Rosario v. Livaditis
| Decision Date | 07 July 1992 |
| Docket Number | 90-1025 and 90-1639,Nos. 89-3745,s. 89-3745 |
| Citation | 963 F.2d 1013 |
| Parties | , RICO Bus.Disp.Guide 8009 Mariluz ROSARIO, Teresa Shapiama, Ligny Canet, Dolores Maldonado, Carmen Ortiz, Sheila Benton, Charlie Lowe, Milagro Perez, Myrna Garcia, Daniel Barba, Altagracia Lopez and Joyce E. Walker, individually and on Behalf of all others similarly situated, Plaintiffs-Appellees, Cross Appellants, v. Anthanasios LIVADITIS, also known as Tom D'or, D'or Beauty College, Incorporated, an Illinois corporation, and D'or School of Cosmetology, Incorporated, an Illinois corporation, Defendants-Appellants, Cross Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Alan A. Alop (argued), Richard M. Wheelock, Legal Assistance Foundation of Chicago, Diane E. Citrino and Elise M. Faber, Legal Assistance Foundation, Chicago, Ill., for plaintiffs.
Raymond L. Prusak (argued), James V. Nudo, Prusak & Nudo, Tom Livaditis, Chicago, Ill., for defendants.
Before WOOD, Jr. * and FLAUM, Circuit Judges, and ESCHBACH, Senior Circuit Judge.
These appeals arise from a lawsuit instituted by a class of former students of two beauty schools. The class alleged that the schools were "sham schools" because the schools provided little or no education and did not adequately prepare the students for a career in cosmetology despite representations to the contrary. These students' claims were grounded in RICO, the Illinois Consumer Fraud Act and breach of contract. The students' Illinois Consumer Fraud claim and two of three RICO claims that went to the jury were successful, although the jury awarded the class damages only as to the consumer fraud count. The class did not prevail on one RICO claim or the breach of contract claim.
Defendants-Appellants, Anthanasios Livaditis, D'or Beauty College, Incorporated and D'or School of Cosmetology, Incorporated challenge the certification of the class of former students of D'or Beauty College and D'or School of Cosmetology. Defendants-Appellants also challenge the trial court's decision barring them from further discovery shortly before trial, and they maintain that this court should reverse the jury's verdict regarding the consumer fraud count because of the trial court's discovery decision. Finally, Defendants-Appellants claim that the trial court improperly awarded the class attorney's fees since the jury awarded the class damages only as to the Illinois Consumer Fraud count. 1
The class brings a cross appeal. They maintain that the trial court abused its discretion in refusing to grant the class' motion for a new trial on damages on the RICO counts for which the jury found the two beauty schools liable but awarded zero damages.
Fourteen hundred four former D'or Beauty College and D'or School of Cosmetology students brought a class action suit against the two schools and the schools' owner, Anthanasios Livaditis a/k/a Tom D'or (collectively "D'or"). The class was certified pursuant to Fed.R.Civ.P. 23(a) and 23(b)(3) and consisted of all those who had executed a contract with the beauty schools for the purpose of a cosmetology education and who had attended one of the D'or schools and for whom the corporate defendants received some kind of payment from state guaranteed loan programs between the dates of February 11, 1983, and August 1988. The class included students who attended the D'or schools for as little as 1 1/2 weeks to as long as was necessary to complete the 1500 course hours required for graduation.
The class alleged that D'or violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(a), (c), and the Illinois Consumer Fraud Act ("CFA"), Ill.Rev.Stat. ch. 121 1/2, p 262. The class also brought a common law breach of contract claim against D'or. In their fourth amended complaint, the class additionally sought an order to prevent Livaditis from fraudulently conveying assets to his family members in an attempt to preclude the assets from being used to satisfy any judgment received by the class. After an 18-day trial, the jury found the two beauty schools liable under RICO, assessing zero damages. The jury found all three appellants liable under CFA and awarded the class actual damages of $640,224. The jury found in favor of all appellants on the breach of contract count and for Livaditis individually on the RICO count asserted against him. Finally, the trial court awarded the class $271,711.80 in attorney's fees.
