A federal judge has thrown out a whistleblower lawsuit that accused the Los Angeles Film School of massive student loan fraud and has sanctioned the claimants’ attorney for filing a brief generated by ChatGPT.
The whistleblowers, two former executives at the school, filed a false claims suit in 2024, alleging a scheme in which the school paid outside vendors to hire its own students, inflating its job placement figures. The school paid $1 million to resolve a Department of Education audit into that and other issues in 2020, but the executives alleged that the school had lied to DOE investigators and hidden the full scope of the fraud.
In a ruling issued Friday, Judge Stanley Blumenfeld dismissed the suit with prejudice, finding that much of the alleged conduct fell outside the six-year statute of limitations. He also imposed a $5,000 fine on attorney Mark Kleiman for submitting a brief without disclosing that it had been written by AI.
The 76-page brief, filed in April, cited a non-existent case, Darwich v. Department of Economic Security. It also cited two additional cases that were real but did not support the proposition for which they were advanced — one of which was authored by Blumenfeld.
One of the claimants, Dave Phillips, later acknowledged that he had drafted the brief himself using ChatGPT and given it to his attorney to review. Kleiman submitted the brief with a disclaimer attempting to disavow any involvement in it other than to file it to meet a deadline. The attorney later explained to the court that his relationships with Phillips and with the other claimant, Ben Chaib, had broken down.
A week after submitting the brief, Kleiman told opposition counsel that his clients had written it with AI and that he was going to withdraw from the case.
In issuing sanctions, the judge faulted Kleiman for “a sustained pattern of neglect” and for violations of court orders and of ethical standards.
“Kleiman filed an obviously deficient brief that he had not even fully read and for which he did not check whether the citations were to real cases — let alone that they supported the brief’s assertions — despite knowing that his nonlawyer clients had prepared the brief using AI,” the judge wrote.
Granting the school’s motion to dismiss, the judge found that the AI-generated opposition brief “contains almost no citations to legal authority or to the (complaint), and advances legal arguments that appear untethered to the (False Claims Act) or Ninth Circuit law.”
The judge also faulted Phillips and Chaib for not getting a new attorney months earlier, when the relationship began to deteriorate. He noted that they were “not blameless” in the AI use, but elected not to sanction them because they are not lawyers.
Phillips, a former VP of job placement at L.A. Film School, and Chaib, former VP of admissions, accused the school of hoodwinking its students and the government by artificially inflating job placement stats. The suit alleged that the school knew its graduates rarely went on to a career in film or music, quoting an internal document stating that most graduates “report a yearly income of 0-$5,000 in their field of study.”
According to the complaint, the school paid entities including Ivar Music Group to hire its students for two-day jobs. The suit alleged that LAFS had used the inflated placement stats to maintain accreditation and eligibility for federal student loans.
The suit also included allegations against CEO James “Bill” Heavener, who owns LAFS and Full Sail University in Winter Park, Fla. Though the complaint alleged that Full Sail University was part of the fraud, the judge found that the claimants had failed to offer any details pertaining to that school.
Other for-profit colleges have paid out multimillion-dollar settlements to resolve suits under the False Claims Act, which allows whistleblowers to sue for fraud against the government and to claim a share of the payout.
Kleiman did not respond to a request for comment.