United States District Court, N.D. Alabama, Middle Division
UNITED STATES ex rel. STEPHEN HEADEN, Plaintiff,
ADAMS AND ASSOCIATES, INC., d/b/a THE GADSDEN JOBS CORPS CENTER; LORRAINE LANE; and SHAILEEN VIERA, Defendants.
VIRGINIA EMERSON HOPKINS, United States District Judge
14, 2016, the Plaintiff-Relator, Stephen Headen, filed this
action against Adams and Associates, Inc. d/b/a the Gadsden
Jobs Corps Center (“Adams”), Lorraine Lane,
Juvenel Levros, and Shaileen Viera to recover, on behalf of
the United States, damages and civil penalties arising from
false statements and claims allegedly made by the Defendants
in violation of the Federal Civil False Claims Act, 31 U.S.C.
§§ 3729-3733, as amended (“the Act” or
the “FCA”). (Doc. 1). On November 18, 2016, the
government filed its notice of non-intervention. (Doc. 9).
Thereafter, Levros was terminated as a defendant when the
Relator filed an Amended Complaint which made no claims
against Levros. (Doc. 41).
Amended Complaint, which is now the operative pleading,
alleges that all Defendants are liable for:
“Substantive Violations of the False Claims Act”
(Count One); “Implied False Certification in Violation
of the False Claims Act” (Count Two); and conspiracy to
violate the False Claims Act (Count Three). The case comes
before the Court on the Defendants' Motion to Dismiss
(the “Motion”). (Doc. 45). For the reasons stated
herein, the Motion will be GRANTED.
Defendants state that their motion is brought “pursuant
to Federal Rules of Civil Procedure 8, 9(b), and
12(b)(6).” (Doc. 45 at 1). The Eleventh Circuit Court
of Appeals has stated:
Rule 9(b) applies in FCA cases. United States ex rel.
Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301,
1308-09 (11th Cir.2002). An FCA complaint must therefore
“state with particularity the circumstances
constituting fraud or mistake.” Fed.R.Civ.P. 9(b).
“The particularity rule serves an important purpose in
fraud actions by alerting defendants to the precise
misconduct with which they are charged and protecting
defendants against spurious charges of immoral and fraudulent
behavior.” United States ex rel. Atkins v.
McInteer, 470 F.3d 1350, 1359 (11th Cir.2006) (quotation
marks omitted). An FCA complaint “satisfies Rule 9(b)
if it sets forth facts as to time, place, and substance of
the defendant's alleged fraud, specifically the details
of the defendants' allegedly fraudulent acts, when they
occurred, and who engaged in them.” Hopper v.
Solvay Pharm., Inc., 588 F.3d 1318, 1324 (11th Cir.2009)
(quotation marks omitted).
Because the submission of an actual claim to the government
for payment is “the sine qua non ” of an FCA
violation, Clausen, 290 F.3d at 1311, a
plaintiff-relator must “plead the submission of a false
claim with particularity, ” United States ex rel.
Matheny v. Medco Health Solutions Inc., 671 F.3d 1217,
1225 (11th Cir.2012). To do so, “a relator must
identify the particular document and statement alleged to be
false, who made or used it, when the statement was made, how
the statement was false, and what the defendants obtained as
a result.” Id.
Rule 9(b) “does not permit a False Claims Act plaintiff
merely to describe a private scheme in detail but then to
allege simply and without any stated reason for his belief
that claims requesting illegal payments must have been
submitted, were likely submitted or should have been
submitted to the Government.” Clausen, 290
F.3d at 1311 (emphasis added). Instead, “some indicia
of reliability must be given in the complaint to support the
allegation of an actual false claim for payment being made to
the Government.” Id.
This Court evaluates “whether the allegations of a
complaint contain sufficient indicia of reliability to
satisfy Rule 9(b) on a case-by-case basis.”
