuring stick’” by which relator’s share was to be determined was the amount of the relators’ contribution. Id. at 1351. As the court explained, if Congress had intended to limit share based on the size of the recovery, it would have drafted the FCA relator share provisions accordingly. Id.
The court briefly described the marathon nature of the litigation, noting, for example, that its order about the relator share was the 1350th docket entry in the case and that the litigation had been “a bear to litigate and adjudicate.” Id. at 1347. More significantly, the court went into considerable detail about the enormous role that Relators played in “creating the litigation momentum and results that yielded the $108 million settlement on behalf of the [g]overnment.” Id. at 1352. As the court stated:
[Relators] poured themselves into the review of over 60,000 Wells Fargo HUD-1s and summarized the evidence in documentation attached to their expert report, ultimately identifying 4,097 loans that went to foreclosure and claim on which Wells Fargo allegedly charged unlawful fees. Mr. Bibby estimates that both he and Mr. Donnelly spent approximately 5,135 hours of their time as expert witnesses solely in the case against Wells Fargo. Between March 23, 2016 and August 16, 2016, Bibby and Donnelly each were separately deposed — two depositions each as fact witnesses and one deposition each as an expert witness — for a total of 29 hours.
Id. at 1353 (internal citations omitted). Notably, Relators’ counsel relied heavily on Relators’ expertise and extensive knowledge of the IRRRL market and particularly Wells Fargo’s conduct, which they had personally observed.
The court then considered the serious seal breaches by Relators and the detrimental effect they had caused during the litigation. Noting that Relators had already been heavily fined for those breaches, however, the court exercised its discretion to set the relator share at 28.5%. In so deciding, the court also considered the substantial contributions of Relators’ counsel and rejected the Government’s contention that it was improper to factor in counsel’s contribution since counsel had also received statutory fees from defendants.
Finally, the court observed that Congress clearly intended for relator shares to “encourage relators to assume the mantel of the public interest in FCA litigation as well as the enormous potential financial risks and losses entailed in FCA litigation,” Id. at 1355, and expressed consternation about the “mysterious hostility” often displayed by the Government to Relators when it comes to agreeing to relator share amounts. Id. at n13.
Clearly the high relator award here was due to the extraordinary effort and expertise put forth by Relators (and their counsel) in this lengthy, hard-fought litigation that the Government had declined to prosecute. Finding experienced and determined counsel who will vigorously litigate a meritorious case until successful resolution is a critical factor for anyone considering filing an FCA case.
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