                                                                            FILED
                           NOT FOR PUBLICATION
                                                                             JUN 09 2016
                     UNITED STATES COURT OF APPEALS                      MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS


                            FOR THE NINTH CIRCUIT


UNITED STATES OF AMERICA ex rel.                 No. 13-55700
NYOKA LEE, AKA Seal 2; TALALA
MSHUJA, AKA Seal 3,                              D.C. No. 2:07-cv-01984-PSG-
                                                 MAN
              Plaintiffs - Appellants,

 v.                                              MEMORANDUM*

CORINTHIAN COLLEGES, AKA Seal
A; ERNST & YOUNG LLP, AKA Seal B;
DAVID MOORE, AKA Seal C; JACK D.
MASSIMINO, AKA Seal D,

              Defendants - Appellees.



UNITED STATES OF AMERICA, ex rel.,               No. 13-56121

              Plaintiff,                         D.C. No. 2:07-cv-01984-PSG-
                                                 MAN
  And

SCOTT D. LEVY; SCOTT D. LEVY &
ASSOCIATES, P.C.,

              Plaintiffs - Appellants,

 v.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
CORINTHIAN COLLEGES, AKA Seal
A; ERNST & YOUNG LLP, AKA Seal B;
DAVID MOORE, AKA Seal C; JACK D.
MASSIMINO, AKA Seal D,

              Defendants - Appellees.


                    Appeal from the United States District Court
                        for the Central District of California
                    Philip S. Gutierrez, District Judge, Presiding

                        Argued and Submitted May 3, 2016
                              Pasadena, California

Before: KOZINSKI, W. FLETCHER, and GOULD, Circuit Judges.

      In case number 13-55700, Nyoka Lee and Talala Mshuja (“Relators”) appeal

the district court’s dismissal of their amended complaint alleging violations of the

False Claims Act (“FCA”) by Corinthian Colleges, Inc. (“Corinthian”), its former

officers David Moore and Jack D. Massimino, and Ernst & Young, LLP (“EY”)

(collectively, “Defendants”). In case number 13-56121, Relators’ attorney Scott D.

Levy and his law firm appeal the district court’s imposition of sanctions in the

amount of Defendants’ attorney’s fees. We previously consolidated the cases for

purposes of appeal. We affirm the district court’s dismissal in no. 13-55700, but

reverse the award of sanctions in no. 13-56121.

      1. The district court concluded that it lacked jurisdiction over Relators’

action because of the FCA’s public disclosure bar. See 31 U.S.C. § 3730(e)(4)(A)
(2010). Relators alleged in their First Amended Complaint (“FAC”) that

Corinthian had falsely certified its compliance with the Higher Education Act

while making unlawful incentive payments to recruiters. See 20 U.S.C. §

1094(a)(20). But a class action securities lawsuit filed in 2005 had previously made

a substantially similar allegation of fraud against Corinthian. Once the allegations

against Corinthian were public, the government had ready access to documents

identifying EY as Corinthian’s auditor, so the allegations against EY were also

subject to the public disclosure bar. See United States ex rel. Harshman v. Alcan

Elec. & Eng’g, Inc., 197 F.3d 1014, 1019 (9th Cir. 1999). Further, Relators were

not an “original source” of the information in their First Amended Complaint

(“FAC”) because they had no direct knowledge of whether Corinthian’s decisions

on compensation and raises were based solely on enrollment numbers. See 31

U.S.C. § 3730(e)(4)(B) (2010). The Relators’ possession of reports comparing the

“lead-to-conversion” ratios of each recruiter did not make them an original source.

      Because Relators’ allegations were previously publicly disclosed and they

were not an “original source” of the information underlying their allegations, the

district court correctly dismissed the case for lack of jurisdiction. 31 U.S.C. §

3730(e)(4)(A). Accordingly, we need not reach Relators’ argument that the district

court erroneously found some of their claims barred by the statute of limitations.
      2. Relators’ arguments contesting the district court’s evidentiary and

discovery rulings are also without merit. The district court did not abuse its

discretion in striking an affidavit submitted by Lee after her deposition as a “sham

affidavit” because it clearly contradicted her testimony. See Yeager v. Bowlin, 693

F.3d 1076, 1081 (9th Cir. 2012). Relators cannot show that any of the district

court’s other discovery rulings should be overturned, because they have not

identified any evidence they would have sought or presented that would have a

“reasonable probability” of changing the outcome in this case. See Laub v. U.S.

Dep’t of the Interior, 342 F.3d 1080, 1093 (9th Cir. 2003).

      3. Although the district court was correct to dismiss the case, it abused its

discretion in imposing nearly $1.5 million in sanctions against Levy and his law

firm. Under 28 U.S.C. § 1927, a district court may sanction an attorney for

“multipl[ying] the proceedings . . . unreasonably and vexatiously,” including

recklessly filing frivolous suits. 28 U.S.C. § 1927; B.K.B. v. Maui Police Dept.,

276 F.3d 1091, 1107 (9th Cir. 2002). Relators’ case was not frivolous. In their first

appeal to this court, we specifically held that Relators could amend their complaint

to state a claim against Defendants, and we remanded to allow them to do so. See

United States ex rel. Lee v. Corinthian Colls., 655 F.3d 984, 996–97, 999–1000

(9th Cir. 2011). Upon amendment, Relators made a plausible argument that newly


                                           4
alleged information regarding “lead-to-conversion” ratios was material and not

based on prior public disclosures. Though this argument was ultimately

unconvincing, it was not frivolous. See United States ex rel. Mateski v. Raytheon

Co., 816 F.3d 565, 579 (9th Cir. 2016) (holding that suits alleging “genuinely new

and material information of fraud” can surmount the public disclosure bar).

Further, the district court’s finding that several of Levy’s motions and filings were

“vexatious” was without support in the record; there is nothing to suggest that

Levy acted with intent to increase expenses or delay. See New Alaska Dev. Corp. v.

Guetschow, 869 F.2d 1298, 1306 (9th Cir. 1989).

      4. The district court also issued sanctions under its inherent powers because

Levy pursued the litigation for the “improper purpose” of extracting settlement.

But the district court cited no evidence that Levy had any improper purpose, and

the record reveals none. Because there is no support for the conclusion that Levy

acted in “bad faith,” this ground for sanctions also fails. See Haeger v. Goodyear

Tire & Rubber Co., 813 F.3d 1233, 1244 (9th Cir. 2016).

                                        ***

      For the reasons explained above, we AFFIRM the district court’s dismissal

of Relators’ FAC in no. 13-55700, but we REVERSE its order of sanctions against




                                          5
Levy and his firm in no. 13-56121. We address Relators’ motion to unseal in a

separate order. Each party shall bear its own costs on appeal.

      AFFIRMED in 13-55700, REVERSED in 13-56121.




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