United States of America v. Itt Educational Services, Inc. et al

MOTION to dismiss for failure to state a claim

M.D. Fla.July 14, 2016

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA JACKSONVILLE DIVISION UNITED STATES OF AMERICA, ex rel., RODNEY LIPSCOMB, Plaintiff/Relator, v. ITT EDUCATIONAL SERVICES, INC., and ITT TECHNICAL INSTITUTE, Defendants. Case No.: 3:15-cv-446-HES-JRK DEFENDANTS’ MOTION TO DISMISS Defendants ITT Educational Services, Inc. and ITT Technical Institute (collectively, “ITT”1) move pursuant to Federal Rules of Civil Procedure 8, 9(b), and 12(b)(6) to dismiss Plaintiff’s amended complaint with prejudice. BASIS FOR MOTION In Counts I to V of his amended complaint, Plaintiff/Relator Rodney Lipscomb, a former Dean of Academic Affairs at ITT’s Tallahassee campus, accuses ITT of violating the False Claims Act, 31 U.S.C. § 3729 et seq. (“FCA”), by falsely certifying to the federal government that it was in compliance with certain eligibility requirements under the federal Title IV student financial aid programs. The Court should dismiss Counts I to V under Rules 8 and 9(b) because Lipscomb fails to plead his FCA claims with plausibility and particularity. Even though his amended complaint consists of 63 pages and 438 paragraphs of allegations: 1 ITT Educational Services, Inc. operates under the name “ITT Technical Institute.” “ITT Technical Institute” is not a corporate entity and, thus, is not a proper party defendant. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 1 of 27 PageID 201 2  Lipscomb fails to plead with particularity that ITT submitted any false claims to the federal government.  Lipscomb fails to plead with particularity ITT’s alleged violations of the Title IV eligibility requirements that form the basis of his FCA claims.  Lipscomb fails to plead any facts that ITT’s alleged violations were material to the federal government’s payment of any claims. These pleading deficiencies are not surprising and cannot be remedied because Lipscomb was never employed in ITT’s finance department and was never exposed or privy to ITT’s interactions with the federal government under the Title IV programs. Count I, which asserts that ITT failed to comply with Title IV’s accreditation requirement, also fails because it is based on a non-existent accreditation standard of ITT’s accreditor, the Accrediting Council for Independent Colleges and Schools (“ACICS”). Contrary to Lipscomb’s misleading quotation from ACICS’s accreditation criteria, ACICS does not require ITT to assess the ability of its students-who, as Lipscomb admits, are high school graduates or have their GEDs-to benefit from ITT’s educational experience. In addition, Count III, which asserts that ITT misrepresented the terms of its “Opportunity Scholarship” to students, fails because Lipscomb does not allege that ITT made any statement about this scholarship that was false and known to be false when the statement was made. According to Lipscomb, ITT started the Opportunity Scholarship in January 2013, but then changed the eligibility requirements for the scholarship going forward in June 2013. A mere change in eligibility requirements does not amount to a misrepresentation. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 2 of 27 PageID 202 3 Count VI asserts that in violation of the whistleblower protection provision of the FCA, 31 U.S.C. § 3730(h), ITT fired Lipscomb because he allegedly reported “illegal and unethical actions” to ITT’s management. Count VI should be dismissed under Rule 12(b)(6) because the purported “illegal and unethical actions” that Lipscomb allegedly reported have no connection to his FCA claims or any efforts to stop any alleged violation of the FCA. Counts VII and VIII assert that ITT violated Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., by firing Lipscomb allegedly because of his African-American race or because he allegedly reported and opposed discriminatory behavior by ITT. Counts VII and VIII should be dismissed under Rule 8 because Lipscomb’s 63-page, 438-paragraph amended complaint fails to contain a short and plain statement of his Title VII claims with simple, concise, and direct allegations. Moreover, Lipscomb’s Title VII discrimination claim (Count VII) should be dismissed under Rule 12(b)(6) because Lipscomb fails to sufficiently plead that ITT acted with discriminatory intent when it terminated his employment. MEMORANDUM OF LEGAL AUTHORITY IN SUPPORT OF MOTION Background A. ITT. ITT is a leading private institution of higher education. Am. Compl. ¶ 3. It provides undergraduate and graduate degree programs in a variety of fields. Id. Since 1969, ITT has educated and served thousands of students throughout the country, many of whom have been underserved by traditional higher education, including older students, low-income students, students working full-time, and single parents. ITT is accredited by ACICS. Am. Compl. ¶ 7. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 3 of 27 PageID 203 4 B. Federal student financial aid under Title IV. Under Title IV of the Higher Education Act of 1965 (“HEA”), the federal government operates a number of programs that disburse funds to students pursuing higher education. 20 U.S.C. §§ 1070-1099d; Am. Compl. ¶¶ 8-9. Funds under these Title IV programs are only available to students who attend eligible schools. 20 U.S.C. § 1091(a)(1); 34 C.F.R. § 668.32(a)(1)(i); Am. Comp. ¶ 47. To be eligible to enroll students with Title IV funds, a school must enter into a program participation agreement (“PPA”) with the Department of Education (“ED”). 20 U.S.C. § 1094; 34 C.F.R. § 668.14(a)(1); Am. Compl. ¶ 48. In signing such an agreement, the school promises to comply with certain statutes, regulations, and contractual requirements. 20 U.S.C. § 1094; 34 C.F.R. § 668.14(b)(1); Am. Compl. ¶49. C. Lipscomb. Lipscomb, an African-American, was Dean of Academic Affairs at ITT’s campus in Tallahassee from April 2011 until he was fired in January 2015. Am. Comp. ¶¶ 2, 4). He supervised five academic program chairs, the library director, and the associate dean at the Tallahassee campus. Am. Compl. ¶ 24. He does not allege that he was ever employed in ITT’s finance department or dealt with any Title IV programs while he was at ITT. D. The lawsuit. On April 8, 2015, Lipscomb filed the present case under seal asserting claims under the FCA as a purported relator for the federal government. He contends that ITT falsely certified to the federal government that it was in compliance with certain requirements under Title IV and its PPA with the ED. