Court Opinion

ID: 4356944
Source: CourtListenerOpinion
Date Created: 2019-01-08 20:00:39.240326+00
Date Added: 2024-06-11T14:46:33.829624
License: Public Domain

PUBLISHED

                     UNITED STATES COURT OF APPEALS
                         FOR THE FOURTH CIRCUIT

                                     No. 18-1028

UNITED STATES EX REL., JON H. OBERG,

                   Plaintiff – Appellant,

             v.

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY,

                   Defendant – Appellee,

             and

NELNET, INC.; KENTUCKY HIGHER EDUCATION STUDENT LOAN
CORP.; SLM CORPORATION; PANHANDLE PLAINS HIGHER EDUCATION
AUTHORITY; BRAZOS GROUP; ARKANSAS STUDENT LOAN
AUTHORITY; EDUCATION LOANS INC/SD; SOUTHWEST STUDENT
SERVICES CORPORATION; BRAZOS HIGHER EDUCATION SERVICE
CORPORATION; BRAZOS HIGHER EDUCATION AUTHORITY, INC.;
NELNET EDUCATION LOAN FUNDING, INC.; PANHANDLE-PLAINS
MANAGEMENT AND SERVICING CORPORATION; STUDENT LOAN
FINANCE CORPORATION; EDUCATION LOANS INC.; VERMONT
STUDENT ASSISTANCE CORPORATION,

                   Defendants.

Appeal from the United States District Court for the Eastern District of Virginia, at
Alexandria. Claude M. Hilton, Senior District Judge. (1:07-cv-00960-CMH-JFA)

Argued: October 31, 2018                                    Decided: January 8, 2019

Before MOTZ, KEENAN, and HARRIS, Circuit Judges.
Affirmed by published opinion. Judge Motz wrote the opinion, in which Judge Keenan
and Judge Harris joined.

ARGUED: Eric Kenneth Bachman, ZUCKERMAN LAW, Chevy Chase, Maryland, for
Appellant. George W. Hicks, Jr., KIRKLAND & ELLIS LLP, Washington, D.C., for
Appellee. ON BRIEF: Jason M. Zuckerman, Washington, D.C., Dallas I. Hammer,
ZUCKERMAN LAW, Tysons Corner, Virginia, for Appellant. Matthew T. Regan,
Chicago, Illinois, Michael A. Glick, Tracie L. Bryant, Michael D. Lieberman,
KIRKLAND & ELLIS LLP, Washington, D.C.; Daniel B. Huyett, STEVENS & LEE,
P.C., Reading, Pennsylvania, for Appellee.

                                        2
DIANA GRIBBON MOTZ, Circuit Judge:

       This case returns to us again, this time on appeal from an adverse jury verdict.

Dr. Jon Oberg, as relator for the United States, brought this qui tam action against four

student loan corporations, including the Pennsylvania Higher Education Assistance

Agency (“PHEAA”). He alleged that the corporations had defrauded the Department of

Education and so violated the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq.

       Over the course of several appeals, we affirmed the dismissal of one defendant and

two of the other defendants settled. See United States ex rel. Oberg v. Pa. Higher Educ.

Assistance Agency, 804 F.3d 646, 650 (4th Cir. 2015); United States ex rel. Oberg v. Pa.

Higher Educ. Assistance Agency, 745 F.3d 131, 145 (4th Cir. 2014); United States ex rel.

Oberg v. Ky. Higher Educ. Student Loan Corp., 681 F.3d 575, 579–81 (4th Cir. 2012).

The case proceeded to trial only against PHEAA.           Oberg now appeals the jury’s

unanimous verdict in favor of PHEAA. For the reasons that follow, we affirm.

                                            I.

       Oberg’s claim concerns a Department of Education subsidy program meant to

encourage the issuance of low-interest federal student loans. It did so by offering Special

Allowance Payments (“SAPs”) to certain qualifying lenders. 20 U.S.C. § 1087-1. For

one particular category of loans — those financed through tax-exempt bonds — Congress

guaranteed lenders a 9.5 percent return. Id. § 1087-1(b)(2)(B). In the low-interest

environment of the mid-2000s, this guaranteed rate made tax-exempt bonds a particularly

attractive investment vehicle.

