UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA, et al., )

ex rel. LAURENCE SCHNEIDER, )
)
Plaintiff-Relator, )
)
v. ) Case. No. 1:14-cv-01047-RMC
)
J.P. MORGAN CHASE BANK, N.A., ) Judge Rosemary M. Collyer
et al., )
)
Defendants. )
)

RELATOR’S OPPOSITION TO UNITED STATES’

APPLICATION FOR A PARTIAL LIFTING OF THE SEAL AS TO THE
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

Relator Laurence Schneider respectfully requests this Court to deny the United States’

application for a partial lifting of the seal of the First Amended Complaint (“FAC”) to allow J.P.

Morgan Chase Bank, N.A. (“Chase”) and the Relator to disclose the FAC under seal or in

camera to the United States District Court for the Southern District of New York (“SDNY”).

BACKGROUND

Relator Laurence Schneider is the owner of three companies, Mortgage Resolution

Servicing, LLC (“MRS”), 1st Fidelity Loan Servicing, LLC (1st Fidelity”), and S&A Capital

Partners, Inc. (“S&A”) (collectively the “Schneider Entities”). The Schneider Entities acquired

certain federally related first and second lien mortgage loans and pools of such loans from Chase

commencing in 2005. These federally related mortgages are subject to review and oversight by

federal regulators. During the course of attempting to service the loans purchased from Chase,
Schneider discovered that Chase had violated numerous requirements of the Home Affordable

Modification Program (“HAMP”) and the Consent Judgment of the National Mortgage

Settlement Agreement. This knowledge was gained from Schneider’s interactions with Chase

employees trying to resolve issues related to the loans purchased from Chase. This knowledge is

the basis of Schneider’s initial False Claims Act (“FCA”) complaint filed on May 6, 2013, in the

U.S. District Court for the District of South Carolina and his subsequent FAC filed under seal in

this Court in October 2014 and docketed by the Clerk on November 17, 2014. The Court

granted the Government’s motion to extend the seal and intervention period until July 16, 2015.

On December 26, 2014, the Schneider Entities filed a complaint in the New York

Supreme Court, County of New York, alleging an ongoing pattern of fraudulent and wrongful

conduct, including, inter alia, fraud, breach of contract on the part of Chase with respect to the

federally-related loans sold to MRS and tortious interference with the contractual relationships

between the Schneider Entities and the borrowers whose loans Chase sold to the Schneider

Entities. The complaint also alleged a pattern of racketeering activity within the meaning of

RICO, 18 U.S.C. § 1961(5) as a part of a scheme by Chase to evade its legal obligations and

liabilities with respect to (a) the proper servicing of federally related mortgages and (b)

requirements under federal law and imposed pursuant to multiple consent orders, settlements and

agreements that Chase entered into with various branches of federal and state governments (the

“Lender Settlements”). The Schneider Entities further alleged that, as part of that scheme, Chase

acted to conceal its violations of federal law, including its breaches of one or more Lender

2
Settlements, and other legal obligations and to pass on liability for those violations to the

Schneider Entities. 1

Based on the federal RICO claim and diversity jurisdiction, Chase removed the case to

federal court, where it is now pending as Mortgage Resolution Serving, LLC v. J.P. Morgan

Chase Bank, N.A., No. 15-CV-293-LTS-JCF (S.D.N.Y.) (“SDNY Action”). Chase now seeks to

have this private action transferred to this Court as a related case to Schneider’s FCA action. In

order to accomplish this, Chase has sought a partial unsealing of the Relator’s current FCA

complaint for the purpose of filing it under seal in the SDNY Action. In order to accommodate

Chase, the Department of Justice filed the instant motion.

DISCUSSION

The Government’s motion does not express any governmental interest in the partial

unsealing of Schneider’s FAC. The Government “expressly notes that it takes no position (i) on

whether the FAC is relevant to the SDNY Action or (ii) as to any position or issue raised by

Chase or the Schneider Entities in that private litigation.” Gov. Mem, n.2 at 4. Instead, it has

only argued that the FAC must remain under seal to permit it to complete its investigation of

Schneider’s allegations. Despite this position, the Government has filed its motion as an

accommodation for one of the parties. Therefore, the Government’s motion should not be given

any special deference.

