When a relator brings a civil action for a violation of the FCA, the Government “may elect to intervene and proceed with the action,” and, thereafter, the Government “shall have the primary responsibility for prosecuting the action.” 31 U.S.C. 3730(b)(2), (c)(1). In United States ex rel. Brooks, et al. v. Stevens-Henager College, Inc., et al., No. 2:15-cv-00199, 2019 WL 186663 (D. Utah Jan. 14, 2019), a judge in the District of Utah addressed the issue of “whether a relator retains an independent right to maintain the non-intervened portion of an action” in which the Government only partially intervened. The district court held that, under the plain language and legislative history of the statute, the relator has no right to litigate the non-intervened portions of the case.

Relators Katie Brooks and Nannette Wride brought a qui tam action against five colleges and an individual alleging that they violated the FCA by knowingly submitting false claims to the Government for Title IV funds. The Government filed a complaint in intervention on some, but not all, of the claims and as to only two of the colleges: Stevens-Henager College, Inc. and the Center for Excellence in Higher Education (“CEHE”). Relators nevertheless continued to pursue certain non-intervened claims, including by filing amended complaints that added additional claims and parties. The defendants filed a motion to dismiss relators’ and the Government’s operative complaints, and the court sua sponte ordered the parties to brief whether the FCA gave the relators the right to pursue the non-intervened claims.

The Government took the position that the FCA gave relators the right to pursue non-intervened claims. According to the Government, section 3730(c)(1) merely provides that, “‘[i]f the Government proceeds with the action, it shall have the primary responsibility for prosecuting the action,’” (emphases added), but “action” means “cause of action,” not the entire “civil action.” Under that reasoning, relators retained the right to litigate the remaining non-intervened causes of action. The district court rejected the Government’s interpretation of “action,” holding that the plain language of the FCA statute did not support it. The first sentence of section 3730(b)(1), for example, plainly provides that a relator may bring a “civil action,” and the following sentence explains that the “action” (i.e. the civil action) shall be brought in the name of the Government.

Indeed, other provisions of the FCA, the district court held, further demonstrate that Congress uses the word “claim” to distinguish a “cause of action” from the entire civil “action.” Section 3730(e)(4)(A), for example, provides that “[t]he court shall dismiss an action or claim . . . if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed.” (Emphasis added.) “If ‘action’ means ‘cause of action,’ the words ‘or claim’ would be superfluous,” the district court reasoned. In a similar methodical fashion, the court went on to dissect several other provisions of the FCA statute—and its legislative history—to show that, once the Government intervenes, it assumes the primary responsibility over the entire civil action. In addition, the court reasoned, “there is nothing in the False Claims Act to suggest that a relator may maintain ‘non-intervened portion[s] of [an] action.’” “If Congress intended to give relators such rights, one would imagine that either the statute or the legislative history would reflect its intent to do so. But neither does.”

With respect to Stevens-Henager’s motion to dismiss the Government’s intervened claims, the court dismissed the Government’s allegation that Stevens-Henager violated the FCA by knowingly submitting false certifications in connection with its claims for Title IV funds. The certifications, known as “G5 certifications,” allegedly stated that the funds would be “expended . . . for the purpose and condition of the agreement.” The “agreement” at issue was the school’s Program Participation Agreement with the Department of Education, which, under the Incentive Compensation Ban (“ICB”) provision, prohibited the school from paying incentive payments to employees based on securing student enrollments or financial aid. The Government alleged that Stevens-Henager was violating the ICB and therefore no longer eligible to receive Title IV funds, but the school’s G5 certifications falsely implied that it was an “eligible institution” entitled to Title IV funds.

The court found these allegations insufficient to plead knowledge for two reasons. First, despite any alleged non-compliance with the ICB, the applicable regulations provide that Stevens-Henager remained an “eligible institution” entitled to receive Title IV funds unless and until the Department of Education terminated the school’s eligibility. But the Government did not allege that the Department of Education terminated Stevens-Henager’s participation in Title IV programs. Second, the Government failed to allege, even generally, that Stevens-Henager “knowingly” misrepresented its eligibility to receive Title IV funds. Although the Government alleged that Stevens-Henager knowingly violated the ICB provision, the court found that was “not enough.” Instead, “[t]he Government needed to allege that Stevens-Henager knew that it was ineligible to receive Title IV funds, and thus knew that its requests for payment were false or fraudulent.” The court suspected that the Government “is probably unable to allege this in good faith because its own policy between 2002 and 2015 was that ‘[i]mproper 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.’”

A copy of the court’s opinion can be found here.