Guzman v. Bridgepoint Education, Inc. et al, No. 3:2011cv00069 - Document 104 (S.D. Cal. 2015)

Court Description: ORDER denying Plaintffs' 78 Motion to Certify Class; granting Defendants' 86 Motion for Sanctions. Court strikes the Ferguson Declaration. Signed by Judge Cynthia Bashant on 3/26/2015. (jah)

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Guzman v. Bridgepoint Education, Inc. et al Doc. 104 1 2 3 4 5 6 7 8 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 BETTY GUZMAN, individually and on behalf of all other similarly situated, 14 Plaintiff, 15 v. 16 17 18 BRIDGEPOINT EDUCATION, INC., et al., Defendants. 19 Case No. 11-cv-69-BAS(WVG) ORDER: (1) GRANTING DEFENDANTS’ MOTION FOR SANCTIONS; AND (2) DENYING PLAINTIFF’S MOTION FOR CLASS CERTIFICATION [ECF Nos. 86, 78] 20 21 On January 11, 2011, Plaintiff Betty Guzman commenced this class action 22 against Defendants Bridgepoint Education, Inc. (“Bridgepoint”), Ashford University 23 (“Ashford”), and University of the Rockies (“The Rockies”),1 alleging that Defendants 24 “engaged in a pattern of improper and unlawful conduct in order to recruit students and 25 over-charge the federal government for federal financial aid . . . through the use of 26 standardized, misleading recruitment tactics[.]” (Compl. ¶ 6.) Plaintiff amended the 27 28 1 University of the Rockies is no longer a party to this action. It was dismissed by court order on May 30, 2012. -1- 11cv69 Dockets.Justia.com 1 complaint twice, the current operative complaint being the Second Amended Complaint 2 (“SAC”). Now pending before the Court are Defendants’ motion for sanctions and 3 Plaintiff’s motion for class certification. Both motions are opposed. 4 Having reviewed the papers submitted and oral argument from both parties, the 5 Court GRANTS Defendants’ motion for sanctions (ECF No. 86) and DENIES 6 Plaintiff’s motion for class certification (ECF No. 78). 7 8 I. BACKGROUND2 9 Bridgepoint is “one of the largest publicly-traded for-profit college companies 10 in the United States” with more than 5,800 employees. (SAC ¶¶ 22, 25.) Ashford is 11 an academic entity founded, owned, and operated by Bridgepoint. (SAC ¶¶ 23–25.) 12 It “offer[s] Associate’s, Bachelor’s, Master’s, and Doctoral degree programs, primarily 13 online.” (SAC ¶ 25.) Though most of Ashford’s students are enrolled in the online 14 program, it nonetheless maintains a physical campus in Clinton, Iowa. (SAC ¶ 23.) 15 Students take only one online class at a time, each course typically being five weeks 16 in length. (Ng Dep. 221:12–23.) 17 According to the complaint, 67,744 students have enrolled in Bridgepoint’s 18 institutions, “99% of whom were attending classes exclusively online.” (SAC ¶ 26.) 19 The total student enrollment at Ashford and The Rockies increased from 19,509 20 students at the end of the first quarter in 2008 to 42,025 students as of March 31, 2009. 21 (SAC ¶ 27.) New student enrollment for the first quarter of 2009 was approximately 22 16,800 compared to new enrollments of approximately 8,800 for the first quarter of 23 2008. (Id.) As of December 31, 2012, over 50,300 students have graduated from the 24 Bridgepoint institutions with students having enrolled from all 50 states, the District 25 of Columbia, and 60 different countries. (Bridgepoint 10-K (2012) at 5.) 26 // 27 2 28 The following background is based primarily on the SAC and the exhibits attached to Plaintiff’s class-certification motion. The parties are to presume that exhibits referenced in this section are to those attached to the class-certification briefs, unless noted otherwise. -2- 11cv69 1 At the heart of this action is Plaintiff’s assertion that “Bridgepoint’s explosive 2 enrollment growth at its online academic institutions is a direct result of misleading 3 marketing tactics designed to recruit students to attend its schools, and its 4 implementation of federally-prohibited employee incentive programs that were 5 designed to encourage ‘enrollment advisors’ to recruit as many students as possible.” 6 (SAC ¶ 28.) 7 8 A. Advertising and Marketing 9 Prior to 2012, Ashford’s only national marketing was through third-party 10 “aggregator websites,” which are “websites that allow students interested in 11 information regarding post-secondary education to input their information to be sent 12 to a number of universities,” including Ashford. (Mignone Decl. ¶ 4; Mignone Dep. 13 118:10–23.) Currently, however, marketing efforts include digital, print, and television 14 advertising. (Mignone Dep. 109:7–111:12.) Digital advertising composed of “70 to 15 80 percent” of all advertising with the remaining “20 to 30 percent” consisting of print 16 and television advertising. (Id.) Ashford does not use the same messaging across all 17 advertising forms. (Id. at 139:8–19.) 18 Ashford’s main website is www.ashford.com. A communications review 19 committee—consisting of “compliance, legal, and other individuals that are part of 20 Ashford University”—vets all content posted on the website. 21 51:3:–16.) “The marketing content on the current website is . . . different from what 22 was on the website in 2005 because Ashford University has expanded its programs and 23 regularly changes its marketing message.” (Mignone Decl. ¶ 5.) (Mignone Dep. 24 In addition to the main website, Ashford has also used other website addresses, 25 the quantity depending on considerations such as the current “campaign” and site 26 testing. (Mignone Dep. 113:7–23.) Currently, Ashford has three additional websites. 27 (Id. at 113:16–114:25.) One of these websites is degrees.ashford.edu, which is a 28 “landing environment for paid search.” (Id.) In other words, it is a site where -3- 11cv69 1 prospective students “simply submit information if they would like to request more 2 information.” 3 belong.ashford.edu, which are also landing environments associated with current or 4 former advertising campaigns. 