                                            3
       To take advantage of the favorable return offered by the program, Oberg claims

that between 2002 and 2006, PHEAA submitted false claims for SAP subsidies by

improperly transferring student loans from non-tax-exempt bonds into tax-exempt bonds.

In doing so, PHEAA converted lower-interest floating-rate loans into loans that

guaranteed a 9.5 percent return. This translated into millions of dollars in additional

revenue for PHEAA.

       During a five-day trial, the court admitted more than 100 exhibits and the jury

heard testimony from more than a dozen witnesses. After deliberating for less than three

hours, the jury returned a unanimous verdict in favor of PHEAA.

       Oberg timely noted this appeal, asking that we vacate the judgment and remand

for a new trial. He maintains that the district court substantially impeded his ability to

prove his claims by improperly excluding critical evidence and rejecting Oberg’s

proposed jury instructions.

                                             II.

       Oberg first contends that the district court erred by excluding certain evidence at

trial. We review a district court’s evidentiary rulings for abuse of discretion. SAS Inst.,

Inc. v. World Programming Ltd., 874 F.3d 370, 384 (4th Cir. 2017). “A district court

abuses its discretion if it relies on an error of law or a clearly erroneous factual finding.”

EEOC v. Freeman, 778 F.3d 463, 466 (4th Cir. 2015).

       At trial, Oberg sought admission of a 2004–2007 Performance Audit of PHEAA

performed by the Pennsylvania Auditor General. The Audit “evaluate[d] PHEAA’s

                                              4
performance in improving access to higher education for Pennsylvania residents” and

concluded that PHEAA had largely “failed its mission.” The Audit found that PHEAA

paid excessive salaries and bonuses to its executives and managers. The Audit also

catalogued and strongly criticized PHEAA’s lavish spending on employee benefits and

“extravagant” expenditures on other unnecessary expenses. It “concluded that PHEAA

was governed and managed within a culture that sometimes allowed self-reward to

supersede fiscal prudence.” The district court excluded the Audit as irrelevant under

Federal Rule of Evidence 401.

      Oberg contends that the Audit was relevant for several reasons. First, he argues

that the Audit’s critical findings tended to establish scienter — i.e., that desire for

personal gain motivated PHEAA officers to submit false claims. This argument fails

because unlike the securities fraud cases on which Oberg relies, 1 FCA claims require a

relator to show only that the defendant had knowledge of the illegality of its actions,

rather than specific intent to defraud.    See, e.g., United States ex rel. Harrison v.

Westinghouse Savannah River Co., 352 F.3d 908, 921 (4th Cir. 2003) (“In establishing

liability under the FCA, a plaintiff need not prove the defendant had a financial motive to

make a false statement relating to a claim seeking government funds.”); United States ex

rel. K & R Ltd. P’ship v. Mass. Hous. Fin. Agency, 530 F.3d 980, 984 (D.C. Cir. 2008)

(finding evidence of defendant’s “motive to submit false claims — the need to bail itself

       1
         Cases requiring proof of specific intent often turn on evidence of motive to prove
scienter. See, e.g., Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 319, 325
(2007) (finding motive “a relevant consideration” in measuring a defendant’s intent to
“deceive, manipulate, or defraud” (internal quotation marks omitted)).

                                            5
out of financial trouble — could not . . . support a finding of knowledge, be it actual,

deliberate ignorance, or reckless disregard”). As the district court correctly explained:

“It doesn’t really make any difference whether they were operating well or not well or

whatever. The only issue in this case is: Did they commit fraud and file a false claim?”

       Oberg next maintains that the Audit would have allowed him to rebut PHEAA’s

own improper argument that its management acted with the “benevolent motive” to

benefit borrowers in carrying out its scheme.      Oberg lodged little objection to this

evidence at trial.   Indeed, Oberg himself elicited most of the “benevolent motive”

testimony through his questions to PHEAA’s management.            In any event, whether

PHEAA’s management had benevolent motive was a collateral issue of limited relevance,

making any error harmless. See Smith v. Balt. City Police Dep’t, 840 F.3d 193, 200–01

(4th Cir. 2016).

