JOHN A. WOODCOCK, JR., District Judge.
The Court denies an educational institute's motion for summary judgment against the claims of two of its graduates, who allege that the institute failed to provide them with an adequate education, changed the school calendar and the school location, causing them to incur unanticipated expenses and lost income, and refused to provide their school transcripts to others, causing them to lose educational and employment opportunities. The Court concludes that there are genuine issues of material fact that preclude summary judgment. The Court also rejects the educational institute's position that the Plaintiffs' claims do not meet the $75,000 jurisdictional requirement for diversity jurisdiction.
On April 6, 2016, Maria Perez-Webber and Jossie Reynoso, former students at the Nursing Program at InterCoast Career Institute (InterCoast), filed this civil action claiming that InterCoast failed to provide them the quality of nursing education it advertised. Compl. (ECF No. 1). The Plaintiffs alleged breach of contract, negligent misrepresentation, and fraud. Id. On May 4, 2016, InterCoast moved to dismiss the complaint and for a more definite statement. Def.'s Mot. to Dismiss Compl. and/or Mot. for a Mo[re] Definite Statement (ECF No. 7). On October 31, 2016, the Court denied the motion to dismiss. Order on Mots. to Dismiss and for More Definite Statement (ECF No. 10).
Following completion of discovery, InterCoast filed a motion for summary judgment on January 22, 2018 together with a statement of undisputed material facts. Def. InterCoast Career Institute's Mot. for Summ. J. (ECF No. 60) (Def.'s Mot.); Def.'s Statement of Undisputed Material Facts in Supp. of Def.'s Mot. for Summ. J. (ECF No. 61) (DSMF). The Plaintiffs filed their opposition on February 22, 2018 with a response to InterCoast's statement of material facts and their own statement of facts. Pls.' Opp'n to Def.'s Mot. for Summ. J. (ECF No. 63) (Pls.' Opp'n); Pls.' Resp. to Def.'s Statement of Material Fact (ECF No. 64) (PRDSMF); Pls.' Statement of Material Facts (ECF No. 65) (PSAMF). On March 8, 2018, InterCoast replied to the Plaintiffs' opposition and to their statement of material facts. Def. InterCoast Career Institute's Mem. in Supp. of Mot. for Summ. J. (ECF No. 66); Def.'s Resp. to Pl.'s Statement of Material Facts (ECF No. 67) (DRPSAMF).
A court may grant summary judgment under Federal Rule of Civil Procedure 56 if the record demonstrates that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). "A `material' fact is a `contested fact [that] has the potential to change the outcome of the suit under the governing law if the dispute over it is resolved favorably to the nonmovant,' and a `genuine issue' means that `the evidence about the fact is such that a reasonable jury could resolve the point in favor of the nonmoving party.'" McCarthy v. City of Newburyport, 252 F. App'x 328, 332 (1st Cir. 2007) (quoting Navarro v. Pfizer Corp., 261 F.3d 90, 93-94 (1st Cir. 2001)) (internal quotation marks and citation omitted).
The Court must examine the record evidence "in the light most favorable to [the nonmovant], and [must draw] all reasonable inferences in . . . favor [of the nonmoving party]." Foley v. Town of Randolf, 598 F.3d 1, 5 (1st Cir. 2010). At the same time, courts ignore "conclusory allegations, improbable inferences, and unsupported speculation." Cortés-Rivera v. Dep't of Corr. & Rehab. of Commonwealth of P.R., 626 F.3d 21, 26 (1st Cir. 2010) (quoting Sullivan v. City of Springfield, 561 F.3d 7, 14 (1st Cir. 2009)).
InterCoast is a private, for-profit California corporation which previously operated a private, for-profit Vocational Nursing Program in Kittery, Maine, with the first class starting in about May 2011 until May 2015. DSMF ¶ 1; PRDSMF ¶ 1. InterCoast also operated a private, for-profit Vocational Nursing Program in South Portland, Maine from approximately October 2007 to March 2016. Id. Maria Perez-Webber and Jossie Reynoso both attended the Practical Nursing Program commencing on or about May 27, 2014 until they both graduated on or about September 4, 2015. DSMF ¶ 2; PRDSMF ¶ 2. Ms. Perez-Webber and Ms. Reynoso applied to and enrolled at InterCoast based on its representations that its nursing program was an accredited professional work-like atmosphere with mature competent professionals to teach students the skills needed to become nurses. PSAMF ¶ 2; DRPSAMF ¶ 2. In exchange for InterCoast's representations, Mses. Perez-Webber and Reynoso each paid InterCoast $37,000 in tuition.