Atkins, 470 F.3d at 1358. Providing exact billing
data-name, date, amount, and services rendered-or attaching a
representative sample claim is one way a complaint can
establish the necessary indicia of reliability that a false
claim was actually submitted. See, e.g., Hopper, 588
F.3d at 1326; Atkins, 470 F.3d at 1358. However,
there is no per se rule that an FCA complaint must provide
exact billing data or attach a representative sample claim.
See Clausen, 290 F.3d at 1312 & n. 21 (listing some
of the types of information that might help a plaintiff plead
the submission of a claim with particularity but cautioning
that Rule 9(b) “does not mandate all of this
information for any of the alleged claims”); see
also Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505, 1512
(11th Cir.1988) (“Allegations of date, time or place
satisfy the Rule 9(b) requirement that the circumstances of
the alleged fraud must be pleaded with particularity, but
alternative means are also available to satisfy the
Under this Court's nuanced, case-by-case approach, other
means are available to present the required indicia of
reliability that a false claim was actually submitted.
Although there are no bright-line rules, our case law has
indicated that a relator with direct, first-hand knowledge of
the defendants' submission of false claims gained through
her employment with the defendants may have a sufficient
basis for asserting that the defendants actually submitted
false claims. See U.S. ex rel. Walker v. R & F Properties
of Lake County, Inc., 433 F.3d 1349, 1360 (11th
Cir.2005) (holding that Rule 9(b) was satisfied where the
relator was a nurse practitioner in the defendant's
employ whose conversations about the defendant's billing
practices with the defendant's office manager formed the
basis for the relator's belief that claims were actually
submitted to the government).
By contrast, a plaintiff-relator without first-hand knowledge
of the defendants' billing practices is unlikely to have
a sufficient basis for such an allegation. See
Atkins, 470 F.3d at 1359 (holding that Rule 9(b) was not
satisfied where the relator was a doctor who did not allege
first-hand knowledge of the hospital's submission of
false claims). Additionally, a corporate outsider likely does
not have the required access to learn enough about the
defendants' billing practices. See Clausen, 290
F.3d at 1314 (noting that a corporate outsider's lack of
information about the defendants' billing practices makes
it more difficult to gather the factual specifics necessary
to meet Rule 9(b)'s requirements).
At a minimum, a plaintiff-relator must explain the basis fo r
her assertion that fraudulent claims were actually submitted.
See Corsello v. Lincare, Inc., 428 F.3d 1008,
1013-14 (11th Cir.2005) (finding insufficient indicia of
reliability after noting that the relator “did not
explain why he believes fraudulent claims were ultimately
submitted”). It is not enough for the plaintiff-relator
to state baldly that he was aware of the defendants'
billing practices, see Id. at 1014, to base his
knowledge on rumors, see Atkins, 470 F.3d at 1359,
or to offer only conjecture about the source of his
knowledge, see United States ex. rel. Sanchez v.
Lymphatx, Inc., 596 F.3d 1300, 1303 n. 4 (11th
U.S. ex rel. Mastej v. Health Mgmt. Assocs., Inc.,
591 Fed.Appx. 693, 703-05 (11th Cir. 2014).
ALLEGATIONS IN THE AMENDED COMPLAINT
Amended Complaint, in pertinent part, alleges:
11. Defendant Adams and Associates, Inc.
(“Adams”) operates and does business as the
Gadsden Job Corps Center (the “center”) in
Gadsden, Alabama. Defendant Adams also operates at least
fourteen (14) other, similar facilities in several states.
The Gadsden Job Corps Center advertises space for
approximately two hundred fifty-six (256) enrolled
residential student[s] as well as approximately thirty (30)
enrolled non-residential students.
