Judge dismisses L.A. Film School fraud suit, sanctions lawyer

By Elena Vasquez

Judge Stanley Blumenfeld, a federal judge, dismissed the Los Angeles Film School (LAFS) whistleblower lawsuit with prejudice on Friday and imposed a $5,000 fine on attorney Mark Kleiman for filing a brief generated by ChatGPT.

What did the lawsuit allege?

The 2024 False Claims Act suit alleged massive student-loan fraud. It was filed by Dave Phillips, a former vice president of job placement, and Ben Chaib, a former vice president of admissions. Phillips and Chaib said LAFS hoodwinked students and the government by paying outside vendors to hire its own students, then using those placements to inflate job-placement figures.

According to the complaint, entities including Ivar Music Group hired students for two-day jobs. The complaint said LAFS used the inflated figures to maintain accreditation and eligibility for federal student loans. An internal school document said most graduates “report a yearly income of 0-$5,000 in their field of study.”

LAFS paid $1 million in 2020 to resolve a Department of Education audit into placement practices and other issues. Phillips and Chaib alleged that the school lied to DOE investigators and concealed the full scope of the fraud.

The suit also named CEO James “Bill” Heavener, who owns LAFS and Full Sail University in Winter Park, Fla. It alleged that Full Sail participated in the fraud, but Blumenfeld found that the claimants supplied no details about that school.

In plain terms, the complaint linked inflated placement numbers to federal student-loan eligibility.

Why did the court dismiss the lawsuit?

Blumenfeld granted LAFS’s motion to dismiss. He found that much of the alleged conduct fell outside the six-year statute of limitations. The suit ended with prejudice before any trial on the alleged fraud.

The ruling paired that finding with severe criticism of the April opposition brief, which ran 76 pages. It cited Darwich v. Department of Economic Security, a case that did not exist. Two other citations named real cases but did not support the propositions for which Kleiman advanced them; one was authored by Blumenfeld.

Phillips later acknowledged that he had drafted the brief with ChatGPT and given it to Kleiman for review. Kleiman submitted it with a disclaimer that disavowed any involvement beyond filing it to meet a deadline.

One week later, Kleiman told opposing counsel that his clients had written the brief with AI and that he intended to withdraw from the case. He later explained to the court that his relationships with Phillips and Chaib had broken down.

Blumenfeld wrote:

“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,”

His sanctions also faulted Kleiman for a sustained pattern of neglect, violations of court orders and ethical standards.

In plain terms, the case failed because its claims and its legal briefing could not withstand judicial scrutiny.

What did the judge say about the AI brief?

Blumenfeld said the AI-generated opposition brief contained almost no citations to legal authority or the complaint. He found its legal arguments untethered from the False Claims Act and Ninth Circuit law.

He also faulted Phillips and Chaib for failing to obtain new counsel months earlier, when the relationship with Kleiman began to deteriorate. He found the pair not blameless in the AI use, but declined to sanction them because they are not lawyers.

The $5,000 sanction therefore fell on the attorney who submitted the brief. Kleiman did not respond to a request for comment.

In plain terms, the judge penalized professional failure more severely than the nonlawyers’ admitted AI use.

What does the ruling mean for future cases?

Under the False Claims Act, whistleblowers may sue for fraud against the government and claim a share of any payout. Other for-profit colleges have paid multimillion-dollar settlements to resolve suits under the law.

For LAFS, the 2024 allegations ended without a new fraud judgment or damages award. Its $1 million payment in 2020 remains the only quantified payment attributed to the school.

The practical warning for future False Claims Act litigation is plain: plead claims within the six-year limit, verify every citation and replace deteriorating counsel before procedural failures compound.