5 environments. (Id.) (Id.) The other two websites are here.ashford.edu and (Id.) Students cannot enroll at these landing 6 Ashford also sends representatives to military bases and military conferences to 7 recruit potential students. (Mignone Dep. 142:22–144:12.) It sends representatives to 8 community colleges and conferences to recruit and speak about corporate partnerships, 9 among other things, as well. (Id. at 144:13–25.) Furthermore, “[o]ftentimes, people 10 may refer friends or family members or people that they work with to attend Ashford 11 University, and that’s an important group of inquiries[.]” (Id. at 103:14–24; see also 12 Grady Decl. ¶ 10.) 13 14 B. Enrollment Advisors 15 After Ashford received contact information from aggregator websites, it would 16 have its enrollment advisors follow up. (Mignone Dep. 120:1–9.) Enrollment advisors 17 “provid[e] whatever is necessary to what the student is asking[.]” (Ng Dep. 66:12–19.) 18 Questions typically received from prospective students range “from the specific 19 education they are looking for all the way to normal questions that students ask when 20 they are looking for what is the right college for them[,]” including questions related 21 to costs and programs. (Id. at 67:6–21.) 22 Enrollment advisors are trained to give “accurate and truthful information” to 23 prospective students. (Ng Dep. 54:8–55:24.) As a part of this training, advisors are 24 given written materials including “the content piece for student services” and 25 “conversation guides.” (Id.) The purpose of the written materials is so that a newly 26 hired enrollment advisor can first learn “what the content is” and then have 27 “conversation guides to ensure that they are giving students . . . information that’s 28 pertinent to that specific student.” (Id.) Though all newly hired enrollment advisors -4- 11cv69 1 receive training materials, different training materials are given depending on the 2 relevant department. (Id.) Defendants insist that enrollment advisors are not given 3 scripts. (Id.) 4 One document provided in the training materials is titled “Ethics of Admissions, 5 which provides nine ethical guidelines for enrollment advisors, including “[a]here[nce] 6 to state and federal Do Not Call regulations,” and “[m]aintaining truth and accuracy of 7 all areas of advertisement.” (Young Decl. Ex. 16; see also Young Decl. Ex. 17 8 (document titled “Enrollment Compliance Acknowledgment”).) Elaborating on the 9 latter, the guidelines explicitly state that “[i]t is unacceptable to misrepresent or advise 10 students incorrectly in any area, (i.e. length of time for completion, program content, 11 attendance requirements, certification, technology requirement, PLA, all charges 12 associated with degree program)” and that “[i]t is not permissible to discuss a definitive 13 amount of funds a student may receive in student loans/grants, a definitive amount of 14 transfer credits prior to an unofficial pre-evaluation or employability upon 15 graduation[.]” (Young Decl. Ex. 16.) 16 In a document titled “Incorporating Quality Control,” presumably from the 17 training materials, Ashford instructed enrollment advisors that “ALL outbound calls 18 must include this verbiage”: “Great! This call may be monitored for quality assurance. 19 So tell me, [prospective student’s name], why is getting your degree so important to 20 you (Motivation Question)?” (Bottini Decl. Ex. 22.) That document makes clear that 21 “[the verbiage] must happen immediately in the call and within a very short time 22 period. No later than 60 seconds.” (Id.) The purpose of the verbiage is to prevent the 23 conversation from “get[ting] away from us[,]” which is why enrollment advisors should 24 not ask “How are you, today?” in their introductions. (Id.) Enrollment advisors are 25 further instructed that their first role is to increase enrollment and achieving that goal 26 may be done if they “Create Urgency” in a “polite, helpful way!” (Bottini Decl. Ex. 27 11.) 28 // -5- 11cv69 1 Ashford also provided guides to its enrollment advisors addressing follow-ups 2 and leaving effective messages. (Bottini Decl. Ex. 12.) In these guides, fields are left 3 open for enrollment advisors to presumably fill out to develop a consistent approach 4 in their own words. (Id.) For example, in the document titled “Leaving Effective 5 Messages - The Rules,” enrollment advisors are told to “[w]rite down 6 [reasons to call 6 you back] and circle 2-3 you might use” to complete the sentence “When you call me 7 back, we will discuss . . . .” (Id.) Example language is also provided throughout this 8 document along with occasional instructions to the enrollment advisor. (Id.) Some 9 instructions provided state, for example: “Be Persistent!”; “It’s important to mix things 10 up a little with your message to avoid sounding like a broken record”; “Spend your 11 time wisely and focus on meeting the students [sic] needs”; and “Slow down and listen 12 to your students.” (Id.) Other documents are similar in form including instructions 13 given with example language. (See, e.g., Bottini Decl. Ex. 23.) 14 Despite the instructions in these guides, a former enrollment advisor at Ashford 15 from August 2009 to January 2011—Ryan Ferguson—states in a declaration that 16 “Ashford pressured enrollment advisors to employ a series of tactics, including making 17 misrepresentations and concealing material information, to induce students to begin 18 enrollment and to remain enrolled.” (Ferguson Decl. ¶ 7.) He continues, “Although 19 Bridgepoint’s training materials required ‘truth and accuracy in all areas of 20 advisement,’ enrollment advisors were pressured to say anything necessary to enroll 21 students.” (Id.) To achieve enrollment goals, enrollment advisors purportedly used 22 “uniform scripted oral misrepresentations[.]” (Id. ¶ 9.) However, the declaration only 23 provides generalized contents of the purported “uniform scripts,” such as “describ[ing] 24 Bridgepoint schools as great school with amazing professors who offer individualized 25 attention to students” and “claiming that a degree from Bridgepoint schools would 26 provide students and prospective students a competitive advantage over graduates from 27 other postsecondary schools.” (See id.) 28 // -6- 11cv69 1 C. 2 Plaintiff is “one of the tens of thousands of students who [allegedly] fell