       Finally, Oberg contends that the Audit would have helped him attack the

credibility of PHEAA’s executives. He argues that because witness credibility is “always

at issue,” any “evidence concerning a witness’s credibility is always relevant.” United

States v. Green, 617 F.3d 233, 251 (3d Cir. 2010). This argument also fails, for Oberg

questioned PHEAA’s executives on the company’s compensation practices and elicited

much of the same information contained in the Audit. Moreover, because nothing in the

Audit contradicted the trial testimony of PHEAA executives, its admission would hardly

have aided Oberg in impeaching the executives’ credibility.

                                            6
        In sum, the district court did not abuse its discretion in excluding the Audit as

irrelevant. 2

                                              III.

        Oberg’s remaining claims center on the district court’s refusal to give several of

his proposed jury instructions.

                                               A.

        Before we consider the merit of his claims, we must first determine our standard

of review.

        PHEAA contends that because Oberg did not object to the jury instructions before

the district court, he has failed to preserve his challenge to them and so we can review

only for plain error. Oberg counters that the district court rejected his properly requested

instructions in a “definitive ruling on the record,” and so we must instead review for

abuse of discretion. Fed. R. Civ. P. 51(d)(1)(B); see also BMG Rights Mgmt. (US) LLC

v. Cox Commc’ns, Inc., 881 F.3d 293, 305 (4th Cir. 2018).

        To resolve this question, we turn to the language of Federal Rule of Civil

Procedure 51(d)(1)(B), which provides:

        A party may assign as error . . . a failure to give an instruction, if that party
        properly requested it and — unless the court rejected the request in a
        definitive ruling on the record — also properly objected.

        2
         The parties also quarrel over whether the Audit was more prejudicial than
probative under Federal Rule of Evidence 403. Because we hold that the district court
did not err in excluding the Audit on relevance grounds, we need not address this issue.

                                               7
Fed. R. Civ. P. 51(d)(1) (emphasis added).

       This provision was added to Rule 51 in 2003. See Fed. R. Civ. P. 51 advisory

committee’s note to 2003 amendment (hereinafter, 2003 Advisory Committee Note).

The Advisory Committee explained that the change was motivated by concern over the

majority view “that a proper request for a jury instruction [was] not alone enough to

preserve the right to appeal failure to give [an] instruction.”      Id.   The Committee

concluded that this rule was “appropriate when the court [had not] sufficiently focused on

the request” or “believe[d] that the request ha[d] been granted in substance although in

different words.” Id. But in other circumstances, the doctrine created “a trap for the

unwary who fail[ed] to add an objection after the court . . . made it clear that the request

[had] been considered and rejected on the merits.” Id. To correct this, the drafters added

the ruling-on-the-record language to “establish[] authority to review the failure to grant a

timely request, despite a failure to add an objection, when the court has made a definitive

ruling on the record rejecting the request.” Id.

       Notwithstanding the 2003 Amendment, some courts have seemed to continue to

follow a more stringent preservation rule than Rule 51(d)(1)(B) now appears to

command. See EEOC v. New Breed Logistics, 783 F.3d 1057, 1075 (6th Cir. 2015); C.B.

v. City of Sonora, 769 F.3d 1005, 1032 (9th Cir. 2014); Consumer Prod. Research &

Design, Inc. v. Jensen, 572 F.3d 436, 439 (7th Cir. 2009); Colon-Millin v. Sears Roebuck

De P.R., Inc., 455 F.3d 30, 41 (1st Cir. 2006); Collins v. Alco Parking Corp., 448 F.3d

652, 656 (3d Cir. 2006).

                                             8
       In our view, the Rule’s text and the Advisory Committee’s direction compel a

different approach. For a court’s rejection of a proposed instruction to constitute “a

definitive ruling on the record,” the record must simply provide a reviewing court with a

sufficient basis from which to determine the district court’s rejection was “on the merits”

— in other words, that the court rejected the substance of the proposed instruction, not

merely the litigant’s choice of words. And, to be “definitive,” this rejection must be final

rather than tentative.

