['UNITED STATES OF AMERICA v. BANK OF AMERICA CORPORATION'] ( 2014 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
__________________________________
)
UNITED STATES, et al., )
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Plaintiffs, )
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v. ) Civil Action No. 12-361 (RMC)
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BANK OF AMERICA, et al., )
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Defendants. )
_________________________________ )
OPINION REGARDING MOTION TO INTERVENE
Alleging misconduct in home mortgage practices, the United States and numerous
State attorneys general sued major mortgagees including Citigroup, Inc.; Citibank, N.A.; and
CitiMortgage, Inc. (collectively, Citi). All parties agreed to a settlement, resulting in multiple
consent judgments. Raymond Wray, acting under the Servicemembers Civil Relief Act (SCRA),
50 U.S.C. app. §§ 501, et seq., seeks to intervene to set aside or amend the Consent Judgment
with Citi to remove a release provision relating to interest rate relief. As explained below, the
motion to intervene will be denied.
I. FACTS
On March 12, 2012, the Department of Justice, forty-nine State attorneys
general, 1 and the attorney general for the District of Columbia filed this case alleging that Citi
and other banks 2 engaged in misconduct in making Federal Housing Administration (FHA)
insured mortgage loans. See Compl. [Dkt. 1].
1
The State of Oklahoma did not participate.
2
The banks that are Defendants here are: Bank of America Corporation; Bank of America,
N.A.; BAC Home Loans Servicing, LP; Countrywide Home Loans, Inc.; Countrywide Financial
Corporation; Countrywide Mortgage Ventures, LLC; Countrywide Bank, FSB; Citigroup, Inc.;
FHA provides mortgage insurance on loans made by approved lenders throughout
the United States, including mortgages on single family housing. Id. ¶ 15. FHA mortgage
insurance provides lenders with protection against losses if mortgagors default. Id. ¶ 16. FHA
approved lenders, known as Direct Endorsement Lenders, are required to ensure that loans meet
strict underwriting criteria in order to be eligible for insurance, including income verification,
credit analysis, and property appraisal. Id. ¶¶ 17, 69. The United States and State attorneys
general complained that certain of the banks’ activities that related to loan servicing, origination,
and certification violated a host of laws. The Complaint set forth the following eight Counts:
Count I – unfair and deceptive consumer practices with respect to
loan servicing;
Count II – unfair and deceptive consumer practices with respect to
foreclosure processing;
Count III – unfair and deceptive consumer practices with respect to
origination;
Count IV – violation of the False Claims Act (or FCA), 31 U.S.C.
§§ 3729(a)(1)(A)-(C) & (G) and 31 U.S.C. §§ 3729(a)(1)-(3) &
(7);
Count V – violation of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1833a;
Count VI – violation of the SCRA;
Count VII – declaratory judgment under 28 U.S.C. §§ 2201, 2202;
and
Count VIII – abuse of the bankruptcy process under common law.
Compl. ¶¶ 102–137.
Citibank, N.A.; CitiMortgage, Inc.; J.P. Morgan Chase & Company; JPMorgan Chase Bank,
N.A.; Residential Capital, LLC; Ally Financial, Inc.; GMAC Mortgage, LLC; GMAC
Residential Funding Co., LLC; Wells Fargo & Company; Wells Fargo Bank N.A.
2
On April 4, 2012, all parties agreed to a settlement and entered into five separate
consent judgments, together valued at $25 billion. See Consent Js. [Dkt. 10-14]. By the terms of
the Citi Consent Judgment, Citi agreed to pay over $2 billion, without admitting fault, in
exchange for release of certain liabilities. See Citi Consent J. [Dkt. 12]. With regard to the
SCRA, the Citi Consent Judgment releases the United States’ potential civil claims under SCRA
“arising prior to the date of this agreement against [Citi] with respect to the servicing of
residential mortgages, under the provisions of the SCRA related to (a) mortgage foreclosure and
(b) the prohibition against charging more than 6% interest on SCRA-covered mortgaged debt
after a valid request by a servicemember to lower the interest rate and receipt of orders.” Id., Ex.
H preamble. The Consent Judgment provides for an interest rate review for individuals who
“submitted a request either orally or in writing for protection under Section 527 of the SCRA,
from January 1, 2008 – present [i.e., the date of enter of the Consent Judgment, April 4, 2012].”
