Citations
- 305 F. Supp. 3d 1279
Full opinion text
Jill N. Parrish, United States District Court Judge
I. INTRODUCTION
This is a qui tam action. Relators Katie Brooks and Nannette Wride filed this case in January 2013 seeking relief under the False Claims Act. They allege that Defendants Stevens-Henager College, Inc.; California College San Diego, Inc.; CollegeAmerica Denver, Inc.; CollegeAmerica Arizona, Inc.; the Center for Excellence in Higher Education ("CEHE"); and Carl Barney (collectively, the "Colleges") submitted, or caused to be submitted, "false or fraudulent" claims for federal financial aid. In April 2014, the Government intervened with respect to certain allegations against two of the defendants: Stevens-Henager and its apparent successor in interest, CEHE.
The parties engaged in extensive motion practice, and Relators amended their complaint three times. On March 30, 2016, the court issued a memorandum decision and order (the "Prior Order"). In it, the court limited Relators and the Government (collectively, "Plaintiffs") to the legal theory that the Colleges knowingly made false statements, either express or implied, when entering into Program Participation Agreements with the Department of Education. Relators, the Government, and the Colleges have all asked the court to reconsider the Prior Order based on the Supreme Court's ruling in Universal Health Services, Inc. v. United States ex rel. Escobar , --- U.S. ----, 136 S.Ct. 1989, 195 L.Ed.2d 348 (2016).
II. LEGAL AND FACTUAL BACKGROUND
A. TITLE IV
Under Title IV of the Higher Education Act, the Government "operates a number of programs that disburse funds to help students defray the costs of higher education." Urquilla-Diaz v. Kaplan Univ. , 780 F.3d 1039, 1043 (11th Cir. 2015) (citing 20 U.S.C. §§ 1070 - 1099d ). "These programs include the Federal Pell Grant, the Federal Family Educational Loan Program, the William D. Ford Federal Direct Loan Program, and the Federal Perkins Loan." Id. (citing 20 U.S.C. §§ 1070a, 1071 - 1087, 1087a - 1087j, 1087aa - 1087ii ). Title IV funds are available only to those students who attend "eligible" institutions. Id.
To become an eligible institution, a school must enter into a Program Participation Agreement ("PPA") with the Department of Education. 20 U.S.C. § 1094(a) ; 34 C.F.R § 668.14(a)(1). Each PPA provides that "[t]he execution of this Agreement by the Institution and the Secretary is a prerequisite to the Institution's initial or continued participation in any Title IV ... program." Third Am. Compl., Ex. 1 at 1. Each PPA also provides that a school's participation in Title IV is "subject to the terms and conditions set forth in this Agreement." Id. When signing a PPA, a school promises to comply with all federal statutes applicable to Title IV and all regulations promulgated thereunder: "The Institution understands and agrees that it is subject to and will comply with the program statutes and implementing regulations for institutional eligibility as set forth in 34 CFR Part 600 and for each Title IV ... program in which it participates ...." Id. , Ex. 1 at 3.
1. The Incentive Compensation Ban
To be eligible to receive Title IV funds, a school must agree to comply with the Incentive Compensation Ban (the "ICB"). The ICB prohibits schools from "provid[ing] any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any persons or entities engaged in any student recruiting or admission activities or in making decisions regarding the award of student financial assistance." § 1094(a)(20). Each PPA expressly provides:
By entering into this [PPA], the Institution agrees that:
...
(22) It will not provide, nor contract with any entity that provides, any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person or entities engaged in any student recruiting or admission activities or in making decisions regarding the awarding of student financial assistance ....
Third Am. Compl., Ex. 1 at 4-6.
2. The 90/10 Rule
Proprietary schools that execute a PPA agree to comply with what is known as the 90/10 Rule. § 1094(a)(24). Under this rule, a proprietary school must derive more than ten percent of its revenue from sources other than Title IV programs. § 1094(a)(24). A proprietary school loses eligibility for Title IV programs if it violates the 90/10 Rule for "two consecutive institutional years." § 1094(d)(2)(A) ; 34 C.F.R. § 668.28(c)(1). If a proprietary school violates the 90/10 Rule for any fiscal year, it "becomes provisionally certified ... for the two fiscal years after the fiscal year it failed to satisfy the [90/10 Rule]." § 668.28(c)(2).
3. Record Keeping Requirements
Schools that participate in Title IV programs must track and report student attendance.
In each PPA, a school agrees to "establish and maintain such administrative and fiscal procedures and records as may be necessary to ensure proper and efficient administration of funds." Third Am. Compl., Ex. 1 at 4; 20 U.S.C. § 1094(a)(3). If a student enrolls but fails to attend class, the school must return the funds received for that student to the Department of Education within a specified period of time. 20 U.S.C. § 1091b ; 34 C.F.R. § 668.21(a), (c). Similarly, if a student enrolls and attends some classes but then stops attending, the school must calculate the funds that the student earned and refund to the Department of Education any unearned funds. § 668.22(a)(1) (schools are obligated to "determine the amount of title IV grant or loan assistance that the student earned as of the student's withdrawal date"); § 668.22(a)(4) (the "difference between these amounts must be returned to the title IV programs"); see also 20 U.S.C. § 1091b ; 34 C.F.R. § 668.22(b), (g), (i).
4. Satisfactory Academic Progress
Schools that participate in Title IV programs must create and enforce reasonable standards of academic progress. Under the applicable regulations, "[a]n institution must establish a reasonable satisfactory academic progress policy for determining whether an otherwise eligible student is making satisfactory academic progress in his or her educational program and may receive assistance under the title IV ... programs." § 668.34(a); see also 20 U.S.C. § 1091(a)(2) (requiring students to make "satisfactory progress"); § 1091(c) (defining "satisfactory progress").
5. Accreditation Standards
To participate in Title IV programs, schools must "meet the requirements established by ... accrediting agencies or associations." 20 U.S.C. § 1094(a)(21). In each PPA, a school expressly agrees that it "will meet the requirements established pursuant to part H of Title IV of the HEA by ... nationally recognized accrediting agencies." Third Am. Compl., Ex. 1 at 6.
B. RELATORS' COMPLAINT
Relators' Third Amended Complaint ("Realtors' complaint") spans 160 pages and includes over 130 pages of factual allegations. In brief, Relators allege that the Colleges ran afoul of various Title IV requirements. According to Relators, the Colleges made false statements to the Department of Education in, among other things, PPAs. These false statements allegedly induced the Department of Education to make the Colleges eligible for Title IV programs. The Colleges' requests for Title IV funds were allegedly "false or fraudulent" because the Colleges fraudulently induced the Department of Education to allow the Colleges to participate in Title IV programs.
