NOT FOR PUBLICATION (Doc. No. 52)

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

CAMDEN VICINAGE

_________________________________________

:

UNITED STATES OF AMERICA, ex rel. :

LAPORTE, et al., :

:

Plaintiffs, : Civil No. 11-3523 (RBK/AMD)

:

v. : 

: OPINION 

PREMIER EDUCATION GROUP, L.P. :

et al., :

:

Defendants. :

_________________________________________ :

KUGLER, United States District Judge:

This matter is a qui tam action, which Plaintiffs bring under the False Claims Act, 

arising out of alleged fraudulent claims made by Premier Education Group, and its 

subsidiary schools, to the Federal government. Presently before the Court is Defendants’ 

motion to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1)

and 12(b)(6) (Doc. No. 52). For the reasons set forth below, the motion to dismiss will 

be granted.

I. FACTUAL BACKGROUND

Relators Laura LaPorte, Angela Davenport, Pamela Hone, Robert Biaselli, Kelli J. 

Amaya, Amanda Kenny, and Doris Moody (“Plaintiffs”) brought this qui tam action on 

behalf of the United States of America against Defendants Premier Education Group, 

L.P. and Premier Education Group, G.P., Inc. d/b/a Branford Hall Career Institute, Harris 

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School of Business, Salter College, The Salter School, Seacoast Career Schools, and 

Suburban Technical School (collectively, “PEG”), and John Does # 1-50, Fictitious 

Names (together with PEG, the “Defendants”), pursuant to the Federal Civil False Claims 

Act, 31 U.S.C. §§ 3729, et seq. (“FCA”). This action was originally brought on June 20, 

2011 (Doc. No. 1), and the Complaint was subsequently amended four times. The Fourth 

Amended Complaint (“FAC”) was filed on February 27, 2014 (Doc. No. 46).

In their FAC, Plaintiffs explain that their lawsuit is based on the actions of PEG,

which allegedly made or caused to be made false claims and statements in order to 

participate in the Federal student financial aid programs (“Federal Programs”), from 2006 

onward. (FAC ¶ 2; id. ¶ 97.) They claim PEG violated Federal regulations it was 

required to comply with in order to be eligible to receive Federal Program funding. 

Specifically, PEG violated provisions of the contractual agreements between PEG and the 

Department of Education (“DOE”), called Program Participation Agreements (“PPAs”), 

in which PEG agreed to abide by Federal regulations and not engage in material 

misrepresentations as a condition of PEG’s eligibility to receive said funding. As

required by the PPAs, PEG certified, each time it drew down student aid monies, that the 

funds were being expended in accordance with the conditions of those PPAs. (Id. ¶ 3.)

Congress established various student loan and grant programs under Title IV of 

the Higher Education Act of 1965, 29 U.S.C. §§ 1070 et seq. (“HEA”), including the 

Federal Pell Grant Program, the Federal Family Education Loan Program and the Federal 

Direct Loan Program. In 2008 Congress reauthorized the HEA, as amended, through its 

passage of the Higher Education Opportunity Act. (FAC ¶ 60.) In order to participate in 

the Title IV Federal Programs for financial aid, an institution such as PEG must (1) 

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establish institutional and program eligibility, and then (2) ensure student eligibility prior 

to disbursing the Federal Program funds. (Id. ¶ 61.) There are federal requirements for 

institutions that wish to participate in Title IV Federal Programs, including the 

requirement that a school be accredited and licensed to operate in each state in which it is 

doing business. (Id. ¶ 64; 20 U.S.C. § 1001; 34 C.F.R. § 600.5(a)(4), (6).) Institutions 

that wish to receive federal funds also may not make substantial misrepresentations to 

prospective applicants about the nature of the institution’s educational programs or the 

employability of its graduates. (FAC ¶ 65; 34 C.F.R. § 668.71; id. § 668.74; id. § 

668.72.) To qualify as eligible, a student must be enrolled or accepted for enrollment in 

an eligible program at an eligible institution, must have a high school diploma or 

recognized equivalent, unless an enumerated exception applies (such as, during the 

relevant time period, having “obtained a passing score specified by the Secretary on an 

independently administered test”), and must be maintaining “Satisfactory Academic 

Progress” in his or her course of study according to the school’s published standards, and 

in accordance with Federal guidelines. (FAC ¶ 62; 34 C.F.R. § 668.32; id. § 668.34.)1

All post-secondary schools must enter into PPAs with the DOE in order to be 

eligible to receive Title IV Federal Program funds, or have their students receive Title IV 

funding. (FAC ¶ 67; 20 U.S.C. § 1094; 34 C.F.R. § 668.14.) PPAs condition the initial 

and continued participation of an eligible institution in a Title IV Federal Program upon 

compliance with the regulations specified above. (FAC ¶ 67; 34 C.F.R. § 668.14(a)(1).) 

PEG has, since at least 2006, annually signed and submitted PPAs to the DOE on behalf 

 

1 Discussion of additional requirements for the various Title IV Grant and Title IV Loan funds, not 

pertinent to the Court’s disposition of this motion, can be found in the FAC at paragraphs 71 to 87.

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of all of its educational institutions throughout the United States. (FAC ¶ 88.) These 

PPAs signed by PEG contain the same certifications that PEG was in compliance with all 

the applicable regulations described supra. (Id. ¶¶ 89-96.) Plaintiffs aver that PEG has 

“claimed and received substantial sums in Title IV funding from the [DOE] as a result of 

its fraudulent conduct.” (Id. ¶ 97.)

The first of the specific allegations is that PEG made false statements and 

concealed material information from state agencies and the DOE in order to ensure that it 

would maintain its state licenses and accreditation status for each of its campuses in order 

to continue to receive Federal Program funding. (Id. ¶¶ 4, 6.) This included actions such 

as fabricating job placement statistics for graduates at its campuses, in order to remain 

licensed and accredited. (Id. ¶ 6; id. ¶ 257-58; id. ¶ 308.) Second, Plaintiffs allege that 

PEG engaged in false advertising in an attempt to induce students to enroll at its 

campuses, in violation of Federal Program regulations and its PPAs. (Id. ¶ 7.) This 

involved misrepresenting the accreditation status of certain programs, enrolling students 

into programs of study without disclosing that they would be effectively disqualified 

from employment in their chosen fields upon graduation, and misrepresenting the nature 

and success of PEG’s career placement services. (Id.; id. at 78-91.)

2

 Third, Plaintiffs 

aver that PEG engaged in fraudulent conduct in order to secure financial aid for students 

who, but for PEG’s conduct, would not have been eligible for assistance from the Federal 

Programs. (Id. ¶ 8.) For example, PEG allegedly falsified records to make it appear that 

 

2 For purposes of clarity, each time the Court cites to a paragraph or range of paragraphs in one of the 

documents in the record it will use the “¶” symbol, and when it cites to a page or range of pages numbers it 

will use the notation “[document] at [page number].”

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students had either graduated from a recognized high school or received a GED in order 

to permit unqualified students to enroll, and PEG improperly received and retained 

Federal Program assistance and monies for those ineligible students. (Id.; id. at 41-55.). 

Fourth, PEG purportedly continued to falsify student records once they were enrolled and 

receiving Federal Program financial aid, in order to receive more Federal Program 

funding for which the students were in fact ineligible. (Id. ¶ 9.) To achieve this, PEG 

falsely certified students’ “Satisfactory Academic Progress” on the Federal Program 

financial aid recipient list by falsifying attendance records for students who were no 

longer in attendance and changing student grades from failing to passing, and PEG 

falsified financial aid records in order to secure more Federal Program funding than 

students should have been eligible to receive. (Id.; id. at 55-72.) Finally, Plaintiffs allege 

PEG’s employee compensation system, as designed and implemented, did not comply 

with the Incentive Compensation Ban in Title IV of the HEA. (Id. ¶ 10; id. at 72-75.)

