Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_12-cv-08193/USCOURTS-azd-3_12-cv-08193-1/pdf.json

Nature of Suit Code: 375
Nature of Suit: False Claims Act
Cause of Action: 31:3729 False Claims Act

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

United States ex rel. Daniel Hamilton,

Plaintiff, 

v. 

Yavapai Community College District, et al., 

Defendants.

No. CV-12-08193-PCT-PGR 

ORDER 

 

 The Court has before it the Motion to Dismiss Counterclaims under A.R.S. § 12-

752(A) and Special Motion to Strike Counterclaims Under Cal. Civ. Proc. Code § 425.16 

(Doc. 135); the Motion to Reconsider Ruling on Scienter and Ruling On Scope of Claims 

under Counts I and II (Doc. 145); the United States of America’s Statement of Interest on 

Relator’s Motion to Reconsider (Doc. 147); Motion to Exceed Page Limit on Reply on 

Motion to Dismiss/Strike Counterclaims (Doc. 159); Defendants Guidance Academy and 

Stoneciphers’ Motion to Strike the United States of America’s Statement of Interest 

(Doc. 164); and Relator-Plaintiff’s Motion for Judgment on the Pleadings Re: 

Affirmative Defense of Failure to Mitigate Damages Asserted by Yavapai Community 

College District (Doc. 167).1

A. Motion to Dismiss Counterclaims under A.R.S. § 12-752(A) and Special Motion 

 1

 The Court finds that oral argument would not assist in resolving this matter and 

accordingly finds the pending motions suitable for decision without oral argument. See

LRCiv 7.2(f); Fed. R. Civ. P. 78(b); Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 

1998). 

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to Strike Counterclaims under Cal. Civ. Proc. Code § 425.16 (Doc. 135) 

 Plaintiff-Relator Hamilton moves to dismiss the defamation counterclaim and the 

intentional interference with contractual relations counterclaim (which is based on the 

same alleged defamatory conduct) (collectively “Counterclaim”) brought against him by 

defendants Guidance Academy and the Stoneciphers (collectively “Guidance”).2

 

Hamilton seeks dismissal of the Counterclaim under Arizona’s Anti-SLAPP statute, 

and/or striking of the claim under California’s Anti-SLAPP statute. 

 Guidance contends that Hamilton has waived any right to bring a motion to 

dismiss based on an Anti-SLAPP affirmative defense by failing to plead the defense in 

his answer. (Doc. 144 at 4-5.) Hamilton argues that he did raise the defense in his 

answer. (Doc. 160 at 4-5.) 

 Hamilton’s answer alleges that the counterclaims against him “are barred because 

they violate the public policy protecting FCA whistleblowers.” (Doc. 133, ¶ 33.) This is 

sufficient to preserve the affirmative defense. Further, even if the Court were to find that 

this was not sufficient, the Court would permit Hamilton to include this affirmative 

defense in subsequent pleadings as Guidance has not demonstrated that doing so would 

result in prejudice against it. See Simmons v. Navajo County, 609 F.3d 1011, 1023 (9th 

Cir. 2010). 

 1. Arizona’s Anti-SLAPP Statute 

 Arizona’s Anti-SLAPP statute provides: “In any legal action that involves a 

party’s exercise of the right of petition, the defending party may file a motion to dismiss 

the action under this section.” A.R.S. § 12-752(A). The Court must grant the motion 

“unless the party against whom the motion is made shows that the moving party’s 

exercise of the right of petition did not contain any reasonable factual support or any 

 

2

 Guidance contends that Hamilton did not challenge in his motion Guidance’s counterclaim for intentional interference with contractual relations (Doc. 144 at 2, n.1). 

The Court disagrees. Hamilton’s motion refers to the “Counterclaim” in which Guidance 

defendants “accuse Relator of defamation and interference with contract (also based on 

alleged defamation).” (Doc. 135 at 2.) Thus, Hamilton defined “Counterclaim” in his 

motion as collectively including both the defamation counterclaim and the interference 

with contract counterclaim, and sought dismissal of this collective “Counterclaim.” 

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arguable basis in law and that the moving party’s acts caused actual compensable injury 

to the responding party.” A.R.S. § 12-752(B). 

 Guidance contends that the Anti-SLAPP statute is inapplicable because the 

statements allegedly made by Hamilton that are the subject of the Counterclaim did not 

involve Hamilton’s “exercise of the right of petition.” 

 The “exercise of the right of petition” is defined under Arizona law as 

any written or oral statement that falls within the constitutional protection of free 

speech and that is made as part of an initiative, referendum or recall effort or that 

is all of the following: 

(a) Made before or submitted to a legislative or executive body or any other 

governmental proceeding. 

(b) Made in connection with an issue that is under consideration or review by a 

legislative or executive body or any other governmental proceeding. 

