State ex rel. Weiser v. Ctr. for Excellence in Higher Educ., Inc.

• Decision Date: 26 August 2021
• Docket Number: Court of Appeals No. 20CA1692
• Citation: 499 P.3d 1081,2021 COA 117
• Parties: STATE of Colorado, EX REL.; Philip J. WEISER, as Attorney General of the State of Colorado; and Martha Fulford, as Administrator of the Uniform Consumer Credit Code, Plaintiffs-Appellees and Cross-Appellants, v. CENTER FOR EXCELLENCE IN HIGHER EDUCATION, INC., a not-for-profit company; CollegeAmerica Denver, Inc.; CollegeAmerica Arizona, Inc., divisions thereof d/b/a College America; Stevens-Henager College, Inc., a division thereof d/b/a Stevens-Henagar College ; CollegeAmerica Services, Inc., a division thereof; Carl Barney, Chairman of Center for Excellence in Higher Education, Inc., and Trustee of the Carl Barney Living Trust; The Carl Barney Living Trust; and Eric Juhlin, Chief Executive Officer of Center for Excellence in Higher Education, Inc., Defendants-Appellants and Cross-Appellees.
• Court: Colorado Court of Appeals

499 P.3d 1081

2021 COA 117

STATE of Colorado, EX REL.; Philip J. WEISER, as Attorney General of the State of Colorado; and Martha Fulford, as Administrator of the Uniform Consumer Credit Code, Plaintiffs-Appellees and Cross-Appellants,

v.CENTER FOR EXCELLENCE IN HIGHER EDUCATION, INC., a not-for-profit company; CollegeAmerica Denver, Inc.; CollegeAmerica Arizona, Inc., divisions thereof d/b/a College America; Stevens-Henager College, Inc., a division thereof d/b/a Stevens-Henagar College ; CollegeAmerica Services, Inc., a division thereof; Carl Barney, Chairman of Center for Excellence in Higher Education, Inc., and Trustee of the Carl Barney Living Trust; The Carl Barney Living Trust; and Eric Juhlin, Chief Executive Officer of Center for Excellence in Higher Education, Inc., Defendants-Appellants and Cross-Appellees.

Court of Appeals No. 20CA1692

Colorado Court of Appeals, Division A.

Announced August 26, 2021

Rehearing Denied September 30, 2021

Philip J. Weiser, Attorney General, Eric R. Olson, Solicitor General, Abigail M. Hinchcliff, First Assistant Attorney General, Olivia D. Webster, Senior Assistant Attorney General II, Mark T. Bailey, Senior Assistant Attorney General II, Hanah M. Harris, Assistant Attorney General, Denver, Colorado, for Plaintiffs-Appellees and Cross-Appellants

Connelly Law LLC, Sean Connelly, Denver, Colorado, for Defendants-Appellants and Cross-Appellees Center for Excellence in Higher Education, Inc., CollegeAmerica Denver, Inc., CollegeAmerica Arizona, Inc., Stevens-Henager College, Inc., and CollegeAmerica Services, Inc.

L S Pozner, PLLC, Larry S. Pozner, Denver, Colorado; Gombos Leyton PC, Steven M. Gombos, Jacob C. Shorter, Fairfax, Virginia, for Defendants-Appellants and Cross-Appellees Carl Barney, The Carl Barney Living Trust, and Eric Juhlin

Opinion by CHIEF JUDGE BERNARD

¶ 1 Certain advertisements are seemingly ubiquitous, appearing on the television, on the radio, and in print. As is pertinent to this case, one frequently aired television advertisement began, "You've been lied to. The truth is, the right college degree can lead to a higher paying job. And with the right degree from CollegeAmerica you could get a better job."

¶ 2 According to Colorado's Attorney General, some ten thousand Colorado consumers responded to advertisements such as the one quoted above and enrolled in CollegeAmerica. But those consumers, the Attorney General alleged, were sold a bill of goods. Instead of achieving the career advancement and increased income that they were led to expect, they entered degree programs that did not prepare them for jobs in their fields of study, and they were left saddled with debt that they had no hope of repaying. The Attorney General added that CollegeAmerica knew about these deficiencies in its programs, but it did not care; it was making money.

¶ 3 To hear CollegeAmerica tell it, it was filling a critical gap in the market, offering nontraditional, often disadvantaged students the opportunity to earn marketable degrees in high-demand fields in less time than local community colleges could, and with a better chance of graduating, too.

¶ 4 In December 2014, the Attorney General and the Administrator of the Uniform Consumer Credit Code sued the corporate entities and the individuals that made up CollegeAmerica's Colorado operation. (CollegeAmerica also has a presence in other states.) We shall refer to the plaintiffs collectively as "the Attorney General." The named corporate defendants were the Center for Excellence in Higher Education, Inc., and its subsidiaries; the named individual defendants were Carl Barney, Eric Juhlin, and the Carl Barney Living Trust. We shall refer to the defendants collectively as "CollegeAmerica" unless we need to identify them individually. We note that, although the corporate defendants and the individual defendants were represented by the same counsel during the trial, they are represented by separate counsel on appeal.