1. The Colleges and Mr. Barney
The Colleges, other than CEHE, operated for-profit postsecondary educational schools throughout the western United States. Id. ¶ 19. Mr. Barney allegedly signed PPAs on behalf of the Colleges at various times, including one in 2001 for Stevens-Henager. Id. ¶ 273. The Colleges derived a substantial portion of their revenue from Title IV programs. Id. ¶ 20. On or about December 31, 2012, the Colleges merged into CEHE, an Indiana nonprofit corporation. Id. ¶ 19. Before the merger, all of the Colleges, other than CEHE, were privately owned by Mr. Barney. Id. ¶ 21. Mr. Barney is the chairman of CEHE and the sole statutory member of CEHE. Id.
2. Relators Katie Brooks and Nanette Wride
Ms. Brooks began working at Stevens-Henager as an admissions consultant in March 2009. Id. ¶ 179. Her base salary was $38,000 per year when she started, but it was increased to $42,000 per year in September 2009. Id. ¶ 180 & n.6. Ms. Brooks allegedly received significant bonuses based on the number of students she enrolled in Stevens-Henager. Id. ¶ 180. For instance, in 2010, Ms. Brooks allegedly received bonuses (net of taxes and withholding) of approximately $31,450. Id. ¶ 190. Ms. Brooks stopped working at Stevens-Henager around March 2011. Id. ¶ 211.
Mr. Wride began working at Stevens-Henager as an admissions consultant in July 2009. Id. ¶ 212. She was paid a base salary of approximately $33,000 per year when she first started, which was later increased to $37,000 per year. Id. ¶ 228. She too was allegedly paid significant bonuses based on the number of students she enrolled in Stevens-Henager. Id. For instance, Ms. Wride allegedly received four or five bonuses ranging from $1,200 to $4,000 based on her success in enrolling students at Stevens-Henager. Id. Ms. Wride stopped working at Stevens-Henager on June 6, 2011. Id. ¶ 382.
3. Alleged Violations of the ICB
The Colleges, according to Relators, violated the ICB from "at least July 1, 2002" to at least 2011. Id. ¶ 138. Specifically, Relators allege that the Colleges' compensation plan, as detailed in the 2007 version of Procedure Directive 85R, violated the ICB. Id. ¶ 176. Admissions consultants, under the terms of the plan, received bonuses if they satisfied three requirements: first , the admissions consultant recruited a student who completed thirty-six credit units (the equivalent of one year of study); second , the admissions consultant recruited at least five new students within a three-month period; and third , the admissions consultant maintained at least a thirty-three percent "conversion ratio" over the three-month period. Id. ¶ 182. According to Relators, the Colleges' written compensation plan, which purportedly relied on regulatory safe harbors, was drafted to disguise ICB violations. Id. ¶¶ 165, 178. Relators also allege that, during their time at Stevens-Henager, the director of admissions offered "prizes" to admissions consultants who achieved a certain number of enrollments. Id. ¶ 195. These prizes consisted of vacations, cash payments, movie tickets, and consumer electronic products, such as televisions and iPads. Id. ¶¶ 196-200, 233.
4. Alleged Violations of the 90/10 Rule
Relators allege that the Colleges have attempted to disguise violations of the 90/10 Rule. Id. ¶ 313. Relators rely on three allegations to show that the Colleges violated the 90/10 Rule. First , Relators allege that the Colleges used a "scheme" involving textbooks to inflate their revenue from non-governmental sources. Id. ¶ 314. Relators "believe and allege" that the Colleges used this "scheme" because, on approximately April 25, 2012, the Colleges'
chief operating officer told employees at a CollegeAmerica campus that she did not want accreditors to see a book room that might "raise questions" about compliance with the 90/10 Rule. Id. ¶ 315. Second , Relators allege that, in early 2014, employees at Stevens-Henager altered files to show that Stevens-Henager students attended CollegeAmerica Arizona. Id. ¶ 317. According to Relators, this was done to make CollegeAmerica Arizona's "statistics appear better than they actually were" for purposes of the 90/10 Rule. Id. Third , Relators allege that the Colleges are attempting to achieve not-for-profit status so that they are exempt from the 90/10 Rule. Id. ¶ 318.
5. Violations of Refund Requirement
Relators allege that the faculty and administrative personnel at Stevens-Henager falsified attendance records to delay students' withdrawal dates, thereby decreasing the amount of Title IV funds that the Colleges were required to return to the Department of Education. Id. ¶ 329. Specifically, "faculty and administrative officials would alter attendance reports to show that certain students had attended classes when the students had not actually done so." Id. ¶ 320. For instance, one professor "recorded a student as having perfect attendance even though the student had given birth during the module in a different part of the state and had not been to the campus since that time." Id. ¶ 321. Ms. Brooks and Ms. Wride were aware of these practices during their time at Stevens-Henager. Id. ¶ 319.
Employees at CollegeAmerica allegedly reported similar misconduct. Id. ¶ 327. For instance, Relators allege that one CollegeAmerica employee testified that the school "could change the last day of attendance without [the student] even knowing it." Id. ¶ 328. Relators also allege that the associate dean at CollegeAmerica Denver would hold a "Last Day Attended" meeting each year where the deans would reach out to students who had stopped attending and encourage them to log on to their account so the school would not have to count them as "dropped." Id. ¶ 327.
6. Satisfactory Academic Progress
Relators allege that the faculty and administrators at Stevens-Henager falsified grades to show that students were achieving satisfactory academic progress when, in reality, they were not. Id. ¶ 330. According to Realtors, faculty would also employ grading standards that guaranteed passing grades. Id. Ms. Brooks and Ms. Wride were aware of these practices during their time at Stevens-Henager. Id. Relators allege that CollegeAmerica Denver engaged in similar conduct between July 2010 and March 2011. Id. ¶ 342. Specifically, students were allowed to pass a class with a D- or better even though "faculty members ... expected students to achieve a grade of at least C to pass." Id.
7. Accrediting Standards
Relators allege that faculty at Stevens-Henager lacked the qualifications that were required by the school's accreditor. Id. ¶ 363. Specifically, Ms. Wride discovered that many faculty members did not meet the minimum qualifications to teach the courses they were assigned. Id. For instance, Ms. Wride discovered that one professor did not have the requisite work experience to teach the courses he was assigned to teach. Id. ¶ 364. Relators allege that Stevens-Henager circumvented accreditation requirements by assigning qualified teachers to certain courses but then substituting unqualified teachers in their place. Id. ¶ 402.
