IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

________________________________________

)

UNITED STATES OF AMERICA ex rel. )

LAURA LAPORTE, ANGELA DAVENPORT, ) Civil Action No.: 

PAMELA HONE, ROBERT BIASELLI, ) 1:11-CV-03523(RBK)(AMD)

KELLI J. AMAYA, AMANDA KENNY, and )

DORIS MOODY, )

)

Plaintiffs, )

v. ) ORAL ARGUMENT IS

) REQUESTED

)

PREMIER EDUCATION GROUP, L.P. and )

PREMIER EDUCATION GROUP, G.P., INC. )

d/b/a HARRIS SCHOOL OF BUSINESS, ) [Filed Electronically]

BRANFORD HALL CAREER INSTITUTE, )

SALTER COLLEGE, THE SALTER SCHOOL, ) Motion Day:

SEACOAST CAREER SCHOOLS, SUBURBAN ) Monday, April 21, 2014

TECHNICAL SCHOOL; and JOHN DOES )

NOS. 1-50, FICTITIOUS NAMES, )

)

Defendants. )

_______________________________________ )

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION 

TO DISMISS THE FOURTH AMENDED COMPLAINT

MELTZER, LIPPE, GOLDSTEIN & BREITSTONE, LLP

190 Willis Avenue

Mineola, New York 11501

(516) 747-0300

Attorneys for Defendants

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TABLE OF CONTENTS

PAGE

TABLE OF AUTHORITIES ................................................................................... iii

PRELIMINARY STATEMENT & SUMMARY OF ARGUMENT........................1

ARGUMENT.............................................................................................................7

I. THE ACTION MUST BE DISMISSED FOR WANT OF 

JURISDICTION PURSUANT TO THE “FIRST-TO-FILE RULE”

AND DUE TO PRIOR PUBLIC DISCLOSURES OF THE 

ALLEGED WRONGS..................................................................................7

A. The Court Lacks Jurisdiction Pursuant to the “First-to-File Rule.” .............7

B. Prior Public Disclosures Mandate Dismissal of the Action. ......................11

II. RELATORS’ CLAIMS ARE BARRED BY APPLICABLE 

STATUTES OF LIMITATIONS................................................................15

III. THE ACTION MUST BE DISMISSED FOR FAILURE TO 

PROPERLY PLEAD PURSUANT TO RULE 8 AND TO PLEAD 

FRAUD WITH PARTICULARITY PURSUANT TO RULE 9(b)...........16

A. The Action Should be Dismissed Because the PPA Violations Have 

Not Been Pleaded with the Requisite Particularity.....................................17

1. Allegations that Defendants Caused Financial Aid to be Awarded to 

Ineligible Students Are Not Pleaded with Particularity. .........................17

2. Allegations that Defendants Used High-Pressure Tactics to Enroll 

Students Under False Pretenses are Not Pleaded With Particularity. .....21

3. Allegations that Defendants Made Material Misrepresentations to 

Induce Students to Enroll in Their Institutions Are Not Pleaded 

with Particularity. ....................................................................................22

4. Allegations That Defendants Used Prohibited Incentive Compensation 

for Employees Are Not Pleaded with Particularity.................................23

B. The Action Should At Least be Limited to Those Campuses Where 

Misconduct is Alleged to Have Taken Place..............................................25

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IV. THE FALSE CERTIFICATION CLAIMS (COUNTS I AND II) 

MUST BE DISMISSED FOR FAILURE TO STATE A CLAIM 

PURSUANT TO RULE 12(b)(6). ..............................................................28

A. No FCA Claim Can Be Stated Without a Regulatory Violation and 

Relators Fail to Allege Such Violations. ....................................................31

B. Dismissal is Required of the FCA Claims That Lack a Condition of 

Payment Predicate.......................................................................................39

V. RELATORS’ REVERSE FALSE CERTIFICATION CLAIM 

(COUNT IV) MUST BE DISMISSED PURSUANT TO 

RULE 12(b)(6)............................................................................................47

VI. RELATORS’ FCA CONSPIRACY CLAIM (COUNT III) MUST BE 

DISMISSED PURSUANT TO RULES 9(b) AND 12(b)(6). ....................49

VII. RELATORS’ FCA RETALIATION CLAIMS (COUNTS V 

AND VII) MUST BE DISMISSED PURSUANT TO RULES 9(b) 

AND 12(b)(6)..............................................................................................51

VIII. THE CLAIMS OF RELATORS AMAYA AND MOODY FOR 

INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS 

(COUNTS VI AND VIII) FAIL TO STATE A CLAIM FOR 

WHICH RELIEF MAY BE GRANTED....................................................53

CONCLUSION........................................................................................................55

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TABLE OF AUTHORITIES

Page(s)

Cases

Ashcroft v. Iqbal, 556 U.S. 662 (2009) ............................................................ 28, 40

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ..................................................28

Campion v. Ne. Util., 598 F. Supp. 2d 638 (M.D. Pa. 2009)........................... 52, 53

CSX Transp. Co. v. Novolog Bucks Cnty., 502 F.3d 247 (3d Cir. 2007)...............47

E.E.O.C. v. Avecia Inc., Civ.A. 03–320–SLR,

2003 WL 22432911 (D. Del. Oct. 23, 2003)........................................... 15, 53, 54

Gould Electronics Inc. v. U.S., 220 F.3d 169 (3d Cir. 2000)....................................8

Halasa v. ITT Educational Services, Inc., 10-cv-437 (WTL), 

2011 WL 4036516, (S.D. Ind. Sept. 12, 2011), 

aff’d, 690 F.3d 844 (7th Cir. 2012)......................................................................35

Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176 (3d Cir. 2001).......... 51, 52

In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir.1997)................20

Jordan v. Delaware, 433 F. Supp. 2d 433 (D. Del. 2006)........................... 53, 54, 55

Mattern v. Hudson, 532 A.2d 85 (Del. Super.1987)................................................53

Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001) .................................................. 40, 47

Semulka v. Moschell, 401 F. App’x 628 (3d Cir. 2010).........................................16

Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 

742 F.2d 786 (3d Cir. 1984).................................................................................27

Tredennick v. Bone, 323 F. App’x 103 (3d Cir. 2008) ...........................................26

U.S. ex rel. Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506 (3d Cir. 2007)............8

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U.S. ex rel. Bott v. Silicon Valley Colleges, 262 F. App’x 810 

(9th Cir. 2008) ......................................................................................................34

U.S. ex rel. Clausen v. Lab. Corp. of Am., Inc., 

290 F.3d 1301 (11th Cir. 2002)............................................................................19

U.S. ex rel. Conner v. Salina Reg’l Health Ctr., Inc., 

543 F.3d 1211 (10th Cir. 2008)......................................................... 41, 42, 45, 47

U.S. ex rel. Diaz v. Kaplan University, 09–20756–CIV, 2011 WL 

3627285 (S.D. Fla. Aug. 17, 2011) .............................................................. passim

U.S. ex rel. Gatsiopoulos v. Kaplan Career Inst., 09-21720-CIV, 

2010 WL 5392668 (S.D. Fla. Dec. 22, 2010) ......................................................22

U.S. ex rel. Ge v. Takeda Pharm. Co. Ltd., 737 F.3d 116 (1st Cir. 2013) ..............19

U.S. ex rel. Harris v. Alan Ritchey, Inc., C00-2191Z, 2006 WL 3761339 

(W.D. Wash. Dec. 20, 2006)......................................................................... 26, 28

U.S. ex rel. Hobbs v. MedQuest Assocs. Inc., 

711 F.3d 707 (6th Cir. 2013)............................................................. 40, 42, 45, 47

U.S. ex rel. Hoggett v. Univ. of Phoenix, 10-CV-02478-MCE, 

2012 WL 2681817 (E.D. Cal. July 6, 2012).........................................................24

U.S. ex rel. Knisely v. Cintas Corp., Inc., CIV.A. 10-1193, 

2014 WL 983468 (E.D. Pa. Mar. 14, 2014).........................................................18

U.S. ex rel. LaCorte v. SmithKline Beechman Clinical Labs., Inc.,

351 F. App’x 778 (3d Cir. 2009)................................................................... 7, 8, 9

U.S. ex rel. Lampkin v. Johnson & Johnson, Inc., 

CIV.A. 08-05362 JAP, 2013 WL 2404238 (D.N.J. May 31, 2013) ....................50

U.S. ex rel. Lobel v. Express Scripts, Inc., 351 F. App’x 778 (3d Cir. 2009).........55

U.S. ex. rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181 (9th Cir. 2001)............11

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U.S. ex rel. Mailly v. Healthsouth Holdings, Inc., Civ. A. No. 07-2981, 

Civ. A. No. 09-483, 2010 WL 149830 (D.N.J. Jan. 15, 2010) ..............................7

U.S. ex rel. Nelson v. Sanford-Brown, Ltd., 12-CV-775-JPS, 2014 

WL 1052944 (E.D. Wis. Mar. 17, 2014) ...................................................... 14, 15

U.S. ex rel. Piacentile v. Sanofi Synthelabo, Inc., Civ. 05-2927 (KSH),

2010 WL 5466043 (D.N.J. Dec. 30, 2010) ................................. 10, 11, 49, 50, 51

U.S. ex rel. Pilecki-Simko v. The Chubb Institute, Civ. A. No. 06-3562, 

2010 WL 1076228 (D. N.J. Mar. 22, 2010) (“Chubb I”)............................. passim

U.S. ex rel. Pilecki-Simko v. The Chubb Institute, 

443 F. App’x 754 (3d Cir. 2011) (“Chubb II”)............................................. 17, 29

U.S. ex rel. Qazi v. Bushwick United Housing Development 

Fund Corporation, 11-cv-1592 (BMC), 2013 WL 5607181 

(E.D.N.Y. Oct. 14, 2013)......................................................................................47

U.S. ex rel. Quinn v. Omnicare, Inc, 382 F.3d 432 (3d Cir. 2004) .........................31

U.S. ex rel. Saldivar v. Fresenius Med. Care Holdings, Inc.,

906 F. Supp. 2d 1264 (N.D. Ga. 2012) ................................................................26

U.S. ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235 (3d Cir. 2004)........................16

U.S. ex rel. Schmidt v. Zimmer, Inc., Civ. A. No. 00-1044, 

2005 WL 1806502 (E.D. Pa. July 29, 2005)........................................................19

U.S. ex rel. Simpson v. Bayer Corp., Civ. A. No. 05-3895 JLL, 

2012 WL 3600302 (D.N.J. Aug. 21, 2012)............................................................7

U.S. ex rel. Sobek v. Educ. Mgmt., LLC, 2013 WL 2404082 

(W.D. Pa. May 31, 2013) ............................................................................. passim

U.S. ex rel. Thomas v. Siemens AG, 708 F. Supp. 2d 505 (E.D. Pa. 2010) ...........48

U.S. ex rel. Torres v. Kaplan Higher Education Corp., 09-21733-CIV (PAS), 

2011 WL 3704707 (S.D. Fla. Aug. 23, 2011)......................................................34

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U.S. ex rel. Wall v. Vista Hospice Care, Inc.,

778 F. Supp. 2d 709 (N.D. Tex. 2011).................................................................26

U.S. ex rel. Washington v. Educ. Mgmt. Corp.,

871 F. Supp. 2d 433 (W.D. Pa. 2012) ..................................................................24

U.S. ex rel. Wilkins v. United Health Group, Inc., 

659 F.3d 295 (3d Cir. 2011)......................................................................... passim

U.S. ex rel. Zizic v. Q2Administrators, LLC, 728 F.3d 228 (3d Cir. 2013) ...........11

United States v. The Baylor Univ. Med. Ctr., 469 F.3d 263 (2d Cir. 2006)...........15

United States v. Warnings, CIV. A. 93-4541, 

1994 WL 396432 (E.D. Pa. July 26, 1994)..........................................................50

Yuhasz v. Brush Wellman, Inc., 341 F.3d 559 (6th Cir. 2003)...............................53