victim 3 to Bridgepoint’s systematic false advertisements, material omissions, dissemination of 4 misstatements, and boiler-room pressure recruiting tactics.” (SAC ¶ 30.) Her initial 5 contact with Bridgepoint started through the Internet, and in the time period leading up 6 to enrollment at Ashford in 2006, “a Bridgepoint enrollment advisor used high-pressure 7 sales tactics on her by calling her several times a week.” (Id.) According to Plaintiff, 8 the enrollment advisor made numerous misrepresentations, including: • 9 Student Complaints “Bridgepoint schools offered the most affordable education to students, 10 and the tuition and costs were the ‘lowest’ and could not be found 11 elsewhere”; • 12 “Federal financial aid would cover all tuition, books, fees, and other costs, including costs for purchasing computers and software”; 13 • 14 “The need to enroll as soon as possible and to apply for maximum financial aid was urgent”; 15 • 16 “Bridgepoint schools are fully accredited, and all credits awarded by 17 Bridgepoint schools are transferable to other higher education 18 institutions”; and • 19 “A high percentage of Bridgepoint graduates found jobs in their fields of 20 studies immediately following graduation, and earned tens of thousands 21 of dollars in annual income.” 22 (Id.) Plaintiff alleges that all of these statements are lies. (SAC ¶ 31.) And though 23 inaccurate, “these statements are part of the uniform script designed by Bridgepoint, 24 and used by all Bridgepoint enrollment advisors during their communications with 25 prospective students.” (Id.) 26 // 27 // 28 // -7- 11cv69 1 Other students had similar experiences. For example, one student, a veteran, was 2 repeatedly told by recruiters that his post-9/11 GI Bill benefits would cover the entire 3 cost of his degree, only to find out after he was enrolled that he would owe 4 approximately $11,000 to Ashford that his benefits did not cover. (Bottini Decl. Ex. 5 3.3 ) According to that student, he “was extremely disappointed, confused and angry[,]” 6 and felt that he “ha[d] been misled, deceived or even outright lied to in an effort to gain 7 [his] contractual agreement.” (Bottini Decl. Ex. 3, Document 1.) That said, the student 8 did note that except for incident involving tuition, he “thoroughly enjoyed [his] 9 affiliation with Ashford University and [has] effectively referred several people to this 10 University” because he “completely believe[s] in the concepts that Ashford subscribes 11 to and [has] been a strong advocate of this University.” (Id.) 12 In another example, a student was told that he would be able to receive his 13 teaching license from Ashford. (Bottini Decl. Ex. 3, Document 2.) But a year later, 14 right before his scheduled graduation, he found out that Ashford was not allowed by 15 the state of Iowa to award teaching licenses, so he would have to attend a “cooperating 16 school” in Arizona for a year. (Id.) The student “was really blown away to find out 17 that [he] had spent so much time and money at a College that [he] was not going to be 18 able to obtain [his] Teacher’s license from.” (Id.) 19 Another student entered Ashford intending to become a licensed dental assistant. 20 (Bottini Decl. Ex. 3, Document 3.) Recruiters told him that he could achieve this goal 21 at Ashford. (Id.) After becoming suspicious about the lack of dental classes one year 22 in, he raised his suspicion with his academic advisor who told him Ashford would not 23 lead to a dental assistant license and that “she didn’t really have anything to say.” (Id.) 24 The student told the school that he felt that he was “completely and utterly lied to,” 25 3 26 27 28 Exhibit 3 to the Bottini Declaration includes a summary of the U.S. Senate Committee on Health, Education, Labor, and Pensions (“Senate HELP Committee”)’s of many of the student complaints it received as a part of its investigation in addition to copies of over 20 different actual student complaints. This document is a part of a collection of documents produced by the Senate HELP Committee’s investigation “focusing on the Federal investment in for-profit higher education companies and whether the $26 billion in annual taxpayer money flowing to this sector is a good value for students and taxpayers.” (Bottini Decl. Ex. 1; see also Bottini Decl. Exs. 2, 3, 5.) -8- 11cv69 1 only to be left with $9,000 in loans and $3,000 owed to the school. (Id.) 2 In addition to experiences where students felt lied to by recruiters, student 3 complaints included a broad range grievances: (1) students who could not get a 4 response to their requests for help once enrolled; (2) students who found out after 5 leaving or graduating that they owed money; (3) mishandling of student financial aid; 6 (4) students who were not informed of a technology fee; (5) lack of accommodation for 7 students who need extra help; (6) problems with transfer credits; (7) students who felt 8 worse off after attending Ashford; and (8) complaints directed at specific teaching 9 programs, such as the use of an outdated curriculum. (Bottini Decl. Ex. 3.) Plaintiff 10 supports her motion with student complaints that touch upon each and every one of the 11 general categories listed above.4 12 Procedural History5 13 D. 14 There are two related actions filed in this district: (1) Rosendahl v. Bridgepoint 15 Education, Inc., No. 11-cv-61-BAS(WVG) (S.D. Cal. Jan 11, 2011); and (2) Ferguson 16 v. Bridgepoint Education, Inc., No. 11-cv-493-BTM(DHB) (S.D. Cal. Mar. 10, 2011).6 17 Both actions name the same defendants—Bridgepoint, Ashford, and The Rockies—and 18 the same plaintiffs’ counsel—Francis A. Bottini—as this action. 19 Rosendahl was strikingly similar to this action, alleging similar facts and 20 asserting nearly identical claims, including claims for violations of the California 21 Business & Professions Code §§ 17200 and 17500, violation of the California 22 Consumer Legal Remedies Act (“CLRA”), and negligent misrepresentation. The 23 24 25 26 27 28 4 Defendants contend that the Senate HELP Committee’s documents are inadmissible and irrelevant. (Defs.’ Opp’n 24:11–25:22.) Despite this objection, the Court will nonetheless consider the Senate HELP Committee documents. 5 On May 15, 2014, this action was transferred to this Court. Prior to that date, the Honorable William Q. Hayes presided over this action. All orders issued prior to May 15, 2014 were issued by Judge Hayes. 6 One of the named plaintiffs in Ferguson is Ryan Ferguson, whose declaration is included in support of Plaintiff’s class-certification motion. -9- 11cv69 1 plaintiffs in Rosendahl also proposed a near-verbatim class definition as the one 2 proposed in this action, down to the proposed class period, with the only difference 3 being the inclusion of University of the Rockies7: 4 All persons in the United States, who during the period from approximately March 1, 2005 through the present . . ., enrolled in and/or attended classes offered by Bridgepoint Education through either of its two academic institutions, Ashford University or University of the Rockies. Excluded from the Class are defendants, their immediate families, subsidiaries, affiliates, successors-in-interest, representatives, trustees, executors, administrators, heirs, assigns or transferees, any person acting on behalf of defendants, all governmental entities, and co-conspirators. Ultimately, on February 28, 2012, the Rosendahl action was administratively closed 5 6 7 8 9 10 after the court granted the defendants’ motion to compel arbitration. 11 Ferguson was a qui tam action brought under the False Claims Act, based on 12 allegations that prospective students were induced to enroll at Bridgepoint schools by 13 making misrepresentations and concealing material information. The United States 14 chose to decline to intervene, and on June 13, 2013, the case was eventually dismissed 15 without prejudice at the joint request of the parties. 16 This action commenced on January 12, 2011, around the same time as Rosendahl 17 and Ferguson. Plaintiff amended the complaint twice, the current operative complaint 18 being the SAC. Plaintiff asserts five claims under California law in her SAC: (1) 19 Violation of Business & Professions Code § 17200 (Unfair Trade Practices Act, also 20 known as Unfair Competition Law or “UCL”); (2) Violation of Business & Professions 21 Code § 17500 (False Advertising Act or “FAL”); (3) Violation of the CLRA; (4) 22 Violation of Civil Code § 1710(3); and (5) Negligent Misrepresentation. 23 Now pending before the Court are Defendants’ motion for sanctions and 24 Plaintiff’s motion for class certification. Both motions are opposed. The Court will 25 address both motions below in turn, beginning with Defendants’ motion for sanctions, 26 27 28 7 The proposed class definition from Rosendahl can be found in paragraph 34 of that action’s complaint. - 10 - 11cv69 1 which presents a preliminary issue that needs to be resolved before reaching Plaintiff’s 2 motion for class certification. 3 4 II. DEFENDANTS’ MOTION FOR SANCTIONS8 5 On May 9, 2013, Plaintiff served Defendants initial disclosures pursuant to 6 Federal Rule of Civil Procedure 26(a)(1). (Bottini Decl ¶ 10; Young Decl. ¶ 2; Pl.’s 7 Initial Disclosures 2:19–23.) 8 Defendants her First Amended Initial Disclosures. (Bottini Decl. ¶ 10; Pl.’s First Am. 9 Initial Disclosures 185:1–186:19.) In both disclosures, Plaintiff did not list Ryan 10 Ferguson as a potential witness in this litigation. (Bottini Decl. ¶ 10; Young Decl. ¶ 11 2; Pl.’s Initial Disclosures 2:24–3:9; Pl.’s First Am. Initial Disclosures 185:1–186:19.) 12 As previously mentioned, Mr. Ferguson is a former employee of Defendants who 13 had filed a qui tam action against them in March 2011. See Ferguson, No. 11-cv-493. 14 Plaintiff’s current counsel, Mr. Bottini, along with two other attorneys represented Mr. 15 Ferguson and his co-plaintiff in the qui tam action. Similar to Plaintiff’s SAC and Mr. 16 Ferguson’s declaration in support of Plaintiff’s class-certification motion, Mr. 17 Ferguson alleged Defendants incentivized their employees to use uniform written and 18 scripted oral misrepresentations in an effort to meet enrollment quotas. The matter was 19 dismissed on June 13, 2013. (See Bottini Decl. ¶ 3.) Subsequently, on June 7, 2013, Plaintiff served 20 On August 6, 2013, Defendants served Plaintiff with interrogatories. (Young 21 Decl. ¶ 3; Defs.’ Interrog. 7:15–12:25.) The interrogatories sought facts, documents, 22 and witnesses supporting specific allegations in Plaintiff’s SAC. (See Defs.’ Interrog. 23 7:15–12:25.) Defendants’ sixteenth interrogatory, particularly relevant here, requested 24 25 26 27 28 8 All references to documents and exhibits—in particular, the declarations of counsel—in this section are to the attachments to the parties’ briefing addressing Defendants’ motion for sanctions. It is important to note this footnote to avoid confusion with documents and exhibits related to the class-certification motion. Furthermore, in abbreviating to citations to the briefs of the two pending motions, “Mot.,” “Opp’n,” and “Reply” refer to the class-certification briefs, and “Sanctions Mot.,” “Sanctions Opp’n,” and “Sanctions Reply” refer to the sanctions briefs. - 11 - 11cv69 1 Plaintiff to “[s]tate all facts that support [her] allegation in paragraph 52 of the SAC 2 that [Defendants] ‘make uniform written and scripted oral misrepresentations’ . . . 3 including but not limited to . . . any [persons] who provided these statements.” (Defs.’ 4 Interrog. 10:17–23.) Plaintiff served responses to Defendants’ interrogatories on 5 October 9, 2013. (Bottini Decl. ¶ 12; Pl.’s Resp. Defs.’ Interrog. 27:1–28:22.) But she 6 again failed to identify Mr. Ferguson, or any other witness, as requested by Defendants’ 7 sixteenth interrogatory. Plaintiff merely objected to the interrogatory while also 8 directing Defendants’ attention to the allegations set forth in her SAC. (Young Decl. 9 ¶ 4; Pl.’s Resp. Defs.’ Interrog. 27:1–28:22.) 