Nevada District Court denies remand in state qui tam action against Fannie Mae

by Ben Vernia | February 22nd, 2011

On February 4, U.S. District Judge Robert C. Jones denied the motion to remand of relators in a qui tam brought against Fannie Mae under Nevada’s False Claims Act. The whistleblowers had brought the action against several banks, mortgage companies, and Fannie Mae, alleging that they had collectively avoided paying required documentary transfer taxes for real property transactions in Nevada. Fannie Mae’s conservator, the Federal Housing Finance Agency (FHFA), had removed the case from state court to federal on the grounds that Fannie Mae’s charter conferred federal jurisdiction, as did issues of federal law.

Judge Jones reviewed cases – including the Supreme Court’s 1992 decision in American Red Cross v. S.G., 505 U.S. 247, and concluded that the language of Fannie Mae’s charter neither conferred nor created subject matter jurisdiction in the federal courts.

He did, however, find two other grounds for federal jurisdiction: First, FHFA, Fannie Mae’s conservator, was undoubtedly a federal agency, and so had an absolute right of removal under 28 USC 1442(a)(1). Second, Judge Jones found that the federal questions existed in the case because the interpretation of federal law was necessary to the adjudication of the whistleblowers’ claims. (They had alleged that Fannie Mae had falsely claimed to be a governmental agency that was immune from state taxation.)

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