United States of America v. Grand Canyon University, Inc.

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

)

UNITED STATES OF AMERICA EX REL. )

MICHELLE MACKILLOP, )

Plaintiff, )

)

v. ) CIVIL ACTION

) NO. 18-11192-WGY

GRAND CANYON EDUCATION, INC., GC )

EDUCATION, INC. F/K/A GRAND CANYON )

UNIVERSITY, INC., and GRAND CANYON )

UNIVERSITY F/K/A GAZELLE )

UNIVERSITY, )

)

Defendants. )

YOUNG, D.J. September 6, 2022

MEMORANDUM & ORDER

I. INTRODUCTION

University counselor Michelle Mackillop (“Relator”) brings

this qui tam action on behalf of the United States under the

False Claims Act against Grand Canyon Education Inc., GC

Education Inc. f/k/a Grand Canyon University, Inc., and Grand

Canyon University f/k/a Gazelle University (collectively “Grand

Canyon” or the “Defendants”). Relator alleges that Grand Canyon

applied for federal grants and financial aid while failing to

disclose its violations of the “Incentive Compensation Ban,”

sometimes referred to as the “ICB” (“Compensation Ban”) –- a

statute and set of Department of Education regulations. The

Compensation Ban prohibits schools from compensating their

counselors and recruiters based on how many students they

enroll. Grand Canyon moves for summary judgment, arguing that

Relator does not sufficiently raise a dispute of material fact

as to the alleged Compensation Ban violation or the requisite

False Claims Act elements.

This Court concludes, first, that there is a genuine

dispute regarding whether a Compensation Ban violation exists:

both how Grand Canyon administers its Compensation Plans in

practice and how it provides several types of bonuses,

promotions, and overtime pay is disputed.

Second, there is a genuine dispute of material fact as to

whether the False Claim Act’s elements are met. The False

Claims Act requires that: (1) claims were made; (2) these claims

were false; (3) these falsities were material; and (4) the

claims were made with knowledge of their falsity. The first

element is easily met: (1) Grand Canyon undisputedly made claims

for federal funding. In these claims Grand Canyon (2) made

certifications regarding its Compensation Ban compliance -–

whether it complied in actuality is heavily disputed. Finally,

there are genuine disputes as to whether Grand Canyon’s

misrepresentations are (3) material and (4) made with knowledge

of their falsity –- based on the Department of Education’s and

school administrators’ knowledge, respectively.

Accordingly, Grand Canyon’s motion for summary judgment is

DENIED in its entirety.

A. Procedural History

Relator brought this suit on June 7, 2018. See Compl., ECF

No. 1.1 Relator brings three claims under the False Claims Act:

(1) count I alleges assertion of false claims for payment or

approval, 31 U.S.C. § 3729(a)(1)(A), Relator’s Corrected Second

Am. Compl. & Demand Jury Trial (“Am. Compl.”) ¶¶ 194-201, ECF

No. 141; (2) count II asserts the existence of false statements

material to the false claims, 31 U.S.C. § 3729(a)(1)(B), id. ¶¶

202-09; and (3) count III alleges retaliation and constructive

discharge, 31 U.S.C. § 3730(h), id. ¶¶ 210-11.

On July 6, 2020, Grand Canyon moved to transfer the case to

the District of Arizona. See Mot. Transfer, ECF No. 38. The

motion to transfer was granted on November 18, 2020, and the

case is to be transferred to the District of Arizona upon

conclusion of the final pre-trial conference. See Electronic

Clerk’s Notes, ECF No. 70. On October 12, 2020, Grand Canyon

moved to dismiss the Second Amended Complaint. See Defs.’ Mot.

1 Relator amended the complaint three times: once on January

29, 2020, see First Am. Compl., ECF No. 23; again on September

14, 2020, see Second Am. Compl., ECF No. 51; and finally on

September 22, 2021, see Am. Compl.

Dismiss Second Am. Compl., ECF No. 57.2 At a hearing held on

December 22, 2020, the motion to dismiss was denied in part --

as to counts I and II -- and granted, in part -- as to count

III. See Electronic Clerk’s Notes, ECF No. 84.

Grand Canyon moved for summary judgment on October 27,

2020. Defs.’ Mot. Summ. J., ECF No. 152. The parties have

fully briefed this motion. See Defs.’ Mem. Supp. Mot. Summ. J.

(“Defs.’ Mem. Summ. J.”), ECF No. 153; Relator’s Opp’n Defs.’

Mot. Summ. J. (“Relator’s Mem. Opp’n”), ECF No. 168.

Furthermore, the government filed a statement of interest. See

United States’ Statement Interest (“Statement Interest”), ECF

No. 171.

On February 8, 2022, the Court heard argument on the motion

for summary judgment and took the matter under advisement. See

Electronic Clerk’s Notes, ECF No. 181. After the hearing, the

parties requested that ruling on this motion be held in abeyance

pending mediation. On March 2, 2022, the case was referred to

Alternative Dispute Resolution. See Electronic Order, ECF No.

184. A hearing was set for May 27, 2022, before the Honorable

Magistrate Judge Jennifer C. Boal. See Electronic Notice

2 Grand Canyon had moved to dismiss the first amended

complaint in September, see First Mot. Dismiss Relator’s First

Am. Compl., ECF No. 49, but this action was mooted by Relator’s

filing of her second amended complaint, see Electronic Order,

ECF No. 77.

Hearing, ECF No. 186. On May 17, 2022, the parties submitted a

request that the mediation be cancelled and the matter be

returned to the active docket. See Joint Letter, ECF No. 194.

Judge Boal granted the request, and the case was returned to

this session of the Court. See Electronic Order, ECF No. 195.

B. Undisputed Facts

Grand Canyon University is a private, four-year Christian

University, founded in 1949 with a physical campus in Phoenix,

Arizona. Defs.’ Statement Undisputed Material Facts Mot. Summ.

J. (“Defs.’ Facts”) ¶¶ 1-2, ECF No. 155; Relator’s Resp. Defs.’

Statement & Statement Additional Facts (“Relator’s Facts”) ¶¶ 1-

2, ECF No. 160. The University offers students over 220

graduate and undergraduate programs via on-campus and online

classes. Defs.’ Facts ¶ 1; Relator’s Facts ¶ 1.

1. Counselors

Relator worked as a University Counselor at Grand Canyon

from August 2009 to November 2017 -- she was hired as an

Enrollment Counselor (a role later renamed as University

Counselor). Defs.’ Facts ¶ 7; Relator’s Facts ¶ 7. Several

types of Counselors provide a variety of enrollment services at

Grand Canyon. Defs.’ Facts ¶ 11; Relator’s Facts ¶ 11. Three

types of counselors are of particular interest in this suit:

University Counselors, University Development Counselors

(“Development Counselors”), and Student Service Counselors

(“Service Counselors”). Each role is described in its

respective Job Expectations Pamphlet created by Grand Canyon.

See Defs.’ Facts, Ex. 10, University Counselor Job Expectations

(“University Counselor Job Expectations”), ECF No. 155-10; id.

Ex. 12, University Development Counselor Job Expectations

(“Development Counselor Job Expectations”), ECF No. 155-12;

Relator’s Facts, Ex. 110, Student Services Counselor Job

Expectations & Compensation Plan (“Service Counselor Job

Expectations & Compensation”), ECF No. 167-9.

As described in the Job Expectations Pamphlets provided by

Grand Canyon in August 2016,3 University Counselors’ and

Development Counselors’ roles “include[], but [are] not limited

to, supporting the counseling, retention and graduation of

qualified students . . . .” University Counselor Job

Expectations 2; Development Counselor Job Expectations 2.

University Counselors and Development Counselors are often the

first point of contact for prospective students. Defs.’ Facts

¶¶ 13, 16; Relator’s Facts ¶¶ 13, 16. Whereas Development

Counselors work in different locations across the United States

to help students who express interest through partnerships

3 The University Counselor Job Expectations became effective

August 1, 2016, and were revised on January 19, 2017. See

University Counselor Job Expectations 1. The Development

Counselor Job Expectations were issued on August 1, 2016, and

revised on May 1, 2017. See Development Counselor Job

Expectations.

between Grand Canyon and various businesses, University

Counselors work with students who reach out to Grand Canyon

directly. Defs.’ Facts ¶ 17; Relator’s Facts ¶ 17.

The Service Counselor Job Expectations and Compensation

Plan describe the Service Counselor Role as a “unique combined

academic and finance counseling role created to provide complete

and comprehensive support to help meet the goals of each

individual student.” Service Counselor Job Expectations &

Compensation 2. Service Counselors support students from the

“start of a program through graduation.” Id.

2. The Compensation Plans

From late 2015 to early 2016, Grand Canyon decided to

update the Compensation Plans for its counseling and enrollment

staff. Defs.’ Facts ¶ 18; Relator’s Facts ¶ 18. There are two

separate Compensation Plans at issue in this case: one for

University Counselors and the other for Development Counselors,

which are similar in many respects. See Defs.’ Facts, Ex. 14,

University Counselor Compensation Plan (“University Counselor

Compensation Plan”), ECF No. 155-14; id. Ex. 16, University

Development Counselor Compensation Plan (“Development Counselor

Compensation Plan”), ECF No. 155-16. The University Counselor

Compensation Plan took effect in August 2016 and the written

version was finalized in February 2017. Defs.’ Facts ¶ 20;

Relator’s Facts ¶ 20. The Development Counselor Compensation

Plan took effect on August 1, 2016, and the first version of the

written Compensation Plan was finalized on May 1, 2017. Defs.’s

Facts ¶ 28; Relator’s Facts ¶ 28. Grand Canyon consulted

attorneys, including Blaine Butner (“Butner”), in the design of

both Compensation Plans. Defs.’ Facts ¶¶ 47-50; Relator’s Facts

¶ 50.

The first iterations of the plans as finalized in writing

describe the following. University Counselors are paid on an

hourly fixed rate calculated yearly, which can be altered based

either on tenure or merit, but never both. University Counselor

Compensation Plan 2. Development Counselors are paid bi-weekly

at a fixed rate that can be adjusted in the same way as

University Counselors’ salaries. Development Counselor

Compensation Plan 2. Both Plans envision four levels of

advancement; once a counselor reaches Level 3, she can opt to

stay at that level or move to Level 4 -- at every other level a

counselor will be promoted at the end of a 365-day calendar year

regardless of her desire to advance. See University Counselor

Compensation Plan 2-3; Development Counselor Compensation Plan

2. Once a University Counselor or Development Counselor

progresses to the next level they are not permitted to regress

back to their previous level. University Counselor Compensation

Plan 2; Development Counselor Compensation Plan 2.

The base compensation rates for each role are as follows:

Level Years of Development University

Tenure Counselor Salary Counselor

Salary

1 0-1 $ 65,000 $ 40,000

2 1-2 $ 70,000 $ 45,000

3 2-3 $ 75,000 $ 55,000

4 3+ $ 90,000 $ 70,000

See University Counselor Compensation Plan 3; Development

Counselor Compensation Plan 2-3. Counselors at Levels 1-3 are

not eligible for merit-based increases, whereas counselors who

choose to remain at Level 3 after completion of one year and

Level 4 counselors are eligible for merit increases of zero to

two percent based on their Annual Performance Evaluation.

University Counselor Compensation Plan 4-5; Development

Counselor Compensation Plan 2-3. According to the Compensation

Plans the Annual Performance Evaluation is based upon five

factors: active learning, communication, employee engagement,

job knowledge, problem solving, service focus, and work

standards. See University Counselor Compensation Plan 5-6;

Development Counselor Compensation Plan 4-5. The Compensation

Plans state: “[a]ll counselors, regardless of performance

status, will receive their tenure or merit increases . . . .”

University Counselor Compensation Plan 2; Development Counselor

Compensation Plan 2.

The original Development Counselor Compensation Plan, and a

later version of the University Counselor Compensation Plan,

explained the compensation for transitions between the

University Counselor and Development Counselor roles:

Level 1-3 [University Counselors] who apply and are

selected for a [Development Counselor] position will

retain their current tenure level and their salary

will be adjusted to the starting salary of the new

position at their current level. Level 4 [University

Counselors] who apply and are selected for a

[Development Counselor] position will retain their

current tenure level and will have a 12-month

transition period during which they will receive 85%

of the full Level 4 [Development Counselor] salary

(i.e. $76,500). After 12 months in their new role

their salary will be adjusted to the full Level 4

salary of $90,000.