C. THE GOVERNMENT'S COMPLAINT
The Government intervened with respect to the claims brought against Stevens-Henager based on alleged violations of the ICB. The Government's Complaint in Intervention (the "Government's complaint") alleges that Stevens-Henager's compensation plan violated the ICB from approximately 2000 to at least July 1, 2011. Gov't Compl. Intervention ("GCI") ¶¶ 72, 88. During this time, Stevens-Henager promised in a 2007 PPA and a 2010 PPA that it would not "provide, nor contract with any entity that provides, any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person or entities engaged in any student recruiting or admission activities or in making decisions regarding the awarding of student financial assistance." GCI ¶ 63. Both promises were allegedly false when made because Stevens-Henager knew that it was violating and would continue to violate the ICB. GCI ¶ 99. According to the Government, Stevens-Henager's promises to comply with the ICB were "material to the Department of Education's decision to make Stevens-Henager eligible for [Title IV] programs." GCI ¶ 106, 111.
D. PROCEDURAL BACKGROUND
In the Prior Order, the court limited Plaintiffs to the legal theory that the Colleges knowingly made false statements, either express or implied, when entering into PPAs with the Department of Education. In reaching this conclusion, the court relied on the now-discredited "condition of participation versus condition of payment" test, which was articulated by the Tenth Circuit in United States ex rel. Conner v. Salina Regional Health Center, Inc. , 543 F.3d 1211 (10th Cir. 2008). About three months after the court issued the Prior Order, the Supreme Court issued its decision in Universal Health Services, Inc. v. United States ex rel. Escobar , --- U.S. ----, 136 S.Ct. 1989, 195 L.Ed.2d 348 (2016). In it, the Supreme Court expressly rejected the "condition of participation versus condition of payment" test upon which this court had relied.
Shortly after the Supreme Court decided Escobar , the parties requested that the court stay all deadlines while they attempted to mediate the case. The court did so. After about five months of unsuccessful mediation, the parties requested that the court lift the stay. The court lifted the stay on November 16, 2016, and on December 7, 2016, the Colleges filed a motion for reconsideration, arguing that all claims under the False Claims Act should be dismissed in light of the Supreme Court's decision in Escobar .
On November 15, 2017, at a hearing on the Colleges' motion for reconsideration, the court raised concerns that it had impermissibly limited Plaintiffs' claims, in light of Escobar . The court inquired of Plaintiffs why they had not sought reconsideration of the Prior Order. Plaintiffs stated that they believed that the Prior Order was erroneous in light of Escobar , but offered various reasons as to why they had not sought reconsideration.
The day after the hearing, Relators filed a motion for reconsideration, arguing that the court had impermissibly narrowed their claims in the Prior Order. Relators stated that they had been instructed by the Government, in January 2017, not to seek reconsideration. The Government followed suit shortly thereafter and filed a similar motion seeking reconsideration, explaining that it had not promptly sought reconsideration for strategic reasons. Both motions were fully briefed, and the court entertained oral argument on March 15, 2018.
III. DISCUSSION
A. REQUIREMENTS FOR RECONSIDERATION
Grounds for seeking reconsideration include "(1) an intervening change in the controlling law, (2) new evidence previously unavailable, and (3) the need to correct clear error or prevent manifest injustice." Servants of Paraclete v. Does , 204 F.3d 1005, 1012 (10th Cir. 2000). Moreover, a motion for reconsideration is appropriate where the court has misapprehended the facts, a party's position, or the controlling law. Id. But a motion for reconsideration is an inappropriate vehicle to "reargue an issue previously addressed by the court when the motion merely advances new arguments." Id.
Here, reconsideration is appropriate because there has been an intervening change in the law, namely the Supreme Court's decision in Escobar . The parties agree that Escobar has effected an intervening change in the law, but they disagree on what it means for this case. The court agrees that Escobar has effected an intervening change in the law and therefore concludes that reconsideration is appropriate. See Rose v. Stephens Inst. , No. 09-cv-05966-PJH, 2016 WL 5076214, at *3 (N.D. Cal. Sept. 20, 2016) (" Escobar articulated a materiality standard under the [False Claims Act] that, at least potentially, undermines the existing Ninth Circuit law on the issue.").
In the Prior Order, the court also conflated two related but distinct theories used to show that claims are "false or fraudulent": (1) false certification (either express or implied); and (2) promissory fraud. After review of the Prior Order, the court concludes that portions of its ruling relating to the claims against the Colleges are erroneous. The court therefore vacates the Prior Order as it relates to these claims.
B. MOTION STANDARD
Because the Prior Order addressed motions to dismiss, the court analyzes the issues presented by the pending motions under the Rule 12(b)(6) standard. That is, the court must determine whether Plaintiffs have stated claims for relief under the False Claims Act. A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "Each allegation must be simple, concise, and direct." Fed. R. Civ. P. 8(d)(1). This standard "does not require 'detailed factual allegations,' but it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).
Where the allegations are merely "label and conclusions" or a "formulaic recitation of the elements of a cause of action," the plaintiff's claim will not survive a motion to dismiss. Twombly , 550 U.S. at 555, 127 S.Ct. 1955. For the claim to survive, the plaintiff's allegations "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). Plausibility, in this context, means that the plaintiff has alleged facts that allow "the court to draw [a] reasonable inference that the defendant is liable for the alleged misconduct." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. Factual allegations that are " 'merely consistent with' a defendant's liability," however, are not facially plausible. Id. (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ).
Where multiple defendants are involved, "[i]t is particularly important ... that the complaint make clear exactly who is alleged to have done what to whom , to provide each individual with fair notice as to the basis of the claims against him or her." Kan. Penn Gaming, LLC v. Collins , 656 F.3d 1210, 1215 (10th Cir. 2011) (quoting Robbins v. Okla. ex rel. Dep't of Human Servs. , 519 F.3d 1242, 1250 (10th Cir. 2008) ); see also Bulanda v. A.W. Chesterton Co. , No. 11 C 1682, 2011 WL 2214010, at *2 (N.D. Ill. June 7, 2011) (dismissing complaint that made a number of generic allegations as to the defendants collectively); Boykin Anchor Co. v. AT & T Corp. , No. 5:10-CV-591-FL, 2011 WL 1456388, at *4 (E.D.N.C. Apr. 14, 2011) ("Plaintiff's attempt to treat all defendants as one 'corporate family' for purposes of this lawsuit is unfounded."). "The law recognizes a difference between notice pleading and 'shotgun' pleading." Glenn v. First Nat'l Bank in Grand Junction , 868 F.2d 368, 371 (10th Cir. 1989). As such, "[i]t is not the role of the court to sort through a lengthy complaint to construct the plaintiff's case." Chavez v. Huerfano Cnty. , 195 Fed.Appx. 728, 730 (10th Cir. 2006).