Id., Ex. H(II)(b). The Consent Judgment provides for the following process: through an audit,
the Government will identify servicemembers who did not receive their SCRA reduced interest
rates; Citi will send each identified person a letter and a release; upon receipt, the servicemember
may elect to sign the release in exchange for the payment negotiated for him under the terms of
the Consent Judgment. Id., Ex. H(II)(b).
Mr. Wray filed a complaint in federal court in South Carolina against
CitiMortgage, alleging violation of § 527, the SCRA interest rate provision. Wray v.
CitiMortgage, Inc., Civ. No. 3:12-cv-3628-DMC (D.S.C. 2012), Compl. filed Dec. 21, 2012)
(S.C. Compl.) (attached as Ex. A to Wray Mot. to Intervene [Dkt. 126]). The South Carolina
Complaint alleges that (1) Mr. Wray sought SCRA protection from Citi prior to November 2002;
(2) starting in November 2002, Citi issued an “interest subsidy” each month in an amount
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intended to equal the excess interest rate owed on Wray’s account; (3) Citi did not re-amortize
the mortgage at an interest rate of six percent as required by SCRA. S.C. Compl. ¶¶ 13-14. In
the South Carolina Complaint, Mr. Wray seeks to represent a class of persons “entitled to SCRA
relief possessing a mortgage, trust deed, or other security in the nature of a mortgage with
CitiMortgage, Inc. from November 1, 2002 to the present whose mortgage, trust deed, or other
security bore interest in excess of six percent.” Id. ¶ 17.
For the benefit of his putative class action litigation, Mr. Wray filed a motion to
intervene in the present case on December 24, 2013. Mot. to Intervene [Dkt. 126]. The motion
to intervene seeks a temporary restraining order, preliminary injunction, and ultimately final
judgment setting aside or amending the interest rate portion of the Citi Consent Judgment.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 24(a)(1) provides that a court must permit
intervention where the applicant (1) makes a timely motion and (2) the person has an
unconditional right to intervene via a federal statute. The SCRA provides for such a right: “upon
timely application, a person aggrieved by a violation of this Act with respect to which the civil
action is commenced may intervene in such action.” 50 U.S.C. app. § 597(c). A district court
has discretion to determine whether a motion to intervene was timely, see Fund for Animals, Inc.
v. Norton, 322 F.3d 728, 732 (D.C. Cir. 2003), weighing the amount of time elapsed, the purpose
of, and need for, intervention, and the prejudice to those already parties in the case, see United
States v. AT&T, 642 F.2d 1285, 1295 (D.C. Cir. 1980). To determine whether a motion was
timely, courts look to the date that the party seeking to intervene “knew or should have known
that any of [his] rights would be directly affected” by the litigation. Nat’l Wildlife Fed’n v.
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Burford, 878 F.2d 422, 434 (D.C. Cir. 1989), rev’d on other grounds sub nom. Mountain States
Legal Found. v. Nat’l Wildlife Fed’n, 497 U.S. 871 (1990).
III. ANALYSIS
Mr. Wray is not an “aggrieved person” who has a right to intervene under SCRA
§ 597(c). The Citi Consent Judgment expressly limits the scope of the interest rate review to
individuals who requested protection under SCRA § 527 from January 2, 2008 to April 4, 2012.
Citi Consent J., Ex. H(II)(b). The South Carolina Complaint asserts a request for SCRA
protection prior to November 2002, more than five years before the Consent Judgment review
period.
Further, Mr. Wray’s motion to intervene is untimely. It was filed twenty-two
months after nationwide media coverage of the settlement began and twenty months after the
Court entered the Citi Consent Judgment. Beginning in February 2012, the consent judgments in
this case were publicized in national and local newspapers, including media directed especially
to the military. See, e.g., Nelson D. Schwartz & Julie Creswell, Mortgage Plan Gives Billions to
Homeowners, but With Exceptions, The New York Times, Feb. 10, 2012 at B1 (Ex. 6); 3 John H.