Defs.’ Facts, Ex. 32, University Counselor Compensation Plan May

2017 4, ECF No. 155-32; Development Counselor Compensation Plan

3. Later iterations of the Compensation Plans: (1) increased

the number of tenure levels to 5 and 6 levels, respectively; (2)

allowed Level 3, 4, and 5 counselors to stay at their “tenure

level” or progress to a new tenure level and receive a

corresponding raise; and (3) allowed Level, 3, 4, 5, and 6

counselors to receive merit increases.4 See Notice Filing Exs.

4 This Memorandum primarily discusses the first finalized

versions of each Compensation Plan published in February and May

2017 for two reasons: (1) these versions of the Plans are

discussed most at length by the parties, see Am. Compl. ¶¶ 74-

84, 113; id. Ex. 1-B, University Counselor Compensation Plan

(Rev. May 1, 2017), ECF No. 51-2; Defs.’ Facts ¶ 21; and (2) the

Plans remained largely the same in their functioning -- with the

exception of the addition of two additional tenure levels, which

are subject to the same compliance considerations as Level 4 in

the first finalized plans, see Def.’s Facts ¶ 21.

Relator’s Resp. Defs.’ Statement & Statement Additional Facts V

(“Relator’s Exs. V”), Ex. 72, University Counselor Compensation

Plan May 2018, ECF No. 165-7 (5 levels); Defs.’ Facts, Ex. 47,

University Counselor Compensation Plan Jul. 2018, ECF No. 155-47

(same); id. Ex. 15, University Counselor Compensation Plan Jun.

2017, ECF No. 155-15 (6 levels); Notice Filing Exs. Relator’s

Resp. Defs.’ Statement & Statement Additional Facts II

(“Relator’s Exs. II”), Ex. 27, University Counselor Compensation

Plan Nov. 2020, ECF No. 162-12 (same); Defs.’ Facts, Ex. 48,

University Development Counselor Compensation Plan Jul. 2018,

ECF No. 155-48 (5 Levels); Relator’s Exs. V, Ex. 69, University

Development Counselor Compensation Plan May 2018, ECF No. 165-4

(same); Defs.’ Facts, Ex. 17, University Development Counselor

Compensation Nov. 2020, ECF No. 155-17 (6 levels).

University Counselors and Development Counselors are also

expected to follow their respective Job Expectations Pamphlets.

According to the University Counselors’ and Development

The parties also attach draft versions of the University

Counselor Compensation Plan which pre-date the finalized

versions published in February and May 2017. See Defs.’ Facts,

Ex. 24, University Counselor Compensation Plan Oct. 2016, ECF

No. 155-24; Notice Filing Exs. Relator’s Resp. Defs.’ Statement

& Additional Statement Facts Relator’s Exs. III, Ex. 40,

University Counselor Compensation Plan Oct. 2016 (edited), ECF

No. 163-10. These are not discussed at length because, while

possibly pertinent to show the drafter’s intent at trial, they

are not relevant to determining whether the plans violate the

Compensation Ban as written or as implemented.

Counselors’ Job Expectations Pamphlets, counselors are expected

to maintain a certain “Annual Student Count” depending on their

tenure year. “Annual Student Counts equate to the number of new

students who successfully complete their first course.”

University Counselor Job Expectations 3; Development Counselor

Job Expectations 3. The Annual Student Counts for each role5 are

summarized below:

Level Years of University Development

Tenure Counselor Counselor

Annual Student Annual

Count Student

Count

1 0-1 28 28

2 1-2 40 40

3 2-3 50 50

4 3+ 70 60

5 This information is drawn from the first iterations of

each set of Job Expectations issued in August 2016 and reviewed

in January 2017 for University Counselors and May 2017 for

Development Counselors. See University Counselor Job

Expectations; Development Counselor Job Expectations. Later

iterations of the University Counselor and Development Counselor

Job Expectations include recruitment expectations and transferal

procedures (from University Counselors to Development

Counselors) for one or two additional tenure levels (Levels 5

and 6); these Job Expectations, however, are in all other

respects identical to the University Counselor and Development

Counselor Job Expectations described above. See Relator’s Exs.

V, Ex. 71, University Counselor Job Expectations May 2018, ECF

No. 165-6; Notice Filing Exs. Relator’s Resp. Defs.’ Statement &

Additional Statement Facts I, Ex. 11, University Counselor Job

Expectations Nov. 2020, ECF No. 161-11; Relator’s Exs. V, Ex.

70, Development Counselor Job Expectations May 2018, ECF No.

165-5.

The Job Expectations Pamphlets lay out how University

Counselors and Development Counselors are expected to achieve

the “required annual student counts” by breaking down the

expected student recruitment and retention numbers for each

month. University Counselor Job Expectations 4; Development

Counselor Job Expectations 4. According to the Job Expectations

Pamphlets percent of student count achieved is one of the

“Effectiveness Factors,” which help determine a Development

Counselors or University Counselors readiness to take on

management responsibilities or transfer to a Development

Counselor role (if they are a University Counselor). University

Counselor Job Expectations 4; Development Counselor Job

Expectations 5. The Development Counselor Job Expectations, and

a later iteration of the University Counselor Job Expectations,

describe the expectations for University Counselors who apply

and are selected to transition to Development Counselors:

Level 1-3 [University Counselors] who apply and are

selected for a [Development Counselor] position will

retain their current tenure level and annual student

count expectations. Level 4 [University Counselors]

who apply and are selected for a [Development

Counselor] position will retain their current tenure

level and will have a 12 month transition period

during which their annual student count expectation

will be 85% of the full Level 4 [Development

Counselor] expectations (i.e. 51 students completing

their first course). After 12 months in their new

role their annual student count expectation will be

adjusted to the full Level 4 expectations of 60

students completing their first course.

Development Counselor Job Expectations 3; Defs.’ Facts, Ex. 15,

University Counselor Job Expectations May 1, 2017 4, ECF No.

155-18. Following Butner’s advice, the Defendants specifically

kept the Job Expectations out of the Compensation Plans and in a

separate document. Defs.’ Facts ¶ 59.

The Service Counselors have a separate Compensation Plan,

which delineates that they are compensated based on tenure and

the number of active students a counselor successfully supports

-- defined as the number of students actively in a degree or

certificate Program. That breakdown is as follows:

Service Tenure Active Student Salary

Counselor Count

Level

Level I 0-1 years 200 $ 43,000

Level II 1+ years 250 $ 47,000

Level III 1+ years 320 $ 55,000

Level IV 2+ years (and 400 $ 60,000

a minimum of 3

months at

level III)

Service Counselor Job Expectations and Compensation 2.

3. The Corrective Action Process

When Counselors do not meet their Job Expectations –- i.e.,

do not recruit the requisite number of students -- they may be

placed on a corrective action plan (“CAP”). Defs.’ Facts ¶ 69;

Relator’s Facts ¶ 69. It is undisputed that that CAP involves

at least: (1) a written warning, (2) formal corrective action

(3) and, if the counselor does not improve, a process called

“final” CAP. Defs.’ Facts ¶ 70; Relator’s Facts ¶ 70. If a

Counselor fails to improve her performance after progressing

through all of the CAP stages she may be terminated. Defs.’

Facts ¶ 71; Relator’s Facts ¶ 71.

In 2017 and 2018, 44 University Counselors received

promotions while still under CAP, and in the same period, 79

University Counselors were terminated for “performance-based

reasons.” Defs.’ Facts ¶¶ 78-79; Relator’s Facts ¶¶ 78-79. In

2017, 127 Counselors were placed on CAP within a year of their

promotions, and 115 were so placed in 2018. Defs.’ Facts ¶¶ 76-

77; Relator’s Facts ¶¶ 76-77.

4. Perks

In January 2021, Grand Canyon recognized Counselors who

were promoted to the next level by providing them with a

handwritten card, a small “swag bag,” and a trophy. Defs.’

Facts ¶ 66; Relator’s Facts ¶ 66.

Other perks include overtime and telework. The University

Counselor Compensation Plan provides that counselors may earn

overtime pay, which is awarded on a first come, first served

basis at the discretion of managers. University Counselor

Compensation Plan 4. Grand Canyon’s Telework Program Guidelines

provide that counselors are only eligible for Telework if they

are not on CAP, and the “Performance Expectations” section of

the guidelines states that employees must maintain minimum

monthly job expectations over a three-month rolling period or

will no longer be eligible for the telework program. Relator’s

Facts ¶ 132; Notice Filing Exs. Relator’s Resp. Defs.’ Statement

& Statement Additional Facts III (“Relator’s Exs. III”), Ex.

42., Telework Program Guidelines for Online Operation 1, ECF No.

163-12.

5. Grand Canyon’s Reporting to the Government

To receive Title IV funds, Grand Canyon enters into Program

Participation Agreements (“PPA”) with the Department of

Education. See Defs.’ Facts ¶¶ 81-82; Relator’s Facts ¶¶ 168.

In August 2017 Grand Canyon entered into a PPA with the

Department of Education enabling it to receive Title IV funding

until 2020. See Relator’s Facts ¶ 168 n.5; see also Relator’s

Facts, Ex. 117, Program Participation Agreement Aug. 24, 2017

(“2017 PPA”), ECF No. 167-16. Once Grand Canyon University was

sold by Grand Canyon Education, Inc., a new PPA had to be

executed. See Relator’s Facts ¶ 168 n.5. A PPA was

undisputedly signed by the Department of Education on August 30,

2018, which granted temporary approval. Grand Canyon University

& Grand Canyon Education, Inc.’s Mem. Supp. Mot. Dismiss

Relator’s First Am. Compl., Ex. 1, Temporary Program

Participation Agreement Aug. 30, 2018 (“2018 PPA”), ECF No. 39-

1. Most recently, on November 6, 2019, the Department of

Education provisionally certified Grand Canyon to enter into

another PPA, which would qualify it to receive Title IV funds

until September 30, 2022. Defs.’ Facts ¶ 82; Relator’s Facts ¶¶

82, 168; Defs.’ Facts, Ex. 50, Provisional Certification Letter

Nov. 6, 2019 (“Certification Letter”), ECF No. 155-50.

Relator further asserts, without Grand Canyon’s objection,

that Grand Canyon “submitted hundreds of thousands of claims for

Title IV and [Veterans Affairs] funds to the Government between

2012 and present” and that these claims contained information

including “each student’s name, student ID, the year of the

charge, total charges, the loan programs, the transmission of

funds to [Grand Canyon] via government funds management systems,

and the amount of funds returned to the Government.” Relator’s

Facts ¶¶ 110-11. Furthermore, evidence adduced by Relator and

Grand Canyon suggests that Grand Canyon Education, Inc. makes

Title IV claims for payment on behalf of Grand Canyon University

to the Department of Education and that these claims include

“disbursements of subsidized and unsubsidized Stafford Loans,

Plus Loans, Pell Grants, SEOG, Perkins Loans, and TEACH Grants.”

Id. ¶ 111; see also Defs.’ Facts, Ex. 49, Funds Spreadsheet, ECF

No. 155-49 (detailing various Title IV funds received by Grand

Canyon). Grand Canyon Education, Inc. also submits claims to

the Department of Veterans Affairs including “assistance

pursuant to the Post 9/11 Veteran[s’] Educational Assistance

Program and the Vocational Rehabilitation for Disabled

Veteran[s] Program.” Relator’s Facts ¶ 111.

The total claim amount submitted by Grand Canyon to the

government has increased every year since 2016. See Relator’s

Facts ¶¶ 112-16; see also Funds Spreadsheet. During the 2016

Fiscal Year, the Defendants submitted claims to the Department

of Education pursuant to Title IV of the Act for $936,330,947

and $22,504,596 to the Department of Veterans Affairs; in Fiscal

Year 2017, the Defendants submitted $1,022,527,541 to the

Department of Education and $25,685,456 to the Department of

Veterans Affairs; in Fiscal Year 2018, the Defendants submitted

$1,095,590,981 to the Department of Education and $29,392,712 to

the Department of Veterans Affairs; in Fiscal Year 2019, the

Defendants submitted $1,210,053,400 to the Department of

Education and $34,462,100 to the Department of Veterans Affairs;

and in 2020, the Defendants submitted $1,329,357,889 to the

Department of Education and $36,772,872 to the Department of

Veterans Affairs. Relator’s Facts ¶¶ 112-16.