10 On November 22, 2013, the parties’ counsel met and conferred regarding 11 Plaintiff’s responses to Defendants’ interrogatories. (Young Decl. ¶ 5.) Plaintiff’s 12 counsel “confirmed that Plaintiff possessed no additional information responsive to 13 Defendants’ interrogatories,” “was not withholding any responsive information as 14 privileged or protected[,]” and “did not intend to further supplement her interrogatory 15 responses and would not use any previously undisclosed witnesses to support her 16 claims.” (Young Decl. ¶ 6.) On January 9, 2014, Defendants’ counsel sent a letter to 17 Plaintiff’s counsel confirming these representations and stating they would “move to 18 exclude any . . . witnesses that [P]laintiff ha[d] not disclosed in her responses . . . 19 should [P]laintiff attempt to later provide, produce or disclose such . . . witnesses in 20 support of the various specific contentions[.]” (Defs.’ Sanctions Mot. Ex. 4.) 21 On March 31, 2014, the period allotted for class-certification-related discovery 22 closed.9 23 Plaintiff filed her now-pending motion for class certification. She also submitted a 24 declaration from Mr. Ferguson in support of the class-certification motion. (ECF No. 25 78-19.) Plaintiff’s motion for class certification relies heavily on Mr. Ferguson’s (Case Mgmt. Conference Order 2:17–19.) And then, on April 30, 2014, 26 27 28 9 Discovery in this litigation was bifurcated; the first phase limited to solely discovery of class-certification-related evidence occurred from September 23, 2013 until March 31, 2014. (See ECF No. 61.) - 12 - 11cv69 1 declaration to substantiate her contention that her proposed class satisfies Rule 23(a)’s 2 commonality requirements. (See Pl.’s Mot. 27:7–28.) 3 One week after filing her class-certification motion, Plaintiff served Defendants 4 her Second Amended Initial Disclosures. (Young Decl. ¶ 8; Pl.’s Second Am. Initial 5 Disclosures 2:21–26.) In these disclosures, Plaintiff listed Mr. Ferguson as a possible 6 witness “likely to have discoverable information” regarding “Defendants’ policies and 7 practices . . . relating to recruiting prospective students . . . and keeping students in 8 enrollment.” (Pl.’s Second Am. Initial Disclosures 3:23–4:1.) 9 On June 9, 2014, Defendants filed a motion for Rule 37 sanctions concerning 10 Plaintiff’s failure to disclose Mr. Ferguson as witness in her initial discovery 11 disclosures and failure to amend her initial disclosures in response to Defendants’ 12 interrogatories. Plaintiff opposes Defendants’ sanctions motion. 13 14 A. Rule 26’s Disclosure Requirement 15 Federal Rule of Civil Procedure 26(a) states “a party must, without awaiting a 16 discovery request, provide to the other parties . . . the name and, if known, the address 17 and telephone number of each individual likely to have discoverable 18 information—along with the subjects of that information—that the disclosing party 19 may use to support its claims or defenses, unless the use would be solely for 20 impeachment[.]” Fed. R. Civ. P. 26(a)(1)(A)(i). Additionally, Rule 26(e) requires “[a] 21 party who has made a disclosure under Rule 26(a)—or who has responded to an 22 interrogatory, request for production, or request for admission—[to] supplement or 23 correct its disclosure or response . . . in a timely manner if the party learns that in some 24 material respect the disclosure or response is incomplete or incorrect, and if the 25 additional or corrective information has not otherwise been made known to the other 26 parties during the discovery process or in writing[.]” Fed. R. Civ. P. 26(e)(1)(A). 27 // 28 // - 13 - 11cv69 1 Where “a party fails to provide information or identify a witness as required by 2 Rule 26(a) or (e), the party is not allowed to use that information or witness to supply 3 evidence on a motion, at a hearing, or at a trial, unless the failure was substantially 4 justified or is harmless.” Fed. R. Civ. P. 37(c)(1). “In addition to or instead of this 5 sanction, the court on motion and after being given an opportunity to be heard” may 6 instead “order payment of the reasonable expenses, including attorney’s fees, caused 7 by the failure[,] may inform the jury of the party’s failure[,] or may impose other 8 appropriate sanctions[.]” Fed. R. Civ. P 37(c)(1)(A)–(C). The Ninth Circuit “give[s] 9 particularly wide latitude to the district court’s discretion to issue sanctions under Rule 10 37(c)(1).” Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 11 2001). This is because “[p]arties, aware of the ‘self-executing’ and ‘automatic’ nature 12 of Rule 37(c)(1) sanctions, have a right to expect that only disclosed witnesses will be 13 used to support the disclosing party’s claims and defenses.” Rhodes v. Sutter Health, 14 949 F. Supp. 2d 997, 1010 (E.D. Cal. 2013) (quoting Yeti, 259 F.3d at 1106); see also 15 Fed. R. Civ. P. 37 advisory committee’s note (1993) (“This automatic sanction provides 16 a strong inducement for disclosure of material that the disclosing party would expect 17 to use as evidence.”). 18 19 B. Violation of Rule 26’s Disclosure Requirement 20 Defendants argue Plaintiff violated Rule 26(a) by failing to disclose Mr. 21 Ferguson in her initial disclosures and in her responses to Defendants’ interrogatories. 22 (Defs.’ Sanctions Mot. 8:5–8.) Conversely, Plaintiff contends she has not violated 23 Rule 26’s disclosure requirements because she “did not intend to use Ferguson as a 24 witness until late April 2014,” past the point at which she had filed her SAC and served 25 Defendants responses to their interrogatories, and because Mr. Ferguson is not the 26 source of the allegations contained in her SAC. (Pl.’s Sanctions Opp’n 14:11–18.) As 27 a result, Plaintiff argues she was not required to disclose Mr. Ferguson as a witness in 28 her initial disclosures or subsequent interrogatory responses to Defendants. (Id. at - 14 - 11cv69 1 2 13:15–16.) The suspicious circumstances surrounding Mr. Ferguson strongly suggest 3 Plaintiff violated Rule 26’s disclosure requirements. Plaintiff’s counsel—Mr. 4 Bottini—previously represented Mr. Ferguson in an action against Defendants which 5 featured allegations closely matching those Plaintiff asserts in her SAC. As such, 6 Plaintiff cannot claim she was unaware of Mr. Ferguson’s identity prior to responding 7 to Defendants’ interrogatories or serving her Second Amended Initial Disclosures. It 8 is irrelevant whether Plaintiff herself, rather than her counsel, knew Mr. Ferguson had 9 discoverable information that could substantiate her allegations in the SAC at the time 10 she served Defendants her responses to their interrogatories because “[a] party cannot 11 refuse to answer interrogatories on the ground that the information sought is solely 12 within the knowledge of his attorney.” See Hickman v. Taylor, 329 U.S. 495, 504 13 (1947). Hence, given Plaintiff’s counsel’s knowledge of Mr. Ferguson’s previous 14 litigation against Defendants and the similarity of Mr. Ferguson’s complaint to 15 Plaintiff’s SAC, Mr. Ferguson was an “individual likely to have discoverable 16 information” that Plaintiff might have “used to support [her] claims.” See Fed. R. Civ. 17 P. 26(a)(1)(A)(i). 