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Wright v. Capella University, Inc.

United States District Court, D. Minnesota

May 6, 2019

Carolyn Wright et al., Plaintiffs,
v.
Capella University, Inc., and Capella Education Company, Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

          WILHELMINA M. WRIGHT, UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Defendants' motion to dismiss Plaintiffs' amended complaint for failure to state a claim on which relief can be granted. (Dkt. 38.) For the reasons addressed below, the motion is granted in part and denied in part.

         BACKGROUND

         Plaintiffs are current and former doctoral students of Capella University that hail from Alabama, Florida, Kansas, Massachusetts, New York, Ohio, Pennsylvania, and Tennessee. Defendants are Capella Education Company and its wholly-owned subsidiary, Capella University, Inc. (collectively, “Capella”), both of which are Minnesota corporations.

         Capella offers multiple online doctoral degree programs. Before enrolling in Capella's doctoral programs, Plaintiffs received information from Capella via emails, website content, or conversations with Capella recruiters. Through each of these sources, Plaintiffs contend, Capella represented its doctoral programs as shorter and less expensive than the programs actually were. Plaintiffs purportedly relied on Capella's representations of the time and cost to complete the programs when deciding to enroll. Plaintiffs allege that, after enrolling in Capella's doctoral programs, Capella created obstacles so as to prolong the programs and collect more tuition. These alleged obstacles include high faculty turnover rates and inconsistent and delayed feedback to students from professors.

         Plaintiffs initiated this putative class action lawsuit on April 20, 2018, and filed an amended complaint on August 20, 2018.[1] Plaintiffs assert claims of common-law and statutory fraud, breach of contract, and unjust enrichment.

         ANALYSIS

         Capella moves to dismiss Plaintiffs' amended complaint for failure to state a claim on which relief can be granted. See Fed. R. Civ. P. 12(b)(6). In part, Capella argues that Plaintiff Lois Mason's claims are “premature” and that Plaintiff Jacqueline Carter has not suffered an injury. Although Capella makes these arguments in the context of a Rule 12(b)(6) motion, the question of whether Mason or Carter has been injured implicates their standing to bring this lawsuit. As a jurisdictional prerequisite, standing must be resolved before reaching the merits of a lawsuit. City of Clarkson Valley v. Mineta, 495 F.3d 567, 569 (8th Cir. 2007). For this reason, the Court addresses Capella's standing arguments first and then addresses Capella's remaining arguments as to the merits of Plaintiffs' amended complaint.

         I. Standing

         Capella argues that Mason and Carter cannot bring claims because neither Mason nor Carter had suffered an injury when Plaintiffs filed the amended complaint. Mason enrolled in Capella's Doctor of Information Technology (DIT) program in 2016. The 2.5-year timeline that Capella allegedly promised her had not yet elapsed when Plaintiffs filed the amended complaint. Carter enrolled in Capella's Doctor of Social Work (DSW) program in 2015, but she withdrew before her projected graduation date.

         Article III of the United States Constitution limits federal jurisdiction to actual cases or controversies. U.S. Const., art. III, § 2, cl. 1; Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992); Hargis v. Access Capital Funding, LLC, 674 F.3d 783, 790 (8th Cir. 2012). If a federal district court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action. Fed.R.Civ.P. 12(h)(3). When the district court or a party challenges standing, the party invoking federal jurisdiction must establish that the requirements of standing have been satisfied. Mineta, 495 F.3d at 569. Standing is determined based on the facts as they existed when the complaint was filed. Lujan, 504 U.S. at 569 n.4.

         To have constitutional standing, a plaintiff must (1) have suffered an injury in fact, (2) establish a causal relationship between the defendant's conduct and the alleged injury, and (3) show that the injury would be redressed by a favorable decision. Id. at 560-61; Mineta, 495 F.3d at 569. Only the injury-in-fact element is at issue here. Such injury in fact must be “concrete, particularized, and either actual or imminent.” United States v. Metro. St. Louis Sewer Dist., 569 F.3d 829, 833-34 (8th Cir. 2009) (internal quotation marks omitted).

         Mason and Carter, like the other Plaintiffs, allege that Capella induced them to enroll in doctoral programs based on false promises and representations of the programs. They lost time and money, Plaintiffs contend, by enrolling and participating in a program in which they otherwise would not have enrolled. The alleged time and money that was lost began to accrue when Mason and Carter enrolled in their programs and paid tuition for them. As alleged, the injury is particularized and actual. Accordingly, the Court rejects Capella's argument that Mason and Carter need to wait until their projected graduation dates in order to bring claims against Capella.