(c) Made for the purpose of influencing a governmental action, decision or result. 

A.R.S. § 12-751(1). A “government proceeding” is defined under the statute as “any 

proceeding, other than a judicial proceeding, by an officer, official or body of this state 

and any political subdivision of this state . . . or by an officer, official or body of the 

federal government.” A.R.S. § 12-751(2). 

 The Counterclaim alleges that Hamilton defamed Guidance when he “made false 

statements of fact about Guidance’s compliance with VA regulations and alleged scheme 

to defraud the United States with regard to veteran educational benefits to (i) YC 

employees and contractors; (ii) members of the media; and (iii) the public at large.” 

(Doc. 132 at 25, ¶ 18.) These alleged defamatory statements were alleged to have been 

made as part of an initiative, referendum or recall effort, and were not made before or 

submitted to a legislative or executive body. See A.R.S. § 12-751(1). Further, there is no 

indication in the Counterclaim that the alleged defamatory statements were (a) made 

before or submitted to a governmental proceeding, and (b) made in connection with an 

issue under consideration or review by the governmental proceeding. Id. The alleged 

defamatory statements thus do not fall within the category of cases subject to dismissal 

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under Arizona’s Anti-SLAPP statute. 

 Further, the Counterclaim does not allege that defamatory statements were made 

to an “officer,” “official,” or “body” of YC, the Veterans Administration, or the 

Department of Justice. To the contrary, the Counterclaim alleges that the defamatory 

statements were made to YC employees or contractors, members of the community at 

large, and media outlets. (See Doc. 132 at 24, ¶ 12; id. at 25, ¶ 18; id. at 26, ¶ 26.) The 

publishing of defamatory statements to these individuals does not fall under the 

protection of Arizona’s anti-SLAPP statute. 

 Hamilton cites extensively to his declaration, which he has submitted in support of 

his motion. (See Doc. 135 at 3-12; Doc. 137.) In general, if a district court considers 

evidence outside of the pleadings in ruling on a motion to dismiss on the pleadings, the 

motion will be treated as one for summary judgment. See Fed. R. Civ. P. 12(d). 

Although there is a narrow exception under which a court can consider certain types of 

evidence without converting the motion into one for summary judgment (such as 

documents attached to the complaint or incorporated into the complaint by reference), see 

United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003), Hamilton’s declaration does 

not fall into this narrow exception. The Court declines to consider this evidence and 

therefore does not convert the motion to dismiss into a motion for summary judgment. 

 2. California’s Anti-SLAPP Statute 

 As noted, the Counterclaim alleges that Hamilton told YC employees or 

contractors, members of the community at large, and media outlets that Guidance had 

defrauded the United States. (Doc. 132 at 24, ¶ 12.) As to media outlets, the 

Counterclaim specifically mentions the Daily Courier and Los Angeles Times. (Id. at 

¶ 11.) However, there are no allegations in the Counterclaim indicating that the alleged 

defamatory statements were made anywhere but in Arizona. 

 Hamilton argues that his communications with the Los Angeles Times referenced 

in the Counterclaim “occurred outside of Arizona and within California” and that, 

therefore, the California Anti-SLAPP statute applies to, and mandates dismissal of, the 

Counterclaim. (Doc. 135 at 12.) In support of his assertion that the communications 

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occurred in California, Hamilton again relies on his declaration. (See Doc. 135 at 12-15, 

137.) As noted above, the Court declines to consider Hamilton’s declaration, which is 

neither attached to nor incorporated by reference into the pleadings. The Court therefore 

does not convert the motion to dismiss into a motion for summary judgment. 

 In sum, based on the allegations contained in the Counterclaim, the Counterclaim 

is not subject to dismissal under either Arizona’s anti-SLAPP statute, or California’s antiSLAPP statute. The motion to dismiss and/or strike will accordingly be denied. 

B. Motion to Reconsider Ruling on Scienter and Ruling on Scope of Claims under 

Counts I and II (Doc. 145) 

 Hamilton seeks to have the Court reconsider its ruling on scienter, contained in its 

April 2, 2015, Order (Doc. 127), as well as the Court’s statement regarding the scope of 

the claims remaining at issue under Counts I and II, in its Order dated June 3, 2015 (Doc. 

140). The Court will deny the motion. 

1. Claims arising prior to Summer 2011 term related to failure to comply with 

85/15 Rule 

 “[A]ny motion for reconsideration shall be filed no later than fourteen (14) days 

after the date of the filing of the Order that is the subject of the motion.” LRCiv 

7.2(g)(2). On April 2, 2015, the Court entered its Order dismissing Count I and Count II 

“as to all claims arising prior to Summer 2011 term related to the failure to comply with 

the 85/15 Rule.” (Doc. 127 at 25, 26.) A motion seeking reconsideration of the Court’s 

ruling was required to be filed by April 16, 2015. Hamilton filed his motion to reconsider 

on June 17, 2015, two months after the Court issued its Order. The motion is therefore 

untimely. 