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 4 of 27 PageID 204 5 The federal government declined to intervene and prosecute the case, leaving it up to Lipscomb to do so. The Court unsealed the case on January 15, 2016. On May 16, 2016, Lipscomb filed an amended complaint, which drops many allegations from his original complaint, reasserts claims under the FCA, and asserts new claims for racial discrimination and retaliation in violation of Title VII. E. Lipscomb’s False Claims Act claims. Counts I to V of Lipscomb’s amended complaint arise under the False Claims Act. Each count alleges that ITT violated a different eligibility requirement under Title IV. Count I concerns ITT’s accreditation with ACICS. To be eligible to receive Title IV funds, a school must be accredited by an accrediting agency that is recognized by the ED. 34 C.F.R. §§ 600.4(a)(5)(i), 600.5(a)(6); Am. Compl. ¶ 355. As Lipscomb concedes, ITT has been so accredited by ACICS during all relevant times. Am. Compl. ¶¶ 7, 58. Nevertheless, Lipscomb asserts in Count I that ITT has violated the FCA by falsely certifying to the ED that it meets all of ACICS’s accreditation standards. Lipscomb alleges that under ACICS’s accreditation standards, ITT was required to assess the ability of each student to benefit from ITT’s education experience; that ITT did not perform such assessments, but simply accepted all students who have graduated from high school or obtained their GED; and that ITT enrolled students who allegedly lacked the ability to benefit from ITT’s educational experience. Am. Compl. ¶¶ 62-66, 358-367. In Count II, Lipscomb asserts that ITT made misrepresentations to unidentified students about its course offerings in violation of 34 C.F.R. § 668.72. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 5 of 27 PageID 205 6 Count III asserts that ITT provided inaccurate financial cost and scholarship information to students in violation of 20 U.S.C. § 1092(a)(1)(E) and 34 C.F.R. §§ 668.42 and 668.72. Lipscomb asserts that ITT misrepresented the terms of its “Opportunity Scholarship” because it allegedly changed the eligibility requirements for the scholarship several months after it began to offer the scholarship to students. Specifically, Lipscomb alleges that in January 2013, ITT began to offer “Opportunity Scholarships” to students and told students that they could simultaneously receive both this scholarship and grant money from the Tallahassee Economic Development Workforce. Am. Compl. ¶¶ 159-166. By receiving both grant money and scholarship money, the students would have less out-of- pocket cost to attend ITT. Am. Compl. ¶ 167. Lipscomb adds that in June 2013, ITT changed its policy such that students who were receiving this grant were no longer eligible to also receive the scholarship and, in turn, incurred higher out-of-pocket costs to attend ITT. Am. Compl. ¶¶ 169-70, 172. Lipscomb does not allege that ITT retroactively changed its policy and took away scholarship money that it had previously awarded to students. In Count IV, Lipscomb asserts that ITT made misrepresentations to unidentified students about its credit transfer policies and the transferability of its credits in violation of 20 U.S.C. § 1092(h)(1) and 34 C.F.R. § 668.72(b)(1). In Count V, Lipscomb asserts that ITT instructed unidentified students to submit false information about their income on their Free Application for Federal Student Aid (“FAFSA”), a document that students submit to the ED for the ED to determine the amount of federal student loans for which they are eligible. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 6 of 27 PageID 206 7 Argument I. The Court should dismiss Plaintiff’s False Claims Act claims (Counts I to V) because Lipscomb fails to plead with plausibility and particularity that ITT submitted any false claims to the federal government, that ITT violated any Title IV eligibility requirements, or that ITT’s alleged violations of Title IV eligibility requirements were material to the federal government’s payment of any claims. The Court should dismiss Lipscomb’s FCA claims (Counts I to V) because Lipscomb has failed to plead them with plausibility and particularity as required under Rules 8 and 9(b). Most glaringly, he fails to plead with particularity that ITT submitted any false claims to the federal government. Moreover, he fails to plead with particularity ITT’s alleged violations of the Title IV eligibility requirements underlying his FCA claims as he omits the “who,” “what,” “where,” “when,” and “how” of the alleged violations. In addition, he fails to plead any facts that ITT’s alleged violations of Title IV eligibility requirements were material to the federal government’s payment of any claims. A. The False Claims Act. The FCA enables private citizens to recover damages on behalf of the United States by filing a qui tam action against a person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval,” 31 U.S.C. § 3729(a)(1)(A) (2009), or “knowingly makes, uses, or causes to be used, a false record or statement material to a false or fraudulent claim,” 31 U.S.C. § 3729(a)(1)(B) (2009).2 See 31 U.S.C. § 3730(b). “Liability under the False Claims Act arises from the submission of a fraudulent claim to the government, not the disregard of government regulations or failure to maintain proper internal procedures.” Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1045 (11th Cir. 2015). 2 Similar, predecessor versions of these two provisions were previously codified as Sections 3729(a)(1) and 3729(a)(2). Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 7 of 27 PageID 207 8 B. Under Rules 8 and 9(b), Lipscomb must plead any claims under the False Claims Act with plausibility and particularity. The United States Supreme Court recently emphasized that “False Claims Act plaintiffs must [ ] plead their claims with plausibility and particularity under Federal Rules of Civil Procedure 8 and 9(b)” and that inadequately pleaded FCA claims are subject to dismissal on a motion to dismiss. Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989, 2003 n.6 (2016). Based on Rule 8: Where the allegations are merely labels and conclusions or a formulaic recitation of the elements of a cause of action, the plaintiff’s claim will not survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). For the claim to survive, the plaintiff’s allegations must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Urquilla-Diaz, 780 F.3d at 1051 (quotations and citations omitted). Moreover, “complaints alleging violations of the False Claims Act are governed by Rule 9(b).” Corsello v. Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005) (citing United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1308-09 (11th Cir. 2002). Rule 9(b) provides that a party alleging fraud “must state with particularity the circumstances constituting fraud” but may allege scienter generally. To satisfy this heightened-pleading standard in a False Claims Act action, the relator has to allege “facts as to time, place, and substance of the defendant’s alleged fraud,” particularly, “the details of the defendants’ allegedly fraudulent acts, when they occurred, and who engaged in them.” Urquilla-Diaz, 780 F.3d at 1051 (citing Clausen, 290 F.3d at 1309). “Failure to satisfy Rule 9(b) is a ground for dismissal of a complaint.” Corsello, 428 F.3d at 1012. “The particularity rule serves an important purpose in fraud actions by alerting defendants to the precise misconduct with which they are charged and protecting defendants against spurious charges of immoral and fraudulent behavior.” U.S. ex rel. Atkins v. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 8 of 27 PageID 208 9 McInteer, 470 F.3d 1350, 1359 (11th Cir. 2006) (quotation omitted). “When a plaintiff does not specifically plead the minimum elements of [his] allegation, it enables [him] to learn the complaint’s bare essentials through discovery and may needlessly harm a defendant’s goodwill and reputation by bringing a suit that is, at best, missing some of its core underpinnings, and at worst, ... baseless allegations used to extract settlements.” Id. (quotation omitted). C. Lipscomb fails to plead with particularity that ITT submitted any false claims to the federal government. The Court should dismiss Counts I to V because Lipscomb fails to plead with particularity that ITT submitted any false claims to the federal government. To satisfy Rule 9(b)’s heightened-pleading requirements, the relator must allege the “actual presentment of a claim … with particularity,” Clausen, 290 F.3d at 1327, meaning particular facts about “the ‘who,’ ‘what,’ ‘where,’ ‘when,’ and ‘how’ of fraudulent submissions to the government.” Corsello, 428 F.3d at 1014. “Without the presentment of such a claim, while the practices of an entity that provides services to the Government may be unwise or improper, there is simply no actionable damage to the public fisc as required under the False Claims Act.” Clausen, 290 F.3d at 1311. “Underlying improper practices alone are insufficient to state a claim under the False Claims Act absent allegations that a specific fraudulent claim was in fact submitted to the government.” Corsello, 428 F.3d at 1014. “As such, Rule 9(b)'s directive that ‘the circumstances constituting fraud or mistake shall be stated with particularity’ does not permit a False Claims Act plaintiff merely to describe a private scheme in detail but then to allege simply and without any stated reason for his belief that Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 9 of 27 PageID 209 10 claims requesting illegal payments must have been submitted, were likely submitted or should have been submitted to the Government.” Clausen, 290 F.3d at 1311. Lipscomb has not provided the “who,” “what,” “where,” “when,” and “how” of any fraudulent claim that ITT submitted to the federal government. He does not identify who at ITT submitted any fraudulent claims, what the fraudulent claims were, where ITT submitted the fraudulent claims, when ITT submitted the fraudulent claims, or how ITT submitted the fraudulent claims.3 This is not surprising as Lipscomb does not, and cannot, profess to have any personal knowledge of ITT’s billing practices to the federal government. See Jallali v. Nova Se. Univ., Inc., 486 F. App'x 765, 767 (11th Cir. 2012) (relator’s allegations that school failed to comply with Title IV regulations and requested federal student aid payments “do not satisfy Rule 9(b) under our precedent” because “[relator’s] complaint does not allege facts identifying the time, place, or substance of the allegedly fraudulent claims for payment” and “[n]or does [relator] possess personal knowledge of [the school’s] billing practices”). Lipscomb simply alleges in a conclusory manner that “Defendants knowingly presented or caused to presented to the United States false or fraudulent claims for payment or approval in violation of the FCA” and that “Defendants knowingly made, used, or caused to made or used a false record or statement material to their false claims.” Am. Compl. ¶¶ 352-53, 369-70, 384-85, and 398-99. These allegations are merely a formulaic recitation of Sections 3729(a)(1)(A) and 3729(a)(1)(B) and do not satisfy his burden under Rule 9(b). See Clausen, 290 F.3d at 1312. In words that apply here with equal force, “nowhere in the blur 3 Lipscomb describes a few students only by their initials. But even then, he never alleges that ITT submitted any false claims with respect to them. Nor does he plead particular facts about the “who,” “what,” “where,” “when,” and “how” of any such false claims. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 10 of 27 PageID 210 11 of” Lipscomb’s 438 paragraphs of allegations “can one find any allegation, stated with particularity of a false claim actually being submitted to the Government.” Id. Lipscomb apparently (and mistakenly) believes that he can state claims under the FCA simply by alleging that “ITT engages in systemic violations of Title IV and the PPA and, consequently, the [False Claims Act].” Am. Compl. ¶ 43. In Corsello, the Eleventh Circuit rejected this very premise: Corsello argues that a pattern of improper practices of the defendants leads to the inference that fraudulent claims were submitted to the government, but we disagree. Because it is the submission of a fraudulent claim that gives rise to liability under the False Claims Act, that submission must be pleaded with particularity and not inferred from the circumstances. Although we construe all facts in favor of the plaintiff when reviewing a motion to dismiss, we decline to make inferences about the submission of fraudulent claims because such an assumption would strip all meaning from Rule 9(b)’s requirements of specificity. 428 F.3d at 1013 (quotations and citations omitted). Lipscomb only attempts to allege a fraudulent scheme and utterly fails to allege with particularity the submission of any false claims to the federal government. Under Eleventh Circuit precedent, Lipscomb has failed to satisfy his pleading burden under Rule 9(b): The Eleventh Circuit has consistently … dismiss[ed] complaints alleging in detail the fraudulent scheme but failing to allege with particularity the submission of the false claims to the government. In U.S. ex rel. Atkins v. McInteer, 470 F.3d 1350 (11th Cir. 2006), the complaint cited “particular patients, dates and corresponding medical records for services that he contends were not eligible for government reimbursement,” but did not allege any “firsthand knowledge of the defendants' submission of false claims.” Id. at 1359. The plaintiff merely “portray[ed] the scheme and then summarily conclude[d] that the defendants submitted false claims to the government for reimbursement.” Id. Rutledge v. Aveda, No. 2:14-CV-00145-AKK, 2015 WL 2238786, at *11 (N.D. Ala. May 12, 2015). “The particularity requirement of Rule 9 is a nullity if Plaintiff gets a ticket to the Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 11 of 27 PageID 211 12 discovery process without identifying a single claim.” Atkins, 470 F.3d at 1359 (quotation omitted). The Court, therefore, should dismiss Counts I to V with prejudice. D. Lipscomb fails to plead ITT’s alleged violations of Title IV eligibility requirements with particularity. Counts I to V should also be dismissed because Lipscomb fails to plead with particularity ITT’s alleged violations of the Title IV eligibility requirements that form the basis of his FCA claims. “To state a claim under the False Claims Act with particularity, the complaint must allege facts as to time, place, and substance of the defendant’s alleged fraud, and the details of the defendants’ allegedly fraudulent acts, when they occurred, and who engaged in them.” Corsello, 428 F.3d at 1012 (quotations omitted). Lipscomb fails to plead the “who,” “what,” “where,” “when,” and “how” of any alleged violations with particularity. He does not identify a single ITT employee who made any of the alleged misrepresentations or allegedly instructed students to submit false information about their income on their FAFSA forms. Lipscomb only mentions unidentified “recruitment representatives,” but that does not satisfy Rule 9(b). See U.S. ex rel. Keeler v. Eisai, Inc., 568 F. App'x 783, 796 (11th Cir. 2014) (“The Complaint makes other passing references to unnamed physicians speaking about Eisai's products at unspecified dates and locations. These allegations fail to comply with the basic elements of pleading any fraudulent scheme.”); U.S. ex rel. Butler v. Magellan Health Servs., Inc., 74 F. Supp. 2d 1201, 1216 (M.D. Fla. 1999) (Plaintiff’s FCA claim failed under Rule 9(b) because Plaintiff did not identify specific employees involved in fraud, but only referred to positions). Lipscomb also fails to identify any students to whom ITT made the alleged misrepresentations or fraudulent instructions: Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 12 of 27 PageID 212 13  In Count I, Lipscomb identifies by initials two students (“D.H.” and “H.M.”) whom he contends ITT should not have enrolled even though he contends that he “became upset with the amount of unprepared and inappropriate students that were admitted.” Am. Compl. ¶¶ 70, ¶¶ 79-105, 361.  He makes no attempt to identify any students in Counts II.  Count III vaguely mentions one student identified only as “R.O.,” Am. Compl. ¶¶ 173-177, but Lipscomb does not allege that ITT made any representations to “R.O.” about the Opportunity Scholarship or even that “R.O.” ever received the scholarship or the Tallahassee Economic Development Workforce grant.  In Count IV, he purports to describe one isolated instance when an unidentified “recruitment representative” allegedly told an unidentified “John Doe” student at some unspecified time that “credits earned at ITT would transfer to [Florida State University].” Am. Compl. ¶¶ 200-204.  In Count V, he alleges that one student identified only as “H.M.” “confirmed to Lipscomb that he had not completed his own FAFSA paperwork and that a financial aid counselor had entered all of the necessary information for him,” Am. Compl. ¶ 28, but even then, Lipscomb does not allege that any information reported on H.M.’s FAFSA was false. These sparse allegations do not come close to satisfying his pleading burden under Rule 9(b). Additionally, Lipscomb does not identify when, how, or where ITT made the alleged misrepresentations or fraudulent instructions. As a result, Lipscomb has failed to comply with Rule 9(b), and the Court should dismiss Counts I to V with prejudice. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 13 of 27 PageID 213 14 E. Lipscomb fails to plead any facts that ITT’s alleged violations of Title IV eligibility requirements were material to the federal government’s payment of any claims. Counts I to V should also be dismissed because Lipscomb fails to plead any facts that ITT’s alleged violations of Title IV eligibility requirements were material to the federal government’s payment of any claims. “[A] misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government’s payment decision in order to be actionable under the False Claims Act.” Universal Health Servs., 136 S.Ct. at 2002. Because “[t]he standard for materiality … is a familiar and rigorous one[,] … False Claims Act plaintiffs must [ ] plead their claims with plausibility and particularity under Federal Rules of Civil Procedure 8 and 9(b) by, for instance, pleading facts to support allegations of materiality.” Id. at 2003 n.6 (emphasis added). Lipscomb fails to plead any facts that ITT’s alleged misrepresentations to students (Counts I to IV) or its alleged fraudulent instructions to students (Count V) were material to the federal government’s payment of any claims. While he alleges (without providing the particulars) that ITT failed to comply with certain Title IV eligibility requirements, the Supreme Court has stressed that “[a] misrepresentation cannot be deemed material merely because the Government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment.” Universal Health Servs., 136 S.Ct. at 2003. Because Lipscomb fails to adequately plead materiality, Counts I to V must be dismissed. See Rutledge v. Aveda, No. 2:14-CV-00145-AKK, 2015 WL 2238786, at *10 (N.D. Ala. May 12, 2015) (“[Relator] has failed to allege any misrepresentations and Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 14 of 27 PageID 214 15 violations were material to the government’s payment of claims and would have made the [school] ineligible for participation in the program.”). In particular, with respect to Count I, Lipscomb has not pleaded any particular facts that ITT’s failure to assess the ability of its students to benefit from ITT’s educational experience was material, either to ACICS’s accreditation of ITT or the federal government’s decision to provide Title IV funding to ITT’s students. “Making false statements to an accreditation agency does not expose a school to liability under [the FCA] unless the statements were essential to the school having received (or maintained) its accreditation.” Urquilla-Diaz, 780 F.3d at 1056. Lipscomb does not allege any particular facts that ITT would have lost its accreditation with ACICS if ACICS had known that ITT did not assess the ability of its students to benefit from its educational experience. Absent the pleading of such facts, Count I fails to state a cognizable claim. Id. at 1056-57 (affirming dismissal of FCA claim based on accreditation requirement). Moreover, Lipscomb concedes that ITT’s failure to assess students is not material to the ED. He alleges that “[b]oth Title IV and the PPA require ITT to acquire and maintain accreditation from a recognized accrediting agency,” Am. Compl. ¶ 355, and he concedes that “maintaining ACICS accreditation is a material condition of payment,” Am. Compl. ¶ 65 (emphasis added). The accreditation eligibility requirement under Title IV and the PPA only requires that ITT be accredited by ACICS, not that ITT be in compliance with each of ACICS’s accreditation standards at all times. 34 C.F.R. §§ 600.4(a)(5)(i), 600.5(a)(6). A school can still be accredited even if it is not in compliance with a particular accreditation standard at some particular time. See, e.g., Ambrose v. New England Ass’n of Schs. & Colls., Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 15 of 27 PageID 215 16 252 F.3d 488, 495-96 (1st Cir. 2001). Thus, what is material to the ED is whether ITT has maintained its accreditation with ACICS, not whether ITT has remained in compliance with each of ACICS’s accreditation standards at all times. Because ITT has maintained its accreditation by ACICS while receiving Title IV funds, it has satisfied the accreditation eligibility requirement and has not made any false certification about its accreditation. As for Count V, Lipscomb fails to plead any facts that any specific student’s FAFSA form that allegedly contained false information about the student’s income was material to the federal government’s making of a loan to that student. There are no allegations that the federal student loans that any student received would have been any different if the student’s income had been reported accurately on his or her FAFSA. Similar deficiencies exist with respect to Counts II to IV. Lipscomb fails to plead any facts that ITT’s alleged violations of Title IV requirements were material to the federal government’s payment of any claims. Thus, the Court should dismiss Counts I to V. II. The Court should dismiss Count I because ACICS does not require ITT to assess the ability of its students to benefit from ITT’s educational experience. Putting aside Lipscomb’s pleading deficiencies, Count I fails as a matter of law because the ACICS accreditation standard that Lipscomb accuses ITT of violating simply does not exist. There is no accreditation standard that requires ITT to assess the ability of its students to benefit from its educational experience. Lipscomb correctly alleges that “Title I, Chapter 2 of the Accreditation Manual is entitled ‘Eligibility Criteria’” and that “[t]his section deals with entities gaining and maintaining accreditation” by ACICS. Am. Compl. ¶ 62. But then he proceeds to selectively and deceptively quote from this ACICS eligibility criteria by alleging: Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 16 of 27 PageID 216 17 In order to be eligible for accreditation, an institution must be “an institution of postsecondary education.” As defined by ACICS, an institution of post-secondary education must, among other things, “enroll students who … demonstrate through valid assessment an ability to benefit from the educational experience.” Am. Compl. ¶ 64; see also Am. Compl. ¶ 359. Attached to this motion as Exhibit 1 is the ACICS’s eligibility criteria partially quoted by Lipscomb, Criteria 1-2-100. The Court may consider this document without converting ITT’s motion into one for summary judgment because this document is central to Lipscomb’s claim, the contents of this document are alleged in his amended complaint, and the authenticity of this document cannot be genuinely disputed. Urquilla-Diaz, 780 F.3d at 1053 n.12; Day v. Taylor, 400 F.3d 1272, 1276 (11th Cir. 2005). ACICS’s Criteria 1-2-100 states that “[t]o be eligible for consideration for accreditation, an institution must ... (a) … be an institution of postsecondary education,” which requires that the institution “enrolls students who possess a high school diploma or its equivalent, or who are beyond the