United States ex rel. Grubea v. Rosicki, Rosicki & Assocs., P.C.

318 F.Supp.3d 680

UNITED STATES of America EX REL. Peter D. GRUBEA, Plaintiff,

v.ROSICKI, ROSICKI & ASSOCIATES, P.C., Paramount Land, Inc., Threshold Land Inc., Enterprise Process Service, Inc., McCabe, Weisberg, & Conway, P.C., Attorney Outsourcing Support Services, Inc., REO America Abstract, Inc., Cenlar FSB, Citigroup, Inc., Citibank, N.A., CitiMortgage, Inc., Ditech Financial LLC, EverHome Mortgage Company, EverBank FSB, Flagstar Bank, FSB, Green Tree Credit, James B. Nutter & Co., MetLife Bank, N.A., Nationstar Mortgage LLC, OneWest Bank FSB, PHH Mortgage Corporation, PNC Bank, FSB, SunTrust Mortgage, Inc., U.S. Bank, N.A., and Wells Fargo & Co., Defendants.

United States of America, Plaintiff–Intervenor,

v.Rosicki, Rosicki & Associates, P.C., Enterprise Process Service, Inc., Paramount Land, Inc., Defendants.

United States of America ex rel. Peter D. Grubea, Plaintiff,

v.Bank of America Corporation, Bank of America, N.A., J.P. Morgan Chase & Co., and JPMorgan Chase Bank, N.A., Defendants.

12–CV–7199 (JSR)

13–cv–1467 (JSR)

United States District Court, S.D. New York.

Signed June 23, 2018

Cristine Irvin Phillips, Lauren Almquist Lively, Andrew Edward Krause, United States Attorney Office, New York, NY, Brian Marc Feldman, Harter, Secrest & Emery, LLP, Rochester, NY, Carol E. Heckman, Harter,Secrest & Emery, LLP, Buffalo, NY, Arun Srinivas Subramanian, Cory Spencer Buland, Jacob W. Buchdahl, Zachary B. Savage, Susman Godfrey LLP, New York, NY, Kathryn P. Hoek, Susman Godfrey LLP, Los Angeles, CA, William R. H. Merrill, Susman Godfrey LLP, Houston, TX, for Plaintiff.

Daniel James Horwitz, Jonathan Robert Jeremias, Tracy Alexandria Burnett, McLaughlin and Stern, LLP, Andrew William Schilling Brian Jeffrey Wegrzyn, Ross Eric Morrison, Buckley Sandler LLP, Damien Jerome Marshall, Randall Wade Jackson, Mario De Oliveira Gazzola, Boies, Schiller & Flexner LLP, Stephanie Katsigiannis Benecchi, Kasowitz, Benson, Torres & Friedman LLP, Courtney M. Dankworth, Matthew Lee Biben, William David Sarratt, Debevoise & Plimpton LLP, Stephen George Rinehart, Troutman Sanders LLP, Daniel Lawrence Stein, Mayer Brown LLP, Luke A. Connelly, Winston & Strawn LLP, John F. Lynch, Jonathan M. Moses, Kevin Michael Jonke, Leah Sonia Rizkallah, Wachtell, Lipton, Rosen & Katz, New York, NY, John Bell Williams, III, Buckley Sandler LLP, Edward Tae Kang, Kelley Connolly Barnaby, Alston & Bird LLP, Washington, DC, Candidus K. Dougherty, Edmund Kean John, Jeffrey B. McCarron, Swartz Campbell LLC, Mark B. Sheppard, Lathrop B. Nelson, III, Montgomery McCracken Walker & Rhoads LLP, Philadelphia, PA, Amy Pritchard Williams, K & L Gates LLP, Jack M. Knight, John H. Cobb, Stacie C. Knight, Winston & Strawn LLP, Charlotte, NC, Debra Bogo–Ernst, Lucia Nale, Michael John Thomas Downey, Mayer Brown LLP, Chicago, IL, for Defendants

OPINION AND ORDER

JED S. RAKOFF, U.S.D.J.