 Hamilton also seeks reconsideration based on “new evidence” that he asserts 

establishes that Defendants knew they were not compliant with the 85/15 Rule going into 

the Spring 2011 term. (Doc. 145 at 7.) A motion for reconsideration can be based on 

new evidence that could not have been brought to the Court’s attention earlier. LRCiv 

7.2(g)(1). The “new evidence” relied on by Hamilton is a series of emails from early 

January 2011, between John Morgan and JJ Johnson. The declaration of Hamilton’s 

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counsel in support of the motion for reconsideration states that this series of emails was 

“discovered” on June 16, 2015. (Doc. 146 at 2.) However, counsel does not explain 

when this information was disclosed to him by Defendants or explain why he was unable 

to discover this information sooner (other than discussing the amount of discovery that 

has been produced by YC). (Id. at 1-2.) The emails, which are attached to the 

declaration, are Bates stamped YC002354 and YC002362. (Docs. 146-1, 146-2.) 

YC produced those documents in January 2014, and reproduced them in “native format” 

pursuant to Plaintiff’s counsel’s request in September 2014. (See Doc. 162 at 2-3; Doc. 

162-1 at 8, 24, 36.) Thus, the evidence upon which Hamilton relies could have been 

brought to the Court’s attention earlier and is insufficient to support a motion to 

reconsider. 

 2. Claims related to enrollment from Fall 2011 through Spring 2013 

 The parties previously presented to the Court a discovery dispute regarding 

whether the Court had dismissed, in its April 2, 2015, Order, claims related to enrollment 

from Fall 2011 through Spring 2013. The Court heard the parties’ argument regarding 

this discovery dispute on June 1, 2015. At that hearing, Yavapai’s counsel specifically 

noted that the only claims in the Third Amended Complaint (TAC) for Fall 2011 through 

Spring 2013 related to the employee enrollment program and scholarship program, and 

Hamilton’s counsel did not provide the Court with any citation to the TAC or argument 

to the contrary. Further, the Court’s review of the TAC confirms that the alleged 

violations of the 85/15 Rule for Fall 2011 through Spring 2013 relate to the employment 

enrollment program and scholarship program (Doc. 82 at 23-38.) The Court will 

therefore deny reconsideration. 

C. The United States of America’s Statement of Interest on Relator’s Motion to 

Reconsider (Doc. 147); Defendants Guidance Academy and Stoneciphers’ Motion 

to Strike the United States of America’s Statement of Interest (Doc. 164) 

 The United States has filed a Statement of Interest on Relator’s Motion to 

Reconsider. In this statement, the Government takes no position regarding the 

sufficiency of Hamilton’s Third Amended Complaint, nor does the statement specifically 

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challenge the Court’s substantive rulings in its April 2, 2015, Order. Instead, the Notice 

of Interest merely seeks a ruling from the Court that reckless disregard or deliberate 

indifference is sufficient to plead and prove scienter under the FCA. Guidance 

Defendants seek to strike the Statement of Interest, arguing that it is a motion to 

reconsider the Court’s April 2, 2015, Order. The Court would agree with Guidance 

Defendants that if the Notice of Interest is intended to be a motion for reconsideration of 

the Court’s April 2, 2015, Order, the motion is untimely. However, the Court construes 

the Notice of Interest as a request for clarification and will grant the requested 

clarification and deny the motion to strike. 

 As stated in the April 2, 2015, Order, “knowing” or “knowledge” under the FCA 

can be shown not only through “actual knowledge of the falsity of a claim, but also 

through a showing of deliberate indifference or reckless disregard of whether the claim is 

false.” (Doc. 127 at 7 (citing Hooper v. Lockheed Martin Corp., 688 F.3d 1017, 1050 (9th

Cir. 2012)).) In its analysis of the claims in Counts I and II arising prior to Summer 

2011, the Court – perhaps in-artfully – used the terms “aware,” and “knowingly and 

intentionally.” (Doc. 127 at 10.) The Court’s use of these terms was with the 

understanding that the terms encompass, and that the FCA only requires, “deliberate 

indifference” or “reckless disregard.” 

 In sum, the Court clarifies that reckless disregard or deliberate indifference – not 

actual knowledge or intent to deceive – is sufficient to plead and prove scienter under the 

FCA. The Court further clarifies that the Court applied that standard in dismissing in part 

claims contained in the Third Amended Complaint. 

D. Relator-Plaintiff’s Motion for Judgment on the Pleadings Re: Affirmative 

Defense of Failure to Mitigate Damages Asserted by Yavapai Community College 

District (Doc. 167). 

