United States ex rel. Oberg v. Pa. Higher Educ. Assistance Agency

Citation912 F.3d 731
Decision Date08 January 2019
Docket NumberNo. 18-1028,18-1028
Parties UNITED STATES EX REL., Jon H. OBERG, Plaintiff–Appellant, v. PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, Defendant–Appellee, and Nelnet, Inc.; Kentucky Higher Education Student Loan Corp. ; SLM Corporation; Panhandle Plains Higher Education Authority ; Brazos Group; Arkansas Student Loan Authority; Education Loans Inc/SD; Southwest Student Services Corporation; Brazos Higher Education Service Corporation; Brazos Higher Education Authority, Inc.; Nelnet Education Loan Funding, Inc.; Panhandle-Plains Management and Servicing Corporation; Student Loan Finance Corporation; Education Loans Inc. ; Vermont Student Assistance Corporation, Defendants.
CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)

ARGUED: Eric Kenneth Bachman, ZUCKERMAN LAW, Chevy Chase, Maryland, for Appellant. George W. Hicks, Jr., KIRKLAND & ELLIS LLP, Washington, D.C., for Appellee. ON BRIEF: Jason M. Zuckerman, Washington, D.C., Dallas I. Hammer, ZUCKERMAN LAW, Tysons Corner, Virginia, for Appellant. Matthew T. Regan, Chicago, Illinois, Michael A. Glick, Tracie L. Bryant, Michael D. Lieberman, KIRKLAND & ELLIS LLP, Washington, D.C.; Daniel B. Huyett, STEVENS & LEE, P.C., Reading, Pennsylvania, for Appellee.

Before MOTZ, KEENAN, and HARRIS, Circuit Judges.

Affirmed by published opinion. Judge Motz wrote the opinion, in which Judge Keenan and Judge Harris joined.

DIANA GRIBBON MOTZ, Circuit Judge:

This case returns to us again, this time on appeal from an adverse jury verdict. Dr. Jon Oberg, as relator for the United States, brought this qui tam action against four student loan corporations, including the Pennsylvania Higher Education Assistance Agency ("PHEAA"). He alleged that the corporations had defrauded the Department of Education and so violated the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq .

Over the course of several appeals, we affirmed the dismissal of one defendant and two of the other defendants settled. See United States ex rel. Oberg v. Pa. Higher Educ. Assistance Agency , 804 F.3d 646, 650 (4th Cir. 2015) ; United States ex rel. Oberg v. Pa. Higher Educ. Assistance Agency , 745 F.3d 131, 145 (4th Cir. 2014) ; United States ex rel. Oberg v. Ky. Higher Educ. Student Loan Corp. , 681 F.3d 575, 579–81 (4th Cir. 2012). The case proceeded to trial only against PHEAA. Oberg now appeals the jury's unanimous verdict in favor of PHEAA. For the reasons that follow, we affirm.

I.

Oberg's claim concerns a Department of Education subsidy program meant to encourage the issuance of low-interest federal student loans. It did so by offering Special Allowance Payments ("SAPs") to certain qualifying lenders. 20 U.S.C. § 1087-1. For one particular category of loans—those financed through tax-exempt bonds—Congress guaranteed lenders a 9.5 percent return. Id . § 1087-1(b)(2)(B). In the low-interest environment of the mid-2000s, this guaranteed rate made tax-exempt bonds a particularly attractive investment vehicle.

To take advantage of the favorable return offered by the program, Oberg claims that between 2002 and 2006, PHEAA submitted false claims for SAP subsidies by improperly transferring student loans from non-tax-exempt bonds into tax-exempt bonds. In doing so, PHEAA converted lower-interest floating-rate loans into loans that guaranteed a 9.5 percent return. This translated into millions of dollars in additional revenue for PHEAA.

During a five-day trial, the court admitted more than 100 exhibits and the jury heard testimony from more than a dozen witnesses. After deliberating for less than three hours, the jury returned a unanimous verdict in favor of PHEAA.

Oberg timely noted this appeal, asking that we vacate the judgment and remand for a new trial. He maintains that the district court substantially impeded his ability to prove his claims by improperly excluding critical evidence and rejecting Oberg's proposed jury instructions.

II.

Oberg first contends that the district court erred by excluding certain evidence at trial. We review a district court's evidentiary rulings for abuse of discretion. SAS Inst., Inc. v. World Programming Ltd. , 874 F.3d 370, 384 (4th Cir. 2017). "A district court abuses its discretion if it relies on an error of law or a clearly erroneous factual finding." EEOC v. Freeman , 778 F.3d 463, 466 (4th Cir. 2015).

