Case No. 08-cv-0724
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN
March 23, 2022
Relator Todd Heath brings this qui tam action under the False Claims Act (“FCA“) alleging that defendant Wisconsin Bell Inc. fraudulently obtained subsidies by falsely certifying that it was providing telecommunications services to schools and libraries at the lowest rate charged to similarly situated customers. See
I. THE E-RATE PROGRAM
Wisconsin Bell is a common carrier that receives subsidies under the Education Rate (“E-rate“) Program. Congress established the E-rate program as part of the Telecommunications Act of 1996. Under the program, the government pays 20-90% of the price of certain telecommunications and information services provided to eligible schools and libraries.
The “Lowest corresponding price” or “LCP” is the lowest price that a service provider charges “similarly situated” nonresidential customers for “similar services,” unless the Federal Communications Commission or equivalent state commission finds that the LCP is “not compensatory.”
II. SUMMARY JUDGMENT STANDARD
Summary judgment is required where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
III. ANALYSIS
The FCA imposes civil liability on any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.”
A. Heath
Heath argues that Wisconsin Bell is liable under the FCA because it submitted claims for subsidies while falsely certifying compliance with the LCP rule. To show that any certification was false, Heath must first show that Wisconsin Bell violated the LCP rule. A provider violates the rule if it charges E-rate customers a higher rate than it charged similarly situated customers for similar services.
Heath makes no argument that any of Wisconsin Bell‘s customers were similarly situated based on any factors related to cost.1 Heath concedes that cost factors are relevant to the similarly situated analysis but argues that Wisconsin Bell has the burden of showing customers were not similarly situated. The only authority Heath points to in support of his argument is FCC guidance stating that providers are only permitted to charge prices “above the prices charged to other similarly situated customers when those providers can show that they face demonstrably and significantly higher costs.” Id.
To begin with, this statement does not describe which party has the burden of proving which customers are similarly situated. Rather, by its terms, it applies only after similarly situated customers have been identified. Second, and more importantly, the FCA requires the relator—not the defendant—“to prove all essential elements of the cause of action.”
Because Heath does not show that any customers were similarly situated based on the relevant factors, he cannot show that any E-rate customers were charged more than the lowest corresponding price. However, Heath argues that Wisconsin Bell may have violated the LCP rule in three other ways: (1) it failed to “seek recourse” from the government before charging an E-rate customer a rate higher than the LCP; (2) it failed to offer E-rate customers the lowest prices available, including failing to offer negotiated state rates to customers who were eligible for those rates; and (3) it charged highly varied prices to different customers for similar services. For the reasons explained below, these arguments also fail.
1. Heath Does Not Show Wisconsin Bell Failed to Seek Recourse from the Government Before Charging Higher Than the LCP
Heath argues that Wisconsin Bell was obligated to “seek recourse” from either the FCC or the equivalent state agency before charging any E-rate customer a price higher than the LCP. See
2. Heath Does Not Show Wisconsin Bell‘s Pricing Policies Violated the LCP Rule
Heath also argues that Wisconsin Bell‘s pricing policies precluded compliance with the LCP rule because they did not require salespeople to offer E-rate customers the lowest possible price. For instance, salespeople did not always inform customers that they were eligible for special, state negotiated rates and did not always offer customers equivalent, cheaper services. But the LCP rule does not require a provider to offer E-rate customers the lowest rate available; it requires providers to offer the lowest rate charged to similarly situated customers. Heath does not show that any customers that were charged the lower rates were similarly situated to those who were charged a higher rate. Without such a showing, a reasonable jury could not infer Wisconsin Bell violated the LCP rule. Accordingly, these arguments fail.
3. Price Variations Do Not Necessarily Violate the LCP Rule
Heath next argues the varied prices charged to E-rate customers necessarily demonstrate violations of the LCP. According to Heath, “given the price variation, [the charges] could not possibly all have been LCP compliant.” ECF no. 311 p. 13. But the LCP rule does not prohibit varied prices in and of themselves. Highly varied prices may be suspicious, but once again they do not demonstrate a violation of the LCP rule without a showing that the differently charged customers were similarly situated. Heath does not make that showing. Heath fares no better when he addresses specific price variations. For instance, Heath points to the Bruce Guadalupe Community School, which was charged a rate more than three times higher than the rate charged to Automatic Data, a non-residential customer buying the same service. But again, Heath makes no attempt to show that the two customers were similarly situated. Accordingly, this argument fails.