         For this reason, Mason and Carter have standing to bring this lawsuit.

         II. Failure to State a Claim

         Capella next contends that Plaintiffs have failed to state a claim on which relief can be granted. A complaint must allege sufficient facts such that, when accepted as true, a facially plausible claim to relief is stated. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). If a complaint fails to state a claim on which relief can be granted, dismissal is warranted. See Fed. R. Civ. P. 12(b)(6). When determining whether a complaint states a facially plausible claim, a district court accepts the factual allegations in the complaint as true and draws all reasonable inferences in the plaintiff's favor. Blankenship v. USA Truck, Inc., 601 F.3d 852, 853 (8th Cir. 2010). Factual allegations must be sufficient to “raise a right to relief above the speculative level” and “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). Mere “labels and conclusions” are insufficient, as is a “formulaic recitation of the elements of a cause of action.” Id. at 555. And legal conclusions couched as factual allegations may be disregarded. See Iqbal, 556 U.S. at 678. Each of Plaintiffs' causes of action is addressed in turn.[2]

         A. Common-Law Fraud (Counts 1, 7, 11, 14, 18, 22, 26, 30, 34, 38 and 44)

         Capella contends that Plaintiffs have neither alleged a misstatement of fact nor pleaded their fraud claims with particularity. Alternatively, Capella argues that the educational-malpractice doctrine bars Plaintiffs' claims. Each argument is addressed in turn.

         1. Misstatement of Fact

         Capella argues that Plaintiffs' common-law fraud claims do not sufficiently allege an actionable misstatement of fact. To state a claim for common-law fraudulent misrepresentation under Minnesota law, a plaintiff must allege that (1) a party falsely represented a past or existing material fact that is susceptible of knowledge, (2) the party made the representation either knowing that it was false or without knowing if the representation was true or false, (3) the party intended to induce another to act in reliance on the representation, (4) the plaintiff acted in reliance on the representation, and (5) the plaintiff consequently suffered pecuniary damages.[3] Angeles v. Medtronic, Inc., 863 N.W.2d 404, 422 (Minn.Ct.App. 2015). Capella challenges the first element.

         a. Plaintiff Wright

         Plaintiff Carolyn Wright, who enrolled in Capella's Doctor of Nursing Practice (DNP) program, alleges that she relied on a statement on Capella's website that claims, “[i]n just two years you can earn your DNP.” Wright also alleges that she relied on a 2-year recommended timeline contained within materials that Capella sent to her. According to Wright, the DNP program is not, in fact, a 2-year program. Rather, Capella's Gainful Employment report[4] states that only 13 percent of Capella students who graduated with a DNP degree between 2013 and 2014 were able to finish in 30 months or fewer. And, between 2014 and 2015, 84 percent of students who graduated with a DNP degree from Capella did so within 39 months.

         Wright fails to allege a false statement of material fact. Although Capella's website and course catalogue suggest that it is possible for a student to complete a DNP degree within 2 years, neither source represents that the average student completion rate is within that time period. Nor do these sources guarantee that Wright will complete the DNP degree within 2 years. For this reason, Wright's experience at Capella and the statistics presented in the Gainful Employment report are not incompatible with the representations on Capella's website and course catalogue. Nothing in Wright's allegations suggests that it would be impossible to complete a DNP degree in 2 years. Consequently, there is no allegation of a false representation of material fact.

         Accordingly, Count 1 is dismissed as asserted by Wright.[5]

         b. Plaintiffs Kennedy, Brannen, and Matelski

         Plaintiffs Debbra Kennedy, Sherry Bailey Brannen, and Shauna Matelski enrolled in Capella's Doctor of Education (Ed.D.) program. Each of these Plaintiffs alleges that she was induced to enroll in this program based on Capella's website, which represented that the Ed.D. program is “designed to be completed in less than 3 years.” In contrast to this representation, Capella's Gainful Employment Report states that no student who graduated with an Ed.D. degree between 2014 and 2015 completed the program within 3 years.

         These three Plaintiffs do not sufficiently allege a false representation. Accepting Plaintiffs' allegations as true for the purpose of this motion, Capella represents that the Ed.D. program is “designed” to take less than 3 years. Capella does not represent that an average student would complete the degree in 3 years, nor did Capella guarantee that Kennedy, Brannen, or Matelski would complete the Ed.D. program in fewer than 3 years. Neither the statistics contained in the Gainful Employment report nor the experiences of the Plaintiffs contradict the representation of a 3-year “design” time.[6]

         For these reasons, Kennedy, Brannen, and Matelski have not stated a claim for common-law fraud. Count 1 is dismissed ...


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