age of compulsory school attendance and demonstrate through valid assessment an ability to benefit from the educational experience....” Ex. 1 (emphasis added). Lipscomb inexplicably uses an ellipsis to omit all of the critical language between “enroll students who” and “demonstrate through valid assessment an ability to benefit from the educational experience.” Am. Compl. ¶¶ 64, 359. Under ACICS’s Criteria 1-2-100, a school must enroll students who: (a) possess a high school diploma or its equivalent; or (b) are beyond the age of compulsory school attendance and demonstrate through valid assessment an ability to benefit from the educational experience. This criteria tracks 20 U.S.C. § 1091(d)(1)(A)(iii) and 34 C.F.R. § Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 17 of 27 PageID 217 18 668.32(e). Section 668.32(e) provides that a student is eligible for Title IV funds if, among satisfying the other eligibility requirements in § 668.32, he or she “(1) Has a high school diploma or its recognized equivalent;” or one of the exceptions in (2)-(5) applies. See U.S., ex rel. LaPorte v. Premier Educ. Grp., L.P., No. CIV. 11-3523 RBK/AMD, 2014 WL 5449745, at *1 (D.N.J. Oct. 27, 2014) (“To qualify as eligible, a student … must have a high school diploma or recognized equivalent, unless an enumerated exception applies.”). The exception in § 668.32(e)(5) allows a student without a high school diploma or GED to receive Title IV funds if he or she “[h]as been determined by the institution to have the ability to benefit from the education or training offered by the institution….” Under ACICS’s accreditation standards and federal law, ITT is not required to assess the ability of students with high school diplomas or GEDs to benefit from its educational experience. 4 Lipscomb concedes that ITT complies with this accreditation standard: “[ITT’s] admissions office accepts everyone who applies and has a high school diploma or GED.” Am. Compl. ¶ 78 (emphasis added). Because ITT’s students are high school graduates or have their GED, ITT is not required to assess their ability to benefit from its educational experience. See United States v. Premier Educ. Grp., L.P., No. 11-3523 (RBK/AMD), 2016 WL 2747195, at *15 (D.N.J. May 11, 2016) (dismissing FCA claim against proprietary school based on relators’ allegations that school had admitted unqualified students, including disabled students). The Court should dismiss Count I with prejudice. 4 Community colleges and many public and private universities and colleges have “open admissions” policies under which they offer admittance to all students who have completed high school or have their GED without assessing whether the students will benefit from attending the schools. Florida alone has 28 public colleges that have a general open-door admissions policy for students who have a high school diploma or GED. See https://www.floridacollegesystem.com/students/admissions.aspx (last visited July 11, 2016). Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 18 of 27 PageID 218 19 III. The Court should dismiss Count III because Lipscomb does not allege that ITT made any statement about its Opportunity Scholarship that was false and known to be false when the statement was made. In addition to the pleading deficiencies identified above, Count III, which asserts that ITT misrepresented the terms of its Opportunity Scholarship to students, is deficient and should be dismissed because Lipscomb does not allege that ITT actually made any misrepresentation about this scholarship. A misrepresentation is a statement that was false and known to be false when the statement was made. See Greer v. Honda Mfg. of Alabama, LLC, 280 F. App'x 808, 812 (11th Cir. 2008) (“Greer failed to present evidence that HMA made a false representation.”); In re Crown Auto Dealerships, Inc., 187 B.R. 1009, 1016 (Bankr. M.D. Fla. 1995) (“To prove a cause of action based on fraud, there must be clear evidence that a false statement was actually made. Absent such clear evidence, the claim must fail.”); Checkers Drive-In Restaurants, Inc. v. Tampa Checkmate Food Servs., Inc., 805 So. 2d 941, 944 (Fla. Dist. Ct. App. 2001) (“There was no evidence, however, that the statement attributed to Mr. Brown in this press release was false or misleading at the time it was made.”). Lipscomb does not allege that ITT made any statement about the Opportunity Scholarship that was false when the statement was made, let alone that ITT knew that statement was false when made. The mere fact that ITT changed the eligibility requirements for the scholarship going forward in June 2013 does not mean that ITT had misrepresented the eligibility requirements for the scholarship in January 2013. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 19 of 27 PageID 219 20 IV. The Court should dismiss Lipscomb’s whistleblower retaliation claim (Count VI) because the purported “illegal and unethical actions” that he allegedly reported to ITT’s management have no connection to his FCA claims or any efforts to stop any alleged violation of the FCA. In Count VI, Lipscomb asserts that ITT violated Section 3730(h) of the FCA, which provides that an “employee … shall be entitled to all relief necessary to make that employee … whole, if that employee … is discharged … because of lawful acts done by the employee … in furtherance of an action under this section or other efforts to stop 1 or more violations of [the False Claims Act].” He contends that ITT unlawfully terminated his employment because he “engaged in activity protected under the False Claims Act by engaging in lawful acts in the furtherance of a qui tam action under the False Claims Act and other efforts to stop [ITT’s] violation of the False Claims Act … by reporting various illegal and unethical actions by ITT to” certain ITT management employees. Am. Compl. ¶¶ 415-16. The Court should dismiss Count VI because the purported “illegal and unethical actions” that Lipscomb allegedly reported to ITT’s management have no connection to his FCA claims or any efforts to stop any alleged violation of the FCA. According to Lipscomb, the purported “illegal and unethical actions” that he observed and reported to ITT’s management consisted of: the instruction to recruitment representatives to use a “pain funnel,” representatives pressuring students to enroll in programs the student has not expressed interest in, recruitment representatives being pressured to enroll students the representative had concerns about succeeding at ITT, employees expressing fear that they would be retaliated against if they spoke up about legal or ethical compliance issues, re-enrolling students in the B.S. program to waive their status for job placement rate reasons, students being pressured into business management as a “back up plan,” and students being told they can “try out” classes without being told the full financial obligation of sitting in a class. