Case 8:07-cv-00669-SDM-TGW Document 58 Filed 07/29/2008 Page 1 of 6

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

UNITED STATES OF AMERICA

ex rel. CARLOS URQUILLA-DIAZ, et al.,

Plaintiffs,

v. 8:07-cv-669-T-23-TGW

KAPLAN UNIVERSITY et al.,

Defendants.

UNITED STATES’ SUR-REPLY STATEMENT OF INTEREST AS

TO DEFENDANTS’ MOTION TO DISMISS

In their Reply, the Defendants argue that False Claims Act (FCA) liability cannot be

predicated on the violation of a condition of participation, and that their position is validated by

the Supreme Court’s recent decision in Allison Engine Co. v. United States ex rel. Sanders, 128

Sup. Ct. 2123 (2008). Allison does no such thing. A long line of Supreme Court and lower

court decisions have imposed FCA liability based on violations of conditions of participation.

Nothing in Allison Engine purports to change this result. Indeed, Allison does not even mention

the term “condition of participation.” Accordingly, the defendants’ suggestion that this case

suddenly and silently reversed course and stands for the proposition that the violation of a

condition of participation can never be the basis for an FCA violation lacks any merit.

The issue before the Supreme Court in Allison was whether §§ 3729(a)(2) and (a)(3) of

the FCA require that a false claim be presented to a federal official as an element of liability.

The Court concluded that they do not. Allison, 128 Sup. Ct. at 2129-30. The Court relied

heavily on the fact that § 3729(a)(1) expressly references “presentment,” but that no such

reference is contained in §§ 3729(a)(2) or (a)(3).

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Although it concluded that §§ 3729(a)(2) and (a)(3) do not contain a presentment

requirement, the Court held that they require proof that the defendant intended that its conduct

would result in the payment of a claim by the United States, as opposed to a private party. As

the Court explained, “[e]liminating this element of intent . . . would expand the FCA well

beyond its intended role of combating ‘fraud against the Government.’ ” Id. 2128 (emphasis in

original). Later in its opinion, the Court reiterated that the FCA applies only if the defendant

intended the Government, rather than a private party, to rely on its misrepresentation: “If a

subcontractor or another defendant makes a false statement to a private entity and does not

intend the Government to rely on that false statement as a condition of payment, the statement is

not made with the purpose of inducing payment of a false claim ‘by the Government.’ ” Id. at

2130.

The Defendants now contend that this passing reference to a “condition of payment”

means that even conduct aimed at the Government is outside the FCA if that conduct violated a

condition of participation or eligibility (as opposed to a condition of payment). According to the

Defendants, this one sentence in Allison stands for the proposition that the violation of a

condition of participation or eligibility can never be the basis for an FCA violation. The

Defendants’ argument lacks merit for several fundamental reasons.

First, the Defendants’ argument erroneously assumes that conditions of payment and

participation are mutually exclusive. That very argument was rejected by the 9th Circuit, which

properly recognized that a condition of participation can also be a condition of payment. See

United States’ Statement of Interest (Dkt. 28) at 6, citing U.S. ex rel. Hendow v. University of

Phoenix, 461 F.3d 1166, 1176 (9th Cir. 2006); see also U.S. ex rel. Quinn v. Omnicare Inc., 382

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F.3d 432, 442-43 (3d Cir. 2004) (concluding that New Jersey Board of Pharmacy regulations

were both conditions of participation and payment). As the 9th Circuit explained, a condition of

payment is merely a condition that is a “prerequisite” to payment. Id; see also United States v.

Rogan, 517 F.3d 449, 453 (7th Cir. 2008). While not every condition of participation or

eligibility is necessarily a prerequisite to payment, it does not follow that no condition of

participation can ever be a prerequisite to payment.1 And there is certainly nothing in Allison

that supports such a conclusion, given that the case does not even mention the term condition of

participation, let alone hold (or even suggest) that conditions of participation and payment are

mutually exclusive.

Second, the Defendants’ argument entirely ignores the context of the Allison decision

and, in particular, the one sentence they rely upon in that decision. As noted, the Supreme Court

was concerned that subsections (a)(2) and (a)(3), because they lack a presentment requirement,

could be construed to encompass fraud directed solely at private parties. Accordingly, to guard

against such a result, the Supreme Court interpreted these subsections to require proof that the

defendant intended a false claim to be paid by the Government. The isolated sentence that the

Defendants’ cite from Allison was intended merely to reiterate that § 3729(a)(2) does not

encompass fraud directed at private parties. See Allison, 128 S. Ct. at 2130 (“If a subcontractor

or another defendant makes a false statement to a private entity and does not intend the

Government to rely on that false statement as a condition of payment, the statement is not made

with the purpose of inducing payment of a false claim ‘by the Government.’ ”) (emphases

1
A condition of participation or eligibility is typically a requirement that must be met to qualify for a
government program or benefit, and the violation of such a requirement may result in disqualification and/or some
lesser sanction, including the denial of payment. Where the denial of payment is authorized, the condition of
participation is also properly considered a condition of payment.