18 Additionally, Plaintiff’s reliance on the 2006 Advisory Committee’s notes’ 19 reference to “intent” to demonstrate that she complied with Rule 26’s requirements is 20 misplaced. (See Pl.’s Sanctions Opp’n 12: 7–13, 16:9–12.) Requiring parties to 21 disclose only those witnesses they subjectively intend to use in substantiating their 22 claims, rather than those they merely “may use” as Rule 26 explicitly requires, would 23 erode the efficacy of the rule’s disclosure requirements. See Fed. R. Civ. P. 26(a). 24 Parties would be free to engage in the sort of “gamesmanship” Rule 26 intends to 25 prevent by hiding witnesses and evidence that they have to offer from their opposition. 26 See Fed. R. Civ. P. 26 advisory committee’s note (1993). Such is not the spirit of Rule 27 26. See Thomas v. Old Town Dental Grp., P.A., 300 F.R.D. 585, 589 (S.D. Fla. 2014) 28 (noting that a party’s contention it need not disclose fact witnesses in response to an - 15 - 11cv69 1 interrogatory calling for fact witnesses unless the party “chose to rely” on the witnesses 2 was meritless because such an intent-based disclosure requirement “would permit 3 litigants to easily hide unfavorable witnesses with impunity”). Consequently, Plaintiff 4 was required to disclose Mr. Ferguson regardless of whether she subjectively intended 5 to use him as a witness prior to late April 2014. 6 Furthermore, Plaintiff’s argument concerning her lack of intent to use Mr. 7 Ferguson as a witness prior to serving Defendants her Second Amended Initial 8 Disclosures is dubious. Thus far, Mr. Ferguson’s declaration is the primary evidence 9 Plaintiff offers to substantiate her claims that Defendants use “uniform scripted oral 10 misrepresentations” in conducting their business. (Pl.’s Mot. 16:3 (quoting Ferguson 11 Decl. ¶ 9); see also SAC ¶¶ 52, 55.) Under Federal Rule of Civil Procedure 11, in 12 presenting a pleading to a federal court, an attorney “certifies that to the best of the 13 person’s knowledge, information, and belief, formed after an inquiry reasonable under 14 the circumstances . . . the factual contentions have evidentiary support or, if specifically 15 so identified, will likely have evidentiary support after a reasonable opportunity for 16 further investigation or discovery[.]” Fed. R. Civ. P. 11. Therefore, assuming Plaintiff 17 was complying with Rule 11 when filing her SAC, and keeping in mind both the fact 18 that Mr. Ferguson is one of the few, if not the only, witness Plaintiff offers in support 19 of the allegations highlighted above and Plaintiff’s counsel’s knowledge of Mr. 20 Ferguson’s previous complaint against Defendants, it is highly unlikely Plaintiff would 21 not have intended to use Mr. Ferguson to support her claims at the times she filed her 22 SAC or later when served her responses to Defendants’ interrogatories. 23 Accordingly, Plaintiff’s failure to identify Mr. Ferguson in her initial disclosures 24 and in response to Defendants’ interrogatories violated Rule 26’s disclosure 25 requirements. 26 // 27 // 28 // - 16 - 11cv69 1 C. Substantial Justification or Harmlessness 2 Defendants contend Plaintiff’s non-disclosure was neither substantially justified 3 nor harmless because the sudden introduction of Mr. Ferguson’s declaration surprised 4 Defendants in a manner that cannot be cured, brought in evidence quintessential to 5 Plaintiff’s SAC and motion for class certification, and cannot be founded on any 6 reasonable explanation by Plaintiff. (See Defs.’ Sanctions Mot. 8:1–18.) In response, 7 Plaintiff argues she was substantially justified in not disclosing Mr. Ferguson’s identity 8 because “it cannot be disputed that [she] ha[d] no obligation to identify Ferguson as a 9 witness.” (See Pl.’s Sanctions Opp’n 21:6–7 (emphasis in original).) Additionally, 10 Plaintiff avers her non-disclosure was harmless because Defendants have known of 11 “[Mr. Ferguson’s] allegations of their illegal practices since December 2012” and did 12 not delineate “what possible remedial measures are appropriate” or how they were 13 harmed by Plaintiff’s non-disclosure. (Id. at 21:6–7, 21:14–15, 21:22–23, 22:24.) 14 Rule 37’s exclusionary sanction may be avoided and “information may be 15 introduced if the [non-disclosing] parties’ failure to disclose the required information 16 [wa]s substantially justified or harmless.” Yeti, 259 F.3d at 1106 (quoting Fed. R. Civ. 17 P. 37(c)(1)). “The party facing sanctions bears the burden of proving that its failure to 18 disclose the required information was substantially justified or is harmless.” R & R 19 Sails, Inc. v. Ins. Co. of Penn., 673 F.3d 1240, 1246 (9th Cir. 2012). 20 Plaintiff fails to meet her burden of demonstrating that her failure to disclose Mr. 21 Ferguson was either substantially justified or harmless. As the Court explained above, 22 Plaintiff is wrong in contending that she had no obligation whatsoever to disclose Mr. 23 Ferguson’s identity to Defendants. Therefore, she was not substantially justified for 24 her non-disclosure on the basis of having had no obligation to do so. 25 Additionally, Plaintiff’s citation to Krzesniak v. Cendant Corp., No. C 05-05156 26 MEJ, 2007 WL 1795703, *1 (N.D. Cal. June 20, 2007), in supporting her argument that 27 her non-disclosure was substantially justified is misplaced. (See Pl.’s Sanctions Opp’n 28 21:10–12.) There, the plaintiff was substantially justified in failing to initially disclose - 17 - 11cv69 1 a witness it later relied on where the plaintiff was unable to locate the witness because 2 the defendant—who was the employer of the witness—had opposed the plaintiff’s 3 previous request for the witness’ contact information. See Krzesniak, 2007 WL 4 1795703, at *5. 