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United States ex rel. Brooks v. Stevens-Henager College, Inc.

United States District Court, D. Utah

January 14, 2019

UNITED STATES OF AMERICA ex rel. KATIE BROOKS and NANNETTE WRIDE, Plaintiffs,
v.
STEVENS-HENAGER COLLEGE, INC., et al., Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS

          JILL N. PARRISH UNITED STATES DISTRICT COURT.

         INTRODUCTION

         This is a qui tam action. Relators Katie Brooks and Nannette Wride alleged 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 false claims for federal financial aid.

         The Government filed a complaint in intervention. It intervened on some but not all of the relators' claims against two defendants: Stevens-Henager and its apparent successor in interest, CEHE. Shortly thereafter, the relators filed their second amended complaint. This complaint asserted new claims and named additional defendants. The Government elected to not intervene as to the new claims but “respectfully refer[red]” the court to 31 U.S.C. § 3730(b)(1), which supposedly “allows [a] relator to maintain the non-intervened portion of the action in the name of the United States.”

         Since then, the Government's claims against the Colleges have had two masters. The United States has pursued some claims directly through its Complaint in Intervention. The relators, on behalf of the United States, have asserted other claims against the Colleges in a separate Complaint, which the relators have publicly amended by naming additional defendants and asserting additional claims for relief. The operative pleadings in this case currently consist of an Amended Complaint in Intervention filed by the Government and a Fourth Amended Complaint filed by the relators.

         The Colleges filed a motion to dismiss the Government's Amended Complaint, [Docket 439], and a separate motion to dismiss the relators' Fourth Amended Complaint, [Docket 438]. The Colleges have also moved this court to take judicial notice of certain documents in relation to the motions to dismiss. [Docket 440]. The court subsequently asked the parties to brief whether the False Claims Act permitted the relators to independently pursue claims against the Colleges after the Government elected to intervene in the lawsuit. Upon consideration of the briefing of the parties, the court rules as follows: the court GRANTS the motion for judicial notice, GRANTS IN PART and DENIES IN PART the motion to dismiss the Government's Amended Complaint, and GRANTS IN PART and DENIES IN PART the motion to dismiss the relators' Fourth Amended Complaint. Finally, the court concludes that the relators may not maintain their separate complaint in this action because the Government has elected to intervene. The court, therefore, STRIKES the relators' post-intervention complaints.

         BACKGROUND

         The relators filed their complaint in early 2013. They named as defendants Stevens-Henager, California College, CollegeAmerica Denver, and CollegeAmerica Arizona. The complaint alleged that these schools were liable under the False Claims Act because they made false statements concerning compliance with the Incentive Compensation Ban (ICB). Moreover, the complaint alleged an alternative factual basis for liability as to Stevens-Henager: the school made false statements to its accreditor regarding faculty qualifications.

         Toward the end of 2013, the relators amended their complaint, adding CEHE and Carl Barney as defendants. The amended complaint added three factual bases for liability as to Stevens-Henager. Specifically, Stevens-Henager allegedly made false statements concerning attendance-taking requirements, academic-progress requirements, and recordkeeping requirements.

         In May 2014, the Government intervened in the action. The Government filed a complaint in intervention that named two defendants: Stevens-Henager and CEHE. The Government stated that it was intervening on some but not all of the relators' claims. Specifically, the Government alleged one factual basis for its claims against Stevens-Henager and CEHE: Stevens-Henager made false statements concerning the ICB. The Government chose not to intervene as to any of the claims against California College, CollegeAmerica Denver, CollegeAmerica Arizona, and Mr. Barney.

         Shortly after the Government intervened, the relators filed their second amended complaint. Purporting to comply with 31 U.S.C. § 3730(b)(2), the relators filed portions of the second amended complaint under seal because it “alleged violations of the [False Claims Act] never before set forth in any prior complaint.” The relators included allegations that the Colleges made false statements concerning the so-called 90/10 Rule-another factual basis for imposing liability on the Colleges. The relators also expanded the factual bases for liability as to California College, CollegeAmerica Denver, and CollegeAmerica Arizona.

         The Government declined to intervene as to the new claims alleged in the second amended complaint. But the Government “respectfully referred the Court to 31 U.S.C. § 3730(b)(1), ” which supposedly “allows [a] relator to maintain the non-intervened portion of the action in the name of the United States . . . .” Section 3730(b)(1) actually provides:

A person may bring a civil action for a violation of section 3729 for the person and for the United States Government. The action shall be brought in the name of the Government. The action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.

