Académique Documents
Professionnel Documents
Culture Documents
No. 11-1103
Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond.
Henry E. Hudson, District
Judge. (3:07-cv-00290-HEH)
Argued:
December 7, 2011
Decided:
I.
Appellants-Relators Lenora Jones and Patricia J. Willoughby
(the
Relators)
Services, Inc.
are
former
employees
of
Collegiate
Funding
CFS
is
major
student
loan
lender
and
servicing
company
that
provides
variety
of
federal
student
loan
seq.,
and
is
administered
by
the
federal
Department
of
inducements
1085(d)(5)(A);
(2)
to
secure
engages
loan
in
applications,
fraudulent
or
20
U.S.C.
misleading
Relators
Original
Complaint,
filed
in
the
United
that
CFS
submitted
false
claims
to
the
federal
to
financial
aid
units
within
post-secondary
education
which
were
designed
to
create
the
perception
order
allowances,
to
defaults.
and
The
obtain
interest
guaranty
DoEd
payment
payments
requires
that
subsidies,
occasioned
all
such
by
loan
special
payment
submissions
for
under the FCA: (1) presenting false claims; (2) causing false
certifications
and
other
statements
to
be
used
to
get
false
four
transferred
from
Eastern
District
months
the
of
later,
Northern
Virginia,
after
District
the
the
of
Relators
case
had
been
Illinois
to
filed
Amended
an
the
included
the
significantly
Complaint:
(1)
that
following
from
CFS
the
practices,
allegations
provided
some
in
inducements
of
the
to
which
Original
secure
and
volume;
(2)
that
CFS
provided
on-line,
rather
than
in-
violations,
no
interest,
guaranty,
or
special
allowance payments would have been made, and CFS would have been
obliged to repay any federal funds received because they would
7
Amended
Complaint
specifically
alleged
21
separate
than
alleged
the
that
violation
original
CFS
and
31
U.S.C.
of
four
its
counts.
loan
The
servicing
3729(a)(2)
first
15
company
(2006),
counts
had,
caused
in
false
paid
deviations
for
loans
from
made
prescribed
as
result
conduct:
(1)
of
the
unlawful
following
inducements
direct
solicitation
(Counts
7-9);
(4)
bonus-
that
CFS
directly
presented
false
claims
related
to
16)
and
loan
interest
and
special
allowance
payments
payments
(Count
19),
in
violation
of
31
U.S.C.
to
payments
allowance
avoid
obligatory
(Count
20)
payments
and
(Count
repayment
of
government
21),
in
government
interest
violation
insurance
and
of
31
special
U.S.C.
over
all
counts
except
Counts
10-12
(concerning
In 2009, the FCA was amended and these provisions are now
found at 31 U.S.C.A. 3729(a)(1).
The
FCA
public
disclosure
bar,
31
U.S.C.
3730(e)(4)
support
this
ground
for
dismissal,
CFS
submitted
38
investigations
into
student
lender
business
10
on
behalf
of
other
Relators). 7
CFS
also
submitted
chart
claims
alleged
conduct
that
had
in
fact
been
made
opposing
the
Motion
to
Dismiss,
the
Relators
filed
affidavits attesting that they had not read any of the publiclyavailable
documents
submitted
by
CFS
before
filing
their
lawsuit, and they had not resided in any of the cities where
news media producing the coverage were based. In addition, the
Relators
brief
in
submitted
Ortho
copy
Biotech
of
the
Products
governments
amicus
v.
rel.
U.S.
ex
curiae
Chinyelu
11
documents
counsel
had
intended
no
to
knowledge
of
show
that
the
news
they
and
coverage
their
or
then
of
the
out
theory
of
FCA
liability
for
CFS
regarding
their
initially
by
Motion
magistrate
judge,
to
Dismiss
who
was
conducted
considered
an
evidentiary
hearing
a
and
disclosure
bar,
and
that
Counts
7-12
and
20-21
be
12
dismissed
for
failure
to
state
claim.
(Counts
13-15
were
Relators
failed
to
show
any
actual
direct
knowledge
of
programs,
the
or
preferred
alleged
lender
kickback
program,
arrangements
exit
between
&
jurisdiction
over
found
that
Counts
the
7-9,
court
had
relating
subject
to
matter
direct
employed
borrowers
who
at
had
CFS
they
received
handled
the
13
calls
mailings,
from
and
prospective
they
had
been
trained to tell callers that CFS was licensed and backed by the
federal
government.
J.A.
738.
