Goehring v. Chapman University

Decision Date03 August 2004
Docket NumberNo. D039816.,D039816.
Citation121 Cal.App.4th 353,17 Cal.Rptr.3d 39
PartiesDennis GOEHRING et al., Plaintiffs and Appellants, v. CHAPMAN UNIVERSITY, Defendant and Appellant.
CourtCalifornia Court of Appeals Court of Appeals

Rutan & Tucker, Duke F. Wahlquist and Jane Taylor Kacer, Costa Mesa, for Defendant and Appellant.

McCONNELL, P.J.

This case arises from misrepresentations Chapman University (Chapman) made to plaintiffs, students in the inaugural class of its law school, and its violations of Business and Professions Code section 6061, which requires written disclosures of facts pertinent to a law school's unaccredited status. We hold as matters of first impression that Business and Professions Code section 6061(1) confers a private right of action for the refund of tuition from an unaccredited law school that violates written disclosure requirements; (2) is not subject to the exhaustion of administrative remedies doctrine; (3) requires written disclosures each semester, or preceding any payment of any tuition or fee other than an application fee; (4) does not unjustly enrich students who obtain refunds of tuition and continue in school; and (5) is governed by the one-year limitations period for actions on a statute for a penalty or forfeiture (Code Civ. Proc., § 340, subd. (a) [former subd. (1)]). We also conclude that to any extent doctrines of substantial compliance and waiver may apply to Business and Professions Code section 6061, they are inapplicable here.

Further, we conclude substantial evidence supports the jury's findings that plaintiffs Stephen Mann and Raelyn Yeomans did not prove the damages element of their fraud cause of action, and the trial court properly granted Chapman summary adjudication of plaintiff Dennis Goehring's fraud and related causes of action because as a matter of law he cannot prove the damages element of the claims. We affirm the judgment in all aspects.

FACTUAL AND PROCEDURAL BACKGROUND

A brief legal discussion is required to put the facts in context. California law schools are either accredited or unaccredited. An accredited law school has been granted accreditation by the Committee of Bar Examiners of the State Bar of California (the Committee), based on a variety of factors demonstrating it offers a sound legal education and complies with applicable provisions of the Business and Professions Code and other laws. (Rules Regulating Accreditation of Law Schools in Cal. (Accreditation Rules), rule one, §§ 1.04(A), 1.05.) Generally, the Committee deems accredited a law school either provisionally or fully approved by the American Bar Association (ABA). (Id., § 1.06.)

To be eligible to sit for the California bar examination, students in an unaccredited law school must attend a minimum of four years of law school, 270 or more hours per year, and pass the First Year Law Student's Examination (FYLSX). (Bus. & Prof.Code, § 6060, subds. (e)(2)(A) & (h)(1).)1 In contrast, students in an accredited law school are exempt from the FYLSX (Bus. & Prof.Code, § 6060, subd. (h)(2)), and at the relevant time could sit for the bar examination after three years of full-time study (former Bus. & Prof. Code, § 6060, subd. (e)(1)).2 Further, at the relevant time the State Bar gave a student in an unaccredited law school no credit for the first year of study until he or she passed the FYLSX, and absent a showing of good cause no credit for any subsequent study undertaken before he or she passed the FYLSX. (Former Bus. & Prof.Code, § 6060, subd. (g); Historical and Statutory Notes, 3B pt. 3 West's Ann. Bus. & Prof.Code (2003 ed.) foll. § 6060, p. 80.)3

In July 1994, in anticipation of opening a law school in 1995, Chapman sought accreditation from the Committee.4 In an internal memorandum Chapman stated that without accreditation it would attract "only the very worst of students," because the FYLSX had a low passage rate and was "dreaded." The Committee deferred Chapman's request pending the receipt of additional information and cautioned that it ordinarily takes seven years to become accredited.

Nonetheless, in January 1995 Chapman published a newsletter for prospective students predicting approval under rule XVIII of the Committee's Admission Rules "at the earliest possible time, which is September 1, 1995," and advising the approval would exempt students from the FYLSX requirement. The Committee notified Chapman the newsletter was misleading because early preliminary approval under rule XVIII was "very unlikely to occur," and in any event, students in a school preliminarily approved under rule XVIII were not exempt from the FYLSX requirement. Chapman did not heed the Committee's suggestion it correct the newsletter.