         The relators subsequently moved for leave to file a third amended complaint. The stated purpose of the third amended complaint was to “narrow and streamline the scope of the allegations and eliminate two theories of falsity from the [second amended complaint]: [the Colleges'] violations of the attendance-taking and academic-progress requirements.” The relators explained that they “never intended to pursue these theories” but included them “at the Government's request.” But because the Government declined to intervene as to these theories, the relators “wish[ed] to eliminate them and focus on the . . . more substantial theories.”

         Some six months later, following a change of venue to this court, the court granted the relators leave to file a third amended complaint. At the hearing on the motion to amend, the parties agreed that the relators could file a complaint that differed from the one attached to the motion to amend. But despite representing that they would eliminate factual bases for liability related to violations of attendance-taking and academic-progress requirements, the Third Amended Complaint actually expanded those factual bases for liability to California College, CollegeAmerica Denver, and CollegeAmerica Arizona. The Third Amended Complaint also added Weworski & Associates, an accounting firm, as a defendant. The relators did not file the Third Amended Complaint under seal, so the Government had no opportunity to intervene while the complaint remained under seal.

         The court eventually dismissed the relators' Third Amended Complaint and granted the relators and the Government leave to amend. The court granted both parties leave to amend so that they could allege facts to support a theory of liability that appeared viable in light of the Supreme Court's decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S.Ct. 1989 (2016). The Government filed an Amended Complaint in intervention, and the relators filed their Fourth Amended Complaint.

         The Fourth Amended Complaint, like the relators' previous complaints, expands the scope of their claims. The relators allege that CEHE fraudulently induced the Department of Education to execute a Program Participation Agreement (PPA) in January 2013-a period that was not covered by any prior pleadings. And the relators allege that Stevens-Heanger violated the ICB by paying bonuses to online admissions consultants and enrollment advisors who worked for Independence University-an online school operated by Stevens-Henager. No prior pleading mentioned Independence University. The relators did not file the Fourth Amended Complaint under seal, so the Government had no opportunity to intervene while the complaint remained under seal.

         The Colleges moved to dismiss both the relators' and the Government's complaints, claiming that neither states a claim upon which relief can be granted. After reviewing the briefing, however, the court became concerned with the way the case had been litigated. Specifically, the False Claims Act provides that if the Government intervenes in the action, the Government conducts the action and has the primary responsibility for prosecuting the action. Nothing in the False Claims Act suggests that a relator could maintain the non-intervened portion of an action, conducting, in essence, his or her separate action. And in light of how the case had proceeded, the court expressed concern as to whether the False Claims Act violates the “take Care” clause of Article II. Accordingly, the court asked the parties to submit supplemental briefs on these issues, which they did.

         ANALYSIS

         The court first addresses the Colleges' motion to dismiss the Government's Amended Complaint and the related motion to take judicial notice. The court then turns to the Colleges' motion to dismiss the relators' Forth Amended Complaint. Finally, the court addresses the issue of whether the relators may maintain a separate action after the Government chose to intervene.

         I. MOTION TO DISMISS THE GOVERNMENT'S AMENDED COMPLAINT

         A. The Government's Amended Complaint in Intervention

         Stevens-Henager must comply with the ICB, which provides that schools will not provide “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.” (Government's Am. Compl. ¶ 27 (quoting 20 U.S.C. § 1094(a)(20)).)

         In 2002, the regulations that accompany the ICB were amended to add certain “safe harbor[s].” (Id. ¶¶ 30-31.) One of the safe harbors-Safe Harbor E-allows schools to pay “[c]ompensation that is based upon students successfully completing their educations programs, or one academic year of their education programs, whichever is shorter.” (Id. ¶ 30 (quoting 34 C.F.R. § 668.14(b)(22)(ii)(E)).)

         1) The Admissions Consultant Bonus Plan

         Stevens-Henager distributed manuals to its admissions consultants. (Id. ¶ 69.) Each manual provides examples of how an admissions consultant can receive bonuses by enrolling students. (Id.) Stevens-Henager also issued various directives to its admissions consultants in the form of “Procedure Directives” and “Information Letters.” (Id. ¶ 70.) Mr. Barney, the former sole shareholder and chairman of Stevens-Henager, issued versions of “Procedure Directive 85R” in 2000, 2003, 2004, and 2007. (Id. ¶ 71.)