5 Here, Defendants in no way hid Mr. Ferguson’s identity from Plaintiff at any 6 point during this litigation. Indeed, it is quite apparent it is Plaintiff who hid Mr. 7 Ferguson’s identity from Defendants until the deadline for class-certification discovery 8 passed. Therefore, Plaintiff fails to meet her burden of demonstrating that she was 9 substantially justified in failing to disclose Mr. Ferguson’s identity to Defendants 10 pursuant to Rule 26 on this ground as well. 11 Similarly, Plaintiff fails to demonstrate her failure to disclose Mr. Ferguson’s 12 identity was harmless. Contrary to Plaintiff’s contentions, any failure on the part of 13 Defendants to delineate how Plaintiff’s non-disclosure was harmful does not carry her 14 burden of demonstrating her non-disclosure was harmless. See R & R Sails, 673 F.3d 15 at 1246 (“The party facing sanctions bears the burden of proving that its failure to 16 disclose the required information was substantially justified or is harmless.”). 17 Plaintiff’s only argument supporting her non-disclosure was harmless is that 18 Defendants had knowledge of Mr. Ferguson’s prior complaint against them, meaning 19 they could not have been surprised by his introduction. (See Pl.’s Sanctions Opp’n 20 21:6–7, 21:14–15, 21:22–23, 22:24.) However, this argument is without merit. 21 It is where a witness has been alluded to in the same litigation, not different 22 litigation, that a party’s failure to disclose a witness has been considered harmless. See 23 Van Maanen v. Youth With a Mission-Bishop, 852 F. Supp. 2d 1232, 1237 (E.D. Cal. 24 2012), aff’d sub nom. Van Maanen v. Univ. of the Nations, Inc., 542 F. App’x 581 (9th 25 Cir. 2013) (finding a failure to disclose a witness harmless where the identity, location 26 and subject of information possessed by a witness was revealed during numerous 27 depositions in the same case months before the discovery cut-off date). Here, however, 28 there is no indication Mr. Ferguson was alluded to in any depositions taken or any - 18 - 11cv69 1 other proceedings in this litigation. Rather, after responding to Defendants’ 2 interrogatories, Plaintiff’s counsel assured Defendants they were not withholding any 3 witnesses not already disclosed. (Young Decl. ¶ 6.) 4 Courts have even found the non-disclosure of a witness harmful where the 5 witness was referenced in the same litigation. See Rhodes, 949 F. Supp. 2d at 1010 6 (finding a plaintiff’s non-disclosure of a witness was not harmless where, although the 7 witness had been referenced in depositions, the defendant “was not on sufficient notice 8 that [the witness] possessed information that supported plaintiff's claims or defenses 9 such that [the defendant] could make an informed decision about whether to pursue 10 discovery as to [the witness]”). Like the defendant in Rhodes, Defendants here lacked 11 any notice Plaintiff would be using Mr. Ferguson as a witness in light of Plaintiff’s 12 failure to initially disclose his identity, subsequent failure to disclose his identity in 13 response to Defendants’ interrogatories, and further confirmation they were not 14 withholding any additional witnesses. Following that chain of events, Plaintiff cannot 15 now claim Defendants’ knowledge of Mr. Ferguson’s prior litigation against them 16 rendered her failure to disclose Mr. Ferguson’s identity prior to her Second Amended 17 Initial Disclosures harmless. 18 Because Plaintiff violated Rule 26 and fails to demonstrate that this violation 19 was substantially justified or harmless, Defendants are entitled to sanctions under Rule 20 37. 21 22 D. Appropriate Sanction 23 Defendants argue the exclusion of Mr. Ferguson’s declaration is the only 24 appropriate sanction because lesser remedies would be insufficient to correct the 25 prejudice Plaintiff’s non-disclosure cost them and because further discovery and 26 litigation of the class certification would entail substantial cost. (See Defs.’ Sanctions 27 Mot. 10:11–11:6.) In response, Plaintiff contends no sanctions are appropriate here 28 because she “has complied with her disclosure obligations” and Defendants have - 19 - 11cv69 1 consequently “suffered no harm[.]” (Pl.’s Sanctions Opp’n 8:2–3, 8:16.) Plaintiff 2 asserts that, at most, Defendants should be allowed to depose Mr. Ferguson. (See id. 3 at 8:18–20.) 4 Because Defendants’ motion for sanctions may materially affect the course of 5 litigation, the Court must consider sanctions aside from the complete exclusion of Mr. 6 Ferguson’s declaration. By excluding Mr. Ferguson’s declaration, Defendants’ motion 7 here may undermine the merits of Plaintiff’s motion for class certification.10 Thus, in 8 adjudicating Defendants’ motion for Rule 37 sanctions, the Court is “required to 9 consider whether the claimed noncompliance involved willfulness, fault, or bad faith 10 . . . and also consider the availability of lesser sanctions.” R & R Sails, 673 F.3d at 11 1247 (internal citation omitted). 12 Here, Plaintiff is incorrect in her contention that no sanctions, or alternatively, 13 allowing Defendants to depose Mr. Ferguson, would be proper. Rather, exclusion of 14 and striking any references to Mr. Ferguson’s declaration in Plaintiff’s motion for class 15 certification and SAC is proper. Plaintiff is correct in noting the Court could re-open 16 class-certification discovery and allow Defendants to depose Mr. Ferguson rather than 17 exclude Mr. Ferguson’s declaration and impose monetary sanctions against Plaintiff. 18 (See Pl.’s Sanctions Opp’n 24:17–18.) However, despite this possibility, Rule 37’s 19 default remedy of exclusion is appropriate under these circumstances. See Fed. R. Civ. 20 P. 37 advisory committee’s note (1993) (noting Rule 37 “provides a self-executing 21 sanction” which “prevents a party from using as evidence any witness or information 22 that . . . has not been disclosed as required by Rules 26(a) and 26(e)(1)”). 