United States District Court, E.D. California
UNITED STATES OF AMERICA and STATE OF CALIFORNIA, ex rel. REBECCA HANDAL, et al., Plaintiffs,
CENTER FOR EMPLOYMENT TRAINING, et al., Defendants.
plaintiffs and relators Rebecca Handal, Dina Dominguez,
Elicia Fernandez, and Christine Stearns filed the original
Complaint against defendants on August 16, 2013, ECF No. 1,
and amended the complaint on March 26, 2014, FAC, ECF No. 7.
The First Amended Complaint alleges defendants Center for
Employment Training (CET), and Mohammad Aryanpour, Jennifer
Cruickshank, Tomasita Guajardo, Ezequiel Guzman, Shirley
Johnson, Jennifer Lopez, Maria Elena Riddle, Hermelinda
Sapien and Rachel Wickland (collectively, “individual
defendants”) submitted false certifications to the
federal and the state government in connection with Title IV
of the Higher Education Act (HEA), 20 U.S.C. §§
1070 et seq., in violation of the False Claims Act
(FCA), 31 U.S.C. §§ 3729-3737, and its California
counterpart, the California False Claims Act (CFCA),
California Government Code section 12652(c). See
generally FAC. Relators also allege common law
claims of payment under mistake of fact and unjust
enrichment, and fraud and deceit based on California Civil
Code sections 1709 and 1710. Id. On October 15,
2015, the State of California and the United States declined
to intervene in the action. ECF No. 24.
matter is before the court on defendants’ motion to
dismiss the First Amended Complaint. See generally
Mot., ECF No. 43-1. Relators oppose, Opp’n, ECF No. 51,
and defendants have replied, ECF No. 53. The United States,
though having declined to intervene, submits a Statement of
Interest with respect to the issue of “express”
and “implied false certification” theories of FCA
liability, ECF No. 52, and defendants have responded to the
statement, ECF No. 54. The court held a hearing on April 22,
2016. Gary Callahan appeared for relators. Elizabeth
O’Brien and Larry Gondelman appeared for defendants.
Vincente Tennerelli appeared for the United States.
reasons explained below, the court GRANTS in part and DENIES
in part defendants’ motion to dismiss.
REQUEST FOR JUDICIAL NOTICE
Defendants request the court take judicial notice of the
CET’s Program Participation Agreement (PPA).
CET’s Institutional Participation Agreement (IPA).
Final Program Review Determinations (FPRD) Program Review
control Numbers 201320828221 and 201310828169, published by
the Department of Education (DOE) at
Req. Jud. Not. (RJN), ECF No. 43-4, Exs. A-C. Relators do not
oppose the request for judicial notice. Under Federal Rule of
Evidence 201(b), “the court may judicially notice a
fact that is not subject to reasonable dispute because it (1)
is generally known within the trial court’s territorial
jurisdiction; or (2) can be accurately and readily determined
from sources whose accuracy cannot reasonably be
questioned.” United States v. Esquivel, 88
F.3d 722, 726-27 (9th Cir. 1996).
court takes judicial notice of the FPRD because the content
of government agency websites is a proper subject of judicial
notice. Paralyzed Veterans of Am. v. McPherson, No.
06-4670, 2008 WL 4183981, at *5 (N.D. Cal. Sept. 9, 2008).
further reflection since hearing, the court need not take
judicial notice of the PPA, IPA, or OMB Circular No. A-133
forms, because the First Amended Complaint refers to the
documents and they are central to relators’ claims.
Courts may consider material properly submitted as part of
the complaint; even if not physically attached to the
complaint, documents may nevertheless be considered if their
authenticity is not contested and the plaintiff’s
complaint necessarily relies on them. Lee v. City of
L.A., 250 F.3d 668, 689-90 (9th Cir. 2001); see
FAC ¶¶ 43, 44. While the court cites below to the
Request for Judicial Notice for the purposes of identifying
the documents filed with it, it does not take notice as
the FCA, a private individual can bring an action known as
qui tam action on behalf of the United States
government against any individual or company who has
knowingly presented a false or fraudulent claim to the
government. United States ex rel. Anderson v. Northern
Telecom, 52 F.3d 810, 812-13 (9th Cir. 1995). In this
case, relators have raised allegations that CET and other
individual defendants made false certifications to the
government to obtain funding under Title IV of the HEA.
