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United States ex rel. Whatley v. Eastwick College

United States District Court, D. New Jersey

July 23, 2015

UNITED STATES OF AMERICA ex rel. SUEDA WHATLEY and JOHN and JANE DOE, individually, Plaintiff,
v.
EASTWICK COLLEGE, et al., Defendants.

OPINION

WILLIAM J. MARTINI, District Judge.

Plaintiff/Relator Sueda Whatley filed this case against Defendants Eastwick Education, Inc., E.L.M. Eastwick Education, Inc., M. Eastwick Education, Inc., and Thomas Eastwick. Defendants Eastwick Education, Inc., E.L.M. Eastwick Education, Inc., and M. Eastwick Education, Inc. are for-profit educational institutions. The Court will refer to them collectively as "Hohokus Schools." Plaintiff, a former student of the Hohokus Schools, seeks to recover damages and penalties on behalf of the United States as a qui tam relator under the False Claims Act, 31 U.S.C. § 3729 et seq. ("FCA"). She also asserts several state law claims.

Defendants move to dismiss under Federal Rule of Civil Procedure 12(b)(6). Plaintiff moves to file an amended complaint. There was no oral argument. Fed.R.Civ.P. 78(b). For the reasons explained below, Defendants' motion to dismiss is GRANTED, and Plaintiff's motion to amend is DENIED.

I. BACKGROUND

Plaintiff Sueda Whatley is a former student of Hohokus Schools. Defendant Thomas Eastwick owns Hohokus Schools. The following facts are alleged in the First Amended Complaint (the "FAC").

A. Individual Allegations Related to Plaintiff Sueda Whatley

The following represents the Court's best attempt at creating a cohesive summary of Plaintiff's lengthy, disorganized, and repetitive FAC. Plaintiff attended Hohokus Schools from August 2011 through October 2012. FAC ¶ 16, ECF No. 7. When Plaintiff applied for admission, she paid a fee of $125 to be credited against tuition of $22, 350. Id. ¶ 184. She passed an entrance exam and then enrolled in the 18-month Bilingual Licensed Practical Nursing ("BLPN") program. Id. ¶ 186-88. Despite enrolling in and attending the BLPN program, Plaintiff claims she did not need it, because she did not speak Spanish. Id. ¶ 194. Defendants drew down federal funds to pay for her tuition and fees. Id. ¶ 197. For instance, her account was charged a registration fee of $100 and $2, 650 for books. Id. ¶ 192-93. And her account was charged a lab fee of $1, 250 even though she did not have a lab course during her first module. Id. ¶ 196.

Two of the classes Plaintiff took during the first module - "Medical Terminology" and "English" - were taught by a teacher with limited English-speaking abilities. FAC ¶ 198. Plaintiff failed a course and claims she could not review or challenge the grade on her final exam. Id. ¶ 200. The Director of Hohokus Schools told her that she did not belong in the BLPN program and told her that she could transfer to the 12-month Licensed Practical Nursing ("LPN") program to repeat her failed course with tuition adjustments instead of out-of-pocket costs. Id. ¶¶ 201-02. She agreed to transfer into the LPN program. Id. ¶¶ 202-03.

In late October 2011, Plaintiff began her second module. FAC ¶ 206. Defendants again drew down federal funds for her tuition and fees. Id. ¶ 208. Although she only took two courses during her second module, she was billed the same amount as in her first. Id. ¶ 208. Additionally, she was charged a second time for books even though she had already received her LPN books when she first enrolled in the BLPN program. Id. ¶ 209. She was also charged a second time for lab fees. Id. ¶ 210. She eventually received a partial refund check for $1, 957 from the federal government for her second module. Id. ¶ 214. That check was delivered to Defendants. Id. ¶¶ 216, 222. Upon Defendants' request she endorsed it over to them for future costs, such as if she failed a course. Id.

In February 2012, Plaintiff began her third module. FAC ¶ 212. Defendants again drew down full federal loans and grants for her education. Id. ¶ 213. Plaintiff was told that she failed the final exam in "Fundamentals of Nursing" and thus the course, but was not permitted to challenge her grade. Id. ¶¶ 217-18. She claims that 50-66% of the class failed that course. Id. ¶ 219. Defendants told her that she had to repeat the failed course or would have to drop out of the LPN program. Id. ¶ 221. Defendants used the partial refund from her second module to pay for her to retake the course. Id. ¶¶ 221-27. Defendants also required that she pay an additional $880 in her own personal funds. Id. ¶ 224. Plaintiff retook the failed course, along with three new courses, during her fourth module. Id. ¶ 225. Defendants again drew down federal funds for her education. Id. ¶ 227.