In applying for these funds, Grand Canyon provided the

Department of Education and the Department of Defense with its

Compensation Plans. Defs.’ Facts ¶¶ 80, 86; Relator’s Facts ¶¶

80, 86. It is undisputed that the Department of Education

entered into a PPA with Grand Canyon and continued to disburse

funds after Relator filed the suit at bar. Defs.’ Facts ¶ 81;

Relator’s Facts ¶ 81. Susan D. Crim, the Director of the

Administrative Action and Appeals Service Group, which handles

Federal Student Aid for the Department of Education, however,

attests, without objection from Grand Canyon, that the

Department of Education never reviewed the Compensation Plans

that are the subject of this suit before the case was filed.

See Relator’s Exs. V, Ex. 67, Decl. Susan D. Crim ¶ 6, ECF No.

165-2. It is also undisputed that the Department of Defense

completed a review of Grand Canyon’s compensation practices and

continued to distribute military tuition assistance. Defs.’

Facts ¶¶ 85-86; Relator’s Facts ¶¶ 85-86.

C. Disputed Facts

1. The Compensation Plans

The first point of contention is whether the Compensation

Plans violate the Compensation Ban. The Defendants provide

evidence that the Plans are “tenure-based,” with various levels.

Defs.’ Facts ¶ 21. Relator counters that the Plans are both

“tenure-based” and performance-based in practice, and in

actuality, “[e]nrollment numbers drive promotions.” Relator’s

Facts ¶¶ 19, 21, 96.

In support of this contention Relator provides: (1) an

expert report, which concludes that “[c]ounselors’ enrollment

numbers are positively associated with their subsequent salaries

. . . . even after control[ling] either for counselors’ tenure

at [Grand Canyon] or for their job ‘level,’” Relator’s Exs. III,

Ex. 33, Expert Report J. Bradford Rice 4-5, ECF No. 163-3; and

(2) individual accounts from Counselors claiming that the

Compensation Plans at Grand Canyon were essentially tenure-based

in name only, see Relator’s Facts ¶ 43; see, e.g., Notice Filing

Exs. Relator’s Resp. Defs.’ Statement & Additional Statement

Facts I (“Relator’s Exs. I”), Ex. 10, Decl. Jamie Castiglione

(“Castiglione Decl.”) ¶¶ 7-15, ECF No. 161-10. For example, one

Development Counselor, Nathan Clipperton, attested that: (1)

“Grand Canyon’s compensation practices resulted in [c]ounselors

being paid more money for enrolling more students” and that

“[t]he only changes from level to level were the higher salary

and commensurately higher student enrollment quota[s]”; (2) that

Grand Canyon’s purported other requirements for each level “were

disingenuous at best”; (3) that the higher recruitment

requirements were enforced via “regular messaging from Grand

Canyon to [c]ounselors”; and (4) that the other performance

requirements Grand Canyon claims to monitor are “simply a smoke

screen.” Relator’s Ex. I, Ex. 13, Decl. Nathan Clipperton ¶¶

19-21, ECF No. 161-13.

Relator further posits that: (1) merit-based promotions are

based on recruitment numbers, id. ¶ 27; (2) University

Counselors are provided promotions to Development Counselors

based on recruitment numbers, id. ¶ 21; and (3) Services

Counselors play a role in recruitment, which would make their

undisputedly compensation-based enrollment violative of the

Compensation Ban, id. ¶¶ 47.

The second point of contention, assuming for the moment

that the Compensation Plans violate the Compensation Ban, is

whether Grand Canyon’s administration violated the Compensation

Ban knowingly. The Defendants claim they devised the Plans with

Attorney Butner’s help. Defs.’ Facts ¶¶ 47-50. Butner advised

the Defendants regarding several aspects of the Plans, but

according to evidence presented by Relator, the Defendants did

not follow much of Butner’s advice. Relator’s Facts ¶¶ 49-51,

120, 122-123.

The Defendants counter that they sought implementation

advice from outside counsel including Butner and Dennis Cariello

(“Cariello”). Defs.’ Facts ¶¶ 63-65. Relator rebuts with

testimony that suggests Butner and Cariello were not part of the

implementation efforts. Relator’s Facts ¶¶ 49-51, 63-64; see

also Relator’s Exs. II, Ex. 17, Tr. Blain Butner Dep. (“Butner

Dep.”) 87:18-24, ECF No. 162-2 (stating that he “did not go to

visit the campus for the purpose of assessing the implementation

of the” Compensation Plans or Job Expectations); id. Ex. 30, Tr.

Dennis Cariello Dep. 88:7-9, ECF No. 162-15 (“I would not

typically follow up, you know, how would this be implemented?

It’s not really within the typical scope of my

representation.”); Defs.’ Facts, Ex. 22, Tr. Dep. Blain Butner

181:1-12, ECF No. 155-2 (stating that “[i]f you fired everybody

and then awarded the bonus the next week” based on recruitment,

it could be violative, and admitting that compliance depended on

how the Plans were “applied” in practice).

Finally, Relator also alleges that the Defendants,

specifically five Grand Canyon executives, moved to Grand Canyon

from the University of Phoenix where they were also accused of

skirting the Compensation Ban’s requirements. See Relator’s

Facts ¶¶ 162-67. At their prior University, two employees sued

in the name of the Government alleging violations of incentive-

based compensation regulations. Id. ¶ 167.

2. The Corrective Action Process

The Defendants present evidence that if a counselor is on

CAP for failing to meet enrollment requirements, she will still

be promoted and receive the concomitant salary increase. Defs.’

Facts ¶ 73. As proof, the Defendants cite to the cases of two

counselors who were promoted while on CAP. Def’s Facts ¶¶ 74-

75. Grand Canyon also cites to an expert report that counters

the conclusions of Relator’s expert report, see id. Ex. 45,

William L. Jennings Expert Report, ECF No. 155-45, and data it

purports establishes that counselors are promoted

notwithstanding the CAP procedures, see id., Ex. 9-B, CAP

Promotions Data 2017 (“CAP Data”), 2019, ECF No. 155-9.

Relator disputes these contentions with evidence that less

than one percent of Counselors on an “active CAP” were promoted.

Relator’s Facts ¶ 73. Relator also asserts that the number of

counselors promoted while on CAP is not representative because

it omits counselors who quit before being terminated and who

were terminated while not on CAP. Relator’s Facts ¶ 79. For

example, Relator cites to the declaration of former counselor,

Jamie Castiglione, who attested that: (1) after opting to rise

from tenure level 3 to 4 she was expected to recruit more

students; (2) she began to fall short and was placed on CAP; (3)

she “found the action demoralizing, and the subsequent pressure

to enroll students was overwhelming”; and (4) she resigned as a

result. Castiglione Decl. ¶¶ 13-16. Relator further claims

that the Defendants encourage Counselors with low enrollment

numbers to quit by telling them they are eligible for other

roles at the University only if they quit (instead of if they

are fired). See Relator’s Facts ¶ 79; Relator’s Exs. I, Ex. 7,

Tr. Michelle Mackillop Dep 59:10-25, ECF No. 161-7.

3. Perks

The Defendants assert that enrollment numbers play no role

in determining who is permitted to work overtime. Defs.’ Facts

¶ 45. Relator disputes that Managers award overtime based on

enrollment success in violation of Butner’s advice. Relator’s

Facts ¶¶ 45, 138.

Relator also claims that University Counselors who meet

enrollment quotas are allowed to work “flex schedules,” while

others are not. Relator’s Facts ¶ 130. She further alleges

teleworking privileges are based on recruitment. Id. ¶ 134,

139.

4. Grand Canyon’s Reporting to the Government

Relator contends that while the Defendants provided the

relevant governmental agencies with the University Counselor and

Development Counselor Compensation Plans, they did not attach

the relevant Job Expectations. Defs.’ Facts ¶¶ 80, 85. Relator

also raises a question regarding whether the Department of

Education even received the Compensation Plan at issue in this

case, citing to the declaration of a Department of Education

official. See Relator’s Facts ¶ 81. Relator does not dispute

Grand Canyon was certified to receive funding from the

Departments of Education and Defense, but she claims the

agencies did not have the full information needed to make that

determination. Relator’s Facts ¶¶ 82, 85.

II. ANALYSIS

The central issue in this action is whether Grand Canyon

committed a violation under the False Claims Act, 31 U.S.C. §§

3729-33, by feigning compliance with Department of Education

regulations –- the Compensation Ban -- to secure federal

funding. Am. Compl. ¶¶ 1-3. Grand Canyon moves for summary

judgment claiming Relator cannot (1) prove a Compensation Ban

violation, and (2) establish the elements of a False Claims Act

claim. Mem. Summ. J. 6-16. This Memorandum concludes Relator

has established genuine disputes of material facts with regard

to both issues. Thus, this Court denies Grand Canyon’s motion

for summary judgment.

A. Pleading Standard

Summary judgment is required when “there is no genuine

dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a). An issue

of material fact is genuine “if the evidence is such that a

reasonable jury could return a verdict for the nonmoving party.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Materiality depends on the substantive law, and only factual

disputes that might affect the outcome of the suit can preclude

summary judgment. Id. In reviewing the evidence, this Court

must “draw all reasonable inferences in favor of the nonmoving

party, and it may not make credibility determinations or weigh

the evidence.” Reeves v. Sanderson Plumbing Prods., Inc., 530

U.S. 133, 150 (2000). This Court must also “disregard all

evidence favorable to the moving party that the jury is not

required to believe.” Id. at 151. The moving party bears the

initial burden of demonstrating that “the nonmoving party has

failed to make a sufficient showing on an essential element of

her case with respect to which she has the burden of proof.”

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the

movant does so, then the nonmovant must set forth specific facts

sufficient to establish a genuine issue for trial. Matsushita

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87

(1986).

B. The Compensation Ban

Relator accuses Grand Canyon of violating the Higher

Education Act (the “Act”), 20 U.S.C. § 1094(a)(20) -– which

includes the Compensation Ban or ICB –- and misleading the

United States Government by failing to disclose this violation

when applying for federal funding. Am. Compl. ¶ 2. Grand

Canyon denies the same. Mem. Summ. J. 6-7. Relator also

accuses the Defendants of violating a parallel regulation which

governs Veterans Affairs funding;6 this regulation has language

almost identical to that of the Compensation Ban in the Act.7

6 Relator accuses Grand Canyon of violating “the U.S.

Department of Veterans Affairs regulations codified in 38 U.S.C.

§ 3696(d).” Am. Compl. ¶ 2. This regulation is actually

codified at 38 U.S.C. § 3696(c).

7 The Department of Veterans Affairs Statute provides:

An educational institution with a course or program of

education approved under this chapter, and an entity

that owns such an educational institution, shall not

provide any commission, bonus, or other incentive

payment based directly or indirectly on success in

securing enrollments or financial aid to any persons

or entities engaged in any student recruiting or

Am. Compl. ¶ 2. This Memorandum analyzes only the Compensation

Ban of the Act, given the Department of Veterans Affairs

statute’s near-identical language and the well-accepted maxim

that identical language across similar statutes ought be read

the same. Erlenbaugh v. United States, 409 U.S. 239, 243

(1972).

This sub-section proceeds by: (1) providing background on

the Compensation Ban; (2) defining the scope of the Compensation

Ban; and (3) assessing whether Relator has established a genuine

dispute of material fact as to the existence of a Compensation

Ban violation.

1. Introduction to the Compensation Ban and

Associated Regulations

Under Title IV of the Act, Congress provides billions in

grant programs to students in need. Ass’n of Priv. Sector

Colls. & Univs. v. Duncan, 681 F.3d 427, 433 (D.C. Cir. 2012).

In order to qualify for these programs and, thus, receive

federal funds, postsecondary institutions must meet several

requirements. Id. One of these requirements is that a school

admission activities or in making decisions regarding

the award of student financial assistance, except for

the recruitment of foreign students residing in

foreign countries who are not eligible to receive

Federal student assistance.

38 U.S.C. § 3696(c).

must “enter into a program participation agreement with the

Secretary [of Education].” See 20 U.S.C. § 1094(a)(20); Duncan,

681 F.3d at 433. In so doing, the school promises, inter alia,

to

not provide any commission, bonus, or other incentive

payment based directly or indirectly on success in

securing enrollments or financial aid to any persons

or entities engaged in any student recruiting or

admission activities or in making decisions regarding

the award of student financial assistance, except that

this paragraph shall not apply to the recruitment of

foreign students residing in foreign countries who are

not eligible to receive Federal student assistance.