         The 2007 Procedure Directive 85R details the Admissions Consultant Bonus Plan. (See Id. ¶ 72.) When a student completes 36 credits, the admissions consultant who enrolled that student receives a “Completion Certificate.” (Id. ¶ 74.) The value assigned to a Completion Certificate depends on two factors: (1) the average number of starts (i.e., enrollments) that the admissions consultant achieved during the last three modules, and (2) the admissions consultant's “Interview Conversion Rate.” (Id. ¶ 75.) Each module is about one month long and consists of about three or four credit hours. (Id. ¶ 90.)

         The 2007 Procedure Directive 85R contains a chart for determining the value of Completion Certificates. (Id. ¶ 75.) The first row in the column is “Packaged Starts.” (Id. ¶ 79.) Packaged Starts refers to the average number of starts that an admissions consultant achieved per module during the last three modules. (See Id. ¶ 72.) The lowest value in the Packaged Starts column is five. (Id. ¶ 79.) The top row of the chart lists ascending Interview Conversion Rates, or “Intconversion%” for short. (Id. ¶ 76.) The lowest value in the Intconversion% row is 33 percent. (Id. ¶ 77.) Notes to the chart explain that “Intconversion%” is calculated by “[t]otal[ing] the last three modules' starts and interviews and dividing the total number of starts by the total number of interviews.” (Id. ¶ 76.) So if an admissions consultant interviewed ten students and five enrolled, the “Intconversion%” would be 50 percent. (See id.)

         ADMISSION CONSULTANT POTENTIAL COMPENSATION

Interconversion%-Quality of Service to Honored Guests;

Packaged Starts

>33%

>35%

>40%

>45%

>50%

5

$100

$300

$400

$500

$600

6

$100

$300

$400

$500

$600

7

$100

$300

$400

$500

$600

8

$100

$300

$400

$500

$600

9

$100

$300

$400

$500

$600

10

$100

$300

$400

$500

$600

Total @ 10

$1, 000

$3, 000

$4, 000

$5, 000

$6, 000

11

$100

$300

$400

$500

$600

12

$100

$300

$400

$500

$600

13

$100

$300

$400

$500

$600

14

$100

$300

$400

$500

$600

15

$100

$300

$400

$500

$600

Total @ 15

$1, 500

$4, 500

$6, 000

$7, 500

$9, 000

16

$100

$300

$400

$500

$600

17

$100

$300

$400

$500

$600

18

$100

$300

$400

$500

S600

19

$100

$300

$400

$500

S600

20

$100

$300

$400

$500

S600

Total @ 20

$2, 000

$6, 000

$8, 000

$10, 000

$12, 000

         According to the chart, before an admissions consultant's Completion Certificates were worth anything, the admissions consultant had to (1) “start, ” or enroll, at least five students per module, and (2) enroll at least one out of every three students interviewed. If an admissions consultant failed to meet either requirement, the admissions consultant's Completion Certificates were worthless because he or she would be ineligible to receive a bonus.

         Under the 2007 Procedure Directive 85R, an admissions consultant who enrolled four students, all of whom completed their studies, received no bonus. But an admissions consultant who achieved a 33 percent Conversion Rate and enrolled five students-three of whom completed their studies-would receive a $1, 500 bonus ($500 per Completion Certificate). And an admissions consultant who achieved a 40 percent Conversion Rate and enrolled ten students-two of whom completed their studies-would receive an $8, 000 bonus ($4, 000 per Completion Certificate).

Hypothetical Admissions Consultant

Starts

Completions

Conversion Rate

Bonus

A

4

4

33%

$0

B

5

3

33%

$1, 500

C

10

2

40%

$8, 000

         Ms. Brooks and Ms. Wride worked at Stevens-Henager between 2009 and 2011, and both were aware of the Admissions Consultant Bonus Plan. (Id. ¶¶ 13-14.) Ms. Brooks and Ms. Wride attended conferences in Las Vegas where they learned that Stevens-Henager employed the Admissions Consultant Bonus Plan at all of its campuses. (Id. ¶ 84.) Stevens-Henager paid bonuses based on the Admissions Consultant Bonus Plan until at least 2011. (Id. ¶ 89.)

         2) The Program Participation Agreements

         To participate in Title IV programs, Stevens-Henager entered into PPAs with the Department of Education. (Id. ¶ 25 (citing 20 U.S.C. § 1094(a); 34 C.F.R. § 668.14).) Each PPA 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 persons or entities engaged in any student recruiting or admission activities or in making decisions regarding the awarding of student financial assistance . . . .