12. Under the auspices of the Gadsden Job Corps Center,
[Adams] offers a GED program, a high school diploma through
Etowah County Public Schools, career technical training in
six (6) vocational areas, and collegiate classes at Gadsden
State Community College for certain students. Defendant Adams
advertises that the center provides “a full range of
services to our students including residential dorms, medical
and dental care, career and social counseling, academic and
vocational training, transportation and a living
13. Defendant Adams advertises that the Gadsden Job Corps
Center offers Career Technical Training, Academic
Opportunities (High School Diploma or GED), Room and Board,
Medical and Dental Care, Recreational Activities, Field
Trips, Spending Money, Real World Work Experience, Graduation
Bonus, and Job Placement Assistance. Defendant Adams
advertises that the Gadsden Job Corps Center Offers technical
training programs in Advanced Human Services, Carpentry,
Culinary Arts, Nurse Assistant/Home Health Aide, Office
Administration, and Security & Protective Services. Adams
advertises that the Gadsden Job Corps Center offers academic
programs in Math & Reading, Mentoring, General Education
Diploma (GED), High School Diploma, Community College for
Qualified & Motivated Students, English Language Learner
(ELL), Tutoring, Study Groups, Counseling, Leadership, and
14. Defendant Lorraine Lane is the former Center Director and
an agent of defendant Adams and Associates. Defendant Lane
was the highest ranking official at the Gadsden Job Corps
Center during a portion of the relevant time period.
Defendant Lane was the official in charge of all aspects of
the Gadsden Job Corps Center including enforcement of the
statutory “zero tolerance” policy prohibiting
drug use and violence described herein.
15. Defendant Viera is the CSIO Supervisor and an agent of
defendant Adams and Associates. Defendant Viera was the
official in charge of discipline of student enrollees
including enforcement of the statutory “zero
tolerance” policy prohibiting drug use and violence
16. Defendant Adams is an “operator and service
provider” who has entered into an agreement with the
U.S. Department of Labor pursuant to 29 U.S.C. §3197 and
receives approximately $27, 000 per enrollee annually.
Defendant Adams is paid based upon anticipated enrollment and
has to return or take a credit against future payments for
each slot for each enrolled student which is not filled by an
enrolled student or which is vacated when an accepted
enrolled student leaves the center for any reason. In order
to qualify, defendant Adams was required to submit certify
[sic] that it provided the services required by the Job Corps
and to further certify that it complied with the material
provisions of the act. In particular, Section 3197 requires
an “[assurance the entity will comply with basic health
and safety codes, which shall include the disciplinary
measures described in section 3202(b) of this
17. 29 U.S.C. § 3202(a) requires the Secretary and
directors of Job Corps to “stringently enforce
standards of conduct within the centers . . . [which] shall
include provisions forbidding” acts of violence and the
use, sale, or possession of a controlled substance or
18. Section 3202(b) requires the director to dismiss an
enrollee from the Job Corps, inter alia, if the
director determines retention jeopardizes the enforcement of
standards and specifically establishes a “zero
tolerance” policy for the certain infractions,
including “an act of violence, for use, sale, or
possession of a controlled substance, for abuse of alcohol,
or for other illegal or disruptive activity.” Section
3202(b)(2)(ii) states “‘zero tolerance' means
a policy under which an enrollee shall be automatically
dismissed from the Job Corps after a determination by the
director that the enrollee has carried out an action”
which specifically includes, (1) an act of violence, (2) the
use, sale or possession of a controlled substance, or (3)
abuse of alcohol.
19. 29 U.S.C. § 3195 requires the Secretary to establish
specific standards and procedures, which “at a minimum
. . . [include] informing enrollees that drug tests will be
administered to the enrollees and the results received within
45 days after the enrollees enroll in the Job
20. The center is therefore required to administer drug tests
to new enrollees upon enrollment and is required by statute
to expel any enrolled student who tests positive for the use
of a controlled substance after 45 days. The center is
also required by statute to expel any enrolle d student if
the enrolled student is found to use, sell or possess any
controlled substance at any time after enrollment.
