In what should be viewed as a surprising development, it does not appear that, to date, any qui tam complaints have been filed against schools based on the Department of Education's ("DOE") new compensation regulations, which went into effect in July 2011 and were upheld in significant part by the United States Court of Appeals for the District of Columbia in June 2012. These regulations have the potential for significantly changing the landscape of defending incentive compensation lawsuits, with qui tam relators likely arguing that they limit arguments for dismissal, and altering the school's burden in defending against claims. The revised compensation regulations could also impact decisions by DOJ with regard to intervention.
Given the FCA's first-to-file rule, it was anticipated that the new regulations would cause a race to the courthouse by relators and their counsel to file claims based on the new provisions. While these cases may still be under seal, there is nothing to suggest that any cases relating to conduct after the effective date of the new regulations have been filed. Given the increasing willingness of plaintiffs' attorneys to target the sector, it seems likely that cases based on the new regulations are on the horizon (if not already filed and still under seal).
Relators and their counsel might also be encouraged to file new lawsuits by the recently promulgated DOE OIG audit priorities for 2013 which include, as the first listed priority, to "assess FSA's oversight of and schools' compliance with recent changes to requirements for incentive compensation and misrepresentation."