20 U.S.C. § 1094(a)(20).

The Secretary of Education is vested with the power to

promulgate the regulations needed to administer this statute.

See 20 U.S.C. § 1221e-3; see also id. § 1098a(a)(1). An early

version of the regulations created a “safe harbor” provision,

which allowed “payment of fixed compensation, such as a fixed

annual salary or a fixed hourly wage, as long as that

compensation was not [among other things] . . . based solely on

the number of students recruited, admitted, enrolled, or awarded

financial aid.” Federal Student Aid Program, 67 Fed. Reg.

67048, 67072 (Nov. 1, 2002) (to be codified at 34 C.F.R.

668.14(b)(22)(ii)(A)) (emphasis added).

In a set of amendments published on October 29, 2010, and

later codified in 2011, the Department of Education removed

these “safe harbor” provisions entirely. See Program Integrity

Issues, 75 Fed. Reg. 66832, 66950 (Oct. 29, 2010) (to be

codified at 34 C.F.R. § 668.14). Instead, the regulations

simply provided that the Compensation Ban exclude “[m]erit-based

adjustments to employee compensation . . . based in any part

directly or indirectly upon success in securing enrollments or

the award of financial aid.” Id. (emphasis added). New

versions of the regulation governing the Compensation Ban since

have remained unchanged in this respect -- the Safe Harbor

continued to be absent, and the only allowance that endured was

the availability of merit-based compensation that did not have

any connection to recruitment success. See 34 C.F.R. §

668.14(b)(22)(ii)(A); Program Integrity, 76 Fed. Reg. 34386,

34837 (Jun. 13, 2011); Program Integrity Issues, 78 Fed. Reg.

17598, 17599 (Mar. 22, 2013); Program Integrity, 79 Fed. Reg.

64890, 65007 (Oct. 31, 2014); Program Integrity and Improvement,

81 Fed. Reg. 92232, 92262-63 (Dec. 19, 2016); Program Integrity

84 Fed. Reg. 31392, 31452-53 (Jul. 1, 2019). It is important to

note that securing enrollments includes any form of contact with

prospective students that would go on to receive federal funds.

See, e.g., 34 C.F.R. § 668.14 (b)(22)(iii)(B).8

8 The regulations of interest have remained unchanged over

the entirety of the relevant period. The suit was filed in

2018, Compl., and the relevant plan was adopted in 2016-2017,

see Relator’s Facts ¶¶ 18, 20; Defendants’ Facts ¶¶ 18, 20.

During this period the regulations continuously prohibited “any”

connection between recruitment and incentive compensation. See

2. Scope of the Compensation Ban

Relator argues that Grand Canyon’s Compensation Plans

violate the Compensation Ban for several reasons. First, she

posits that while the Compensation Plans are facially linked to

tenure, they are modified by the counselor “Job Expectations”;

either because the Job Expectations are incorporated by

reference into the Compensation Plans or because the Job

Expectations modify how the plans operate in practice.

Relator’s Opp’n 1, 8. The Job Expectations, Relator says,

require higher recruitment numbers at each level of tenure,

essentially tying promotion to recruitment numbers. Id. 7.

Relatedly, the Job Expectations demonstrate that the highest

promotional levels for counselors are not based on tenure at all

and are in fact only based on recruitment performance. Id.

Second, Relator argues that when counselors fail to perform

according to their Job expectations they are placed on CAP,

which urges counselors to meet their enrollment quotas and

terminates them if they fail to improve enrollment numbers. Id.

Third, Relator also appears to argue that telework, flex

schedules, and overtime are awarded based on recruitment.

Relator’s Facts ¶¶ 134, 138-39.

75 Fed. Reg. 66832, 66950 (Oct. 29, 2010); 34 C.F.R. §

668.14(b)(22)(ii)(A).

Grand Canyon rebuts this account in several ways. First,

it states that Grand Canyon automatically promotes counselors

each year, regardless of performance, based on tenure, and that

it “routinely promotes University counselors who have not met

expectations regarding student enrollment.” Defs.’ Mem. Summ.

J. 8. Second, counselors often receive promotions while on CAP.

Id. Third, the Compensation Ban allows terminating counselors

based on recruitment; nevertheless, it posits Grand Canyon does

so rarely. Id. 9. Finally, Grand Canyon argues that none of

the perks identified by Relator constitute a “commission, bonus

or incentive payment” under the Compensation Ban, and even if

they did, these perks are not provided on the basis of

enrollment numbers. Id. 9-10.

These disputes raise two core issues: (1) what exactly

ought be considered compensation; and (2) what constitutes an

incentive compensation plan. The First Circuit and this Court

have yet to weigh in on how to interpret the Act and its

concomitant regulations.9 The teachings of courts in other

circuits help elucidate the Compensation Ban’s scope.

Furthermore, this Court looks to the plain and ordinary meaning

9 The decisions of the Ninth Circuit, encompassing the

District of Arizona where this case eventually will be tried,

see supra Section II.B, have done so, see United States ex. rel

Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1175 (9th Cir. 2006);

United States ex. rel Rose v. Stephens Inst., 909 F.3d 1012,

1022 (9th Cir. 2018).

of the Act, see Wisconsin Cent. Ltd. v. United States, 138 S.

Ct. 2067, 2074 (2018), and where ambiguous, utilizes agency

interpretation, see National Cable & Telecomm. Ass’n v. Brand X

Internet Servs., 545 U.S. 967, 980 (2005) (citing Chevron,

U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 865-

66 (1984)), applying the same principles of statutory

construction, see CS-360, LLC v. United States, 94 Fed. Cl. 488,

497 (2010) (quotation marks omitted).

a. What Constitutes Compensation?

The Act applies to “any commission, bonus or other

incentive payment.” 20 U.S.C. 1094(a)(20). The pertinent

regulations define a “commission, bonus, or other incentive” as

“a sum of money or something of value, other than a fixed salary

or wages, paid to or given to a person or an entity for services

rendered.” See 34 C.F.R. § 668.14 (b)(22)(iii)(A) (2011).

Several courts have concluded that “the phrase ‘any commission,

bonus, or other incentive payment’ is broad enough to encompass

salary adjustments.” Duncan, 681 F.3d at 443; see also United

States ex rel. Munoz v. Computer Sys. Inst., Inc., No. 11-CV-

7899, 2013 WL 5781810, at *1 (N.D. Ill. Oct. 25, 2013) (stating

the regulation “flatly prohibit[s] . . . adjusting salaries”);

United States ex rel. Hendow v. Univ. of Phx., 461 F.3d 1166,

1175 (9th Cir. 2006) (listing “higher salaries” among the

incentives that could violate the Compensation Ban). The

reasoning behind this conclusion is that the plain and ordinary

meaning of an incentive payment is “something paid . . . to

motivate improved performance” and that a raise is exactly that.

See Duncan, 681 F.3d at 443.

Courts have also suggested that “small, occasional perk[s]”

do not constitute the type of payment encompassed by the

Compensation Ban. United States ex rel. Rose v. Stephens Inst.,

909 F.3d 1012, 1022 (9th Cir. 2018). For instance, “were a

school to offer admissions representatives cups of coffee or $10

gift cards for recruiting higher numbers of students,” there

would not be a viable Compensation Ban violation. Id. Courts

have, however, considered significant perks or prizes to

constitute the type of incentive contemplated under the

Compensation Ban. See, e.g., Boca Raton Firefighters’ & Police

Pension Fund v. Devry Inc., No. 10C7031, 2013 WL 1286700, at *4

(N.D. Ill. Mar. 27, 2013) (considering that a bonus based on

recruitment was “illegal”); United States ex rel. Capriola v.

Brightstar Educ. Grp., Inc., No. 1:11 - CV - 00135 AWI GSA, 2013

U.S. Dist. LEXIS 52503, at *15 (E.D. Cal. Apr. 10, 2013).

Therefore, the statute covers salary adjustments, raises, and

cash prizes of a substantial amount.

Under the same logic, the Compensation Ban could also apply

to the opportunity to earn overtime, as it is something “paid”

to counselors that could motivate recruitment. Work from home

and flex schedule, however, are distinctly not the type of

benefit that can be categorized as a “payment,” or “something of

value”; these are instead ‘perks’ not clearly encompassed by the

Compensation Ban.

b. What Constitutes an Incentive Plan?

To determine what constitutes an Incentive Compensation

Plan, this Court must first define the operative universe. A

Compensation Plan is not solely limited to what is recorded on

paper. In fact, even if a plan appears compliant with the

Compensation Ban as written, several courts have considered

whether plans were violative as implemented or “in practice.”

See United States v. Corinthian Colls., 655 F.3d 984, 996 (9th

Cir., 2011) (contemplating an as-implemented violation as

possible, albeit insufficiently pled in the case at bar); United

States ex rel. Main v. Oakland City Univ., 426 F.3d 914, 916

(7th Cir. 2005) (allowing implicitly an as-implemented claim by

overturning a district court’s dismissal); United States v.

Educ. Mgmt. Corp., 871 F. Supp. 2d 433, 449 (W.D. Pa. 2012)

(applying this as-implemented theory of Compensation Ban

violation).

Next, the Court must define what types of plans are

violative of the Compensation Ban. The relevant statute

provides that “incentive payment based directly or indirectly on

success in securing enrollments” is prohibited. 20 U.S.C.

1094(a)(20) (emphasis added). The regulation adds that “[m]erit

based adjustments to employee” salaries cannot be based “in any

part directly or indirectly upon success in securing enrollments

or the award of financial aid.” 34 C.F.R. §

668.14(b)(22)(ii)(A) (2021) (emphasis added). Caselaw suggests

“allegations of a sham multi-factor” test for providing raises

is sufficient to constitute a Compensation Ban violation if

proven. Computer Sys. Inst., Inc., 2013 WL 5781810, at *4

(listing cases).10

Furthermore, the legislative history of the Act suggests

that compensations plans that are facially based on acceptable

factors –- tenure, for example –- but are in actuality based on

enrollment success, are clearly violative. The Act was meant to

10 Many cases that interpret what factors ought be

considered in assessing compliance with the Compensation Ban are

inapposite here because they consider plans in accordance with

the 2002 explanatory regulations -- which allowed plans that

were not based solely on recruitment-- rather than prohibiting

plans that have any connection with recruitment -- the current

and more restrictive standard. See, e.g., Educ. Mgmt. Corp.,

871 F. Supp. 2d at 439-447 (assessing policies in place from

2003-2005 and finding that the plan, as written, did not provide

commissions “solely” based on enrollments); Corinthian Colleges,

655 F.3d at 994 (applying the 2002 regulation and holding the

same); United States ex rel. Hoggett v. Univ. of Phoenix, No.

2:10-CV-02478-MCE, 2012 WL 2681817, at *6 (E.D. Cal. July 6,

2012) (applying the 2002 regulation but declining to dismiss

because the plaintiff had plausibly pled that the variables not

based on recruitment were a sham); United States ex rel. Irwin

v. Significant Educ., Inc., No. CV-07-1771-PHX-DGC, 2009 WL

322875, at *1 (D. Ariz. Feb. 10, 2009) (involving Grand Canyon

and assessing in light of the 2002 regulation).

disincentivize schools from recruiting as many students as

possible -– without regard for their dedication, fitness, or

ability to afford the educational program. Duncan, 681 F.3d at

435. This effort was based on the detrimental effect such

recruitment has on United States government funds; if a student

receiving Title IV funds fails to repay the funds, the costs are

borne by the taxpayer -- the schools lose nothing and, in fact,

only stand to benefit financially. Id. “Thus, the ban on

incentive payments and commissions is meant to curb eligible

schools from recruiting unqualified students simply to fill

quotas and turn a profit.” United States ex rel. Lopez v.

Strayer Educ., Inc., 698 F. Supp. 2d 633, 635 (E.D. Va. 2010);

Corinthian Colls., 655 F.3d at 989 (same)); Main, 426 F.3d at

916 (same). Although originally the concomitant regulations

associated with the Act provided schools with some leeway, they

were amended in 2010 to eliminate “safe harbor[s],” in response

to schools’ abuse of this latitude. 75 Fed. Reg. 66832, 66872

(Oct. 29, 2010) (“[T]he Department’s experience has demonstrated

that unscrupulous actors routinely rely upon these safe harbors

to circumvent the intent of [the Compensation Ban] of the

HEA.”); see also Duncan, 681 F.3d at 434.