21. Section 3202 prohibits the use of controlled substances.
Section 3195 requires the center to administer drug tests at
enrollment and again within 45 days in order to enforce a
zero tolerance policy against continued drug use by enrolled
students. The U.S. Department of Labor Office of Job
Corps Policy and Requirements Handbook requires that each
student be tested for controlled substances at the time of
admission and then re-tested at an interval between and 40
days after an initial positive test. The handbook also
requires that an enrolled student must be tested on suspicion
of use of a controlled substance at any time.
22. Section 3202 prohibit[s] acts of violence. This section
states the standards of conduct shall include “zero
tolerance” for acts of violence and requires the
director to dismiss any enrollee from the Job Corps who
commits and [sic] act of violence.
23. The plaintiff/relator was employed by defendant Adams
from approximately March 3, 2014[, ] until approximately
August 26, 2015. During his employment, Mr. Headen was
aware that defendant Adams did not follow the statute and
failed to administer drug tests as required. Mr. Headen was
also aware that defendant Adams ignored drug use including
failing to administer tests as required or by ignoring
positive drug tests in violation of federal statute.
24. All of the funds Defendant Adams received for all of the
students in the program came from the federal government
through the Department of Labor. There were no state, county
or local funds which paid for the students to attend or
participate in the program. There were no charitable funds
which paid for the students to attend or participate in the
program. Defendant Adams d id not offer scholarships or
tuition waivers since the students were not required to pay
any tuition, which was paid by the federal government.
25. Funding and enrollment levels were openly discussed at
Adams, including by defendant Lane, who emphasized the need
to keep numbers up as close as possible to the maximum of
290. The students enrolled were listed on a roster which was
distributed every day. The plaintiff/relator and other
employees conducted several head counts daily which were used
to produce the roster. Students who were on sick leave
continued to be listed on the roster, which meant Adams was
being paid by the federal government as if they were
enrolled. Adams would list students who were commuters on the
roster as if they were enrolled from time to time, depending
upon where the actual number of on campus students happened
26. The plaintiff/relator had specific personal knowledge
that defendant Adams, by and through its agents Lane, Viera
and others, intentionally ignored the statutory “zero
tolerance” policy against acts of violence, drug use
and alcohol abuse.
27. The plaintiff/relator had specific personal knowledge
that defendant Adams, by and through its agents Lane and
others, claimed that enrolled students who had left the
program were actually present and attending programs after
these students had actually left the program. The
plaintiff/relator had specific personal knowledge that
defendant Adams claimed enrolled students were using
residential facilities after they had moved out and were no
longer enrolled or residents.
28. Defendant Adams, through Lane and Viera, had a policy and
practice of failing to drug test, ignoring positive drug
tests, and/or ignoring obvious drug use throughout the
relevant time period. Nicholas Johnson and NeQuia Underwood
were two students who were obviously using drugs and/or
abusing alcohol during their enrollment, but that drug use
and alcohol abuse was ignored by defendant Lane. When issues
with Nicholas came up, Lane would instruct staff not to file
a case not because that would create a paper record of the
issue. Nicholas Johnson was allowed to remain enrolled until
May or June 2015, when he was finally expelled from the
program after multiple instances of fighting.
29. Defendant Adams, through Lane and Viera, had a policy and
practice of ignoring and failing to document acts of violence
throughout the relevant time period. Students Rashawn
Lockley, Jamal Morgan, Brian James, KenDarius Birmingham,
Jessie Rollins, James Spearman, Daryl Page, Johnny Ward,
Quentin Slaughter and Nicholas Johnson had multiple instances
of fighting during their enrollment. These issues were not
documented based on direct instruction from defendant Lane.
Lane instructed the staff to alert her about any instances of
fighting before filing a written case note. When staff
alerted her to instances of fighting, including instances
involving these specific students, Lane instructed staff not
to create a case note about the incidents. Daryl Page and
Johnny Ward were still enrolled as students when Headen was
terminated. Quentin Slaughter was eventually expelled but was
allowed to remain because, according to defendant Lane, the
student numbers were low at the time. Nicholas Johnson was
eventually expelled in May or June 2015, but only after
multiple instances of violence.
