MEMORANDUM AND ORDER

MORRISON C. ENGLAND, Jr., District Judge.

Through the present action, Relator Plaintiffs Derek Hoggett and Tavis Good ("Relators") sue UOPX under the False Claims Act, 31 U.S.C. § 3729, et seq. ("FCA") and its California counterpart, Government Code § 3729, et seq. ("CFCA"). Relators are former admission counselors for the University of Phoenix, a for-profit post-secondary education institution and a subsidiary of Defendant Apollo Group (hereinafter collectively referred to as "UOPX"). Relators allege that UOPX submitted false claims for federal student financial aid funds to the United States Department of Education pursuant to the Higher Education Act, Title IV ("HEA") from at least December 12, 2009 to the present.

Presently before the Court is UOPX's Motion to Dismiss. UOPX first argues that the Court lacks jurisdiction under Federal Rule of Civil Procedure 12(b)(1) because a prior lawsuit (United States ex rel. Hendow v. University of Phoenix, No. 2:03-cv-0457-GEB-DAD (E.D. Cal.) (Burrell, J.)), also against UOPX, bars the present action under the so-called "first to file" rule. According to UOPX, that lawsuit settled on or about December 11, 2009 at a total cost of some $78.5 million, and involved virtually identical allegations of misconduct. Secondly, UOPX argues that Plaintiffs cannot state a viable claim in any event, pursuant to Rule 12(b)(6), because their complaint, and the exhibits thereto, show that UOPX is entitled to a safe harbor provision from false claims act liability. Finally, UOPX contends, with respect to the CFCA claims, that they fail for several independent reasons, including a limitations bar, the fact that California law permitted enrollment based recruiter payments for much of the time period in question, and also because the Court should decline to exercise supplemental jurisdiction over the state law claims in any event if no cognizable federal claim is present.

For the reasons set forth below, UOPX's Motion to Dismiss will be denied.1

BACKGROUND

Relators allege that UOPX, despite its settlement of earlier charges in 2009, in fact continues to violate HEA's prohibition against awarding incentive payments to recruiters based solely on enrollment numbers. (Second Amended Complaint ("SAC"), ECF No. 36, at 2.)2 By knowingly or recklessly submitting false representations of compliance with requests for HEA or California student financial aid funds, Relators claim that UOPX violated FCA sections 3729(a)(1) and (a)(2), and CFCA § 3729. (Id.)

Relators allege that from at least December 12, 2009, UOPX has fraudulently asserted that it "had not paid to any persons or entities any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments ... for each year at issue." (Id. at 6.) Relators contend that although UOPX disguises its compensation practices with a "matrix" that ostensibly lists non-enrollment criteria for performance evaluation, in practice, enrollment numbers are the sole, direct factor in determining promotion, salaries, and bonuses. (Id. at 6-7.)

Relators further allege that this conduct was not deterred or altered by the Hendow settlement, and that the fraudulent activities continued with the knowledge and support of UOPX compliance officials. (Id.) Relators claim that they were told to destroy documents related to training and recruitment, and were also told that there were no plans to change the old policies. (Id. at 9-11.) Relators allege that despite the performance matrix, UOPX continues to "stack rank" counselors based on their number of enrollments, and uses that ranking to determine compensation. (Id. at 11.) Further, UOPX continues to publish separate documents showing a salary range aligned with each performance rating from the matrix, so that a counselor can determine his or her salary range based on their enrollment levels. (Id.) Finally, Relators detail numerous occasions when UOPX officials and employees told Relators directly that compensation decisions are based solely on enrollment numbers (Id. at 9.) Relators argue that these facts, and others alleged in the Second Amended Complaint, show that UOPX knowingly bases recruiter compensation on enrollment numbers, while trying to disguise this illicit behavior with a misleading performance evaluation matrix, all in violation of the FCA and CFCA.

STANDARD

In moving to dismiss for lack of subject matter jurisdiction pursuant to Rule 12 (b)(1), the challenging party may either make a "facial attack" on the allegations of jurisdiction contained in the complaint or can instead take issue with subject matter jurisdiction on a factual basis ("factual attack"). Thornhill Publishing Co. v. General Tel. & Elect. Corp., 594 F.2d 730, 733 (9th Cir. 1979); Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). If the motion constitutes a facial attack, the Court must consider the factual allegations of the complaint to be true. Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir. 1981); Mortensen, 549 F.2d at 891. If the motion constitutes a factual attack, however, "no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Thornhill, 594 F.2d at 733 (quoting Mortensen, 549 F.2d at 891).