This history reveals that the Department of Education’s use

of the words “indirectly” and “any” was rather intentional. The

Department of Education sought to eliminate all possible

circumvention of the Compensation Ban by curbing loopholes.

Furthermore, removal of the so-called “safe harbors” prevents

schools from abiding by the letter but not the spirit of the

Compensation Ban. In short, any compensation-based incentives

that create even indirect pressure to recruit are violative.

The scope of these indirect pressures, however, has been

somewhat cabined by courts. The Ninth Circuit has held that

“discipline[], demot[ion], or terminat[ion] on the basis of []

recruitment numbers” does not constitute a violation of the

Compensation Ban. Corinthian Colls., 655 F.3d at 992 (internal

quotations omitted). “Even as broadly construed, the Act does

not prohibit any and all employment-related decisions on the

basis of recruitment numbers; it prohibits only a particular

type of incentive compensation. Thus, adverse employment

actions, including termination, on the basis of recruitment

numbers remain permissible under the statute’s terms.” Id. at

992-93 (emphasis in original); see also United States ex rel.

Bott v. Silicon Valley Colleges, 262 Fed. Appx. 810, 812 (9th

Cir.2008) (“The decision to fire an employee is not covered by

the Act because termination is not a prohibited ‘commission,

bonus, or other incentive payment.’” (quoting 20 U.S.C. §

1094(a)(20)). Although these decisions pre-dated the Department

of Education’s decision to eliminate the “safe harbors” for the

Compensation Ban, there is some indication this reading may

govern even in light of the amended regulations. See United

States ex rel. Whatley v. Eastwick Coll., No. 2:13-1226, 2015

U.S. Dist. LEXIS 95862, at *18 (D.N.J. July 23, 2015) (citing

Corinthian and concluding the following in the context of the

new Compensation Ban regulations: “Plaintiff alleges that

Defendants violated the [Compensation Ban] by terminating

[counselors] for ‘failing to make their quotas.’ But the

[Compensation Ban] does not prohibit institutions from

terminating employees based on their recruitment numbers”),

aff’d, 657 F. App’x 89 (3d Cir. 2016).

3. Grand Canyon’s Alleged Compensation Ban

violation.

To establish a Compensation Ban violation, Relator has to

demonstrate (a) a plan (b) that incentivizes recruitment via

compensation.

a. A Plan

There are two ways of demonstrating that a violative plan

exists: showing that a university’s compensation plan (1) is

facially violative as written, or (2) is violative as

implemented. Corinthian Colls., 655 F.3d at 996. Relator

argues both: (1) first, that the Job Expectations are

incorporated by reference into Compensation Plans such that they

facially violate the Compensation Ban; and (2) second, even if

not incorporated, the implementation of the Job Expectations

alongside the Compensation Ban constitutes a violation in

practice. See Relator’s Mem. Opp’n 8 (alleging the Job

Expectations were “incorporated by reference”), 10 (stating that

“[i]n substance” the way counselors were promoted was

violative); Relator’s Facts ¶¶ 20, 36, 47.

As to the first argument, “[g]enerally speaking, courts

have held that incorporation by reference requires that the

document be specifically referred to and described in the,” item

or contract in question. United States v. Bos. Sci. Corp., 167

F. Supp. 2d 424, 431 (D. Mass. 2001) (Saris, J.). Here, the Job

Expectations are not incorporated by reference in either the

University Counselor or Development Counselor Compensation Plans

-- they are never mentioned by name and are only alluded to

insofar as the Compensation Plans refer to counselors meeting

the standards set forth by the University. See generally

University Counselor Compensation Plan; Development Counselor

Compensation Plan. This does not, however, prove fatal to

Relator’s claim, as she can -- and does -- bring it as an as-

implemented violation. See Main, 426 F.3d at 916.

b. Providing Compensation Based on Recruitment

Relator identifies genuine disputes of material fact as to

whether Grand Canyon’s Compensation Plans incentivize

recruitment in three manners: (i) the Compensation Plans’

operation in conjunction with the Job Expectations; (ii) the

Compensations Plans’ implementation alongside the CAP Process;

and (iii) Grand Canyon’s approach to providing other promotions

and perks.

i. The Compensation Plans’ Operation

Alongside the Job Expectations

The first theory as to how Grand Canyon may have violated

the Compensation Ban is simple. Relator argues that although

the Job Expectations and Compensation Plans are purportedly

separate, they in reality work in tandem. Relator’s Opp’n 2, 8.

All of the Compensation Plans allow counselors to remain

stagnant at Level 3 (or 4, 5, or 6) or advance to the next level

–- before reaching Level 3, Counselors are promoted

automatically regardless whether they would like to advance.

See University Counselor Compensation Plan 3; Development

Counselor Compensation Plan 2. Levels 4, 5, and 6, come with a

significant compensation increase. See supra Section I.B.2. At

the same time, the Job Expectations outline higher recruitment

requirements at Level 4, 5, and 6. See University Counselor Job

Expectations; Development Counselor Job Expectations; Relator’s

Exs. V, Ex. 71, University Counselor Job Expectations May 2018,

ECF No. 165-6; Relator’s Exs. I, Ex. 11, University Counselor

Job Expectations Nov. 2020, ECF No. 161-11; Relator’s Exs. V,

Ex. 70, Development Counselor Job Expectations May 2018, ECF No.

165-5.

It is disputed whether counselors’ enrollment numbers are

factored into whether they are allowed to elect to move up to

these new levels. Defs.’ Facts ¶ 34; Relator’s Facts ¶ 34.

Furthermore, since these promotions are not automatic, they

cannot be purely tenure-based –- that much is undisputed.

Defs.’ Facts ¶ 33; Relator’s Facts ¶ 33. Therefore, if the

recruitment requirements are enforced, then the increased

salaries between Tenure Level 3 and the levels above it may

constitute a Compensation Ban violation. Relator explains, for

example that two Development Counselors can both have 9 years of

tenure at Grand Canyon but, depending on whether they chose to

stop or advance in the Development Counselor Compensation Plan,

one could be earning $90,000 (Level 4) and the other could be

earning $110,000 (Level 6); the only difference between the

Counselors’ roles at these levels, she contends, is their

recruitment expectations. Relator’s Facts ¶ 28; Development

Counselor Compensation Nov. 2020.

If this close connection between the Job Expectations and

the Compensation Plans proves to be true in practice, then the

Compensations Plans violate the Compensation Ban: allowing

counselors to agree to a raise on the condition that they are

expected to recruit greater numbers of students is

definitionally an incentive compensation. Even if Grand Canyon

does not terminate counselors at Levels 4, 5, and 6 who do not

meet these expectations, it is disputed whether Grand Canyon

provides greater pay and consistently expects greater

recruitment at these “Levels” in practice. If both the

Compensation Plans and Job Expectations are strictly enforced,

this would constitute a violation of the Compensation Ban’s

prohibition on “incentive payment based directly or indirectly

on success in securing enrollments.” 20 U.S.C. 1094(a)(20)

(emphasis added).

Even barring this, Relator highlights another manner by

which the Compensation Plans may violate the Compensation Ban.

It is disputed whether recruitment numbers are taken into

account in determining “merit-based” compensation increases.

Defs.’s Facts ¶ 27; Pl.’s Facts ¶ 27. These merit-based

increases can elevate a counselor’s salary from zero to two

percent if they have decided to stay stagnant at a Tenure Level

-– for example Level 3. Defs.’ Facts ¶ 35; Relator’s Facts ¶

35.11 If established this would also constitute a Compensation

Ban violation.

11 Relator also claims that merit-based increases are

“cap[ped]” such that a merit-based increase would never bring a

Counselor up to the salary of a next Tenure Level, Relator’s

Facts ¶ 27. “[T]his ‘Merit Cap’ is to ensure that Counselors

can earn the salary associated with a particular level only if

they are subject to the enrollment requirement of that level,”

according to Relator. Id. This “Merit Cap,” if shown through

data-based evidence, could lend further credence to Relator’s

first theory as to how Grand Canyon violates the Compensation

Ban, see supra Section II.B.3.b.iii.

ii. The Compensation Plans’ Operation

Alongside CAP

Relator also alleges that even the automatic “tenure-based”

promotions are conditioned upon recruitment numbers. Under

Relator’s account of the facts, Grand Canyon is providing higher

pay, requiring higher recruitment levels at each new tenure

level, and firing counselors who do not meet the expected

recruitment quotas. Relator’s Facts ¶¶ 19, 21, 36, 47, 73, 79,

96. Taken as true, this system is a violative recruitment-based

compensation system in practice: Grand Canyon’s counselors

essentially are given the choice between recruiting more

students and receiving a raise or being terminated. Grand

Canyon provides two main counterarguments to this theory.

Grand Canyon’s first counterargument is that it does not

commit an as-applied violation because the Compensation Ban

permits both firing based on enrollments and merit-based

promotions (as long as they are not tied to recruitment).

Defs.’ Mem. Summ. J. 9. Grand Canyon is in part correct: none

of the elements of its plan taken alone are forbidden by the

Compensation Ban and its regulations. Grand Canyon can provide

promotions based solely on tenure, see 34 C.F.R. §

668.14(b)(22)(ii)(A) -- what Grand Canyon calls a “lockstep”

compensation system, Defs.’ Mem. Summ. J. 4; Defs.’ Facts ¶¶ 52-

53. Separately, it can require enrollment numbers as part of

its job expectations. Bott, 262 Fed. App’x. at 812. Finally,

it is likely not violative for Grand Canyon to terminate

Counselors for not meeting these enrollment quotas. Id. The

adoption of all three of these tools in unison, however, could

create a compensation system that is tenure-based in name only.

Specifically, if Grand Canyon both requires higher recruitment

at each level of promotion and fires based on recruitment

numbers, then its Compensation Plans are violative. There is,

therefore, a genuine dispute of material fact as to (1) whether

this is how the plans actually work in practice and (2) whether,

controlling for tenure, higher recruiting counselors are paid

more. Relator provides evidence that supports her theory and

Grand Canyon rebuts it. Relator’s Facts ¶¶ 21, 36, 39, 43, 47,

73, 79, 100; Defs.’ Facts ¶¶ 21, 36, 39, 43, 47, 73, 79.

Grand Canyon’s second counterargument is that Relator

cannot establish the plan functions in this way because Grand

Canyon automatically promotes counselors at each new tenure

level, regardless whether they meet recruitment expectations.

Defs.’ Facts ¶¶ 73-75. Relator contends, however, that this is

true for only the minority of counselors. Relator’s Facts ¶ 73.

To rebut this, Grand Canyon states: “In 2017, [] approximately

127 University Counselors were promoted despite failing to meet

enrollment expectations. In 2018, 115 University Counselors

were promoted despite failing to meet enrollment expectations.

What is more, 44 of these Counselors received their promotions

while they were still on a Corrective Action Plan for failure to

meet enrollment expectations.” Defs.’ Mem. Summ. J. 8 (internal

citations and emphasis omitted).

Grand Canyon’s argument is unpersuasive in two respects:

(1) it applies the improper standard by taking all inferences in

its favor, not the Relator’s; and (2) it cherry picks data to

obfuscate the complete picture of the promotion and firing at

Grand Canyon.

The 242 (127 in 2017 and 115 in 2018) University Counselors

Grand Canyon claims “failed to meet enrollment expectations”

include any individual who was promoted the same year as being

on CAP; in other words, it includes even those who were promoted

long after CAP forced them to raise their enrollment numbers and

those who fell behind expectations after their promotion. See

Defs.’ Facts ¶ 76; CAP Data. Of these 242 people, only 44 were

promoted while actively on CAP, or in other words, while

actively falling behind on enrollment expectations. Id. In

brief, the 242 figure artificially inflates the number of

individuals considered as “fail[ing] to meet enrollment

expectations.” See Defs.’ Facts ¶ 78. Furthermore, of the 44

people promoted while on active CAP, 8 were fired shortly after

their promotion (within approximately a year). Id. Therefore,

only 36, out of the over 2,600 counselors in Grand Canyon’s

employ, were promoted while actively struggling with their

recruitment numbers without later being fired -- around 1.4

percent of Counselors. Defs.’ Facts ¶ 79 (stating that 79

Counselors constitute just over 3 percent of the Counselors

employed between 2017 and 2018, suggesting that Grand Canyon

must have employed at least 2,600 counselors during that same

time period). Furthermore, Grand Canyon admits it terminated 79

people for “performance-based reasons” between 2017 and 2018.