Plaintiff subsequently had an accident, could not attend school or work, and went on medical leave from school. FAC ¶ 228. After her leave, Defendants told her that she had to complete four courses during her fifth module to continue in the LPN program. Id. ¶ 229. "Other students" told her about failure rates of "as much as 50% or more" for students enrolled in some of those courses. Id. ¶¶ 230-31. She complained to Defendants that "she was being set up for failure, " but Defendants said she could not take a less demanding schedule due to financial aid requirements. Id. ¶ 231-32. On October 25, 2012, she orally notified Defendants of her decision to withdraw from the LPN program. Id. ¶ 233. The next day, she executed documents to confirm her withdrawal at the financial aid office and was told that no financial obligations were incurred due to her timely withdrawal. Id. ¶¶ 234.

Although she did not attend any classes after October 25, 2012, Defendants again drew down federal funds on her behalf. FAC ¶¶ 235-36. She received no refund or payment for the charges. Id. ¶ 237. In early December 2012, Plaintiff received a phone message from Defendants stating that she had not been attending classes and that finals were approaching. Id. ¶ 238. After she called and faxed letters confirming that she had withdrawn, Defendants sent her an attendance record consisting of sign-in sheets for various classes. Id. ¶ 239. Plaintiff alleges that the attendance record was altered to indicate that she had attended a course during the instant module. Id. ¶ 241.

Whatley alleges that although Defendants told her credits could be transferred to "any other LPN program" in New Jersey, her credits are not transferrable. FAC ¶¶ 248-49. Finally, Whatley alleges Defendants "overcharged students for coursework by charging them private tuitions while also collecting loans and grants from the federal government. Id. ¶¶ 248-49.

B. General Allegations Concerning the Programs

The FAC also contains various allegations regarding Defendants' general treatment of students in their Medical Assistant ("MA"), LPN, and BPLN programs (together, the "Programs").

i. Incentive Compensation Program

The FAC alleges that Defendants instituted a system under which admissions counselors/sales personnel ("AC/SRs") had quotas of students they had to enroll to avoid termination. FAC ¶ 84. Mr. Easwick informed AC/SRs of those quotas and then fired individuals who did not make quotas. Id. ¶ 85-86. Defendants allegedly fired Natalie Lopez, Vinnie Jazenbach, and Norris Brown for not meeting new nursing student quotas. Id. ¶ 87.

Defendants reported on recruitment in newsletters, ranked AC/SRs, and tracked student enrollment numbers. Id. ¶¶ 89, 92. Mr. Eastwick paid cash incentives to AC/SRs that enrolled "the most students." Id. ¶ 90. Additionally, Defendants gave "positive incentives" to AC/SRs based upon the number of recruitments. Id. ¶ 91. For example, "an AC/SR who recruited a greater number of students would be publicly rewarded with cash bonuses at the... annual holiday party, of $300, $500, or $1000." Id. ¶ 91. Due to Defendants' practices, Hohokus Schools allegedly accepted unqualified students who had little chance of completing the Programs or the required third party certification tests. Id. ¶ 95-96. For instance, the AC/SRs accepted students who could not adequately speak or write English even though the third-party certification tests for becoming a nurse are administered only in English. Id. ¶¶ 92-96. The AC/SRs also accepted mentally challenged and special needs students, who had "little or no chance of completing the [P]rograms." Id. ¶ 97. Plaintiff thus alleges, upon information and belief, that Defendants falsely certified compliance with the prohibition on compensation incentives. Id. ¶ 88.

ii. Enrollment in, and Transfer Among, the Programs

The FAC alleges that the MA and BLPN programs were used to recruit students who were not qualified for the LPN program. AC/SR's recruited students into the MA program with the explanation that it was easier to qualify for the MA program than the LPN program. FAC ¶ 37. Defendants told students that credits would transfer from the MA program to the LPN program and to other schools, which was untrue. Id. ¶¶ 40. Defendants promised the students that there would be adequate federal funds and federally subsidized loans from them to complete the MA and LPN programs, without out-of-pocket ...


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