On September 24, 2012, Peter D. Grubea ("Relator") filed a "qui tarn" action on behalf of the United States of America (the "Government") against Rosicki, Rosicki & Associates ("Rosicki"), Enterprise Process Service, Inc. ("Enterprise"), Paramount Land, Inc. ("Paramount"), Threshold Land, Inc. ("Threshold") (collectively, the "Rosicki Defendants") and various mortgage servicers (the "First Suit"). See Complaint, Dkt. 25. On February 28, 2013, Grubea filed a First Amended Complaint naming as additional defendants McCabe, Weisberg & Conway, P.C. ("McCabe"), Attorney Outsourcing Support Services, Inc. ("AOSS"), REO America Abstract, Inc. ("REO") (collectively, the "McCabe Defendants"), and certain additional mortgage services. See Dkt. 27.

On March 5, 2013, Grubea filed suit against four mortgage servicers: HSBC Bank USA, N.A., HSBC Finance Corporation, HSBC Mortgage Corporation (USA), HSBC Mortgage Services, Inc. (collectively, "HSBC") (the "Second Suit").See Complaint, Dkt. 22, No. 13 Civ. 1467. Thereafter, in 2014, HSBC admitted to liability and the Court entered judgment in the amount of $10 million. See Stipulation and Order of Settlement and Dismissal, Dkt. 151–1.

On June 27, 2014, Grubea filed a Second Amended Complaint in the First Suit adding still more servicers as defendants. See Dkt. 28. On July 8, 2014, Grubea filed a First Amended Complaint in the Second Suit naming Bank of America Corporation, Bank of America, N.A. (collectively, "Bank of America"), and J.P. Morgan Chase & Co, and JPMorgan Chase Bank, N.A. (collectively, "JPMorgan Chase") as defendants. See Dkt. 23, No. 13 Civ. 1467.

All of this remained under seal while the Government undertook its own inquiry in order to determine whether to intervene. However, in January of 2018, both suits were reassigned to this Judge, see Dkt. 19; Dkt. 20, No. 13 Civ. 14 67, and the Court required the Government to make its election without further delay. On February 13, 2018, the Government elected to intervene in part and to decline intervention in part in the First Suit, see Government's Notice of Election to Intervene in Part and Decline Intervention in Part, Dkt. 33, and to decline any intervention in the Second Suit, see Notice of Election to Decline Intervention, Dkt. 31, No. 13 Civ. 1467.

Accordingly, on March 27, 2018, the Government filed a three-count complaint against the Rosicki Defendants¹ for violations of the False Claims Act ("FCA"). See Complaint-in-Intervention ("CII"), Dkt. 22. On April 3, Relator filed a five-count Third Amended Complaint ("TAC") in the First Suit against the Rosicki Defendants, the McCabe Defendants, and all of the Servicer Defendants² except for JPMorgan Chase and Bank of America, see Dkt. 29, and a five-count Second Amended Complaint ("SAC") in the Second Suit against the remaining Servicer Defendants, JPMorgan Chase and Bank of America, see Dkt. 28, No 13. Civ. 1467.