Id. Of these, 24 were among the 242 who were “place[d] on [CAP]

while also receiving a promotion during the [2017 and 2018]

calendar year[s].” See CAP Data. The other 55 individuals were

not on the CAP list, meaning they were terminated in their first

year (before they became eligible for promotion) or were fired

without being placed on CAP. The data then reveals that

counselors are sometimes fired for falling behind on recruitment

even without being placed on CAP. This indicates that the data

provided by Grand Canyon is far from the ‘smoking gun’ to prove

Relator’s claims “objectively and indisputably false.” See

Defs.’ Supp. Statement Supp. Mot. Summ. J. 2, ECF No. 196.

On the contrary, viewing the CAP data provided by Grand

Canyon in the light most favorable to the Relator highlights a

genuine dispute of material fact as to how the Compensation

Plans work in practice and, therefore, whether Grand Canyon

violates the Compensation Ban.

iii. Grand Canyon’s Approach to Other

Promotions and Perks

Finally, Relator has established a genuine dispute of

material fact as to three other possible Compensation Ban

violations. First, it is disputed whether recruitment numbers

are tied to promotions from University Counselor to Development

Counselor or Manager. Relator’s Facts ¶¶ 96-98. Regardless how

Grand Canyon characterizes this career transition, it comes with

a significant raise and higher recruitment expectations, and

therefore could fall within the scope of a Compensation Ban

violation. See University Counselor Compensation Plan 3

(University Counselor Tier 1 compensation is $40,000);

Development Counselor Compensation Plan 2 (Development Counselor

Tier 1 compensation is $65,000). Second, there is a genuine

dispute of material fact as to whether overtime is granted only

to those with higher recruitment numbers. Defs.’ Facts ¶ 45;

Relator’s Facts ¶¶ 45, 127-39. As discussed above, see supra

Section II.B.2.i., the opportunity to earn overtime could be

considered incentive pay; if the Relator is correct, this could

also constitute a Compensation Ban violation. Third, Service

Counselors are undisputedly paid based on the number of students

they retain. See Service Counselor Job Expectations &

Compensation. Whether this is done in violation of the

Compensation Ban depends on the Service Counselors’ roles in

practice and whether they play any part in recruitment; if they

do, as Relator suggests, Relator’s Facts ¶ 142, then this could

also constitute a Compensation Ban violation.

Therefore, the existence of genuine disputes of material

fact as to Compensation Ban violations requires this Court to

next consider whether Relator has satisfied her burden on

summary judgment with respect to the elements of a False Claims

Act.

C. Whether Grand Canyon Violated the False Claims Act

There are two types of False Claims Act, 31 U.S.C. §§ 3729-

33, violations at issue in this action. Relator first claims

Grand Canyon violated the False Claims Act by “knowingly

present[ing], or caus[ing] to be presented, a false fraudulent

claim for payment or approval” (count 1), 31 U.S.C. §

3729(a)(1)(A), and second, by “knowingly mak[ing], us[ing], or

caus[ing] to be made or used, a false record or statement

material to a false or fraudulent claim” (count 2), id. at §

3729(a)(1)(B).

To establish prima facie the submission of a false claim,

Relator must show that Grand Canyon has:

1) present[ed] or cause[d] to be presented to the

United States government, a claim for approval or

payment, where 2) that claim is false or fraudulent,

and 3) the action was undertaken ‘knowingly,’ in other

words, with actual knowledge of the falsity of the

information contained in the claim, or in deliberate

ignorance or reckless disregard of the truth or

falsity of that information.

United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360

F.3d 220, 225 (1st Cir. 2004); see also United States ex rel.

Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 380 (1st Cir.

2011). The misrepresentation “must be material to the

Government’s payment decision in order to be actionable.”

Universal Health Servs. v. United States ex rel. Escobar, 579

U.S. 176, 181 (2016) (“Escobar I”); see also Corinthian Colls.,

655 F.3d at 992 (“The essential elements of an FCA claim are (1)

a false statement or fraudulent course of conduct, (2) made with

requisite scienter, (3) that was material, causing (4) the

government to pay out money or forfeit moneys due.”).

The test similarly applies to false statements: “the False

Claims Act imposes civil liability upon ‘[a]ny person’ who . . .

knowingly makes a false record or statement material to such a

false claim . . . .” United States ex rel. Willette v. Univ. of

Mass., 80 F. Supp. 3d 296, 298 (D. Mass. 2015) (Hillman, J.)

(quoting 31 U.S.C. § 3729(a)(1)(A)-(C)).

Whether Grand Canyon violated these two parts of the False

Claims Act hinges on four elements: whether (1) claims or

statements were made; (2) these claims or statements were false;

(3) these falsehoods were material; and (4) these statements

were made with scienter of the falsehood. See Hendow, 461 F.3d

at 1174 (recounting the elements for False Claims Act liability

as: “(1) a false statement or fraudulent course of conduct, (2)

made with scienter, (3) that was material, causing (4) the

government to pay out money or forfeit moneys due”).

This Court concludes that Relator has demonstrated a

genuine dispute of material fact as to each of these

requirements for the reasons that follow.

1. Existence of a Claim or Statements

Grand Canyon argues that “Relator has not identified any

claims for payment that contained specific (and false)

representations about the goods or services provided by Grand

Canyon.” See Defs.’ Mem. Summ. J. 11. Relator counters that

submission of the PPA by Grand Canyon constitutes a claim. See

Relator’s Mem. Opp’n 11. Relator prevails on this issue.

As to false statements, “any time a false statement is made

in a transaction involving a call on the U.S. fisc, False Claims

Act liability may attach.” Harrison v. Westinghouse Savannah

River Co., 176 F.3d 776, 788 (4th Cir. 1999). The theory of

false statements here rests on the possible false claims for

title IV funds; therefore, the remainder of this section focuses

on these claims.

“The ‘sine qua non’ of a False Claims Act violation is, as

the name of the statute would suggest, an ‘actual false claim.’”

United States v. Pfizer, Inc., 188 F. Supp. 3d 122, 129 (D.

Mass. 2016) (Woodlock, J.) (emphasis added) (citation omitted),

aff'd sub nom. United States ex rel. Booker v. Pfizer, Inc., 847

F.3d 52 (1st Cir. 2017). The False Claims Act defines a claim

as “any request or demand . . . for money or property . . . that

. . . is presented to an officer, employee, or agent of the

United States.” 31 U.S.C. § 3729 (b)(2)(A). Claims include

“direct requests to the Government for payment as well as

reimbursement requests made to the recipients of federal funds

under federal benefits programs.” Escobar I, 579 U.S. at 182.

“A ‘non-submitting’ entity that knowingly causes the submission

of a false claim may be liable under the FCA even if the entity

directly submitting the claim to the government lacks the

requisite mental state.” Guilfoile v. Shields, 913 F.3d 178,

187 (1st Cir. 2019).

A claim exists when a University signs a PPA and later

submits applications for Title IV funds. See, e.g., Hendow, 461

F.3d at 1176 (concluding that, to establish the existence of

claims,it mattered not which types of Title IV loans or grants

the defendants had applied for, but that the government

forfeited moneys); Main, 426 F.3d at 916-17 (“The University

‘uses’ its phase-one application (and the resulting

certification of eligibility) when it makes (or ‘causes’ a

student to make or use) a phase-two application for payment. No

more is required under the statute.” (quoting 31 U.S.C. §

3729(a)(2))). And while relators must reach a certain “level of

specificity” in providing evidence regarding false claims

submitted to the government, Pfizer, Inc., 188 F. Supp. 3d at

130; United States v. Kitsap Physicians Serv., 314 F.3d 995,

1002 (9th Cir. 2002) (granting summary judgment because Relator

“fail[ed] to detail any particular false claim”), here, Relator

does so at length, Relator’s Facts ¶¶ 82-83, 86, 168; Defs.’

Facts ¶¶ 82-83, 86; 2018 PPA. Most recently, the Department of

Education certified Grand Canyon to enter into a new PPA on

November 6, 2019. Defs.’ Facts ¶ 81; Relator’s Facts ¶¶ 81,

168; Certification Letter.

Relator adduces evidence that Grand Canyon entered into

several PPAs:

In August 2017, Mr. Mueller executed a PPA, which gave

the University the ability to participate in the Title

IV programs through December 31, 2020. However, the

sale of [Grand Canyon University, Inc.] by [Grand

Canyon Education, Inc.] in July 2018 resulted in a

change in control of [Grand Canyon University, Inc.]

necessitating the application for a new PPA. On

August 20, 2018, Mr. Mueller signed a Temporary

Program PPA with [the Department of Education], which

granted [Grand Canyon University, Inc.] provisional

approval to participate in the Title IV programs on a

month-to-month basis. On November 7, 2019, Mr.

Mueller again signed a PPA, which gives the University

the ability to participate in the Title IV programs

through June 30, 2022.

Relator’s Facts ¶ 168 n.5 (internal citations omitted); see also

2017 PPA; 2018 PPA. Grand Canyon itself provides evidence that

it entered into a PPA with the Department of Education to

receive Title IV funds on November 6, 2019, which enabled it to

receive Title IV funds until September 30, 2022. Defs.’ Facts ¶

82; Certification Letter.

Relator further provides evidence that the “Defendants

submitted hundreds of thousands of claims for Title IV and

[Department of Veterans Affairs] funds to the Government between

2012 and the present.” Relator’s Facts ¶ 110 (citing to

documentary evidence provided by the Defendants). To support

this, she makes specific allegations as to several disbursements

of funds: in “2016, Defendants submitted claims for payment to

the United States, pursuant to Title IV of the HEA, for the

aggregate amount of $936,330,947”; in “2017, Defendants

submitted . . . $1,022,527,541” in claims; in “2018, Defendants

submitted . . . $1,095,590,981” in claims; in “2019, Defendants

submitted . . . $1,210,053,400” in claims; and in “2020,

Defendants submitted . . . $1,329,357,889.” Id. ¶¶ 112-16.

It is therefore undisputed that claims for payment to the

United States government were made.

2. Falsity

This session of the Court has identified three possible

types of falsity: factual falsity, legal falsity under an

express certification theory, and legal falsity under an implied

certification theory. See United States ex rel. Westmoreland v.

Amgen, Inc., 738 F. Supp. 2d 267, 272–73 (D. Mass. 2010). The

latter two are applicable in this case.

“A legally false claim occurs when a party represents

compliance with a statute or regulation as a condition to

payment, without actually complying with such statute or

regulation.” Id. Having already established that a genuine

dispute of material fact exists as to whether Grand Canyon

violated the Compensation Ban, this Court must next consider

whether evidence exists that Grand Canyon –- impliedly or

expressly -- certified compliance with the Compensation Ban in

its claims. Escobar I, 579 U.S. at 181.

“A claim is legally false under an express certification

theory when the party making the claim for payment expressly

represents compliance with a statute or regulation.” Amgen,

738, F. Supp. at 273; Ebeid ex rel. United States v. Lungwitz,

616 F.3d 993, 998 (9th Cir. 2010) (defining express

certification, as occurring when an “entity seeking payment

[falsely] certifies compliance with a law, rule or regulation as

part of the process through which the claim for payment is

submitted”). By executing and submitting a PPA to the

government, schools expressly agree to abide by the Act’s

concomitant regulations, which include the Compensation Ban, 34

C.F.R. § 668.14(b)(22)(i)(A). In fact, both PPAs submitted into

evidence –- that Grand Canyon signed in 2017 and 2018 -–

expressly include the language from the Compensation Ban,

prohibiting “incentive payment based in any part, directly or

indirectly upon success in securing enrollments.” See 2018 PPA

7; 2017 PPA 6. Thus, under this theory, if Grand Canyon was

violating the Compensation Ban, by signing a PPA with the

Department of Education, it automatically made an express false

certification every time a claim was paid out pursuant to those

PPAs. Grand Canyon also admits that, in order to receive

payments, it explicitly responded to an inquiry to the

Department of Defense regarding its Compensation Ban compliance

by making the express certification that it:

[c]omplies with the prohibitions against providing

incentive compensation codified at 20 U.S.C. §

1094(a)(20) because [Grand Canyon Education, Inc.]

does not compensate its admissions or financial aid

Counselors based upon success in securing enrollments.

