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United States ex rel. Brooks v. Stevens-Henager College, Inc.

United States District Court, D. Idaho

July 7, 2014

UNITED STATES OF AMERICA ex rel. KATIE BROOKS and NANNETTE WRIDE, Plaintiffs,
v.
STEVENS-HENAGER COLLEGE, INC., a Utah Corporation; CALIFORNIA COLLEGE SAN DIEGO, INC., a Utah Corporation; COLLEGEAMERICA DENVER, INC., a Colorado Corporation; COLLEGEAMERICA ARIZONA, INC., a Colorado Corporation; CENTER FOR EXCELLENCE IN HIGHER EDUCATION, an Indiana corporation; CARL BARNEY, an individual; and DOES 1-500, Inclusive, Defendants.

ORDER

B. LYNN WINMILL, Chief District Judge.

Before the Court are three motions: (1) the United States' Motion to Seal Exhibits A through K to its Complaint in Intervention, Dkt. 42; (2) Relators' Motion to Partially Seal the Second Amended Complaint, Dkt. 50; and (3) a Joint Motion to Extend the Deadline to File Responsive Pleadings, Dkt. 67. For the reasons expressed below, the Court will deny the government's motion to seal, grant the relators' motion to seal, and grant the joint motion to extend the deadline to file responsive pleadings.

BACKGROUND

The relators in this case, Katie Brooks and Nannette Wride, worked as admissions consultants for Stevens-Henager College. Their central allegation is that Stevens-Henager and its affiliated schools pay admissions consultants hefty bonuses just for enrolling students - regardless of whether these students need or will benefit from college courses. Each school, however, has signed a participation agreement with the United States government which has an incentive-compensation ban. As its name suggestions, the incentive-compensation ban prohibits schools from paying admissions personnel incentives simply for enrolling students. See Second Am. Comp. ¶¶ 49-50 (citing 20 U.S.C. §§ 1094(a)(20) (the incentive-compensation ban); 34 C.F.R. § 668.14(b)(22) (regulations related to the incentive-compensation ban)).

The relators allege that defendants violated the False Claims Act, 31 U.S.C. §§ 3279-33, by telling the government that they would not make incentive payments to their admissions personnel based on their success in enrolling students. See e.g., id. ¶¶ 405-14. According to the relators' complaint, when the schools falsely certified they were not making these incentive payments, they fraudulently induced the Department of Education to make them eligible to participate in programs established under Title IV of the Higher Education Act (HEA). Ultimately, based on these allegedly false certifications, relators allege that "each and every one of the claims... [defendants] submitted or caused to a student to submit violated the FCA [False Claims Act]." Id . ¶ 408.

PROCEDURAL HISTORY

The relators bring this action under the qui tam provisions of the False Claims Act. See 31 U.S.C. § 3730(b)(2). These provisions allow private individuals to sue on behalf of the United States government. A qui tam action is initially filed under seal for a 60-day period, which gives the government a chance to investigate the claims and decide whether it wishes to intervene in the action. Relators are also required to serve the complaint and written disclosures of all material evidence in their possession upon the government.

In this case, after the complaint was originally filed, the government sought and received several lengthy extensions to the 60-day seal period. See Dkts. 7, 9, 13, 15, 20 (motions seeking extensions of time); Dkts. 6, 8, 10, 14, 19, 24 (orders related to motions to extend). As a result of these extensions, the government had about 15 months in which to investigate relators' allegations before deciding whether to intervene. See Jan. 3, 2013 Compl., Dkt. 1; Apr. 7, 2014 United States' Notice of Election to Intervene in Part, Dkt. 23. The Court lifted the seal in April 2014, and the government filed its complaint in intervention on May 2, 2014. See Dkts. 24, 41. At the parties' joint request, the Court also allowed the relators until May 13, 2014 to file an amended complaint. See April 28, 2014 Order on Joint Motion to Modify, Dkt. 35.

Relators filed their second amended complaint on May 13, 2014, but in so doing, they redacted some of the new allegations and concurrently asked this Court to seal these redacted portions of the complaint for 60 days, in accordance with 31 U.S.C. § 3730(b)(2). Relators say these redacted portions contain "information about additional alleged claims... never before set forth in any prior complaint." Mot. Mem., Dkt. 51, at 2. They therefore propose to file their unredacted second amended complaint under seal, which would provide the government with a fresh 60 days in which to investigate the new allegations while, at the same time, the defendants would not be aware of the content of these allegations.

Finally, while relators' motion to seal was pending, all parties jointly requested an extension of time for defendants to file responsive pleadings.

DISCUSSION

The Court will address each motion in turn, beginning with the government's unopposed motion to seal exhibits to its complaint in intervention.

1. The Government's Motion to Seal Exhibits

The government asks the Court to seal all 11 exhibits to its complaint. It supports this request ...


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