Chapman's catalog for the 1995-1996 academic year notified prospective students of the FYLSX requirement and stated that it expected, but did not guarantee, it would have ABA approval by 1997. However, Chapman did not disclose the four-year rule. Rather, it offered a three-year program and implied that even if the school remained unaccredited students could sit for the California bar examination after completing three years of study. Before Chapman published the catalog, the Committee reminded it of the four-year rule, and the effect of unaccreditation on students not passing the FYLSX.

Chapman opened an unaccredited law school in August 1995, with a founding class of approximately 200 students, including Goehring, Mann and Yeomans. The Committee advised Chapman it should disclose that if it did not obtain preliminary approval from the ABA as projected, students would be required to take the FYLSX and pass it to get credit for their studies. However, Chapman made no such disclosure.

To the contrary, during the spring 1996 semester Chapman's president informed students that under an "exemption" the State Bar would allow students failing the FYLSX to continue their studies and obtain full credit for them, and Chapman was seeking a ruling from the State Bar making the FYLSX voluntary for its students. Further, Chapman's dean told students that although they had to take the FYLSX, the State Bar waived the requirement they had to pass it to sit for the bar examination, or had made the FYLSX advisory only because of Chapman's special status.

Chapman's inaugural class took the FYLSX in June 1996, and the passage rate was only 13.7 percent. Students began to learn about the four-year rule because the State Bar notified students who did pass the examination that they were required to attend three additional years of classes before sitting for the bar examination. In response to students' complaints, Chapman's dean said it did not inform students of the four-year rule because the State Bar never enforced it.

Chapman's catalog for the 1996-1997 academic year continued to offer a three-year program, and stated that by agreement with the Committee students who did not pass the FYLSX could continue their studies and may be allowed to sit for the bar examination. The State Bar complained to Chapman of misstatements in the catalog and denied having any agreement with it pertaining to the FYLSX.

In January 1997 the ABA rejected Chapman's application for provisional approval. Noting students' undergraduate grade point averages, Law School Aptitude Test (LSAT) scores and the passage rate on the FYLSX, the ABA explained its "most serious concern . . . was the quality of the student body and the apparent weakness of the School's academic standards." The ABA also commented on the faculty's "`lax approach' to academic grading," evidenced by the lack of mandatory academic dismissals until the end of the third semester and the failure to take specific steps to address academic standards.

Chapman initially refused to let students review the ABA's letter, and told them it was "extremely pleased with the positive feedback" and "in the ballpark of ABA approval." However, in May 1997 the ABA denied Chapman's request for reconsideration.5

In June 1997 Chapman, under new leadership and pursuant to the State Bar's direction, finally disclosed the requirement that students in unaccredited law schools attend four years of classes, and with the exception of the first year, they would receive no credit for classes taken before passing the FYLSX. Further, Chapman released the ABA's January and May 1997 letters denying it approval.

Responding to students' displeasure, Chapman offered to refund all tuition paid by inaugural students who elected by September 1997 to withdraw from school. For continuing students, Chapman offered, contingent on its not receiving accreditation by the end of the spring 1998 semester, a 50 percent reduction in tuition through spring 1998 and free or reduced tuition for classes taken after 1998 to meet the four-year requirement. However, a student could qualify only by signing a waiver of all claims against Chapman.

Goehring, Mann and Yeomans, who all failed the FYLSX, rejected Chapman's refund offer. Mann withdrew from school and Yeomans took a one-year leave of absence, citing financial reasons. Goehring continued in school until January 1998 when Chapman dismissed him for academic reasons. Yeomans returned to Chapman for a third year of study and graduated in May 1999, after it attained preliminary approval from the ABA.

Goehring, Mann and Yeomans separately sued Chapman for fraud and related causes of action, and the court consolidated their cases.6 In a fourth amended complaint, Mann alleged that in enrolling and reenrolling in law school he relied on numerous written and...

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