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reply brief florida kaplan

reply brief florida kaplan

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Published by: gillespie.jude on Oct 19, 2009
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{M2863936;1}
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 09-20756-CIV-SEITZ
UNITED STATES OF AMERICA,ex rel.
CARLOS URQUILLA-DIAZet al.,
Plaintiffs,
v.
KAPLAN UNIVERSITYet al.,
Defendants.
____________________________________/
DISPOSITIVE MOTION

DEFENDANTS KAPLAN, INC., KAPLAN UNIVERSITY, AND KAPLAN HIGHER
EDUCATION CORPORATION\u2019S REPLY BRIEF IN SUPPORT OF MOTION TO
DISMISS RELATORS\u2019 SECOND AMENDED COMPLAINT

I.
INTRODUCTION AND SUMMARY OF ARGUMENT

In their opposition, Relators rely upon a series of arguments and extraneous materials in the hope of distracting the Court from the three reasons why their case should be dismissed: (1) it is barred by the first-to-file provision, (2) Relators have not alleged an underlying violation of the law with particularity, and (3) Relators\u2019 general theory of liability fails as a matter of law. Nothing that Relators say in their opposition \u2013 or that the United States mentions in its limited Statement of Interest \u2013 changes the result that Relators\u2019 case should be dismissed with prejudice before Relators expose Kaplan to potentially millions of dollars of futile discovery.

II.
RELATORS\u2019 CASE SHOULD BE DISMISSED PURSUANT TO THE FIRST-TO-
FILE PROVISION

The first reason why Relators\u2019 case should be dismissed is because it is jurisdictionally
barred from proceeding by the \u201cfirst-to-file\u201d provision. As Kaplan outlines in its Motion, the
first-to-file provision bars a False Claims Act (\u201cFCA\u201d) case from going forward to the extent it is
a \u201crelated action based on the facts underlying [an earlier-filed] pending [qui tam] action.\u201d 31
U.S.C. \u00a7 3730(b)(5).See Mot. at 5-6. To be barred, a case need not be identical to an earlier-
filed case; rather, the first-to-file \u201cbar applies \u2018so long as a subsequent complaint raises the same

Case 1:09-cv-20756-PAS Document 187 Entered on FLSD Docket 10/16/2009 Page 1 of 13
{M2863936;1}
1

or a related claim based in significant measure on the core fact or general conduct relied upon in the firstqui tam action.\u2019\u201dU.S. ex rel. Bane v. Life Care Diagnostics, 2008 WL 4853599, at *3 (M.D. Fla. Nov. 10, 2008) (citation omitted). The idea behind the first-to-file rule is that once an earlier-filed complaint has placed the government on notice, no further complaints need be filed to alert the government or otherwise protect the government\u2019s interests.U.S. ex rel. St. John

Lacorte v. Smithkline Beecham, 149 F.3d 227, 234 (3d Cir. 1998). As held by all courts, the

first-to-file provision is broad, and requires dismissal under Rules 12(b)(1) or 12(b)(6) of any complaint that it precludes.See, e.g.,Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276, 1278 (10th Cir. 2004).1

Here, Relators\u2019 case is clearly barred by the first-to-file provision. The earlier-filed case
ofU.S. ex rel. Gatsiopoulos v. ICM and Kaplan alleges the exact same theory of \u201cfraud\u201d as
Relators allege here; alleges, like Relators here, that this fraud occurred in connection with
statements made by Kaplan in Program Participation Agreements (\u201cPPAs\u201d) entered into with the
Department of Education (\u201cDOE\u201d); alleges, like Relators here, that these false statements related
to compliance with various Higher Education Act (\u201cHEA\u201d) and DOE requirements; and even
provides some of the exact same examples of how this purported \u201cfraud\u201d took place, including,
for instance, by allegedly paying recruiters prohibited \u201cincentive compensation\u201d and \u201cinflating\u201d
students\u2019 grades.Compare Req. for Jud. Not. (filed Aug. 4, 2009) (\u201cRJN\u201d) Exs. A-B,with Sec.
Am. Compl. (\u201cSAC\u201d); Mot. at 6-7 (outlining overlap). Indeed, Relators themselves have
acknowledged the similarities between their case andGatsiopoulos in submissions to the Panel
on Multi-District Litigation in which they urged thatGatsiopoulos be coordinated with this case.
RJN Ex. E at 3 (\u201cAmong other things, the Qui Tam Actions make similar allegations concerning
how Kaplan made fraudulent misrepresentations to the United States in order to obtain student
loans.\u201d);id. (\u201cThe Florida Action details numerous instances of fraud, many of which overlap
with the allegations in the . . . Pennsylvania action[].\u201d). And it is for these reasons that the Panel
transferredGatsiopoulos to this Court. RJN Ex. C at 1 (\u201c[W]e find that the[] . . . actions involve