¶ 5 The complaint alleged that CollegeAmerica's efforts to recruit consumers and enroll them as CollegeAmerica students violated the Colorado Consumer Protection Act, or the CCPA, which we will shorten to "the Consumer Act," and Colorado's Uniform Consumer Credit Code, or the UCCC, which we will call "the Credit Code."

¶ 6 In particular, the Attorney General alleged that CollegeAmerica (1) "knowingly made false representations as to the state governmental approval necessary to offer various degrees and certifications," in violation of section 6-1-105(1)(b), C.R.S. 2014; (2) "knowingly misrepresented the outcomes and benefits of certain or all of [its] degree programs; the characteristics and benefits of its loans and scholarships; and the sponsorship, approval[,] or affiliation necessary to offer certain degree programs and certifications," in violation of section 6-1-105(1)(e) ; (3) "knew or should have known that [it had] misrepresented the outcomes, value[,] and quality of [its] various degree programs," in violation of section 6-1-105(1)(g) ; (4) engaged in "bait and switch" advertising, in violation of section 6-1-105(1)(n)(I), (II) ; (5) failed to disclose material information with the intent to induce consumers to enroll as students, in violation of section 6-1-105(1)(u) ; (6) "failed to obtain the necessary authorization to offer certain degree programs," in violation of section 6-1-105(1)(z) ; and (7) engaged in fraudulent or unconscionable conduct in inducing consumers to enter into loans, in violation of section 5-6-112, C.R.S. 2020.

¶ 7 The trial court partially dismissed the "bait and switch" claim. The court held a four-week bench trial on the remaining claims beginning in October 2017.

¶ 8 The court issued its judgment, which included findings of fact and conclusions of law, about two years and nine months later. Much of the court's order was copied verbatim from the Attorney General's proposed order, and one of the reasons we know this is because the same typographical errors that appear in the trial court's order are also found in the Attorney General's proposed order.

¶ 9 The court decided that all the named defendants were jointly and severally liable for violating the Consumer Act, and it ordered them to pay $3 million in civil penalties; it issued detailed injunctions against CollegeAmerica under both the Consumer Act and the Credit Code; it denied the Attorney General's request that CollegeAmerica pay back every dollar that its Colorado consumers had ever paid on tuition and for fees; and it determined that CollegeAmerica's loan program, known as EduPlan, was not unconscionable.

¶ 10 CollegeAmerica and the Attorney General appeal the trial court's judgment. CollegeAmerica asserts that the judgment went too far; the Attorney General counters that the judgment did not go far enough.

¶ 11 Specifically, the corporate defendants contend that the trial court erred when it (1) applied a 2019 amendment to the Consumer Act — which did away with the Attorney General's burden of proving "significant public impact" — retroactively; (2) deprived them of their right to a jury trial; (3) allowed the Attorney General to pursue what amounted to a claim for educational malpractice; (4) held the corporate defendants liable for conduct that federal regulations required, thus substituting its own policy judgments for those of the federal regulators; (5) decided the Consumer Act claims against them; and (6) deprived them of their right to a fair process because its ruling was long delayed and it incorporated so much of the Attorney General's proposed order.

¶ 12 The individual defendants, meanwhile, assert that (1) the court erred when it did not require the Attorney General to prove significant public impact under the Consumer Act; (2) the court erred when it denied them the right to a jury trial; (3) the evidence presented at trial did not support the imposition of personal liability against either Mr. Barney or Mr. Juhlin; and (4) the court erroneously imposed liability against the trust under an alter ego theory.

¶ 13 The Attorney General replies that the court only committed one error: it should have found, as a matter of law, that CollegeAmerica's entire EduPlan loan program was unconscionable.

¶ 14 As we shall explain, we reverse the trial court's judgment, in part, and we remand the case for a new trial. We conclude that each of the Consumer Act claims must be retried because the trial court erred when it decided that the Attorney General did not have to prove that CollegeAmerica's conduct significantly impacted the public. Based on this conclusion, we only address the remaining contentions that (1) must be resolved for the purposes of the new trial on remand; or (2) would obviate the need for a retrial.

I. The Trial Court Erred When It Decided That the Attorney General Did Not Need to Prove Significant Public Impact

A. Background

¶ 15 Before trial, CollegeAmerica asked the court to order summary judgment on two issues related to public impact. First, it argued that its programs only impacted "a handful" of students, not the public at large. Second, it argued that its mailed advertisements containing salary information and statements about the loan program did not affect the public because its tracking data showed that "no consumers who responded to any of the [s]tarting [s]alary [m]ailers enrolled in any of the programs for which starting salary information was included; and only six consumers who responded to any of the EduPlan [m]ailers enrolled in any program."

¶ 16 The court disagreed with CollegeAmerica on both issues and the larger issue of whether there was any need to prove significant public impact at all, explaining that these requests for summary judgment presented "what appear[ed] to be a matter of first impression in Colorado, which has not been squarely decided by any appellate court." The court explained that the "matter of first impression" was whether the Attorney General was required to "demonstrate a ...