Federal Statutes

20 U.S.C. § 1094(a)(20).................................................................................... 23, 34

31 U.S.C. § 3729.............................................................................................. passim

31 U.S.C. § 3729(a)(1)(A).......................................................................................28

31 U.S.C. § 3729(a)(1)(B) .......................................................................................28

31 U.S.C. § 3729(a)(1)(G)................................................................................ 47, 48

31 U.S.C. § 3730(b)(5)................................................................................ 4, 7, 8, 11

31 U.S.C. § 3730(e)(4)............................................................................ 4, 11, 12, 15

31 U.S.C. § 3730(h).................................................................................... 15, 51, 52

31 U.S.C. § 3731(b)(1).............................................................................................15

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State Statutes

10 Del.C. § 8119 ......................................................................................................15

Del. Code Ann. tit. 19, § 2304 (West).............................................................. 53, 54

Mass. Gen. Laws Ann. ch. 151B ...................................................................... 26, 27

Mass. Gen. Laws Ann. ch. 151C .............................................................................26

Federal Rules

Fed R. Civ. P. 8....................................................................................................1, 16

Fed.R.Civ.P. 9(b) ............................................................................................. passim

Fed. R. Civ. P. 12(b)(1)................................................................................... 1, 8, 10

Fed. R. Civ. P. 12(b)(6).................................................................................... passim

Fed. R. Civ. P. 12(f)...................................................................................................1

Fed. R. Civ. P. 15(c)(2)............................................................................................16

Federal Regulations

34 C.F.R. § 104.3(j)(1)(i).........................................................................................36

34 C.F.R. § 104.42(a)-(b).........................................................................................36

34 C.F.R. § 668.14(b) ..............................................................................................32

34 C.F.R. § 668.14(b)(22)(ii)(E)................................................................. 23, 24, 34

34 C.F.R. § 668.16 ............................................................................................ 45, 46

34 C.F.R. § 668.16(e).................................................................................. 38, 45, 46

34 C.F.R. § 668.22(b) ....................................................................................... 38, 39

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34 C.F.R. § 668.32 ...................................................................................................20

34 C.F.R. § 668.32(e)...............................................................................................20

34 C.F.R. § 668.32(e)(1)................................................................................... 19, 20

34 C.F.R. § 668.32(e)(1)-(5)....................................................................................20

34 C.F.R. § 668.32(f)...............................................................................................38

34 C.F.R. § 668.34 ............................................................................................ 38, 46

34 C.F.R. § 668.34(a)(7)..........................................................................................38

34 C.F.R. § 668.40(a)...............................................................................................37

34 C.F.R. § 668.40(a)(1)................................................................................... 36, 37

34 C.F.R. § 668.40(a)-(c).........................................................................................37

34 C.F.R. § 668.75 ............................................................................................ 43, 45

34 C.F.R. § 668.75(a)-(c).........................................................................................44

34 C.F.R. § 668.75(a)...............................................................................................44

34 C.F.R. § 668.75(b) ..............................................................................................43

34 C.F.R. § 668.75(c)...............................................................................................44

34 C.F.R. §§ 668.141-145........................................................................................32

45 C.F.R. § 80.3(a)-(b)(1)........................................................................................36

45 C.F.R. Pt. 80, App. B(IV)(L)..............................................................................36

48 Fed. Reg. 45670 ........................................................................................... 33, 46

75 Fed. Reg. 66832 ..................................................................................................46

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75 Fed. Reg. 66915 ..................................................................................................44

Other Authorities

ACICS Accreditation Criteria Policies, Procedures, and 

Standards, No. 2-2-503(a) ....................................................................................39

ACICS Accreditation Criteria § 3-1-441(c).............................................................33

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Defendants Premier Education Group, L.P. and Premier Education Group, 

G.P., Inc. (“Defendants”) respectfully submit this memorandum of law in support 

of their motion to dismiss the Fourth Amended Complaint (“FAC”) pursuant to 

Federal Rules of Civil Procedure (“Rules”) 8, 9(b), 12(b)(1), 12(b)(6) and 12(f).

PRELIMINARY STATEMENT & SUMMARY OF ARGUMENT

This case is the latest of the recent wave of False Claims Act (“FCA”), 31 

U.S.C. § 3279 et seq., qui tam lawsuits filed against career schools. This action, 

however, goes far beyond those confronted by other courts. Consequently, by 

asserting the most tenuous legal theories based upon speculative and vague 

allegations, Relators threaten to open the floodgates to unbridled and massive 

litigation. More directly, Relators’ unfounded and overreaching allegations would 

work a particular burden on the limited resources of this Court, as Relators will

undoubtedly seek overwhelming civil discovery into every aspect of Defendants, 

including information and documents originating or somehow concerning six of 

Defendants’ schools and 21 campuses spread across several states. Respectfully, 

and for reasons more fully described below, this Court should not permit such legal 

theories and allegations to go beyond the pleading stage and should grant the 

instant motion to dismiss the FAC, in its entirety, and with prejudice.

Before delving into Relators’ claims, Defendants must begrudgingly 

presume certain of the allegations to be true solely for the purpose of the instant 

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motion. Regardless, Defendants categorically deny that they engaged in any widespread, systemic wrongdoing or otherwise intentionally violated any federal, state 

or accreditor requirements. Premier Education Group, L.P. is a leader in adult 

career training and it strives to foster pride, dignity, and self-respect in its student 

body. Defendants did not become a leader in this field by engaging in the type of 

conduct alleged by Relators.

The FAC is brought by seven relators. Relators LaPorte, Biaselli, Hone, 

Davenport and Amaya plead they were employed at the Linwood Campus of 

Defendants’ Harris School of Business (“HSB”), a school alleged to include seven 

campuses spread across three states. Relator Amaya alleges she was employed 

during different time periods at both the Linwood and Wilmington campuses of 

HSB. And Relators Kenny and Moody allege they were employed at only the 

Wilmington Campus of HSB.

Relators assert eight counts. Counts I through IV are based upon alleged 

violations of the federal FCA. Relators Amaya and Moody, in Counts V through 

VIII, assert claims on behalf of themselves based upon alleged retaliatory 

discharges in violation of the federal FCA and state law claims for intentional 

infliction of emotional distress.

The theory of liability used to prop up Relators’ primary counts (the federal 

FCA claims at Counts I through IV) are both attenuated and, in many respects, 

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invite this Court to apply novel and far-reaching theories. These claims are 

predicated upon the FCA and its 2009 amendments under the Fraud Enforcement 

Recovery Act (“FERA”), which make it unlawful to present or cause to be 

presented to the United States a claim for payment that is false or fraudulent. 

Relators claim that each time any of Defendants’ 21 campuses draw down federal 

funds for any of its thousands of students, Defendants have “impliedly” submitted 

a false claim because the schools allegedly were not in compliance with all 

regulations.

Relators assert a litany of alleged wrongdoings, improprieties and regulatory 

violations purportedly engaged in by Defendants to advance their supposed 

“Fraudulent Scheme.” FAC § V. For example, Relators allege Defendants 

admitted unqualified students (id. § V.A.1), altered students’ grades from failing to 

passing (id. § V.A.3), changed attendance records (id. § V.A.4), employed highpressure tactics to enroll students (id. § V.B) and made various misrepresentations 

to induce students to enroll (id. § V.C). To be sure, with the previously mentioned 

novel theories and slew of allegations, the FAC is impressive in its breadth, 

amounting to 116 pages and 365 enumerated paragraphs. But what the FAC

accomplishes in destruction to the environment, it fails in pleading cognizable 

claims.

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As a threshold matter, the Court lacks jurisdiction pursuant to 31 

§ 3730(b)(5), the “first-to-file rule,” because there was a prior FCA qui tam action

against Defendants, commenced nearly a year and half prior to the commencement 

of the instant action, based upon the same facts underlying the instant action. Part 

I.A, infra. Further, the FAC must be dismissed pursuant to the “prior public 

disclosure” doctrine of 31 U.S.C. § 3730(e)(4) because Relators are not true 

whistleblowers; the whistle they are attempting to blow has been sounded in news 

reports and prior litigations years ago. Indeed, not satisfied with the fictitious 

allegations made in the FAC and intending to litigate this action in the press, one 

of the Relators made defamatory statements about Defendants that appeared in a

front page article in The New York Times a few weeks ago, prior to the filing of the 

FAC. Part I.B, infra.

In yet another example of Relators’ overreaching and vague allegations, they 

repeatedly attempt to invoke a virtually unlimited time period, including 

allegations of pre-2006 conduct, despite all of the Relators being employed during 

limited one or two year periods, and despite the fact that many such allegations are 

barred by the applicable statues of limitations. Part II, infra.

Assuming the FAC survives the jurisdictional defects and statutes of 

limitations bars, the vague and speculative allegations must be dismissed 

nonetheless because they do not satisfy Rule 9(b)’s heightened pleading 

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requirement for claims sounding in fraud. Part III, infra. Moreover, as previously 

stated, Relators originate from only two campuses of one of Defendants’ schools

and were only employed during limited time periods, yet they assert sweeping 

allegations of misconduct originating from six schools and 21 campuses. Given 

their compartmentalized exposure at only two campuses of one school, they do not 

nor can they plead personal and particularized knowledge of wrongdoing to satisfy 

Rule 9(b).

Relators’ FCA claims must also be dismissed because such claims, to 

withstand a motion to dismiss, must plead violations of federal regulations and no 

such regulatory violations are pleaded. Part IV.A, infra. Further, the doctrine of

implied false certification has been limited such that only those claims that allege 

violations of regulations that are a “precondition to payment” may survive a 

motion to dismiss, but Relators here have not pleaded violations of regulations that 

are preconditions to payment. Part IV.B, infra. Further, the doctrine of primary 

jurisdiction precludes Relators’ claims because the Department of Education 

(“DOE”) has the exclusive authority to make findings with respect to the subject 

regulatory violations. Id.

Relators’ “reverse false certification” claim (Count IV) must be dismissed 

because there are no new or separate allegations to support such a claim. Part V, 

infra. The FCA conspiracy claim (Count III) must also be dismissed because, inter 

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alia, Relators have not pleaded the prima facie elements of the claim and because 

the intracorporate conspiracy doctrine (e.g., a company cannot conspire with itself) 

mandates dismissal. Part VI, infra. Relator Moody’s and Amaya’s FCA 

retaliation claims (Counts V and VII) must be dismissed because they have not 

pleaded they were engaged in protected conduct under the statute, nor have they 

properly alleged that they were discriminated against because of such conduct.

With respect to federal oversight, Relators commenced the instant action on 

June 6, 2011 with the under seal filing of a complaint. Thereafter, the complaint in 

this action was amended three times with each iteration adding new allegations, all 

while the action was still under seal. Throughout the duration of this under seal 

time-period, the federal Department of Justice (“DOJ”) conducted an investigation 

into the claims and allegations and ultimately declined to intervene in this action. 

See Certification of Richard M. Howard, Esq., dated February 4, 2014 (“Howard

Cert.”). Undeterred, Relators have pressed forward, amending the complaint yet 

again after a motion to dismiss the Third Amended Complaint was filed, and will 

continue to harass Defendants unless the Court finally disposes of this action by 

granting the instant Motion, in its entirety, and with prejudice.1

 1 The pertinent facts referenced in this brief are largely taken from the FAC, the 

documents referred therein, facts and documents that are publicly available and/or 

the Howard Certification and the documents appended thereto.

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ARGUMENT

I. THE ACTION MUST BE DISMISSED FOR WANT OF 

JURISDICTION PURSUANT TO THE “FIRST-TO-FILE RULE”

AND DUE TO PRIOR PUBLIC DISCLOSURES OF THE ALLEGED 

WRONGS.

A. The Court Lacks Jurisdiction Pursuant to the “First-to-File 

Rule.”

Relators’ claims must be dismissed pursuant to the “first-to-file” provision 

of the FCA, 31 U.S.C. § 3730(b)(5). Relators’ claims and allegations are the 

subject of another, previously filed FCA qui tam action, U.S. ex rel. Bumgarner v. 

