United States ex rel. Sillman v. Weston Educ., Inc.

• Decision Date: 19 October 2016
• Docket Number: No. 14–1760,14–1760
• Citation: 840 F.3d 494
• Parties: United States of America, ex rel. Chickoiyah Miller, ex rel. Cathy Sillman, Plaintiff Chickoiyah Miller; Cathy Sillman, Relators–Appellants v. Weston Educational, Inc., doing business as Heritage College, Defendant–Appellee
• Court: U.S. Court of Appeals — Eighth Circuit

840 F.3d 494

United States of America, ex rel. Chickoiyah Miller, ex rel. Cathy Sillman, PlaintiffChickoiyah Miller; Cathy Sillman, Relators–Appellants

v.Weston Educational, Inc., doing business as Heritage College, Defendant–Appellee

No. 14–1760

United States Court of Appeals, Eighth Circuit.

Submitted: July 29, 2016

Filed: October 19, 2016

Matthew V. Bartle, Bartle & Marcus LLC, Kansas City, MO, argued (David L. Marcus, Bartle & Marcus LLC, Kansas City, MO, Gene P. Graham, Bryan T. White, White Graham Buckley & Carr, LLC, Independence, MO, on the brief), for appellants.

Steven M. Gombos, Ritzert & Leyton, P.C., Fairfax, VA, argued ( Matthew T. Geiger, Geiger Prell, LLC, Overland Park, KS, on the brief), for appellee.

Benjamin L. Mizer, Principal Deputy Asst. Atty. Gen., Michael S. Raab, Charles W. Scarborough, Appellate Staff, Civ. Div., U.S. Dept. of Justice, Washington, DC, Tammy Dickinson, U.S. Atty., Kansas City, MO, for amicus curiae United States of America supporting appellants.

Before SMITH, BENTON, and SHEPHERD, Circuit Judges.

BENTON

, Circuit Judge.

Chickoiyah Yehnee Miller and Cathy Lynn Sillman filed a qui tam False Claims suit against Heritage College, alleging it fraudulently induced the Department of Education (DOE) to provide funds by falsely promising to keep accurate student records. Each relator also alleged retaliation under the FCA and wrongful discharge under state law. The district court granted summary judgment to Heritage. Relators appealed, except on Sillman's retaliation claim. The Supreme Court vacated this court's earlier opinion. Weston Educ., Inc. v. United States ex rel. Miller , ––– U.S. ––––, 136 S.Ct. 2505, –––L.Ed.2d –––– (2016)

, vacating

United States ex rel. Miller v. Weston Educ., Inc. , 784 F.3d 1198 (8th Cir. 2015). Having jurisdiction under 28 U.S.C. § 1291, this court reverses and remands the FCA claim, and affirms the employment claims.

I.

Heritage, a for-profit college, signed a Program Participation Agreement (PPA) with the DOE to participate in programs under Title IV of the Higher Education Act of 1965. See 20 U.S.C. §§ 1070

– 1099d (2012) (providing federal financial assistance to eligible post-secondary students).¹ Under the PPA, Heritage and its students submit applications for specific federal grants, loans, or scholarships. Around 97% of Heritage students receive Title IV aid, accounting for about 90% of gross tuition. From 2009 to 2012, the DOE disbursed $32,817,727 to Heritage.

The PPA obligates Heritage to “establish and maintain such administrative and fiscal procedures and records as may be necessary to ensure proper and efficient administration of funds.” See also 20 U.S.C. § 1094(a)(3)

(same language); 34 C.F.R. § 668.14(b)(4) (same language). This includes “[d]ocumentation” of each student's eligibility and of any refunds due on behalf of the student. 34 C.F.R. § 668.24(c)(iii)–(iv). To be eligible for funds, a student must make “satisfactory progress.” Id. §§ 668.32(f) , 668.34 . SP is measured by cumulative grade point average. See Heritage Coll., ABHES Institutional Self–Evaluation Report 72 (2007) (noting student must attain 70% GPA by end of program to make SP). Refunds to the DOE may be due when a student withdraws, depending on how much of a program the student completed. See 34 C.F.R. § 668.22(e) (noting no refund required if student completes 60% or more of program). Withdrawal is determined by the “last date of academic attendance.” Id. § 668.22(b)(1).

Relators, both former Heritage employees, claim that Heritage altered grade and attendance records from 2006 to 2012 to ensure students made SP and to avoid refunds, thereby maximizing Title IV funds. Miller saw an administrator increase student grades without instructor knowledge or consent, erasing the grades in a paper grade book and replacing them. She identifies a number of her own students—from before and after the signing of the PPA—whose transcripts reflect higher grades than she awarded. She saw administrators alter attendance records to mark absent students as present. At meetings in 2009 and 2010, Miller heard administrators discuss keeping students at Heritage long enough to get all Title IV funds possible. Two other program managers testified that administrators ordered them to go through instructor grade books and change failing grades to passing. Other Heritage employees and instructors witnessed or participated in altering grade and attendance records, before and after the signing of the PPA. For the purpose of summary judgment, Heritage does not dispute it altered records.

