593 F.Supp.3d 855
E.D. Wis.2022Background
- Qui tam suit under the False Claims Act by relator Todd Heath alleging Wisconsin Bell falsely certified compliance with the E‑rate program’s Lowest Corresponding Price (LCP) rule to obtain subsidies.
- E‑rate program subsidizes telecom services to schools and libraries; providers must charge eligible entities the lowest price charged to similarly situated nonresidential customers.
- Heath claimed Wisconsin Bell charged E‑rate customers higher rates, failed to seek regulatory recourse, didn’t offer the lowest available prices, and showed impermissible price variation.
- At summary judgment, Heath failed to identify any nonresidential customers who were shown to be "similarly situated" under cost‑related factors the FCC identifies.
- Court found Heath also failed to prove Wisconsin Bell acted knowingly (FCA scienter), applied Seventh Circuit/Safeco objective‑reasonableness standard, and granted summary judgment for Wisconsin Bell.
- Court denied motions to exclude experts as moot, partially denied/partially granted sealing requests (ordering certain filings unsealed), and declined to set an early sanctions briefing schedule.
Issues
| Issue | Plaintiff's Argument (Heath) | Defendant's Argument (Wisconsin Bell) | Held |
|---|---|---|---|
| Whether relator proved falsity via LCP violation | Heath: Wisconsin Bell charged E‑rate customers higher than the LCP and thus submitted false certifications | Wisconsin Bell: No showing that any lower‑priced customers were "similarly situated" under cost factors; no LCP violation | Held: Heath failed to show any similarly situated customers, so no falsity proven |
| Whether provider was required to seek recourse before charging above LCP | Heath: Wisconsin Bell had to seek FCC/state recourse before charging above LCP | Wisconsin Bell: There were no charges above the LCP because Heath didn’t prove similarly situated customers | Held: Argument fails because Heath did not prove any above‑LCP charges |
| Whether pricing policies/price variation establish LCP noncompliance | Heath: Sales practices and wide price variation show failure to offer LCP; failure to offer state negotiated rates | Wisconsin Bell: LCP requires parity with similarly situated customers only; variation alone is not dispositive without similarity proof | Held: Price variation or sales practices, without showing similarly situated comparators, do not prove LCP violations |
| Whether Heath proved scienter under the FCA | Heath: Wisconsin Bell knowingly or recklessly certified compliance | Wisconsin Bell: Its interpretation of LCP and use of cost factors was objectively reasonable and consistent with FCC guidance | Held: Under Seventh Circuit/Safeco standard, Wisconsin Bell’s interpretation was objectively reasonable and unchallenged by authoritative guidance; no scienter shown |
Key Cases Cited
- Meza Morales v. Barr, 973 F.3d 656 (7th Cir. 2020) (deference to agency guidance where regulation is ambiguous)
- Univ. Health Servs., Inc. v. U.S. ex rel. Escobar, 579 U.S. 176 (Sup. Ct. 2016) (materiality requirement for FCA claims)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (Sup. Ct. 1986) (summary judgment standard)
- U.S. ex rel. Crews v. NCS Healthcare of Ill., Inc., 460 F.3d 853 (7th Cir. 2006) (relator bears burden to prove all FCA elements)
- U.S. ex rel. Schutte v. Supervalu Inc., 9 F.4th 455 (7th Cir. 2021) (adopting Safeco objective‑reasonableness standard for FCA scienter)
- Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (Sup. Ct. 2007) (objective‑reasonableness standard for statutory interpretation and scienter)
- Baxter Int'l Inc. v. Abbott Labs., 297 F.3d 544 (7th Cir. 2002) (public access standard for judicial records; only materials underpinning decision must be public)
- City of Greenville v. Syngenta Crop Protection, 764 F.3d 695 (7th Cir. 2014) (no public right to documents that cannot aid understanding of judicial decisionmaking)
- Crespo v. Colvin, 824 F.3d 667 (7th Cir. 2016) (undeveloped arguments may be waived)