Cushman, Jr., Mortgage Relief for Service Members, The New York Times, Feb. 12, 2012,
http://atwar.blogs.nytimes.com/2012/02/12/mortgage-relief-for-service-members/
?_php=true&_type=blogs&_r=1 (Ex. 7); Hefty Payments Will Reach Military Foreclosure
Victims, Sun Herald (Biloxi, MS), Apr. 22, 2012, available at 2012 WLNR 8450828 (Ex. 9);
Patricia Kline, Millions Owed to Families in Foreclosure Deal, Army Times, Feb. 10, 2012,
http://www.armytimes.com/apps/pbcs.dll/article?AID=2012202100301 (Ex. 11); Leo Shane III,
Mortgage Settlement Includes Cash, Help for Troops, Stars and Stripes, Feb. 16, 2012 (Ex. 12).
3
The publications are part of the record, attached as Exhibits to Citi’s Opposition [Dkt 135];
each citation references the Exhibit by number.
5
The consent judgments were also reported via the Department of Justice website. See U.S. Dep’t
of Justice, $25 Billion Mortgage Servicing Agreement Filed in Federal Court, Mar. 12, 2012,
http://www.justice.gov/opa/pr/2012/March/12-asg-306.html (Ex. 15). The consent judgments
were announced and the full text was made available through PACER as well as through the
website especially set up for this settlement. See Nat’l Mortgage Settlement, http://www.
nationalmortgagesettlement.com (last visited Mar. 18, 2014). The National Mortgage Settlement
website includes contact information for the Attorney General’s Offices for the States that
participated in the settlement. Due to the substantial and widespread publicity that the consent
judgments in this case received starting in February 2012, Mr. Wray had actual or constructive
notice of the Citi Consent Judgment twenty-two months before filing his motion to intervene in
December 2013.
Plaintiff’s counsel, Richard Harpootlian, also had actual or constructive
knowledge about the Citi Consent Judgment as early as April 2012 because the Consent
Judgment partially settled a lawsuit in which counsel represented a whistleblower (Lynn
Szymoniak). The Citi Consent Judgment provided:
The Federal Payment Settlement Amount includes resolution of the
following qui tam actions: . . . . (iii) $95,000,000 from those claims
in United States ex rel. Szymoniak v. [SEALED], Civ. No. 0:10-cv-
01465 (D.S.C.) and in United States ex rel. Szymoniak v.
[SEALED], Civ. No. 3:10-cv-575 (W.D.S.C.) that are expressly
released by the United States in this litigation.
See Citi Consent J., Ex. B ¶ 1. Even though the whistleblower lawsuits did not deal with SCRA,
Mr. Harpootlian received either actual or constructive notice of the Citi Consent Judgment in
April 2012. Such notice gave rise to a duty to investigate the details of the Citi Consent
Judgment for the purpose of Mr. Wray’s lawsuit. The motion to intervene in this case was not
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filed until December 2013, after the Citi Consent Judgment had been in effect for over twenty
months. This long delay renders the motion to intervene untimely.
In addition, the motion to intervene is untimely because it would interfere with a
large and complex settlement, a settlement that had been in effect for twenty months before Mr.
Wray filed his motion. A district court acts within the bounds of its discretion when it chooses to
deny intervention to avoid the risk of undoing a hard-won settlement. Moten v. Bricklayers,
Masons & Plasterers Int’l Union of Am., 543 F.2d 224, 228 (D.C. Cir. 1976) (affirming the
district court’s denial of motion to intervene as untimely where the motion was filed on the eve
of settlement).
Because Mr. Wray is not an “aggrieved person” under SCRA, the motion to
intervene is untimely, and intervention would be prejudicial to a hard-won settlement, the motion
will be denied. 4
IV. CONCLUSION
For the foregoing reasons, Raymond Wray’s motion to intervene [Dkt. 126] will
be denied. Further, Mr. Wray’s motion for a temporary restraining order and preliminary
injunction, filed as part of the motion to intervene, will be denied as moot. A memorializing
Order accompanies this Opinion.
Date: March 18, 2014
/s/
ROSEMARY M. COLLYER
United States District Judge
4
As an alternative to intervention as of right, a court may allow permissive intervention––where
the applicant (1) makes a timely motion; (2) has a claim or defense; and (3) that claim or defense
shares with the main action a common question of law or fact. Fed. R. Civ. P. 24(b); see also
EEOC v. Nat’l Children’s Ctr., 146 F.3d 1042, 1046 (D.C. Cir. 1998). Because Mr. Wray’s
motion is untimely and intervention would be prejudicial, the Court will not grant permissive
intervention.
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