Premier Education Group, No. 1:10-cv-00787 (RMB)(KMW) (D.N.J.). The filing 

of the Bumgarner action warrants dismissal of this action pursuant to Rule 

12(b)(1).

Section 3730(b)(5) states, “When 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.” Thus, “[t]he plain 

language of [31 U.S.C. § 3730(b)(5)] ‘clearly bars claims arising from events that 

are already the subject of existing suits.’” U.S. ex rel. Simpson v. Bayer Corp., 

2012 WL 3600302, at *3 (D.N.J. Aug. 21, 2012) (quoting U.S. ex rel. LaCorte v. 

SmithKline Beechman Clinical Labs., Inc., 149 F.3d 227, 232 (3d Cir.1998)).

The first-to-file rule is a threshold, jurisdictional requirement. See, e.g., U.S. 

ex rel. Mailly v. Healthsouth Holdings, Inc., 2010 WL 149830, at *4 (D.N.J. Jan. 

15, 2010) (“Courts have routinely held [31 U.S.C. § 3730(b)(5) is] a jurisdictional 

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requirement.”). As such, Relators bear the burden of persuasion that the action 

should not be dismissed pursuant to Rule 12(b)(1), Gould Electronics Inc. v. U.S., 

220 F.3d 169, 178 (3d Cir. 2000), and the allegations are not to be construed in a 

light most favorable to Relators, U.S. ex rel. Atkinson v. Pa. Shipbuilding Co., 473 

F.3d 506, 514 (3d Cir. 2007).2 Moreover, the later filed case “need not rest on 

precisely the same facts as a previous claim to run afoul of this statutory bar.”

LaCorte, 149 F.3d at 232. Rather, the later allegation must simply state the 

essential facts of the previously filed claim to be barred by § 3730(b)(5). Id. at 

232-33.

The Bumgarner action was commenced on February 17, 2010. See Dckt.

Rpt. (Howard Cert. Ex. E). This action was commenced approximately a year and 

half later, on June 6, 2011. The named relator in the previous action, Mr. 

Bumgarner, is a former employee of Defendants, allegedly having been employed 

at the precise campus (Linwood) of HSB where five of the seven Relators in the 

instant action allegedly were employed. Compare Bumgarner Cmplt. (Howard

Cert. Ex. D) ¶ 10, with FAC ¶ 19, 22, 25, 28, 32. Critically, Bumgarner, like the 

instant action, is a purported qui tam action based upon alleged violations of the 

FCA. See Bumgarner Cmplt. (Howard Cert. Ex. D) ¶ 1.

 2 Should the Court determine that this jurisdictional question requires it to consider 

and weigh certain evidence, respectfully, the Court should stay all discovery, save 

limited and expedited jurisdictional discovery. See, e.g., U.S. ex rel. Sobek v. 

Educ. Mgmt., LLC, 2013 WL 2404082, at *5 (W.D. Pa. May 31, 2013). 

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In attempting to establish FCA liability against Defendants, the two actions 

rest on the same underlying theory of liability. In Bumgarner, relators alleged

Defendants submitted “false or fraudulent records, statements, or claims . . . for

obtaining financial aid from students in the form of loans and grants, which claims 

were made to the federal government . . . .” Id. (Howard Cert. Ex. D) ¶ 3. Relators

here characterize their action in a strikingly similar manner: “This 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.” FAC ¶ 1.

While dismissal pursuant to the first-to-file rule does not require identical 

allegations, see LaCorte, 149 F.3d at 232-33, the allegations of the specific 

mechanisms by which Defendants purportedly accomplished their supposed 

(albeit, fictitious) company-wide fraud are the same. Indeed, virtually every

substantive allegation the relators pled against Defendants in Bumgarner has been 

parroted by Relators here. For example, and in no way constituting an exhaustive 

comparison of the exact, overlapping and/or similar allegations:

• Allegations of misrepresentations to accreditors. Compare Bumgarner Cmplt. 

¶ 13.1, at 4; id. ¶ 14.A, at 5; id. ¶ 30, at 13; and id. ¶ 31.C, at 14, with FAC at 

81 (“ii. PEG Misrepresented Its Loss of Institutional Accreditation and Lied to 

Accreditation Agencies.”); id. ¶ 262-63; and id. ¶ 271 (citing ACICS 

Accreditation Criteria).

• Allegations regarding the admission of unqualified students: Compare

Bumgarner Cmplt. ¶ 6; id. ¶ 31.E, at 14; id. ¶ 43, at 18; id. ¶ 44, at 19; id.

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¶ 70.A, at 33; and id. 96.G, at 43, with FAC at 41 (“PEG Admitted Students 

Who Were Obviously Unqualified for Admission, and Who Were Incapable of 

Completing the Educational Program, and it Fabricated Test Results”); id. 47

(“V.A.1.ii. PEG Admitted Known Felons Who Were Either Ineligible for 

Federal Financial Aid or Could Not Obtain Licensure in Their Chosen Fields”); 

id. ¶ 157.

• Allegations of misrepresentations regarding job placement: Compare

Bumgarner Cmplt. ¶ 8, at 8; id. ¶ 31.H, at 15; see also id. ¶ 44, at 19; id. ¶ 97, at 

43; id. ¶ 96.A-G, at 43, with FAC at 82 (“2. PEG Misled Prospective Students 

Regarding Its Career Placement Performance”); id. ¶ 262-63; id. ¶ 265.

• Allegations of altered attendance records and course grades: Compare

Bumgarner Cmplt.¶ 8, at 8; id. ¶ 14.B, at 9; id. ¶ 31.M, at 15; ¶ 102, at 60, with

FAC ¶¶ 176-226. 

• Allegations of altered or falsified admissions exams: Compare Bumgarner

Cmplt.¶ 31.F, at 14; id. ¶ 69, at 33; id. ¶ 70, at 33; id. at 59 (“So basically we 

can tweak the admissions test to get students in the door.”), with FAC at 

¶ 299(iii); id. ¶ 316(i).

• Allegations that Defendants used prohibited incentive compensation: 

Compare Bumgarner Cmplt. ¶ 31.P, at 16, with FAC at 110 (“PEG Used 

Prohibited Incentive Compensation To Induce Employees to Participate in Its 

Fraudulent Scheme”); id. ¶¶ 289-305.

Thus, the Bumgarner action has already asserted the primary theories of 

liability later mimicked by Relators here and virtually every substantive category 

of allegations put forth to support Relators’ misguided theories of liability have 

already been asserted in the Bumgarner action. Accordingly, the first-to-file rule 

warrants dismissal pursuant to Rule 12(b)(1).3

 3 The Bumgarner action was dismissed, without prejudice, on September 16, 2013. 

See Order, Dckt. Rpt. 14 (Howard Cert. Ex. E). The dismissal, however, does not 

alter the inevitable outcome that the Court lacks jurisdiction. See U.S. ex rel. 

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B. Prior Public Disclosures Mandate Dismissal of the Action.

The Court should also dismiss the action because Relators’ allegations are 

substantially similar to publically available information and, as such, the Court 

cannot entertain the suit. 31 U.S.C. § 3730(e)(4) states, in pertinent part:

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 

(i) in a Federal criminal, civil, or administrative hearing in which the 

Government or its agent is a party; . . . or (iii) from the news media, . . 

. unless . . . the person bringing the action is an original source of the 

information.

Known as the “public disclosure bar,” 31 U.S.C. § 3730(e)(4) has “generally 

broad scope,” and its purpose is “to strike a balance between encouraging private 

persons to root out fraud and stifling parasitic lawsuits.” U.S. ex rel. Zizic v. 

Q2Administrators, LLC, 728 F.3d 228, 235 (3d Cir. 2013) (internal quotation

marks and citations omitted). Due to, inter alia, the Bumgarner action and various 

news media reports on previous allegations that later formed the crux of Relators’ 

claims, and because Relators do not specifically allege that they were the original 

sources of the information reported on in the news reports, Relators claims are 

revealed as nothing but parasitic claims that must be dismissed.

 

Piacentile v. Sanofi Synthelabo, Inc., 2010 WL 5466043, at *4 (D.N.J. Dec. 30, 

2010) (“even complaints that are later dismissed have preclusive effect.”) (citing 

U.S. ex. rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1183, 1189 (9th Cir.2001) 

(holding “that § 3730(b)(5) establishes an exception-free, first-to-file bar” and 

further holding “that subsequently dismissed cases constitute pending actions 

under § 3730(b)(5).”)).

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First, as previously discussed, the Bumgarner action was filed in 2010, 

approximately a year and a half prior to the instant action, and the two actions 

contain substantially the same allegations. Moreover, as an FCA qui tam suit, the 

federal government was a party to that action. See Bumgarner Dckt. Rpt. (Howard

Cert. Ex. E). As such, not only does the Bumgarner action strip the Court of 

jurisdiction over the instant suit pursuant to the first-to-file rule, it also warrants 

dismissal pursuant to 31 U.S.C. § 3730(e)(4)(A)(i).4

Second, Relators’ allegations have been the subject of numerous news media 

reports since, at least, 2007 and continuing until just several weeks ago. For 

example, on September 6, 2007, six former students at HSB commenced suit 

against Defendants. See Consumer Fraud Complaint in Harrigan, et al. v. Premier 

Education Group, L.P. d/b/a Harris School of Business of Linwood, et al., No. L2924-07 (N.J. Super. Ct., Law Div., Atl. Cnty.) (Howard Cert. Ex. P). Like 

Relators here, the Harrigan Plaintiffs alleged misconduct, including that 

Defendants improperly changed students’ grades and altered students’ attendance 

records with the intent of defrauding the federal government of student loan funds. 

Compare Harrigan Cmplt. ¶¶ 57, 58, with FAC ¶¶ 176-226. The Harrigan lawsuit 

was reported on in the news media. See, e.g., Howard Cert. Ex. L.

 4 See also Sobek, 2013 WL 2404082, at *5 (ordering limited and expedited 

discovery into the issue of prior public disclosure).

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Subsequent to Harrigan but still well-prior to the instant action, a virtually 

identical lawsuit was filed against Defendants on behalf of fourteen different HSB 

students on December 8, 2008. See Complaint in Gomez et al. v. Premier 

Education Group, L.P. d/b a Harris School of Business of Linwood, et al., No. L4412-08 (N.J. Super. Ct., Law Div., Atl. Cnty) (Howard Cert. Ex. F). Like the 

previous Harrigan lawsuit, the Gomez action was the subject of news media 

reports. See, e.g., Howard Cert. Ex. K.

Yet another lawsuit was filed against Defendants in New Jersey state court 

in March 2011 on behalf of thirty-seven Plaintiffs asserting nearly identical 

allegations as the allegations previously asserted in the Harrigan and Gomez cases. 

See Complaint in Eagen, et al. v. Premier Education Group, L.P., d/b/a The Harris 

School of Business of Linwood, et al., No. 2128-11 (N.J. Super. Ct., Law Div., Atl. 

Cnty.) (Howard Cert. Ex. G). The Eagen complaint was amended several times

and the most recent iteration is a virtual carbon-copy of the initial complaint in the 

instant action. Compare Eagen Second Am. Cmplt., dated Oct. 20, 2011 (Howard

Cert. Ex. 13), with LaPorte Cmplt., Dckt. Rpt. No. 26. Indeed, the similarities in 

allegations are not surprising given lead counsel in the Gomez and Eagen actions, 

David I. Sinderbrand, is lead counsel in the instant action. See Gomez Cmplt; 

Eagen Cmplts.; LaPorte Dckt. Rpt. (Howard Cert. Exs. B, F, G, H.). Like the 

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reports on the Harrigan and Gomez actions, the media also reported on the 

allegations made in the Eagen lawsuit. See, e.g., Howard Cert. Ex. M.

Relators have chosen to litigate this case in the media, as Relator Amaya 

made false and defamatory statements about Defendants to a reporter, which 

appeared in an article entitled “Federal Lawsuit Accuses For-Profit Schools of 

Fraud” published on the front page of The New York Times on February 19, 2014. 

See Howard Cert. Ex. Q. The February 19th publication of this article was prior 

to Relators’ filing of the FAC on February 27, 2014 and, therefore, the public 

disclosure bar mandates dismissal of the FAC.

