LAMPKIN v. PIONEER EDUCATION, LLC et al

Filing 38

OPINION. Signed by Judge Renee Marie Bumb on 7/31/2020. (dmr)

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[Dkt. No. 35]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE

UNITED STATES OF AMERICA ex
rel. SHARON LAMPKIN,
Plaintiff/Relator,
v.

Civ. No. 16-1817 (RMB/KMW)
OPINION

PIONEER EDUCATION, LLC; PIONEER
EDUCATION MANAGER, INC.; JOLIE
HEALTH & BEAUTY ACADEMY; and
JOSEPH VISCONTI,
Defendants.

APPEARANCES:
MORGAN ROOKS, P.C.
By: Franklin J. Rooks, Jr., Esq.
525 Route 73 North, Suite 104
Marlton, New Jersey 08053
Counsel for Plaintiff/Relator Sharon Lampkin
JARED JACOBSON LAW, LLC
By: Jared A. Jacobson, Esq.
144 N. Narbeth Avenue, Suite 502
Narbeth, Pennsylvania 19072
Counsel for Plaintiff/Relator Sharon Lampkin
MARSHALL DENNEHEY WARNER COLEMAN & GOGGIN, P.C.
By: Richard L. Goldstein, Esq.
15000 Midatlantic Drive, Suite 200
P.O. Box 5429
Mount Laurel, New Jersey 08054
Counsel for Defendants Pioneer Education, LLC, Pioneer
Education Manager, Inc., Jolie Health & Beauty Academy, and
Joseph Visconti
UNITED STATES ATTORNEY’S OFFICE
By: Anthony J. Labruna, Jr., Esq.
970 Broad Street, Suite 700
Newark, New Jersey 07102
Counsel for Interested Party United States of America

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RENÉE MARIE BUMB, UNITED STATES DISTRICT JUDGE:
Plaintiff/Relator Sharon Lampkin (“Relator”) brings this
qui tam action against Defendants Pioneer Education, LLC,
Pioneer Education Manager, Inc., Jolie Health & Beauty Academy,
and Joseph Visconti (“Defendants”), alleging violations of the
False Claims Act, 31 U.S.C. § 3729-33 (“FCA”) [Amended Complaint
(“Am. Compl.”), at ¶¶ 20, 24, 26].

In the Amended Complaint

[Dkt. No. 33], Relator alleges that Defendants violated the FCA
by falsifying student attendance records, falsifying the
satisfactory academic progress (“SAP”) of students, falsifying
student eligibility, and illegally terminated her for voicing
concerns about the alleged violations. (Am. Compl., at ¶¶ 2028). Now, this matter comes before the Court upon Defendants’
Motion to Dismiss the Amended Complaint [Dkt. No. 35].

For the

reasons set forth below, Defendants’ Motion to Dismiss will be
GRANTED and the Amended Complaint will be DISMISSED.

I.

FACTUAL & PROCEDURAL BACKGROUND
Relator’s claims arise from her employment with Defendant

Jolie Health and Beauty Academy (the “Academy”) at its location
in Northfield, New Jersey.

As alleged in the Amended Complaint,

the Academy is a post-secondary educational institution offering
training in occupations such as cosmetology and barbering, which
is operated by Defendants Pioneer Education, LLC, Pioneer

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Education Manager, Inc., and Joseph Visconti. [Am. Compl., at ¶¶
30-31].

Relator was hired by the Academy on October 29, 2012

and was employed on a full-time basis a Lead Barber Instructor
in the Academy’s barbering program until she was terminated in
October of 2015. [Id., at ¶¶ 32-35, 56].1

Relator alleges that

on numerous occasions during her last three months of
employment, she raised concerns to Defendants’ management team
about attendance violations, student conduct code infractions
and lack of satisfactory academic progress. [Id., at ¶ 48].
Ultimately, Defendant was terminated from her position on
October 1, 2015, which she alleges was a direct result of, and
in retaliation for, voicing her concerns about improper
practices at the Academy. [Id., at ¶¶ 55-57].
Relator instituted this qui tam action on March 31, 2016.
After an investigation into Relator’s claims the United States
filed a Notice of Election to Decline Intervention on July 29,
2019. [See Dkt. No. 4].