The named relators are all reportedly original sources of the allegations in the 

FAC. (Id. ¶ 17.) Relator Laura LaPorte (LaPorte) worked as the Registrar at the Harris 

School of Business (“HSB”) in Linwood, New Jersey (“HSB-Linwood”), in 2006 and 

2007, and she was responsible for administering admissions tests, tracking student 

attendance, and inputting student grades into the computer system. (Id. ¶ 19.) She 

resigned her employment with PEG voluntarily. (Id.) Relator Robert Biaselli 

(“Biaselli”) worked as an instructor at HSB-Linwood in 2006 and 2007. (Id. ¶ 22.) 

Relator Pamela Hone (“Hone”) was an admissions representative at HSB-Linwood in 

2006 and 2007. (Id. ¶ 25.) Relator Angela Davenport (“Davenport”) was the Director of 

Education for HSB during 2009. (Id. ¶ 28.) In her role, Davenport worked directly with 

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the registrar at the HSB campus in Cherry Hill, New Jersey (“HSB-Cherry Hill”), and 

was responsible for preparation of the HSB-Linwood personnel files. (Id.) She resigned 

her employment with PEG voluntarily. (Id. ¶ 29.) Relator Kelli J. Amaya (“Amaya”) 

worked as the Externship Coordinator at HSB-Linwood from September, 2009, through 

June, 2010, and in July, 2010 she was promoted to Director of Education/Externship at 

HSB in Wilmington, Delaware (“HSB-Wilmington”). (Id. ¶ 32.) She claims that, after 

she reported problems at the HSB-Wilmington campus, she was first demoted and then 

fired in January, 2011, as a result of “whistleblowing activities.” (Id.) Relator Amanda 

Kenny (“Kenny”) was hired as a Financial Aid Administrator for HSB-Wilmington in 

2009, and was promoted to Director of Financial Aid at HSB-Wilmington in January, 

2011. (Id. ¶ 35.) As Director of Financial Aid she was responsible for the submission of 

FAFSA forms to the DOE, for scheduling financial aid disbursements, for drawing down 

Federal Program funds for HSB-Wilmington students, for preparing and processing all 

internal and external paperwork and reports and correspondence to the DOE relating to 

student financial aid, for monitoring each student’s eligibility for financial aid on an 

ongoing basis, for attending weekly manager meetings and financial aid conference calls 

with other PEG schools, and for weekly meetings with the Director of Admissions and 

other PEG managers to monitor the financial aid process on a student-by-student basis, as 

well as to manage re-enrollments. (Id.) Relator Kenny voluntary resigned her position 

with PEG in October, 2011. (Id.) Relator Doris Moody (“Moody”) was the Registrar at 

HSB-Wilmington from October, 2010, until August, 2012, at which point she alleges she 

was constructively terminated due to her “whistleblowing activities.” (Id. ¶¶ 38-39.) As 

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Registrar, her responsibilities included grade and attendance records input and generating 

reports of the same. (Id. ¶ 38.)

In their FAC, Plaintiffs allege that Defendants violated the FCA by: (1)

knowingly presenting, or causing to be presented, a false or fraudulent claim for payment 

or approval (FAC Count I (citing 31 U.S.C. § 3729(a)(1)(A)); (2) knowingly making, 

using, or causing to be made or used, a false record or statement material to a false or 

fraudulent claim (FAC Count II (citing § 3729(a)(1)(B)); (3) conspiring to commit a 

violation of subparagraph (A), (B), (D), (E), (F), or (G) of § 3729(a)(1) (FAC Count III

(citing § 3729(a)(1)(C));

3

and (4) knowingly making, using, or causing to be made or 

used, a false record or statement material to an obligation to pay or transmit money or 

property to the Government, or knowingly concealing or knowingly and improperly 

avoiding or decreasing an obligation to pay or transmit money or property to the 

Government (FAC Count IV (citing § 3729(a)(1)(G)).

4

 Additionally, Plaintiffs allege 

Defendants violated § 3730(h) by taking retaliatory action against relators Amaya and 

Moody in the terms and conditions of their employment because of lawful acts done by 

them in furtherance of this action under the FCA (FAC Counts V, VII). Finally, 

Plaintiffs also allege that Defendants violated the rights of relators Amaya and Moody to 

be free from intentional infliction of emotional distress (FAC Counts VI, VIII).

 

3 Plaintiffs also alleged violation of § 3729(a)(3) to the extent that the conduct complained of preceded the 

FCA’s May 20, 2009 amendments. The Court notes that the language of this prior version is substantially 

similar to the current version, but for the reasons discussed infra in its discussion of Counts I-IV, it need not 

parse the applicable versions of the statutes and the offenses by date.

4 Here too Plaintiffs allege a violation of § 3729(a)(7) under the prior version, though as noted supra at note 

3, is not relevant for purposes of the Court’s analysis.

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As indicated above, the original Complaint was filed on June 20, 2010, under 

seal, the Third Amended Complaint was unsealed on July 2, 2013 (Doc. No. 18), and the 

FAC was filed on February 27, 2014. On March 26, 2014, Defendants filed the present 

motion to dismiss the FAC. The United States filed its Notice of Election to Decline 

Intervention on July 2, 2013, (Doc No. 17), and a Statement of Interest in Response to 

Defendants’ Motion to Dismiss on May 21, 2014 (Doc. No. 60).5

In Defendants’ motion to dismiss they argue that Plaintiffs’ action must be 

dismissed for lack of jurisdiction under 31 U.S.C. § 3730(b)(5) and § 3730(e)(4). (Defs.’ 

Br. at 7-15.) Additionally, they argue the claims are barred by the applicable statute of 

limitations. (Id. at 15-16). In the alternative, if the Court were reach the merits of 

Plaintiffs’ claims, Defendants move to dismiss Counts I-IV for failure to properly plead 

pursuant to Rule 8 and to plead fraud with particularity pursuant to Rule 9(b), (id. at 16-

28), and/or to dismiss all Counts for failure to state a claim pursuant to Rule 12(b)(6). 

(Id. at 28-55.)

II. LEGAL STANDARD

Defendants move to dismiss Plaintiffs’ FAC based on lack of subject-matter 

jurisdiction under Rule 12(b)(1) and for failure to state a claim under Rule 12(b)(6). 

“When a motion under Rule 12 is based on more than one ground, the court should 

consider the 12(b)(1) challenge first because if it must dismiss the complaint for lack of 

subject matter jurisdiction, all other defenses and objections become moot.” In re 

 

5

In its statement of interest, the United States only takes a position concerning certain aspects of 

Defendants’ Motion to Dismiss, specifically one of Defendants’ arguments in favor of dismissal under Rule 

12(b)(6) for Counts I-IV. For the reasons set forth infra, the Court need not address these arguments.

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Corestates Trust Fee Litig., 837 F. Supp. 104, 105 (E.D. Pa. 1993). Because the Court 

concludes that there is no jurisdiction to hear only certain Counts in the FAC, both the 

Rule 12(b)(1) and Rule 12(b)(6) standards are relevant.

Where a defendant moves to dismiss under Rule 12(b)(1) for lack of subjectmatter jurisdiction, plaintiff bears the burden of proving by a preponderance of the 

evidence that the Court has subject matter jurisdiction. See Gould Electronics Inc. v. 

