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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. Hysteria? Really Ben? Tell the young lady reported on in the link below that worrying about the sexualizing of our children is mere hysteria. Such thinking is common in the Royal Order of Jesters and other running sex vacays in Thailand or Brazil ... like Indy's Jared Fogle. Those tempted to call such concerns mere histronics need to think on this: http://www.msn.com/en-us/news/us/a-12-year-old-girl-live-streamed-her-suicide-it-took-two-weeks-for-facebook-to-take-the-video-down/ar-AAlT8ka?li=AA4ZnC&ocid=spartanntp

  2. This is happening so much. Even in 2016.2017. I hope the father sue for civil rights violation. I hope he sue as more are doing and even without a lawyer as pro-se, he got a good one here. God bless him.

  3. I whole-heartedly agree with Doug Church's comment, above. Indiana lawyers were especially fortunate to benefit from Tom Pyrz' leadership and foresight at a time when there has been unprecedented change in the legal profession. Consider how dramatically computer technology and its role in the practice of law have changed over the last 25 years. The impact of the great recession of 2008 dramatically changed the composition and structure of law firms across the country. Economic pressures altered what had long been a routine, robust annual recruitment process for law students and recent law school graduates. That has, in turn, impacted law school enrollment across the country, placing upward pressure on law school tuition. The internet continues to drive significant changes in the provision of legal services in both public and private sectors. The ISBA has worked to make quality legal representation accessible and affordable for all who need it and to raise general public understanding of Indiana laws and procedures. How difficult it would have been to tackle each of these issues without Tom's leadership. Tom has set the tone for positive change at the ISBA to meet the evolving practice needs of lawyers of all backgrounds and ages. He has led the organization with vision, patience, flexibility, commitment, thoughtfulness & even humor. He will, indeed, be a tough act to follow. Thank you, Tom, for all you've done and all the energy you've invested in making the ISBA an excellent, progressive, highly responsive, all-inclusive, respectful & respected professional association during his tenure there.

  4. The is putting restrictions on vaping just because big tobacco companies are losing money. http://vapingisthefuture.com

  5. Oh, and I should add ... the stigma JLAP attaches lasts forever. As my documents show, I had good reason to reject the many conflicted diagnoses for not thinking like the state wanted me to. BUT when I resisted and raised constitutional and even ADA "regarded as" arguments I was then denied licensed in Indiana for LIFE. As in until death does us part. Evidence in comments here: http://www.theindianalawyer.com/scotus-denies-cert-to-kansas-attorney-seeking-to-practice-in-indiana/PARAMS/article/40522 Resistance is futile, comrades.

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