Daghlian v. Devry University, Inc.

• Decision Date: 20 July 2006
• Docket Number: No. CV06-00994MMM(PJWx).,CV06-00994MMM(PJWx).
• Citation: 461 F.Supp.2d 1121
• Parties: Saro DAGHLIAN on behalf of himself and all others similarly situated, Plaintiff, v. DeVRY UNIVERSITY, INC., DeVry Inc., and Does 1 through and including 100, Defendants.
• Court: U.S. District Court — Central District of California

461 F.Supp.2d 1121

Saro DAGHLIAN on behalf of himself and all others similarly situated, Plaintiff, v. DeVRY UNIVERSITY, INC., DeVry Inc., and Does 1 through and including 100, Defendants.

No. CV06-00994MMM(PJWx).

United States District Court, C.D. California.

July 20, 2006.

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Janet Lindner Spielberg, Janet L. Spielberg Law Offices, Michael D. Braun, Braun Law Group, Los Angeles, CA, for Plaintiff.

Amir Shlesinger, Felicia Yu, Van T. Lam, Reed Smith, Los Angeles, CA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS FIRST AMENDED COMPLAINT

MORROW, District Judge.

On December 23, 2005, Saro Daghlian commenced this putative class action against DeVry University, Inc., DeVry Inc., and Does 1 through 100 (collectively, "DeVry" or "defendants") in state court. Daghlian alleges that defendants failed to inform students, including him, that academic units earned at DeVry probably would not transfer to other educational institutions, and that students who sought further education elsewhere would have to earn the units anew.

Daghlian filed a first amended complaint on January 11, 2006, which asserted four causes of action: (1) violations of the California Education Code; (2) violations of the California Consumer Legal Remedies Act; (3) false advertising in violation of California Business & Professions Code §§ 17500 et seq.; and (4) unlawful, unfair, and deceptive business practices in violation of California Business & Professions Code §§ 17200 et seq. Defendants removed the action to federal court on February 17, 2006. They now move to dismiss all causes of action in plaintiffs first amended complaint.

I. FACTUAL BACKGROUND

The first amended complaint contains the following factual allegations, which are accepted as true for purposes of this motion:

Defendant DeVry University provides career-oriented undergraduate and graduate degree programs in technology, business, and management.¹ In addition to an online program, it offers courses at seventy-five locations, including nine campuses in California.² Defendant DeVry Inc. is one of the largest publicly held for-profit higher education companies in North America.³ It is the holding company for DeVry University and a number of other educational institutions.⁴

Plaintiff Saro Daghlian was a student at DeVry University from April 2002 until October 2005, attending the Electronics Computer Technology program at the West Hills Campus.⁵ Prior to enrolling, Daghlian met with a DeVry recruiter, who represented that DeVry was an accredited college where students were able to obtain degrees. The recruiter told Daghlian that unlike technical colleges that give students certificates that cannot be used towards advanced degrees, academic credits from DeVry were transferable to a wide variety of other academic institutions.⁶ The recruiter did not give Daghlian any documents explaining that DeVry credits were not likely to be accepted by other colleges, and that he would have to start his education over if he chose to attend another college.⁷ In reliance on DeVry's representations, Daghlian signed an enrollment agreement in the presence of the recruiter.⁸ He has since incurred approximately $40,000.00 of educational debt.⁹

II. DISCUSSION

A. Legal Standard Governing Motions To Dismiss Under Rule 12(b)(6)

A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. FED.R.CIV.PROC. 12(b)(6). A court may not dismiss a complaint for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see also Moore v. City of Costa Mesa, 886 F.2d 260, 262 (9th Cir.1989). For this reason, a court should not dismiss a complaint if it states a claim under any legal theory, even if a plaintiff erroneously relies on a different theory. Haddock v. Bd. of Dental Examiners, 777 F.2d 462, 464 (9th Cir.1985). In other words, a Rule 12(b)(6) dismissal is proper only where there is either a "lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir.1988).

In deciding a motion to dismiss for failure to state a claim, the court's review is generally limited to the contents of the complaint. See Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir.1996); Allarcom Pay Television, Ltd. v. General Instrument Corp., 69 F.3d 381, 385 (9th Cir.1995). The court may also consider material that is properly submitted as part of the complaint or that is a proper subject of judicial notice under Rule 201 of the Federal Rules of Evidence. United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003); Gumataotao v. Director of Dept. of Revenue and Taxation, 236 F.3d 1077, 1083 (9th Cir.2001); Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir.1990). The court must accept plaintiff's factual allegations as true, and construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir.1995). It need not, however, accept as true legal conclusions cast in the form of factual allegations. Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir.1981).