On November 4, 2019 the Court held a

pre-motion conference to address the parties’ respective
positions on Defendants’ anticipated motion to dismiss.

At the

pre-motion conference, the Court noted various deficiencies in
Relator’s initial complaint.

1

Accordingly, the Court permitted

The Court notes that Relator’s Amended Complaint skips directly
from paragraph 32 to paragraph 35, and contains no paragraphs
numbered 33 or 34.

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Relator fourteen days to submit an amended complaint, which
Relator filed on November 19, 2019.2

This matter now comes

before the Court upon Defendants’ Motion to Dismiss the Amended
Complaint.

II.

LEGAL STANDARDS
A.

Motion to Dismiss

To withstand a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007)). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. at 662. “[A]n unadorned, the defendantunlawfully-harmed-me accusation” does not suffice to survive a
motion to dismiss. Id. at 678. “[A] plaintiff’s obligation to
provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires
more than labels and conclusions, and a formulaic recitation of
the elements of a cause of action will not do.” Twombly, 550

2

When Relator filed her Amended Complaint, she removed Premier
Education Group, LLC as a defendant, as that entity had been
erroneously named in the suit. [Am. Compl., at ¶¶ 1-2].

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U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286
(1986)).
When reviewing a plaintiff’s complaint on a motion to
dismiss, the district court “must accept as true all well-pled
factual allegations as well as all reasonable inferences that
can be drawn from them, and construe those allegations in the
light most favorable to the plaintiff.” Bistrian v. Levi, 696
F.3d 352, 358 n.1 (3d Cir. 2012).

When undertaking this review,

courts are limited to the allegations found in the complaint,
exhibits attached to the complaint, matters of public record,
and undisputedly authentic documents that form the basis of a
claim. See In re Burlington Coat Factory Sec. Litig., 114 F.3d
1410, 1426 (3d Cir. 1997); Pension Benefit Guar. Corp. v. White
Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).
B.

The False Claims Act

Under the FCA, it is unlawful to knowingly submit a
fraudulent claim to the federal government.3 Bristol-Myers Squibb
Co., 332 F. Supp. 3d at 938 (citing U.S. ex rel. Schumann v.
Astrazeneca Pharm. L.P., 769 F.3d 837, 840 (3d. Cir 2014)). The
FCA contains includes a qui tam provision permitting private

3

The FCA imposes liability on ”any Person who (A) knowingly
presents, or causes to be presented, a false or fraudulent claim
for payment or approval;” or “(B) knowingly makes uses, or
causes to be made or used, a false record or statement material
to a false or fraudulent claim.”

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parties, known as relators, to bring suit against anyone who
submitted a false claim to the government. Id. at 938-39 (citing
Schumann, 769 F.3d at 840).

A violation of the FCA has four

elements: (1) falsity, (2) causation, (3) knowledge, and (4)
materiality. U.S. ex rel. Petratos v. Genentech Inc., 855 F.3d
481, 487 (3d. Cir. 2017).
There are two primary categories of false claims that can
satisfy the falsity requirement: (1) factually false claims and
(2) legally false claims. Bristol-Myers Squibb Co., 332 F. Supp.
at 939.4 “A claim is factually false when the claimant
misrepresents what goods or services that it provided to the
Government and a claim is legally false when the claimant
knowingly falsely certifies that it has complied with a statute
or regulation the compliance with which is a condition for
Government payment.” U.S. ex rel. Wilkins v. United Health Grp.
Inc., 659 F.3d 295, 305 (3d. Cir 2011).
Legally false claims are subcategorized into two theories
of liability: (1) express false certification and (2) implied
false certification. U.S. v. Kindred Healthcare Inc., 2020 U.S.
Dist. LEXIS 115998, at *17 (E.D. Pa. June 29, 2020). A defendant

4

The Court notes that “federal courts have recognized a narrow,
third category of false claims obtained by fraud-in-the
inducement.” Bristol-Myers Squibb Co., 332 F. Supp. at 939
(internal quotation marks omitted). This variant of a false
claim, however, is not relevant to this case and need not be
examined by the Court.

