Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-2_13-cv-01989/USCOURTS-alnd-2_13-cv-01989-3/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 31:3729 False Claims Act

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

UNITED STATES ex rel. RANDI

CREIGHTON,

Plaintiff,

v.

BEAUTY BASICS INC,

Defendant.

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Case No.: 2:13-CV-1989-VEH

MEMORANDUM OPINION AND ORDER

This is Plaintiff-Relator Randi Creighton’s fourth attempt at drafting a

complaint in this False Claims Act suit and her third failure to follow the court’s

instructions on how to do so properly. She gets no more do-overs; her motion to

amend the complaint will be DENIED and this action will be DISMISSED WITH

PREJUDICE. 

STATEMENT OF FACTS

Since this is effectively a motion to dismiss, all of the well-pleaded factual

allegations are taken astrue. Franklin v. Curry, 738 F.3d 1246, 1248 (11thCir. 2013).

Legal conclusions are disregarded. Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009). 

Defendant Beauty Basics, Inc. (“Beauty Basics”) is a “for-profit corporation that

FILED

 2016 Jun-28 PM 05:10

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 2:13-cv-01989-VEH Document 46 Filed 06/28/16 Page 1 of 10
operates a beauty school offering cosmetology, esthiology,

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and massage programs.”

(Doc. 44-1, ¶ 1). In 2009, Beauty Basics entered into a Program Participation

Agreement (“PPA”) with the Department of Education that allowed Beauty Basics,

through its Aveda Institute subsidiary, to obtain federalstudent loans for itsstudents.

(Id.). As part of the PPA, “Defendant explicitly agreed to meet” certain requirements,

including compliance with the “standards of its [Beauty Basics’s] accrediting body,”

id., ¶ 2, both at the time of signing and in the future. (Id., ¶ 11). 

BeautyBasics/Aveda was accredited by the “National Accrediting Commission

of [Career] Arts and Sciences (‘NACCAS’).” (Id., ¶ 13). Among other things,

NACCAS requires the organizations it accredits to “employ[] instructional staff that

is fully qualified . . . [in] compliance with state requirements,” to “have a reasonable

system of grades,” to “evaluate students no later than the midpoint of the academic

year or the course of the program,” to “always meet eligibility requirements

throughout the period of accreditation,” and to “notify [NACCAS] within ten (10)

days of any event that may jeopardize its continued operation as a licensed accredited

school.” (Id., ¶ 15–16). 

Randi Creighton (“Creighton”) enrolled in Aveda’s esthiology program “at

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 “[T]he typical Esthiology program incorporates skin care, facials, body treatments, hair

removal, makeup application, business development, wellness and retail knowledge.”

ESTHIOLOGY/SKIN CARE, http://avedu.edu/student-programs/esthiology-skin-care

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Case 2:13-cv-01989-VEH Document 46 Filed 06/28/16 Page 2 of 10
different times during 2012 and 2013.” (Id., ¶ 9). Creighton claims to have

observed the following violations of the NACCAS requirements:

a) Beginning in approximately December of 2012 through

July 2013, Defendant failed to provide properly licensed

instructors to teach classes enrolled by Relator. This was

occurring in both the Esthiology andCosmetology sections

and included all "classes" or "sessions" that the Relator

attended in both sections.

b) No teacher whatsoever was provided in early 2013

through July 2013 for all Esthiology and Cosmetology

classes. 

c) Defendant failed to give grades to Relator from October

and/or December of 2012 through July 2013 for all classes

in the Esthiology and Cosmetology program. 

d) Despite these inadequacies, Defendant provided no

information to NACCAS regarding the violations which

would render it unaccredited by NACCAS.

(Id., ¶ 17). Laura Michael, Beauty Basics’s Financial Aid Manager, and Emily

Salillas, its Admissions Director, submitted financial aid applications on behalf of

Creighton so thatshe could receive Stafford loansfrom the federal government. (Id.).

Creighton’s loan was disbursed on June 12, 2013. (Id.). The payment request

“represent[ed] certifications that Defendant was in compliance with the terms of the

PPA and its accrediting body, the NACCAS.” (Id., ¶ 19). 