       It remains true, of course, that “the mere tendering of a proposed instruction will

not preserve error for appeal.” Bunn v. Oldendorff Carriers GmbH & Co. KG, 723 F.3d

454, 469 (4th Cir. 2013) (internal quotation marks omitted).           But where a litigant

proposes an instruction and the district court’s final ruling on the record demonstrates

that the court rejected it on the merits, the claim of error is preserved. This approach

hews closely to the language and purpose of Rule 51(d)(1)(B) while remaining cognizant

of the important interests embodied in requiring parties to raise objections in the district

court. See Booker v. Mass. Dep’t of Pub. Health, 612 F.3d 34, 41 (1st Cir. 2010).

       Applied here, we must conclude that Oberg did not preserve his challenge to the

failure to give his proposed jury instructions. At the charge conference, the district court

outlined its proposed jury instructions in broad terms, explaining that it would give

standard instructions on issues like the burden of proof and reasonable doubt, and would

also instruct the jury on the essential elements of an FCA claim. PHEAA raised several

clarifying questions.    Oberg sought only to ensure that the instructions contained a

provision not at issue on appeal, i.e., that proof of reckless disregard sufficed to establish

                                              9
an FCA claim. When the court called for any final comments, PHEAA asked whether

the court would read any of the instructions Oberg had submitted before the charge

conference. The court responded that it was “not reading anybody’s instruction[s]” and it

had “the areas” it was “going to instruct on.” Oberg did not object. After instructing the

jury, the court once again asked whether the parties had any objections to the instructions.

PHEAA raised two; Oberg responded: “[n]o objection from the relator.”

       Oberg argues that the district court’s statement that it would “not read anybody’s

instruction[s]” constitutes a “definitive ruling on the record” rejecting his instructions on

the merits. Fed. R. Civ. P. 51(d)(1)(B). This argument falls far short. Even assuming

that the court’s asserted “denial” — a brief response to a question by PHEAA, not Oberg

— constituted a final ruling that foreclosed further discussion of the issue, we cannot

discern from the record whether the court considered Oberg’s proposed instructions and

rejected them for their substance, or simply believed that its own instructions were an

adequate substitute. To preserve the issue, Oberg could have sought clarification as to

the court’s basis for rejecting his instructions, or he could have timely objected. Because

he did neither, we review only for plain error. 3

       3
         Oberg’s reliance on dicta from Justice Scalia’s concurring opinion in Connick v.
Thompson, 563 U.S. 51, 72 (2011), cannot aid him. In Connick, Justice Scalia found that
a trial court’s response, “No, I’m not giving that,” to an appellant’s request for a jury
instruction was sufficient to “preserve a claim of error.” Id. at 75 (citing Fed. Rule Civ.
P. 51(d)(1)(B)). The trial court in that case, however, had already ruled on the matter in a
motion for summary judgment — perhaps the quintessential example of a definitive
ruling on the merits.

                                             10
       We note that the Tenth Circuit also recently addressed the 2003 amendment to

Rule 51. There, appellants claimed to have preserved their challenge to jury instructions

by submitting proposed instructions and receiving a responsive email from the district

court with the court’s tentative instructions, which did not incorporate their proposals.

First Am. Title Ins. Co. v. Nw. Title Ins. Agency, 906 F.3d 884, 894–95 (10th Cir. 2018).

The Tenth Circuit observed that the district court did not suggest the email included its

final instructions and that counsel had ample opportunity to discuss its proposed

instructions. Id. at 895. It thus held that the email did not constitute a “definitive”

rejection as contemplated by Rule 51(d)(1)(B). Id. 4 Our holding here does not conflict

with the Tenth Circuit’s opinion, but that case does not provide as clear a parallel as

PHEAA suggests. The district court’s statement that it would not read any party’s

instruction was arguably more final than that considered by the Tenth Circuit, but we

cannot conclude that it was “on the merits,” and so it fails to satisfy the Rule for that

reason.

                                              B.

       Because Oberg failed to preserve his objections to the jury instructions, we review

only for plain error. Oberg must show that in refusing to give his proposed instructions

(1) the district court erred; “(2) the error is plain; (3) the error affects substantial rights;

       4
          The Tenth Circuit went further to state that for a rejection to be definitive, “the
district court must expressly reject that specific argument.” Id. (emphasis added). In
light of the Advisory Committee’s guidance, we doubt that Rule 51(d)(1)(B) requires
such specificity when a court’s ruling is otherwise final and on the merits. We need not
decide this question, however, because we cannot determine that the court’s rejection
here was on the merits.