1
Chase recently admitted to violations of the Lender Settlements in a separate $50
million settlement with the U.S. Trustee Program. The Director of that program noted: “[y]ears
after uncovering improper mortgage servicing practices and entering into court-ordered
settlements to fix flawed systems, it is deeply disturbing that a major bank would still make
improper court filings and fail to provide adequate and timely notices to homeowners about
payment due.” Exhibit A.

3
 Even though the FCA and SDNY complaints allege similar facts, they are unrelated

because they rely on different legal theories. The following are Chase’s characterizations of

each of Schneider’s counts in his SDNY Action:

x Breach of Contract (Claim One). Whether Chase failed to deliver loans

that satisfied the requirements of the alleged contract and whether a valid
purchase agreement was formed.

x Promissory Estoppel (Claim Two). Whether plaintiffs can use the

promissory estoppel doctrine to vary the terms of a written agreement,
whether Chase made a specific and definite promise that it breached, and
whether plaintiffs detrimentally relied on such a promise and suffered
unconscionable injury as a result.

x Conversion (Claim Three). Whether plaintiffs’ conversion claim is

duplicative of their breach of contract claim, whether a conversion claim
will lie if no physical property was converted, and whether plaintiffs have
pled the elements of conversion.

x Unfair Competition (Claim Four). Whether plaintiffs’ claim should be

dismissed because plaintiffs and defendants were not competitors, but
were in a vertical business relationship, and whether an unfair competition
claim lies outside the context of trademark infringement.

x Unjust Enrichment (Claim Five). Whether this claim is duplicative of

plaintiffs’ breach of contract claim, and whether plaintiffs have adequately
alleged that Chase was enriched “unjustly.”

x Tortious Interference with Contractual Relations (Claim Six).

Whether plaintiffs have adequately alleged that Chase induced or procured
a third-party breach of contract without justification, whether an actual
breach of contract occurred, and whether damages resulted therefrom.

x Fraud and Fraudulent Omission (Claim Seven). Whether this claim is

duplicative of plaintiffs’ breach of contract claim, whether the claim has
been pled with the specificity required by Rule 9(b), and, with respect to
the fraudulent omission component of the claim, whether Chase owed a
fiduciary duty to plaintiffs.

x Negligent Misrepresentation (Claim Eight). Whether this claim is

duplicative of plaintiffs’ breach of contract claim, and whether plaintiffs
have alleged the existence of a special relationship of trust between the
parties that could support a claim of negligent misrepresentation.

x Defamation (Claim Nine). Whether plaintiffs have adequately identified

4
 a false statement regarding plaintiffs that Chase published that caused
plaintiffs special harm, whether this claim is barred by the applicable
statute of limitations, and whether plaintiffs have alleged the facts
necessary to support punitive damages.

x Slander of Title (Claim Ten). Whether plaintiffs have adequately

alleged the existence of a communication reasonably calculated to cause
harm, that plaintiffs suffered special damages, or that Chase’s actions
caused a prospective sale to be lost because of a cloud on plaintiffs’ title.

x Negligence (Claim Eleven). Whether this claim should be dismissed

under the economic loss rule or because the relationship between the
parties did not give rise to a duty independent of their contractual
relationship.

x RICO (Claim Twelve). Whether the Complaint adequately alleges a

RICO “person” distinct from the alleged “enterprise,” whether plaintiffs
have adequately alleged the scienter element of mail and wire fraud with
the specificity under Rule 9(b), and whether plaintiffs’ allegations are
sufficient to show that the alleged RICO enterprise proximately caused
their alleged damages.

x N.J. Consumer Fraud Act (Claim Thirteen). Whether New Jersey law
applies under the applicable choice of law rules, and whether plaintiffs
have adequately alleged the elements of this cause of action.

SDNY Action, Preliminary Pre-Trial Statement, Doc. 29-1 at 10-12 (April 17, 2015) (Exhibit B).