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added). Nothing in this sentence suggests that it was intended to carve out a category of conduct

from the FCA that was directed at the government rather than a private party – and to immunize

a defendant who claims money to which it is not entitled just because the defendant violated a

condition of participation or eligibility.

Third, the Defendants’ proffered interpretation of Allison is inconsistent with more than

50 years of FCA jurisprudence. As far back as U.S. ex rel. Marcus v. Hess, 317 U.S. 537 (1943),

which upheld liability against a defendant that engaged in bid-rigging, the Supreme Court has

made clear that violations of conditions of participation or eligibility can provide the basis for

FCA liability. Since then, “[a] number of courts in a variety of contexts have found violations of

the False Claims Act when a government contract or program required compliance with certain

conditions as a prerequisite to a government benefit, payment, or program . . . .” Harrison v.

Westinghouse Savannah River Co., 176 F.3d 776, 786 (4th Cir. 1999) (citing cases). If the

Supreme Court in Allison had intended to overrule Marcus and its progeny, presumably it would

have signaled such an intention beyond a passing reference to the term “condition of payment.”

Finally, this Court should reject the Defendants’ unjustified attempt to extend Allison’s

holding to limit the scope of § 3729(a)(1). Allison grounded its holding that subsections (a)(2)

and (a)(3) require proof that the defendant intended its conduct to result in the payment of a

claim by the United States in the specific language of these sections. Specifically, Allison relied

on the similar language in both sections requiring proof that the defendant used a false statement

“to get” a false or fraudulent claim paid by the Government, 31 U.S.C. §3729(a)(2), or conspired

to defraud the Government “by getting” such a claim paid by the Government, id. § 3729(a)(3).

See Allison, 128 S. Ct. at 2128 (“ ‘To get’ denotes purpose, and thus a person must have the

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purpose of getting a false or fraudulent claim ‘paid or approved by the Government’ in order to

be liable under § 3729(a)(2).”); id. at 2130 (“Our interpretation of [the language of §3729(a)(3)]

is similar to our interpretation of the language of § 3729(a)(2).”). Significantly, subsection

(a)(1) does not contain the “to get” language found in subsections (a)(2) and (a)(3).

Accordingly, the Defendants’ attempt to extend Allison’s holding to subsection (a)(1) violates

the principle of statutory interpretation that Allison itself invoked: that “[w]hen Congress

includes particular language in one section of a statute but omits it in another section of the same

Act, it is generally presumed that Congress acts intentionally and purposely in the disparate

inclusion or exclusion.” Id. at 2129-30.

Moreover, there is no reason to try to stretch Allison to cover (a)(1). Since this provision,

unlike (a)(2) and (a)(3), requires that a claim actually be presented to the United States, the

Supreme Court’s overriding concern that the FCA will encompass purely private misconduct

does not arise. That concern arises only under subsections (a)(2) and (a)(3) because they do not

contain any such presentment requirement. Accordingly, the Defendant’s argument that Allison

limits the scope of subsection (a)(1) ignores both the letter and the spirit of that decision.

Accepting their argument would be a misapplication of the Supreme Court’s holding in that case.

Respectfully submitted,

Dated: July 29, 2008 ROBERT E. O’NEILL

United States Attorney

By: s/Charles T. Harden III

CHARLES T. HARDEN III
Assistant United States Attorney
Florida Bar No. 97934
400 North Tampa Street, Suite 3200

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Tampa, Florida 33602

Telephone No: (813) 274-6316
Facsimile: (813) 274-6200
E-mail: charles.harden@usdoj.gov

GREGORY G. KATSAS
Assistant Attorney General

JOYCE R. BRANDA
MICHAEL GRANSTON
RENEE BROOKER
JAY D. MAJORS
LINDA M. McMAHON
Attorneys, Civil Division
Commercial Litigation Branch
Post Office Box 261
Ben Franklin Station
Washington, D.C. 20044
Telephone: (202) 307-0448

CERTIFICATE OF SERVICE

I hereby certify that on July 29, 2008, I electronically filed the foregoing with the Clerk
of the Court by using the CM/ECF system which will send a notice of electronic filing of same
to the following:

John W. Andrews, Esq. Susan Eisenberg James L. Zelenay, Jr.

Andrewslawgroup@ix.netcom.com
J. Troy Andrews
andrewslawgroup@ix.netcom.com
Andrews Law Group
3220 Henderson Blvd.
Tampa, FL 33609
Counsel for Relators
susan.eisenberg@akerman.com
Mia Rene Martin
mia.martin@akerman.com
Samuel S. Heywood
samuel.heywood@akerman.com
Akerman Senterfitt
One S.E. 3rd Ave., 28th Flr.
Miami, FL 33131-1714
Counsel for Defendants
jzelenay@gibsondunn.com
Nicola T. Hanna
nhanna@gibsondunn.com
Timothy J. Hatch
thatch@gibsondunn.com
Gibson, Dunn & Crutcher, LLP
333 South Grand Avenue
Los Angeles, CA 90071
Counsel for Defendants

By: s/Charles T. Harden III

CHARLES T. HARDEN III
Assistant United States Attorney