                                              11
and (4) . . . the error seriously affects the fairness, integrity or public reputation of judicial

proceedings.” Gregg v. Ham, 678 F.3d 333, 338 (4th Cir. 2012) (internal quotation

marks omitted). Even if his claim had been properly preserved, Oberg “faces a heavy

burden, for we accord the district court much discretion to fashion the charge.” United

States v. Raza, 876 F.3d 604, 614 (4th Cir. 2017) (internal quotation marks omitted).

       Oberg first argues that the district court erred by failing to inform the jury that he

did not need to prove PHEAA had a “specific intent to defraud” the government for his

FCA claim to succeed. Oberg’s proposed instruction did accurately restate a statutory

element of the FCA, 31 U.S.C. § 3729(b)(1)(B), but the instructions given by the district

court “substantially covered” this issue. United States ex rel. Drakeford v. Tuomey, 792

F.3d 364, 382 (4th Cir. 2015). The court’s instructions correctly listed the three ways in

which the jury could find that PHEAA acted with the requisite knowledge, none of which

required Oberg to show specific intent to defraud. The court did not err, much less

plainly err, in declining to provide any additional instruction. See Noel v. Artson, 641

F.3d 580, 590 (4th Cir. 2011) (“We have always left the choice between generality versus

specificity in the charge to the sound discretion of the trial courts.” (internal quotation

marks and alteration omitted)).

       Next, Oberg argues that the district court should have included an instruction

stating that “benevolent motivation . . . is not a defense” to an FCA claim. Much like

Oberg’s previous objection, the instructions given by the court substantially covered this

instruction. Moreover, Oberg’s proposed instruction addresses only a collateral issue —

attempting to “cure” any improper introduction of benevolent motive evidence — that

                                               12
would not have affected the outcome in the district court. See Gregg, 678 F.3d at 338

(requiring that proposed instruction must affect substantial rights to establish plain error).

       Finally, Oberg contends that the court erred by refusing to instruct the jury on how

it could find PHEAA’s claims fraudulent. He asserts that because the court did not

provide the jury with the specific statutory language defining whether PHEAA’s claims

were eligible for the 9.5 percent SAP payments, the jury lacked the necessary tools to

decide an element of his FCA claim. Had the district court erred in its charge on this

issue, it would have committed the type of error that would usually require reversal, even

on plain error review. See United States v. Jennings, 160 F.3d 1006, 1019 (4th Cir. 1998)

(noting that “failure to instruct the jury on any essential element of an offense constitutes

plain error”).

       But yet again, the district court’s instructions substantially covered the substance

of Oberg’s proposal. Contrary to Oberg’s assertions, the court’s instructions sufficiently

explained that the jury had to consider whether PHEAA’s claims were “false or

fraudulent,” and that the crux of Oberg’s argument was that PHEAA “was not entitled to

the 9.5 percent floor SAP on the claimed loans.” Although the district court did not detail

the precise steps the jury should follow to determine the eligibility of PHEAA’s SAP

claims, “where, as here, the instructions accurately covered all the issues in the case, the

failure to reference specific aspects of a party’s contentions cannot serve as a basis for a

finding of error.”    Noel, 641 F.3d at 590 (internal quotation marks and alterations

omitted).

                                             13
       In contrast, Oberg’s proposed instruction provided a misleading framework that

presumed his interpretation of the relevant statute and DOE’s regulations was correct,

essentially requiring the jury to find PHEAA’s claims ineligible. See id. (“[W]e cannot

fault the district court for declining to give a wink and a nod to the jury.”).

       Armed with extensive testimony and numerous exhibits, it was up to the jury to

determine whether PHEAA’s claims were eligible and, if they were not, whether PHEAA

knew so when it submitted its claims. This is precisely what the district court’s jury

instructions asked of them.

                                              IV.

       For the foregoing reasons, the judgment of the district court is

                                                                                  AFFIRMED.

                                              14