On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007) (internal citations and quotations omitted). Though "a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the `grounds' of his `entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 1964-65 (internal citations and quotations omitted). A plaintiff's factual allegations must be enough to raise a right to relief above the speculative level. Id. at 1965 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-36 (3d ed. 2004) ("The pleading must contain something more ... than ... a statement of facts that merely creates a suspicion [of] a legally cognizable right of action")).

Moreover, "Rule 8(a)(2) ... requires a `showing,' rather than a blanket assertion of entitlement to relief. Without some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing not only `fair notice' of the nature of the claim, but also `grounds' on which the claim rests." Twombly, at 1965, n.3 (internal citations omitted). A pleading must contain "only enough facts to state a claim to relief that is plausible on its face." Id. at 1960; see also Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009). If the "plaintiffs ... have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed." Id.

ANALYSIS

A. Relators' Claim Is Not Jurisdictionally Barred Pursuant to 31 U.S.C. § 3730(b)(5) and § 3730(e)(4).

UOPX argues that Relators lack jurisdiction pursuant to Rule 12(b)(1) because their claim is barred by the first-to-file rule laid out in § 3730(b)(5), which bars so-called qui tam litigants3 from bringing related claims based on the facts underlying a pending action. (MTD at 2.) UOPX contends that Relators' allegations are aimed at the continuation of practices identical to those already litigated in Hendow. (Id.) UOPX acknowledges that the alleged fraud took place after Hendow, but contends that § 3730(b)(5) "precludes a subsequent relator's claim that alleges the defendant engaged in the same type of wrongdoing as that claimed in a prior action even if the allegations cover a different time period." (Id.) (quoting United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1188 (9th Cir. 2001) (internal quotations omitted).

Relators, on the other hand, argue that Hendow was dismissed on December 17, 2009, long before this action was filed on September 15, 2010. (Opp. at 1-2.) According to Relators, because Hendow was no longer pending at the time of filing, the present suit is not barred by the first-to-file rule. (Id. at 2.)

UOPX further claims that Relators lack jurisdiction under § 3730(e)(4) because the factual allegations underlying the Second Amended Complaint were publicly disclosed in the Hendow litigation. (Reply at 5.) UOPX also argues that Relators are not original sources under § 3730(e)(4)(B). (Id. at 7.) All of UOPX's contentions will now be addressed in turn.

1. Relators are not barred from bringing suit under § 3730(b)(5) because the previous suit was not pending.

The FCA permits suits by private parties on behalf of the United States against anyone submitting a false claim to the government. Lujan, 243 F.3d at 1183. Under the FCA's first-to-file provision, "no person other than the Government may ... bring a related action based on the facts underlying [a] pending action." 31 U.S.C. § 3730(b)(5); see also Cal. Gov. Code § 12652(c)(10) (same provision under CFCA). The Ninth Circuit held that § 3730(b)(5) establishes an exception-free, first-to-file bar, and dismissed Lujan's qui tam action for lack of subject matter jurisdiction under § 3730(b)(5). Lujan, 243 F.3d at 1183. Lujan is distinguishable from the present matter because in that case, unlike here, the two suits in question overlapped for a period of time. In Lujan, a previous suit was filed in 1989 and dismissed in 1997. Lujan, 243 F.3d at 1188. In 1992, plaintiff Lujan filed a related action based on the facts underlying the original action. Id. In 2001, the Ninth Circuit ruled that the original case was "pending" for the purpose of § 3730(b)(5), even though it was dismissed prior to the completion of Lujan's suit. Id. The Ninth Circuit found that "Lujan's action [was] barred if she brought the claim while [the original suit] was pending." Id.