Discovery took place for over two years before this case went to trial. During this time D'or changed its representation several times. D'or's fourth new counsel, Mr. Prusak, filed his appearance on October 5, 1988, more than a year after the class filed its original complaint. Mr. Prusak became D'or's counsel after a default judgment had been entered against D'or. The default judgment was subsequently vacated. By the time Mr. Prusak filed his appearance as D'or's counsel, the court had already granted an extension on discovery until August 26, 1988. The court stated at that time that no further extension would be granted. Despite this statement, the court extended discovery only to allow the class to complete nine remaining depositions. At this point, Mr. Prusak became D'or's fourth new counsel. Discovery was ordered closed on March 15, 1989, but was again opened until April 5, 1989, in order to allow both parties limited discovery on the class' fraudulent conveyances count, which was added in the fourth amended complaint. On July 12, 1989, the court entered a protective order to prevent D'or's counsel from contacting any of the class' witnesses on any matter concerning the litigation. The class requested that the court issue this order when D'or's counsel notified the class' counsel that he intended to hire an investigator to contact some of the class members. The jury trial began on August 7, 1989, and the jury rendered its verdict on August 25, 1989.
Former D'or students and teachers testified at trial. These witnesses recounted the poor conditions at the two D'or facilities that were not conducive to learning. The trial testimony indicated that D'or classes contained illiterate students, despite a federal requirement that students lacking a high school education pass an aptitude test in order to be admitted. No student ever failed the D'or admission test. Frequently, there were insufficient numbers of The students were frequently furnished with substandard equipment that broke shortly after being issued. The students were then required to buy replacement hairdryers, curling irons, and other such equipment at high cost. Moreover, the students were never issued sanitary equipment such as Barbicide jars; they had to buy those from D'or or go without them.
teachers for periods as long as a month or longer at the D'or schools. And, when there were teachers, the student-to-teacher ratio in D'or classes generally exceeded the state requirement of 20-to-1 by ten and often thirty. The lack of teachers resulted in many different levels of students being taught at once in a single class. There were unlicensed teachers at the D'or schools in violation of state law. D'or offered "student teacher" courses, but as soon as the student teachers signed up (and paid $1,000-$2,000 for the course), they were sent into the classroom without any real preparation or instruction. Although the D'or schools advertised that classes in Spanish were available, in many instances there were no Spanish-speaking instructors. As a result, those students speaking only Spanish were forced to attend overcrowded classes in English and learn the best they could
There was testimony indicating that the physical conditions of the D'or schools were as poor as the quality of the teaching. The schools were infested with rodents and cockroaches. The ceilings leaked when it rained, and the heating-ventilating-air-conditioning system was inadequate. The bathrooms were squalid, and the students were often required to clean the bathroom toilets and take out the garbage.
The National Accrediting Commission for Cosmetology Arts and Sciences ("NACCAS") is a private organization comprised of accredited cosmetology schools nation-wide. The Board of Commissioners of the NACCAS withdrew the two beauty schools' accreditation in June 1987 due to unsafe and unsanitary school facilities, improperly assigned instructional staff, use of unlicensed personnel, equipment not in working order, inadequate heating and air conditioning, multiple classes being taught in the same rooms and unsanitary bathrooms. The NACCAS never reaccredited the D'or schools.
After the trial, the trial court awarded the class $271,711.80 in attorney's fees, which was the entire amount the class requested, save $50 for a Reader's Digest consultation that the court described as "inexplicable."
D'or first argues that the trial court improperly certified the class of former D'or students under Fed.R.Civ.P. 23(a). There are four prerequisites to a class action under Fed.R.Civ.P. 23(a): numerosity, commonality, typicality, and fair and adequate representation. Once these four prerequisites are satisfied, the potential class must also satisfy at...
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