Finally, Relators were employed at only two campuses of one school, HSBLinwood and HSB-Wilmington, and only during limited time periods (FAC ¶¶ 17-

40), yet they assert sweeping allegations of a company-wide fraud originating at 

six schools and 21 campuses over a seemingly unlimited time period. As the court 

in U.S. ex rel. Nelson v. Sanford-Brown, Ltd., 2014 WL 1052944, at *4 (E.D. Wis. 

Mar. 17, 2014), recently held, such lack of “direct and personal knowledge of the 

allegations and transactions at [other campuses]” and outside of the time of 

employment, strip the Court of subject matter jurisdiction “both as to time and 

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location” under § 3730(e)(4).

5

 See also Part III.B (arguing Relators’

compartmentalized knowledge also warrants dismissal pursuant to Rule 9(b)).

II. RELATORS’ CLAIMS ARE BARRED BY APPLICABLE STATUTES

OF LIMITATIONS.

Relators’ federal FCA claims are subject to a six-year statute of limitations. 

31 U.S.C. § 3731(b)(1). Relator Amaya’s and Moody’s retaliation claims are 

subject to three-year statutes of limitations, 31 U.S.C. § 3730(h)(1)(3), while their 

intentional infliction of emotional distress claims are subject to two-year statutes of 

limitations, E.E.O.C. v. Avecia Inc., 2003 WL 22432911, at *2 (D. Del. Oct. 23, 

2003) (citing 10 Del.C. § 8119). Many of Relators’ allegations are so vague that 

their claims may well be time-barred by these statutes of limitations.

Importantly, the FCA’s six-year statute of limitation runs from August 9, 

2013, the date of the unsealing of the Third Amended Complaint (see Dckt. Rpt. 

25, Unsealing Order of the Court) because this is the first date for which 

Defendants had notice of Relators’ allegations. See United States v. The Baylor 

Univ. Med. Ctr., 469 F.3d 263, 270 (2d Cir. 2006) (“the seal provision of § 

3730(b) deprives the defendant in an FCA suit of the notice usually given by a 

complaint. Because any relation back of subsequent filings to the original 

 5 The Nelson court also directed relators to file “detailed evidence to establish 

compliance with the ‘voluntary disclosure’ requirements of § 3730(e)(4)(B)” or 

risk dismissal. The Court here should require such a filing of Relators here.

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complaint is incompatible with the core requirement of notice under Rule 15(c)(2), 

continued running of the statute of limitations is warranted.”).

Alternatively, the allegations in the FAC should only relate back to the filing 

of the Third Amended Complaint on May 9, 2013 (see Dckt. Rpt. 14) because the 

prior pleadings (i.e., the initial, Amended, and Second Amended Complaints) have 

been superseded and rendered of no legal effect. Semulka v. Moschell, 401 F. 

App’x 628, 629 (3d Cir. 2010) (“An amended complaint supersedes the original 

complaint and renders it of no legal effect unless the amended complaint 

specifically refers to and adopts or incorporates by reference the earlier pleading.”) 

(internal citation omitted).

Thus, under the FCA’s six-year statute of limitations, any allegations in the 

FAC describing events prior to August 9, 2007, or alternatively, prior to May 9, 

2007, must be dismissed. See, e.g., FAC ¶¶ 2, 5, 88, 95, 133(i), 184, 191, 209, 

281, 286, 292, 293, 295, 315, 316(i), 316(v) & 317.

III. THE ACTION MUST BE DISMISSED FOR FAILURE TO 

PROPERLY PLEAD PURSUANT TO RULE 8 AND TO PLEAD 

FRAUD WITH PARTICULARITY PURSUANT TO RULE 9(b).

It is axiomatic that Relators’ “FCA claims must be pleaded with particularity 

in accordance with Fed.R.Civ.P. 9(b).” U.S. ex rel. Schmidt v. Zimmer, Inc., 386 

F.3d 235, 242 n.9 (3d Cir. 2004). Rule 9(b) “requires, at a minimum, that plaintiffs 

support their allegations of ... fraud with all of the essential factual background 

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that would accompany the first paragraph of any newspaper story – that is, the 

who, what, when, where and how of the events at issue.” U.S. ex rel. Pilecki–

Simko, et al. v. Chubb Inst., 2010 WL 1076228, at *7 (D.N.J. Mar. 22, 2010) 

(Chubb I) (internal quotation marks and citation omitted). “Although Rule 9(b) 

permits a plaintiff to generally allege a defendant’s mental state,” courts have held 

that “the Rule ... still require[s] plaintiffs to allege facts that show the court their 

basis for inferring that the defendants acted with ‘scienter.” Id. (internal quotation 

marks and citation omitted).

Relators’ allegations fail to meet Rule 8’s pleading requirements, U.S. ex rel. 

Pilecki-Simko v. The Chubb Institute, 443 F. App’x 754 (3d Cir. 2011) (“Chubb 

II”), and fall far short of satisfying the heightened pleading requirements of Rule 

9(b), for at least two reasons, as discussed further below.

A. The Action Should be Dismissed Because the PPA Violations 

Have Not Been Pleaded with the Requisite Particularity.

1. Allegations that Defendants Caused Financial Aid to be 

Awarded to Ineligible Students Are Not Pleaded with 

Particularity.

Relators allege that Defendants admitted students who were ineligible for 

federal financial aid and permitted or caused those students to apply and receive 

such aid (FAC § V.A) in violation of its Program Participation Agreements 

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(“PPA”).

6 Relators provide several vague “examples” of students who were 

allegedly ineligible for financial aid, but who nevertheless attended Defendants’

schools. However, even a cursory review of the allegations reveal that Relators 

have failed to allege the “who, what, when, where and how” of the events 

surrounding these claims. Chubb I, 2010 WL 1076228, at *7.

Relators’ vague “examples” regarding student eligibility fail for, at least, 

three reasons. First, and most importantly, none of the examples identify students 

who actually submitted claims for moneys to the government. Second, the 

examples do not allege how the students were ineligible for financial aid. Finally,

Relators have failed to plead that Defendants acted with the requisite scienter; 

there are no allegations that any of the Defendants either knew these students were 

ineligible for federal financial, or that these allegedly ineligible students would 

apply for financial aid. The anecdotal “examples” are far too numerous to address 

individually.

Relators also fail to allege if the individuals applied for and received 

financial aid from the federal government. U.S. ex rel. Knisely v. Cintas Corp., 

Inc., 2014 WL 983468, at *9 (E.D. Pa. Mar. 14, 2014) (plaintiff “has failed to 

 6 FAC § V.D contains similar assertions. However, Section V.D fails to allege any

examples of admissions and financial aid employees who encouraged students to 

apply for federal financial aid or executed certifications that Defendants were 

eligible to receive financial assistance. Accordingly, and for the sake of brevity, 

arguments seeking dismissal of Relators’ claims based on ineligible students 

receiving financial aid are directed solely FAC §V.A.

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allege an FCA violation with the requisite Rule 9(b) precision in that Knisely failed 

to identify a single false claim, or the time, place, or individuals allegedly involved 

in submitting any claims”). There is no allegation that a claim was actually 

submitted to the government, “the sine qua non of a False Claims Act violation.”

U.S. ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1311 (11th Cir. 

2002); see also U.S. ex rel. Schmidt v. Zimmer, Inc., 2005 WL 1806502, at *2

(E.D. Pa. July 29, 2005). Relators allege that the individuals were “not qualified to 

receive financial aid” (FAC ¶ 130), but they do not allege the individual students

actually applied for and received such aid or how much aid they received. This, 

and all other “examples” (e.g., FAC ¶¶ 133, 139-42, 150-51, 158, 163-64, 166, 

173), of ineligible students, should be completely disregarded because a pleading 

“must sufficiently establish that false claims were submitted for government 

payment as a result of the defendant’s alleged misconduct.” U.S. ex rel. Ge v. 

Takeda Pharm. Co. Ltd., 737 F.3d 116, 124 (1st Cir. 2013) (internal quotation 

marks and citation omitted).

Relators’ examples of ineligible students also do not allege with particularity 

why these individuals were ineligible for financial aid. Relators improperly cite to 

34 C.F.R. § 668.32(e)(1) in implying that the individual students were ineligible to 

receive financial aid funds. FAC § V.A., ¶ 132. Relators mischaracterize this 

regulation as requiring that students have a high school diploma or its recognized 

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equivalent in order to receive financial aid funds. Id. In fact, 34 C.F.R. § 668.32 

specifies several ways in which a student may be eligible for receiving financial 

aid without having obtained a high school diploma or its recognized equivalent. 34 

C.F.R. § 668.32(e)(1)-(5). There is no allegation that students were not eligible to 

receive financial aid funds under the other provisions of 34 C.F.R. § 668.32(e).

These allegations fail to meet the heightened pleading standard because there are 

no specific allegations to support the hollow conclusion that “the mere admission 

of this student violated [Defendants’] PPA requirements.” Chubb I, 2010 WL 

1076228, at *9.

These purported examples are also insufficient because Relators “fail[] to 

aver circumstantial facts enabling the inference that [Defendants] acted with 

scienter with regard to admitting allegedly unqualified students.” Id. (citing In re 

Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1418 (3d Cir. 1997)). There is 

simply no allegation that any of Defendants’ employees knew that these students 

should not be admitted or knew that the admission of these students violated 

Defendants’ obligations under the PPA. Id. As noted, the FAC is devoid of any 

particularized allegations supporting the conclusion that these individuals were, in 

fact, ineligible for financial aid. As a result, it is impossible to make the inference 

that Defendants’ employees knew students were ineligible when assisting them 

with financial aid applications. Consequently, “the [FAC] fails to allege 

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circumstantial facts enabling the inference that [Defendants] acted with scienter in 

assisting ineligible students apply for Title IV financial aid.” Id.

2. Allegations that Defendants Used High-Pressure Tactics to 

Enroll Students Under False Pretenses are Not Pleaded

With Particularity.

The allegations regarding Defendants’ use of high-pressure tactics to enroll 

students (FAC § V.B) are deficient pursuant to Rule 9(b). Specifically, the

allegations: (i) are not related to claims for payment submitted to the government; 

(ii) do not describe high-pressure tactics with any particularity; and (iii) even when 

taken as true, fail to show how Defendants violated any PPA obligations.

The allegations in Section V.B. are completely unrelated to claims for 

payment and do not otherwise meet the heightened pleading requirements of 

Rule 9(b). The allegations here fail for the same reason the Court in U.S. ex rel. 

Sobek v. Educ. Mgmt., LLC, 2013 WL 2404082 (W.D. Pa. May 31, 2013),

dismissed one of the relators’ counts under Rule 9(b), i.e., there are no specific 

examples of Defendants’ employees utilizing high-pressure sales tactics. 2013 WL 

2404082, at *26. Rather, all of the averments are “non-specific and vague.” Id.

Further, there are no allegations specifying when high-pressure tactics were used 

or whether the tactics resulted in ineligible students receiving financial aid.

Finally, the claims warrant dismissal because there is absolutely no 

allegation that the purported high-pressure tactics violated Defendants’ obligations 

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under the PPA or any regulations. FAC ¶¶ 227-48. Because Relators have not 

pleaded how the alleged high-pressure recruitment tactics violate the various PPAs 

or underlying statutes and regulations, all claims and allegations asserted in 

Section V.B must be dismissed pursuant to Rule 9(b). U.S. ex rel. Gatsiopoulos v. 

Kaplan Career Inst., 2010 WL 5392668, at *6 (S.D. Fla. Dec. 22, 2010).

3. Allegations that Defendants Made Material 

Misrepresentations to Induce Students to Enroll in Their 

Institutions Are Not Pleaded with Particularity.

Relators have asserted only conclusory allegations that Defendants made 

various misrepresentations to students to induce them to enroll at Defendants’

schools. FAC § V.C. There are no specific allegations regarding who made these 

alleged misrepresentations or when they were supposedly made. There is no 

specific allegation that any of the students to whom misrepresentations were 

purportedly made actually applied for and received financial aid.

