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State ex rel. Hall v. LearnKey, Inc.

United States District Court, D. Utah, Central Division

April 28, 2016

UNITED STATES OF AMERICA EX REL. AMBER HALL, Plaintiff/Relator,
v.
LEARNKEY, INC.; JEFF CORUCCINI; DAVID CLEMONS; AND BRIAN TREMELLING, Defendants.

          MEMORANDUM DECISION AND ORDER

          Paul M. Warner Chief United States Magistrate Judge

         Pursuant to 28 U.S.C. § 636(c), the parties consented to have Chief United States Magistrate Judge Paul M. Warner conduct all proceedings in this case, including trial, entry of final judgment, and all post-judgment proceedings.[1] Before the court are two motions: (1) Relator Amber Hall's (“Hall”) Motion for Partial Summary Judgment[2] and (2) a Cross-Motion for Partial Summary Judgment filed by Defendants LearnKey, Inc., Jeff Coruccini, David Clemons, and Brian Tremelling (collectively “LearnKey”).[3]

         On April 25, 2017, the court heard oral argument on the motions.[4] At the hearing, Hall was represented by Brett D. Ekins.[5] LearnKey was represented by David L. Elmont.[6] At the conclusion of the hearing, the court took the motions under advisement.[7] Now being fully advised, the court renders the following Memorandum Decision and Order.

         BACKGROUND

         The First Amended Complaint is a declined qui tam action brought by Hall, a former employee of LearnKey, who alleges that LearnKey violated the False Claims Act (“FCA”) by seeking funding from the United States Department of Veterans Affairs (the “VA”) for nonqualifying educational courses.[8] In the First Amended Complaint, Hall claims she worked for LearnKey between February 24, 2014, and March 3, 2014, and that she is “an original source” with “independent knowledge” of LearnKey's FCA violations.[9]

         LearnKey provides video training courses to disabled veterans who qualify for benefits under the Vocational Rehabilitation and Employment program, authorized by Congress under Title 38, United States Code, Chapter 31 (“Chapter 31”).[10] Under Chapter 31, LearnKey submits invoices to the VA for the payment of costs and expenses associated with LearnKey's courses.[11]On September 1, 2011, LearnKey was approved by the VA to be a provider of “Online Expert-Computer Applications” under Chapter 31.[12]

         LearnKey does not enroll veterans in its courses.[13] Under the umbrella of Chapter 31, the Secretary of the VA is tasked with formulating an “individualized written plan of vocational rehabilitation” for eligible veterans. 38 U.S.C. § 3107(a). Accordingly, the VA works directly with an eligible veteran to select which LearnKey courses will meet the veteran's particular needs.[14]

         Unlike a traditional school course, LearnKey's courses do not involve live in-class instruction and do not require the course to begin on a specified date. LearnKey's Veteran Services Course Catalog itemizes courses offered by LearnKey.[15] Generally, LearnKey's courses involve online video instruction and allow a student to choose when to begin the course.[16] Once the student begins the course, LearnKey requires that the course be completed by a particular date and provides the student with performance milestones.[17] If the student “falls behind in the course schedule and the delay is not promptly corrected, disciplinary action is taken which includes the discontinuance of VA stipend payments to the student and ultimately prevents the student from receiving credit for the course.”[18]

         Some of LearnKey's courses prepare students to take tests administered by professional or trade organizations for certification.[19] Once the student completes LearnKey's course, LearnKey arranges for the student to take the test for certification with the professional or trade organization.[20] Conversely, where a particular field lacks a professional certification, LearnKey provides the student with a certificate demonstrating the skills they mastered during LearnKey's course.[21]

         The parties dispute how LearnKey's employees are compensated. LearnKey claims that it “does not pay commissions based on the sales of its courses, nor does it invoice commissions to the VA.”[22] LearnKey contends that any incentive-based pay is factored into LearnKey's tuition costs and, therefore, LearnKey does not directly charge the VA for employee incentives.[23]Hall, however, argues that LearnKey's invoices demonstrate that LearnKey routinely billed the VA for employee commissions in violation of Chapter 31 regulations.[24] For example, Hall relies on a LearnKey invoice for Mr. Steven Boyd (“Boyd Invoice”) wherein LearnKey charged the VA $675 for “[m]oney towards incentives, in house lunches, misc expenses, etc. A Cert 2012 Crs-OL.”[25]

