• Court Orders Sanctions of Nearly $395,000 against Three Law Firms Who Brought a False Claims Act Lawsuit against ITT
  • April 11, 2012 | Authors: Timothy J. Hatch; Jeremy S. Ochsenbein; James L. Zelenay
  • Law Firm: Gibson, Dunn & Crutcher LLP - Los Angeles Office
  • Declaring that "some type of monetary sanction is necessary to deter [the Plaintiff's attorneys] from engaging in this type of conduct going forward," the United States District Court for the Southern District of Indiana on March 26, 2012, awarded $394,988 in sanctions against one plaintiff attorney individually and three law firms in connection with a False Claims Act ("FCA") case filed against ITT Educational Services, Inc. ("ITT"). United States ex rel. Leveski v. ITT Educ. Servs., Inc., No. 1:07-cv-0867-TWP-MJD, 2012 U.S. Dist. LEXIS 40646 at *13, *18 (S.D. Ind. March 26, 2012). In the 31-page opinion, Judge Pratt admonished the behavior of the plaintiff's counsel, Timothy Matusheski, whose website domain is www.mississippiwhistleblower.com, stating his "tactics are far worse than the garden-variety 'ambulance chasing'--seen in movies and read about in John Grisham novels." Id. at *13.

    As discovery revealed, Debra Leveski--the named relator in the case--was originally contacted by a private investigator working for Mr. Matusheski. (Ms. Leveski had previously filed a personnel action against ITT, and it appeared that Mr. Matusheski found her information by searching court dockets for former ITT employees). Deposition testimony from Ms. Leveski revealed that she never even contemplated filing a qui tam action under the FCA until she spoke with Mr. Matusheski and, in fact, did not believe that ITT was in violation of the FCA until she spoke with Mr. Matusheski. Moreover, Ms. Leveski admitted that the entire basis for her FCA claims came from Mr. Matusheski and public materials. Ms. Leveski's case was a lawyer-driven lawsuit based upon publicly disclosed materials and therefore clearly barred by the FCA's public disclosure provision, 29 U.S.C. 3730(e)(4).

    The egregiousness of Mr. Matusheski's conduct was made worse by the fact that he previously had cases against other private sector schools (DeVry and Strayer) dismissed on these exact same grounds, and--in order to avoid sanctions in one of them--filed a public apology with the court. Leveski, 2012 WL 1028794 at *5. Despite this experience and a warning from ITT that they would be subject to a motion for attorneys' fees if they continued with the meritless lawsuit, Mr. Matusheski and Ms. Leveski decided to proceed.

    ITT thereafter filed a motion to dismiss based on the public disclosure bar of the FCA, which the court granted on August 8, 2011. Ms. Leveski and her counsel sought reconsideration of this decision, which the Court denied.

    On August 22, 2011, ITT filed a motion for sanctions and attorneys' fees. On March 26, 2012, the Court granted that motion, finding that the case lacked any valid basis and was intended merely "to extract a large settlement from ITT." Id. at *12. The Court issued sanctions against Mr. Matusheski as an individual as well as the Law Offices of Timothy Matusheski, the law firm of Plews Shadley Racher & Braun, and the law firm of Motley Rice, LLP. Finding a "public shaming" to be "inadequate," the Court held Mr. Matusheski and the three law firms to be jointly and severally liable for $394,998.33 in sanctions. Id. at *13.