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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. All the lawyers involved in this don't add up to a hill of beans; mostly yes-men punching their tickets for future advancement. REMF types. Window dressing. Who in this mess was a real hero? the whistleblower that let the public know about the torture, whom the US sent to Jail. John Kyriakou. http://www.nytimes.com/2013/01/26/us/ex-officer-for-cia-is-sentenced-in-leak-case.html?_r=0 Now, considering that Torture is Illegal, considering that during Vietnam a soldier was court-martialed and imprisoned for waterboarding, why has the whistleblower gone to jail but none of the torturers have been held to account? It's amazing that Uncle Sam's sunk lower than Vietnam. But that's where we're at. An even more unjust and pointless war conducted in an even more bogus manner. this from npr: "On Jan. 21, 1968, The Washington Post ran a front-page photo of a U.S. soldier supervising the waterboarding of a captured North Vietnamese soldier. The caption said the technique induced "a flooding sense of suffocation and drowning, meant to make him talk." The picture led to an Army investigation and, two months later, the court martial of the soldier." Today, the US itself has become lawless.

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