United States District Court, D. Arizona
MURRAY SNOW, CHIEF UNITED STATES DISTRICT JUDGE
before the Court are Defendant Yavapai Community College and
John Morgan's Joint Motion for Summary Judgment (Doc.
169) and Cross Motion for Summary Judgment (Doc. 183),
Defendant North-Aire's Motion for Summary Judgment (Doc.
173), and Plaintiff Daniel Hamilton's Motion for Partial
Summary Judgment (Doc. 175).
several years, Defendant Yavapai Community College
(“Yavapai”) has provided air flight training
programs as part of the courses it offers. John Morgan is a
Dean at the school who oversaw the Aviation Programs. Yavapai
offers both helicopter and fixed-wing training programs, but
these motions are centered on the fixed-wing training
2011, North-Aire Aviation (“North-Aire”) entered
a Memorandum of Understanding (“MOU”) with
Yavapai to offer an Associate of Applied Science
(“AAS”) degree in Aviation Technology. Under the
agreement, North-Aire provided the fixed-wing flight course
component, while Yavapai offered all ground training.
North-Aire then invoiced Yavapai for the costs of the flight
course, and Yavapai would then submit these invoices to the
Department of Veterans Affairs (“VA”). The VA
would then reimburse Yavapai for veterans who were enrolled
in the course. After Yavapai submitted these invoices and
received payment from the VA, North-Aire was reimbursed from
Yavapai. The MOU specifically stated that Yavapai would not
be able to pay North-Aire until after the VA provided
reimbursement for the flight training program. (Doc. 174 at
69). And Yavapai stated that it would retain all the money
from the ground courses. (Id. at 68).
Daniel Hamilton's claims here center on allegations that
North-Aire and Yavapai defrauded the VA by failing to comply
with VA regulations. To obtain payment from Veteran Affairs,
Yavapai and North-Aire were required to comply with the
“85/15 Rule.” 38 C.F.R. § 21.4201(f)(2)(i).
The 85/15 Rule requires that no more than 85% of students
enrolled in a specific course are supported by the VA or by
the institution at any given time. 38 C.F.R. §
21.4201(a). Thus, a school must enroll at least 15 percent of
their students in a given course that do not receive
institutional funding. Regulation 4201 also outlines the
requirements for determining which students may be considered
“nonsupported.” In relevant part, students are
considered non-supported if they are: (1) not veterans or
reservists, and “are not in receipt of institutional
aid, ” or (2) are “undergrads and non-college
degree students receiving any assistance provided by an
institution, if the institutional policy for determining the
recipients of such aid is equal with respect to veterans and
nonveterans alike.” 38 C.F.R. § 21.4201(e)(2). If
the student falls outside the definition of non-supported,
then she must be considered “supported” by the
this rule, the institution is responsible for accurately
reporting these numbers to the VA. Separate 85/15
calculations are required whenever a course materially
differs from another, such as through degree requirements,
length or course objectives. Id. (e). VA regulations
expressly require flight courses under a contract to comply
with the 85/15 Rule. 38 C.F.R. § 21.4263(1). Under these
regulations, only an institution of higher learning or a
flight school-not a private company-can be approved for
reimbursement. Id. (a). The 85/15 Rule is
specifically designed to prevent the abuse of the GI bill.
See Cleland v. Nat'l College of Business, 435
U.S. 213, 217 (1978) (“[I]f an institution of higher
learning cannot attract sufficient nonveteran and
nonsubsidized students to its programs, it presents a great
potential for abuse of our GI educational programs.”)
(internal quotation marks and citations omitted).
early 2012, the VA Regional Office found that Yavapai
violated the 85/15 Rule and suspended its flight programs.
After this suspension, Yavapai decided to sunset its
helicopter and fixed-wing vehicle training degree programs,
and to create a new program that combined different
concentrations into one-degree program-the AVT program.
Fall of 2013, Yavapai created this program, offering an AAS
degree with four different concentrations. Under this new
degree program, it was possible for students to obtain an
AAS, and be counted as non-supported, without ever taking any
flight courses. A VA Compliance Officer, Ms. Swafford, says
that at some point she was aware that Yavapai was counting
the students from the four separate concentrations together
in the program but did not ever state that she instructed
Yavapai to count the students together. (Doc. 170, Ex. 17, at
348-349). And Ms. Swafford did state that if she had been
asked by Yavapai at the time, she would have told Yavapai
that counting the concentrations together was permissible.
