United States v. Sanford-Brown, Ltd.
| Decision Date | 13 June 2014 |
| Docket Number | Case No. 12–CV–775–JPS. |
| Citation | 30 F.Supp.3d 806 |
| Parties | UNITED STATES of America, Plaintiff, and Brent M. Nelson, Relator, v. SANFORD–BROWN, LIMITED, and Ultrasound Technical Services, Inc., Defendants. |
| Court | U.S. District Court — Eastern District of Wisconsin |
Jay D. Majors, Michael D. Granston, Renee Brooker, United States Department of Justice, Washington, DC, Keith S. Alexander, United States Department of Justice, Milwaukee, WI, for Plaintiff.
Daniel J. Vaccaro, S. Edward Sarskas, Michael Best & Friedrich LLP, Milwaukee, WI, Derek T. Teeter, Martin M. Loring, Michael E. Norton, Husch Blackwell LLP, Kansas City, MO, James F. Monafo, Kyle P. Seelbach, Husch Blackwell LLP, St. Louis, MO, Melissa H. Burkland, Michael Best & Friedrich LLP, Madison, WI, for Defendants.
Steven Andrew Smith, James H. Kaster, Janet M. Olawsky, Jason P. Hungerford, Kate A. Fisher, Nichols Kaster PLLP, Minneapolis, MN, Lucas J. Kaster, Kaster Law, Milwaukee, WI, for Relator.
1. BACKGROUND
1.1 Parties
Brent M. Nelson (“Nelson”), the relator in this lawsuit filed under the qui tam provision of the False Claims Act (“FCA”), 31 U.S.C. § 3730(b), brings claims on behalf of the United States against defendant Sanford–Brown, Limited (formerly known as Ultrasound Technical Services, Inc.), a for-profit higher education enterprise, alleging fraudulent conduct in connection with claims for federal subsidies under the Higher Education Act. (Docket # 12).1
From June 2008 to January 2009, Nelson served as the Director of Education at Sanford–Brown's campus in West Allis, Wisconsin (“SB–Milwaukee”). (Docket # 79 at ¶ 6); (Docket # 95 at ¶ 7).2 Based upon this short stint of employment with SB–Milwaukee, Nelson brings this case.3
Before summarizing Nelson's principal allegations, the Court will briefly address the particular statutory subsection on which this case turns: 20 U.S.C. § 1094(a).
1.2 Program Participation Agreements
In order to receive federal subsidies under Title IV of the Higher Education Act, a school must enter into a “program participation agreement” (“PPA”) with the United States Secretary of Education. 20 U.S.C. § 1094(a). The statute provides that each PPA “shall condition the initial and continuing eligibility of an institution to participate in a program [for Title IV subsidies] upon compliance with [certain] requirements....” 20 U.S.C. § 1094(a)(1)-(29). The Court will refer to these requirements as “Title IV Restrictions.”
Nelson alleges that SB–Milwaukee recklessly disregarded (and violated) four Title IV Restrictions—(i) 20 U.S.C. § 1094(a)(20) (); (ii) § 1094(a)(21) (); (iii) § 1094(a)(22) (); and (iv) § 1094(a)(3) () (collectively, the “Disputed Title IV Restrictions”)—and nevertheless: (a) promised, in a PPA, to comply with such restrictions; (b) periodically certified compliance with such restrictions; and (c) submitted, or caused to be submitted, claims for Title IV subsidies “during the 2008–2009 school year” (Docket # 12 at ¶¶ 8, 24, 25, 32 and 48–79); (Docket # 107 at § 4.1.2.2); (Docket # 81).4
Based on these allegations, Nelson brings claims under two statutory subsections of the FCA:
Before the Court is Sanford–Brown's motion for summary judgment on all of Nelson's claims. (Docket # 60).
“The 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.” Fed.R.Civ.P. 56(a) ; see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “Material facts” are those under the applicable substantive law that “might affect the outcome of the suit.” See Anderson, 477 U.S. at 248, 106 S.Ct. 2505. A dispute over “material fact” is “genuine” if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. In determining whether a genuine dispute of material fact exists, the court must construe all reasonable inferences in favor of the non-movant. Lac Courte Oreilles Band of Lake Superior Chippewa Indians v. Voigt, 700 F.2d 341, 349 (7th Cir.1983).