Other cases cited by UOPX to support the proposition that a previously dismissed case bars subsequent qui tam litigation based on related facts all involve original suits that were actually pending at the time the subsequent suit was brought. See, e.g., United States ex rel. LaCorte v. SmithKline Beecham Clinical Lab., Inc., 149 F.3d 227 (3d Cir. 1998) (dismissing related qui tam suit brought before the final execution of a settlement agreement in an earlier suit). In the instant case, Hendow was dismissed before Relators brought their suit, and therefore was not "pending" under § 3730(b)(5). Section 3730(b)(5) only applies while the initial complaint is pending. United States ex rel. Chovanec v. Apria Healthcare Group, 606 F.3d 361, 365 (7th Cir. 2010) (holding that under § 3730(b)(5), relator was entitled to bring a related complaint after earlier actions were settled and no longer pending). Because § 3730(b)(5) only applies when the initial complaint is pending, it is immaterial that Relators' complaint is "related" to the fraud alleged in Hendow.

The purpose of the first-to-file provision is to encourage whistleblowers to come forward, while at the same time, discouraging opportunistic or parasitic lawsuits. Lujan, 243 F.3d at 1187 (citing United States ex rel. LaCorte v. SmithKline Beecham Clinical Lab., Inc., 149 F.3d 227, 233-34 (3d Cir. 1998)). Using the first-to-file rule to bar whistleblower suits that allege new fraud perpetrated by a wrongdoer after completion of a previous suit would thwart the statute's purpose to encourage whistleblowers to come forward. UOPX's argument would bar any qui tam lawsuits against a defendant who had previously been involved in a fraud action as long as the previous fraud was related to the subsequent fraud. This contention, however, taken to its logical conclusion, could produce an absurd result. In short, actors committing fraud would be better off perpetrating a related fraud instead of finding novel ways to defraud the government. Further, if Relators' allegations are true, and UOPX is perpetrating a fraud similar to the fraud that it previously perpetrated against the government, then there is nothing either opportunistic or parasitic about bringing this suit.

2. Relators are not barred from bringing suit under § 3730(e)(4)(A) because they are "original sources" under § 3730(e)(4)(B).

According to § 3730(e)(4)(A), qui tam litigants cannot bring a suit "if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed ... unless ... the person bringing the action is an original source of the information." Original source is defined in § 3730(e)(4)(B) as an individual who "has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions ..."

Here, Relators allege that while UOPX has ostensibly changed its procedures to comply with federal regulations, they have knowledge that UOPX has continued to perpetrate a fraud on the government even after the Hendow case was completed. If, as Relators allege, the new procedures cover up a continuation of the previous fraud, then Relators have provided information that is independent of and materially adds to the information publicly disclosed during the Hendow case, and could potentially lead to a return of misappropriated funds.

The public disclosure bar in § 3730(e)(4) is not meant to bar all actions based on information already in the government's possession. Graham County Soil & Water Conservation Dist. v. U.S. ex rel. Wilson, 130 S.Ct. 1396, 1407 (2010) (noting that a total bar on qui tam actions based on information already in the Government's possession thwarted a significant number of potentially valuable claims). In the instant case, the government may be aware of previous fraud committed by UOPX, and disclosed in Hendow, but that knowledge does not bar other potential qui tam litigants from bringing additional instances of fraud to light. Were UOPX's argument to be adopted, there would be no qui tam remedy for subsequent violations of the FCA by the same defendant when the government is aware of previous wrongdoing.

B. Relators' Claims Will Not Be Dismissed Pursuant to Rule 12(b)(6).

UOPX argues that Relators' claim should be dismissed pursuant to Rule 12(b)(6) because they fail to plead with the particularity required by Rule 9(b), and they fail to satisfy the plausibility standard of Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009). UOPX also argues that Relators failed to plead specific facts showing that UOPX's compensation practices fall outside of the HEA's safe harbor provision. (MTD at 3) (citing United States ex rel. Bott v. Silicon Valley Colleges, 262 F. App'x. 810, 811-12 (9th Cir. 2008) ("Relators have not pled specific facts supporting the inference that salary reviews were performed solely on the basis of recruiting success."). UOPX argues that the "matrix" used to evaluate different performance indicators was evidence that enrollment numbers were not the sole criteria. (MTD at 3.) Relators rely on United States ex rel. Lee v. Corinthian Colleges, 655 F.3d 984, 993-94 (9th Cir. 2011), for the proposition that "the mere inclusion of this performance rating ... does not allow us to conclusively determine whether its method of awarding salary increases falls within the Safe Harbor Provision." For the following reasons, UOPX's motion to dismiss is denied.