(Id. ¶ 28 (citing 34 C.F.R. § 668.14(b)(22)).)

         Vicky Dewsnup, as the President of Stevens-Henager, executed two PPAs on the school's behalf, one on April 19, 2007 and another on January 21, 2010. (Id. ¶¶ 57-58.) In both PPAs, Stevens-Henager promised to comply with the ICB. (Id. ¶ 114.) But Stevens-Henager allegedly knew that these promises were false because it was paying and planned to continue paying admissions consultant bonuses based on their success in securing enrollments. (Id.) According to the Government, Stevens-Henager's promises to comply with the ICB were material to the Department of Education's decision to allow Stevens-Henager to receive Title IV funds. (Id.)

         3) The G5 Certifications

         A student applies for financial aid by completing a free application. (Id. ¶ 40.) A school uses the information in the application to create a financial-aid package for the student. (Id. ¶ 43.) The student can accept all or part of the package. (Id. ¶ 44.) If the student accepts a Pell Grant, a Direct Loan, or both, the student's school creates an electronic origination record. (Id. ¶ 45.) The school then submits the record to the Department of Education using a computerized database called the Common Origination and Disbursement System. (Id.)

         If the information supplied by the school is consistent with the Department of Education's information, the Department of Education makes funds available for the school to draw down from a computerized system known as G5. (Id. ¶ 46.) Before drawing down funds, a school certifies that “the funds are being expended within three business days of receipt for the purpose and condition of the agreement.” (Id. ¶ 47.) The parties refer to this as the G5 certification.

         Stevens-Henager submitted numerous claims for Title IV funds under its 2007 and 2010 PPAs. (Id. ¶ 61.) These claims were made in the G5 system and were accompanied by the representation that the funds would be “expended within three business days of receipt for the purpose and condition of the agreement.” (Id. ¶ 64.) According to the Government, the “agreement” referenced in the G5 certification is the school's PPA. (Id.) And, according to the Government, “Stevens-Henager failed to disclose that it was violating the [ICB]” when it requested funds in the G5 system. (Id. ¶ 65.) Because Stevens-Henager was “knowingly violating the [ICB], [it] was not an eligible institution, thus rendering the institution (and its students) ineligible for Title IV funds.” (Id.)

         B. The Motion to Take Judicial Notice

         Stevens-Henager and CEHE (collectively, Stevens-Henager) ask the court to take judicial notice of five Government documents: (1) the “Hansen Memo, ” (2) the “Mitchell Memo, ” (3) the Government Accountability Office, GAO-10-370R, Higher Education: Information on Incentive Compensation Violations Substantiated by the U.S. Department of Education (First GAO Report), (4) the United States Government Accountability Office Report to the Congressional Committees: Stronger Federal Oversight Needed to Enforce Ban on Incentive Payments to School Recruiters (Second GAO Report), and (5) an Office of Inspector General Audit Report (OIG Report).

         1) The Hansen Memo

         The Hansen Memo is dated October 30, 2002. It was written by William D. Hansen, the former Deputy Secretary of Education, and addressed to Terri Shaw, the former Chief Operating Officer for Federal Student Aid. It provides, in relevant part:

The purpose of the memorandum is to provide direction with regard to the Department's response to violations of [the ICB] . . . .
The [ICB] was designed to reduce the financial inventive for an institution to enroll students by misrepresenting the quality of the institution, or the ability of students to benefit from its educational programs. The Department has in the past measured the damages resulting from a violation as the total amount of student aid provided to each improperly recruited student. After further analysis, I have concluded that the preferable approach is to view a violation of the [ICB] as not resulting in monetary loss to the Department. Improper recruiting does not render a recruited student ineligible to receive student aid funds for attendance at the institution on whose behalf the recruiting is conducted. Accordingly, the Department should treat a violation of the law as a compliance matter for which remedial or punitive sanctions should be considered.
In some instances, violations of the [ICB], either themselves or in combination with other program violations, may constitute a basis for limitation, suspension, or termination action. However, much more commonly, the appropriate sanction to consider will be the imposition of a fine.

         (footnote omitted).