Title IV of the HEA, Congress established various student
loan and grant programs in order to assist eligible students
in obtaining a post-secondary education. FAC ¶ 33. In
order for an educational institution to receive federal
subsidies under Title IV and the HEA, or to have its students
receive such funding, it must enter into a PPA with the DOE.
20 U.S.C. § 1094(a); 34 C.F.R. § 668.14. Each PPA
expressly conditions a school’s initial and continuing
eligibility to receive Title IV funding on compliance with
certain statutory and regulatory provisions. 20 U.S.C. §
1094(a); United States ex rel. Hendow v. Univ. of
Phoenix, 461 F.3d 1166, 1168-69 (9th Cir. 2006). By
entering into a PPA with the DOE, the educational institution
agrees and certifies that “it will comply with all
statutory provisions of or applicable to Title IV of the HEA,
all applicable regulatory provisions prescribed under that
statutory authority . . . .” 34 C.F.R. §
668.14(b)(1). The relevant statutes here are those governing
(1) the most recent available data concerning employment
statistics and graduation statistics, 34 C.F.R. §
668.14(b)(10)(i); (2) tuition and fees, id. §
668.1(b)(1)(iii); (3) placement rates of graduates,
id. § 668(b)(1)(iv); (4) occupations that the
program prepares students to enter, id. §
668(b)(1)(v); (5) median loan debt incurred by student who
completed the program, id.; (6) financial assistance
available, id. § 668.41(d)(1); and (7) the
placement of and types of employment obtained by graduates,
id. § 668.41(d)(5).
also prohibits educational institutions from engaging in
misleading or deceptive marketing. Id. §
668.71(b)-(c). Provisions following section 668 expressly
provide that the educational institution and its
representatives may not make “[a]ny false, erroneous or
misleading statement” to any student, prospective
student or the public regarding information, including (1)
the nature of the institution’s educational program,
id. § 668.72, (2) the financial charges,
id. § 668.73, and (3) the employability of
graduates, id. § 668.74.
parallel track with the federal system, California provides
students with financial aid through the Cal Grants Program.
Cal. Educ. Code §§ 69400-69460. In order to
participate in the Cal Grants Program, educational
institutions must sign and certify an IPA. FAC ¶ 43. The
IPA contains certain requirements that parallel those imposed
by the HEA. Id. ¶ 64. For example,
participating educational institutions are prohibited from,
b. Promis[ing] or guarantee[ing] employment, or otherwise
overstating the availability of jobs upon graduation;
. . .
(j)(2) . . . mak[ing] an untrue or misleading change in, or
untrue or misleading statement related to, a test score,
grade or record of grade, attendance record, record
indicating student completion, placement, employment,
salaries or financial information, including . . .
[i]nformation or records relating to the student’s
eligibility for student financial aid at the institution; and
. . .
(m) Direct[ing] any individual to perform an act that
violates this chapter . . . .
Cal. Educ. Code § 94897(b), (j)(2), (m).
four former students at CET, a non-profit educational
institution, allege that CET and individual defendants (1)
did not disclose to prospective and current CET students
employment and/or placement rates of CET Sacramento’s
Medical Assistant (MA) graduates, and (2) falsely certified
compliance by misrepresenting the nature of CET’s
Sacramento MA program. FAC ¶¶ 10-13, 61-62, 67.
allege that defendants included false certifications in
CET’s PPA submitted to the DOE in 2009. FAC
¶¶ 45, 50-51. As discussed in more detail below,
defendants claimed CET would comply with the following
Gainful Employment ...