U.S., 220 F.3d 169, 178 (3d Cir. 2000). A district court may treat a party’s motion to 

dismiss for lack of subject-matter jurisdiction under Rule 12(b)(1) as either a facial or 

factual challenge to the court’s jurisdiction. Id. at 176. A facial challenge is one in 

which a defendant argues “that the allegations on the face of the complaint, taken as true, 

are insufficient to invoke the court’s jurisdiction.” Turicentro, S.A. v. Am. Airlines, Inc., 

303 F.3d 293, 300 & n.4 (3d Cir. 2002). “In reviewing a facial attack, the court must 

only consider the allegations of the complaint and documents referenced therein and 

attached thereto, in the light most favorable to the plaintiff.” Gould, 220 F.3d at 176

(citing PBGC v. White, 998 F.2d 1192, 1196 (3d Cir. 1993)). 

Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss an action for 

failure to state a claim upon which relief can be granted. When evaluating a motion to 

dismiss, “courts accept all factual allegations as true, construe the complaint in the light 

most favorable to the plaintiff, and determine whether, under any reasonable reading of 

the complaint, the plaintiff may be entitled to relief.” Fowler v. UPMC Shadyside, 578 

F.3d 203, 210 (3d Cir. 2009) (quoting Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 

(3d Cir. 2008)). In other words, a complaint survives a motion to dismiss if it contains 

sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its 

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face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atlantic Corp. v. Twombly, 550 

U.S. 544, 570 (2007).

To make this determination, a court conducts a three-part analysis. Santiago v. 

Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must "tak[e] note of 

the elements a plaintiff must plead to state a claim." Id. (quoting Iqbal, 556 U.S. at 675).

Second, the court should identify allegations that, "because they are no more than 

conclusions, are not entitled to the assumption of truth." Id. at 131 (quoting Iqbal, 556 

U.S. at 680). Finally, "where there are well-pleaded factual allegations, a court should 

assume their veracity and then determine whether they plausibly give rise to an 

entitlement for relief." Id. (quoting Iqbal, 556 U.S. at 680). This plausibility 

determination is a "context-specific task that requires the reviewing court to draw on its 

judicial experience and common sense." Iqbal, 556 U.S. at 679. A complaint cannot 

survive where a court can only infer that a claim is merely possible rather than plausible. 

Id.

III. DISCUSSION

Defendants have moved to dismiss Plaintiffs’ claims for lack of jurisdiction 

pursuant to Rule 12(b)(1) and for failure to state a claim pursuant to Rule 12(b)(6), as 

well as for failure to properly plead pursuant to Rule 8 and to properly plead fraud 

pursuant to Rule 9(b), and as being barred by the applicable statutes of limitations. For 

the reasons discussed below, the Court will analyze Defendants’ motion to dismiss 

Counts I-IV of the FAC together, and will dismiss those Counts for lack of jurisdiction. 

The Court will then discuss Counts V and VII together, and dismiss those Counts for 

failure to state a claim. Finally, because no federal claims remain, the Court will decline 

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to exercise supplemental jurisdiction over the remaining state law claims, and will 

dismiss Counts VI and VIII.

a. Counts I-IV

Defendants move first to dismiss the FAC for lack of jurisdiction pursuant to § 

3730(b)(5).6 Because the Court finds that Bumgarner7 was a “related action” within the 

meaning of § 3730(b)(5), the court will dismiss Counts I-IV for lack of jurisdiction, and 

will not reach Defendants’ other arguments with respect to those Counts.

i. Bumgarner is a Related Action

Under § 3730(b)(5), a later-filed complaint is barred if it arises “from events that 

are already the subject of existing suits.” U.S. ex rel. LaCorte v. Smithkline Beecham 

Clinical Laboratories, Inc., 149 F.3d 227, 232 (3d Cir. 1998); see also id. at 234 n.6 

(“[W]e may decide whether the later complaints allege the same material elements as 

 

6 Defendants’ arguments for dismissal based on lack of jurisdiction pursuant to § 3730(b)(5) are not 

applicable with respect to the remaining counts. Section 3730(b) applies only to actions arising under § 

3729. See § 3730(b)(5) (“When a person brings an action under this subsection ...”); § 3730(b)(1) (“A 

person may bring a civil action for a violation of section 3729 for the person and for the United States 

Government. ...”). Counts V and VII arise under § 3730(h), and Counts VI and VIII arise under state tort 

law.

Nor does the Court find that it lacks jurisdiction to hear Defendants’ claims in Counts V-VIII pursuant to § 

3730(e)(4). By its terms, § 3730(e)(4) does not apply to Plaintiffs’ state law claims in Counts VI and VIII. 

See § 3730(e)(4)(1) (“The court shall dismiss an action or claim under this section, unless opposed by the 

Government, if substantially the same allegations or transactions as alleged in the action or claim were 

publicly disclosed”). Plaintiffs intentional infliction of emotional distress claims do not arise under § 3730, 

so the Court does not lack jurisdiction under § 3730(e)(4) over Counts VI and VIII.

While relators Amaya’s and Moody’s retaliation claims pursuant to § 3730(h) technically do arise under § 

3730, the Court questions whether it is appropriate and consistent with Congress’ intent to apply the public 

disclosure bar in § 3730(e)(4) to retaliation claims under § 3730(h). The Court need not answer this 

question, however, because Defendants have not argued in their briefs, nor have they attached materials to 

those briefs, suggesting that the retaliation claims in Counts V and VII are barred by the public disclosure 

bar. (See Defs.’ Br. at 11-15; Defs.’ Rep. Br. at 3-5.) Accordingly, the Court finds it does not lack 

jurisdiction to hear Counts V and VII of the FAC.

7 Bumgarner et al. v. Premier Education Group et al., No. 10-787 (D.N.J. filed Feb. 17, 2010) 

(“Bumgarner”).

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claims in the original lawsuits simply by comparing the original and later complaints.”) 

The subsequent case “need not rest on precisely the same facts as a previous claim to run 

afoul of this statutory bar. Rather, if a later allegation states all the essential facts of a 

previously-filed claim, the two are related and section 3730(b)(5) bars the later claim, 

even if that claim incorporates somewhat different details.” Id. at 232-33; see also U.S. 

ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1189 (9th Cir. 2001) (“§ 3730(b)(5) 

bars later-filed actions alleging the same material elements of fraud described in an 

earlier suit, regardless of whether the allegations incorporate somewhat different 

details.”); id. at 1188-89 (noting the “common principle” in cases applying § 3730(b)(5) 

is that it “‘precludes a subsequent relator's claim that alleges the defendant engaged in the 

same type of wrongdoing as that claimed in a prior action even if the allegations cover a 

different time period or location within a company,’” and endorsing the Third Circuit’s 

reasoning in LaCorte) (quoting U.S. ex rel. Capella v. United Technologies Corp., 1999 

WL 464536, at *9 (D. Conn. June 3, 1999)). Also, as the Third Circuit noted in LaCorte, 

“duplicative claims do not help reduce fraud or return funds to the federal fisc, since once 

the government knows the essential facts of a fraudulent scheme, it has enough 

information to discover related frauds.” LaCorte. 149 F.3d at 234; see also U.S. ex rel. 

Shea v. Cellco Partnership, 748 F.3d 338, 342 (D.C. Cir. 2014) (finding that where two 

complaints allege the same fraudulent scheme, the first complaint “would suffice to equip 

the government to investigate [Plaintiff’s] expanded allegations in [the second 

complaint.]”) (citing U.S., ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1209 (D.C. Cir. 