A party alleging violations of the False Claims Act must also comply with Rule 9(b)'s heightened pleading requirement. United States ex rel. Lemmon v. Envirocare of Utah, Inc. , 614 F.3d 1163, 1171 (10th Cir. 2010). Under Rule 9(b), a party must "state with particularity the circumstances constituting fraud." The purpose of this rule is to afford defendants fair notice of the plaintiff's claims and the factual grounds upon which they are based. Lemmon , 614 F.3d at 1172. To comply with Rule 9(b), a plaintiff seeking relief under the False Claims Act must allege the who, what, when, where, and how of the alleged fraud. Id. at 1171. In short, the plaintiff must "show the specifics of [the] fraudulent scheme and provide an adequate basis for a reasonable inference that false claims were submitted as part of that scheme." Id. at 1172.
C. THE FALSE CLAIMS ACT
The False Claims Act imposes liability on any person who:
(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; [or]
(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim ....
31 U.S.C. § 3729(a)(1)(A), (B) (2009). A claim under § 3729(a)(1)(A) has three elements: (1) the defendant submits a claim for payment to the Government; (2) the claim is false; and (3) the defendant knows the claim is false. Similarly, a claim under § 3729(a)(1)(B) has three elements: (1) the defendant makes a false statement; (2) the defendant acts knowing that the statement is false; and (3) the false statement is material to a false claim for payment. "Claim," as it is used in the False Claims Act, means, among other things, "any request or demand ... for money or property ... that ... is presented to ... the United States." § 3729(b)(2).
Section 3729(a)(1)(B) is "designed to prevent those who make false records or statements ... to get claims paid or approved from escaping liability solely on the ground that they did not themselves present a claim for payment or approval." Pencheng Si v. Laogai Research Found. , 71 F.Supp.3d 73, 87 (D.D.C. 2014) (quoting United States ex rel. Totten v. Bombardier Corp. , 380 F.3d 488, 501 (D.C. Cir. 2004) ). In other words, the primary purpose of § 3729(a)(1)(B) is to remove any defense that the defendant did not personally submit, or cause to be submitted, a false claim. Boese, supra at 2-32. "Obviously, many violations of [ § 3729(a)(1)(B) ] may also be considered violations of [ § 3729(a)(1)(A) ] under the 'causes to be presented' language." Id.
The issue in this case is whether the Colleges submitted "false or fraudulent" claims for payment. Unlike the terms "claim" and "knowingly," which are defined in the False Claims Act, "false" and "fraudulent" are defined only by judicial interpretation and construction. Boese, supra at 2-137. Plaintiffs contend that Colleges' requests for Title IV funds were "false or fraudulent" based on two distinct legal theories: (1) false certification (either express or implied); and (2) promissory fraud. In the Prior Order, the court conflated these two theories, and so the court now discusses both in detail.
Historically, most False Claims Act cases involved "factually false" claims for payment. United States ex rel. Conner v. Salina Regional Health Ctr., Inc. , 543 F.3d 1211, 1217 (10th Cir. 2008) (describing a "run-of-the-mill 'factually false' case"); United States ex rel. Hendow v. Univ. of Phoenix , 461 F.3d 1166, 1170 (9th Cir. 2006) ("In an archetypal qui tam False Claims action ... the claim for payment is itself literally false or fraudulent."). To prove that a claim is factually false, a plaintiff must show that the defendant submitted "an incorrect description of goods or services provided or a request for reimbursement for goods or services never provided." Conner , 543 F.3d at 1217 (quoting Mikes v. Straus , 274 F.3d 687, 697 (2d Cir. 2001) ).
But the False Claims Act is not limited to factually false claims. Rather, it is "intended to reach all types of fraud, without qualification, that might result in financial loss to the Government." United States v. Neifert-White Co. , 390 U.S. 228, 232, 88 S.Ct. 959, 19 L.Ed.2d 1061 (1968). Specifically, when amending the False Claims Act, Congress emphasized that the term "false or fraudulent claim" should be broadly construed:
[E]ach and every claim submitted under a contract, loan guarantee, or other agreement which was originally obtained by means of false statements or other corrupt or fraudulent conduct, or in violation of any statute or applicable regulation, constitutes a false claim.
S. Rep. No. 99-345, at 9 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5274 (emphasis added). "The principles embodied in this broad construction of 'false or fraudulent claim' have given rise to two doctrines that attach potential False Claims Act liability to claims for payment that are not explicitly and/or independently false: (1) false certification (either express or implied); and (2) promissory fraud." Hendow , 461 F.3d at 1171. These are the theories upon which Plaintiffs seek to proceed.
1. Promissory Fraud
Promissory fraud, which is also referred to as fraudulent inducement, is a theory that attaches liability to each and every claim submitted under a contract obtained through fraudulent statements. United States ex rel. Miller v. Weston Educ., Inc. , 840 F.3d 494, 503 (8th Cir. 2016) ; Hendow , 461 F.3d at 1173 ; United States ex rel. Main v. Oakland City Univ. , 426 F.3d 914, 916 (7th Cir. 2005). Put simply, an initial falsehood "can taint subsequent claims for payment, even if those claims are for legitimate goods or services." John H. Krause, Reflections on Certification, Interpretation, and the Quest for Fraud that "Counts" Under the False Claims Act , 2017 U. Ill. L. Rev. 1811, 1817 (2017) ; see also Hendow , 461 F.3d at 1173 ("[S]ubsequent claims are false because of an original fraud (whether a certification or otherwise)."); Pencheng Si , 71 F.Supp.3d at 87-88 ("The fraudulent inducement theory prescribes liability 'for each claim submitted to the Government under a contract which was procured by fraud, even in the absence of evidence that the claims were fraudulent in themselves.' " (citation omitted) ).
