In these consolidated appeals, plaintiffs in consolidated actions against Ex'pression Center for New Media (Ex'pression) contend the trial court misinterpreted a portion of the Education Code, wrongly granted Ex'pression's demurrer on the theory that certain of their claims were barred by the statute of limitations, and wrongly denied their motions for a directed verdict. We agree the trial court misinterpreted Education Code former section 94877, subdivision (a), and shall remand for further proceedings. In all other respects, we shall affirm.
Ex'pression is a private postsecondary educational institution in Emeryville, California, which offers courses in sound arts, digital visual media, and Web design and development. In 1998, Ex'pression received temporary approval to operate from California's Bureau for Private Postsecondary and Vocational Education (the Bureau), a part of the Department of Consumer Affairs. The Bureau approved Ex'pression as a California private postsecondary degree-granting institution in January 2001, authorizing it to offer bachelor of applied science degrees in comprehensive sound, comprehensive digital visual media, and Web design and development; and diplomas in comprehensive sound arts, digital visual media, and Web design and development.
On September 13, 2004, Rebecca Spielman, Anna Navone, Christopher Friend, Amanda Instone, Jillian Meador, and Bobby Cochran (collectively the Spielman plaintiffs), all Ex'pression graduates, filed an action against Ex'pression and others (collectively Ex'pression) for violation of Education
The Spielman plaintiffs alleged that Ex'pression misrepresented to them that it would soon be nationally accredited, that they would graduate from Ex'pression with degrees from a nationally accredited institution, that their degrees and credits would be transferable to other accredited institutions, that Ex'pression had a "`100 percent'" job placement rate, that it was highly regarded by Bay Area employers and would provide meaningful career placement assistance, that its education would allow plaintiffs to obtain employment in their fields of study, that plaintiffs would be eligible for government student loans or that they could apply for such loans retroactively, and that when Ex'pression became accredited, plaintiffs' degrees would retroactively be deemed accredited. The Yu plaintiffs similarly alleged that before they enrolled, defendants made various false representations, including that Ex'pression was or soon would be fully accredited, that the Yu plaintiffs would receive valid associate of science or bachelor's degrees, and that the units earned at Ex'pression were legitimate and transferable.
Ex'pression demurred to the Yu plaintiffs' second amended complaint, contending, as pertinent here, that the cause of action for violations of the Waters Act was barred by the applicable statutes of limitations. Ex'pression argued that some of the plaintiffs (Toomajian, Morales, Elias, and Delgado) last attended Ex'pression on May 12, 2001, and that Ikeda last attended Ex'pression on July 20, 2001. According to Ex'pression, these plaintiffs were barred from pleading any claim with a three-year statute of limitations. The
Ex'pression cross-complained against the Spielman plaintiffs and Yu, Ho, Ikeda, Elias, and Delgado, alleging they had defaulted on their tuition loan payments and asserting causes of action for breach of contract, open book account, account stated, money had and received, and quantum meruit.
The Yu and Spielman actions were consolidated. During trial, Ikeda and all the Spielman plaintiffs except Instone moved for a directed verdict on Ex'pression's cross-complaints on the ground that their tuition had been paid to Ex'pression by a third party, EJW, which was not a party to the consolidated actions, and that there was no evidence EJW had assigned to Ex'pression its right to collect on the loan amounts due to EJW. The trial court denied the motion.
The jury returned separate special verdicts as to each plaintiff.
On plaintiffs' claims under section 94877, subdivision (a),
Plaintiffs took nothing by their complaints, and the trial court awarded damages to Ex'pression as found by the jury.
We first consider Ex'pression's contention that plaintiff's claims have been abated by the repeal of the Reform Act, including section 94877, effective January 1, 2008. (Former § 94999; Stats. 2004, ch. 740, § 7.)