30. Defendant Adams, through Lane, had a policy and practice
of claiming that enrolled students who had left the program
were actually present and attending programs after these
students had actually left the program. Headen and other
employees were routinely sent on trips across the state to
pick up students who did not return to the campus after the
weekend. Often, these students had informed Lane, or her
assistant Epiphany Cherry, that they did not intend to
return. Headen and other employees were sent in an Adams
vehicle to contact the students and at times to convince them
to return to the campus. Many times, Headen and other
employees, such as Ross Arrington, were told to offer these
students paying jobs if they would come back. However, some
students refused to return at all and were then listed as
being on sick leave while still on the roster. Students who
refused to return were carried for seven (7) days, and at
times even longer, on the roster which meant that Adams was
being paid by the federal government as if they were present.
One student, Timothy Bradham, who was from the Troy, Alabama
area, informed Adams, and Cherry, that he was leaving the
center. Mr. Headen and another employee were sent to attempt
to convince Bradham to return. Bradham refused to return, and
told Mr. Headen. Mr. Headen in turn told Cherry and Lane that
Bradham refused to return. Despite Bradham's refusal to
return, Bradham was listed on the roster for the following
week as if her [sic] were on sick leave. Bradham was
eventually dropped from the roster after seven (7) days, when
a new group of students would arrive.
31. Defendant Adams, through defendant Lane, terminated Mr.
Headen on or about August 26, 2015. Defendant terminated Mr.
Headen, supposedly for using inappropriate and unprofessional
language in a text message he sent to NeQuia Underwood, who
was his wife's cousin, from his cell phone to her cell
phone during hours when he was not at work and she was not on
32. Mr. Headen had several conversations with NeQuia
Underwood, his wife's cousin and an enrollee in the
Gadsden Job Corps program. Upon information and belief, Ms.
Underwood tested positive for controlled substances when she
enrolled in the Gadsden Job Corps program. Ms. Underwood
continued to abuse alcohol and to use controlled substances
while she was enrolled. Defendant Adams, through Lane, Viera
and other agents, ignored Ms. Underwood's repeated
alcohol abuse and continued drug use, failed to drug test Ms.
Underwood, and/or, in the alternative, ignored positive drug
tests. Mr. Headen learned that Ms. Underwood had been using
drugs and continued to use drugs while enrolled in the Job
33. Upon information and belief, defendant Adams continues to
operate in the same manner under current Center Director
Levros. Former Director Lane was promoted to a position of
greater authority and now supervises the Gadsden Job Corps
Center as well as other Job Corps centers owned and operated
by defendant Adams.
(Doc. 41 at 5-15, ¶¶11-33).
One alleges that the Defendants are liable for violation of
31 U.S.C. §§3729(a)(1)(A), (a)(1)(B), and
(a)(1)(G). Those sections impose liability on “any
person who[:] . . . (A) knowingly presents, or causes to be
presented, a false or fraudulent claim for payment or
approval; . . . (B) knowingly makes, uses, or causes to be
made or used, a false record or statement material to a false
or fraudulent claim; [and] . . . (G) knowingly makes, uses,
or causes to be made or used, a false record or statement
material to an obligation to pay or transmit money or
property to the Government, or knowingly conceals or
knowingly and improperly avoids or decreases an obligation to
pay or transmit money or property to the Government[.]”
31 U.S.C. §§3729(a)(1)(A), (a)(1)(B), and
(a)(1)(G). The court will address each subsection in turn.
Realtor Fails To Allege with Sufficient Particularity that
the Defendants Knowingly Presented,
or Caused To Be Presented, a False or Fraudulent Claim for
Payment or Approval [31 U.S.C.
Amended Complaint alleges two separate violations of this
subsection of the FCA: 1) the continued enrollment of
students who violated the “zero tolerance”