Finally, Relators here, like the relators in Chubb I, have not alleged that any 

of the Defendants acted with the requisite scienter; that is, that the Defendants 

knew the falsity of the alleged misrepresentations and that the Defendants 

“knowingly committed acts in violation of § 3729.” 2010 WL 1076228, at *8. 

Accordingly, Relators’ allegations regarding misrepresentations to students must 

be dismissed pursuant to Rule 9(b).

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4. Allegations That Defendants Used Prohibited Incentive 

Compensation for Employees Are Not Pleaded with

Particularity.

Relators have alleged that Defendants violated the PPAs by utilizing 

prohibited compensation for employees in violation of the federal Incentive 

Compensation Ban, Higher Education Act (“HEA”), 20 U.S.C. § 1094(a)(20).

FAC § V.E, ¶ 289. However, Relators acknowledge that from 2002 through 2011

there were Safe Harbor Provisions “for activities that were deemed to not violate

the restrictions on incentive compensation.” Id. ¶ 290. Essentially, Relators 

attempt to allege that Defendants’ “form Premier Education Group LP Admissions

Representative Compensation Plan, offered to all PEG admissions employees” (id.

¶ 297) during the time period of the FAC, violated the Incentive Compensation 

Ban in two ways: (i) as written (id. ¶¶ 297-98, 304); and (ii) as implemented (id. ¶¶ 

291-96, 299-303, 305).

First, Relators fail to sufficiently plead that the “Premier Education Group

LP Admissions Representative Compensation Plan” violates the applicable Safe 

Harbor provision as written. During the pertinent time period, 34 C.F.R. 

§ 668.14(b)(22)(ii)(E)7 allowed educational institutions to provide “compensation 

that is based upon students successfully completing their educational programs, or 

one academic year of their educational programs, whichever is shorter.” Relators 

 7 This section of the C.F.R. has since been amended to remove these Safe Harbor 

provisions.

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concede that the plan, as written, only “offered a bonus of $40 per graduate for 

admissions representatives and $60 per graduate for senior admissions 

representatives.” FAC ¶ 297. This alleged compensation falls squarely within the 

Safe Harbor provision of 34 C.F.R. § 668.14(b)(22)(ii)(E). As a matter of law, 

Relators have not pleaded that Defendants violated the PPA based on their written 

compensation plan and such allegations and any claims premised upon them must 

be dismissed. U.S. ex rel. Washington v. Educ. Mgmt. Corp., 871 F. Supp. 2d 433, 

448 (W.D. Pa. 2012) (hereinafter, “Washington”) (citation omitted).

Second, allegations that Defendants’ compensation plan, as implemented, 

violates the Incentive Compensation Ban (FAC § V.E), are not pleaded with 

particularity. Relators do not allege who made the supposed “promises,” when the

promises were made, whether the purported bonuses were ever paid and whether 

Defendants acted with the requisite scienter. See U.S. ex rel. Hoggett v. Univ. of 

Phoenix, 2012 WL 2681817, at *5 (E.D. Cal. July 6, 2012) (“Relators meet their 

burden[, under Rule 9(b),] by naming individual officers and employees of UOPX 

who have participated in the fraudulent conduct, and detailing how the fraud was 

carried out.”). Thus, because Relators’ allegations concerning violations of the 

Incentive Compensation Ban, as implemented, do not provide the “who, what, 

when, where and how” of the events surrounding these claims (Chubb I, 2010 WL 

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1076228, at *7), the allegations should be dismissed for failing to meet the 

heightened pleading requirements of Rule 9(b).

B. The Action Should At Least be Limited to Those Campuses 

Where Misconduct is Alleged to Have Taken Place.

Assuming, arguendo, that the Court does not dismiss this action altogether, 

Relators’ sprawling FAC should be pared down to include only allegations that

have been pleaded with particularity in accordance with Rule 9(b). The FAC has 

alleged that six of Defendants’ schools, comprised of 21 campuses throughout 

several states, have fraudulently obtained federal monies. FAC ¶¶ 47-51. Relators 

are ostensibly seeking the recovery of funds obtained by each of the 21 campus of 

those six schools. However, Relators were employed at only two campuses of one 

school, HSB-Linwood and HSB-Wilmington, and only during limited time 

periods. FAC ¶¶ 17-40. Consequently, Relators have not, because they cannot, 

please direct knowledge of allegations originating from any other campus.

Notwithstanding the foregoing, Relators attempt to impute the alleged 

misconduct taking place at HSB-Linwood and HSB-Wilmington to all 21

campuses of Defendants’ six schools. Relators fail to allege any misconduct taking 

place at several of the schools and the vast majority of Defendants’ campuses. 

Courts have routinely dismissed similar claims where a relator has alleged 

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misconduct specific to only one location of a business entity defendant with 

multiple locations.8

Among the schools identified by Relators are Salter College (FAC ¶ 48(iii)), 

Seacoast Career Schools (FAC ¶ 48(v)) and Suburban Technical School (FAC

¶ 48(vi)). Salter College is mentioned again only once when Relators allege that 

School Director Charlene Keefe instructed Sonia Patota, allegedly an admissions 

representative at Salter College from January 2009 to April 2010, “to enroll 

students with felony convictions, but to direct them into programs (e.g. medical 

billing) where a criminal record would not automatically preclude employment.”

FAC ¶ 154. Relators have not alleged that such enrollment was unlawful or even 

inappropriate. Indeed, it would seem that Relators would prefer Defendants to 

discriminate against individuals solely on the basis of their criminal history, 

contrary to the law of Massachusetts where Salter College is located (FAC 

¶ 49(iii)). See, e.g., Mass. Gen. Laws Ann. ch. 151C, § 2(f) (West) (it is an unfair 

education practice for an educational institution to request certain information 

regarding an applicant’s criminal history); Mass. Gen. Laws Ann. ch. 151B, 

 8 U.S. ex rel. Saldivar v. Fresenius Med. Care Holdings, Inc., 906 F. Supp. 2d 

1264, 1277 (N.D. Ga. 2012); U.S. ex rel. Wall v. Vista Hospice Care, Inc., 778 F. 

Supp. 2d 709, 723 (N.D. Tex. 2011); U.S. ex rel. Harris v. Alan Ritchey, Inc., 2006 

WL 3761339, at *6 (W.D. Wash. Dec. 20, 2006); see also Tredennick v. Bone, 323 

F. App’x 103, 105 (3d Cir. 2008) (“where multiple defendants are involved, the 

complaint should inform each defendant of the nature of his alleged participation 

in the fraud.”).

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§ 4(91⁄2) (West) (unlawful for employers to inquire into applicant’s criminal 

convictions unless otherwise required by federal or state law).

Suburban Technical School is also only mentioned fleetingly after first being 

identified in the FAC. FAC ¶ 293. However, those allegations do not state a 

violation of any statute or regulation. Id. Similarly, allegations referencing 

Seacoast Career School, or “SCS,” do not allege conduct violative of any 

regulation or statute. Id. ¶ 248, 270, 295.

While the allegations against Salter School and Branford Hall are more 

numerous than the allegations against the other four schools, they still fail to meet 

the heightened pleading requirements of Rule 9(b). The allegations concerning 

Salter School (FAC ¶¶ 110, 112, 135, 153-54, 226, 237 & 310) and Branford Hall 

(FAC ¶¶ 113, 120, 135-36, 155, 162, 165, 184-85, 208-209, 244, 268-69, 283-84, 

294, 296 & 310) are nothing but irrelevant narratives from non-relator witnesses 

who derive their information from unidentified sources. Assuming Relators can 

rely upon third parties to supply their personal and direct knowledge (and they may 

not), these unrelated anecdotes fail to provide the requisite details about when the 

events took place or how they are connected to fraud on the government. 

Therefore, Relators do not “place the defendants on notice of the precise 

misconduct with which they are charged,” as required by Rule 9(b). Seville Indus. 

Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984).

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Finally, all claims against HSB should be dismissed pursuant to Rule 9(b). 

Relators have not alleged with particularity that fraudulent conduct was carried out 

in all seven campuses of HSB. Harris, 2006 WL 3761339, at *1 (dismissing 

company-wide fraud claims because there were only specific allegations 

concerning one of the company’s manufacturing plants and those claims did not 

impute liability to all of the company’s plants for purposes of Rule 9(b)).

IV. THE FALSE CERTIFICATION CLAIMS (COUNTS I AND II) MUST 

BE DISMISSED FOR FAILURE TO STATE A CLAIM PURSUANT 

TO RULE 12(b)(6).

Counts I and II, premised upon the FCA, should be dismissed as a matter of 

law pursuant to Rule 12(b)(6).

9 Subsection (a)(1)(A) of the FCA makes it 

unlawful to present or cause to be presented to the United States a claim for 

payment that is false or fraudulent and known to be so by the defendant. 31 U.S.C. 

§ 3729 (a)(1)(A); see also Chubb I, 2010 WL 1076228, at *4. Subsection (a)(1)(B)

of the FCA prohibits a party from making or using, or causing someone else to 

make or use, a false record to cause a false claim to be paid or approved. 31 

U.S.C. § 3729 (a)(1)(B). To defeat a motion to dismiss, a relator must allege that: 

(i) defendant made or caused a claim of payment to be made to the U.S.; (ii) the 

 9 A complaint must be dismissed if it does not allege enough facts to state a claim 

for relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544 

(2007); see also Ashcroft v. Iqbal, 556 U.S. 662 (2009). A complaint that recites 

elements of a cause of action supported by mere conclusory statements will not 

state a plausible claim for relief. Iqbal, 556 U.S. at 678. The factual allegations 

must be more than conceivable; they must be plausible. Id. at 679.

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claim was false or fraudulent; and (iii) the claim was known to be false by the 

defendant. Chubb II, 443 F. App’x at 759 (citation omitted). In addition, a relator 

must allege that the false statement is material to the government and that the 

government paid monies as a result. Sobek, 2013 WL 2404082, at *21 n.5.

The FCA qui tam career school cases are unlike other FCA cases in which 

the typical claim is the submission of a false invoice to a government agency and 

the claim fits squarely within the plain language of the statute. Chubb I, 2010 WL 

1076228, at *5. The theory of liability in the qui tam career school cases is far 

more attenuated and relies upon concepts of “certification” or “eligibility.” Career 

schools sign a PPA to be eligible to participate in HEA Title IV financial aid 

programs and receive government payment of the proceeds of student loans and 

grants. The PPAs contain statements certifying that the career school will comply 

with governing statutes and regulations. No separate further certification is made 

each time a school draws down on federal financial aid funds for any particular 

student. Yet Relators claim here that each time such a draw down occurs, 

Defendants have “impliedly” submitted a false claim because the schools allegedly

were not in compliance with regulations; as a result, Defendants were ineligible to 

participate in the financial aid program and draw down on funds.

Conceding that Defendants have not submitted “factually false” claims to 

the government, Relators assert that Defendants allegedly submitted a “legally 

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false” claim; i.e., Defendants falsely certified compliance with statutes and 

regulations. Sobek, 2013 WL 2404082, at *22. Relators’ claims are even more 

attenuated because they rely upon a dichotomy in “legally” false certification 

theories of liability; express versus implied false certification:

Under the ‘express false certification theory, an entity is liable under 

the FCA for falsely certifying that it is in compliance with regulations 

that are prerequisites to Government payment in connection with the 

claim for payment of federal funds. Under the broader ‘implied false 

certification’ theory... liability attaches when a claimant seeks and 

makes a claim for payment from the Government without disclosing 

that it has violated regulations that affect its eligibility for payment. . 

.’the act of submitting a claim for reimbursement itself implies 

compliance with governing federal rules that are a precondition to 

payment.’

Sobek, 2013 WL 2404082, at *22 (quoting U.S. ex rel. Wilkins v. United Health 

Care Group, Inc., 659 F.3d 295 (3d Cir. 2011)). Relators rely upon “implied false 

certification” theories; i.e., without further certification submissions, Defendants’

drawing down on federal funds implied compliance with regulations. Id.