In December 2010, Relators complained to Heritage about this and other alleged misconduct. Heritage fired Sillman on December 27, 2010, citing poor job performance and interpersonal skills. Miller quit on January 7, 2011, claiming that she had been excluded from meetings, removed as program manager, refused a previously-offered employment position, docked Saturday pay, and threatened with termination.

Relators filed a qui tam FCA action, alleging numerous theories of FCA liability. The federal government declined to intervene. Relators added claims for retaliation under the FCA and wrongful discharge under Missouri law. The court granted summary judgment to Heritage on all claims. Relators appeal on one theory of FCA liability, fraudulent inducement. They also appeal the judgments on wrongful discharge and Miller's retaliation claim.

II.

Relators claim that Heritage committed fraudulent inducement by signing the PPA without intending to maintain “records as may be necessary to ensure proper and efficient administration of funds.” The district court held Heritage did not promise to keep perfect records and any promise was not material to the disbursement of funds. This court reviews de novo a grant of summary judgment. Torgerson v. City of Rochester , 643 F.3d 1031, 1042 (8th Cir. 2011)

(en banc). Summary judgment is proper when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A court “must view the evidence in the light most favorable to the opposing party” and draw “reasonable inferences” in favor of that party. Tolan v. Cotton , ––– U.S. ––––, 134 S.Ct. 1861, 1866, 1868, 188 L.Ed.2d 895 (2014) (per curiam) (internal quotation marks omitted).

The FCA makes liable anyone who “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)(B)

. Under fraudulent inducement, FCA liability attaches to “each claim submitted to the government under a contract so long as the original contract was obtained through false statements or fraudulent conduct.” In re Baycol Prods. Litig. , 732 F.3d 869, 876 (8th Cir. 2013), citing

United States ex rel. Marcus v. Hess , 317 U.S. 537, 543–44, 552, 63 S.Ct. 379, 87 L.Ed. 443 (1943) (finding contractors liable under FCA for all claims submitted under government contract obtained by collusive bidding). Accord

United States v. United Techs. Corp. , 626 F.3d 313, 320 (6th Cir. 2011) (“False statements underlying multi-year contracts generate a stream of related invoices and cause the government to pay all of the invoices related to the contract.”); United States ex rel. Longhi v. United States , 575 F.3d 458, 468 (5th Cir. 2009) (“[A]lthough the Defendants' subsequent claims for payment made under the contract were not literally false, [because] they derived from the original fraudulent misrepresentation, they, too, became actionable false claims.” (second alteration in original) (internal quotation marks omitted)); United States ex rel. Hendow v. Univ. of Phoenix , 461 F.3d 1166, 1173 (9th Cir. 2006)

(“[L]iability will attach to each claim submitted to the government under a contract, when the contract ... was originally obtained through false statements or fraudulent conduct.”); United States ex rel. Main v. Oakland City Univ. , 426 F.3d 914, 916 (7th Cir. 2005) (“If a false statement is integral to a causal chain leading to payment, it is irrelevant how the federal bureaucracy has apportioned the statements among layers of paperwork.”); Harrison v. Westinghouse Savannah River Co. , 176 F.3d 776, 788 (4th Cir. 1999) (stating “any time a false statement is made in a transaction involving a call on the U.S. fisc, False Claims Act liability may attach” even if “the claims that were submitted were not in and of themselves false”). See also

United States v. Neifert–White Co. , 390 U.S. 228, 232, 88 S.Ct. 959, 19 L.Ed.2d 1061 (1968) (noting FCA “was intended to reach all types of fraud, without qualification, that might result in financial loss to the Government”).

Fraudulent inducement requires a plaintiff to show: (1) the defendant made a “false record or statement”; (2) the defendant knew the statement was false; (3) the statement was material; and (4) the defendant made a “claim” for the government to pay money or forfeit money due. See Baycol , 732 F.3d at 875–76

(“[A] claim alleging fraud in the inducement of a government contract does focus on the false or fraudulent statements which induced the government to enter into the contract at the outset.”); United States ex rel. Vigil v. Nelnet, Inc. , 639 F.3d 791, 796, 799 (8th Cir. 2011) (requiring materiality). At issue is whether Heritage made a knowingly false statement, and whether it was material.

A.

Relators claim that Heritage falsely stated it would keep accurate student records. Heritage argues that the PPA does not require the maintenance of these specific grading and attendance records.

For a statement to be knowingly false, a person must have “actual knowledge of the information,” or act in “deliberate ignorance” or “reckless disregard” of the truth or falsity of the information. 31 U.S.C. § 3729(b)

. “Innocent mistakes and negligence are not offenses under the Act. In short, the claim must be a lie.” United States ex rel. Onnen v. Sioux Falls Indep. Sch....