Litigation Update: Ninth Circuit to Weigh In on Key Post-Escobar Issues
We have reported previously on an implied false certification case in the Northern District of California, United States ex rel. Rose v. Stephens Institute, in which the court considered whether a university violated the FCA when it obtained funding from the U.S. Department of Education by allegedly falsely certifying compliance with Title IV of the Higher Education Act. The university moved to certify the district court’s order ruling against it on falsity and materiality for immediate appeal to the Ninth Circuit, and as we reported here, the district court in October certified three of the university’s four proposed questions for interlocutory appeal and stayed the case pending resolution of the university’s appeal.
The questions certified for appeal are (1) whether
claims for payment form the basis for liability under an implied false
certification theory when Escobar’s two-part test for falsity is not
met; (2) whether a failure to comply with the incentive compensation ban
automatically causes a loss of institutional eligibility under Title IV; and
(3) whether the Ninth Circuit’s decision in United States
ex rel. Hendow v. University of Phoenix, 461 F.3d 1166 (9th Cir. 2006)
(which held prior to Escobar that compliance with the incentive
compensation ban was material) remains good law post-Escobar.
The Ninth Circuit granted the university’s petition
for permission to appeal this week. The Ninth Circuit will now have the
opportunity to weigh in on several key post-Escobar issues, including on
the application of Escobar’s “demanding” materiality standard, where
the Seventh and Eighth Circuits have split in recent months. Merits
briefing and arguments will follow, so stay tuned for developments!