Friday, March 23, 2007

State Unfair Trade Practices Claims Target Colleges, Schools

It’s probably too early to call it a trend, but schools have been the subject of a number of state unfair trade practice lawsuits brought by their students. Predictably, rulings in these cases have gone a number of different ways.

Standing to Sue

In Daghlian v. DeVry University, Inc. (CCH State Unfair Trade Practices Law ¶31,352), the federal district court in Los Angeles held that a student could pursue putative class action claims that DeVry technical school violated California false advertising and unfair competition laws by failing to inform students that academic credits earned at the school probably would not transfer to other educational institutions.

Contrary to DeVry’s claim, the student had standing under California Proposition 64 because he asserted an actual injury in fact as a result of the alleged false advertising and unfair competition, the court determined. DeVry maintained that the student did not have standing because he did not allege that he actually attempted to transfer to another school, which refused to accept his DeVry credits.

The student asserted that he suffered injury when he spent $40,000 in tuition, expecting that his degree would be a foundation for further education, but did not receive what he had bargained for. He alleged that, prior to enrolling, a DeVry recruiter had told him that the school offered academic credits that would be accepted by a wide variety of other academic institutions.

The fact that the student may have received some value from his tuition payments did not mean he suffered no injury, according to the court.

Charter School as “Person”

In Wells v. One2One Learning Foundation (CCH State Unfair Trade Practices Law ¶31,281), the California Supreme Court ruled that state charter schools and their operators were “persons” who could be sued under the California Unfair Competition Law (UCL) for failure to provide students with promised equipment, supplies, and services.

The UCL defines “persons” subject to suit as “natural persons, corporations, firms, partnerships, joint stock companies, associations and other organizations of persons.” Because they were “associations” or “organizations,” the charter schools fell within the plain meaning of the statute.

Pleading Fraud with Particularity

In Jamieson v. Vatterott Educational Center, Inc. (CCH State Unfair Trade Practices Law ¶31,354), the federal district court in Witchita, Kansas, held that a Kansas Consumer Protection Act claim that an occupational training college misrepresented the quality and reputation of its curriculum was not pled with sufficient particularity.

Fraud complainants must identify, among other things, the “who, what, where, and when” of alleged misrepresentations. In this case, the complaint alleged that school representatives had made false statements about (1) the completeness of the school’s courses of study, (2) the qualifications and competence of the faculty, (3) the quality and availability of materials and equipment that would be provided by the school, (4) the school’s accreditation, (5) the school’s job placement rates, and (6) the skills plaintiffs would have upon completing a course of study.

Although the plaintiffs identified the general subject matter of the alleged misrepresentations, they failed to suffinciently identify any specific content, according to the court.

Deceptive or Unconscionable Claims

A student that had completed coursework in a polysomnography program at an Ohio community college was not allowed to proceed with claims against the college for alleged violations of the Ohio Deceptive Trade Practices Act and the Ohio Consumer Sales Practices Act.

The student claimed that marketing literature distributed by the college falsely represented that completion of the program would confer a sleep technician certificate accredited by the Ohio Board of Regents rather than a non-accredited “Competency Award.”

However, the Ohio Court of Appeals held that the literature was neither deceptive nor unconscionable, since the student did receive a “certificate” of competency and nothing in the literature suggested that completion of the program would result in registration with the state.

The case is Spafford v. Cuyahoga Community College (CCH State Unfair Trade Practices Law ¶30,979).

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