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7th Circuit reverses sanctions against Plews Shadley, other firms in False Claims Act case

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After finding that a federal court in Indianapolis erred in dismissing a former ITT Educational Services Inc. employee’s False Claims Act lawsuit, the 7th Circuit Court of Appeals reversed the nearly $350,000 in sanctions imposed against three law firms representing the woman.

Debra Leveski worked at ITT for more than 10 years – first as an inside recruitment representative, then as a financial aid administrator. After she left the company following the settlement of a sexual harassment suit she filed against ITT, she was contacted by Mississippi attorney Timothy J. Mathusheski. The attorney sought former ITT employees to bring an FCA suit.

Leveski, who had been told by supervisors and other employees that her pay increases as a recruit representative and financial aid administrator depended on the numbers of students who, among other things, enrolled and received financial aid, decided to file the suit on behalf of the government in 2007. Indianapolis firm Plews Shadley Racher & Braun LLP and Motley Rice LLP, headquartered in Charleston, S.C., later joined as Leveski’s attorneys along with Mathusheski.

The suit alleges that ITT, headquartered in Carmel, knowingly submitted false claims to the Department of Education in order to receive funding from federal student financial assistance programs. The suit survived two motions to dismiss in District Court, although the timeframe in the suit was limited to July 2001 to July 2007. But when the case was transferred to Judge Tanya Walton Pratt, she dismissed it for want of jurisdiction. Walton Pratt said Leveski’s allegations had already been publicly disclosed in United States ex rel. Graves v. ITT Educ. Servs. Inc., 284 F. Supp. 2d 487 (S.D. Tex. 2003), and she was not the original source of her allegations. The judge also sanctioned the three firms and Mathusheski $394,998.33 for filing a suit she deemed frivolous.

The 7th Circuit found Leveski’s allegations are not substantially similar to the relators’ allegations in Graves. In Graves, two former employees who worked for ITT as inside recruitment representatives for less than two years alleged ITT violated the Higher Education Act by illegally paying incentive compensation to its RRs. The law in effect at the time of the lawsuit prohibited adjusting compensation for student recruiters and financial aid officers based solely on the number of students recruited, admitted, enrolled or awarded financial aid.

The sham compensation scheme and the financial aid violations alleged by Leveski are different than the outright quota system alleged by the Graves relators, Judge John Daniel Tinder wrote in Debra Leveski v. ITT Educational Services, Inc. and Appeals of: Motley Rice LLP, Plews Shadley Racher & Braun LLP, The Law Offices of Timothy J. Matusheski and Timothy J. Matusheski, 12-1369, 12-1967, 12-1979, 12-2008, 12-2891.

And those allegations are different enough from the Graves allegations to bring her suit outside the public disclosure bar of 31 U.S.C. § 3730(e)(4).

“We believe that Leveski’s case is yet another instance of a district court dismissing an FCA suit after viewing the allegations at too high a level of generality,” Tinder concluded.

Her case rests on genuinely new and material information, so the District Court had subject-matter jurisdiction over her case under Section 3730(e)(4)(A). The judges also found that Leveski has direct and independent knowledge of her allegations, and thus, is the original source of them.

Because the 7th Circuit found the case merits further development and Leveski’s allegations are sufficiently distinct from prior public disclosures, the sanctions against the law firms also were reversed.

“We do not know whether Leveski will ultimately prevail, nor do we state any opinion as to whether Leveski should ultimately prevail. But we do believe that Leveski should be allowed to litigate her case on the merits, and thus, sanctions for bringing a frivolous lawsuit are inappropriate,” Tinder wrote. If it turns out Leveski made up all of her allegations and supporting evidence, then sanctions may be warranted.

After the ruling Monday, PSRB managing partner John Ketcham said in a statement, “We are gratified that the Seventh Circuit has held this case is ‘substantial’, which is what our client has contended all along, and reversed the sanctions.”

 

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  1. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  2. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  3. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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