         2) The Mitchell Memo

         The Mitchell Memo is dated June 2, 2015. It was written by Ted Mitchell, the former Undersecretary to the Secretary of Education, and addressed to James Runcie, the former Chief Operating Office of Federal Student Aid. It provides, in relevant part:

Until 2002, long after the enactment of the [ICB], the Department measured damages resulting from a violation of the prohibition as the total amount of student aid provided to improperly recruited students. In 2002, however, the Department's Deputy Secretary issued [the Hansen Memo] that changed the Department's approach for measuring damages in the context of establishing administrative liabilities, to view a violation of [the ICB] as not resulting in monetary loss to the Department. The [Hansen Memo] rested on the view that the Department purportedly suffers no loss when an institution receives Title IV funds by violating the promises and representations it made as a condition of participation in the Title IV programs.
To the contrary, the Department, in fact, incurs monetary loss upon a violation of [the ICB], and the appropriate response is to recover that loss, as provided for in the Department's original policy. When acting as the Department's fiduciary, an institution may receive funds only in accord with the representations it makes in order to become eligible for those funds. When an institution makes an incentive payment based upon the number of students enrolled, the institution breaches those representations. It thus violates a condition of its Title IV program eligibility and is not entitled to receive those Title IV funds. In this situation, an institution is liable to the Department for the cost of the funds it received.

         Put simply, the Mitchell Memo repealed the Hansen Memo. But between October 30, 2002 and June 2, 2015, the Department of Education's position was that ICB violations do not result in monetary loss and do not render students ineligible to receive Title IV funds.

         3) The Remaining Reports

         In addition to the Hansen Memo and the Mitchell Memo, Stevens-Henager asks the court to take notice of three reports: (1) the First GAO Report, (2) the Second GAO Report, and (3) the OIG Report.

         In the First GAO Report, the GAO analyzed the Department of Education's program-review and audit-report data related to the ICB for January 1998 through December 2009. The GAO found that during that period the Department of Education reported that 32 schools violated the ICB. In addition to these 32 schools, the Department of Education entered into settlement agreements with 22 other schools.

         In the Second GAO Report, the GAO provided “additional information” on the Department of Education's oversight of the ICB between January 1998 and December 2009. The relevant findings are as follows:

• Between 1998 and 2008, [the Department of Education] resolved most incentive compensation cases by requiring corrective actions or reaching settlement agreements, and did not limit, suspend, or terminate any school's access to federal student aid.
• [The Department of Education] changed its enforcement policy in 2002, which resulted in an increased burden on [the Department of Education] to prove a violation and lessened associated financial penalties (fines and settlement payments). As a result, it became more difficult for [the Department of Education] to prove a school violated the [ICB] and schools ultimately paid smaller penalties.
• [Department of Education] officials shared with [the GAO] internal guidance that is used to determine fines and settlement payments for incentive compensation cases. Internal guidance for imposing fines and settlement payments establishes caps on total penalty amounts, although related regulations do not have such caps. [Department of Education] officials have stated that the agency has not always used the guidance to determine fines and settlement payments.
• [The Department of Education's] varying approaches for determining fines and settlement payments could lead to inconsistent treatment of schools without adequate justification for the differential treatment. For example, some schools were fined for [ICB] violations, while others were not. In one case, [the Department of Education] withdrew an initiated school fine of over $2 million dollars, and case documentation did not reveal the reason for the fine withdrawal.

         In the OIG Report, the OIG reiterated the findings from the First and Second GAO Reports, made findings as to Department of Education's enforcement of the ICB, and proposed recommendations that would facilitate enforcement of the ICB.

         4) Judicial Notice: Federal Rule of Evidence 201

         A court may take judicial notice of a fact that is not subject to reasonable dispute because the fact “can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b). This rule allows courts to “take judicial notice of . . . facts which are a matter of public record.” Tal v. Hogan, 453 F.3d 1244, 1264 n.24 (10th Cir. 2006) (citation omitted). If a party requests that a court take judicial notice of a fact and supplies the court with the necessary information to do so, the court must take judicial notice of the fact. Fed.R.Evid. 201(c).

         Here, the court must take judicial notice as to the contents of the five documents provided by Stevens-Henager because their contents can be accurately and readily determined from sources whose accuracy cannot be questioned. See Fed. R. Evid. 201(b); Tal, 453 F.3d at 1264 n.24. Indeed, no party disputes the authenticity and accuracy of the documents, and the documents are a matter of public record. Instead, the parties' dispute centers on what the court should do once it has taken notice as to the contents of the documents.