Before trial, Ex'pression filed a motion seeking a legal interpretation of the elements necessary to establish plaintiffs' Education Code claims, arguing that in enacting section 94877 the Legislature intended to incorporate the common law of misrepresentation. For purposes of this appeal, the relevant portion of section 94877 is subdivision (a), which provided: "If an institution violates this article [(the Waters Act)] or Section 94832 or commits an act as set forth in Section 94830 in connection with an agreement for a course of instruction, that agreement shall be unenforceable, and the institution shall refund all consideration paid by or on behalf of the student."
The trial court agreed with Ex'pression and, as reflected in the special verdict forms, required plaintiffs to show not only that Ex'pression had made the requisite false or misleading statements, presented false or misleading information, or engaged in false, deceptive, misleading or unfair acts, but also that the acts related to an important fact, and that plaintiffs relied on the acts and were induced by them to enroll or remain enrolled at Ex'pression, in order to prevail on their causes of action under section 94877, subdivision (a). Plaintiffs contend on appeal that the trial court erred in requiring them to show materiality, reliance, and causation in connection with their claims and defenses under section 94877, subdivision (a).
This conclusion is bolstered by Goehring v. Chapman University (2004) 121 Cal.App.4th 353 [17 Cal.Rptr.3d 39] (Goehring). As relevant here, the court in Goehring considered whether a private right of action under Business and Professions Code section 6061 was governed by the one-year statute of limitations for an "action upon a statute for a penalty or forfeiture" (Code Civ. Proc., § 340, subd. (a)), or the three-year period for "an `action upon a liability created by statute, other than a penalty or forfeiture" (id., § 338, subd. (a)). (See Goehring, at p. 374.) Business and Professions Code section 6061 requires any unaccredited law school to provide a disclosure statement containing certain information and provides: "The disclosure statement required by this section shall be signed by each student, who shall receive as a receipt a copy of his or her signed disclosure statement. If any school does not comply with these requirements, it shall make a full refund of all fees paid by students." (Bus. & Prof. Code, § 6061, 10th par.) The Court of Appeal noted that a penalty is "`"`"any law compelling a defendant to pay a plaintiff other than what is necessary to compensate him [or her] for a legal damage done him [or her] by the former""' [citation]" (Goehring, at p. 386), and concluded the purpose of the refund provision of Business and Professions Code section 6061 was "penal in nature, as actual damage is not an element of the claim. Rather, to obtain a refund of tuition a plaintiff need only show the law school did not timely comply with disclosure requirements" (Goehring, at p. 387, italics added).
Ex'pression tries to distinguish Goehring on the ground that the jury there found the law school had knowingly and recklessly made false representations with the intent to defraud the plaintiff students, and that the plaintiffs had justifiably relied on the misrepresentations. (Goehring, supra, 121 Cal.App.4th at p. 362.) These findings, however, were made in connection with the plaintiffs' fraud claims, rather than their statutory cause of action for
Ex'pression also contends—and the trial court agreed—that the provisions of section 94877, subdivision (a) are less clearly penal in nature than those of Business and Professions Code section 6061. According to Ex'pression: "[W]hile both statutes involve tuition refunds, [Business and Professions Code s]ection 6061 directly links violation of the statute to the refund . . . . In contrast, [Education Code s]ection 94877(a) ties violation of the referenced Reform Act provisions to the unenforceability of the enrollment agreement, with the refund as the remedy." We find this distinction unpersuasive. Both statutes require the school to refund tuition if it violates the statutory provisions. Section 94877, subdivision (a)'s additional provision that an agreement for a course of instruction is unenforceable if the institution commits the violations does not change that fact.
Ex'pression relies on Prudential Home Mortgage Co. v. Superior Court (1998) 66 Cal.App.4th 1236 [78 Cal.Rptr.2d 566] to argue that section 94877, subdivision (a) does not provide for a penalty; but Prudential is inapposite. The court in Prudential looked to three factors to determine whether sums imposed under a statute constituted a penalty or forfeiture governed by the one-year statute of limitations or were remedial in nature and governed by a longer limitations period. These factors were (1) whether the statute's language characterizes the sums as a penalty or forfeiture, (2) whether the legislative history refers to the sums as a penalty or forfeiture, and (3) whether the sums are imposed without reference to the actual damage sustained by the plaintiff. (Prudential, at pp. 1242-1243.) The question before us, however, is not whether to apply the statute of limitations for a penal provision or for a remedial provision; it is whether the Legislature incorporated within section 94877, subdivision (a) a requirement that the plaintiff show the elements of a cause of action for misrepresentation.