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is liable under the express false certification theory when they
falsely certify that they are in compliance with a material
statute, regulation, or contractual provision. Bristol-Myers
Squibb Co., 332 F. Supp. at 939. "By contrast, implied false
certification liability attaches when a claimant 'makes specific
representations about the goods or services provided' and the
claimant's 'failure to disclose noncompliance with material
statutory, regulatory, or contractual requirements makes those
representations misleading half-truths.'" United States v.
Eastwick Coll., 657 F. App'x 89, 93-94 (3d Cir. 2016)(quoting
Universal Health Servs. v. U.S. ex rel. Escobar, 136 S. Ct.
1989, 2001 (2016)).
Because FCA claims allege fraud, they are subject to the
heightened pleading standards of Federal Rule of Civil Procedure
9(b). See Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153,
155-156 (3d. Cir. 2014)). In order for a relator to satisfy the
standards of Rule 9(b) for purposes of FCA claims, the relator
“must provide ‘particular details of a scheme to submit false
claims paired with reliable indicia that lead to a strong
inference that claims were actually submitted.’ Describing a
mere opportunity for fraud will not suffice. Sufficient facts to
establish ‘a plausible ground for relief’ must be alleged.” Id.
at 157-158 (citing Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th

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Cir. 2009) and Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d
Cir. 2009)).
III. DISCUSSION
Among Defendants’ arguments for dismissal are that Relator
(1) fails to allege materiality with sufficient plausibility and
particularity; (2) fails to adequately state a claim for
retaliatory discharge; and (3) does not attribute any specific
wrongdoing to Defendant Visconti. On each of these points, the
Court agrees with Defendants.5
A.

Materiality (Counts I, II, III)

Defendants argue that Relator’s allegations appear premised
upon an implied false certification theory of liability, but
fail to conform with the materiality standard proscribed in
Escobar. [MTD, at 11-12].

Indeed, an FCA claim that asserts a

“misrepresentation about compliance with a statutory,
regulatory, or contractual requirement must be material to the
Government’s payment decision in order to be legally
actionable.” Escobar, 136 S.Ct. at 1996.

5

“In other words, all

Defendants also argue that Count III (falsification of student
eligibility) should be dismissed because, as a matter of law,
the Academy cannot discriminate against students based on
disability or national origin. The Court shares Defendants’
skepticism about the viability of this claim. However, reaching
this issue would likely force the Court to improperly examine
issues of fact regarding the nature and severity of the
students’ alleged disabilities and English language abilities.
Regardless, as the Court finds that dismissal is warranted on
other grounds, the Court need not resolve this argument herein.  

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FCA claims of legal falsity must also meet the FCA’s materiality
standard.” U.S. ex rel. Simpson v. Bayer Corp., 376 F.Supp.3d
392, 409 (D.N.J. Apr. 23, 2019).

In response, Relator argues

that the claims laid out in her pleading can be advanced under
both factually false and legally false theories of liability and
that the Escobar materiality standard need not apply to
factually false claims. [See Relator’s Brief in Opposition
(“Opp. Br.”)[Dkt. No. 36], at 9-10].
The Court agrees with Defendants that Relator’s Amended
Complaint appears to proceed under an implied false
certification theory; and an implied false certification theory
alone.6

As previously stated, a “claim is factually false when

the claimant misrepresents what goods or services that it
provided to the Government.” Wilkins, 659 F.3d at 305.

Despite

Relator’s arguments to the contrary, the Court cannot discern
any allegation in the Amended Complaint that Defendants directly
misrepresented a good or service that they provided to the
government.

For example, Relator does not allege that

Defendants were not providing cosmetology or barber programs.
Rather, Relator appears to contend that the submission of false
certifications amounted to “misleading half-truths,” because

6

As such, this Court need not resolve whether Escobar’s
materiality standard applies to allegations of factual falsity.

