Trials & Litigation

7th Circuit erases $400K sanction against Motley Rice, revives whistleblower case

The 7th U.S. Circuit Court of Appeals has revived a whistleblower suit brought by a former employee alleging ITT Educational Services submitted false claims to the U.S. Department of Education.

In reviving the qui tam suit, characterized by a lower court as “frivolous,” the 7th Circuit panel vacated a $395,000 sanctions order against three firms representing the plaintiff, former ITT employe Debra Leveski. The Chronicle of Higher Education Ticker blog and Am Law’s Litigation Daily have stories about Monday’s ruling.

Last year, a federal judge in Indianapolis ordered Motley Rice (a late addition to the case), Leveski’s lawyer Timothy Matusheski and Plews Shadley Racher & Braun to pay nearly $395,000 in legal fees for bringing what the judge called a frivolous whistleblower suit “based on a completely false story.” The judge ruled the court lacked jurisdiction over the case because Leveski’s claims had already been made public and she wasn’t an original source.

But in its detailed, 51-page examination of the case Monday, the 7th Circuit found that Leveski’s claims merit further development in the lower court and that her claims were sufficiently distinct from prior public disclosures.

The panel was critical of the case’s dismissal, writing, “[W]e believe that Leveski’s case is yet another instance of a district court dismissing an FCA suit after viewing the allegations at too high a level of generality.”

The panel remanded the case and vacated the penalties, which it said for now, are inappropriate.

Read the opinion here.

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