U.S. ex rel. Haskins v. Omega Institute, Inc.

• Decision Date: 02 July 1998
• Docket Number: Civil No. 95-265(SSB).
• Citation: 11 F.Supp.2d 555
• Parties: UNITED STATES of America ex rel. Diane HASKINS, Beverlee Ralph, and Tamara Livingston, and Diane Haskins, Beverlee Ralph, and Tamara Livingston, on behalf of themselves and all others similarly situated, Plaintiffs, v. OMEGA INSTITUTE, INC.; Lee E. Cobleigh; Franklin Burke; Dr. Clarita Eusebio-:Kelly; Raymond Papin; Adele Winter; Joseph Marra; and Sharon E. Gremmels, Defendants.
• Court: U.S. District Court — District of New Jersey

11 F.Supp.2d 555

UNITED STATES of America ex rel. Diane HASKINS, Beverlee Ralph, and Tamara Livingston, and Diane Haskins, Beverlee Ralph, and Tamara Livingston, on behalf of themselves and all others similarly situated, Plaintiffs, v. OMEGA INSTITUTE, INC.; Lee E. Cobleigh; Franklin Burke; Dr. Clarita Eusebio-:Kelly; Raymond Papin; Adele Winter; Joseph Marra; and Sharon E. Gremmels, Defendants.

Civil No. 95-265(SSB).

United States District Court, D. New Jersey.

July 2, 1998.

COPYRIGHT MATERIAL OMITTED

Law Firm of Philip Stephen Fuoco, Haddonfield, NJ by Philip Stephen Fuoco, Joseph A. Osefchen, for Plaintiffs.

Florio & Perucci, P.C., Piscataway, NJ by Michael J. Perrucci, Edward J. Boccher, Glenn A. Clouser, Eltia I. Montano, Michele A. Daitz, for Defendants.

U.S. Dept. of Justice Civil Division, Washington, DC by Sara Winslow, Stephen D. Altman, Michael F. Hertz, for U.S. amicus curiae.

OPINION

BROTMAN, District Judge.

A. Background

Defendant Omega Institute, Inc. (hereinafter "Omega") was established in 1980 and is a private, post-secondary school providing alternative adult education in various fields, including allied health, legal support services, hospitality, business, and computer repair. Omega's curriculum and programs have been developed under the guidelines of the New Jersey Department of Education and have been periodically reviewed, evaluated, and approved by the Department of Education and by the school's accrediting agency, the Accrediting Council for Independent Colleges and Schools ("ACICS"). Most of the courses at Omega are approved for recommended credit at various local colleges, and the school has been successful in retaining its accreditation on a yearly basis.

The present action focuses squarely on Omega's paralegal/legal support training programs. Omega points out that it has offered these programs since 1980 and that the curriculum, programs, faculty, number of instruction hours, and support staff have evolved and changed over the years. Defs.' Br. in Opposition to Class Certification at 5-6. Some courses in these programs, in fact, have been entirely phased out. Id. at 6. Because of many changes over the years, defendants contend that the individual experiences of Omega students were different as well, depending upon when they were enrolled. Id. at 7. The plaintiffs in this action contend, however, that their experiences at the school were not simply uneven. Rather, they claim that Omega shortchanged them in a variety of ways, and have brought suit to redress their grievances.

The United States Department of Justice's Civil Division, after originally commencing this action, filed with the Court on October 6, 1995 a Notice of Election to Decline Intervention. The named plaintiffs — stepping into the shoes of the Government — now bring this qui tam action on behalf of themselves and other former and current Omega paralegal students. They argue that Omega operated by making false statements regarding its paralegal training in documents it filed with the U.S. Department of Education, the New Jersey Department of Education, and Job Training Partnership Act ("JTPA") bodies. Plaintiffs assert that written documents Omega provided to its prospective students contained these false statements and were consistently the same, regardless of whether the intended recipient was a student or a government entity. More specifically, plaintiffs allege that the actual number of instruction hours they received, the school's attendance policies, and the quality of the school's instructors which they observed for themselves were not in keeping with the written statements Omega promulgated. Essentially, plaintiffs argue that the written statements in question were greatly exaggerated when compared to their actual educational experiences at the school.

On January 14, 1997 plaintiffs filed a nine-count First Amended Qui Tam and Class Action Complaint demanding a jury trial. In their Complaint, plaintiffs brought the following claims: Ct. I, qui tam on behalf of the United States, pursuant to 31 U.S.C. § 3729(a)(1) and (2), the False Claims Act ("FCA"), (¶¶ 208-14); Ct. II, qui tam on behalf of the United States, pursuant to 31 U.S.C. § 3729(3), (¶¶ 215-20); Ct. III, federal Civil RICO, 18 U.S.C. § 1962(c), (¶¶ 221-31); Ct. IV, conspiracy to violate RICO, 18 U.S.C. § 1962(d), (¶¶ 232-39); Ct. V, New Jersey RICO, N.J.S.A. 2C:41-1 et seq., (¶¶ 240-44); Ct. VI, the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1, et seq., (¶¶ 245-48); Ct. VII, common-law fraud, (¶¶ 249-54); Ct. VIII, breach of duty to third-party beneficiaries, (¶¶ 255-59); and Ct. IX, breach of contract, (¶¶ 260-64).