Ms. Perez-Webber and Ms. Reynoso began taking classes in 2014 at InterCoast's Kittery location. PSAMF ¶ 1; DRPSMAF ¶ 1. The program consisted of four terms.
Maria Perez-Webber and Jossie Reynoso both signed the same enrollment forms with InterCoast.
During the time the Plaintiffs were attending the Practical Nursing Program, InterCoast decided to give all students a one-week break between terms.
Both Plaintiffs initialed an "Enrollment Certification Form."
DSMF ¶ 14; PRDSMF ¶ 14.
In order to graduate, students must:
DSMF ¶ 15; PRDSMF ¶ 15.
After Jossie Reynoso graduated from InterCoast's Practical Nursing Program, she requested that InterCoast forward her transcripts to the State Nursing Board in late 2015 so that she could take the State Nursing Exam, called the NCLEX-PN exam, and InterCoast complied with that request because satisfactory financial arrangements had been made with the institution. DSMF ¶ 16; PRDSMF ¶ 16. Jossie Reynoso passed the NCLEX-PN on her first attempt and received her Practical Nursing License on or about December 17, 2015. DSMF ¶ 17; PRDSMF ¶ 17. Ms. Reynoso planned to begin nursing school in January 2016 to obtain her Registered Nurse's license; however, InterCoast initially refused to release her transcripts, falsely claiming that Ms. Reynoso had an outstanding balance with InterCoast.
In January 2016, Attorney Loranger contacted InterCoast's counsel, Neil Evans, to request release of Ms. Reynoso's transcript.
After Maria Perez-Webber graduated from InterCoast's Practical Nursing Program, InterCoast did not forward her transcripts to the State Board of Nursing in 2015 despite the fact that Ms. Perez-Webber had met her financial obligations to InterCoast.
In this lawsuit, Geeta Brown, InterCoast's corporate president, submitted an affidavit in which she attests that as of late 2015, Ms. Reynoso had made "satisfactory financial arrangements" with InterCoast.
After Term III, InterCoast closed its Kittery campus due to the poor facilities at the Kittery campus and forced the students, including Ms. Perez-Webber, to commute to InterCoast's South Portland location.
Ms. Perez-Webber took out loans through InterCoast to finance her education. PSAMF ¶ 21; DRPSAMF ¶ 21. The terms of the loans allowed her up to thirty-six months to repay them.
Ms. Perez-Webber planned to take the LPN Nursing Boards in October 2015.
InterCoast's motion for summary judgment is primarily based on its contention that the contract between the Plaintiffs and InterCoast expressly allows InterCoast to do the exact things about which the Plaintiffs are now complaining, and therefore the Plaintiffs have no ground to complain. Def.'s Mot. at 7-10. In InterCoast's view, to the extent the Plaintiffs complain that InterCoast provided them an inadequate education, their performance on the state LPN Board belies their complaint since both Ms. Perez-Webber and Ms. Reynoso passed the licensing examination the first time they took it. Id. at 8. Although the Plaintiffs complain about the one-week break between terms that InterCoast instituted while they were there, InterCoast insists that the contract allows it to make such adjustments to the academic calendar. Id. Similarly, InterCoast argues that it contractually reserved the right to change locations, here from Kittery to South Portland. Id. Finally, InterCoast says that the contract allows it to withhold transcripts for those students who owe it money and therefore there was no breach of the contract by InterCoast when it withheld transcripts from both Plaintiffs. Id. InterCoast says that once it becomes clear that the contract allowed it to proceed in the fashion that it did, the negligence and fraudulent misrepresentation claims must fail as well. Id.
In addition, InterCoast says that the Plaintiffs have failed to allege $75,000 in damages in a manner sufficient for the Court to continue to exercise diversity jurisdiction. Id. at 11-12. In InterCoast's words, it contends that this Court has "lost subject matter jurisdiction—here, the clear absence of more than $75,000 per Plaintiff in controversy." Id. at 12. InterCoast urges the Court to dismiss the claims and remand them to Superior Court for the state of Maine.
In their opposition, the Plaintiffs argue that they are claiming the right to receive back the $37,000 in tuition they each paid InterCoast because they received a deficient education and that the state of Maine Board of Nursing placed InterCoast's Kittery facility on probation and eventually revoked its license. Pls.' Opp'n at 2. In 2016, they say, the state Board of Nursing forced InterCoast to close its nursing program altogether. Id.
