Ninth Circuit holds that Fannie Mae and Freddie Mac are not officers, employees, or agents of the United States under 31 U.S.C. § 3729(b)(2)(A)(i) of the False Claims Act
On February 22, the Ninth Circuit affirmed the dismissal of an FCA claim brought by relators alleging that various lenders and loan servicers made false certifications to Fannie Mae and Freddie Mac, concluding that claims presented to Fannie Mae or Freddie Mac could not give rise to liability under § 3729(b)(2)(A)(i) of the FCA. See U.S. ex rel. Adams v. Aurora Loan Servs., Inc., No. 14-15031 (9th Cir. Feb. 22, 2016). According to the Court of Appeals, claims presented to Fannie Mae or Freddie Mac were not presented to an “officer, employee or agent” of the United States under 31 U.S.C. § 3729(b)(2)(A)(i) “because Fannie Mae and Freddie Mac are private companies, albeit companies sponsored or chartered by the federal government.” Id. at *1.
The relators alleged that Fannie and Freddie were federal instrumentalities of the United States under 31 U.S.C. § 3729(b)(2)(A)(i), relying on case law and the Federal Housing Finance Agency’s conservatorship of the entities. Id. Distinguishing its prior holding that Fannie Mae was a federal instrumentality for state/city tax purposes, the court stated that “just because an entity is considered a federal instrumentality for one purpose does not mean that the same entity is a federal instrumentality for another purpose.” Id. The court also explained that the FHFA’s conservatorship of Fannie and Freddie does not transform them into federal instrumentalities, because “[the conservatorship] places FHFA in the shoes of Fannie Mae and Freddie Mac, and gives the FHFA their rights and duties, not the other way around.” Id. at *2.
Although the Ninth Circuit’s decision seemingly forecloses FCA lawsuits involving claims presented to Fannie or Freddie under 31 U.S.C. 3729(b)(2)(A)(i), the Court of Appeals rejected the district court’s holding “that claims made to Freddie Mac and Fannie Mae could never be ‘claims’ within the FCA’s definition of that term.” Id. at *1. Rather, the court explained that “[a] properly pled claim under § 3729(b)(2)(A)(ii) could give rise to FCA liability.” Id. Because the relators’ sole argument was made under 31 U.S.C. 3729(b)(2)(A)(i), however, the court was careful to “express no opinion as to whether the relators could state a claim under 31 U.S.C. § 3729(b)(2)(A)(ii)” in this particular case.