Nevertheless,
the
&
of
which
certifications
alleged
to
be
that
CFS
used
caused
(in
false
violation
statements
of
31
or
U.S.C.
relate
to
asserted
violations
of
the
HEA
and
DOED
regulations.
personal
knowledge
J.A.
of
744.
any
Because
particular
the
Relators
claims
had
submitted
no
for
false
claim
concerning
government-insured
loan
is
material only when the loan has gone into default and a claim is
in
fact
submitted
(i.e.,
the
14
insurance
payout
has
been
not
possess
the
information
that
is
necessary
for
asserted
that
as
CFS
customer
service
she
leaving
learned
CFS
misleading;
that
that
through
the
CFS
her
work
company
had
an
with
designed
agreement
other
its
with
lenders
software
Norfolk
after
to
be
State
to
an
unnamed
representative
who
would
be
able
to
that
as
an
employee
of
CFS
she
had
access
to
the
addition,
Jones
attested
that
she,
Willoughby,
and
their
WL
129842
(E.D.
the
Relators
addressed
proceeded
from
Va.
false
Jan.
12,
assertion
dichotomy
2011).
that
.
the
.
First,
R
&
that
the
court
unfairly
if
[their]
16
that
Relator
the
magistrate
Willoughbys
judge
work
in
appropriately
the
student
considered
loan
industry
filings
purposes
of
disregarded
reasoned
by
the
in
were
public
the
administrative
and
the
administrative
disclosure
authorship,
availability,
not
assessing
that
government
CFS
of
and
dismissal
reports
but
use
bar
thus
motion.
are
government
a
reports
should
The
defined
document
be
court
not
receipt,
particular
for
by
public
for
the
the
SEC
filings
met
each
of
these
requirements,
the
knowledge,
the
court
listed
17
the
publicly
disclosed
their
logical
access
to
the
information
within
their
days
before
the
filing
of
the
Relators
Original
the
Amended
allegations
Complaint,
regarding
in
alumni
which
the
associations
Relators
(instead
first
of
made
or
in
products.
period
In
between
Complaints,
two
addition,
the
filing
publicly
the
court
of
the
disclosed
noted
that
Original
reports
during
and
referred
the
Amended
to
CFSs
no
mention
of
online
exit
counseling
at
all,
yet
the
concerning
inducements
and
online
exit
counseling
to
the
public
disclosure
bar,
pursuant
to
which
court
adopted
the
finding
in
the
&
that
the
jurisdiction
over
the
direct
solicitation
the
Relators
personal
experience
as
customer
service
Counts
20-21,
conspiracy
to
cause
false
statements
and
counts
were
independent
of
the
other
counts
and
the
bases
for
these
allegations
invalidated counts.
20
was
independent
of
the
finding
inadequate
evidence
of
Relators
independent
Counts
7-12
(alleging
violations
of
(a)(2)),
and
the
Relators
had
satisfied
their
burden
to
show
their
the
heightened
pleading
requirements
of
Fed.
R.
Civ.
P.
did
not
allege
the
involvement
of
any
third
party
11
15.
21
particularize
because
they
dates
were
and
alleging
amounts
a
of
fraudulent
individual
scheme
claims
rather
than
regarding
assertion,
the
court
submitted
claims
concluded,
and
were
as
therefore
such
were
naked
merely
12
The
district
court
also
briefly
addressed
the
governments submission of a Statement of Interest, which
articulated its understanding of the particularity standard for
(Continued)
22
The courts final order thus dismissed Counts 1-6 for lack
of subject matter jurisdiction and Counts 7-12 and 16-21 for
failure to state claim. The Relators have timely appealed.
II.
This case comes to us under somewhat ironic circumstances,
in that the district court found that some of the allegations of
fraud brought by the Relators, if meritorious, were too widely
known to support their claims, and some of the allegations were
too
opaque
and
lacking
specificity.
We
first
consider
the
23
A.
The Relators argue first that the district court erred in
determining that they actually based the allegations in Counts
1-6 of the Amended Complaint, concerning loans made as a result
of unlawful inducements and deceptive exit counseling, on public
disclosures. The determination of an actual basis for an FCA
allegation
is
finding
of
fact,
reviewed
for
clear
error.
United States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 348 (4th
Cir.
2009).
[A]
relators
action
is
based
upon
public
disclosure
bar
encompasses
actions
even
partly
based
to
dismiss
on
jurisdictional
grounds
is
filed,
the
13
For much of the time that the FCA language of 2007 was in
effect,
this
circuits
subjective
actual
reliance
rule
differed from that of the majority of circuits, which held that
an objective standard (in which a factual overlap of relator
allegations
and
public
disclosures,
regardless
of
actual
reliance, triggers the bar) is proper. See Jones, 2011 WL
129842, at *5 (noting that the Second, Third, Sixth, Seventh,
Eighth, Ninth, Tenth, and Eleventh Circuits all applied an
objective rule of public disclosure for the provision in effect
in 2007).