2011)); Lujan, 243 F.3d at 1187 (“The first-filed claim provides the government notice of 

the essential facts of an alleged fraud, while the first-to-file bar stops repetitive claims.”)

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In Bumgarner the relators alleged substantially similar claims to those Relators 

presently allege in Counts I-IV. To begin, Bumgarner was

an action to recover damages and civil penalties ... for 

violations of the False Claims Act arising from false or 

fraudulent records, statements, or claims, or any 

combination thereof, [PEG], their agents, employees, or coconspirators, or any combination thereof, with respect to 

false claims for obtaining financial aid from students in the 

form of loans and grants, which claims were made to the 

federal government...

(Ex. D to Defs.’ Br., Bumgarner Compl. (“Bumgarner Compl.”) ¶ 3; see also id. ¶ 27 

(describing liability under 31 U.S.C. § 3729(a)(1), (2) for anyone who “knowingly 

presents or causes a false or fraudulent claim to be presented for payment, or to a false 

record or statement made to get a false or fraudulent claim paid by the government.”).) 

The instant case is

an action to recover damages and civil penalties on behalf 

of the United States, arising from false statements and 

claims that PEG knowingly presented to, or caused to be 

presented to, the United States in violation of the FCA.

PEG knowingly presented and/or has made, or caused to be 

made, the false claims and statements at issue, in order to 

participate in the Federal student financial aid programs ... 

PEG knowingly submitted, or caused to be submitted to the 

Federal Programs, numerous false claims for payment 

arising from PEG’s fraudulent course of conduct.

(FAC ¶¶ 1-2; see also id. at 108-111 (alleging violations of 31 U.S.C. § 3729(a)(1)(A)-

(C), (G) in Counts I-IV).) Both complaints allege that PEG violated the terms of the Title 

IV Federal Programs in which it participated, in order to fraudulently obtain funds from 

the Federal government. (See Bumgarner Compl. ¶¶ 24-25 (describing requirements 

under 20 U.S.C. §§ 1001 et seq.); FAC at 27-29 (“C. PEG’s Participation in Title IV, 

HEA Programs”).)

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Bumgarner was commenced on February 17, 2010, and dismissed on September 

10, 2013. (Ex. E to Def.’s Br., Bumgarner Docket Report (“Bumgarner Docket”), Doc. 

Nos. 1, 12.)8 The named relator, Larry Bumgarner, was allegedly employed at HSBLinwood from 2009 to 2010, the same location five of the seven relators in the present 

action were apparently employed. (Bumgarner Compl. ¶¶ 10, 13(9)(G), 33.) Bumgarner

named as defendants PEG and the HSB, indicating that PEG operated Branford Hall 

Career Institute, Salter College, the Salter School, Seacoast Career Schools, Suburban 

Technical School, Hallmark Institute of Photography, and Harris School of Business, 

which has campuses in Cherry Hill, Linwood, Trenton, and Stratford, New Jersey, Upper 

Darby, Pennsylvania, and Wilmington and Dover, Delaware. (Id. ¶¶ 11-12.)9

Importantly, the Bumgarner complaint rested on many similar factual allegations 

to those found in the FAC, including:

 Allegations of misrepresentations to accreditors, including 

misrepresentations regarding job placement. (Compare Bumgarner

 

8 A week later the district court entered a modified Order of Dismissal on September 16, 2013, clarifying 

that the dismissal was without prejudice, after the United States filed a letter on September 13, 2013, 

requesting that any dismissal reflect that it was without prejudice to the United States, as it had not 

consented to the dismissal under 31 U.S.C. § 3730(b)(1). (See Bumgarner Docket, Doc Nos. 13-14.)

9 While Plaintiffs argue that the allegations in Bumgarner are “substantively, temporally, and 

geographically narrow,” because Larry Bumgarner only worked at HSB-Linwood for sixth months, and 

only as a business instructor, (Pls.’ Opp’n at 10), the Court notes that Bumgarner alleged fraud that

extended beyond the HSB-Linwood location to the same extent Relators alleged fraud in the instant case. 

(See Bumgarner Compl. ¶¶ 11-12 (identifying seven schools owned and operated by PEG, as well as the 

seven HSB locations); id. ¶ 31 (describing various allegations against both HSB and PEG); id. ¶ 98 

(alleging, based on relator Bumgarner’s independent investigation of certain claims made against the Salter 

School, that PEG is committing similar frauds at all of its schools); id. ¶¶ 101-02 (noting online posting by 

alleged former admissions employee from a different HSB location that raised many of the same fraud 

accusations as relator Bumgarner); see also id. at 74-75 (“VII. Defendants’ Liability”) (alleging that HSB 

and PEG submitted fraudulent claims through “its employees, agents, management and owners,” to the 

United States and “to the State of New Jersey and other state governments to collect financial aid”) 

(emphasis added).) In the present matter, relators LaPorte, Biaselli, and Hone only worked for the HSBLinwood campus, while relator Davenport worked at HSB-Linwood and HSB-Cherry Hill, relator Amaya 

worked at HSB-Linwood and HSB-Wilmington, and relators Kenny and Moody only worked at HSBWilmington, (see FAC at 6-12), yet here too Relators’ claims of fraud against PEG are corporate-wide, and 

are not limited to the HSB campuses they had personal knowledge of. (See FAC ¶¶ 102-28.)

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Compl. ¶ 13(1); id. ¶ 13(8-2);10 id. ¶ 14(A); id. ¶ 30; id. ¶ 31(C);

id. ¶ 31(H); id. ¶ 44; id. ¶ 52 (alleging relator Bumgarner was 

instructed by school officials to lie to accreditors); id. ¶ 96; with

FAC ¶¶ 257-77 (“ii. PEG Misrepresented Its Loss of Institutional 

Accreditation and Lied to Accreditation Agencies”); id. ¶¶ 262-63;

id. ¶ 265 (“PEG used misleading criteria to create a false 

impression of its job placement success ... PEG used various 

‘tricks of the trade’ to report misleadingly its alleged 

placements.”); ¶ 277 (“PEG knowingly falsified or manipulated the 

job placement data it disclosed to ... accrediting bodies ... in order 

to ... mislead accrediting bodies regarding the job placement 

success of PEG programs.”).)

 Allegations that Defendants misled students regarding their career

placement prospects. (Compare Bumgarner Compl. ¶ 30 (“When 

students graduate they find out that they are not qualified for the 

types of jobs that the [PEG] and the [HSB] has promised them.”); 

id. ¶¶ 81, 85 (noting that PEG was allegedly on notice regarding 

the sub-standard level of education students were receiving and 

alleging that PEG was fraudulent covering up the situation); id. ¶ 

96; with FAC ¶¶ 259-277 (“PEG Misled Prospective Students 

Regarding Its Career Placement Performance”).)

 Allegations regarding the admission of unqualified students. 

(Compare Bumgarner Compl. ¶ 13(6); id. ¶ 31(E); id. ¶¶ 43-44; id.

¶¶ 70-71 (“The students, after taking the [entrance exam] were 

ushered to the financial aid office where they were signed up for 

financial aid whether they passed the test or not.”); id. at 59, ¶ 101 

(anonymous alleged former HSB-Cherry Hill employee stating, 

“basically [HSB employees] can tweek [sic] the admissions test to 

get students in the door.”); with FAC ¶¶ 131-60 (“1. PEG 

Admitted Students Who Were Obviously Unqualified for 

Admission, and Who Were Incapable of Completing the 

Educational Program”); id. ¶¶ 132-45 (admission of students with 

no high school diplomas or GEDs); id. ¶¶ 146-56 (PEG admitted 

known felons who were either ineligible for financial aid or could 

not obtain licensure in their chosen fields); id. ¶¶ 157-70 

(admission of learning-disabled, non-English speaking, and 

illiterate students).)