The most prominent case involving promissory fraud is United States ex rel. Marcus v. Hess , 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943) (cited in Escobar , 136 S.Ct. at 2003 ). There, the Supreme Court held that contractors were liable under the False Claims Act for claims submitted under government contracts that the contractors obtained through collusive bidding. Id. at 542, 63 S.Ct. 379. As the Court explained:
This fraud did not spend itself with the execution of the contract. Its taint entered into every swollen estimate which was the basic cause for payment of every dollar paid by the [Government].... The initial fraudulent action and every step thereafter taken, pressed ever to the ultimate goal-payment of government money to persons who had caused it to be defrauded.
Id. at 543-44, 63 S.Ct. 379.
Courts of appeal in at least three circuit have recognized that a school's requests for Title IV funds can be "false or fraudulent" if the school made false statements in its PPA. First, in United States ex rel. Main v. Oakland City University , the Seventh Circuit held that relators stated violations of the False Claims Act based on allegations that a university promised, in its PPA, to comply with the ICB when the university had no intentions of doing so. 426 F.3d at 916. Second, in United States ex rel. Hendow v. University of Phoenix , the Ninth Circuit held that relators had stated a claim under the False Claims Act based on allegations that a university promised, in its PPA, to comply with the ICB when the university knew that it would not do so. 461 F.3d at 1177-78. Third, in United States ex rel. Miller v. Weston Educational, Inc. , the Eighth Circuit held that relators stated a claim under the False Claims Act based on allegations that a college promised, in its PPA, to keep accurate grade and attendance records when, in fact, it did not intend to keep accurate records. 840 F.3d at 502-03.
To prove that a claim was "false or fraudulent" under a theory of promissory fraud, a plaintiff must establish: (1) that the defendant made false statements; (2) that the defendant knew that the statements were false; (3) that the false statements were material to the Government's decision to enter into a contract with the defendant, and (4) that the defendant made claims for payment under the contract that was fraudulently induced. See id. at 500 ; Hendow , 461 F.3d at 1174. Thus, in the Title IV context, a plaintiff can establish that claims for Title IV funds were "false or fraudulent" by showing: (1) that a school made false statements in its PPA; (2) that the school knew the statements were false; (3) that the statements were material to the Department of Education's decision to execute the PPA; and (4) that the school made claims for Title IV funds under the fraudulently induced PPA. See Miller , 840 F.3d at 500 ; Hendow , 461 F.3d at 1174.
2. False Certification
Claims for payment can be "false or fraudulent" when the claim falsely certifies that the claimant is complying with an underlying statute, regulation, or contract. Express false certification occurs when a claim for payment "falsely certif[ies] compliance with a particular statute, regulation or contractual term." Lemmon , 614 F.3d at 1168 (emphasis added) (quoting Mikes , 274 F.3d at 698 ). A claim for payment is impliedly false when it impliedly certifies compliance with underlying legal requirement when, in fact, the claimant is not in compliance. Id. at 1169 ; see also Ab-Tech Constr., Inc. v. United States , 31 Fed.Cl. 429, 434 (Fed. Cl. 1994) ("[T]he payment vouchers represented an implied certification by [claimant] of its continuing adherence to the requirements for participation in the program.").
The Supreme Court has recognized that the "the implied false certification theory can, at least in some circumstances, provide a basis for liability." Escobar , 136 S.Ct. at 1999. Specifically, liability attaches "at least where two conditions are satisfied: first , the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second , the defendant's failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths." Id. at 2001 (emphasis added).
The facts of Escobar provide insight on when a claim "does not merely request payment, but also makes specific representations about the goods or services provided." In Escobar , a healthcare provider "submitted reimbursement claims that made representations about the specific services provided by specific types of professionals, but that failed to disclose serious violations of regulations pertaining to staff qualifications and licensing requirements for those services." Id. at 1997-98. The state Medicaid program, unaware of these violations, paid the claims. Id. at 1998. The Court concluded that "by submitting claims for payment using payment codes that corresponded to specific counseling services, [the healthcare provider] represented that it had provided individual therapy, family therapy, preventative medication counseling, and other types of treatment." Id. at 2000. Staff members also "submitt[ed] Medicaid reimbursement claims by using National Provider Identification numbers corresponding to specific job titles." Id. These representations "were clearly misleading in context" and fell "squarely within the rule that half-truths-representations that state the truth only so far as it goes, while omitting critical qualifying information-can be actionable." Id.
D. THE GOVERNMENT'S CLAIMS
The Government alleges three causes of action under the False Claims Act. First , the Government alleges that Stevens-Henager submitted false claims from approximately July 1, 2007 to May 20, 2009, in violation of § 3729(a)(1). GCI ¶ 105. The Government alleges that the claims were false because Stevens-Henager promised to comply with the ICB in its PPAs when Stevens-Henager knew that it would not comply with the ICB. Id. Second , based on the same theory, the Government alleges that Stevens-Henager submitted false claims from May 20, 2009 to approximately July 1, 2011, in violation of § 3729(a)(1)(A). Id. ¶¶ 110-11. Third , based on a similar theory, the Government alleges that Stevens-Henager submitted false claims for payment from approximately May 20, 2009 to July 1, 2011, in violation of § 3729(a)(1)(B). Id. ¶ 115.
1. The Government's Claims Under § 3729(a)(1) and § 3729(a)(1)(A) : False Certification
The Government argued, in its briefing and at oral argument, that it can proceed on a theory of implied false certification. Specifically, the Government contends that the "claim forms for Title IV funding in this case, accompanied by the certifications known as 'G5 certifications' ... are half-truths capable of misleading the Department [of Education]." In each G5 certification, Stevens-Henager certified that "the funds are being expended within three business days of receipt for the purpose and condition of the [PPA]." GCI ¶ 50. According to the Government, when Stevens-Henager made these G5 certifications, it impliedly represented that it was an eligible institution when it was not-because it was in violation of the ICB.
When submitting G5 certifications, Stevens-Henager may have impliedly represented that it complied with the ICB and that it was eligible to receive Title IV funds. Indeed, some courts have held that G5 certifications impliedly certify compliance with various Title IV requirements. See, e.g. , Fast Train II , 2017 WL 606346, at *10 ("Each draw-down falsely certified [the school's] compliance with [Department of Education] regulations.");
Rose v. Stephens Inst. , No. 09-cv-05966-PJH, 2016 WL 2344225, at *10 (N.D. Cal. May 4, 2016) ; United States ex rel. Mayers v. Lacy Sch. of Cosmetology, LLC , No. 1:13-cv-00218-JMC, 2015 WL 8665345, at *4 (D.S.C. Dec. 14, 2015) (holding that G5 certifications were "necessary to receive the payment of federal funds").
