Two recent decisions--one from the Ninth Circuit Court of Appeals and one from the United States District Court for the Eastern District of California--show an apparent willingness by some courts (at least, or perhaps especially, in the Ninth Circuit) to find that relators in qui tam actions have adequately pled False Claims Act ("FCA") violations against schools, allowing them to proceed to discovery.
In the first such decision, the Ninth Circuit Court of Appeals, on February 13, 2013, held that the district court below had erred in dismissing a qui tam relator's case against the school by requiring the relator to identify a specific false claim in support of his False Claims Act case. U.S. ex rel. Jajdelski v. Kaplan, Inc., No. 11–16651, 2013 WL 520418, at *2 (9th Cir. Feb. 13, 2013).* The Ninth Circuit held that the court could infer a false claim because the relator had provided details of an alleged "phantom student scheme" in which Heritage College, a school that Kaplan had acquired, allegedly enrolled and then prepared diplomas for phantom students in order to obtain financial aid funding. Id. at *1-2. The Court held that the relator in the case did not need to go the "next step," and specifically identify any students for whom false claims were actually allegedly submitted. See id. at *2. The Court noted that the other circuit courts were divided on this issue and followed the minority view that a specific claim was not necessary. See id. Interestingly, the short opinion from the Ninth Circuit was accompanied by a vigorous dissent from Judge Callahan, arguing that "Jajdelski's complaint relies too much on innuendo, ultimately failing to lend the requisite specificity--the who, what, when, where, and how." Id. at *3 (Callahan, J., dissenting) (internal quotation omitted).
The Jajdelski decision is unpublished and thus of limited precedential value. Nevertheless, it is an unfortunate example of the approach taken by some courts to stretch the False Claims Act beyond its normal scope (not even requiring the specific identification of an actual false claim).
The second decision was made by the United States District Court for the Eastern District of California on April 11, 2013 in U.S. ex rel. Capriola v. Brightstar Education Group., Inc., No. 1:11-CV-00135 AWI GSA, 2013 WL 1499319 (E.D. Cal. Apr. 11, 2013). There, the relators--all former employees of the Institute of Technology, Inc.--alleged that the school falsely reported job placement rates and violated the incentive compensation ban by holding weekly and annual competitions based exclusively on enrollments numbers. Id. at *1-2. The court ruled that the relators had pleaded sufficient factual details to survive a motion to dismiss. Id. at *5-9.