B. First Cause Of Action Alleging Education Code Violations

Daghlian's first cause of action alleges that defendants failed to comply with various provisions of the Private Postsecondary and Vocational Education Reform Act of 1989 (the "Reform Act"), which is part of the California Education Code. Daghlian contends that defendants violated Education Code § 94816(b) by failing to provide written notification to students that credits earned at DeVry would probably not transfer to other colleges or universities.¹⁰ He also asserts that, as part of their recruiting effort, defendants actively misled students to believe that the credits would transfer to other institutions,¹¹ in violation of Education Code § 94832.¹² Finally, Daghlian alleges that defendants breached Education Code § 94814, which requires that institutions give students and other interested persons, prior to enrollment, a brochure or catalogue that sets forth all material facts that are reasonably likely to affect their decision to enroll.¹³

1. Whether Plaintiff Has A Private Right Of Action To Sue For Violation Of Education Code §§ 94814, 94816, And 94832

Defendants argue that Daghlian lacks standing to enforce Education Code §§ 94814, 94816, and 94832, because these sections are not listed in § 94985(b), the Reform Act provision that confers a private right of action to sue for violations of specific sections of the act.¹⁴ Defendants contend that in amending § 94985, the California Legislature "expressly chose to exclude a private right of action as a remedy for violations of Sections 94814, 94816, and 94832," and therefore that Daghlian's first cause of action must be dismissed¹⁵

Daghlian disputes this, focusing on § 94985(b)(6). That section states:

"Notwithstanding any provision of the contract or agreement, a student may bring an action for a violation of this article or for an institution's failure to perform its legal obligations and, upon prevailing thereon, is entitled to the recovery of damages, equitable relief, or any other relief authorized by this article, and reasonable attorney's fees and costs." CAL. EDUC. CODE § 94985(b)(6).

Based on the legislative history of § 94985, the purpose of the Reform Act and subsequent amendments, Daghlian contends that this provision should have been subdivision (c), and that its placement under subdivision (b) was a legislative drafting error. He asks that the court overlook this "blatant" error, and find that he has a private right of action to sue under Education Code §§ 94814, 94816, and 94832.

a. Principles Of Statutory Construction

The parties have not cited, nor has the court found, any case that directly addresses the question presented here. To resolve the issue, therefore, the court must interpret the pertinent provisions of the Reform Act, following California's rules of statutory construction. See In re First T.D. & Inv., Inc., 253 F.3d 520, 527 (9th Cir.2001) ("With the exception of the bankruptcy and district courts below, no state or federal court has had occasion to interpret [Cal. Prof. & Bus.Code] § 10233.2. We therefore apply California's rules of statutory construction," citing Fed. Sav. & Loan Ins. Corp. v. Butler, 904 F.2d 505, 510 (9th Cir.1990) (applying California's rules of statutory construction to interpret California Civil Code § 877)); In re Anderson, 824 F.2d 754, 756 (9th Cir. 1987) ("We can find no relevant California cases which discuss the problems raised in this appeal. We are bound by California rules of construction in our independent interpretation of the California statutes at issue, however"). See also Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th Cir.1986) ("Where the state's highest court has not decided an issue, the task of the federal courts is to predict how the state high court would resolve it").

Under California law, "the `ultimate task' in statutory interpretation`is to ascertain the legislature's intent.'" In re First T.D. & Inv., 253 F.3d at 527 (quoting People v. Massie, 19 Cal.4th 550, 569, 79 Cal.Rptr.2d 816, 967 P.2d 29 (1998), cert. denied, 526 U.S. 1113, 119 S.Ct. 1759, 143 L.E d.2d 790 (1999)). See also S.D. Myers, Inc. v. City and County of San Francisco, 336 F.3d 1174, 1179 (9th Cir.2003) ("Of primary importance the court should ascertain the intent of the Legislature so as to effectuate the purpose of the law,'" quoting San Diego Union v. City Council, 146 Cal.App.3d 947, 953-54, 196 Cal.Rptr. 45 (1983...