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many enrolled students were not successfully completing their
programs.
As best as this Court can extrapolate from the Amended
Complaint, which is hardly a model of clarity and specificity,
Counts I through III are based on the following theory:
(1) Defendants received funding under Title IV of the
Higher Education Act of 1965 (the “HEA);
(2) each institution receiving Title IV funding must enter
into a Program Participation Agreement (“PPA”);
(3) the PPA requires such institutions to conform to the
requirements of an accrediting agency, which for the
Academy was the National Accrediting Commission of
Career Arts and Sciences ("NACCAS");
(4) the NACCAS requires that "[t]he institution complies
with applicable, federal (including Title IV Federal
Financial Aid), state, and local statutes and
regulations governing the operations of the institution
including the NACCAS Rules of Practice and Procedure”;
and
(5) therefore, violations of a relevant state, local, or
federal statute or regulation would constitute a
violation of the FCA due to a failure to conform with
the PPA.
[Am. Compl., at ¶¶ 36-42, 76-87, 96-98]

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Relator argues that Defendants’ alleged violations of the
PPA have a “presumption of materiality” because they violate
Title IV regulations that are express conditions of payment.
(RRB, 2). Relator argues that “[t]o be eligible for Title IV
funding, an educational institution ‘shall’ enter into a Program
Participation Agreement that ‘shall condition the initial and
continuing eligibility of an institution to participate in a
program upon compliance with’ certain requirements, including
that the ‘institution will establish and maintain such
administrative and fiscal procedures and records as may be
necessary to ensure proper and efficient administration of
funds.’ 20 U.S.C. § 1094(a) (emphasis added).” [Opp. Br., at 2].
Stated simply, Relator’s argument misses the mark.
When “a defendant makes representations in submitting a
claim but omits its violations of statutory, regulatory, or
contractual requirements, those omissions can be a basis for
[FCA] liability.” Escobar, 136 S.Ct. at 1999. In order to be
legally actionable, however, a nondisclosure must be material.
Id. at 2001. Indeed, “not every undisclosed violation of an
express condition of payment automatically triggers liability.
Whether a provision is labeled a condition of payment is
relevant to but not dispositive of the materiality inquiry.” Id.
As set forth in Escobar, a misrepresentation is not
material solely because compliance has been deemed a condition

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of payment. Escobar, 136 S.Ct. at 2002.

The FCA’s materiality

standard is “rigorous” and “demanding[,]” and the statute is not
meant to be an “all-purpose antifraud statute… or a vehicle for
punishing garden-variety breaches of contract or regulatory
violations.” Id., at 2002-03.

Under the FCA, a

misrepresentation is material if it has “a natural tendency to
influence, or be capable of influencing, the payment or receipt
of money or property.” 31 U.S.C. § 3729(b)(4)(2009).
Materiality “look[s] to the effect on the likely or actual
behavior of the recipient of the alleged misrepresentation.”
Escobar, 136 S. Ct. at 2002 (citing 26 R. Lord, Williston on
Contracts §69:12, p.549 (4th ed. 2003) (Williston)).
Relator’s claims fail under Escobar’s materiality standard
because they are devoid of any substantive allegation to support
a finding of materiality.

To that end, the Amended Complaint

does not specify whether the DOE would have ceased payment of
Title IV funds if it learned about any, or all, of the alleged
falsifications of student records (Count I), falsifications of
SAP (Count II), and enrollment of ineligible students (Count
III).

Although Relator alleges that false statements “caused

the Department of Education to pay various claims under Title IV
HEA Programs that it would not have paid but for Defendants’
fraud,” [Am. Compl., at ¶ 117], the Amended Complaint lacks any
allegations in support of this conclusory declaration of

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materiality.

Furthermore, Relator’s argument that Defendant’s

alleged violations are entitled to a “presumption of
materiality” is not supported by a citation to any caselaw, and
in fact is in stark contrast to the Supreme Court’s controlling
opinion on precisely this issue.7
As recognized in Escobar, the failure to plead materiality
“was a proper basis for a motion to dismiss.” Bristol-Myers
Squibb Co., 332 F. Supp. at 946. Accordingly, the Court will
dismiss Counts I, II and III.8

7

Relator’s reliance on Urquilla-Diaz v. Kaplan Univ., 780 F.3d
1039, 1054 (11th Cir. 2015), to support the notion that
“[m]aking false statements to an accreditation agency could lead
to a FCA violation because whether a school is accredited is
material to the government's decision to disburse Title IV funds
to the school (or its students)” is misplaced and unpersuasive.
Notably, Urquilla-Diaz is an out-of-Circuit case that was
decided before Escobar, and, therefore, did not apply the
Escobar Court’s heightened standard for materiality on implied
false certification FCA claims.
8

Defendants also contends that that Counts I, II, and III are
deficient as redundant “reverse false claims,” because they
allege FCA violations for both misrepresentations/omissions and
for failing to return overpayments. As the Court has already
found that dismissal is warranted, the Court need not discuss
this issue at any length. Stated succinctly, however, the Court
agrees with Defendants that Relator cannot seek relief under
both theories simultaneously. Although Relator may be able to
pursue these claims in the alternative, they are impermissibly
alleged concurrently in the Amended Complaint. Thus, to the
extent Relator seeks amendment, this deficiency must be
corrected.