While the Government's implied-false-certification theory appears to be a valid legal theory, it does not align with the Government's pleadings. In fact, the Government's complaint does not articulate this theory of liability. Instead, the Government relies exclusively on a theory of promissory fraud:
Stevens-Henager knowingly submitted or caused to be submitted, false representations regarding compliance with the requirements of Title IV ..., [in] its [PPA] and annual financial and compliance audits as well as in student loan and grant applications. Stevens-Henager submitted these false representations in order to obtain eligibility to participate in Title IV funding programs and receive Title IV funding .... Stevens-Henager made express representations in writing ... [that] induced the Department of Education to make students at Stevens-Henager colleges eligible for many forms of financial aid. These representations were material to the Department of Education's decision to make Stevens-Henager eligible for these financial aid programs.... Therefore, Stevens-Henager fraudulently induced the Department of Education to make Stevens-Henager eligible to participate in Title IV funding ....
GCI ¶¶ 105-06, 110-11 (emphasis added). Nowhere does the Government's complaint allege that Stevens-Henager's requests for Title IV funds were "false or fraudulent" because the requests impliedly certified that the school was eligible to receive Title IV funds when it was not. Indeed, the Government does not even explicitly reference the G5 certifications in its causes of action. In short, the Government attempts to argue a legal theory-implied false certification-which it does not allege in its complaint, and which it has not supported with factual allegations. If the Government intends to pursue this theory of liability, it must amend its complaint to articulate both the legal theory and the facts that support it. The Government has 21 days from the date of this order to amend its complaint.
2. The Government's Claims Under § 3729(a)(1) and § 3729(a)(1)(A) : Promissory Fraud
In the Prior Order, the court allowed the Government to proceed on a theory of promissory fraud. As discussed above, to state a claim for promissory fraud, the Government must allege facts establishing that: (1) Stevens-Henager made false statements in its PPAs; (2) Stevens-Henager knew that its statements were false;
(3) the statements were material to Department of Education's decision to execute the PPAs; and (4) Stevens-Henager made claims for payment under the fraudulently induced PPAs. Stevens-Henager, in light of Escobar , contends that the Government has not alleged sufficient facts to establish the third element of materiality.
a. False Statements
The Government has alleged sufficient facts to plausibly establish that Stevens-Henager made false statements in its 2007 and 2010 PPAs regarding its intent to comply with the ICB. In both PPAs, Stevens-Henager promised that it would "not provide, nor contract with any entity that provides, any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person or entities engaged in any student recruiting or admission activities or in making decisions regarding the awarding of student financial assistance ...." GCI ¶ 63. Both promises were allegedly false because Stevens-Henager did not comply with the ICB after it signed the PPAs in question. GCI ¶ 99; see also Hendow , 461 F.3d at 1174-75 (relators alleged falsity by alleging that university "violates a statutory requirements, the [ICB], to which it agreed in writing in the [PPA]"). Thus, the Government has alleged sufficient facts to establish that Stevens-Henager falsely certified that it would comply with the ICB in its 2007 and 2010 PPAs.
b. Knowledge
The Government has also alleged sufficient facts to plausibly establish that Stevens-Henager knew that its promises to comply with the ICB were false when made. Specifically, the Government has alleged facts showing: (1) that Stevens-Henager was aware of the ICB, and (2) that the school's compensation plan violated the ICB from 2000 to at least July 1, 2011. See GCI ¶ 70. Put simply, the Government has alleged that Stevens-Henager knowingly violated the ICB before it executed the 2007 PPA and continued to knowingly violate the PPA after it executed the 2010 PPA. Taking the Government's allegations as true, and drawing all reasonable inferences in the light most favorable to it, Stevens-Henager knew that its promises to comply with the ICB
in the 2007 and 2010 PPAs were false when made.
c. Materiality
Stevens-Henager contends that the Government, in light of Escobar , has failed to allege sufficient facts to establish that the Stevens-Henager's promises to comply with the ICB were material to the Department of Education's decision to enter into PPAs with the Stevens-Henager. Put simply, Stevens-Henager argues that Government has not alleged sufficient facts to establish that Stevens-Henager knew or should have known that Department of Education attached importance to the school's promise to comply with the ICB. The court disagrees.
Section 3729(b)(4) of the False Claims Act defines material as "having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property." While the Supreme Court, in Escobar , found it unnecessary to "decide whether § 3729(a)(1)(A)'s materiality requirement is governed by § 3729(b)(4) or derived directly from the common law," the Court suggested that there was no difference between the formulations. 136 S.Ct. at 2002. "Under any understanding of the concept, materiality 'look[s] to the effect on the likely or actual behavior of the recipient of the alleged misrepresentation.' " Id. (quoting 26 R. Lord, Williston on Contracts § 69:12 at 549 (4th ed. 2003) (Williston) ).
To shed further light on the materiality standard, the Court looked to the common law. In contract law, "a misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or if the maker knows that it would be likely to induce the recipient to do so." Restatement (Second) Contracts § 162(2) (quoted in Escobar , 136 S. Ct. at 2003). And in tort law, a matter is material in only two instances: (1) if a reasonable person would likely attach importance to it, or (2) if the defendant knew or should have known that the recipient would attach importance to it. Restatement (Second) Torts § 538 (quoted in Escobar , 136 S. Ct. at 2003). Thus, a false statement is material under the False Claims Act "if either (1) a reasonable person would likely attach importance to it or (2) the defendant knew or should have known that the government would attach importance to it." Miller , 840 F.3d at 503 (citing Escobar , 136 S.Ct. at 2002-03 ).
In Escobar , the Court rejected the argument that a misrepresentation is material if it goes to a condition of payment: "A misrepresentation cannot be deemed material merely because the Government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment." 136 S.Ct. at 2003. Instead, "the Government's decision to expressly identify a provision as a condition of payment is relevant, but not automatically dispositive." Id. (emphasis added). Moreover, "[a] defendant can have 'actual knowledge' that a condition is material without the Government expressly calling it a condition of payment." Id. at 2001. For instance, "[i]f the Government failed to specify that guns it orders must actually shoot, but the defendant knows that the Government routinely rescinds contracts if the guns do not shoot, the defendant has 'actual knowledge' " that a term-that the guns must shoot-is material. Id.