         STANDARDS OF REVIEW

         Pursuant to Rule 56(a) of the Federal Rules of Civil Procedure, “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” In evaluating a motion for summary judgment, the court reviews the facts in a light most favorable to the nonmovant and draws all reasonable inferences in the nonmovant's favor. Jones v. Norton, 809 F.3d 564, 573 (10th Cir. 2015). “In considering the parties' competing motions for summary judgment, the court treats each motion separately, drawing all reasonable inferences against the party whose motion is under consideration.” Morden v. XL Specialty Ins., No. 2:14-cv-0224, 2016 WL 1337252, at *3 (D. Utah Apr. 5, 2016) (citing Mascon v. United Parcel Serv. Inc., 743 F.3d 708, 712 (10th Cir. 2014)). “[T]he plain language of [Rule 56(a)] mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

         DISCUSSION

         The FCA imposes civil liability on “any person who . . . knowingly presents, or causes to be presented, a false or fraudulent claim [to the government] for payment or approval.” 31 U.S.C. § 3729(a)(1)(A). The FCA permits qui tam actions, which allow an individual plaintiff to sue on behalf of the government. Once a qui tam action is filed, the government may intervene and take over the plaintiff's case. Id. § 3730(b). If the government declines to intervene, the plaintiff or “relator” may proceed while sharing any recovery with the government. Id. § 3730(c)(3). In this case, on August 3, 2015, the government declined to intervene; therefore, Hall is proceeding as a relator under the FCA.[26]

         Under Chapter 31, the Secretary of the VA is responsible for formulating an “individualized written plan of vocational rehabilitation” for eligible disabled veterans. 38 U.S.C. § 3107(a). There are six types of courses that qualify for Chapter 31 funding. Relevant here, LearnKey argues that its courses qualify as “school course[s]” pursuant to 38 C.F.R. § 21.122.[27]

         Section 21.122(a) broadly defines a “school course” to include “public or private school, secondary school, vocational school, correspondence school, business school, junior college, teacher's college, college, normal school, professional school, university, scientific or technical institution, or other institution furnishing education for adults.” Furthermore, a “school course” generally

consists of a number of areas of subject matter which are organized into learning units for the purpose of attaining a specific educational or vocational objective. Organized instruction in the units comprising the course is offered within a given period of time and credit toward graduation or certification is generally given.

38 C.F.R. § 21.122(b).

         Importantly, it is not enough for the course to meet the regulatory definition of “school course.” The VA is tasked with determining whether a course meets the requirements of Chapter 31 and the VA must approve the course for Chapter 31 funding. See Id. § 21.292(a) & (b). To determine whether a course meets the requirements of Chapter 31, the VA may rely on a number of resources, including: state approval agencies, the Department of Labor, or nationally recognized accrediting associations. See Id. § 21.292(c)(1).[28] In addition to VA approval, any tuition charged to the VA “may not exceed that charged to similarly circumstanced nonveteran students” and if “the contractor has more than one standard charge for the same service, the charge to [the] VA must be the lowest price that is offered or published for the entire course, semester, quarter, or term.” 48 C.F.R. § 831.7001-1.

         Hall argues that LearnKey violated the FCA in two ways. First, Hall claims that LearnKey's courses do not qualify for Chapter 31 funding because LearnKey's courses are not offered in a “given period of time” and some of LearnKey's courses do not offer credit toward “graduation or certification.”[29] Therefore, according to Hall, every time LearnKey submits an invoice for reimbursement to the VA, LearnKey is violating the FCA. Second, Hall argues that LearnKey violated the FCA by submitting invoices to the VA for employee commissions which are not entitled to Chapter 31 funding.[30]

         In response, LearnKey argues that Hall fails to offer any evidence demonstrating that LearnKey knowingly engaged in fraudulent activity.[31] LearnKey further argues that any dispute over Chapter 31 course eligibility is within the sole jurisdiction of the Secretary of the VA.[32]Moreover, even if the court reaches the merits of Hall's claims, LearnKey argues that its courses qualify as “school course[s]” and are eligible for Chapter 31 funding.[33]