The Servicer Defendants, the Rosicki Defendants, McCabe, and the McCabe Affiliates³ now move to dismiss the three operative complaints. See Dkts. 123, 132, 135, and 137; Dkt. 56, No. 13 Civ. 14 67; Memorandum of Law in Support of the Servicer Defendants' Motion to Dismiss the Complaint ("Servicer Mem."), Dkt. 124; Memorandum of Law in Support of the Rosicki Defendants' Motion to Dismiss ("Rosicki Mem."), Dkt. 134; Memorandum of Law in Support of Motion to Dismiss the Third Amended Complaint by Defendant, McCabe, Weisberg & Conway, P.C. ("McCabe Mem."), Dkt. 138; Memorandum of Law in Support of Attorney Outsourcing Support Services, Inc.'s and REO America Abstract, Inc.'s Motion to Dismiss Third Amended Complaint ("AOSS Mem."), Dkt. 136; Reply Memorandum of Law in Further Support of the Servicer Defendants' Motion to Dismiss the Complaint ("Servicer Reply"), Dkt. 158; Reply Memorandum of Law in Further Support of the Rosicki Defendants' Motion to Dismiss ("Rosicki Reply"), Dkt. 157; Reply in Support of Motion to Dismiss the Third Amended Complaint by Defendant, McCabe, Weisberg & Conway, P.C. ("McCabe Reply"), Dkt. 163; Reply Memorandum of Law in Support of Attorney Outsourcing Support Services, Inc.'s and REO America Abstract, Inc.'s Motion to Dismiss Third Amended Complaint ("AOSS Reply"), Dkt. 162.⁴

Grubea and the Government oppose. See Memorandum of Law of Plaintiff–Intervenor United States of America in Opposition to the Rosicki Defendants' Motion to Dismiss ("Gov't Mem."), Dkt. 149; Memorandum of Law in Opposition to Defendants' Motions to Dismiss ("Relator Mem."), Dkt. 150; Sur–Reply Memorandum of Law of Plaintiff–Intervenor United States of America in Further Opposition to the Rosicki Defendants' Motion to Dismiss ("Gov't Reply"), Dkt. 167; Relator's Sur–Reply ("Relator Reply"), Dkt. 168.

Following this extensive briefing, the Court heard oral argument on May 25, 2018. See Transcript dated May 25, 2018 ("Tr."), Dkt. 176. Now, after careful consideration, the Court hereby dismisses with prejudice the claims against the Servicer Defendants; dismisses the claims against McCabe and the McCabe Affiliates without prejudice to Relator amending his complaint to detail further specific examples of McCabe and its Affiliates' allegedly fraudulent conduct; and otherwise denies the motions (in particular, denying the motion to dismiss of the Rosicki Defendants).

The pertinent allegations, as set forth in the operative complaints,⁵ are as follows:

Grubea is an experienced consumer bankruptcy attorney residing in Erie County, New York. See TAC ¶ 18. Rosicki is a New York professional corporation specializing in mortgage law, with offices in Plainview, Batavia, and Fishkill, New York. Id. ¶ 19. Threshold is a New York business corporation, incorporated on May 30, 2003, and dissolved on July 11, 2011, with its principal office in Plainview, New York. Id. ¶ 21. Paramount is the successor-in-interest to Threshold and a New York business corporation, with its principal office in Plainview, New York. Id. ¶¶ 20–21. Enterprise is a New York business corporation, with its principal office in Plainview, New York. Id. ¶ 22.

McCabe is a New York professional corporation with locations in New York and Pennsylvania. Id. ¶ 23. AOSS is a Pennsylvania corporation with its principal office in Philadelphia, Pennsylvania. Id. ¶ 24. REO is a Pennsylvania corporation with its principal office in Philadelphia, Pennsylvania. Id. ¶ 25.

Cenlar FSB ("Cenlar") is a federal savings bank, with its principal office in Trenton, New Jersey. Id. ¶ 26. Citigroup, Inc. is a Delaware corporation, with its principal office in New York; Citibank, N.A. is a subsidiary of Citigroup; and CitiMortgage, Inc. is a New York corporation and a subsidiary of Citigroup (collectively, "Citi"). Id. ¶ 27. EverHome Mortgage Company is a Florida corporation, with its principal office in Jacksonville, Florida and EverBank FSB is a federal savings bank, with its principal office in Jacksonville, Florida. Id. ¶ 28. Flagstar Bank, FSB ("Flagstar") is a federal savings bank, with its principal office in Troy, Michigan. Id. ¶ 29. Green Tree Credit ("Green Tree") is a Delaware limited liability company, with...