Next, Ms. Reynoso says that she has been unable to attend a nursing school because InterCoast has refused to release her transcripts. Id. at 2-3. This is true even though InterCoast's corporate president Geeta Brown swore under oath that by late 2015, Ms. Reynoso had made "satisfactory financial arrangements" with InterCoast. Id. at 3. Ms. Reynoso says that her nursing career as a registered nurse has been delayed by fourteen months to date. Id. She claims $75,000 in lost wages, which she attributes to InterCoast's refusal to release her transcripts. Id. at 3-4.
Ms. Perez-Webber's claims generally track Ms. Reynoso's. Ms. Perez-Webber says that InterCoast's refusal to release the transcript caused her to lose $13,000 in wages. Id. at 4. She also claims commuting expenses totaling $1,000 stemming from the closure of Kittery and her subsequent need to travel to South Portland for schooling. Id. at 4-5.
Both Plaintiffs seek punitive damages against InterCoast. Id. at 5.
In reply, InterCoast argues that, other than the Plaintiffs' general claim that InterCoast "utterly failed" to provide what it advertised and what the Board of Nursing required, there are "no facts set forth in either Declaration to support any alleged breach of contract or any damages suffered from an alleged breach of contract." Def.'s Reply at 2. InterCoast contends that the Plaintiffs alleged no damages from the supposed breach of contract. Id. InterCoast notes that the Plaintiffs concede that they each passed their Nursing Boards the first time and obtained their LPN licenses. Id. Thus, from InterCoast's perspective, the Plaintiffs received the benefit of their contract with InterCoast. Id. at 2-3.
InterCoast maintains that Ms. Perez-Webber's commuter expense claim is barred by the language in the enrollment agreement that allowed InterCoast to change the location of the education. Id. at 3.
InterCoast says that the Complaint does not sufficiently allege the delayed transcript claim and that in any event the contract expressly requires payment in full before the release of transcripts. Id. at 3-4.
InterCoast next asserts that the negligent and intentional misrepresentation claims must fail because the Plaintiffs' allegations are too conclusory and the Plaintiffs failed to present any evidence of damages caused by the alleged misrepresentations. Id. at 4-5.
Turning back to the delayed release of transcripts claim, InterCoast argues that based on Geeta Brown's sworn declaration, the Court should not accept the contrary statement by Ms. Reynoso that she paid off the balance of the loan collected by Tuition Options. Id. at 5. As for Ms. Perez-Webber, InterCoast reiterates its view that she was in default of her loan and therefore it was entitled to treat the loan as unpaid for purposes of releasing her transcript. Id. at 5-6. For both Ms. Reynoso and Ms. Perez-Webber, InterCoast repeats its main contention that their claims are barred by the express terms of the contracts. Id. at 6.
Finally, InterCoast restates its contention that the evidence is insufficient to support the minimum amount in controversy required for the Court to exercise diversity jurisdiction, and it says that remand is mandatory "if it is determined that this Court has lost subject matter jurisdiction based upon the clear absence of more than $75,000 per Plaintiff in controversy." Id. at 7.
The Court disagrees with InterCoast on its primary contention about the viability of the Plaintiffs' claims. The Plaintiffs' theory is that they signed onto an InterCoast program based on InterCoast's representations of a certain level of educational quality, including the promise that InterCoast's Kittery program was accredited. In exchange for an acceptable level of educational quality, they paid InterCoast in excess of $37,000 to attend the LPN program in Kittery. When they arrived, they discovered that the Kittery program did not live up to InterCoast's promises and the state Board of Nursing placed the InterCoast program on probation, ultimately revoking its license in 2016. They therefore seek the return of the tuition money they paid for a program that failed to meet InterCoast's advertised and contracted-to promises.
Preliminarily, the Court notes that, under Maine law, none of the Plaintiffs' three counts is well-suited for resolution prior to the fact-finding stage. "[T]he question of whether there has been a breach of contract is a question of fact." VanVoorhees v. Dodge, 679 A.2d 1077, 1080 (Me. 1996). Likewise, with respect to the negligent misrepresentation count, "[w]hether a party made a misrepresentation and whether the opposing party justifiably relied on a misrepresentation are questions of fact." St. Louis v. Wilkinson Law Offices, P.C., 2012 ME 116, ¶ 19, 55 A.3d 443. "A common, essential element of both [negligent misrepresentation and fraud] claims is the requirement of a false representation." Guiggey v. Bombardier, 615 A.2d 1169, 1173 (Me. 1992). Viewed in the light most favorable to the Plaintiffs, the contrast between InterCoast's LPN program as advertised and its actual LPN program creates genuine issues of material fact as to whether InterCoast met its contractual obligations to the Plaintiffs, the veracity of its representations regarding the program, and whether and to what extent the Plaintiffs detrimentally relied on those representations.