 Yavapai’s answer alleges “Plaintiff has failed to mitigate damages.” (Doc. 92 at 

44.) Hamilton moves for judgment on the pleadings regarding this affirmative defense, 

contending that the defense is not sufficiently pled as it does not give him sufficient 

notice of the basis for the defense. 

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 The Ninth Circuit has not yet decided whether the pleading standards of Bell 

Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 

(2009) apply to affirmative defenses. At least one District Judge in the District of 

Arizona has held that they do not. See Federal Trade Comm’n v. N. Am. Marketing & 

Assoc., LLC, 2012 WL 5034967, at *1 (D. Ariz. 2012). Other districts have also held that 

an allegation that a plaintiff has “failed to mitigate damages” is sufficient notice to the 

plaintiff of the affirmative defense. See, e.g., Minalga v. Fid. Invest. Institutional 

Operations Co., 2002 WL 31527251, at *2 (N.D. Ill. 2002) (allegation that plaintiff failed 

to mitigate damages sufficiently puts plaintiff on notice of defendant’s affirmative 

defense); cf. Birabent v. Hudiburg Auto Group, Inc., 2012 WL 1438921, at *2 (W.D. 

Okla. 2012) (“[T]his Court holds that affirmative defenses other than the failure to 

mitigate damages are subject to the pleading requirements of” Fed. R. Civ. P. 8 and 

Twombly (emphasis added)). 

 Hamilton contends that this “Court already had ruled that affirmative defenses had 

to satisfy at least the ‘fair notice’ pleading standard of Wyshak if not the ‘plausibility’ 

standard of Twombly.” (Doc. 167 at 7 (citing Doc. 74, n.5).) Hamilton’s contention 

misrepresents the Court’s ruling. The Court stated: “The Court finds it unnecessary to 

determine whether the heightened pleading standard set forth in [Twombly] applies to the 

pleading of affirmative defenses because, even if it does, the Morgan Answer meets that 

standard.” (Doc. 74 at 24-25, n.5.) Thus, the Court did not hold that affirmative defenses 

were required to comply with Wyshak or Twombly. 

 Finally, although Federal Rule of Civil Procedure 8(c) does require affirmative 

defenses to be included in responsive pleadings, “absent prejudice to the plaintiff, the 

district court has discretion to allow a defendant to plead an affirmative defense in a 

subsequent motion.” See Simmons v. Navajo County, 609 F.3d 1011, 1023 (9th Cir. 

2010). Similarly, this Court has discretion to review both a defendant’s answer and any 

discovery responses provided by the defendant in determining whether the defendant has 

provided plaintiff with fair notice of the defense and therefore has sufficiently pled the 

defense. Discovery on this issue has apparently not yet proceeded and the “Court is 

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hesitant to create a precedent whereby it is obligated to pick through a defendant’s 

affirmative defenses at this stage of the litigation. The parties control the discovery 

process, and [the Plaintiff], as a sophisticated party, should be able to hone in on those 

affirmative defenses of [the defendant] that may actually become relevant in a dispositive 

motion or at trial.” E.E.O.C. v. Joe Ryan Enterps., Inc., 281 F.R.D. 660 (M.D. Ala. 

2012). The Court will, accordingly, deny the motion to dismiss this affirmative defense 

on the pleadings. 

 IT IS ORDERED that the Motion to Dismiss Counterclaims under A.R.S. § 12-

752(A) and Special Motion to Strike Counterclaims Under Cal. Civ. Proc. Code § 425.16 

(Doc. 135) is denied. 

 IT IS FURTHER ORDERED that the Motion to Reconsider Ruling on Scienter 

and Ruling On Scope of Claims under Counts I and II (Doc. 145) is denied. 

 IT IS FURTHER ORDERED that the United States of America’s Statement of 

Interest on Relator’s Motion to Reconsider (Doc. 147) is construed as a Motion for 

Clarification and, as such, is granted. The Court clarifies that reckless disregard or 

deliberate indifference – not actual knowledge or intent to deceive – is sufficient to plead 

and prove scienter under the FCA. The Court further clarifies that the Court applied that 

standard in dismissing in part claims contained in the Third Amended Complaint. 

 IT IS FURTHER ORDERED that Defendants Guidance Academy and 

Stoneciphers’ Motion to Strike the United States of America’s Statement of Interest 

(Doc. 164) is denied. 

 IT IS FURTHER ORDERED that the Motion to Exceed Page Limit on Reply 

(Doc. 159) is granted. The Clerk of the Court is directed to file the Reply on Motion to 

Dismiss/Strike Counterclaim, lodged at Doc. 160. 

/ / / 

/ / / 

 

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 IT IS FURTHER ORDERED that Relator-Plaintiff’s Motion for Judgment on the 

Pleadings Re: Affirmative Defense of Failure to Mitigate Damages Asserted by Yavapai 

Community College District (Doc. 167) is denied. 

 Dated this 27th day of October, 2015. 

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