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Case 2:13-cv-01989-VEH Document 46 Filed 06/28/16 Page 3 of 10
PROCEDURAL HISTORY

This action, alleging violations of the False Claims Act, 29 U.S.C. §§ 3729-33,

wasfiled on October 29, 2013. The United States declined to intervene on December

6, 2013. On April 28, 2014, BeautyBasics moved to dismissthe complaint for failure

to comply with Rule 9(b), and, on February 11, 2015, the district judge to whom this

case was then assigned granted the motion to dismiss (although allowing leave to

amend). Creighton filed her first amended complaint on March 4, 2015, and Beauty

Basics moved to dismiss it—again based on non-compliance with Rule 9(b)—on

March 23, 2015. On June 11, 2015, the prior district judge granted that motion to

dismiss. That order permitted Creighton to move for leave to file a second amended

complaint. Plaintiff sought said leave on July 1, 2015, and Defendant opposed the

motion as futile (because the third complaint did not comply with Rule 9(b)) on July

14, 2015. 

This matter was reassigned to the undersigned on October 20, 2015. I denied

the motion for leave to amend on May 10, 2016 because the complaint did not comply

with Rules 8 and 10. That May 10, 2016 order offered Creighton one last chance to

seek leave to file a third amended—and fourth total—complaint. She did so on May

17, 2016, and BeautyBasicsregistered its opposition on May 31, 2016. Creighton has

not replied to the opposition.

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Case 2:13-cv-01989-VEH Document 46 Filed 06/28/16 Page 4 of 10
GOVERNING LAW

"The court should freely give leave [to amend a complaint] when justice so

requires," FED. R. CIV. P. 15(a)(2), but "need not" do so "where amendment would

be futile." Bryant v. Dupree, 252 F.3d 1161, 1163 (11th Cir. 2001). Amendment is

futile where "the complaint as amended is still subject to dismissal." Hall v. United

Insurance Co., 367 F.3d 1255, 1263 (11th Cir. 2004). To survive a motion to

dismiss, a pleading must satisfy Rules 8 and 9 (among others). See Universal

Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. __, __ (2016) (slip

op. at 16 n. 6).

A complaint must be legally, as well as factually, sufficient. Iqbal, 556 U.S. at

678 (2009). Although there is not always a bright line between law and facts, a

complaint will generally be legally sufficient if the essential elements of a cause of

action are pleaded, and it is factually sufficient if the facts alleged, presumed true,

plausibly establish that the plaintiff will be able to prove the elements of his claim

and thus be entitled to relief. The significance of a particular fact depends on its

relationship to the elements of plaintiff's cause of action. Cf. FED.R.EVID. 401 (a fact

is relevant if it is of consequence in an action).

FED R. CIV. P. 9(b) imposes a heightened pleading standard, requiring that

allegations of fraud be described with "particularity."This means “a plaintiff must

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Case 2:13-cv-01989-VEH Document 46 Filed 06/28/16 Page 5 of 10
allege:(1) the precise statements, documents, or misrepresentations made; (2) the

time, place, and person responsible for the statement; (3) the content and manner in

which these statements misled the Plaintiffs; and (4) what the defendants gained by

the alleged fraud.” Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1291 (11th Cir.

2010) (citation and internal quotation marks omitted) (emphasis added). Put more

pithily, the complaint must describe the who, what, when, where, and how of each

element of a fraud claim, except scienter. See Corsello v. Lincare, Inc., 428 F.3d

1008, 1014 (11th Cir. 2004). If a complaint's factual sufficiency under Rule 8 is

assessed in light of the essential elements of a claim, it follows ineluctably that the

heightened factual specificity required by Rule 9(b) should also be assessed in light

of the required elements of a claim. 

I offered the following direction to Creighton in drafting her fourth complaint:

Creighton's third amended complaint must comply with

Rule 10(b), setting forth each claim for relief in a separate

count. Moreover, the complaint must include the who,

what, when, where, and how for each element, except

scienter, of each claim for relief. The previous sentence

should be taken literally; Creighton's fourth attempt at

drafting a complaint would benefit from some structure.

The recitation of elements and supporting facts must

appear in each count for relief. A general recitation of facts

is not prohibited, but incorporating those facts by reference

into each count for relief is insufficient.

(Doc. 43 at 5). She essentially ignored this, although I will analyze each count by

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Case 2:13-cv-01989-VEH Document 46 Filed 06/28/16 Page 6 of 10
element—the logical route. Each claim fails on the first element.