At trial, Oberg sought admission of a 20042007 Performance Audit of PHEAA performed by the Pennsylvania Auditor General. The Audit "evaluate[d] PHEAA's performance in improving access to higher education for Pennsylvania residents" and concluded that PHEAA had largely "failed its mission." The Audit found that PHEAA paid excessive salaries and bonuses to its executives and managers. The Audit also catalogued and strongly criticized PHEAA's lavish spending on employee benefits and "extravagant" expenditures on other unnecessary expenses. It "concluded that PHEAA was governed and managed within a culture that sometimes allowed self-reward to supersede fiscal prudence." The district court excluded the Audit as irrelevant under Federal Rule of Evidence 401.

Oberg contends that the Audit was relevant for several reasons. First, he argues that the Audit's critical findings tended to establish scienter—i.e., that desire for personal gain motivated PHEAA officers to submit false claims. This argument fails because unlike the securities fraud cases on which Oberg relies,1 FCA claims require a relator to show only that the defendant had knowledge of the illegality of its actions, rather than specific intent to defraud. See, e.g. , United States ex rel. Harrison v. Westinghouse Savannah River Co. , 352 F.3d 908, 921 (4th Cir. 2003) ("In establishing liability under the FCA, a plaintiff need not prove the defendant had a financial motive to make a false statement relating to a claim seeking government funds."); United States ex rel. K & R Ltd. P'ship v. Mass. Hous. Fin. Agency , 530 F.3d 980, 984 (D.C. Cir. 2008) (finding evidence of defendant's "motive to submit false claims—the need to bail itself out of financial trouble—could not ... support a finding of knowledge, be it actual, deliberate ignorance, or reckless disregard"). As the district court correctly explained: "It doesn't really make any difference whether they were operating well or not well or whatever. The only issue in this case is: Did they commit fraud and file a false claim?"

Oberg next maintains that the Audit would have allowed him to rebut PHEAA's own improper argument that its management acted with the "benevolent motive" to benefit borrowers in carrying out its scheme. Oberg lodged little objection to this evidence at trial. Indeed, Oberg himself elicited most of the "benevolent motive" testimony through his questions to PHEAA's management. In any event, whether PHEAA's management had benevolent motive was a collateral issue of limited relevance, making any error harmless. See Smith v. Balt. City Police Dep't , 840 F.3d 193, 200–01 (4th Cir. 2016).

Finally, Oberg contends that the Audit would have helped him attack the credibility of PHEAA's executives. He argues that because witness credibility is "always at issue," any "evidence concerning a witness's credibility is always relevant." United States v. Green , 617 F.3d 233, 251 (3d Cir. 2010). This argument also fails, for Oberg questioned PHEAA's executives on the company's compensation practices and elicited much of the same information contained in the Audit. Moreover, because nothing in the Audit contradicted the trial testimony of PHEAA executives, its admission would hardly have aided Oberg in impeaching the executives' credibility.

In sum, the district court did not abuse its discretion in excluding the Audit as irrelevant.2

III.

Oberg's remaining claims center on the district court's refusal to give several of his proposed jury instructions.

A.

Before we consider the merit of his claims, we must first determine our standard of review.

PHEAA contends that because Oberg did not object to the jury instructions before the district court, he has failed to preserve his challenge to them and so we can review only for plain error. Oberg counters that the district court rejected his properly requested instructions in a "definitive ruling on the record," and so we must instead review for abuse of discretion. Fed. R. Civ. P. 51(d)(1)(B) ; see also BMG Rights Mgmt. (US) LLC v. Cox Commc'ns, Inc. , 881 F.3d 293, 305 (4th Cir. 2018).

To resolve this question, we turn to the language of Federal Rule of Civil Procedure 51(d)(1)(B), which provides:

A party may assign as error ... a failure to give an instruction, if that party properly requested it and—unless the court rejected the request in a definitive ruling on the record —also properly objected.

Fed. R. Civ. P. 51(d)(1) (emphasis added).

This provision was added to Rule 51 in 2003. See Fed. R. Civ. P. 51 advisory committee's note to 2003 amendment (hereinafter, 2003 Advisory Committee Note). The Advisory Committee explained that the change was motivated by concern over the majority view "that a proper request for a jury instruction [was] not alone enough to preserve the right to appeal failure to give [an] instruction." Id . The Committee concluded that this rule was "appropriate when the court [had not] sufficiently focused on the request" or "believe[d] that the request ha[d] been granted in substance although in different words." Id. But in other circumstances, the doctrine created "a trap for the unwary who fail[ed] to add an objection after the court ... made it clear that the request [had] been considered and rejected on the merits." Id . To correct this, the drafters added the ruling-on-the-record language to "establish[ ] authority to review the failure to grant a timely request, despite a failure to add an objection, when the court has made a definitive ruling on the record rejecting the request." Id.

Notwithstanding the 2003 Amendment, some courts have seemed to continue to follow...

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