Affirming the dismissal of a qui tam lawsuit based on certifications made to the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), the U.S. Court of Appeals for the Ninth Circuit recently held that neither entity is an officer, employee, or agent of the United States. Therefore, demands or requests for payment made to these entities are not claims under 31 U.S.C. § 3729(b)(2)(A)(i) of the False Claims Act. United States ex rel. Adams v. Aurora Loan Services, Inc., — F.3d —-, 2016 WL 697771 (9th Cir. Feb. 22, 2016).
The relators in Adams alleged that the defendant mortgage lenders certified to Fannie Mae and Freddie Mac that they had paid homeowner association assessments before selling loans to Fannie Mae and Freddie Mac when the mortgage lenders knew that the assessments had not been paid and that Fannie Mae and Freddie Mac would have to pay the charges instead. Upholding the dismissal of the relators’ claims, the Ninth Circuit panel held that “[t]he district court properly held that a claim presented to Fannie Mae or Freddie Mac is not presented to an ‘officer, employee or agent’ of the United States. And that’s because Fannie Mae and Freddie Mac are private companies, albeit companies sponsored or chartered by the federal government.” 2016 WL 697771, at *1. The panel rejected the relators’ arguments that: (1) previous rulings that Fannie Mae and Freddie Mac are “federal instrumentalities” for state and city tax purposes mean that they are also government entities for False Claims Act purposes, and (2) the Federal Housing Finance Agency’s conservatorship of Fannie Mae and Freddie Mac transformed the entities into federal instrumentalities. Id. at *1-2.
However, the Ninth Circuit’s decision leaves open the question of whether a request for payment from Fannie Mae or Freddie Mac could present a False Claims Act claim under § 3729(b)(2)(A)(ii). That subsection contains a definition of “claim,” which includes requests or demands made upon a contractor, grantee, or other recipient if the money or property “is to be spent or used on the government’s behalf or to advance a government program or interest,” and if the government has provided or reimbursed “any portion of the money or property requested or demanded.” The relators never raised this theory, even though the possibility was suggested by the United States in an amicus brief. As a result, in its decision, the Ninth Circuit “express[ed] no opinion about whether the relators could state a claim” under the alternative “claim” definition. 2016 WL 697771, at *2.
While those who continue to do business with Fannie Mae and Freddie Mac may find some relief in the Ninth Circuit’s decision that neither entity is an officer, employee, or agent of the United States for qui tam purposes, they still may face claims brought under the alternative theory of False Claims Act liability.