U.S. District Court for the Western District of Missouri Rules that College’s Compliance with Program Participation Agreement Under Title IV of Higher Education Act of 1965 Was Material to Government’s Payment Decisions

 

In United States ex rel. Sillman v. Weston Edu. Inc., No. 4:11-CV-00112-NKL, 2012 U.S. Dist. LEXIS 175637 (W.D. Mo. Dec. 12, 2012), the U.S. District Court for the Western District of Missouri held that the defendant for-profit college’s compliance with a program participation agreement (“PPA” or “program participation agreement”) under Title IV of the Higher Education Act of 1965 (HEA) was material to the Government’s payment decisions.

Allegations and Procedural History: The relators brought a qui tam action against defendant Weston Educational, Inc., d/b/a Heritage College (“Heritage”), a college that received financial aid from the federal government under Title IV of the HEA.  To establish and to maintain eligibility to receive Title IV financial aid, the defendant was required, among other things, to sign a program participation agreement with the Secretary of Education.  The program participation agreement stated, “The execution of this Agreement by the Institution and the Secretary is a prerequisite to the Institution’s initial or continued participation in any Title IV, HEA Program. . . . [Heritage] understands and agrees that it is subject to and will comply with the program statutes and implementing regulations.” Sillman, 2012 U.S. Dist. LEXIS 175637, at *3.

Among other things, the relators alleged that the defendant did not comply with the applicable Title IV statutes and regulations.  For example, the defendant allegedly falsified student attendance records and enrolled and retained ineligible students.  The court denied the defendant’s motion to dismiss under Rule 9(b) and Rule 12(b)(6) of the Federal Rules of Civil Procedure.

Ruling on Whether Defendant’s Compliance with Title IV Program Participation Agreement Was Material to Government’s Payment Decisions:  In denying the defendant’s motion, Judge Nanette K. Laughrey held that the defendant college’s compliance with its Title IV program participation agreement was material to the Government’s payment decisions.  The court rejected the defendant’s categorical argument that compliance with a condition ofparticipation, in contrast to compliance with a condition of payment, can never be considered material to the government’s payment decision: “While the conditions of payment versus participation framework may be useful in some contexts, such as Medicare, it is not necessarily dispositive in every case.”  Id. at *17.  Moreover, the court ruled that the regulations at issue – regulations relating to the administration of Title IV funds – might, in fact, be considered conditions of payment.  The court noted that, although the Eighth Circuit had not addressed the issue, other courts, including the Ninth Circuit in United States ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166 (9th Cir. 2006), had found compliance with certain provisions of Title IV program participation agreements to be material to the Government’s payment decisions.

The court then held that the defendant implicitly had certified that it was in compliance with the program participation agreement each time it submitted or caused to be submitted a claim to the Government for payment: “Execution of the PPA, and thus the express promise to comply with the applicable statutes and regulations, is an absolute prerequisite to initial or continued participation in any Title IV program.  In addition, Title IV eligibility automatically terminates when the PPA expires.”  Id. at *23 (citations omitted).  Judge Laughrey noted that while the Eighth Circuit had not addressed the viability of an implied certification theory under the FCA, numerous other circuits had recognized the theory and, moreover, “the substantial policy concerns that arise in the context of proprietary schools receiving Title IV funds suggest that this theory of liability may be particularly warranted in this context.”  Id. at *24.