Following a May 1, 1997 Order to Show Cause hearing, the Court, in an opinion and order dated May 6, 1997 denied plaintiffs' application for findings of contempt and other injunctive relief. Subsequently, in a November 25, 1997 opinion and order, the Court denied plaintiffs' motion for class certification pursuant to FED. R. CIV. P. 23(a) and (b). More recently, on May 4, 1998, plaintiffs' counsel filed an action in the Superior Court of New Jersey, Gloucester County, captioned Raggio, et al. v. Omega Institute, et al., GLO-L-849-98, seeking class certification. On May 6, 1998, plaintiffs filed a Notice of Voluntary Dismissal of Counts III through IX of the First Amended Qui Tam Complaint. By virtue of an amended scheduling order filed May 28, 1998, Magistrate Judge Joel B. Rosen extended the dispositive motion deadline to June 10, 1998. The Joint Final Pre-Trial Order was entered by the Magistrate Judge on June 29, 1998.

In the interim, the Court has received a flurry of motions. Presently before the Court and ripe for decision are (1) a motion for summary judgment by defendants Omega Institute, Lee E. Cobleigh, Franklin Burke, Clarita Eusebio-Kelly, Raymond Papin, Adele Winter, Joseph Marra, and Sharon E. Gremmels filed December 16, 1997; (2) a motion to dismiss, or in the alternative for a stay pending an administration proceeding currently underway by the United States Department of Education ("DOE"), also filed December 16, 1997; (3) a motion by the abovenamed individual defendants for summary judgment, filed June 10, 1998; and (4) a motion by all defendants "for Summary Judgment to Limit the Scope of Plaintiffs' First Amended Qui Tam Complaint and to dismiss Plaintiff Beverlee Ralph's Complaint," filed June 10, 1998. Also before the Court is a motion by defendants to impose certain conditions upon the plaintiffs' voluntary dismissal of Counts III through IX.¹

The Court has jurisdiction over this case pursuant to 28 U.S.C. § 1331 because it arises under the federal False Claims Act, 31 U.S.C. § 3729 et seq. 28 U.S.C. § 1367 confers supplemental jurisdiction upon the Court over plaintiffs' state statutory and common-law claims. Venue in the District of New Jersey is proper pursuant to 28 U.S.C. § 1391, in that the actions complained of arose in this district and all named plaintiffs reside in Gloucester County, New Jersey.

B. Discussion

I. Defendants' Motion to Dismiss, or Alternatively For a Stay

The plaintiffs in this case are students of Omega's paralegal training program. They specifically allege that Omega violated the False Claims Act, 31 U.S.C. §§ 3729-3733, by obtaining financial aid funds for its paralegal training program while it was ineligible to receive such funds.

In 1995, the DOE began an enforcement investigation or program review of Omega relating to its compliance with federal funding regulations, and to investigate Omega's administration of Title IV student financial assistance programs. This investigation is still ongoing. Therefore, defendants, relying on the doctrine of "primary jurisdiction," have filed a motion either to dismiss without prejudice or, in the alternative, for a stay pending completion of the DOE's enforcement action.

A. The Department of Education's program review does not negate the relators' rights to proceed with their qui tam action

Under 31 U.S.C. § 3730(a), the responsibility for bringing civil actions for false claims rests with the Attorney General. A private individual, however, may also bring a civil action for a false claims violation on his or her own behalf and on behalf of the United States government.² Such an action is called a qui tam action and the plaintiffs are called "relators." In this situation the government has the option to intervene.

When the government declines to intervene in the qui tam action, case law provides that a relator's claim should not be stayed or dismissed without prejudice even though the government may pursue an alternate remedy. In United States ex. rel. Dunleavy v. County of Delaware, 123 F.3d 734 (3d Cir.1997), the Third Circuit Court of Appeals held that the Department of Housing and Urban Development's (HUD) settlement of a dispute with Delaware County in Pennsylvania regarding the County's allegedly improper retention of HUD's funds did not impair the relator's right to pursue a qui tam action under the False Claims Act (FCA).

In Dunleavy, Judge Roth opined that she was uncertain whether the U.S. Attorney and HUD intended the settlement with the County to extinguish the government's claims under the FCA or whether the settlement addressed a less serious transgression such as misrepresentation. Id. at 738. Nevertheless, she explained that resolving the uncertainty was immaterial because the government never exercised its right to intervene into the relators' FCA qui tam action. Therefore, the settlement between HUD and the County did not negate the relator's ability to proceed independently with his qui tam action. Id. at 739. In so finding, the court agreed with the Eleventh Circuit's conclusion that the FCA's purpose is not limited to punishing the wrongs against the public; the FCA also fills a remedial capacity in redressing injury to the individual relator. Id. at 739.

As noted above, the government has declined...