United States v. Center for Employment Training

          ORDER

         Qui tam 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.

         This 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.

         For reasons explained below, the court GRANTS in part and DENIES in part defendants’ motion to dismiss.

         I. REQUEST FOR JUDICIAL NOTICE

Defendants request the court take judicial notice of the following:

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 https://studentaid.ed.gov/sa/about/data-center/school/program-reviews.

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).

         The 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).

         Upon 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 requested.

         II. STATUTORY BACKGROUND

         Under 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.

         Under 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).

         HEA 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.

         On a 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).

         III. FACTUAL ALLEGATIONS

         Relators, 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.

         Relators 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 ...