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 20 of 27 PageID 220 21 Am. Compl. ¶ 417. However, Lipscomb does not allege that any of these purported “illegal and unethical actions” violated any provision of the FCA and, indeed, they are not even the basis of Lipscomb’s FCA claims (Counts I to V). Accordingly, he has not alleged a violation of Section 3730(h), and Count VI should be dismissed with prejudice. V. The Court should dismiss Lipscomb’s Title VII discrimination and retaliation claims (Counts VII and VIII) because his 63-page, 438-paragraph amended complaint fails to contain a short and plain statement of his Title VII claims with simple, concise, and direct allegations in violation of Rule 8. In Counts VII and VIII, Lipscomb asserts that ITT violated Title VII by terminating his employment allegedly because of his race or because he allegedly reported and opposed discriminatory behavior by ITT. The Court should dismiss Counts VII and VIII because Lipscomb’s 63-page, 438-paragraph amended complaint fails to contain a short and plain statement of his Title VII claims with simple, concise, and direct allegations in violation of Rule 8. Rule 8 requires that a pleading contain “a short and plain statement of the claim” and that “[e]ach allegation . . . be simple, concise, and direct.” Fed. R. Civ. P. 8(a)(2), (d)(1). Rule 8 prohibits “shotgun” pleadings. See Washington v. Dep’t of Children & Families, 256 F. App’x 326, 327-28 (11th Cir. 2007); see also Kirby v. Highland Banc, Inc., No. 6:12-CV- 1400-ORL-18, 2012 WL 5417131, at *1 (M.D. Fla. Oct. 1, 2012) (“[A] complaint in ‘shotgun’ form does not provide a ‘short and plain statement of the claim’ as required by Rule 8 . . . .”). “The typical shotgun complaint contains several counts, each one incorporating by reference the allegations of its predecessors, leading to a situation where most of the counts (i.e. all but the first) contain irrelevant factual allegations and legal conclusions.” Kirby, 2012 WL 5417131, *1. Shotgun pleadings are frowned upon because they require courts and defendants to “sift out the irrelevancies,” a task that “impede[s] the Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 21 of 27 PageID 221 22 orderly, efficient, and economic disposition of disputes.” Strategic Income Fund, L.L.C. v. Spear, Leeds & Kellogg Corp., 305 F.3d 1293, 1295 & n.10 (11th Cir. 2002). Lipscomb’s amended complaint is a classic shotgun pleading. Counts VII and VIII incorporate 420 paragraphs of prior allegations, including 42 paragraphs (¶¶ 1-42) under the “Introduction,” “Jurisdiction and Venue,” and “Parties” headings; 162 paragraphs (¶¶ 43- 204) under the “False Claims Act Allegations” heading; 30 paragraphs (¶¶ 205-234) under the “Whistleblower Retaliation Allegations” heading; 116 paragraphs (¶¶ 235-350) under the heading “Discrimination Allegations”; and 70 paragraphs (¶¶ 351-420) in Counts I to VI under the FCA. It is bad enough that Lipscomb’s amended complaint contains 116 paragraphs of “Discrimination Allegations.” But then Lipscomb compounds his violation of Rule 8 by incorporating all other allegations (not just those under the heading “discrimination allegations”) into Counts VII and VIII, including the 232 paragraphs of irrelevant allegations underlying his False Claims Act claims (Counts I to VI). Lipscomb’s method of pleading violates Rule 8, and, consequently, the Court should dismiss Counts VII and VIII (and the rest of the amended complaint). See Harrison v. Bd. of Regents of Univ. Sys. of Ga., 519 F. App’x 641, 642-43 (11th Cir. 2013) (affirming district court’s dismissal of 82-page complaint that contained 231 paragraphs of factual allegations, “many legal conclusions and arguments,” and counts that “incorporate[d] by reference all 231 paragraphs”); Strategic Income, 305 F.3d at 1295-96 (complaint violated Rule 8 when it “contain[ed] 127 paragraphs . . . and nine counts, with each count incorporating by reference every paragraph that precede[d] it”); Magluta v. Samples, 256 F.3d 1282, 1284 (11th Cir. 2001) (58-page Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 22 of 27 PageID 222 23 complaint violated Rule 8 when each count incorporated all 146 factual allegations and “the allegations of any count or counts that preceded it”). VI. The Court should dismiss Lipscomb’s Title VII discrimination claim (Count VII) because he fails to sufficiently plead that ITT acted with discriminatory intent when it terminated his employment. Lipscomb’s Title VII discrimination claim (Count VII) is also deficient because he fails to sufficiently plead that ITT acted with discriminatory intent when it terminated his employment, an essential element of his claim. Hill v. Metro. Atlanta Rapid Transit Auth., 841 F.2d 1533, 1538 (11th Cir. 1988), opinion amended on reh’g, 848 F.2d 1522 (11th Cir. 1988) (per curiam). He only makes the conclusory allegation that “ITT … discriminat[ed] against [him], based on his race, when it terminated his employment.” Am. Compl. ¶ 426. Discriminatory intent may be proven through direct or circumstantial evidence. Hill, 841 F.2d at 1539. “[D]irect evidence is evidence, which if believed, proves [the] existence of [a] fact in issue without inference or presumption.” Apodaca v. Sec’y of Dep’t of Homeland Sec., 161 F. App’x 897, 899 (11th Cir. 2006) (alterations in original) (quoting Akouri v. State of Fla. Dep’t of Transp., 408 F.3d, 1338, 1347 (11th Cir. 2005)) (internal quotation marks omitted). “[D]irect evidence ‘must indicate that the complained-of employment