False educational promises, part 1

Guzman v. Bridgepoint Educ., Inc., 2012 WL 1944822 (S.D. Cal.)

Guzman sued Bridgepoint, Ashford University, and University of the Rockies on behalf of a putative class of people who enrolled in either of the two academic institutions operated by Bridgepoint for violations of California consumer protection statutes and common law.  She alleged that Bridgepoint falsely recruited students and overcharged the government for financial aid, including funding for veterans.  This conduct allegedly included (a) hiding federally-required disclosures on its website; (b) “misrepresent[ing] the true cost of attendance by falsely claiming that Ashford and The Rockies provide ‘some of the lowest cost tuition programs available,’ quoting to prospective students false and misleading tuition rates for degree programs, and failing to disclose substantial non-tuition costs such as administrative fees”; (c) misrepresenting the quality of academic instruction; (d) misrepresenting the status of “The Rockies' accreditation with the American Psychological Association (‘APA’) and ability to qualify students to obtain professional psychology licensure”; (e) misrepresenting employability and earnings potential for graduated students.  Guzman alleged that these uniform misrepresentations were made in written materials, oral scripts for enrollment advisors, and material omissions.  Defendants allegedly encouraged students to apply for more federal financial aid than they needed, failed to disclose that Bridgepoint’s default rate is higher than other institutions’, and failed to disclose that students have to begin repaying loans immediately upon enrollment.

Guzman alleged that she relied on these misrepresentations and completed approximately 20 online courses, but Ashford claimed that she owed over $3600 and refused to issue her diploma and release her transcripts.  Before she enrolled, she alleged, a Bridgeport enrollment advisor used high-pressure sales tactics on her, calling her several times a week and making the misrepresentations discussed above, including that federal financial aid would cover all her tuition, books, fees, and other costs; that Bridgepoint schools are fully accredited, and all credits awarded by Bridgepoint schools are transferable to other higher education institutions; and that a high percentage of Bridgepoint graduates found jobs in their fields of studies immediately following graduation, and earned tens of thousands of dollars in annual income.

Defendants argued that Guzman lacked constitutional standing because she didn’t adequately allege injury from allegedly improper enrollment tactics regarding the military or improper compensation of enrollment advisors.  Guzman responded that she had identified specific misrepresentations and that she wasted thousands of dollars from her enrollment.  After Proposition 64, a plaintiff has to show injury in fact as a result of the violation of the California consumer protection statutes.  Here, Guzman alleged specific misrepresentations that induced her to enroll in Ashford courses, and alleged that she incurred debt as a result. This was injury in fact, so she had standing to assert claims against Bridgeport and Ashford.

What about the Rockies?  She didn’t allege that she attended or had any contact with it.  Guzman argued (correctly, but to no avail) that this was a premature challenge to her typicality and adequacy and that she adequately alleged a common course of misconduct. The court agreed with defendants: Guzman didn’t allege that she relied on any misrepresentations by the Rockies, and thus lacked standing to assert claims against it.

Her claims against the remaining defendants, however, were sufficiently particular to satisfy Rule 9(b).  Defendants argued that a side-by-side comparisons of the allegations in the initial complaint, which was dismissed, and the amended complaint revealed that Guzman had just taken the deficient boilerplate from the first and repackaged them as statements purportedly made directly to her.  It was implausible, defendants argued, that she was suddenly able to remember that she was exposed to all the same generalized misrepresentations alleged in the current complaint.  But the court has to accept the complaint’s allegations as true on a motion to dismiss.