3.1 2005 PPA
In September of 2005, Sanford–Brown's campus in Fenton, Missouri, entered into a PPA with the U.S. Department of Education (“2005 PPA”). (Docket # 64–1); (Docket # 79 at ¶ 20). The 2005 PPA provides, in relevant part, that “[t]he Institution understands and agrees that it is subject to and will comply with the program statutes and implementing regulations for institutional eligibility ...” including the Disputed Title IV Restrictions. (Docket # 64–1 at 3–6). As of June 16, 2006, SB–Milwaukee was an additional campus covered under the 2005 PPA. (Docket # 79 at ¶ 21); (Docket # 64–1 at 2); (Docket # 64–2).
At the time the 2005 PPA was signed, the signatory: (i) intended that the campuses covered by the 2005 PPA would operate in compliance with the conditions specified in the 2005 PPA, including institutional eligibility requirements; and (ii) believed that all certifications and statements of fact contained in the 2005 PPA were true and accurate. (Docket # 79 at ¶¶ 23–24).
3.2 2007 PPA
In December of 2007, Sanford–Brown's campus in Jacksonville, Florida, entered into a PPA with the U.S. Department of Education (“2007 PPA”). (Docket # 65–1); (Docket # 79 at ¶ 25). The 2007 PPA provides, in relevant part, that “[t]he Institution understands and agrees that it is subject to and will comply with the program statutes and implementing regulations for institutional eligibility ...” including the Disputed Title IV Restrictions. (Docket # 65–1 at 2–3 and 6). On May 15, 2008, with the U.S. Department of Education's approval, SB–Milwaukee was removed from the 2005 PPA and added as an additional campus covered under the 2007 PPA. (Docket # 79 at ¶ 26).
At the time the 2007 PPA was signed, the signatory: (i) intended that the campuses covered by the 2007 PPA would operate in compliance with the conditions specified in the 2007 PPA, including institutional eligibility requirements; and (ii) believed that all certifications and statements of fact contained in the 2007 PPA were true and accurate. (Docket # 79 at ¶ ¶ 28–29).9
4.1 Section 3729(a)(1)(B) : Fraudulent Certification
For his claim under § 3729(a)(1)(B) —which imposes civil liability on any person who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim”—Relator offers two theories: one grounded in the statute's plain language (express false certification), and the other not (implied false certification).
A claim under § 3729(a)(1)(B) has three essential elements: (1) the defendant made a statement in order to receive money from the government; (2) the statement was false; and (3) the defendant knew it was false. See Yannacopoulos, 652 F.3d at 822 ; see also United States ex rel. Gross v. AIDS Research Alliance–Chicago, 415 F.3d 601, 604 (7th Cir.2005).
4.1.1 Express False Certification(s)
Seizing upon the teachings of Yannacopoulos, Sanford–Brown's motion for summary judgment challenged Nelson to identify evidence of an express misrepresentation (made with a sufficiently culpable mental state) regarding SB–Milwaukee's compliance with the Disputed Title IV Restrictions. (Docket # 62 at 28–29) (Warning that Nelson may ask the Court to endorse a theory of fraud by implied misrepresentation “[given the absence of an actual misrepresentation....”).
4.1.1.1 2005 PPA and 2007 PPA
By ratifying the PPA, SB–Milwaukee agreed that it “will comply” with the Disputed Title IV Restrictions. (Docket # 64–1 at 3–6); (Docket # 65–1 at 2–3 and 6); see generally Section Three supra. However, Nelson offers no evidence whatsoever regarding SB–Milwaukee's mental state when it was added as an additional campus covered under the PPA. See (Docket # 81); (Docket # 97 at 20); (Docket # 229 at 14); see (Docket # 236).10 Therefore, the record in this case does not sustain a theory of fraudulent inducement. See generally, U.S. ex rel. Main v. Oakland City University, 426 F.3d 914, 917 (7th Cir.2005).11
4.1.1.2 Other Certifications?
Without citation to the evidentiary record, Nelson alleges (by reference to statutory provisions) that SB–Milwaukee must have filed (or caused to be filed) express compliance certifications in connection with its alleged participation in certain Title IV funding programs (e.g., Pel Grants, Federal Supplemental Educational Opportunity Grants, and Stafford loans). (Docket # 81 at 28–29); (Docket # 229 at 13); see (Docket # 236). Nelson's bald accusations plainly fail to satisfy his burden of production.
Accordingly, the Court will turn to Nelson's theory of implied certification.
4.1.2 Implied False Certification(s)
Nelson (joined by the government) asks this Court to adopt an “implied false certification” theory of liability under Section 3729(a)(1)(B) whereby “every claim for payment submitted under Title IV constitutes an ‘implied certification’ of compliance with the...
To continue reading
Request your trial