1
Importantly, the government has taken no position on Kaplan\u2019s first-to-file argument.
Case 1:09-cv-20756-PAS Document 187 Entered on FLSD Docket 10/16/2009 Page 2 of 13
{M2863936;1}
2

common questions of fact. . . .\u201d).2 Therefore, this is clearly a \u201crelated action\u201d based upon the facts underlying the earlier-filedGatsiopoulos case, and Relators\u2019 arguments to the contrary \u2013 which are inconsistent with the statements they made to the MDL Panel \u2013 should be rejected.

In response, Relators now advance a series of arguments, none of which hold water.
First, Relators\u2019 contention that they have asserted \u201cadditional\u201d violations of the incentive
compensation provision, violations of the Rehabilitation Act and Americans with Disabilities Act
(\u201cADA\u201d), and violations of accreditor requirements not found inGatsiopoulos does not save
their case. Opp. at 5-6, 16-17. These are just \u201crelated\u201d frauds that are barred by the first-to-file
provision.See, e.g.,Palladino ex rel. U.S. v. VNA of S. New Jersey, Inc., 68 F. Supp. 2d 455,
478 (D.N.J. 1999) (\u201c[O]nce the government knows the essential facts of a fraudulent scheme, it
has enough information to discover related frauds,\u201d which are also barred). Further, and at any
rate, these allegations are the ones most susceptible to dismissal based upon Kaplan\u2019s other
arguments.See Sections III-IVinfra.

Second, Relators\u2019 argument that their case is not \u201crelated\u201d because this matter may
involve a different Kaplan entity or school thanGatsiopoulos also fails. Opp. at 6-7, 15-16. As
a preliminary matter, Relators conveniently ignore the fact that both they and theGatsiopoulos
relators sue the very same Kaplan entity \u2013 Kaplan Higher Education Corporation. RJN Exs. A-B
(suing KHEC); SAC (same). Likewise, Relators also conveniently ignore that at least some of
the allegations inGatsiopoulos purport to be \u201ccorporate-wide.\u201dSee, e.g., RJN Ex. B \u00b6 22
(alleging purported illegal \u201cincentive compensation\u201d throughout KHEC, the corporate parent of
both ICM and KU). Further, and as outlined in Kaplan\u2019s Motion, Relators\u2019 argument is
generally without support: courts consistently hold that an earlier-filed action against one
corporate affiliate is sufficient to bar a latter action against a different affiliate, provided the
earlier action provided the government notice of what is alleged in the latter action.U.S. ex rel.

Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214, 218 (D.C. Cir. 2003); see also, e.g.,
Grynberg,390 F.3d at 1280 n. 4; cf. U.S. ex rel. Wilson v. Emergency Med. Ass. of Ill., 2000 WL
2Relators misrepresent the Panel\u2019s ruling. The Panel did not \u201creject\u201d the first-to-file argument,

as implied by Relators (Opp. at 5); rather, it simply found that such an argument was for this
Court to decide. RJN Ex. C at 2. Nor did the Panel find that there were dispositive \u201cnon
common issues\u201d among the cases precluding a first-to-file argument. Opp. at 5.

Case 1:09-cv-20756-PAS Document 187 Entered on FLSD Docket 10/16/2009 Page 3 of 13

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