Nontransferability of college credits justifies a consumer protection claim

Daghlian v. DeVry University, Inc., 461 F. Supp. 2d 1121 (C.D. Cal. 2006)

DeVry University is one of the largest publicly held for-profit higher education companies in the country, offering programs in technology, business, and management. According to the complaint, plaintiff Saro Daghlian was a DeVry student in California from April 2002 until October 2005, studing Electronics Computer Technology. Before he enrolled, he met with a DeVry recruiter, who told him that DeVry was an accredited college where students were able to obtain degrees, and that, unlike technical colleges that give students certificates that cannot be used towards advanced degrees, academic credits from DeVry were transferrable to a wide variety of other academic institutions. 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. Relying on DeVry's representations, Daghlian signed an enrollment agreement. He ultimately incurred approximately $40,000.00 of educational debt. He sued in state court; defendants removed, then moved to dismiss.

The court concluded that Daghlian was entitled to bring a private cause of action against DeVry under the California Private Postsecondary and Vocational Education Reform Act of 1989 (a question complicated by what the court determined was an obvious drafting/numbering error in the statute), which requires explicit written disclosures about transferability of credits, prohibits false and misleading inducements to enroll, and requires disclosure of all material information. Further, the court held that DeVry was not exempt from the disclosure requirements, despite a state administrative agency’s interpretation of the law to the contrary.

DeVry argued that Daghlian hadn’t established his standing to bring false advertising and unlawful, unfair, and deceptive business practices claims under Proposition 64’s requirements: he hadn’t actually attempted to transfer to another school that refused to accept his credits, so he hadn’t been forced to repeat courses or incur additional tuition costs. Proposition 64 requires injury in fact, but the court concluded that spending money in reliance on DeVry’s representations about transferability, as alleged, satisfies that standard. He received some value from his $40,000 in tuition, but not the advertised value.