COUNT I: VIOLATION OF 29 U.S.C. § 3729(a)(1)(A)

The elements of a claim under 29 U.S.C. § 3729(a)(1)(A) are: “(1) a false or

fraudulent claim; (2) which was presented, or caused to be presented, by the

defendant to the United States for payment or approval; (3) with the knowledge that

the claim was false.” United States v. R&F Properties of Lake County, Inc., 433 F.3d

1349, 1355 (11th Cir. 2005). 

1. “[A] false or fraudulent claim”

A. Where

Here, this does not bear on the 9(b) analysis.

B. Who

This does not appear in the Count itself, but she alleges in her “Facts

Applicable to All Counts” that Laura Michael and Emily Sallias submitted the loan

applications. 

C. What

Creighton claims that “[t]he false claim was filing the loan application stating

that the Defendantwasin compliance with the PPA including the NACCAS standards

despite knowing that it was not in compliance with same.” (Doc. 44-1, ¶ 30). 

Even assuming that the description of the alleged fraud contains sufficient

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Case 2:13-cv-01989-VEH Document 46 Filed 06/28/16 Page 7 of 10
factual matter to satisfy Rule 8, it is too lacking in detail to satisfy Rule 9(b). At no

point does Creighton allege in what manner Defendant certified compliance with the

NACCAS requirements and/or the Title IV requirements. Instead, the complaint

merely says “they expressly certified that the Defendant was eligible to receive Title

IV HEA funds.” (Doc. 44-1, ¶ 20). Thisis perhaps a legal conclusion and, if so, is due

to be ignored. If not, it is too generalized an allegation to survive a motion to dismiss

predicated on Rule 9(b). Was there a box to check? Did they sign an affidavit? Was

the “certification” part of a form? The “precise statement, document, or

misrepresentation,” Cigna Corp., 605 F.3d at 1291, as well as its contents, must be

alleged; a laconic allegation of the existence of a misrepresentation will not do.

Finally, a note on “implied false certification.”Creighton only explicitly claims

that Beauty Basics submitted an explicit false certification, but the court will offer a

brief word on why the implied false certification theory is not satisfied here, since

Creighton hasrelied on that theory in prior briefing. To plead a false certification, the

plaintiff must allege that “first, the claim does not merely request payment, but also

makesspecific representations about the goods or services provided; and second, the

defendant's failure to disclose noncompliance with material statutory, regulatory, or

contractual requirements makes those representations misleading half-truths.”

Escobar, 576 U.S. at __ (slip op. at 11). The pleadings do not contain sufficient

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Case 2:13-cv-01989-VEH Document 46 Filed 06/28/16 Page 8 of 10
factual matter about “specific representations about the goods or services provided”

to satisfy the “rigorous,” id., standard of materiality for a false representation. Having

determined that the “what” of Count I is deficient, there is no need to consider the

“when” or “how.”

COUNT II: VIOLATION OF 29 U.S.C. § 3729(a)(1)(B)

To state a claim under subparagraph (B), the relator must allege that 1) the

defendant makes, uses, or causes to used or made a record or statement, 2) which is

false, 3) with knowledge of its falsity, 4) and the statement is material to the false

claim. 31 U.S.C. § 3729(a)(1)(B); 1 JOHN T. BOESE, CIVIL FALSE CLAIMS AND QUI

TAM ACTIONS § 2.01[D], at 2-35. Creighton describes the record or statement as

thus: “[o]n or before June 12, 2013, the Defendant made a record and/or false

statement by filing for payment a loan request for the Relator,” doc. 44-1 at 39, and

“claim[ed] to be in compliance with NACCAS standards.” (Id., ¶ 40).

It is abundantly clear that the act alleged to violate section 3729(a)(1)(A)—the

submission of a loan request—is pulling double duty asthe conduct alleged to violate

3729(a)(1)(B). Accordingly, the 9(b) analysis applies with equal force to Count II as

Count I, so Count II also fails to satisfy Rule 9(b). 

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Case 2:13-cv-01989-VEH Document 46 Filed 06/28/16 Page 9 of 10
IV

The proposed complaint does not comply with Rule 9(b). Amendment would

be futile, because the amended complaint would not survive a motion to dismiss. The

motion is DENIED. This action is DISMISSED WITH PREJUDICE. 

DONE and ORDERED this 28th day of June, 2016.

 

 VIRGINIA EMERSON HOPKINS

United States District Judge

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