Hamilton v. Yavapai Community College District

          ORDER

          G. MURRAY SNOW, CHIEF UNITED STATES DISTRICT JUDGE

         Pending 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).

         BACKGROUND

         For 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 program.

         In 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).

         Plaintiff 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 institution.

         Under 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).

         In 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.

         In the 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. (Id.)

         As it 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).

         During 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 program. (Id.).

         While 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).

         In 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. (Id.).

         The 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.

         I. Legal Standard

         A. Motion for Summary Judgment

         Summary 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).

         B. False Claims Act

         The 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.

         Defendants 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).

         II. Analysis

         A. ...