Instead, the compensation plans establish that the

adjustments to fixed compensation are based on tenure

or annual performance reviews that take into account

standard evaluative factors.

Defs.’ Facts ¶ 83.

Other circuits, however, have treated omitting Compensation

Ban non-compliance and submitting Title IV federal financial aid

applications as an implied certification. See, e.g., Rose, 909

F.3d at 1018. Grand Canyon argues Relator fails to meet the

falsity requirement because she cannot establish that an implied

certification exists. See Defs.’ Mem. Summ J. 11. “A claim is

legally false under the implied certification theory when a

claimant makes no express statement regarding compliance with a

statute or regulation, but by submitting a claim, the claimant

implies that it has complied with all of the stated conditions

for payment.” United States ex rel. Lisitza v. Johnson &

Johnson, 765 F. Supp. 2d 112, 125 (D. Mass. 2011) (Stearns, J.);

see also United States ex rel. Bawduniak v. Biogen Idec, Inc.,

No. 12-CV-10601-IT, 2018 WL 1996829, at *4 (D. Mass. Apr. 27,

2018) (Talwani, J.); Ebeid, 616 F.3d at 998 (explaining the

Ninth Circuit’s implied false certification standard as

“occur[ing] when an entity has previously undertaken to

expressly comply with a law, rule, or regulation [but does not],

and that obligation is implicated by submitting a claim for

payment even though a certification of compliance is not

required in the process of submitting the claim.”).

In Universal Health Services, Inc. v. Escobar, the Supreme

Court held that “half-truths -- representations that state the

truth only so far as it goes, while omitting critical qualifying

information -- can be actionable misrepresentations.” Escobar

I, 579 U.S. at 188. The Escobar Court then set out two

requirements for implied false certification liability: (1) the

claim must make specific representations; and (2) failure to

disclose regulatory compliance must make those representations

misleading half-truths. Id. at 190. Grand Canyon argues

unpersuasively that Relator does not meet either Escobar factor,

see Defs.’ Mem. Summ. J. 11.

In United States ex rel. Rose v. Stephens Institute, the

Ninth Circuit held, in the context of Federal Stafford Loan

Applications, that a reasonable trier of fact could conclude an

implied certification was made because the “Defendant

specifically represented that the student applying for federal

financial aid [was] an ‘eligible borrower’ and [was] ‘accepted

for enrollment in an eligible program,’” while failing to

disclose Compensation Ban non-compliance. 909 F.3d at 1018.

Here, the record reveals, on disputed facts taken in the

light most favorable to Relator, an analogous situation. Grand

Canyon did not just make specific representations of compliance

by entering PPAs -- which explicitly required Compensation Ban

compliance -- and by submitting student information, thereby

representing itself as an entity eligible for borrowing. Defs.’

Facts ¶ 82; Relator’s Facts ¶ 110. It also undisputedly

submitted its Compensation Plans to the Department of Education

and Department of Defense for review. Defs.’ Facts ¶¶ 80-84.

At the same time, there is evidence to suggest that Grand Canyon

failed to disclose the Job Expectations Plans and other

information about how the Compensation Plans functioned in

practice, see Relator’s Facts ¶¶ 80, 85 –- if the Compensation

Ban is shown to have been violated in practice, this would be

sufficient to establish legal falsity via an implied

certification theory, as these submissions could constitute

“misleading half-truths,” Escobar I, 579 U.S. at 190.

The Defendants cite United States v. Sanford-Brown, Ltd.,

840 F.3d 445, 447 (7th Cir. 2016), to argue Relator does not

meet the Escobar factors, see Defs.’ Mem. Summ J. 11. This case

is distinguishable. The Plaintiff in Sanford-Brown had not

identified any affirmative representations. See 840 F.3d at

447. Instead here, the Defendants themselves have identified

affirmative representations -- they contend they submitted the

Compensation Plans for the Department of Education’s and

Department of Defense’s review -- which constitute affirmative

representations that their compensation program functions in

accordance with those plans. Defs.’ Facts ¶ 80.

3. Materiality

Grand Canyon argues that because the government was

“apprised” of Grand Canyon’s alleged violation and took no

action, this Court ought rule that its violations are not

material. Defs.’ Mem. Summ. J. 17. Relator counters that

Compensation Ban violations are material and that this Court

should consider several factors beyond this, including the

Government’s consistent payments of Title IV funds to other

Compensation Ban violators. Relator’s Mem. Opp’n 15-18 (citing

United States ex rel. Escobar v. Universal Health Servs.

(“Escobar II”), 842 F.3d 103 (1st Cir. 2016)). The United

States has filed a statement of interest in this case that

addresses the issue of materiality specifically. See Statement

Interest 7-12. For its part, the United States argues that (1)

the government’s awareness of Relator’s allegations is not

dispositive of materiality because it is not equivalent to

awareness of non-compliance; (2) the lack of government

intervention is also not dispositive, because there are many

reasons why the government could opt for non-intervention; and

(3) the Court should instead consider the importance of

Compensation Ban compliance, the government’s routine action

against violators, and the substantial nature of defendants’

violation in ruling. Id.

For a fact to be “material” it must have 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).

“[I]n assessing materiality in connection with a different

section of the False Claims Act, the fundamental inquiry is

‘whether a piece of information is sufficiently important to

influence the behavior of the recipient.’” Escobar II, 842 F.3d

at 110 (quoting United States ex rel. Winkelman et al. v. CVS

Caremark Corp., 827 F.3d 201, 211 (1st Cir. 2016)); see also

United States ex rel. Loughren v. Unum Grp., 613 F.3d 300, 307

(1st Cir. 2010). The standard for materiality is “rigorous”,

see Escobar I, 579 U.S. at 195 n.6, and requires the Court to

engage in a “fact-intensive and context-specific inquiry,” New

York v. Amgen Inc., 652 F.3d 103, 111 (1st Cir. 2011). The

Supreme Court in Universal Health Services v. Escobar laid out

that:

if the Government pays a particular claim in full

despite its actual knowledge that certain requirements

were violated, that is very strong evidence that those

requirements are not material.

579 U.S. at 194–95. Another session of this Court has summed up

the materiality test as requiring “a ‘holistic approach’ that

considers three non-dispositive factors: (1) whether regulatory

compliance was a condition of payment; (2) the centrality of the

relevant requirements in the regulatory program; and (3) whether

the government paid out on particular claims despite actual

knowledge that the supposedly material requirements had been

violated.” United States v. Gen. Hosp. Corp., 394 F. Supp. 3d

174, 189 (D. Mass. 2019) (Burroughs, J.); see also Rose, 909

F.3d at 1020-23 (applying a similar holistic test drawing from

Escobar I’s guidance). This Court agrees.

Here, the first prong of the materiality test is met. The

Department of Education includes within its PPAs an explicit

reference to the Compensation Ban. See 2018 PPA 7; 2017 PPA 6;

see Hendow, 461 F.3d at 1176 (“All of the emphasized phrases in

the . . . [PPA] demonstrate that compliance with the incentive

compensation ban is a necessary condition of continued

eligibility and participation.”). In sum, “[h]ad Defendant not

certified in its [PPAs] that it complied with the [Compensation

Ban], it could not have been paid because Congress required as

much.” Rose, 909 F.3d at 1020.

The second prong of the analysis is also easily met. This

prong centers on whether Compensation Ban compliance goes to the

“very essence” of the bargain in providing Title IV funds.

Escobar II, 842 F.3d at 110; see also United States ex rel.

Martino-Fleming v. S. Bay Mental Health Centers, 540 F. Supp. 3d

103, 127-128 (D. Mass. 2021) (Saris, J.). Compensation Ban

compliance is an unambiguous condition of receiving Title IV

funds under the Act and Department of Education regulations.

See 20 U.S.C. § 1094(a)(20); 34 C.F.R. § 668.14(b)(22). Thus,

the centrality requirement is satisfied.

The conflict in this case can be distilled around the third

prong. Relator, however, prevails on this prong as well.

Several factors can be considered within this prong, including

(1) past government actions when it possessed actual knowledge

of non-compliance, (2) the Defendant’s awareness of past

department actions, and (3) the government’s behavior in this

particular instance. See Rose, 909 F.3d at 1020-22. Whether

the government has chosen to intervene in the qui tam at bar

does not bear significantly on this analysis. United States ex

rel. Int’l Bhd. of Elec. Workers Local Union No. 98 v. Fairfield

Co., 5 F.4th 315, 346 (3d Cir. 2021) (“[I]ntervention decisions

are, at best, of minimal relevance.”); United States ex rel.

Prather v. Brookdale Senior Living Communities, Inc., 892 F.3d

822, 836 (6th Cir. 2018). This Court addresses these factors in

order: (1) other courts have already concluded that, in general,

there is evidence to suggest that the Department of Education

requires corrective action for schools that violate the

Compensation Ban and does not allow schools to continue

violating while receiving Title IV funds, Rose, 909 F.3d at

1022; (2) the Defendants admit they were aware of the

requirement of Compensation Ban compliance in order to secure

government funds, see generally Defs.’ Mem. Summ. J.; see Defs.’

Facts ¶ 48-50 (detailing Grand Canyon’s efforts at Compensation

Ban compliance); and (3) the only remaining question is the

relevance of the Department of Education’s lack of action

against Grand Canyon in this specific instance.

There are three key reasons why the Department of

Education’s lack of action against Grand Canyon -- or failure to

stop disbursing Title IV funds -- is not dispositive of

materiality in this case. First, the government’s awareness

that Relator has filed a claim in Court does not bear on

materiality. Escobar II, 842 F.3d at 112 (“[M]ere awareness of

allegations concerning noncompliance with regulations is

different from knowledge of actual noncompliance.”). “Indeed,

it makes sense not to place much weight on the government's

response in the wake of such litigation because, prior to

discovery and a formal court ruling, the relator’s allegations

are just that –- allegations. . . .” United States ex rel.

Foreman v. AECOM, 19 F.4th 85, 115 (2d Cir. 2021).

Second, and relatedly, there is a dispute of material fact

regarding whether the government had actual knowledge of Grand

Canyon’s Compensation Ban violations, which counsels this Court

against granting summary judgment on this basis. See Escobar

II, 842 F.3d at 110, 112 (declining grant a motion to dismiss on

the basis that the absence of government action weighed on

materiality, because there was no evidence or allegations of

“actual knowledge” by the government); see also United States ex

rel. Campie v. Gilead Scis., Inc., 862 F.3d 890, 907 (9th Cir.

2017) (same); cf. United States v. Mortg. Invs. Corp., 987 F.3d

1340, 1349 (11th Cir. 2021) (holding that undisputed evidence of

actual knowledge existed where Department of Veterans Affairs

audits had uncovered defendant’s misrepresentations -- a

condition that does not exist in the case at bar). Relator

asserts that Grand Canyon never submitted its Job Expectations

to Department of Education and perhaps failed even to submit the

Compensation Plans at the core of this case (the 2017 Plans).

See Relator’s Facts ¶¶ 80, 110; Am Compl. ¶ 74; see also Decl.

Susan D. Crim ¶ 6. Taken in the light most favorable to

Relator, this evidence suggests that the government lacked key

pieces of information in its assessment. Buttressing this

inference, the government posits that neither the Department of

Education nor the Department of Veterans Affairs has reviewed

the Compensation Plans in light of the Second Amended Complaint.

See Statement Interest 8.

Grand Canyon cites two cases in support of its proposition

that the Department of Education’s inaction against Grand Canyon

is dispositive here: United States ex rel Nargol v. DePuy

Orthopaedics, Inc., 865 F.3d 29, 35 (1st Cir. 2017) and

D’Agostino v. ev3, Inc., 845 F.3d 1, 7 (1st Cir. 2016). Both

are inapposite as they involved completely distinguishable

cases: (1) first, neither case deals with Compensation Ban

compliance; (2) second, these cases involve instances in which

the government undisputedly had actual knowledge of the facts

underlying the violation, DePuy, 865 F.3d at 35 (noting “the

complaint allege[d] that Relators told the FDA about every

aspect of the design” that could have been violative);

D’Agostino, 845 F.3d at 8 (noting that the FDA did not withdraw

approval in the six years subsequent the fraud coming to light),

and, with respect to D’Agostino, in which causality of the

falsehoods on payment, not materiality, was the key

consideration in the court’s decision-making, D’Agostino, 845

F.3d at 8 (noting the importance that the misrepresentations

“cause the government to make a payment”). In fact, the First

Circuit in DePuy explains that its holding is consistent with

other circuits’ precedent:

the record in [these other cases] lacked what we have here:

a situation in which the FDA was not alleged to have ever

withdrawn its approval, even long after it acquired full

knowledge of Relators’ claims.