The Third Circuit has only permitted implied certification claims in the 

context of Medicare cases. Wilkins, 659 F.3d at 307. Even so, the Third Circuit 

imposed limits on the use of this tenuous theory of liability, holding that a party’s 

knowingly false certification of compliance with regulations would only be an 

actionable FCA claim when government payment of the defendant’s claim is 

conditioned on compliance with a particular regulation. Id. If the regulation 

merely affects the defendant’s participation in a government program but does not 

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preclude the government’s payment of a claim, no FCA claim based upon an 

implied false certification theory can be stated. Id. at 307-11.

Relators invite this Court to apply the false certification theory in this career 

school context; an application the Third Circuit has not fully endorsed. Relators’

broad and wildly speculative FCA claims not only seek to apply this theory to 

career school FCA qui tam cases in this Circuit, but to stretch the tenuous theory of 

implied false certification far beyond the outer bounds of the law. As 

demonstrated below, Relators’ claims must be dismissed, or at a minimum, pared 

down for two primary reasons. First, Relators have failed to demonstrate that 

Defendants have violated Title IV regulations. Second, most, if not all, the 

regulations cited by Relators are conditions of participation and not conditions of 

payments.

A. No FCA Claim Can Be Stated Without a Regulatory Violation

and Relators Fail to Allege Such Violations.

Courts “cannot impose FCA liability” if, as here, relators’ claims are 

premised upon false certification of compliance with regulations, but the 

regulations at issue do not prohibit the alleged misconduct. U.S. ex rel. Quinn v. 

Omnicare, Inc, 382 F.3d 432, 440-41 (3d Cir. 2004). Stated another way, Relators 

cannot plead the falsity element of an FCA claim without alleging that Defendants 

violated a regulatory provision. Id. at 440-41; U.S. ex rel. Diaz v. Kaplan Univ., 

2011 WL 3627285, at *4-7 (S.D. Fla. Aug. 17, 2011) (“Diaz”) (dismissal of FCA 

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claims against a school for failure to plead a violation of HEA regulations as to 

enrolling unqualified students, grade inflation, extreme pressure upon admissions 

representatives to perform, among others). As the Court held in Diaz, a career 

school FCA qui tam case that mirrors this action, even if Relators can plead 

detailed and truthful allegations, the FCA claim must be dismissed unless the 

allegations constitute a violation of a regulation. 2011 WL 3627285, at *4-7. 

Here, Relators allege certain categories of wrongdoing, addressed below, but have 

failed to show how such conduct violates any regulation.

Allegations of Improprieties in the Admissions Process. Relators allege 

that Defendants “Misled Prospective Students Regarding its Career Placement 

Performance.” FAC at 82. Although Relators allege that “PEG is required to 

disclose detailed consumer information to students and prospective students, 

including job placement rate (sic) for its students after graduation. See 34 C.F.R. 

§§ 668.141-145; §§ 668.14(b)(9)-(11),” (FAC ¶ 259), Relators fail to allege how 

Defendants violated those regulations. Instead, Relators have either avoided 

linking particular violations to regulations and/or misconstrued the cited 

regulations entirely.10 For instance, Relators’ citation to 34 C.F.R. 

§ 668.14(b)(10), concerning job placement statistics (FAC ¶ 259), merely requires

 10 By way of example, 34 C.F.R. § 668.141-145, cited by Relators at FAC ¶ 259, 

has nothing to do with “job placement rates.”

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that the information be made available to students and there is no allegation in the 

FAC that the information was not made available. See FAC at 82-88.

Indeed, Relators do not allege a violation of any particular regulations and

the DOE does not regulate how placement statistics should be calculated, leaving 

career schools the discretion to calculate their own methods of calculation, see 

generally 48 Fed. Reg. 45670. Instead of citing federal regulations, Relators allege 

violations of an industry body that publish ACICS Accreditation Criteria, and then 

the only criteria Relators cite merely require the maintaining of data on graduates 

and jobs and do not impose methods of calculation. FAC ¶ 271 & 273 (citing 

ACICS Accreditation Criteria § 3-1-441(c)).

Relators also claim that Defendants used high-pressure tactics to enroll 

students, such as pressuring admissions representatives or students. FAC at 72-78. 

The Court in Diaz dismissed these same claims because the allegations failed to 

demonstrate “a violation of any statute or regulation.” 2011 WL 3627285, at *7. 

The same is true of Relators’ allegations that cite no regulations. See FAC at 72-

78. To be sure, Relators’ allegations here, that admissions representatives were 

terminated when they “failed to enroll a sufficient number of students” (FAC ¶ 

232), could have no statutory basis because nothing in the governing regulations 

precludes adverse employment actions and, in fact, courts have uniformly held that 

career schools may take action to terminate employees who fail to enroll students. 

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U.S. ex rel. Bott v. Silicon Valley Colleges, 262 F. App’x 810, 812 (9th Cir. 2008)

(“The decision to fire an employee is not covered by the [HEA] because 

termination is not a prohibited ‘commission, bonus, or other incentive payment.’”); 

U.S. ex rel. Torres v. Kaplan Higher Educ. Corp., 2011 WL 3704707, at *3-4 (S.D. 

Fla. Aug. 23, 2011) (same effect).

Allegations of Violation of Incentive Compensation Ban. Similarly 

deficient for failing to show a regulatory violation are Relators’ allegations that 

Defendants have violated the Incentive Compensation Ban, 20 U.S.C. 

§ 1094(a)(20), which states that an educational institution “will not provide any 

commission, bonus, or other incentive payment based directly or indirectly on 

success in securing enrollments or financial aid to any persons or entities engaged 

in any student recruiting or admission activities or in making decisions regarding 

the award of student financial assistance...” 20 U.S.C. § 1094(a)(20). FAC 

¶¶ 289-305. As Relators admit (FAC ¶ 290), however, from 2002 through 2010, 

there were twelve “Safe Harbor” provisions that permitted, among many things, 

incentive “compensation that is based upon students successfully completing their 

educational programs, or one academic year of their educational programs, 

whichever is shorter.” 34 C.F.R. § 668.14(b)(22)(ii)(E). Thus, Relators’

allegations that admissions representatives were promised incentive compensation 

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based on the number of students who graduated – was permissible under the Safe 

Harbor provision and state no claim under the FCA. FAC ¶¶ 292, 294

Allegations that Unqualified Students Were Admitted. Relators’ general 

allegations that Defendants enrolled allegedly unqualified students, FAC ¶¶ 131, 

157-70, should be dismissed pursuant to Diaz, which held that such allegations do 

not “constitute a violation of any statute or regulation.” 2011 WL 3627285, at *7.

Relators have now conceded, by deleting certain paragraphs from the FAC 

that were alleged in previous complaints, their erroneous claim that Defendants 

acted improperly by admitting students who allegedly did not pass a Wonderlic test

(see TAC at 52-56). No regulations support that claim and the case law squarely 

rejects it. Halasa v. ITT Educ. Servs., Inc., 2011 WL 4036516, *4 (S.D. Ind. Sept. 

12, 2011), aff’d, 690 F.3d 844 (7th Cir. 2012) (holding that defendant’s alleged 

falsification of Wonderlic test results is not actionable under the FCA and noting 

that the exam “is used by ITT for internal admission purposes only and the scores 

are not reported to the government or anyone else outside of ITT”). The FAC still 

contains five (5) references to alleged failings of Wonderlic tests (FAC ¶¶ 19, 121, 

158, 299, 316), which are not actionable.

Relators also allege that Defendants violated the FCA by enrolling students 

who were learning disabled or could not speak English. FAC at 50-55. Of course, 

Relators fail to cite a single supporting regulation for this charge because the law is 

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to the contrary. Defendants are in fact prohibited from discriminating against 

handicapped persons, including persons with psychological disorders, such as 

mental retardation and learning disabilities, in their admissions decisions under 34 

C.F.R. § 104.42(a)-(b) (“Qualified handicapped persons, may not, on the basis of 

handicap, be denied admission or be subjected to discrimination in admission or 

recruitment by a [career school to which Federal financial assistance is 

extended].”); see also 34 C.F.R. § 104.3(j)(1)(i). Likewise, Defendants are 

prohibited from discriminating against persons based on their national origin and 

specifically, those with limited English language skills, in their admissions 

decisions. 45 C.F.R. § 80.3(a)-(b)(1); 45 C.F.R. Pt. 80, App. B(IV)(L) 

(“Recipients may not restrict an applicant’s admission to vocational education 

programs because the applicant, as a member of a national origin minority with 

limited English language skills, cannot participate in and benefit from vocational 

instruction to the same extent as a student whose primary language is English.”).

Relators also allege that Defendants violated the FCA by admitting 

convicted felons, that convicted felons are “not eligible for financial aid” and that 

“[s]tudents who have been convicted of a drug-related offense are ineligible to 

receive Federal financial aid....” FAC ¶¶ 146-47. Relators wholly misstate the 

law. First, there is no regulation barring convicted felons from being admitted or 

receiving federal financial aid and Relators cite to none. Second, 34 C.F.R. 

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§668.40(a)(1), which has been in effect from September 8, 2006 through present 

time, does not prohibit students with drug-related offenses from obtaining federal 

financial aid. The regulation provides only that students are ineligible to receive 

Title IV, HEA program funds if they have been convicted of a Federal or state 

crime involving possession or sale of illegal drugs for conduct “that occurred 

during a period of enrollment for which the student was receiving title IV, HEA 

program funds.” 34 C.F.R. §668.40(a)(1) (emphasis added). Even then, the aid 

may be restored after a specific period or if a student has been rehabilitated. 34 

C.F.R. §668.40(a)-(c). Relators do not allege Defendants admitted and qualified 

for Federal financial assistance any students in violation of 34 C.F.R. §668.40(a). 

Relators concede that Defendants properly instructed admissions representatives 

“to enroll students with felony convictions, but to direct them into programs (e.g. 

medical billing) where a criminal record would not automatically preclude 

employment.” FAC ¶ 154.

Allegations that Defendant Changed Grades and Attendance Records. 

Relators also claim that Defendants engaged in misconduct with respect to 

satisfactory academic progress (“SAP”), alleging that Defendants pressured 

administrators and instructors to change grades (FAC at 56-59) and that grades 

were changed from failing to passing (id. at 59-68). These same claims, however, 

were made and dismissed in Diaz, 2011 WL 36727285, at *4, because, as is the 

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case here too, the relators failed to state how the alleged grade inflation violated 

any federal regulation -- they “have not alleged any violation of a statute or 

regulation, [and therefore] have not alleged any fraud”. Id.

Relators’ cite to regulatory authority, but the citations are not supportive of 

their claims. For example, 34 C.F.R. § 668.34(a)(7) cited by Relators (FAC 

¶¶ 180, 188), became effective one month after this action was commenced and 

years after most of the events and examples cited in the FAC. The prior version of 

the regulation in effect through July 2011 is entitled “Satisfactory Progress” (not 

“Satisfactory Academic Progress” as in the revised regulation), has no subsection 

(a)(7) and it is addressed solely to students who are enrolled in two-year programs. 

The programs cited by Relators throughout the FAC, however, are less than two 

years and Defendants, therefore, did not act in violation of its provisions. Diaz, 

2011 WL 36727285, at *4.11

Relators also allege that Defendants altered attendance records (FAC at 72), 

but fail to point to any federal regulation that imposes attendance standards. For 

example, Relators cite 34 C.F.R. § 668.22(b) (FAC ¶ 212) which, on its face, is 

 11 Relators’ reliance upon 34 C.F.R. § 668.32(f) (FAC ¶ 177) is also misplaced. 

The version of this regulation in effect through July 1, 2011 provides that a student 

is eligible for financial aid if he or she “[m]aintains satisfactory progress in his or 

her course of study according to the institution’s published standards” in 

accordance with 34 C.F.R. § 668.34 (which applies only to two year programs 

unlike those referenced in the FAC) and 34 C.F.R. § 668.16(e) (which allows 

schools to establish their own standards which the Secretary deems reasonable if 

they are in accordance with 34 C.F.R. § 668.34).