 Allegations of altered attendance records and course grades. 

(Compare Bumgarner Compl. ¶ 13(8-2); id. ¶ 14(B); id. ¶ 31(M) 

(PEG “discharges and gets rid of students yet keeps the financial 

aid money”); id. ¶ 31(O) (allegations of falsifying classroom 

 

10 The complaint in Bumgarner contains two subsections labeled “8,” in paragraph 13, which the Court will 

refer to as ¶ 13(8-1) and ¶ 13(8-2) respectively. (See Bumgarner Compl. at 6-7, ¶ 13(8-1); id. at 8-9 ¶ 13(8-

2).)

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hours); id. ¶ 102 (“grades are altered to keep the numbers up”); 

with FAC ¶¶ 176-226 (“3. PEG Altered Student Grades from 

Failing to Passing in Violation of Federal Law Requiring Financial 

Aid Recipients to Show They Are Making ‘Satisfactory Academic 

Progress’ in Their Programs”).)

 Allegations of altered or falsified admission exams. (Compare

Bumgarner Compl. ¶ 31(F) (alleging PEG “fraudulently 

administers ability-to-benefit tests”); id. ¶¶ 69-70 (“the entrance 

exam was a fraud and anybody and everybody passed it ... if 

students could not pass it then the [HSB] would alter the results”);

id. at 59, ¶ 101 (allegations of anonymous former HSB-Cherry Hill 

employee); with FAC ¶ 299(iii) (“admissions representatives, who 

changed failing Wonderlic admissions test scores in order to admit 

students who would not qualify”); id. ¶ 316(i) (allegation of a 

student permitted to enroll despite failing the admissions test).)

 Allegations that Defendants used high pressure tactics to enroll 

students. (Compare Bumgarner Compl. ¶ 13(5) (describing the 

“hard sell” techniques used by the HSB financial aid office to 

coerce students into signing up for financial aid, regardless of 

whether they qualify); id. ¶ 98(H) (alleging prospective applicants 

are required to be interviewed in person so that employees can 

“hard sell” enrollment in PEG schools); id. at 59, ¶ 101 

(anonymous alleged former HSB Cherry Hill admissions 

employing stating, “it’s all about the numbers and we have to 

maintain a certain amount of leads per month.”); with FAC ¶¶ 289-

305 (“E. PEG Used Prohibited Incentive Compensation To Induce 

Employees To Participate in Its Fraudulent Scheme”).)

The Court notes that certain allegations contained in the instant Complaint were 

not included in the Bumgarner Complaint.11 This fact does not undermine the relatedness 

of these two complaints. See LaCorte, 149 F.3d at 234. Significantly, both claims assert

 

11 See, e.g., FAC ¶¶ 171-75 (“2. PEG Completed FAFSA Applications for Prospective Students Who Were 

Not Competent to Understand the Financial Obligations They Were Undertaking”); id. ¶¶ 225-36 (“5. PEG 

Used Third Parties to Falsify Attendance Records in Order to Falsely Certify Students’ Eligibility for 

Federal Financial Aid”); id. ¶¶ 278-86 (“3. PEG Misled Prospective Students Regarding Their Ability to 

Transfer Course Credits to Other Institutions and Programs”). While Plaintiffs contend that Bumgarner did 

not allege a violation of the FCA’s Incentive Compensation Ban, (Pls.’ Opp’n at 10 n.3), the Court notes 

that allegations in the Bumgarner complaint of bonuses for PEG admissions and financial aid personnel, 

(see Bumgarner Compl. ¶ 31(P)), allegations of “hard sell” techniques employed by those same employees 

(id. ¶ 13(5); id. ¶ 98(H)), and the allegation that employees were required to keep admissions numbers at a 

certain level, (id. ¶ 101), taken together, are enough to allege a violation of the FCA’s Incentive 

Compensation Ban. (Cf. FAC ¶¶ 289-305 (“PEG Used Prohibited Incentive Compensation To Induce 

Employees to Participate in Its Fraudulent Scheme”).

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that the foregoing, remarkably similar, allegations were part of a scheme perpetrated by 

PEG and its subsidiary schools to file false claims to misrepresent their accreditation 

status or maintain their accreditation status, and to misrepresent student academic 

eligibility and financial aid eligibility, with the purpose of participating in Federal student 

financial aid programs, and receiving millions of dollars of federal financial aid 

disbursements, for which PEG and the students in its schools were not eligible. (See

Bumgarner Compl. ¶ 14; id. ¶¶ 30-31; FAC ¶¶ 1-12.) Bumgarner sufficed to give the 

government notice of PEG’s alleged false claims, and that complaint alleged the same

material elements as those presently alleged for violations of 31 U.S.C. § 3729(a)(1)(A)-

(C), (G), in Counts I-IV of the FAC. See LaCorte, 149 F.3d at 233 (“[T]he district court 

correctly interpreted the statute as barring a later-filed action alleging the same elements 

of a fraud described in an earlier suit.”)

The reasons for the court’s dismissal in Bumgarner are not important for the 

purposes of determining whether that action deprives this Court of jurisdiction to hear

related claims in the present action. See U.S., ex rel. Joseph Piacentile v. Sanofi 

Synthelabo, Inc., No. 05-2927, 2010 WL 5466043, at *4 (D.N.J. Dec. 30, 2010) (“[E]ven 

complaints that are later dismissed have preclusive effect.”). The record suggests the 

actions taken in Bumgarner were sufficient to put the government on notice to the alleged 

false claims submitted by PEG. The Complaint was filed under seal and the government 

was given the required 60 day period to investigate the claims. More than three years 

after the original complaint was filed in Bumgarner, the government filed its Notice of 

Election to Decline Intervention on June 29, 2013. (Bumgarner Docket, Doc. No. 9.) 

Considering Counts I-IV in the present action “related,” and thus barred by the first-toCase 1:11-cv-03523-RBK-AMD Document 76 Filed 10/27/14 Page 17 of 29 PageID: 3275
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file rule, would not defeat the government’s goal of eliminating fraud.12 It is evident that 

the government is already aware of the essential facts pertaining to PEG’s alleged

fraudulent scheme, and has enough information from the Bumgarner complaint to 

discover related schemes at other PEG schools and within the PEG corporate structure. 

LaCorte, 149 F.3d at 234 (“In addition, [ ] duplicative claims do not help reduce fraud or 

return funds to the federal fisc, since once the government knows the essential facts of a 

fraudulent scheme, it has enough information to discover related frauds.”)

For these reasons, the Court finds that Counts I-IV of the FAC are “related 

actions” for purposes of § 3730(b)(5).

ii. The First-to-File Rule

Having determined that Counts I-IV of the present case are a “related action” to 

the previously filed complaint against PEG in Bumgarner, the Court will now address 

Plaintiffs’ and Defendants’ disagreement concerning whether the first-to-file bar applies 

when the initial action is no longer pending. (See Defs.’ Br. at 10 n.3; Pls.’ Opp’n at 5-8; 

Defs.’ Rep. at 2.) The Third Circuit has not addressed this particular issue. But see

LaCorte, 149 F.3d at 233 (“[T]he district court correctly interpreted [§ 3730(b)] as 

barring a later-filed action alleging the same elements of a fraud described in an earlier 

 

12 Though the Court does not examine the reasons for the dismissal of the complaint in Bumgarner, it notes 

that even if Bumgarner had been dismissed for failure to meet the heightened pleading requirement under 

Fed. R. Civ. Pro. 9(b), Bumgarner may still be considered a “related action” for purposes of § 3730(b)(5). 

