2nd Circuit Holds Federal Banks Are Government Entities For FCA Purposes, Revives Qui Tam Suit Against Wells Fargo

United States ex rel. Kraus v. Wells Fargo & Co.

ANALYSIS: february 2020

[1] The allegations also involved conduct by entities later acquired by Wells Fargo, including Wachovia Capital Markets LLC, a Wachovia Corporation subsidiary, and World Savings, Inc.

 

[2] The case had a somewhat complex history prior to the district court’s May 2018 decision. The Eastern District of New York dismissed the complaint on the defendants’ motion, in July 2015, holding Relators’ complaint failed to allege false claims under the FCA. See United States v. Wells Fargo & Co., 117 F. Supp. 3d 215, 228 (E.D.N.Y. 2015). Relators appealed and the Second Circuit affirmed. See Bishop v. Wells Fargo & Co., 823 F.3d 35, 39 (2d Cir. 2016). Relators petitioned for certiorari, which the Supreme Court granted. The Court subsequently vacated the decision in Bishop, 823 F.3d 35, and remanded the case for further consideration in light of Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). See Bishop v. Wells Fargo & Co., 136 S. Ct. 1067 (2017). On remand, the Second Circuit vacated the district court’s judgment in Kraus, 117 F. Supp. 3d 215, and remanded for determination, “in the first instance, whether the relators have adequately alleged the materiality of the defendants’ alleged misrepresentations.”  See Bishop v. Wells Fargo & Co., 870 F.3d 104, 107 (2d Cir. 2017) (per curiam). On remand, Relators obtained leave to amend, the defendants again moved to dismiss, and on May 10, 2018, the district court granted the motion. See Kraus, 2018 U.S. Dist. LEXIS 79292.

 

[3]The court of appeals agreed with the district court “that FRB personnel are not ‘officer[s]’ or ‘employee[s] . . . of the United States’ within the meaning of § 3729(b)(2)(A)(i).” Kraus, 943 F.3d at 596–98.

 

 

 

 

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[1] The allegations also involved conduct by entities later acquired by Wells Fargo, including Wachovia Capital Markets LLC, a Wachovia Corporation subsidiary, and World Savings, Inc.

 

[2] The case had a somewhat complex history prior to the district court’s May 2018 decision. The Eastern District of New York dismissed the complaint on the defendants’ motion, in July 2015, holding Relators’ complaint failed to allege false claims under the FCA. See United States v. Wells Fargo & Co., 117 F. Supp. 3d 215, 228 (E.D.N.Y. 2015). Relators appealed and the Second Circuit affirmed. See Bishop v. Wells Fargo & Co., 823 F.3d 35, 39 (2d Cir. 2016). Relators petitioned for certiorari, which the Supreme Court granted. The Court subsequently vacated the decision in Bishop, 823 F.3d 35, and remanded the case for further consideration in light of Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). See Bishop v. Wells Fargo & Co., 136 S. Ct. 1067 (2017). On remand, the Second Circuit vacated the district court’s judgment in Kraus, 117 F. Supp. 3d 215, and remanded for determination, “in the first instance, whether the relators have adequately alleged the materiality of the defendants’ alleged misrepresentations.”  See Bishop v. Wells Fargo & Co., 870 F.3d 104, 107 (2d Cir. 2017) (per curiam). On remand, Relators obtained leave to amend, the defendants again moved to dismiss, and on May 10, 2018, the district court granted the motion. See Kraus, 2018 U.S. Dist. LEXIS 79292.

 

[3]The court of appeals agreed with the district court “that FRB personnel are not ‘officer[s]’ or ‘employee[s] . . . of the United States’ within the meaning of § 3729(b)(2)(A)(i).” Kraus, 943 F.3d at 596–98.

 

 

 

 

2nd Circuit Holds Federal Banks Are Government Entities For FCA Purposes, Revives Qui Tam Suit Against Wells Fargo

United States ex rel. Kraus v. Wells Fargo & Co.

© 2019 Dinsmore & Shohl LLP.  All rights reserved.

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analysis: February 2020