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inapplicable because it addresses attendance in connection with the “Treatment of 

Title IV Funds when a student withdraws” – not when students are enrolled as 

alleged in the FAC. Id. (emphasis added). Even pursuant to this regulation, 

however, the DOE does not impose attendance parameters; it merely refers to 

attendance standards maintained by the schools themselves. Relators’ reference to 

industry ACICS Accreditation Criteria Policies, Procedures, and Standards, No. 2-

2-503(a) (FAC ¶ 213) is also unhelpful because this policy standard entitled 

“Termination of Programs,” does not address attendance standards at all. Because 

Relators fail to cite governing DOE regulations that specify the manner in which 

schools are required to take attendance, the school’s own internal policies, which 

were applied, cannot be a violation of any federal law and therefore no implied 

false certification fraud claim can be alleged under the FCA.

B. Dismissal is Required of the FCA Claims That Lack a Condition 

of Payment Predicate.

As demonstrated in Part V.A, supra, a prerequisite to an FCA implied false 

certification claim is an allegation that the defendant violated a particular federal 

regulation. But not every violation of a federal regulation can be a basis for an 

FCA claim. The Third Circuit made that point clear in Wilkins by expressly 

limiting the application of the doctrine of implied false certification to only those 

claims that allege violations of regulations that are a “precondition to payment”, 

i.e., payment of federal funds that are conditioned on compliance with certain 

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regulations. 659 F.3d at 307; see also Mikes v. Straus, 274 F.3d 687, 697 (2d Cir. 

2001) (parties’ knowingly false certification of compliance with applicable 

regulations are a violation of the FCA only when such regulations are a condition 

of payment).

Relators’ newly-minted allegations, recently added to the FAC -- that

Defendants’ alleged misrepresentations were material or that the government 

would not have made payment -- are conclusory factual statements or legal 

conclusions, which do not save the FAC from dismissal. Iqbal, 556 U.S. at 678-

79. Moreover, while Relators must ultimately demonstrate that “the government 

would not have paid the claim had it known the provider was not in compliance”

with a particular regulation, the first line of inquiry that must be made is whether 

the regulation itself is one governing program participation rather than payment 

and this issue is one decided as a matter of law. U.S. ex rel. Hobbs v. MedQuest 

Assocs. Inc., 711 F.3d 707, 714 (6th Cir. 2013) (no violation of a regulation which 

was a condition of payment; the FCA “is not a vehicle to police technical 

compliance with complex federal regulations”).

“Conditions of participation ... are enforced through administrative 

mechanisms, and the ultimate sanction for violation of such conditions is removal 

from the government program”; while “[c]onditions of payment are those which, if 

the government knew they were not being followed, might cause it to actually 

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refuse payment.” U.S. ex rel. Conner v. Salina Reg’l Health Ctr., Inc., 543 F.3d 

1211, 1220 (10th Cir. 2008). A general certification that a program participant will 

comply with all applicable regulations and statutes is an insufficient basis upon 

which an FCA claim can be stated. Id. at 1218-19. As the Third Circuit reiterated 

in Wilkins, courts will not allow the FCA to be used as “a blunt instrument to 

enforce compliance with all ... regulations rather than only those regulations that 

are a precondition to payment.” 659 F.3d at 307 (internal citation omitted). Yet 

that is exactly what Relators seek to do.

Thus, in Wilkins, where the government’s payment of Medicare claims was 

not conditioned on compliance with Medicare marketing regulations, no FCA 

claim could be stated. 659 F.3d at 308-11. In that case, the defendants violated 

Medicare marketing regulations by using unapproved flyers, soliciting in clinics’

and physicians’ waiting rooms, chasing people in supermarkets, giving out prizes 

at Medicare presentations, pressuring and overwhelming consumers during 

presentations, etc. Id. at 300-07. The court reviewed the Medicare marketing 

regulations and determined that while the agency may terminate a participant, it 

must provide the participant with notice and an opportunity to develop a corrective 

action plan. Id. at 309. These provisions of agency review of misconduct and 

application of administrative remedies other than withholding payment, such as 

allowing corrective actions or terminating participation in the program, 

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demonstrated that compliance with the marketing regulations was a condition of 

participation, not a condition of payment. Id. at 309-311. By allowing FCA 

claims that are based upon “participation,” courts would be undermining the 

government’s own regulatory and remedial procedures. Id. at 310. Because 

government payment for services rendered were not affected by defendants’ failure 

to abide by marketing regulations, the Third Circuit held it was proper to dismiss 

the relators’ marketing regulation claims of the qui tam complaint without leave to 

replead. Id. at 310, 314-15.12

The Third Circuit pronounced that under an implied false certification 

theory, instead of looking at defendants’ representations to the government, courts

must focus their analysis on “the underlying contracts, statutes, or regulations 

themselves to ascertain whether they make compliance a prerequisite to the 

government’s payment.” Wilkins, 659 F.3d at 313 (quoting Conner, 543 F.3d at 

1218); Hobbs, 711 F.3d at 714. Wilkins delineates several factors to be considered 

in finding that an alleged violation is merely a condition of participation. 659 F.3d

at 310. For example, conditions of participation can be discerned:

 12 In contrast to its holding regarding the marketing regulations, the Wilkins Court

noted that a violation of the anti-kickback statute could be prosecuted as a felony, 

that the court had previously held that a false certification of compliance with an 

anti-kickback statute constituted an FCA claim, and Parts C and D of Medicare 

clearly mandate compliance with the anti-kickback statute as a condition of 

payment. Wilkins, 659 F.3d at 312-14.

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1. If the regulation permits the violation to be corrected and permits 

continued participation (id. at 309);

2. “[T]he Government has established an administrative mechanism for

managing and correcting...[regulatory] violations which includes 

remedies other...than the withholding of payment...” (id. at 310);

3. The “ultimate sanction for violation of such conditions is removal from 

the government program...” (id. at 309);

4. The regulations are so complex “that the best intentioned plan participant 

could make errors in attempting to comply with them” (id. at 310); and

5. There are no cited instances in which the government withheld payment 

based on the alleged violation (id. at 310).

When judged against these factors, it becomes evident that many of 

Relators’ FCA claims relate only to whether the DOE would allow Defendants to 

continue to participate in the loan programs – i.e., they are not conditions of 

payment. For example, Relators’ claims of alleged misrepresentations include 

false statements as to accreditation, transfer of credits, and graduation and/or 

placement statistics (the “Misrepresentation Claims”). Much like the Medicare 

marketing regulations at issue in Wilkins, which were held to be conditions of 

participation, the DOE has its own regulations relating to misrepresentations and 

remedies for their breach. Misrepresentations that the DOE considers to be minor 

require the DOE to “inform [] the institution and endeavor [] to obtain an informal, 

voluntary correction,” 34 C.F.R. § 668.75(b).

13

 13 Citations to 34 C.F.R. § 668.75 refer to a previous version of the regulation that 

was effective until July 1, 2011. This regulation has since been amended; but, as 

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Furthermore, the DOE is granted sole authority to distinguish between minor 

and substantial misrepresentations. 34 C.F.R. § 668.75(a). While substantial 

misrepresentations may result in the termination of participation in a program, 

DOE regulations do not call for the withholding of payment due career schools. 34 

C.F.R. § 668.75(c) (the DOE may fine, limit, suspend or terminate the institution’s 

eligibility to participate in Title IV programs). The DOE has the expertise and 

discretion under its own regulations to determine what constitutes compliance. 34 

C.F.R. § 668.75(a)-(c). When the DOE recently amended provisions of its 

misrepresentation regulations, it explicitly stated that they were not intended to 

provide “additional avenue[s] for litigation for students, employees and other 

members of the public. Instead, the regulations specify the conditions under which 

the department may determine that an institution has engaged in substantial 

misrepresentation and the enforcement actions that the department may choose to 

pursue.” 75 Fed. Reg. 66915.

Relators’ claims principally rely upon a general statement in Defendants’

PPAs executed some years ago that Defendants will abide by HEA regulations. 

Courts have held that such a general certification that a program participant will 

 

Relators acknowledge (see, e.g., FAC ¶ 65), only regulations which were in effect 

at the time of the events of the pleadings are pertinent to this action. Thus, this 

brief references versions of CFR regulations which were in effect prior to June 24, 

2011, the date of the filing of the original complaint and most of the acts alleged in 

the FAC.

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comply with all applicable regulations and statutes is an insufficient basis upon 

which an FCA claim can be stated. Conner, 543 F.3d at 1218-19; Hobbs, 711 F.3d 

at 714-15. Defendants’ PPAs do not explicitly refer to regulatory 

misrepresentation provisions and nothing in the PPA or the applicable regulations 

explicitly preclude the payment of federal funds when misrepresentations are 

identified. See PPAs (Howard Cert. Exs. I and J). For example, the PPA does not 

explicitly reference 34 C.F.R. § 668.75, addressing accreditation issues. Id. 

Sweeping references in a PPA to generalized regulations cannot serve as a basis for 

an FCA suit where, as here, the regulations are comprised of hundreds and 

thousands of specific provisions. See Connor, 543 F.3d at 1218-19; Hobbs, 711 

F.3d at 714-15, 717.

Furthermore, the alleged SAP violations are not conditions of payment. The 

applicable SAP regulation falls within the regulation relating to “Standards for 

administrative capability” (34 C.F.R. § 668.16) and the specific SAP regulation 

provides only that a school must apply “reasonable standards for measuring 

whether an otherwise eligible student is maintaining satisfactory progress in his or 

her educational program.” 34 C.F.R. § 668.16(e) (emphasis added). Section 

668.16(e) thus provides broad guidelines to career schools, but makes clear that the 

details of a school’s SAP policy are for the school itself to determine in light of 

what it considers most appropriate for the needs of the school and its students. The 

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DOE has stated this “administrative capability” regulation was meant only to 

“provid[e] parameters for institutions to use ... while preserving essential 

institutional discretion in setting their own specific standards.” 48 Fed. Reg. 

45670, at *45670. This provision does “not establish a specific single national 

standard” for SAP. 48 Fed. Reg. 45670, at *45672. The lack of precise SAP 

standards contained in § 668.16 is a purposeful one and the DOE has stated that it 

is intentionally designed in this manner because the “regulations retain the 

flexibility for an institution to evaluate different categories of students differently,”

75 Fed. Reg. 66832, at *66880, and to “allow institutions to have as much 

flexibility as possible in developing an appropriate SAP policy for their 

institution. . .” 75 Fed. Reg. 66832, at *66884.

Given the lack of any published standards for SAP in § 668.16(e), it is no 

surprise that Defendants’ PPAs lack any reference to an explicit SAP regulation. 

Instead, the PPA references only the generalized statement of compliance with 

administrative capability, 34 C.F.R. § 668.16(e). PPAs (Howard Cert. Exs. I 

and J). Relators’ SAP claims must therefore fail for lack of any pleaded regulatory 

basis or predicate for the government to refuse Defendants’ payment. It is simply 

not a condition of payment as required by Wilkins, 659 F.3d at 309-10.14

 14 As stated previously, Relators misstate the applicable statute. See FAC at ¶¶ 180 

and 188. 34 C.F.R. § 668.34 in effect through July 2011 regulated “Satisfactory 

Programs” for students enrolled in two year programs not at issue here.

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Relators’ Misrepresentation and SAP Claims invite a deluge upon the 

Federal Courts, threatening to turn every violation of a regulation into an FCA qui 

tam suit. Among others, the Third Circuit in Wilkins, the Second Circuit in Mikes, 

274 F.3d at 699-700 (relied upon by Wilkins), the Sixth Circuit in Hobbs and the 

Tenth Circuit in Conner have all refused to expand the limits of FCA liability,

predicated upon the implied false certification theory, beyond those regulatory 

violations which would prompt the government to refuse payment of submitted 

claims. These courts have all drawn the line, rejecting FCA cases that present only 

violations of conditions of participation instead of conditions of payment and, 

respectfully, this Court should follow the sound reasoning of those courts. See also

U.S. ex rel. Qazi v. Bushwick United Housing Dev. Fund Corp., 2013 WL 

5607181 (E.D.N.Y. Oct. 14, 2013) (dismissing an FCA qui tam complaint filed by 

a day care teacher against her former employer school, which had received federal 

and state funding, on grounds analogous to Wilkins, Mikes and Conner).