Obviously, Chase’s descriptions of the SDNY counts and Chase’s stated defenses do not

suggest any legal issues that implicate the False Claims Act. Therefore, a motion to transfer

based on the similar issues is without merit. Because of the different legal issues, it is possible

for Schneider to lose his FCA action, and yet still prevail in his private action. Whether or not

Chase violated the HAMP or the Consent Judgment, Chase still injured Schneider by interfering

with the loans that it had previously sold to the Schneider Entities.

Further, one of the principal justifications Chase gives for wanting to transfer the SDNY

Action to this Court is that this Court presided over the “consent decrees that are the focus of

many of the allegations in [the SDNY Action]” and “so that discovery in the two actions may be

coordinated” by this Court Id. at 4-5. These assertions ignore the fact that many of Schneider’s

5
allegations in the SDNY Action stem from his purchases of loans from Chase that occurred well

before the Lender Settlements. Further, his SDNY Action does not depend on discovery related

to the Lender Settlements, their servicing standards or crediting processes.

Moreover, Exhibit F of the Consent Judgment specifically releases Chase from all

servicing related “Covered Conduct” as of 11:59 pm., Eastern Standard Time, on February 8,

2012. Even though relevant to Schneider’s private action, the Government may have no need to

conduct discovery on any period before that date. Therefore, contrary to Chase’s assertion, there

will be no need to “coordinate” discovery in the two cases. Because of these releases, the scope

of the United States investigation would be limited to the Defendants’ servicing activities after

February 8, 2012. Chase had ceased all mortgage loan sales to the Schneider’s Entities in

October 2010 and did not service any loans on behalf of the Schneider Entities post sale. Thus,

any order to partially unseal Schneider’s FAC to aid in transferring it to this Court would not

serve the purpose claimed by Chase and likely would be prejudicial and detrimental to the

resolution of Schneider’s private action.

If the two cases are combined, Schneider’s private action will necessarily be delayed

pending the government’s intervention decision and motions practice unrelated to Schneider’s

private claims. If the SDNY case were transferred to this Court, it would become a significant

and unnecessary burden on this Court.

In FCA actions, the United States has the right to control the investigation and discovery

if it intervenes. In addition, the FCA action is an assertion of damages suffered by the United

States. None of those factors pertain to the case that the Schneider Entities filed against Chase in

the SDNY Action.

6
 Further, the action pending in New York is not one brought to enforce the Lender

Settlements. The causes of action that the Schneider Entities have asserted arise out of

transactions between Chase and private plaintiffs. The damages that the Schneider Entities

alleged in the SDNY Action are damages that they suffered, not that the United States has

suffered. This request by Chase is an effort to aid in its defense, and does not advance the

interests of the FCA matter or the Government’s investigation. The causes of action alleged by

the Schneider Entities are independent of the FCA action and that private action is properly

venued in New York. While certain facts relating to the Schneider Entities’ allegations that

Chase engaged in systematic efforts to avoid its obligations under the HAMP and the Lender

Settlements are relevant to demonstrate motive, intent and a pattern of wrongful conduct by

Chase that have damaged the Schneider Entities, the plaintiffs in the two actions are different, as

are the damages and the very party with standing to pursue each action.

Finally, a partial unsealing of the FAC would result in needless complexity in motions

practice in the SDNY. The motion papers and response papers in the SDNY would have to be

redacted to address the matters relating to the FAC. The redacted documents would have to be

crafted in a complex and time-consuming manner in the SDNY action. These considerations are

present for all motions Chase chooses to file, whether in the form of separate transfer and

dismissal motions or one combined motion.

For these reasons, Schneider respectfully requests this Court to deny the Government’s

motion for partial lifting of the seal of the FAC to allow the parties to disclose the FAC under

seal or in camera to the court in the SDNY. Attached is a proposed order denying the United

States’ motion.

7
 * * *

Chase failed to acknowledge in its request to the government for a partial lifting of the

seal that there are other actions involving these two parties based on Chase’s wrongful acts.

Schneider and his entities are involved in litigation around the country, mainly in bankruptcy

court, but also in state and foreclosure forums. These cases involve Chase and the actions Chase

took with regard to its violations of servicing and record keeping requirements. The

justifications for opening the FAC to examination in the SDNY case would, by necessity, also

extend to these other cases. There is nothing inherently different in the relationship between the

FCA matter and the SDNY case than between the FCA matter and these other matters. The

legal, factual and discovery issues are alike or different to the same extent.

