University Dodges a Bullet: Escapes from Potential False Claims Act Liability on Technicality

University Dodges a Bullet: Escapes from Potential False Claims Act Liability on Technicality

December 29, 2016

In Jackson v. Univ. of N. Texas, et. al., the University of North Texas (“UNT”) and various student loan companies faced allegations of improper oversight of student loan certifications and claims submissions in violation of the False Claims Act (“FCA”).  Luckily for the defendants, the court dismissed the claims as untimely and did not address the merits. But even though the defendants won this particular case, all higher education institutions should see it as a warning that false claim submissions to the Department of Education can lead to FCA liability.
 
The plaintiff, Roland Jackson, attended UNT from 1992 to 1996 on an athletic scholarship. While enrolled, Jackson applied for several student loans. Jackson alleges that UNT failed to take into account cost of living adjustments in his student loans due to his athletic scholarship, and as a result, UNT certified to the Department of Education student loan amounts that were much higher than the amounts for which he should have qualified. Jackson also alleges that UNT received the funding but did not disburse the excessive student loans to him. After graduating, Jackson defaulted on his student loans.  In 2005, JP Morgan Chase Bank and other student loan providers submitted a default claim to the Department of Education for reimbursement, including a claim to recover the excessive loans that Jackson never received. Jackson’s wages were garnished as a result.
 
In 2013, Jackson filed a qui tam lawsuit against UNT and the student loan companies, alleging that they violated the FCA by submitting a false claim to the Department of Education for reimbursement of the excessive students loans that were allegedly never disbursed to Jackson. Jackson further alleged that the defendants violated state law for conspiracy and unjust enrichment.
 
The Fifth Circuit Court of Appeals dismissed Jackson’s lawsuit as untimely. The court held that a private citizen bringing a qui tam action, i.e. “relator,” has six years to file a claim after the date on which the violation of the FCA was committed. The court further clarified that within the Fifth Circuit, the alternate ten year statute of limitations that applies to FCA claims brought by the government does not apply to FCA claims brought by qui tam relators like Jackson. Because Jackson did not file the lawsuit within six years of the student loan providers’ submission to the Department of Education, his lawsuit was time-barred. The court similarly found that Jackson’s state law claims were brought too late.
 
Takeaway
 
Even though this case was dismissed due to a technicality, the message is clear. Universities and colleges must be rigorous in their assessment of student loan eligibility and claims submissions to the Department of Education. Furthermore, universities and colleges should thoroughly investigate and verify the accuracy of student loan certifications. Failure to provide adequate oversight may result in liability under the FCA.
 
The Fifth Circuit’s decision is here.

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