         Stevens-Henager contends that the court can use the documents to take judicial notice of the fact that the Department of Education “did not enforce the ICB by seeking the return of Title IV funds or by terminating or limiting participation in Title IV programs.” The Second GAO Report provides: “Between 1998 and 2008, [the Department of Education] resolved most incentive compensation cases by requiring corrective actions or reaching settlement agreements, and did not limit, suspend, or terminate any school's access to federal student aid.”[1] The Government has not argued that the accuracy of this finding can be questioned, so the court takes judicial notice of it.

         But the Government argues that the court must not use this fact to infer that the Department of Education did not attach importance to a school's representations about the ICB, and the court agrees that it would be improper to use this fact to draw inferences against the Government at this stage. See Sutton v. Utah State Sch. for Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999) (“The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted.” (citation omitted)); United States v. Corinthian Colleges, 655 F.3d 984, 999 (9th Cir. 2011) (“Nonetheless, we may not, on the basis of these reports, draw inferences or take notice of facts that might reasonably be disputed.”).

         In sum, the court takes judicial notice of the fact that “[b]etween 1998 and 2008, [the Department of Education] resolved most incentive compensation cases by requiring corrective actions or reaching settlement agreements, and did not limit, suspend, or terminate any school's access to federal student aid.” But it would nevertheless be improper for the court to use this fact to draw inferences against the Government or the relators at this stage of the proceedings, which is, in reality, what Stevens-Henager asks the court to do. Indeed, Stevens-Henager asks the court to use the judicially noticed fact to conclude that the Department of Education did not attach importance to a school's promise to comply with the ICB. This the court cannot do.

         C. The Motion to Dismiss

         Stevens-Henager moves to dismiss the Government's amended complaint on the grounds that it fails to state a claim upon which relief can be granted. But, as noted above, Stevens-Henager did not address the Government's claims for payment by mistake and unjust enrichment, so the motion is better characterized as a motion to dismiss the Government's claims that arise under the False Claims Act. Moreover, Stevens-Henager's motion focuses almost entirely on only one of the Government's two theories of liability, the theory based on Stevens-Henager's G5 certifications.

         Stevens-Henager raises, in essence, three arguments. First, Stevens-Henager argues that the Government fails to allege that Stevens-Henager's requests for payment in the G5 system constitute false claims. Second, Stevens-Henager argues that the Government fails to allege that Stevens-Henager knew that its requests for payment made in the G5 system were false. Third, Stevens-Henager argues that the Government has not alleged sufficient facts to establish that ICB noncompliance was material to the Department of Education's payment decisions.

         1) Motion Standard

         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). 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 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Where the allegations are merely “labels 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. 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 (quoting Twombly, 550 U.S. at 570). Plausibility, in this context, means that the allegations allow “the court to draw [a] reasonable inference that the defendant is liable for the alleged misconduct.” Id. Allegations that are merely consistent with a defendant's liability do not give rise to a plausible claim. Id.

         A plaintiff alleging violations of the False Claims Act must also satisfy the heightened pleading standard of Rule 9(b) of the Federal Rules of Civil Procedure. U.S. ex rel. Sikkenga v. Regence BlueCross BlueShield of Utah, 472 F.3d 702, 726 (10th Cir. 2006). Rule 9(b) provides that a plaintiff must “state with particularity the circumstances constituting fraud.” To satisfy this standard, a plaintiff must allege the “‘who, what, when, where, and how' of the alleged fraud.” Id. at 726-27 (citation omitted). Put another way, the plaintiff must “set forth the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof.” Id. at 727 (citation omitted). “Underlying schemes and other wrongful activities that result in the submission of fraudulent claims are included in the ‘circumstances constituting fraud and mistake' that must be pled with particularity under Rule 9(b).” Id. (citation omitted). Moreover, “[a] relator must provide details that identify particular false claims for payment that were submitted to the government.” Id. (citation omitted).

         2) The False Claims Act: Section 3729

         “[A]ny person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval . . . is liable to the United States Government for a civil penalty . . . plus 3 times the amount of damages which the Government sustains because of the act of that person.” 31 U.S.C. § 3729(a)(1). The term “knowingly” means “that a person, with respect to information (i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard to the truth or falsity of the information.” § 3729(b)(1). The term “claim” means, among other things, “any request or demand . . . for money or property . . . that is presented to an officer, employee, or agent of the United States.” § 3729(b)(2). Thus, to state a claim under the False Claims Act, a plaintiff must allege three things: (1) the ...


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