The Court is also unconvinced by InterCoast's assertion that the Plaintiffs' pleadings are fatally deficient with respect to damages. The Maine Supreme Judicial Court has held that the ordinary measure of damages for breach of contract is an injured party's "expectation interest," which it has defined, quoting the Restatement (Second) of Contracts, as the party's "interest in having the benefit of [its] bargain by being put in as good a position as [it] would have been in had the contract been performed . . . ." Deering Ice Cream Corp. v. Colombo, Inc., 598 A.2d 454, 456-57 (Me. 1991) (quoting Restatement (Second) of Contracts § 344 (Am. Law Inst. 1981)).
The Court understands InterCoast's point about the vagueness of the Plaintiffs' contentions. The general assertion that InterCoast "utterly failed" to live up to its advertised promises could be viewed as a "conclusory allegation[]" under Cortés-Rivera, 626 F.3d at 26. But the Plaintiffs also allege that InterCoast failed to comply with the requirements of the state of Maine Board of Nursing and that the Board therefore "placed [InterCoast]'s nursing program on probation and eventually revoked its license because the [Practical Nursing P]rogram did not meet the minimum requirements to operate a nursing school, [a decision that] caus[ed InterCoast] to close its nursing program in 2016." PSAMF ¶ 5; DRPSAMF ¶ 5. At first blush, the fact that both Mses. Perez-Webber and Reynoso passed their LPN boards on the first try seems to cut against their theory of the case against InterCoast. But it does not necessarily establish that they got from InterCoast what they bargained for. The Plaintiffs could have passed the LPN boards despite, not because of, the quality of the education they received from InterCoast, and, in any event, they are now burdened with having graduated from an LPN program that may be sullied by InterCoast's accreditation issues with the state of Maine Board of Nursing and closure.
At this stage, the Court is constrained by its obligation to assess whether there are any genuine issues of material fact that preclude the granting of summary judgment. If, as Plaintiffs claim, InterCoast's Kittery campus was so inadequately staffed and equipped that the state regulatory body, the Board of Nursing, placed InterCoast on probation while Mses. Perez-Webber and Reynoso were nursing students and revoked its license shortly after they graduated, a jury could well decide that InterCoast failed to live up to its most fundamental contractual obligations and that the Plaintiffs are entitled to damages. The Plaintiffs have pointed to a variety of ways in which they allege they are not in as good a position as they bargained for, and the Court does not perceive their alleged damages as so amorphous as to be noncognizable. With respect to damages associated with the negligent misrepresentation and fraud claims, the Plaintiffs specifically allege economic harms, which such causes of action are designed to address. See Langevin v. Allstate Ins. Co., 2013 ME 55, ¶ 11, 66 A.3d 585; Jourdain v. Dineen, 527 A.2d 1304, 1307 (Me. 1987).
Regarding InterCoast's arguments that because its enrollment agreement with each Plaintiff expressly allowed it to change the academic calendar and the location of the classes, the language in the contractual provision that InterCoast highlighted requires the changes to be "reasonable" and for certain specified reasons. See DSMF ¶ 7 ("to make reasonable changes . . . in the interest of improving the student's education, or where deemed necessary due to industry changes, academic scheduling, or professional requirements"). Preliminarily, InterCoast's argument assumes that it is entitled to enforce the terms of its contract. If the Plaintiffs are able to convince the jury that the contract is void due to InterCoast's failure to meet its basic educational obligations, InterCoast will not be able to defend these claims based on a void contract. If the contract terms are enforceable, whether the complained-of changes that InterCoast effected during the Plaintiffs' time as students were "reasonable" and/or made for covered reasons are mixed questions of fact and law and therefore, InterCoast is not entitled to summary judgment. Furthermore, even if the enrollment agreement gives InterCoast the authority to make these changes, the contract does not address whether it must reimburse the Plaintiffs from damages they incurred as a consequence of InterCoast's changes.