LaCorte, 149 F.3d 234 (“[Plaintiffs] argue that unless § 3730(b)(5) is limited to suits alleging identical 

facts, any relator who discovers a false claim will simply plead a very broad cause of action so as to 

preempt claims by later plaintiffs. We do not believe that the decision we reach today creates an undue risk 

that plaintiffs will engage in such artful pleading. Federal Rule of Civil Procedure 9(b) requires plaintiffs 

to plead fraud with particularity, specifying the time, place and substance of the defendant's alleged 

conduct. ... This requirement provides sufficient deterrence against overly broad allegations. Moreover, 

there is no indication that any of the original plaintiffs in this case worded their complaints in excessively 

general terms for the purpose of thwarting later claims.”) (internal citation omitted).

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suit.”); Piacentile, 2010 WL 5466043, at *4 (“On its face, § 3730(b)(5) is ‘exception 

free.’ ... Because allowing an exception in the event of first-filed claims that may be later 

dismissed would run counter to the purpose of the first-filed bar, the Court declines to 

grant an exception in this case.”) (internal citation omitted) (citing U.S. ex rel. Lujan v. 

Hughes Aircraft Co., 243 F.3d 1181, 1187 (9th Cir. 2001)).

Section 3730(b)(5) of the FCA states that “[w]hen a person brings an action under 

this subsection, no person other than the Government may intervene or bring a related 

action based on the facts underlying the pending action.” This section of the FCA 

“attempts to reconcile two conflicting goals, specifically, preventing opportunistic suits, 

on the one hand, while encouraging citizens to act as whistleblowers, on the other.” 

LaCorte, 149 F.3d at 233 (citing U.S. ex rel. Stinson, Gerlin & Bustamante, P.A. v. 

Prudential Ins. Co., 944 F.2d 1149, 1154 (3d Cir. 1991)); see also id. at 1176 n.5 (Scirica, 

J., dissenting) (“[O]nce an eligible relator has brought an action, no other private party 

can bring an action based on the same information. See § 3730(b)(5). This situation 

creates a potential ‘race to the courthouse’ among eligible relators, but such a race may 

also spur the prompt reporting of fraud.”)

While three other circuits have concluded otherwise,13 this Court agrees with the 

recent decision from the D.C. Circuit, holding that “the first-to-file bar applies even if the 

 

13 The Seventh Circuit concluded in U.S. ex rel. Chovanec v. Apria Healthcare Grp., Inc., 606 F.3d 361 

(7th Cir. 2010), that “§ 3730(b)(5) applies only while the initial complaint is ‘pending,’” id. at 365, but it 

reached that conclusion by reference to its prior conclusory statement that “if one person ‘brings an action’ 

then no one other than the Government may ‘bring a related action’ while the first is ‘pending.’” Id. at 362. 

The issue in the case, however, was the relatedness of two actions, and the statements regarding pendency 

were more dicta than holding. Similarly, the Tenth Circuit’s statements in In re Natural Gas Royalties Qui 

Tam Litigation, 566 F.3d 956 (10th Cir. 2009), that “§ 3730(b)(5) applies only when another qui tam action 

is ‘pending,’” and “if [a] prior claim is no longer pending, the first-to-file bar no longer applies,” are dicta, 

and without further explanation in the opinion. Id. at 964. In U.S. ex rel. Carter v. Halliburton, 710 F.3d 

171 (4th Cir. 2013), the Fourth Circuit relied on In re Natural Gas and Chovanec in concluding that “once a 

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initial action is no longer pending.” Shea, 748 F.3d at 343. There the court noted that the 

first-to-file bar “commences ‘when a person brings an action under [§ 3730(b)],’ and 

thence forth bars any action ‘based on the facts underlying the pending action.’” Id. 

When viewing § 3730(b)(5) as a whole, “the simplest reading of ‘pending’ is the 

referential one; it serves to identify which action bars the other.” Id. Had Congress 

intended the first-to-file bar to be temporal, as it has in other contexts, it could have 

expressed that intent unambiguously. Id. (noting examples in statutes, such as where 

“Congress has barred ‘any claim [in the Court of Federal Claims] for ... which the 

plaintiff ... has pending in any other court any suit or process against the United 

States....’ (emphasis added),” in 28 U.S.C. § 1500, and where Congress precludes “a 

person from bringing a vaccine-related claim in the Court of Federal Claims if he or she 

‘has pending a civil action for damages for a vaccine-related injury or death’ (emphasis 

added)” under 42 U.S.C. § 300aa-11(a)(5)(B)). Id. at 344. According to the D.C. Circuit, 

without such express language, one must read the first-to-file bar to say “no person other 

than the Government may intervene or bring a related action while the first action 

remains pending,” in order to find a clear intent to limit the first-to-file bar temporally. 

Id. at 343.

The D.C. Circuit’s reading is also consistent with the policy considerations behind 

this section. “The resolution of a first-filed action does not somehow put the government 

 

case is no longer pending the first-to-file bar does not stop a relator from filing a related case.” Id. at 183. 

There the court actually confronted the meaning of “pending” as a controlling issue, but did so without 

considering any other possible meaning of the phrase in § 3730(b)(5), and it relied on two decisions where 

the meaning of the term was neither essential to the holding or discussed meaningfully. Decisions from

other circuits are not controlling on this Court, but for the reasons discussed infra, the Court finds the recent 

decision from the D.C. Circuit more persuasive.

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off notice of its contents.” Id. at 344. In fact, “reading the bar temporally would allow 

related qui tam suits indefinitely—no matter to what extent the government could have 

already pursued those claims based on earlier actions. Such duplicative suits would 

contribute nothing to the government's knowledge of fraud.” Id.; see also U.S. ex rel. 

Batiste v. SLM Corp., 659 F.3d 1204, 1208 (D.C. Cir. 2011) (“[§ 3730(b)(5)’s first-tofile bar] furthers the statute's ‘twin goals of rejecting suits which the government is 

capable of pursuing itself, while promoting those which the government is not equipped 

to bring on its own.’”) (quoting U.S. ex rel. Hampton v. Columbia/HCA Healthcare 

Corp., 318 F.3d 214, 217 (D.C. Cir. 2003); LaCorte, 149 F.3d at 234 (“The 1986 

amendment, which introduced the current version of section 3730(b)(5), sought to 

achieve ‘the golden mean between adequate incentives for whistle-blowing insiders with 

genuinely valuable information and discouragement of opportunistic plaintiffs who have 

no significant information to contribute of their own.’”) (citing U.S. ex rel. Springfield 

Terminal Ry. Co. v. Quinn, 14 F.3d 645, 650 (D.C. Cir. 1994)).

Nor does such a reading of § 3730(b)(5) create the danger that opportunistic 

plaintiffs with no inside information would displace actual insiders with knowledge of the 

fraud.14 When comparing the two complaints for relatedness, the Court must first 

determine whether the prior complaint rested on the same essential facts as the 

subsequent complaint, which it does by reviewing the complaints side-by-side. LaCorte, 

 

14 But see Campbell v. Redding Medical Center, 421 F.3d 817, 824-25 (9th Cir. 2005) (discussing the 

application of the “jurisdictional prerequisites of § 3730(e)(4),” the Court found that it would be antithetical 

to the purposes of the FCA for a prior claim, jurisdictionally deficient under § 3730(e)(4), to bar a 

subsequent claim under § 3730(b)(5), because it would permit opportunistic non-original source plaintiffs, 

acting on publicly disclosed information, to bar complaints by subsequent original source relators). This 

Court does not have cause to reach the issue of whether a prior complaint, jurisdictionally deficient under § 

3730(e)(4), bars a subsequent complaint under § 3730(b)(5), and expresses no opinion on the matter.