15

V. RELATORS’ REVERSE FALSE CERTIFICATION CLAIM (COUNT 

IV) MUST BE DISMISSED PURSUANT TO RULE 12(b)(6).

Relators assert a “reverse false certification claim” under the FCA, 31 

U.S.C. § 3729(a)(1)(G), alleging that Defendants “knowingly avoided or decreased 

 15 Defendants are heavily regulated by the DOE and there are a myriad of 

regulations and procedures, including appeal procedures, applicable to Defendants. 

As such, under the doctrine of primary jurisdiction, this Court is required to refrain 

from deciding claims that fall within the DOE’s primary jurisdiction in this case. 

See CSX Transp. Co. v. Novolog Bucks Cnty., 502 F.3d 247, 253 (3d Cir. 2007).

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[their] obligation to pay or transmit money to the Government” through false 

records. FAC Count IV, ¶ 344. There are no factual allegations to support this 

claim – only legal conclusions that Defendants should have refunded monies to the 

government that they received. Relators admit that the facts relied upon are as 

“alleged in detail above” (FAC ¶ 344) – that is, the same allegations that support 

Relators’ claims for Defendants’ alleged violations of the FCA in causing the 

government to pay false claims. See also FAC ¶ 343. These admissions compel 

dismissal of Count IV as a matter of law pursuant to Rule 12(b)(6).

“Reverse false certification” claims predicated upon 31 U.S.C. 

§ 3729(a)(1)(G) and alleging fraudulent efforts to reduce a liability owed to the 

government, have been unceremoniously dismissed in FCA qui tam cases, and 

particularly, in career school cases on the grounds that they are impermissibly 

redundant of the relators’ FCA claim for false payments asserted under other 

provisions of 31 U.S.C. § 3729. Sobek, 2013 WL 2404082 at *29. Where, as 

here, a reverse false certification claim is simply the flipside of the claims made in 

the qui tam complaint asserting the tendering of false claims for payment and 

receipt of payment, the reverse false certification claims must be dismissed. Id.; 

U.S. ex rel. Thomas v. Siemens AG, 708 F. Supp. 2d 505, 514-15 (E.D. Pa. 2010) 

(redundant reverse false certification claim dismissed).

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Further, even after amending their complaint yet again, Relators allege 

nothing in the PPA, statutes or regulations that obligated Defendants to repay 

monies to the government under the alleged facts and circumstances. As such, 

Count IV must be dismissed pursuant to Rule 12(b)(6). Sobek, 2013 WL 2404082,

at *29.

VI. RELATORS’ FCA CONSPIRACY CLAIM (COUNT III) MUST BE 

DISMISSED PURSUANT TO RULES 9(b) AND 12(b)(6).

Relators assert a cause of action for conspiracy under the FCA, consisting of 

only legal conclusions, which are unsupported by any of the factual allegations in 

the FAC. See FAC Count III, ¶¶ 340-42. Relators’ FCA conspiracy claim must be 

dismissed because Relators have not made out the prima facie elements of the 

claim (most importantly, a fraudulent agreement amongst conspirators), the 

intracorporate conspiracy doctrine mandates dismissal of the claim, and the 

Relators have not pleaded the conspiracy claim with the requisite particularity.

When alleging an FCA conspiracy claim, “a plaintiff must plead ‘(1) that the 

defendant conspired with one or more persons to get a false or fraudulent claim 

allowed or paid by the United States; (2) that one or more of the conspirators 

performed any act to effect the object of the conspiracy; and (3) that the United 

States suffered damages as a result of the false or fraudulent claim.’” Piacentile

2010 WL 5466043, at *9 (citation omitted). There are no factual allegations to 

support any of these elements.

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The Relators have, quite simply, not even attempted to allege the existence 

of a conspiracy. “The essence of a conspiracy under the Act is an agreement 

between two or more persons to commit fraud.” U.S. ex rel. Lampkin v. Johnson 

& Johnson, Inc., 2013 WL 2404238, at *6 (D.N.J. May 31, 2013) (quoting 

Piacentile, 2010 WL 5466043, at *9). Because Relators have failed to allege the 

existence of any agreement, let alone a conspiratorial agreement, their FCA 

conspiracy claim must be dismissed. Additionally, Relators have also failed to 

allege the other two required elements of an FCA conspiracy claim: an overt act by 

anyone in furtherance of a conspiracy and damages to the United States. Piacentile

2010 WL 5466043, at *9. The Relators’ FCA conspiracy claim must, therefore, be 

dismissed for failing to state a claim, pursuant to Rule 12(b)(6).

Moreover, the intracorporate conspiracy doctrine mandates dismissal of 

Relators’ FCA conspiracy claim. Relators have alleged that Defendant, its schools 

and employees have engaged in a fraudulent scheme. However, the intracorporate 

conspiracy doctrine warrants dismissal because a corporation is legally incapable 

of conspiring with its wholly owned subsidiaries16 or employees17.

 16 Lampkin, 2013 WL 2404238, at *6 (“the law deems a parent corporation and its 

subsidiaries ‘legally incapable of forming a conspiracy with one another’”).

17 United States v. Warnings, 1994 WL 396432, at *4 (E.D. Pa. July 26, 1994) (“It 

is well-established that a corporation cannot conspire with its own officers while 

the officers are acting in their official capacity.”).

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Finally, Relators’ allegations regarding an FCA conspiracy, carried out by 

“John Does,” (FAC ¶¶ 52-54), must be dismissed pursuant to Rule 9(b) because 

Relators have not alleged any of the details regarding a conspiracy, particularly, 

the identities of conspirators, when the agreements to defraud took place and what 

was agreed upon. Piacentile, 2010 WL 5466043, at *9 (“As with all claims under 

the FCA, conspiracies ... must be pleaded with particularity.”) (internal citations 

omitted). Accordingly, the Court must dismiss Relators’ FCA conspiracy claim for 

failing to state a claim upon which relief may be granted in violation of Rule 

12(b)(6) or because the claim is not pleaded with the requisite particularity in 

violation of Rule 9(b).

VII. RELATORS’ FCA RETALIATION CLAIMS (COUNTS V AND VII)

MUST BE DISMISSED PURSUANT TO RULES 9(b) AND 12(b)(6).

Relators Amaya and Moody have asserted claims that they were terminated, 

or constructively discharged, in retaliation for their “whistleblowing activities,” in 

violation of 31 U.S.C. § 3730(h). The Third Circuit has stated that “a prima facie 

case of retaliation under § 3730 requires proof that the plaintiff (1) engaged in 

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

(2) that the plaintiff’s employer discriminated him because of his ‘protected 

conduct.’” Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 189 n.9 (3d 

Cir. 2001). To prove the second element of a § 3730(h) claim, “a plaintiff must 

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

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

the plaintiff’s engaging in ‘protected conduct.’” Id. Relators Amaya and Moody, 

however, were not engaged in protected conduct under the statute, nor have they 

properly alleged that they were discriminated against because of such conduct. 

Their claims must therefore be dismissed.

Relators Amaya and Moody have formulaically asserted that they were 

terminated as a result of “whistleblowing activities.” FAC ¶¶ 32-33, 39, 319, 323, 

326, 328. Contrary to Relators’ assertions, neither Relator Amaya’s purported 

January 12, 2011 letter to PEG Vice President Nicholas Hastain (FAC ¶ 322) nor 

Relator Moody’s alleged reporting to Mr. Hastain “that two executives at HSBWilmington ... had directed her to change grades without instructor authorization”

(id. ¶ 327) constitute “protected conduct.” Construed extremely liberally, these 

paragraphs merely describe two employees who are investigating their “employer’s 

non-compliance with federal or state regulations,” which the Third Circuit has held 

is not protected conduct. Hutchins, 253 F.3d at 187-88.

Rather, an employee’s conduct must put the employer “on notice of the 

‘distinct possibility’ of False Claims Act litigation” to become protected conduct 

under the FCA. Id. at 191; see also Campion v. Ne. Util., 598 F. Supp. 2d 638, 658 

(M.D. Pa. 2009). Where, as here, Relators make no allegation that they informed 

supervisors that the misconduct complained of was causing government funds to 

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be lost, or gave “any indication that [they] may ultimately initiate an FCA action”

or report PEG’s activities to the government, their activities cannot be considered 

protected conduct and their FCA retaliation claims must be dismissed. Campion, 

598 F. Supp. 2d at 658.

Additionally, Relators’ conduct cannot be considered protected because they 

were merely fulfilling their responsibilities as Director of Education at HSBWilmington (FAC ¶ 32) and Registrar at HSB-Wilmington (FAC ¶ 38). This fact 

creates a presumption that their activity was not protected conduct at all. Yuhasz 

v. Brush Wellman, Inc., 341 F.3d 559, 566-69 (6th Cir. 2003) (retaliation claim 

dismissed where court found relator was “simply performing his ordinary duties”).

VIII. THE CLAIMS OF RELATORS AMAYA AND MOODY FOR 

INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS

(COUNTS VI AND VIII) FAIL TO STATE A CLAIM FOR WHICH 

RELIEF MAY BE GRANTED.

Relator Amaya’s and Moody’s state law claims of intentional infliction of 

emotional distress, presumably pursuant to Delaware law, must be dismissed for, at 

least, two reasons: first, they are barred by the Delaware Workers’ Compensation 

Statute, Avecia Inc., 2003 WL 22432911, at *4-5; second, they do not allege that

Defendants’ behavior was “so extreme in degree, as to go beyond all possible 

bounds of decency, and to be regarded as atrocious, and utterly intolerable in a 

civilized community,” Jordan v. Delaware, 433 F. Supp. 2d 433, 444 (D. Del. 

2006) (quoting Mattern v. Hudson, 532 A.2d 85, 86 (Del. Super. 1987)).

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The Workers’ Compensation Statute, Del. Code Ann. tit. 19, § 2304 (West),

provides the sole remedy for all workplace injuries. As Relators allege no basis for 

pleading that Defendants’ employees engaged in “willful conduct [against 

Relators] ... for personal reasons not related to the scope of employment,” their 

claims are preempted by the statute. Avecia Inc., 2003 WL 22432911, at *4-5

(citation omitted).

Relators Amaya and Moody have simply taken the pertinent language of the 

intentional infliction of emotional distress cause of action, and the rare exception 

for the Worker’s Compensation Statute, and inserted the language into their counts 

without providing any factual support. See FAC ¶¶ 353-356, 362-365. As 

evidence of the hasty and poorly considered manner in which Relators have 

attempted to save their wholly frivolous state-law tort claims, Count VIII 

concerning Relator Moody, references Defendant’s “deliberate intent to bring 

about an injury to Relator Amaya.” Id. at 363 (emphasis added).

Relators Amaya and Moody conclude they suffered “severe emotional 

distress” without alleging one aspect of that “severe emotional distress.” Nor have 

Relators Amaya and Moody identified which of Defendants’ conduct they consider 

to be so “extreme in degree, as to go beyond all possible bounds of decency, and to 

be regarded as atrocious, and utterly intolerable in a civilized community.” Jordan, 

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433 F. Supp. 2d at 444. This is an insufficient and fatally deficient pleading. U.S. 

ex rel. Lobel v. Express Scripts, Inc., 351 F. App’x 778, 780 (3d Cir. 2009).

CONCLUSION

For all of the foregoing reasons, Defendants respectfully request that their 

motion to dismiss the Fourth Amended Complaint be granted in all respects.

Dated: Mineola, New York

March 26, 2014

Respectfully submitted,

MELTZER, LIPPE, GOLDSTEIN 

 & BREITSTONE, LLP

By: /s Richard M. Howard, Esq.

Richard M. Howard, Esq.

Norman R. Cerullo, Esq.

Loretta M. Gastwirth, Esq.

Peter A. Laserna, Esq.

190 Willis Avenue

Mineola, New York 11501

(516) 747-0300

Attorneys for Defendants

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