In addition to whether compliance with a particular provision is labeled as a condition, the Supreme Court identified three other non-exclusive factors bearing on materiality: (1) whether the violation goes to the "essence of the bargain," id. at 2003 n.5 (quoting Junius Constr. Co. v. Cohen , 257 N.Y. 393, 178 N.E. 672, 674 (1931) ), (2) whether the violation is significant, as opposed to "minor or insubstantial," id. at 2003, and (3) whether the Government has taken action in response to similar, known violations, id. at 2003-04. As to the third factor, proof of materiality may include evidence that the defendant "knows that the Government consistently refuses to pay claims" based on noncompliance. Id. at 2003. Conversely, it is less likely that a provision is material if the "Government pays a particular claim in full despite its actual knowledge that certain requirements were violated ." Id. (emphasis added).
Materiality depends on a holistic assessment of many factors, such as the ones discussed above, Escobar , 136 S.Ct. at 2001 ("[M]ateriality cannot rest on 'a single fact or occurrence as always determinative.' " (quoting Matrixx Initiatives, Inc. v. Siracusano , 563 U.S. 27, 39, 131 S.Ct. 1309, 179 L.Ed.2d 398 (2011) ), and it is usually a determination that is left to the jury, see Restatement (Second) of Torts § 538 cmt. e ("[T]he question of whether a reasonable man would have regarded the fact misrepresented to be important in determining his course of action is a matter for the judgment of the jury subject to the control of the court."); Harrison v. Westinghouse Savannah River Co. , 176 F.3d 776, 785 (4th Cir. 1999) ("Materiality is a mixed question of law and fact."). While Escobar did not rule out the possibility that materiality could be decided on a motion to dismiss, 136 S.Ct. at 2004 n.6, it did not suggest that the issue should be routinely decided at such a stage, see United States v. Gaudin , 515 U.S. 506, 512, 115 S.Ct. 2310, 132 L.Ed.2d 444 (1995) (explaining that materiality is peculiarly one for the trier of fact).
As an initial matter, the Government's claims are based on promissory fraud, unlike the claim in Escobar , which was based on implied certification. The Supreme Court, in Escobar , discussed materiality as it relates to claims for reimbursement that are allegedly false because they impliedly certify compliance with underlying regulations. Here, the Government alleges that claims were false based on promissory fraud: Stevens-Henager falsely certified that it would comply with the ICB in its 2007 and 2010 PPAs. In other words, the "fraud" was not a failure to disclose noncompliance with a regulation, as was the case in Escobar , but rather an affirmative misrepresentation: a false promise to comply with the ICB. Because the Government alleges promissory fraud, the court "examines the false statements that induced the government to enter the [PPAs ]." Miller , 840 F.3d at 504 (emphasis added) (citing In re Baycol Prods. Litig. , 732 F.3d 869, 875-76 (8th Cir. 2013) ). Thus, the court must determine whether the Government has alleged sufficient facts to plausibly establish that Stevens-Henager's allegedly false promises to comply with the ICB in its PPAs were material to the Department of Education's decision to execute the PPAs.
Here, the Government has alleged sufficient facts to plausibly establish that the Department of Education attached importance to Stevens-Henager's promises to comply with the ICB, which were made in the school's 2007 and 2010 PPAs. First , the Government expressly conditioned Stevens-Henager's participation in Title IV programs on the school promising to comply with the ICB. Id. ; Hendow , 461 F.3d at 1175. The Government imposed the condition in three ways. First, a federal statute provides that to be eligible an institution must:
enter into a [PPA] with the Secretary [of Education]. The agreement shall condition the initial and continuing eligibility of an institution to participate in a program upon compliance with the following regulations ... [including the ICB.]
20 U.S.C. § 1094(a) (emphasis added). Second, a federal regulation specifies:
An institution may participate in any Title IV ... program ... only if the institution enters into a written [PPA] with the Secretary [of Education] .... A [PPA] conditions the initial and continued participation of an eligible institution in any Title IV ... program upon compliance with the provisions of this part [such as the ICB.]
34 C.F.R. § 668.14(a)(1) (emphasis added). Third and finally, the PPA itself provides:
The execution of this Agreement [which references the ICB] by the Institution and the Secretary [of Education] is a prerequisite to the Institution's initial or continued participation in any Title IV, HEA program.
(emphasis added).
The above passages show that a school must promise to comply with the ICB to become eligible to participate in Title IV programs. Miller , 840 F.3d at 504 ; Hendow , 461 F.3d at 1176. Thus, Stevens-Henager's promises to comply with the ICB were "prerequisites" to federal funding because if it did not promise to comply with the ICB "it would not have gotten paid." Id. ; see also Escobar , 136 S.Ct. at 2003 ("[C]ontractors' misrepresentation that they satisfied a non-collusive bidding requirement for federal program contracts violated the False Claims Act because '[t]he government's money would have never been placed in the joint fund for payment to respondents had its agents known the bids were collusive.' " (quoting Marcus , 317 U.S. at 543, 63 S.Ct. 379 ) ). Put another way, Stevens-Henager could not request Title IV funds unless it promised to comply with the ICB. While conditioning payment on a promise is not "automatically dispositive" of materiality, it is "relevant." Escobar , 136 S.Ct. at 2003. Thus, the Government's decision to condition Title IV eligibility on a promise to comply with the ICB is evidence that the Department of Education attached importance to that promise.
Second , the importance of the ICB, as reflected in the legislative and regulatory history, suggests that Stevens-Henager's promises to comply with the ICB were something to which the Department of Education attached importance. Congress enacted the ban on recruitment-based incentives in 1992 because it determined that such payments were associated with serious program abuses and high loan default rates, resulting in a drain on program funds where the Government acts as a loan guarantor. S. Rep. No. 102-58, at 8 (1991) (Abuses in Federal Student Aid Programs) (noting testimony "that contests were held whereby sales representatives earned incentive awards for enrolling the highest number of students for a given period"); H.R. Rep. No. 102-447, at 10reprinted in 10 U.S.C.C.A.N. 334, 343 (noting new provisions that "include prohibiting the use of commissioned sales persons and recruiters").
The Department of Education has also emphasized the importance of the ICB in safeguarding Title IV funds. In the initial regulations implementing the ICB, the Department of Education explained that incentive payment structures are prone to abuse and fraud even when based solely on the number of students retained. Student Assistance General Provisions; Federal Family Education Loan Programs; Federal Pell Grant Program, 59 Fed. Reg. 22,348, 22,377 (Apr. 29, 1994) ; see also 75 Fed. Reg. 34,806, 34,817 (June 18, 2010) ("When admission personnel are compensated substantially, if not entirely, upon the numbers of students enrolled, the incentive to deceive or misrepresent the manner in which a particular educational program meets a student's needs increases substantially.").