         At the outset, the court will address LearnKey's argument that the court lacks jurisdiction over this case pursuant to 38 U.S.C. § 511. Under § 511, “[t]he Secretary [of the VA] shall decide all questions of law and fact necessary to a decision by the Secretary under a law that affects the provision of benefits by the Secretary to veterans or the dependents or survivors of veterans.” (emphasis added). LearnKey exhausted much of its argument claiming that § 511 prohibits the court from reviewing whether the Secretary of the VA improperly approved LearnKey's courses for Chapter 31 funding. LearnKey's argument misses the mark. This is not a case about the Secretary's decision to approve LearnKey's courses for funding. This is a case about whether LearnKey knowingly submitted a false claim to the VA to receive reimbursement under Chapter 31. Section 511 does not impose a jurisdictional bar where the court is not in the position of reviewing the VA's Chapter 31 eligibility determinations, individual or otherwise.

         Turning to the merits of Hall's FCA claims, for the reasons that follow, LearnKey's Cross Motion for Partial Summary Judgment is granted and Hall's Motion for Partial Summary Judgment is denied. Accepting the evidence proffered by Hall as true and drawing all reasonable inferences in her favor, the court finds that Hall is not entitled to relief under the FCA.[34] Hall offers no evidence demonstrating that LearnKey misrepresented its course offerings to the VA. LearnKey's Veteran Services Course Catalog accurately describes its course offerings as online courses and the VA routinely approved LearnKey's courses for Chapter 31 funding. Similarly, aside from bare speculation, Hall offers no evidence that LearnKey's invoices contained false statements in order to obtain compensation for employee commissions. Furthermore, even if the court were look past these deficiencies, Hall fails to offer any evidence satisfying the materiality and scienter requirements of the FCA. Hall may disagree with the VA's approval of LearnKey courses, but Hall's misgivings do not amount to a claim under the FCA.

         I. False or Fraudulent Claim

         A defendant's “presentation of a false or fraudulent claim to the government is a central element in every [FCA] case.” United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 727 (10th Cir. 2006) (citations omitted). To establish a false or fraudulent claim, a relator may rely on “either a legally or factually false request for payment.” United States ex rel. Thomas v. Black & Veatch Special Projects Corp., 820 F.3d 1162, 1168 (10th Cir. 2016) (quoting United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1168 (10th Cir. 2010)). In the context of compliance with a regulatory mandate, a false claim may be express or implied. “Express false certification occurs when a government contractor falsely certifies compliance with a particular statute, regulation, or contract term and compliance is a prerequisite to payment.” United States v. The Boeing Co., 825 F.3d 1138, 1148 (10th Cir. 2016) (citing Lemmon, 614 F.3d at 1168). Conversely, implied false certification “occurs when a government contractor [does not] expressly certify compliance, but knowingly and falsely implies that it is entitled to payment when it submits a claim.” Id. Implied false certification includes “half-truths” or “representations that state the truth only so far as it goes, while omitting critical qualifying information.” Universal Health Servs., Inc. v. United States, 136 S.Ct. 1989, 2000 (2016).

         The evidence before the court does not demonstrate that LearnKey submitted a false or fraudulent claim for payment or approval by the VA. The VA's approval of LearnKey's courses was not contingent on falsely supplied information or half-truths proffered by LearnKey. Indeed, if LearnKey was presenting its courses in a false light to obtain approval for Chapter 31 funding, Hall may have a cognizable FCA claim. However, LearnKey's Veteran Services Course Catalog does not misrepresent the Chapter 31 deficiencies outlined by Hall. LearnKey's course catalog specifies that LearnKey's courses are online and the number of hours in which a student can expect to complete the course. For example, LearnKey's CompTIA A Certification specifies that the course includes: “approximately 25 hours of instructive video, interactive labs, pre-tests/posttests, adaptive test prep program, online student workbook, and two 800 series exam vouchers . . . .”[35] LearnKey further specifies that it will take the student “162 clock hours or 8 weeks” to complete[36] and that the purpose of its CompTIA classes is to prepare a student to take tests for certification administered by a third party.[37] Moreover, the VA routinely enrolled eligible veterans in LearnKey's courses.[38]

         Hall may believe that LearnKey's courses are not “school course[s]” entitled to Chapter 31 funding. However, Hall's remonstration is with the VA. The evidence before the court shows that the VA knew what it was funding and, as such, there is ...


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