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149 F.3d at 234 n.6. If the second-in-time complaint is related, resting on the same

material alleged facts, then the prior complaint necessarily contained similar information 

to place the government on notice of the alleged fraud. Even a complaint which did not 

plead fraud with particularity in the first instance, see Fed. R. Civ. Pro. Rule 9(b), may

bar a subsequent fraud claim adequately pleaded, so long as it alleged the essential facts

to put the government on notice. See Batiste, 659 F.3d at 1210 (“Section 3730(b) is 

designed to allow recovery when a qui tam relator puts the government on notice of 

potential fraud being worked against the government, but to bar copycat actions that 

provide no additional material information. As the district court found, a complaint may 

provide the government sufficient information to launch an investigation of a fraudulent 

scheme even if the complaint does not meet the particularity standards of Rule 9(b).”)15

By comparing the complaints for relatedness, even when the previous complaint was 

dismissed prior to the filing of the present action, this Court notes that it serves the 

function of preventing opportunistic plaintiffs from filing similar claims for alleged fraud 

of which the government is already aware, while also permitting subsequent fraud claims, 

which rest on essential elements and allegations of fraud not previously alleged, to 

proceed.

 

15 Such a policy does not undermine Congress’ purposes or incentives either, as those who race to file first 

ostensibly hope to recover monetarily, and cannot do so if their complaint is dismissed under Rule 9(b). See

Batiste. 659 F.3d at 1211 (“The first plaintiff's complaint is still subject to the Rule 9(b) pleading 

requirements in order for a court to hear the case. If the first relator did not plead fraud with particularity, 

his complaint would be dismissed and he would lose his own shot at monetary reward. The threat of a 

second application of Rule 9(b) is unnecessary.”); LaCorte, 149 F.3d at 234 (“[Plaintiffs] argue that unless 

§ 3730(b)(5) is limited to suits alleging identical facts, any relator who discovers a false claim will simply 

plead a very broad cause of action so as to preempt claims by later plaintiffs. We do not believe that the 

decision we reach today creates an undue risk that plaintiffs will engage in such artful pleading. Federal 

Rule of Civil Procedure 9(b) requires plaintiffs to plead fraud with particularity, specifying the time, place 

and substance of the defendant's alleged conduct. This requirement provides sufficient deterrence against 

overly broad allegations.”) (internal citation omitted).

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Because the Court reads § 3730(b)(5) as barring all subsequent “related actions” 

based on the underlying facts of the prior claim, and it finds Counts I-IV are “related” for 

purposes of this section, the Court will dismiss Counts I-IV with prejudice as to all 

parties except the government.

b. Counts V and VII

In Counts V and VII, Plaintiffs allege that Defendants retaliated against relators 

Amaya and Moody for their whistleblowing activities, in violation of § 3730(h). 

Defendants argue that Plaintiffs’ § 3730(h) claims must be dismissed because both 

Counts fail to state a prima facie case for retaliation under the statute. (Defs.’ Br. at 51-

53.) For the following reasons, the Court agrees with the Defendants.

To state a claim under § 3730(h), a plaintiff must show “(1) he engaged in 

‘protected conduct,’ (i.e., acts done in furtherance of an action under § 3730) and (2) that 

he was discriminated against because of his ‘protected conduct.’” Hutchins v. Wilentz, 

Goldman & Spitzer, 253 F.3d 176, 186 (3d Cir. 2001) (citing U.S. ex rel. Yesudian v. 

Howard Univ., 153 F.3d 731, 736 (D.C. Cir. 1998)). “In proving that he was 

discriminated against ‘because of’ conduct in furtherance of a False Claims Act suit, a 

plaintiff must show that (1) his employer had knowledge he was engaged in ‘protected 

conduct’; and (2) that his employer's retaliation was motivated, at least in part, by the 

employee's engaging in ‘protected conduct.’” Hutchins, 253 F.3d at 186. “The 

requirement that employers have knowledge that an employee is engaged in ‘protected 

conduct’ ensures that § 3730(h) suits are only prosecuted where there has been actual 

retaliation.” Id. at 186 n.7. “In most retaliation cases under § 3730(h), the two critical 

questions are (1) what sort of activity constitutes ‘protected conduct,’ and (2) whether the 

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employer was on notice that the employee was engaging in ‘protected conduct.’” Id. at 

189.

Determining whether a plaintiff was engaged in “protected conduct” involves 

determining “whether plaintiff's actions sufficiently furthered ‘an action filed or to be 

filed under’ the False Claims Act and, thus, equate to ‘protected conduct.’ Section 

3730(h) specifies that ‘protected conduct’ includes ‘investigation for, initiating of, 

testimony for, or assistance in’ a False Claims Act suit.” Id. at 187 (internal quotation 

marks and citation omitted) (quoting McKenzie v. BellSouth Telecomm., Inc., 219 F.3d 

508, 516 (6th Cir. 2000)). This is a fact specific inquiry, and it “does not require the 

plaintiff to have developed a winning qui tam action.... It only requires that the plaintiff 

engage in acts ... in furtherance of an action under the False Claims Act.” Hutchins, 253 

F.3d at 187 (internal quotation marks omitted) (quoting Yesudian, 153 F.3d at 739). The 

analysis may look to evidence of “internal reporting and investigation of an employer's 

false or fraudulent claims,” Hutchins, 253 F.3d at 87, but “an employee's investigation of 

nothing more than his employer's non-compliance with federal or state regulations” is not 

enough. Id. at 187-88 (quoting Yesudian, 153 F.3d at 740).

Once a plaintiff has shown that he was engaged in “protected conduct,” he must 

show that he was discriminated “because of” his “protected conduct.” Hutchins, 253 

F.3d at 188. “To meet this requirement, a plaintiff must show his employer had 

knowledge that he was engaged in ‘protected conduct’ and that the employer retaliated 

against him because of that conduct.” Id. The Third Circuit has adopted the holding of 

several other courts of appeals that “the knowledge prong of § 3730 liability requires the 

employee to put his employer on notice of the ‘distinct possibility’ of [FCA] litigation.” 

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Id. This notice of a “distinct possibility” of FCA litigation “is essential because without 

knowledge an employee is contemplating a False Claims Act suit, ‘there would be no 

basis to conclude that the employer harbored § 3730(h)'s prohibited motivation, i.e., 

retaliation.’” Id. (citing Mann v. Olsten Certified Healthcare Corp., 49 F. Supp. 2d 1307, 

1314 (M.D. Ala. 1999)). An employer may be on notice of such a “distinct possibility” 

of litigation “when an employee takes actions revealing the intent to report or assist the 

government in the investigation of a [FCA] violation.” Hutchins, 253 F.3d at 189; see 

also id. at 188 n.8 (noting that while “the ‘protected conduct’ and notice requirements are 

separate elements of a prima facie case of retaliation under § 3730 ... the inquiry into 

these elements involves a similar analytical and factual investigation.”)