Therefore, if the Court permits the partial unsealing of the FAC to allow it to be filed in

the SDNY, Schneider will request a broader order on a case by case basis that would allow him

to also file the FCA complaint in the other actions that exist around the country involving

Chase’s wrongdoing. These wrongful acts include filing proof of claims in bankruptcy courts on

loans Chase no longer owns because it sold those loans to Schneider. Chase has also forgiven

loans and released liens on loans sold to Schneider. This has resulted in borrowers filing

complaints against Schneider with various regulatory bodies and in state courts. All of these acts

are related to the “flawed systems” identified in the U.S. Trustee Bankruptcy settlement. To

defend against these actions it would be helpful if Schneider could disclose the existing FCA

complaint in camera in those actions. Just like Chase’s effort to partially unseal to aid in its

defense of the SDNY matter, Schneider should have the equal right to use the FCA complaint to

aid in his defense against these various claims around the country. Schneider has resisted

8
seeking such help, but if Chase is to receive it, fairness and impartiality dictate that a similar

accommodation should be made for Schneider.

Dated: April __, 2015 Respectfully submitted,

/s/ Joseph A. Black

Joseph A. Black (D.C. Bar No. 414869)
Daniel E. Cohen (D.C. Bar No. 414985)
THE CULLENLAW FIRM, PLLC
1101 30th Street, NW
Suite 300
Washington, D.C. 20007
Tel. (202) 944-8600
Fax. (202) 944-8611

Roberto L. Di Marco
Jennifer Martin Foster
WALKER & DI MARCO, P.C.
350 Main Street
First Floor
Malden, MA 02148
Tel. (781) 322-3700
Fax. (781) 322-3757

Admitted Pro Hac Vice

9
EXHIBIT A
EXHIBIT B
Case 1:15-cv-00293-LTS Document 29 Filed 04/17/15 Page 1 of 1

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 1 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 2 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 3 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 4 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 5 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 6 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 7 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 8 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 9 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 10 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 11 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 12 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 13 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 14 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 15 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 16 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 17 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 18 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 19 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 20 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 21 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 22 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 23 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 24 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 25 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 26 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 27 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 28 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 29 of 30

EXHIBIT B
Case 1:15-cv-00293-LTS Document 29-1 Filed 04/17/15 Page 30 of 30

EXHIBIT B
 UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA, et al., )

ex rel. LAURENCE SCHNEIDER, )
)
Plaintiff-Relator, )
)
v. ) Case. No. 1:14-cv-01047-RMC
)
J.P. MORGAN CHASE BANK, N.A., ) UNDER SEAL
et al., )
)
Defendants. )
)

[PROPOSED] ORDER

UPON CONSIDERATION of the United States’ application for a partial lifting of the

seal as to the United States District Court for the Southern District of New York, and the entire

record herein, it is hereby:

ORDERED that the United States’ Application is DENIED; and it is further

ORDERED as previously ordered by the Court, Relator’s First Amended Complaint in

this action shall remain under seal pending further order of the Court.

SO ORDERED:

________________ ___________________________________
Date ROSEMARY M. COLLYER
United States District Judge
 CERTIFICATE OF SERVICE

I hereby certify that on April 30, 2015, a true and correct copy of Relator’s Opposition to

United States’ Application for a Partial Lifting of the Seal as to the United States District

Court for the Southern District of New York and Proposed Order were sent via e-mail and First

Class Mail to the following individuals:

Brian P. Hudak Robert D. Wick

Assistant United States Attorney Michael M. Maya
555 Fourth Street, NW COVINGTON & BURLING LLP
Washington, DC 20530 1201 Pennsylvania Ave., N.W.
Washington, DC 20004
Attorney for the United States Attorneys for Defendants

Dated: April 30, 2015

/s/ Joseph A. Black

Joseph A. Black (D.C. Bar 414869)
The Cullen Law Firm, PLLC
1101 30th Street NW, Suite 300
Washington, DC 20007
(202) 944-8600

Counsel for Plaintiff/Relator