As regards the transcript withholding issue, Ms. Reynoso generated a material question of fact by revealing that InterCoast corporate president Geeta Brown expressly represented that Ms. Reynoso had made satisfactory financial arrangements with InterCoast as of late 2015 and yet InterCoast even as today continues to withhold her transcript from others. This alone generates a genuine issue of material fact that must be resolved by a jury. As for Ms. Perez-Webber, whether she in fact defaulted on her loan with InterCoast, and, if so, whether her default entitled InterCoast to withhold her transcripts are questions that require jury resolution.
Given the various material facts as to which there exist genuine disputes, InterCoast's motion must be denied.
"It is black-letter law that a federal court has an obligation to inquire sua sponte into its own subject matter jurisdiction," McCulloch v. Velez, 364 F.3d 1, 5 (1st Cir. 2004), and the Court is satisfied that it has subject matter jurisdiction over this case. As for the $75,000 jurisdictional amount required for diversity-based jurisdiction under 28 U.S.C. § 1332(a), the existence of which InterCoast disputes here, the plaintiff bears the burden of establishing that the claim meets the jurisdictional amount. Spielman v. Genzyme Corp., 251 F.3d 1, 5 (1st Cir. 2001); Murphy v. United States, 45 F.3d 520, 522 (1st Cir. 1995) ("[T]he party invoking the jurisdiction of the federal court carries the burden of proving its existence"). Under long-established law, a court may consider both actual and punitive damages in determining jurisdictional amount. Bell v. Preferred Life Assurance Soc'y, 320 U.S. 238, 240 (1943). "All the plaintiff must do to carry [her] burden . . . is to set forth facts which, if true, would prevent the trier from concluding to a legal certainty that the potential recovery is capped at a figure below the jurisdictional amount." Payne v. Goodyear Tire & Rubber Co., 229 F.Supp.2d 43, 46 (D. Mass. 2002) (quoting Barrett v. Lombardi, 239 F.3d 23, 30-31 (1st Cir. 2001) (emphasis in original)).
Ms. Reynoso clearly has alleged specific damages in excess of $75,000. She claims the right to receive back the $37,000 she paid in tuition, lost income of $75,000, and punitive damages in an unspecified amount. On its face, her damages claim exceeds the $75,000 threshold.
Ms. Perez-Webber claims the right to receive back the $37,000 she paid in tuition, lost income of $13,000, $1,000 in commuting expenses, and punitive damages in an unspecified amount. Her subtotal is $51,000. To receive a judgment in excess of $75,000, Ms. Perez-Webber would have to receive a punitive damages award of at least $24,000. The trial court has wide discretion in evaluating punitive damages when such damages are claimed to confer federal jurisdiction. Giannetta v. Boucher, No. 92-1488, 1992 U.S. App. LEXIS 33313, at *14 (1st Cir. Dec. 22, 1992) (citing Ehrenfeld v. Webber, 499 F.Supp. 1283, 1292 (D. Me. 1980)). Here, although there is no way to accurately assess what a jury might award in punitive damages, if the jury concluded that InterCoast defrauded Ms. Perez-Webber, the Court concludes that it is not a legal certainty that a jury would not award at least $24,000 in punitive damages against InterCoast.
The Court concludes that each Plaintiff has met the $75,000 jurisdictional amount-in-controversy requirement.
The Court DENIES Defendant InterCoast Career Institute's Motion for Summary Judgment (ECF No. 60).
SO ORDERED.
The Court views InterCoast's responses as frivolous. The Court cannot understand on what basis InterCoast would in good faith deny that Attorney Loranger contacted Attorney Evans. In Attorney Evans' own sworn declaration dated March 8, 2018, Attorney Evans represents that before this litigation, he advised Attorney Loranger that Ms. Reynoso had an outstanding balance with InterCoast. Decl. of Neil C. Evans in Support of Mot. for Summ. J. ¶ 1 (ECF No. 69). This litigation was initiated on April 6, 2016. The Plaintiffs' statement pertains to contact between Attorneys Loranger and Evans in January 2016. So the lawyers were in touch in early 2016. Also, the fact of the contact is not hearsay because it is not an assertion. FED. R. EVID. 801(a). Further, if Attorney Loranger signed an affidavit stating that he had contacted Attorney Evans on behalf of Ms. Reynoso, his statement would not be hearsay and there would be no foundational issue. Finally, in these circumstances, the Court would allow the statement under Federal Rule of Evidence 807, the residual exception. The Court rejects InterCoast's request to strike and includes Plaintiffs' paragraph seven.