The legislative and regulatory history surrounding the ICB, when viewed in the light most favorable to the Government, suggests that the Department of Education attached importance to Stevens-Henager's promises to comply with the ICB. Indeed, the ICB "is designed to prevent schools from incentivizing recruiters to enroll poorly-qualified students who will not benefit from federal subsidies, and may be unable or unwilling to repay federal student loans." Rose , 2016 WL 5076214, at *1 (citing Main , 426 F.3d at 916 ). Accordingly, at this stage of the proceedings, the Government has sufficiently pled that Stevens-Henager's promises to comply with the ICB went to the "essence of the bargain" that it struck with the Department of Education. See Escobar , 136 S.Ct. at 2003.
Third , the importance of Stevens-Henager's promise to comply with the ICB is underscored by the fact that it annually certified in writing that it was complying with the ICB and obtained an independent, professional audit of its certifications. See GCI ¶ 65; 20 U.S.C. § 1094(c)(1)(A) ; 34 C.F.R. § 668.23(a)(2), (a)(4). When viewed in the light most favorable to the Government, the Department of Education required annual certifications of compliance with respect to the ICB because the Department of Education attached importance to a school's promise to comply with the ICB-the Department of Education wanted to ensure that schools lived up to their promises. If the Department of Education did not attach importance to a school's promise to comply with the ICB, it likely would not have required that schools annually certify their compliance.
Fourth , the availability of administrative remedies supports the conclusion that the Department of Education attached importance to Stevens-Henager's promises to comply with the ICB. See 20 U.S.C. § 1094(c)(1)(G) (allowing the Department of Education to withhold Title IV funds if it receives reliable information that an institution is violating, among other things, the ICB). In short, the fact that the Department of Education could take action against schools that violated the ICB suggests that the Department of Education attached importance to Stevens-Henager's promises to comply with it.
Fifth , and perhaps most importantly, the Government alleges facts suggesting that Stevens-Henager was aware of the importance of the ICB and took steps to conceal ICB violations. Specifically, the Government alleges that Stevens-Henager's compensation plan purported to invoke certain regulatory safe harbors that did not actually apply. GCI ¶ 97. Construing the allegations in the light most favorable to the Government, it appears that Stevens-Henager designed its compensation plan to disguise ICB violations because it knew that the Department of Education would not enter into a PPA with a school that violated the ICB. See Rose , 2016 WL 5076214, at *4 n.1 ("[R]elators presented evidence suggesting that [the university] was keenly aware of the significance of the ICB ..., such that [the university's] employees took active steps 'to hide their compensation practices.' This evidence suffices to create a genuine dispute of fact that '[the university] knew that it was actively circumventing the law,' and that [the university] knew that the ICB was material to the government." (citations omitted) ).
In sum, under the holistic approach mandated by Escobar , the Government has alleged sufficient facts that, when viewed in the light most favorable to the Government, establish that Stevens-Henager's promises to comply with the ICB were material to the Department of Education's decision to enter into PPAs with Stevens-Henager.
d. False Claims
Finally, the Government has adequately alleged that Stevens-Henager submitted claims for payment under both the 2007 and 2010 PPAs. Specifically, the Government alleges that "[e]very request for a federal grant, a loan under the Federal Direct Loan Program, a federally guaranteed loan under the Federal Family Education Loan Program, an interest payment on a subsidized Stafford Loan and for Title IV funding made on behalf of a student attending a Stevens-Henager institution constitutes a separate false claim." GCI ¶ 102.
In sum, the Government has alleged sufficient facts to plausibly establish: (1) that Stevens-Henager falsely certified that it would comply with the ICB in its 2007 and 2010 PPAs; (2) that Stevens-Henager knew that its promises to comply with the ICB were false; (3) that the promises to comply with the ICB were material to the Department of Education's decision to execute the PPAs in question; and (4) that Stevens-Henager requested and received Title IV funds under its 2007 and 2010 PPAs. Thus, the Government has alleged sufficient facts to state a plausible claim that Stevens-Heanger knowingly presented false claims for payment to the Government from July 1, 2007 to July 1, 2011. See 31 U.S.C. § 3729(a)(1)(A).
3. The Government's Claim Under § 3729(a)(1)(B)
The Government alleges that from approximately July 1, 2007 to July 1, 2011, Stevens-Henager knowingly made, used, or caused to be made or used false records or statements that were material to false or fraudulent claims, thereby violating § 3729(a)(1)(B). GCI ¶ 115. Specifically, the Government alleges that Stevens-Henager, to become eligible to participate in Title IV programs, falsely certified compliance with the ICB in, among other things, its PPAs. Id.
The Government's claim under § 3729(a)(1)(B) is duplicative of its claims under § 3729(a)(1) and § 3729(a)(1)(A). The primary purpose of § 3729(a)(1)(B) is to remove any defense that the defendant did not personally submit, or cause to be submitted, a false claim for payment. The Government has not alleged any facts suggesting that Stevens-Henager could be held liable under § 3729(a)(1)(B) but not under § 3729(a)(1) or § 3729(a)(1)(A). Specifically, the Government alleges that Stevens-Henager fraudulently induced the Department of Education to execute PPAs and then, pursuant to those PPAs, "knowingly present[ed] ... false or fraudulent claims for payment or approval." See § 3729(a)(1)(A). Because it is entirely duplicative, the court dismisses without prejudice the Government's claim under § 3729(a)(1)(B). See Rose , 2016 WL 2344225, at *7 ("The court similarly finds that there is no reason to present two duplicative causes of action [based on the False Claims Act] to a jury, and dismisses the second cause of action [which alleged violations of § 3729(a)(1)(B) ] ....").
Even if the Government's claim under § 3729(a)(1)(B) were not duplicative of its other claims, the Government has not alleged a theory upon which it could hold Stevens-Henager liable under § 3729(a)(1)(B). The Government alleges a plethora of false statements-those made in PPAs, annual financial and compliance audits, and student loan and grant applications-but the Government fails to identify the false claims to which these false statements or records were "material":
In submitting or causing to be submitted such certifications and applications, Stevens-Heanger acted with actual knowledge ... of the ... falsity of the claims. By virtue of thes