B. Relator Does Not Show Scienter
Even if Heath‘s interpretations of the LCP rule are correct, his claims would nonetheless fail on scienter. The FCA‘s scienter requirement is statutorily defined. A party who submits, or causes to be submitted, a false claim to the government is liable only if it acted knowingly.
Recently, the Seventh Circuit adopted the Supreme Court‘s scienter standard for the Fair Credit Reporting Act from Safeco Insurance Company of America v. Burr, 551 U.S. 47, 127 (2007), and applied it to the FCA‘s scienter provision. Id. at 467. Under this standard, a finding of scienter is precluded if: (1) the defendant‘s interpretation of the regulation was objectively reasonable and (2) no authoritative
Wisconsin Bell interprets the LCP rule to allow it to consider cost-based factors when determining which customers are similarly situated and to allow it to offer different rates to different E-rate customers. I agree with these interpretations. Even, however, if they are incorrect, they are objectively reasonable because they are consistent with the plain language of the LCP rule and the FCC guidance. Heath does not identify any authoritative guidance cautioning Wisconsin Bell against these interpretations. Accordingly, Heath does not show scienter.
Because Heath does not show falsity or scienter, I will grant Wisconsin Bell‘s motion for summary judgment.
IV. MOTIONS TO EXCLUDE
The parties have also filed three motions to exclude expert opinions and testimony. Because I have decided Wisconsin Bell‘s motion for summary judgment on grounds unrelated to the content of those experts’ reports, I need not address the motions and will deny them as moot.
V. MOTIONS TO SEAL DOCUMENTS
The parties have filed several motions to restrict access to documents they have submitted in support of their motions. The motions to restrict are unopposed, but because I have an obligation to ensure that court filings remain open to public review unless good cause for restricting them is shown, I must still decide whether the materials may be restricted. See, e.g., Baxter Int‘l Inc. v. Abbott Labs., 297 F.3d 544, 545 (7th Cir. 2002). Most of the documents which the parties have moved to restrict did not inform my decision. As such, these documents may remain restricted. See Baxter, 297 F.3d at 545 (only documents that “underpin the judicial decision” are open to public inspection); see also City of Greenville, Ill. v. Syngenta Crop Protection, LLC, 764 F.3d 695, 698 (7th Cir. 2014) (the public has no right to access documents that “cannot conceivably aid the understanding of judicial decision making“).
Some of the documents the parties wish to restrict were relevant to my decision, and I cannot restrict access to them unless they contain trade secrets or other categories of bona fide long-term confidentiality. Baxter, 297 F.3d at 545. The parties do not argue that the documents reveal trade secrets or other information that may be properly withheld from the public record. Accordingly, I will deny the motions to restrict as regards the following documents: ECF nos. 277, 310, 312, 314-1, 317, 318, and 319. I will grant the motions to restrict as regards the remaining documents.
VI. MOTION TO SET BRIEFING SCHEDULE
Wisconsin Bell has filed a motion for leave to set a briefing schedule on a possible forthcoming motion for sanctions. Wisconsin Bell explains that it is unsure if such a motion would qualify as a “dispositive motion” under this Court‘s scheduling order and therefore requests a separate schedule. I will clarify that I do not consider a motion for sanctions to be a dispositive motion under the scheduling order in this case, but I am not inclined to set a briefing schedule on a motion for sanctions at this time. I will deny this motion, and the briefing schedule for any subsequent motions will be controlled by the local rules.
VII. CONCLUSION
For the reasons stated, IT IS ORDERED that Wisconsin Bell‘s motion for summary judgment at ECF no. 276 is
IT IS FURTHER ORDERED that the motions to exclude at ECF nos. 266, 274 and 278 are DENIED AS MOOT.
IT IS FURTHER ORDERED that the motions at ECF nos. 302 is DENIED AS MOOT.
IT IS FURTHER ORDERED that the motion to set a briefing schedule at ECF no. 272 is DENIED.
IT IS FURTHER ORDERED that the motions to restrict documents at ECF nos. 268, 283, 287, 289, 296, 300, and 303 are GRANTED.
IT IS FURTHER ORDERED that the motions to restrict documents at ECF no. 270, 307, 316 are GRANTED IN PART and DENIED IN PART as described in this order. The Clerk of Court is instructed to lift the restrictions on the following documents: ECF nos. 277, 310, 312, 314-1, 317, 318, and 319
Dated at Milwaukee, Wisconsin, this 23rd day of March, 2022.
s/Lynn Adelman
LYNN ADELMAN
United States District Judge