decision was motivated by the decision-maker’s [racism].’” Id. (quoting Damon v. Fleming Supermarkets of Fla., Inc., 196 F.3d 1354, 1358-59 (11th Cir. 1999)). “‘[O]nly the most blatant remarks, whose intent could be nothing other than to discriminate on the basis of [race],’ will constitute direct evidence of discrimination.” Damon v. Fleming Supermarkets, Inc., 196 F.3d 1354, 1359 (11th Cir. 1999) (quoting Earley v. Champion Int’l Corp., 907 F.2d 1077, Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 23 of 27 PageID 223 24 1081-82 (11th Cir. 1990)).5 Moreover, only statements “made by a person involved in the challenged decision” constitute direct evidence of discriminatory intent. Hampton v. City of S. Miami, 186 F. App’x 967, 970 n.3 (11th Cir. 2006). Here, Lipscomb alleges that he “was performing adequately in his position,” that he “was the only African American at the Director level within ITT’s Tallahassee campus,” and that ITT “discriminat[ed] against [him], based on his race, when it terminated his employment.” Am. Compl. ¶¶ 424-426. He also alleges that he twice found a magazine that had been defaced in a racist manner (but he does not allege by whom), that ITT human resources employee James Anders reacted insensitively to Lipscomb’s complaints of discrimination on campus, and that ITT campus director Kevin Hasson (not Anders) made the decision to terminate Lipscomb’s employment. Am. Compl. ¶¶ 249-50, 257, 275, 350. Lipscomb’s allegations are a far cry from what is needed to establish discrimination through direct evidence. His allegation that he was terminated “based on race” is a legal conclusion that must be ignored when evaluating the sufficiency of his complaint. See Edwards v. Prime, Inc., 602 F.3d 1276, 1300-01 (11th Cir. 2010) (allegation that plaintiff “was subjected to a hostile discriminatory environment on the basis of his race” was a legal conclusion that could not “take the place of factual allegations in stating a plausible claim for relief”); Davis v. Coca-Cola Bottling Co. Consol., 516 F.3d 955, 974 (11th Cir. 2008) (plaintiffs failed to allege discriminatory intent under Title VII when they alleged they were denied promotions “solely because of [] race” because such statement “epitomizes 5 Damon involved a claim under the Age Discrimination in Employment Act (“ADEA”), but discriminatory intent under the ADEA is analyzed in the same manner as discriminatory intent under Title VII. See Apodaca, 161 F. App’x at 899. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 24 of 27 PageID 224 25 speculation”); Pouyeh v. Bascom Palmer Eye Inst., 613 F. App’x 802, 808-09 (11th Cir. 2015) (plaintiff’s claim of discrimination on the basis of national origin was properly dismissed because allegation that plaintiff was arrested “because of his national origin” was wholly conclusory). Most of Lipscomb’s other allegations do not involve Hasson, the alleged decision-maker, and none of his allegations connect racism to his termination. As such, Lipscomb’s allegations do not rise to the level of direct evidence of discrimination. Lipscomb’s allegations are also insufficient to prove any discriminatory intent through circumstantial evidence, which requires that the plaintiff prove “(1) that she is a member of a protected class, (2) that she was qualified for the position held, (3) that she was terminated, and (4) that she was replaced by a person outside the protected class.” Coutu v. Martin Cty. Bd. of Cty. Comm’rs, 47 F.3d 1068, 1073 (11th Cir. 1995). Lipscomb does not allege that he was replaced by a person outside his protected class. As such, he fails to state a discrimination claim based on circumstantial evidence. See Uppal v. Hosp. Corp. of Am., 482 F. App’x 394, 395-96 (11th Cir. 2012) (plaintiff’s Title VII claim was properly dismissed when she did not allege any facts other than legal conclusions establishing that other similarly situated employees outside plaintiff’s protected class were treated differently). Accordingly, Lipscomb’s Title VII discrimination claim fails to state a cognizable claim, and the Court should dismiss Count VII. Conclusion The Court should dismiss all counts of Lipscomb’s amended complaint with prejudice. Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 25 of 27 PageID 225 26 Respectfully submitted, THOMPSON COBURN LLP By /s/ William R. Bay William R. Bay (pro hac vice)-Trial Counsel Jeffrey R. Fink (pro hac vice) Brian Lamping (pro hac vice) Thompson Coburn LLP One US Bank Plaza St. Louis, Missouri 63101-1611 Telephone: 314.552.6000 Facsimile: 314.552.7000 wbay@thompsoncoburn.com jfink@thompsoncoburn.com blamping@thompsoncoburn.com and BEDELL, DITTMAR, DeVAULT, PILLANS & COXE, a Professional Association Michael E. Lockamy, Florida Bar No. 69626 The Bedell Building 101 East Adams Street Jacksonville, Florida 32202 Telephone: 904.353.0211 Facsimile: 904.353.9307 mel@bedellfirm.com Attorneys for Defendants ITT Educational Services, Inc., and ITT Technical Institute Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 26 of 27 PageID 226 27 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on July 14, 2016, I electronically filed the foregoing motion to dismiss with the Clerk of the Court by using the CM/ECF system, which will send a notice of electronic filing to all CM/ECF participants. I further certify that I sent the foregoing document by electronic mail to Jason P. Mehta, Assistant United States Attorney, 300 North Hogan Street, Suite 700, Jacksonville, FL 32202 at Jason.Mehta@usdoj.gov. /s/ Jeffrey R. Fink Case 3:15-cv-00446-HES-JRK Document 28 Filed 07/14/16 Page 27 of 27 PageID 227 EXHIBIT 1 Case 3:15-cv-00446-HES-JRK Document 28-1 Filed 07/14/16 Page 1 of 7 PageID 228 EXHIBIT 1 Case 3:15-cv-00446-HES-JRK Document 28-1 Filed 07/14/16 Page 2 of 7 PageID 229 EXHIBIT 1 Case 3:15-cv-00446-HES-JRK Document 28-1 Filed 07/14/16 Page 3 of 7 PageID 230 EXHIBIT 1 Case 3:15-cv-00446-HES-JRK Document 28-1 Filed 07/14/16 Page 4 of 7 PageID 231 EXHIBIT 1 Case 3:15-cv-00446-HES-JRK Document 28-1 Filed 07/14/16 Page 5 of 7 PageID 232 EXHIBIT 1 Case 3:15-cv-00446-HES-JRK Document 28-1 Filed 07/14/16 Page 6 of 7 PageID 233 EXHIBIT 1 Case 3:15-cv-00446-HES-JRK Document 28-1 Filed 07/14/16 Page 7 of 7 PageID 234