DePuy, 865 F.3d at 36 (citing Gilead, 862 F.3d at 897). Here,

by contrast, there is a genuine dispute of material fact

regarding whether the Department of Education and Department of

Veterans Affairs have full information: neither has assessed the

Compensation Plans in light of the Job Expectations.

Furthermore, even at present, several facts remain in question

relevant to both Departments’ assessments.

Third, the First Circuit has interpreted the Supreme

Court’s relevant holdings on materiality to entail that actual

knowledge by the government is not dispositive. Escobar II, 842

F.3d at 110.12 As the United States persuasively argues, there

12 It could be argued that the procedural posture of this

case weighs in favor of finding the violations immaterial. This

argument relies on the fact that the majority of cases dealing

with this issue -- whether evidence is sufficient to establish

the government’s actual knowledge and thus a lack of materiality

-- were decided at the motion to dismiss, rather than summary

judgment, stage. See Escobar II, 842 U.S. at 112; see also

United States ex rel. Janssen v. Lawrence Mem'l Hosp., 949 F.3d

533, 542 n. 13 (10th Cir.) (“It is not inconsistent to state

that knowledge of allegations is insufficient, alone, to warrant

dismissal under 12(b)(6) and yet constitutes some evidence of

are many reasons why the Government may refuse to withdraw Title

IV funding even in light of Compensation Ban non-compliance.

Statement of Interest 9-10; see Gilead, 862 F.3d at 906

(“[T]here are many reasons the FDA may choose not to withdraw a

drug approval, unrelated to the concern that the government paid

out billions of dollars for nonconforming and adulterated

drugs.”).

Another factor this Court considers is the magnitude or

substantiality of the violation. See Escobar I, 579 U.S. at

194; see also Rose, 909 F.3d at 1022; United States ex rel.

Brooks v. Stevens-Henager Coll., 305 F. Supp. 3d 1279, 1301 (D.

Utah 2018). How large or small the monetary incentives were for

counselors is a key factor in determining whether the

Compensation Ban violation was material -- were the incentives

“$10 gift cards” or “$30,000 trips to Hawaii”? See Rose, 909

F.3d at 1022. The evidence taken in favor of Relator weighs

immateriality under Rule 56(a). Moreover, in Escobar the

allegations only noted that the Government continued to pay

claims up to the filing of litigation. Here [the government]

has continued to pay claims -- and has requested no changes in

[the defendant]’s data reporting . . . for years despite ongoing

litigation.”), cert. denied, 141 S. Ct. 376 (2020). While this

is compelling reasoning, it does not move the Court in this

case, because: (1) neither the Department of Veterans Affairs

nor the Department of Education has reviewed or audited Grand

Canyon’s compensation practices alleged in the Corrected Second

Amended Complaint, see Statement of Interest 8, and (2) the

extent of Grand Canyon’s possible noncompliance “in practice”

has only recently become visible via discovery.

toward finding materiality in this case, as the violation if

proven would include thousands of dollars in raises and overtime

pay.

4. Knowledge

Finally, this Court must assess whether a genuine dispute

of material fact exists as to Grand Canyon’s scienter. Grand

Canyon argues that the “evidentiary record on scienter is

irrefutable” in that Grand Canyon “not only intended for the

school to comply with the Compensation Ban, but also dedicated

significant resources toward designing and implementing policies

and practices that would ensure compliance” and had no knowledge

it was violating the Compensation Ban. Mem. Summ. J. 12-15. To

this end, Grand Canyon argues that this Court should apply the

recklessness standard propounded in Safeco Ins. Co. of Am. v.

Burr. See Defs. Mem. Summ. J. 13-14 (citing 551 U.S. 47, 68

(2007) (holding that recklessness requires “an unjustifiably

high risk of harm that is either known or so obvious to be

known” (internal citations omitted))). The United States in its

Statement of Interest argues that the Safeco standard is

inapposite here, as it applies to a different type of scienter -

- willfulness -- and only to cases where a statute is ambiguous

-- which the False Claims Act is not. Statement Interest 2-3.

Relator argues that, regardless of the standard, the defense is

not available because there is evidence Grand Canyon failed to

disclose full information to its attorneys and in some cases

intentionally ignored its attorneys’ advice. Mem. Opp’n 12-14.

The requirement of “scienter” or “knowing” is defined as:

“actual knowledge”; “deliberate ignorance of the truth or

falsity of information”; or “reckless disregard of the truth or

falsity of the information.” 31 U.S.C. § 3729 (b)(1). The

False Claims Act states that proof of knowing scienter does not

require “specific intent to defraud.” Id.

There is no dispute that Grand Canyon and its leaders were

aware of the Compensation Ban. Defs.’ Facts ¶¶ 48-49, 50, 59.

Therefore, the only question is whether the alleged Compensation

Ban violation was done with the requisite scienter. This Court

concludes that there is a genuine dispute of material fact with

regard to the scienter requirement in two respects: (1) as to

whether Grand Canyon knowingly violated the Compensation Ban;

(2) and even absent that, as to whether a reckless violation

took place.

As to possible knowing violations, Relator argues Grand

Canyon leadership purposefully skirted Compensation Ban

compliance. First, she cites to evidence that University

leadership had experience in dodging Compensation Ban compliance

at other Universities; specifically, five Grand Canyon

executives moved to Grand Canyon from the University of Phoenix

where they were previously accused of Compensation Ban

violations. See Relator’s Facts ¶¶ 162-7. Second, attorneys

described in detail what Grand Canyon could and could not do --

(1) the Job Expectations could not in any way be linked to

compensation; (2) attorneys advised basing promotions on

graduation rates rather than tenure; (3) lawyers advised that

Service Counselors would also fall under the Compensation Ban.

Relator’s Facts ¶¶ 47-50. Relator alleges Grand Canyon ignored

or violated all of this advice in practice. Id. Third, there

is a genuine dispute as to whether attorneys were actively

counseled during the implementation stages of the Compensation

Plans. Relator’s Facts ¶¶ 50, 63 (claiming attorneys were not

part of the implementation process); Defs.’ Facts ¶¶ 49-51, 63

(asserting they were). One of the attorneys most involved with

the crafting of the plan has stated that he did not visit campus

for purposes of ascertaining implementation. See Butner Dep.

87:12-24. Taken all together, this indicates that there is a

dispute of material fact regarding whether Grand Canyon

intentionally skirted the full extent of attorney advice so that

it could appear compliant to the Department of Education but in

practice promote based on recruitment; if proven, this would

constitute a knowing violation.

As to reckless disregard, the parties dispute what standard

ought apply in this case. Regardless which standard is applied,

there is a genuine dispute of material fact as to whether Grand

Canyon acted recklessly. Under Safeco, which was decided in the

context of another statute, a defendant does not act in

“reckless disregard [] unless the action is not only a violation

under a reasonable reading of the statute's terms, but . . .

[also] . . . that the [defendant] ran a risk of violating the

law substantially greater than the risk associated with a

reading that was merely careless.” 551 U.S. at 69. “A

defendant who acted under an incorrect interpretation of the

relevant statute or regulation did not act with reckless

disregard if (1) the interpretation was objectively reasonable

and (2) no authoritative guidance cautioned defendants against

it.” United States v. Supervalu Inc., 9 F.4th 455, 464 (7th

Cir. 2021).

Some circuits seem to have applied a similar but

distinguishable “gross negligence”-plus standard in the context

of the False Claims Act, defining recklessness as a state of

mind in which one “knows or has reason to know of facts that

would lead a reasonable person” to ascertain that harm is

likely. See Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1058

(11th Cir. 2015); United States v. Krizek, 111 F.3d 934, 942

(D.C.Cir.1997); United States ex rel. Farmer v. City of Houston,

523 F.3d 333, 338 & n.9 (5th Cir.2008); United States ex rel.

Williams v. Renal Care Grp., Inc., 696 F.3d 518, 531 (6th Cir.

2012). Other sessions of this Court and other Circuits,

however, have applied Safeco in determining whether the

recklessness standard is met. See United States ex rel. Banigan

v. Organon USA Inc., No. 07-12153-RWZ, 2016 U.S. Dist. LEXIS

199861, at *11 (D. Mass. Aug. 23, 2016); Supervalu, 9 F.4th at

465 (listing cases). Finally, still others have applied the

Safeco standard warily, closely cabining its reading. See

United States ex rel. Sheldon v. Allergan Sales, LLC, 24 F.4th

340, 350 (4th Cir. 2022), reh'g en banc granted, No. 20-2330,

2022 WL 1467710 (4th Cir. May 10, 2022) (concluding “Safeco

[does not] write defendants a blank check. To start, Safeco's

first step requires an objectively reasonable reading of the

statute” and at the second it prevents defendants from turning a

“blind eye” to the rules); see also United States v. United

Healthcare Ins. Co., 848 F.3d 1161, 1178 (9th Cir. 2016)

(implicitly applying the Safeco standard but rejecting

Defendant’s argument that failure to meet clearly set out

regulatory requirements was not “objectively reasonable”).

Regardless which standard of recklessness this Court

applies, however, the facts taken in the light most favorable to

Relator suggest Grand Canyon’s actions, if not made with actual

knowledge, would certainly fall under either of the recklessness

standards for the same reasons described above. Evidence of

Grand Canyon’s ignoring explicit instructions by attorneys not

to promote based on compensation or to link Job Expectations to

promotions is a question of fact that, if proven, would

demonstrate violations of both the “substantial risk” and the

“objectively reasonable reading” standards.

Grand Canyon also seemingly raises an advice of counsel

defense. “[A] defendant may avoid liability under the [False

Claims Act] if it can show that it acted in good faith on the

advice of counsel.” United States ex rel. Drakeford v. Tuomey,

792 F.3d 364, 381 (4th Cir. 2015). To establish this defense a

defendant must show: “(a) full disclosure of all pertinent facts

to [counsel], and (b) good faith reliance on [counsel's]

advice.” Id. (quoting United States v. Butler, 211 F.3d 826,

833 (4th Cir. 2000)). There is a dispute of material fact as to

whether the advice of counsel defense applies. First, as

discussed above, it is disputed whether the attorneys were

involved or aware of Grand Canyon’s practices in implementing

the plan. See Relator’s Facts ¶ 63. Second, there are several

disputes as to whether the Defendants followed the advice of

counsel: (1) whether they created a system of promotion based on

recruitment, id. ¶¶ 49-51; (2) whether they provided promotions

from University Counselors to Development Counselors and

Managers based on recruitment, id. ¶¶ 48, 96; (3) whether they

provided overtime based on recruitment numbers; (4) whether

recruitment was considered in offering merit-based raises, id. ¶

35; and (5) whether Service Counselors play a role in

recruitment while also receiving recruitment-based raises, id.

¶¶ 141-43 -- all of these actions, if proven, were done in

disregard of the attorneys’ suggestions and therefore are not

susceptible to the advice of counsel defense.

III. CONCLUSION

Relator has indicated genuine disputes of material fact

exist as to whether (1) Grand Canyon violated the Compensation

Ban via its implementation of its compensation system and

therefore, as to the existence of false claims; (2) Grand

Canyon’s purported non-compliance was material; and (3) Grand

Canyon’s management had the requisite scienter for a False

Claims Act violation.

Therefore, Grand Canyon’s motion for summary judgment, ECF

No. 152, is DENIED.

SO ORDERED.

/s/ William G. Young

WILLIAM G. YOUNG

JUDGE

of the

UNITED STATES13

13 This is how my predecessor, Peleg Sprague (D. Mass. 1841-

1865), would sign official documents. Now that I’m a Senior

District Judge I adopt this format in honor of all the judicial

colleagues, state and federal, with whom I have had the

privilege to serve over the past 44 years.