24
evidence
that
the
allegations
are
not
based
upon
public
14
In
2010,
these
3730(e)(4) now provides:
provisions
were
amended.
Section
public
disclosure
bar
applies
only
where
an
FCA
claim
is
specifically
set
out
conduct
by
the
particular
(i)
in
a
Federal
criminal,
civil,
or
administrative hearing in which the Government or its
agent is a party;
(ii)
in
a
congressional,
Government
Accountability
Office,
or
other
Federal
report,
hearing, audit, or investigation; or
(iii) from the news media,
unless the action is brought by the Attorney General
or the person bringing the action is an original
source of the information.
(B) For purposes of this paragraph, original
source means an individual who either (i) prior to a
public disclosure under subsection (e)(4)(a), has
voluntarily
disclosed
to
the
Government
the
information on which allegations or transactions in a
claim are based, or (2) who has knowledge that is
independent of and materially adds to the publicly
disclosed allegations or transactions, and who has
voluntarily provided the information to the Government
before filing an action under this section.
31 U.S.C. 3730(e)(4).
26
Appellees
respond
by
emphasizing
that
CFSs
parent,
build
their
claims.
They
urge
us
to
consider
the
public
court
committed
clear
error
in
finding
that
the
without
specific
allegations
concerning
CFS,
are
defendant.
Circuit
They
decision,
rely
United
primarily
States
on
ex
an
rel.
unpublished
Baltazar
v.
actions
against
individual
27
wrongdoers.
The
publically-
merely
an
industry-wide
set
of
allegations.
The
student
borrowers.
affirmatively
prove
allegations,
as
knowledge
public
of
While
the
the
relators
source
district
of
their
court
disclosures
are
does
required
information
noted,
not
not
mere
for
denial
to
FCA
of
satisfy
the
burden
aver
that
their
established by Vuyyuru.
In
their
affidavits,
the
Relators
28
that
Counts
1-6
of
the
Amended
Complaint
were
not
actually
disclosure
bar,
determination
the
that
Relators
SEC
challenge
filings
by
the
district
CFS
were
15
29
28. Because the district court did consider SEC reports in its
analysis,
however,
we
take
Relators
point
this
opportunity
to
address
the
issue.
The
to
Graham
County
Soil
&
Water
private
parties
constituted
materials
of
administrative
Management
privately-created
Tech.,
SEC
221
F.3d
filings
can
580
also
(4th
Cir.
2000),
constitute
an
administrative report.
We find this reasoning unpersuasive in the context of this
case.
Hearings
parties
present
are,
and
by
general
submit
definition,
privately
forums
prepared
in
which
documents
in
activity
of
some
kind.
30
The
context
for
an
the
SEC
or
created
under
their
supervision,
they
were
The
allegations
statutory
touchstone,
of
have
fraud
been
once
again,
[publicly
is
whether
disclosed].
the
Graham
County, 130 S. Ct. at 1404, 1409, 1410. Here, the SEC forms in
question were requested, received, made public, and presumably
included in any corporate profiles compiled by the agency. While
such a report does not necessarily alert federal agencies to
31
in
dismissing
Counts
7-12
and
16-21
for
lack
of
is
treated
as
failure
to
state
claim
under
Rule
32
were
submitted
to
the
federal
government
in
apparently
raised
an
objection
before
the
district
and
payments
resulted
in
false
claims;
the
&
to
these
two
allegations
payments
on
categories
of
claims
general
could
for
ostensibly
special
class
of
be
allowance
disbursed
different-
and
loans
interest
that
were
detailing
district
court
certification
separate
concluded
forms
together
analysis
that
with
for
merely
each
count,
providing
allegations
that
all
the
blank
loans
set
out
allegations
that,
taken
together,
adequately
16
34
in
question
here,
providing
the
basis
for
all
the
17
the
district
court
that
each
remaining
count
fails
on
this
nor
processed
post-consolidation
information
any
consolidated
customer
regarding
service,
claims
for
loans,
or
had
government
provided
any
access
to
reimbursement
the
Relator
alleged
personal
knowledge
of
the
doctor.
See
also
United
States
ex
rel.
Lusby
v.
Rolls-Royce Corp., 570 F.3d 849, 853-54 (7th Cir. 2009) (finding
adequate particularity under Rule 9(b) where a Relator provided
36
evidence
of
specific
parts
shipped
on
specific
dates,
and
between
CFS
and
the
government
in
which
the
III.
For
district
the
foregoing
courts
jurisdiction
Counts
reasons,
dismissal
1-6
of
for
the
we
discern
lack
Amended
of
no
error
subject
Complaint
in
the
matter
under
the
in
the
district
courts
dismissal
of
Counts
7-12
and