(Id.). Another college in the region similarly
counted their students for a flight training program.
was consolidating its various flight degree programs, Yavapai
also entered into an agreement with the Mountain Institute
Joint Technical Education District (“JTED”) to
enroll high school students into the AVT program. Part of
this agreement allowed JTED to pay the salaries of several
AVT course instructors instead of paying the full amount to
Yavapai for the tuition of the JTED students enrolled in the
AVT program. In a letter to Ms. Swafford that requested
guidance on 85/15 compliance, Yavapai employee Ms. Eckel
noted that “[JTED] will compensate the college so that
their students may enroll in college classes.” (Doc.
170 Ex. 1 at 147). That letter also noted that Yavapai
planned to count the JTED students as non-supported.
(Id.). But the letter did not disclose the specific
payment arrangement between JTED and Yavapai. (Id.).
Ms. Swafford later responded to this letter without objecting
to the arrangement with JTED while also emphasizing that if
part of a student's tuition was being paid by Yavapai,
the student cannot be counted as nonsupported. (Id.
at 148). In her deposition testimony, Ms. Swafford agreed
that “as long as the JTED students were paying the same
tuition as the VA students . . . they were properly included
in the 15 percent.” (Doc. 170 Ex. 2 at 198). The JTED
students, however, did not pay the same tuition as the VA
students, and instead the college reimbursed instructor
salaries. (Doc. 198, Ex. 8).
this time, North-Aire also made payments to at least two
non-supported students who were enrolled in their flight
program. (Doc. 170, ¶ 70). And Yavapai and North-Aire
worked to recruit non-VA students to enroll in the fixed wing
Yavapai was setting up the combined program, North-Aire and
Yavapai conducted several meetings about the 85/15 Rule, and
meeting notes indicate that the parties were aware that 85/15
compliance was an issue, and that they were seeking solutions
to that problem. (Doc. 194 at 169-204).
March 2015, the VA notified Yavapai that the four
concentrations required separate calculations. (Doc. 195, Ex.
30). Because the Airplane Operations concentration included
94% students who were receiving assistance from the VA, the
VA stated that Yavapai could no longer submit VA students for
certification under the Airplane Operations program.
parties bring their various motions for summary judgment on
the issues of whether Yavapai and North-Aire complied with
the 85/15 Rule from 2012 to 2015.
Motion for Summary Judgment
judgment is appropriate if the evidence, viewed in the light
most favorable to the nonmoving party, demonstrates
“that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law.” Fed.R.Civ.P. 56(a). When the parties file
cross-motions for summary judgment, the Court
“evaluate[s] each motion independently, ‘giving
the nonmoving party in each instance the benefit of all
reasonable inferences.'” Lenz v. Universal
Music Corp., 815 F.3d 1145, 1150 (9th Cir. 2015)
(quoting ACLU v. City of Las Vegas, 333 F.3d 1092,
1097 (9th Cir. 2003)). Substantive law determines which facts
are material and “[o]nly disputes over facts that might
affect the outcome of the suit under the governing law will
properly preclude the entry of summary judgment.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). “A fact issue is genuine ‘if the evidence
is such that a reasonable jury could return a verdict for the
nonmoving party.'” Villiarimo v. Aloha Island
Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (quoting
Anderson, 477 U.S. at 248). Thus, the nonmoving
party must show that the genuine factual issues
“‘can be resolved only by a finder of fact
because they may reasonably be resolved in favor of either
party.'” Cal. Architectural Bldg. Prods., Inc.
v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th
Cir. 1987) (quoting Anderson, 477 U.S. at 250).
False Claims Act
False Claims Act imposes liability on any individual who
knowingly defrauds the federal government. Section 3730(b) of
the Act empowers individuals to “file suit on behalf of
the United States seeking damages from persons who file false
claims for government funds.” Hooper v. Lockheed
Martin Corp., 688 F.3d 1037, 1041 (9th Cir. 2012). To
prevail on a claim under the Act, a plaintiff must prove that
the defendant acted knowingly, which includes “acts in
reckless disregard of the truth or falsity of the
information.” See 31 U.S.C. § 3729.
may act with reckless disregard if they fail to familiarize
themselves with the legal requirements for payment.
United States v. Mackby, 261 F.3d 821, 828 (9th Cir.
2001). Reckless disregard includes the situation
where a party “failed to make simple inquiries which
would alert him that false claims are being submitted.”
United States v. Bourseau, 531 F.3d 1159, 1168 (9th
Cir. 2008). Thus, individuals who seek payment from the
government “have some duty to make a limited inquiry so
as to be reasonably certain they are entitled to the money
they seek.” Id. But the reckless disregard
standard requires a showing of more than negligence, and a
mere mistake is not sufficient to establish liability.
Hagood v. Sonoma Cty. Water Agency, 81 F.3d 1465,
1478 (9th Cir. 1996).