In the instant case, Plaintiffs argue relators Amaya and Moody were engaged in 

“protected conduct” because they were not performing their job duties when they 

allegedly reported unlawful activities to other PEG employees, and they did so in 

furtherance of an action “filed or to be filed.” (Pls.’ Opp’n at 52-53.) The allegation in 

the FAC pertaining to relator Amaya is that she provided PEG, via its own reporting 

mechanism, with “specific information that [PEG’s] directives and activities described 

[in the FAC] were ... in violation of PEG’s policies, which had been drafted to create the 

appearance of compliance with Federal law.” (FAC ¶ 320.) Relator Amaya “wrote a 

letter dated January 12, 2011 to PEG Vice President Hastain, outlining multiple instances 

of misconduct, including improper grade changes, advancing unqualified students, failure 

to dismiss students not meeting SAP requirements, and systemic and unchecked 

misconduct by instructors.” (Id. ¶ 322.) With respect to relator Moody, the Complaint 

avers that she too relied on PEG’s reporting policy to provide PEG with “specific 

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information that [PEG’s] directives and activities described [in the FAC] were ... in 

violation of PEG’s policies, which had been drafted to create the appearance of 

compliance with Federal law.” (Id. ¶ 236.) She reported to PEG Vice President Hastain 

that “two executives at HSB-Wilmington ... had directed her to change student grades 

without instructor authorization.” (Id. ¶ 237.)

In both Counts, Plaintiffs contend that relators Amaya’s and Moody’s actions 

were “protected conduct” because they “plainly put PEG on notice of a possible qui tam

action.” (Id. ¶¶ 322, 327.) In reaching this conclusion they assert that PEG Vice 

President Hastain “knew, of course, that the overwhelming majority of students 

implicated by this misconduct were Federal financial aid beneficiaries.” (Id. ¶¶ 322, 

327.) Plaintiffs submit that relator Amaya’s letter “thus outlined the salient elements of 

the fraud described [in the FAC] and it even alerted Hastain to a possible lawsuit by 

students.” (Id. ¶ 322.) The allegations in relator Moody’s claim also rest on the 

inference that, when she alerted Hastain that she was directed to change student grades, 

this was notice of “a material component of PEG’s fraud on the United States, as 

described [in the FAC].” (Id. ¶ 327.)

Nowhere in the FAC do relators Amaya or Moody suggest that they were 

investigating, initiating, testifying for, or assisting with a FCA action when they alerted 

Hastain to the alleged wrongdoing. See Hutchins, 253 F.3d at 187. They do not allege 

that they mentioned a pending or future FCA action or threatened to report PEG’s 

activities to the government in their communications with Hastain. See id. at 189-90. In 

fact, despite their conclusory statements in the pleadings, there is no evidence that they 

even connected the wrongful activity complained of with illegality, unlawful behavior, or

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false claims for Federal student financial aid when they communicated with Hastain. See

id. at 190 (citing Robertson v. Bell Helicopter Textron, Inc., 32 F.3d 948, 951 (5th Cir.

1994)). While the conduct relators Amaya and Moody complained of to Hastain might 

support their present FCA claim, it is not enough to infer that by merely raising those 

concerns in the past, relators Amaya and Moody “outlined the salient elements of the 

fraud described [in the FAC],” and were thus engaging in “protected conduct.” See

Campion v. Northeast Utilities, 598 F. Supp. 2d 638, 658 (M.D. Pa. 2009) (“[Plaintiff’s] 

merely reporting his concern about mischarging the government to his supervisor does 

not suffice to establish that he was acting ‘in furtherance of’ a qui tam action.”) (citing 

Hutchins, 253 F.3d at 188, 190, 193).16 Because there is no indication relators Amaya 

and Moody did more than report allegedly wrongful actions undertaken by certain HSB 

and PEG employees to PEG Vice President Hastain, or that they did so “in furtherance of 

an action under the False Claims Act,” the Court finds that they have not shown they 

were engaged in “protected conduct.” Id. at 187.17

 

16 Plaintiffs filed their initial complaint on June 20, 2011 (Doc. No. 1), and it appears that the alleged 

retaliatory action against relator Amaya occurred in January of 2011 or earlier. (See FAC ¶¶ 320-23.) 

Relator Moody’s claim that PEG systematically retaliated against her for whistleblowing by creating a 

hostile work environment is not associated with any specific date in the Complaint, (see FAC ¶¶ 326-28), 

however the Court notes that she was employed from October, 2010, until she left the company in August, 

2012. (FAC ¶ 38.) There is no indication in the FAC that the communications made by relators Amaya or 

Moody to Hastain regarding certain wrongdoings were related to, coincided with, or followed the filing of 

the original or later-amended Complaints.

17 Based on many of the same considerations, the Court also notes that Plaintiffs have not shown that the

discriminatory treatment they allegedly suffered was “because of” any “protected conduct.” Even if the 

Court accepted that relator Amaya’s and Moody’s actions were “protected conduct,” the facts alleged give 

no indication that PEG retaliated against them as a result of that conduct. See Hutchins, 253 F.3d at 188. 

Merely reporting conduct that might be an element of a false claims act, but may also just be reported 

wrongdoing, does not put the employer on notice that an employee is engaged in an “activity that 

reasonably could lead to a False Claims Act case.” Id. (quoting Yesudian, 153 F.3d at 742). There is no 

indication that the two instances of communication, alleged in the FAC, could have been viewed by PEG as 

more than a suggestion for how PEG should improve or conduct its business more ethically, rather than as a 

precursor to litigation. Hutchins, 253 F.3d at 189 (quoting Luckey v. Baxter Healthcare Corp., 183 F.3d 

730, 733 (7th Cir. 1999), cert. denied, 528 U.S. 1038 (1999)). Because the Court cannot read the 

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Accepting the facts as true and construing the allegations in the Complaint most 

favorably for Plaintiffs, relators Amaya and Moody have not stated a claim for retaliation

under § 3730(h). For this reason, the Court will dismiss Counts V and VII of the FAC.

c. Counts VI and VIII

In Counts VI and VIII Relators allege that Defendants intentionally inflicted 

emotional distress against relators Amaya and Moody. Because all Relators’ claims 

arising under federal law will be dismissed, and Relators have pleaded no other basis for 

jurisdiction, the Court will decline to exercise supplemental jurisdiction over these

remaining state-law claims. 28 U.S.C. § 1367(c)(3).

IV. LEAVE TO AMEND

When a complaint is dismissed for failure to state a claim, leave to amend should 

normally be granted. Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000); Grayson v. 

Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002) (“When a plaintiff does not seek 

leave to amend a deficient complaint after a defendant moves to dismiss it, the court must 

inform the plaintiff that he has leave to amend within a set period of time, unless 

amendment would be inequitable or futile.”)

Here, the Court is unable to conclude that Plaintiffs could not possibly amend 

their pleadings to adequately state their claims for retaliation under § 3730(h) against 

Defendants. Therefore, within the period of time set forth in the Order accompanying 

this Opinion, Plaintiffs may file a motion seeking leave to amend their FAC.

 

allegations as suggesting relators Amaya and Moody took “actions revealing the intent to report or assist 

the government in the investigations of a False Claims Act violation,” it finds that PEG was not on notice 

of a “distinct possibility” of litigation. Hutchins, 253 F.3d at 188-89. As such, Plaintiffs have also failed to 

show that they were discriminated “because of” any alleged “protected conduct.”

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V. CONCLUSION

For the foregoing reasons, Defendants’ motion to dismiss will be GRANTED. 

The dismissal of Counts I-IV will be with prejudice as to all parties except the 

government. Plaintiffs may file a motion for leave to amend the remaining Counts in

their Complaint within the time period specified in the Order accompanying this Opinion. 

An accompanying Order shall issue.

Dated: 10/27/2014 s/ Robert B. Kugler 

ROBERT B. KUGLER

United States District Judge

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