Finally, Ex'pression contends that any interpretation of section 94877, subdivision (a) that does not require a showing of materiality, reliance, and causation could lead to absurd results, for example by requiring a refund even if the only violation were the failure to use a 12-point font type for certain required language in the preenrollment disclosure statement. (Former § 94871, subd. (a)(9).) Whether or not a minor deviation from this requirement would support a claim that the institution had not substantially complied, the misrepresentations found to have been made here are not mere technical lapses. (See Goehring, supra, 121 Cal.App.4th at pp. 384-386.) Moreover, the law provides a limited remedy—a refund of consideration paid by the student—and only if the improper acts were committed in connection
Our conclusion in this case is also buttressed by the fact that there are similar statutes containing heightened consumer protections which have been found not to include the elements of common law fraud unless those elements are made express in the law. For example, state laws require that securities sales be "qualified" prior to being offered (Corp. Code, §§ 25110, 25120, 25130) and provide that purchasers of securities that have not been qualified may sue for return of the consideration paid, less any income received, or for damages if the purchaser no longer owns the security (id., § 25503). "[These statutes] create liability affording the immediate purchaser several specific remedies. None of the above sections require scienter, negligence, or plaintiff's reliance. [Citation]." (Bowden v. Robinson (1977) 67 Cal.App.3d 705, 712 [136 Cal.Rptr. 871]; see id. at p. 714 ["[Corporations Code s]ections 25400, subdivision (d), and 25500 establish a statutory cause of action for fraud, however, conspicuously avoiding the requirement of `actual reliance.' [Citation.] The Legislature is again expressing its intention to afford the victims of securities fraud with a remedy without the formidable task of proving common law fraud."].)
The Legislature is fully capable of expressing in the statutory language those elements required to be proven in order to secure the statutory remedy. (See, e.g., Corp. Code, § 25401 [making unlawful an offer to sell or buy a security by means of a communication that includes "an untrue statement of a material fact" (italics added)].) Perhaps the most salient example of this is found in the recent amendment to the unfair competition law (Bus. & Prof. Code, § 17200 et seq.) (UCL). "Before the November 2004 General Election, when the voters approved Proposition 64, California courts consistently held that liability for restitution under the UCL could be imposed against a defendant without any individualized proof of causation or injury; the
In sum, whether or not we are comfortable with the result, we can find nothing in the statutes under consideration that would invite or countenance the addition of elements that are not contained in the plain language, particularly where the law expressly states that "[t]he remedies provided . . . supplement, but do not supplant, the remedies provided under other provisions of law." (Former § 94877, subd. (d).)
The question of the remedy remains. Plaintiffs Clarke, Ho, Ikeda, and Yu ask us to direct the trial court to enter judgment in their favor on their claims under section 94877, subdivision (a). As to Clarke, Ho, and Yu, however, the jury found against each of these plaintiffs on the question of materiality. It therefore had no occasion to reach the factual issues related to whether their causes of action were barred by the applicable statute of limitations, under which an action must be brought "within three years of the discovery of the facts constituting grounds for commencing the action." (Former § 94877, subd. (e).)
C., D.*
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The judgment is reversed as to the claims and defenses of Cochran, Friend, Instone, Meador, Spielman, Clarke, Ho, Navone, and Yu under section 94877, subdivision (a), and as to Ikeda's defense to the cross-complaint under section 94877, subdivision (a). In all other respects, the judgment is affirmed. The matter is remanded for further proceedings consistent with this opinion. The parties shall bear their own costs on appeal.
Ruvolo, P.J., and Sepulveda, J., concurred.