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Wells Fargo Qui Tam Case Remanded to District Court

By George Khoury, Esq. on September 12, 2017 | Last updated on March 21, 2019

The qui tam action brought against Wells Fargo in 2011 has been brought back to life by the Second Circuit Court of Appeals, thanks to a recent ruling of the Supreme Court.

The case alleges, under the False Claims Act, that Wells Fargo, Wachovia, and World Savings banks all falsely certified compliance with banking laws in order to qualify for loans from the Federal Reserve System. The plaintiffs, or realtors, in the action, had their claims dismissed and that dismissal affirmed; however, on appeal again, as the appellate court noted, the standard has now changed, which resulted in a remand to the district court.

Time to Change

Under the FCA, in order for a realtor's case to qualify, the allegedly false claim must meet certain requirements, particularly as to whether the claim was significant enough to merit government action. Under the prior standard, the realtors failed to meet the particularity requirements. However, those were abandoned in favor of more logical reading of the FCA. The court explained:

[A] misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government's payment decision in order to be actionable under the [FCA]. In general, materiality looks to the effect on the likely or actual behavior of the recipient of the alleged misrepresentation. Specifically in the FCA context, proof of materiality can include, but is not necessarily limited to, evidence that the defendant knows 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. Conversely, 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.

What Comes Next?

At this point, the case has been remanded to the district court. Generally, now the district court will request briefing from the parties, then issue a ruling (that will likely be appealed). As such, it may be some time before this matter actually commences litigation, if it ever does.

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