1. Relators' Claims Satisfy Rule 9(b) Requirements that Fraud Claims Be Pled with Particularity.

Rule 9(b) requires that, when fraud is alleged, a party must state with particularity the circumstances constituting fraud ..." Fed. R. Civ. P. 9(b). Averments of fraud must be accompanied by the "who, what, when, where, and how of the misconduct charged." Vess v. Ciba-Geigy Corp., USA, 317 F.3d 1097, 1106 (9th Cir. 2003). Any averments which do not meet that standard should be disregarded for failure to satisfy Rule 9(b). Id.

Here Relators meet their burden by naming individual officers and employees of UOPX who have participated in the fraudulent conduct, and detailing how the fraud was carried out. Specifically, Relators claim, inter alia, that UOPX carries out mock reviews in which counselors are told how many students they must enroll to earn a salary increase. (SAC at 9.) Counselors were told that they could only keep a tuition reimbursement perk if they met target enrollment numbers. (Id.) Numerous UOPX employees, including Enrollment Counselors, an Enrollment Director, a Corporate Liaison Counselor, and a Student Support Specialist all allegedly told Relator Hoggett that salary increases were based solely on enrollment numbers. (Id.) Relators argue that these facts show that UOPX knowingly creates "fake or imaginary qualitative criteria" in the performance evaluation matrix, while in actuality, the only criterion that counts is enrollment numbers. (Id. at 8.) The facts presented in the Second Amended Complaint satisfy the particularity required by Rule 9(b) to allege fraud.

2. Relators' Claims Meet the Plausibility Standard Required to Survive a Motion to Dismiss, and Are Not Barred by the HEA's Safe Harbor Provision.

As stated above, Relators have satisfied their burden of pleading facts that are both particular and plausible. In order to receive federal student financial aid funds under the HEA, institutions must certify acceptance of the Program Participation Agreement ("PPA"), which states that the institution:

There is, however, a safe harbor provision which states that participating institutions may make semi-annual salary adjustments as long as they are not "based solely on the number of students recruited, admitted, enrolled, or awarded financial aid." § 668.14(b)(22)(ii)(A).4 UOPX's argument that the mere inclusion of qualitative criteria on a performance evaluation form demonstrates conclusively that they did not violate the PPA is unpersuasive. If the criteria are not actually used to make compensation decisions, and are only included to give the illusion of compliance with the PPA, then UOPX's conduct falls outside the safe harbor provision.

It is UOPX's "implementation of its policy, rather than the written policy itself, that bears scrutiny under the HEA, and such allegations would require additional discovery." Corinthian, 655 F.3d at 996. The Second Amended Complaint satisfies the "facially plausible" requirement of Iqbal because the facts alleged allow the Court to draw a reasonable inference that UOPX is liable for violating the FCA. See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1940 (2009).

C. Relators' State Law Claims Are Not Barred by the Statute of Limitations.

UOPX's last argument for dismissing Relators' claims is that the CFCA claims are barred by the statute's three-year limitations period. (MTD at 3) (citing Cal. Gov. Code 12654(a)). Alternately, UOPX argues that state claims should be thrown out because California law explicitly allowed recruiter payments based on enrollment numbers for a brief period between approximately 2002 and the time it was repealed in 2007. (Id.) (citing Cal. Educ. Code § 94832(e) (2002)). Finally, UOPX requests that if the Federal claims are dismissed, the Court should decline to exercise supplemental jurisdiction over the state law claims. (Id. at 3-4.)

The Court declines to dismiss Relators' Federal claims, and will therefore exercise supplemental jurisdiction over the state law claims. 28 U.S.C. § 1367(c). There is no reason to infer as a matter of law that California officials were put on notice, for purposes of the statute of limitations, by the Hendow action. Further, even if California law affirmatively allowed recruiter payment based on enrollment for a portion of the period that Relators allege the fraud occurred, that does not justify dismissing Relators' claims in their entirety at the pleading phase, as advocated by UOPX.

CONCLUSION

For the reasons set forth above, UOPX's Motion to Dismiss (ECF No. 37) is DENIED.