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B.

Retaliatory Discharge (Count IV)

In Count IV, Relator claims that she was terminated from
her job in retaliation for raising concerns about unethical
practices at the Academy.

To state a claim under 31 U.S.C. §

3730(h)(1), a relator must demonstrate that she (1) engaged in
protected conduct, and (2) was terminated (or otherwise
discriminated against) because of engagement in the protected
conduct. See Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d
176, 186 (3d Cir. 2001)(emphasis added).

Upon review, the Court

will dismiss Count IV because Plaintiff fails to adequately
allege either element of retaliatory discharge.
Relator’s Amended Complaint is totally devoid of any
allegations demonstrating that her termination was causally
related to any engagement in protected conduct.

In this case,

Relator contends that she was terminated within three months of
raising concerns about student eligibility, SAP, and attendance.
[Am. Compl., at ¶¶ 191-199]. However, Relator does not even
allege (in either a factual or conclusory manner) that her
employer had any awareness that her concerns had anything to do
with, or raised the possibility of, a contemplated FCA suit,
which are predicate requirements to establish protected
activity.
Furthermore, Relator fails to sufficiently plead that she
was terminated because of her participation in protected

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activity.

Relator simply states that she raised concerns and

was terminated three months later.
suggests a clear connection.

However, Relator never

On the contrary, Relator seemingly

admits that her termination may have been linked to a complaint
lodged by one of her students that resulted in a disciplinary
action by the Academy. After learning that she had been
disciplined, Relator admits that she confronted the student
again about the circumstances that led to his complaint against
her.

As such, it appears that Relator’s own allegations suggest

an alternative reason for her termination.

Because Relator

fails to adequately allege either element necessary for a
retaliatory discharge claim, Count IV must be dismissed.

C.

Liability of Joseph Visconti

Next, Defendants argue that all claims should be dismissed
against Joseph Visconti, the President and CEO of the Academy.
At the pre-motion conference on November 4, 2019, the Court
informed Relator that the initial complaint was insufficient as
to Visconti, as it simply identified his role as President and
CEO of Jolie Health and Beauty Academy and failed to attribute
any wrongdoing to him.

In an apparent effort to remedy this

deficiency, Relator added three references to Visconti in the
Amended Complaint:

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112. Upon information and belief, Defendant Visconti is
responsible for signing and submitting PPAs on behalf of
Defendant Jolie Health and Beauty Academy.
135. Defendant Visconti, as the chief executive officer,
is, upon information and belief, responsible for the
representations made in the PPA executed with the
Department of Education.
136. Defendant Visconti is ultimately responsible for
ensuring compliance with the material terms and
conditions of the PPA.
[Am. Compl., at ¶¶ 112, 135, 136].
The Court notes that nowhere in these allegations does
Relator allege an actual FCA violation (in relation to Counts I,
II, and III) on the part of Visconti. Further, Relator openly
admits that she “does not have any authority that would
expressly include Defendant Visconti as a defendant under Count
IV.” [Opp. Br., at 25, n.5].

As such, the Court finds it

apparent that Relator cannot, in good faith, allege liability on
the part of Defendant Visconti and will dismiss the claims
against him with prejudice.

IV.

CONCLUSION

For the foregoing reasons, Defendants’ Motion to Dismiss
will be GRANTED and Relator’s Amended Complaint will be
DISMISSED.

Although Relator’s claims against Defendant Visconti

will be DISMISSED WITH PREJDUICE, the Court will permit Relator
an opportunity to file a Motion for Leave to Amend, in which she
explains why the deficiencies outlined herein could be cured

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through amendment, in relation to the claims against the other
Defendants.

An appropriate Order shall issue on this date.

DATED: July 31, 2020
s/Renée Marie Bumb
RENÉE MARIE BUMB
UNITED STATES DISTRICT JUDGE