U.S. District Court for Southern District of Ohio Enforces Arbitration Agreement between Defendants and Plaintiffs in False Claims Act Action in Which Government Declined to Intervene

 

In Deck v. Miami Jacobs Business College Co., No. 3:12-cv-63, 2013 U.S. Dist. LEXIS 14845 (S.D. Ohio Jan. 31, 2013), the court ordered the defendants and the relators to arbitrate False Claims Act (FCA) claims and other non-FCA claims in an action in which the government declined to intervene.  The court dismissed all claims except for the FCA claims and ordered that the parties, following arbitration, “either request that the Attorney General consent to the resolution of the FCA claims as determined at arbitration or resume litigation on the FCA claims in this Court.”

Allegations and Procedural History: The plaintiffs filed a putative class action against defendant college Miami-Jacobs and related entities alleging that the plaintiffs “paid tuition, incurred significant debt, lost wages or earning capacity in order to pursue and obtain what was falsely represented as accredited marketable degrees, certifications, education, and/or careers by Miami-Jacobs.”  The plaintiffs asserted numerous common law and statutory claims, including FCA claims.  The United States declined to intervene in the action with respect to the FCA claims.  The defendants moved to compel arbitration and dismiss the action based on an enrollment agreement in which the plaintiffs had agreed to arbitrate “a dispute arising out of or relating to this enrollment agreement.”  In response, the plaintiffs argued, inter alia, that the arbitration agreement could not be enforced with respect to the FCA claims because Congress did not intend for such claims to be arbitrated.   The United States was not a party to the arbitration agreement, and informed the court that its position was that an arbitration ruling would not be binding on the United States.

Ruling on Arbitration of FCA Claims:  In an opinion by Judge Timothy S. Black, the court ordered the plaintiffs to arbitrate all of the claims, including the FCA claims, dismissed all claims except the FCA claims, and stayed the action.  In ordering arbitration, Judge Black relied on the Supreme Court’s recognition that “federal statutory claims can be appropriately resolved through arbitration.”  Deck, 2013 U.S. Dist. LEXIS, at *22.  The court ruled that, “[e]ven if mandatory arbitration of the Plaintiffs’ FCA claim [was] not binding on the United States, arbitration is appropriate given the substantive and procedural posture,” and, “as the United States has affirmatively elected not to intervene, it cannot prevent the arbitration of Plaintiffs’ FCA claims against the Defendants.”  Id. at *24.  The court appeared to be persuaded by the fact that, even though the FCA claim was brought in the name of the government, “it still represents a claim belonging to the Plaintiffs themselves.”  Id. at *25.