SCOTUS Must Curtail DOJ Power in JP Morgan Fraud Row: Petition

The U.S. Supreme Court should find the U.S. Justice Department doesn’t have unfettered discretion when seeking to dismiss a whistleblower’s False Claims Act suit and should revive mortgage fraud claims against JPMorgan Chase Bank, whistleblower Laurence Schneider said in a petition for writ of certiorari.

The court needs to repair a circuit split between the U.S. Court of Appeals for the D.C. Circuit, which affirmed the dismissal of Schneider’s suit, and the Ninth Circuit, which requires the DOJ to show that dismissal serves a valid governmental purpose, the petition said.

The Ninth Circuit standard is consistent with the FCA, which supports a meaningful role for whistleblowers in exposing government fraud, the petition said.

Statutory provisions that give whistleblowers the right to conduct suits after the government declines to join and the right to object to the fairness of settlements show that the D.C. Circuit’s unfettered discretion standard is inconsistent with the FCA, the petition said.

Schneider added that the government’s motion to dismiss, which said his case lacked merit and drained government litigation resources, was arbitrary and capricious.

The government has admitted it agrees with Schneider’s legal theory and that the amount at stake in the suit far exceeds any possible cost to the government in terms of resources, the petition said.

“The government obviously has other reasons for dismissing this case” that are “unrelated to the merits,” the petition said. “The government should be required to state those reasons, so that a court can determine whether the rationale for dismissal is ‘fraudulent, illegal, or arbitrary and capricious.’”

Schneider first pursued his action in 2013, accusing JPMorgan of avoiding payments to the government by falsely claiming compliance with requirements of the 2012 National Mortgage Settlement which concern deceptive foreclosure practices.

The D.C. Circuit rejected Schneider’s claims in December 2017, but remanded the case to the district court to give Schneider a chance to amend his complaint.

The DOJ, however, moved to dismiss the action in November 2018, saying that Schneider’s claims lacked substantial merit, and that further litigating the case would require unnecessary government expenditures.

A district court granted dismissal in March, stating that the FCA gives the DOJ an unfettered right to dismiss a whistleblower’s case as long as the whistleblower has the opportunity to convince federal prosecutors to keep the case alive. Schneider was given that chance, the court said.

The D.C. Circuit affirmed that ruling in August.

Foster, Walker & Di Marco P.C. and The Cullen Law Firm PLLC represented Schneider.

The case is United States ex rel. Schneider v. JPMorgan Chase Bank N.A., U.S., No. 19-678, petition filed 11/20/19.