23 As discussed above, Plaintiff’s violation of Rule 26 is without substantial 24 25 26 27 28 10 Plaintiff’s motion for class certification relies heavily on Mr. Ferguson’s declaration to substantiate the contention that her proposed class satisfies Rule 23(a)’s commonality requirement. (See Pl.’s Mot. 27:7–28.); see also 28 U.S.C. § 636(b)(1)(A) (noting district court judges may not designate magistrate judges to hear and determine motions to “dismiss or permit maintenance of a class action”); Maisonville v. F2 America, Inc., 902 F.2d 746, 747 (9th Cir.1989) (agreeing with other appellate courts that it is motions for discovery sanctions under Rule 37 not contained within 28 U.S.C. § 636(b)(1)’s list that are non-dispositive matters). - 20 - 11cv69 1 justification or harmlessness. Plaintiff was well aware of Mr. Ferguson as an 2 individual likely to have discoverable information supporting her claims, and she had 3 a duty to disclose Mr. Ferguson’s identity to Defendants under Rule 26. Simply 4 re-opening class-certification discovery and allowing Defendants to depose Mr. 5 Ferguson would strip Rule 26 and Rule 37 of their efficacy. Rule 37’s exclusionary 6 sanction exists with the purpose of deterring litigants from “hiding the ball” as Plaintiff 7 has done here. See Rhodes, 949 F. Supp. 2d at 1010 (quoting Yeti, 259 F.3d at 1106) 8 (“Parties, aware of the ‘self-executing’ and ‘automatic’ nature of Rule 37(c)(1) 9 sanctions, have a right to expect that only disclosed witnesses will be used to support 10 the disclosing party’s claims and defenses.”). 11 Plaintiff’s failure to disclose Mr. Ferguson’s identity before the close of 12 discovery for class certification prejudiced Defendants by, at the very least, preventing 13 them from deposing him as a witness during the regular course of litigation. Had 14 Plaintiff properly disclosed Mr. Ferguson’s identity as a witness prior to serving 15 Defendants her Second Amended Initial Disclosures, Defendants could have deposed 16 Mr. Ferguson as a witness during discovery and fully litigated against Plaintiff’s 17 motion for class certification. It would be unreasonable to burden Defendants with the 18 costs of deposing Mr. Ferguson and amending their opposition to Plaintiff’s motion for 19 class certification at this time. Plaintiff directly induced Defendants into believing they 20 had no further need to undertake discovery relating to class certification in this 21 litigation. 22 Therefore, because Plaintiff’s non-disclosure violates Rule 26 and is not 23 substantially justified or harmless, exclusion of Mr. Ferguson’s declaration is 24 appropriate. See Ollier v. Sweetwater Union High Sch. Dist., 267 F.R.D. 339, 343–44 25 (S.D. Cal. 2010) (Lorenz, J.) (excluding fact witnesses where, although the witnesses 26 had been at least mentioned during various depositions, discovery had closed and 27 non-disclosure was harmful and without substantial justification). Cf. R & R Sails, 673 28 F.3d at 1246 (holding a district court’s exclusion of evidence pursuant to Rule 37 was - 21 - 11cv69 1 improper because the court failed to consider whether the non-disclosure involved 2 willfulness, fault, or bad faith, or if lesser sanctions were a viable option). 3 4 III. PLAINTIFF’S MOTION FOR CLASS CERTIFICATION 5 The class action is “an exception to the usual rule that litigation is conducted by 6 and on behalf of the individual named parties only.” Wal-Mart Stores, Inc. v. Dukes, 7 131 S.Ct. 2541, 2550 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01 8 (1979)). In order to justify a departure from that rule, “a class representative must be 9 part of the class and ‘possess the same interest and suffer the same injury’ as the class 10 members.” Id. (citing E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403 11 (1977)). In this regard, Rule 23 contains two sets of class-certification requirements 12 set forth in Rule 23(a) and (b). United Steel, Paper & Forestry, Rubber, Mfg. Energy, 13 Allied Indus. & Serv. Workers Int’l Union v. ConocoPhillips Co., 593 F.3d 802, 806 14 (9th Cir. 2010). “A court may certify a class if a plaintiff demonstrates that all of the 15 prerequisites of Rule 23(a) have been met, and that at least one of the requirements of 16 Rule 23(b) have been met.” Otsuka v. Polo Ralph Lauren Corp., 251 F.R.D. 439, 443 17 (N.D. Cal. 2008). 18 “Rule 23(a) provides four prerequisites that must be satisfied for class 19 certification: (1) the class must be so numerous that joinder of all members is 20 impracticable; (2) questions of law or fact exist that are common to the class; (3) the 21 claims or defenses of the representative parties are typical of the claims or defenses of 22 the class; and (4) the representative parties will fairly and adequately protect the 23 interests of the class.” Otsuka, 251 F.R.D. at 443 (citing Fed. R. Civ. P. 23(a)). “A 24 plaintiff must also establish that one or more of the grounds for maintaining the suit are 25 met under Rule 23(b), including: (1) that there is a risk of substantial prejudice from 26 separate actions; (2) that declaratory or injunctive relief benefitting the class as a whole 27 would be appropriate; or (3) that common questions of law or fact predominate and the 28 class action is superior to other available methods of adjudication.” Id. (citing Fed. R. - 22 - 11cv69 1 2 Civ. P. 23(b)). Plaintiff proposes the following class definition: 8 All person in the United States who enrolled in and/or attended classes offered by Bridgepoint Education, Inc. through Ashford University during the period from approximately March 1, 2005 through the present (“Class Period”). Excluded from the class are defendants, defendants’ immediate families, subsidiaries, affiliates, successors-in-interest, representatives, trustees, executors, administrators, heirs, assigns or transferees, any person acting on behalf of defendants, all governmental entities, and coconspirators. She contends that the class is ascertainable and satisfies all the requirements of Rule 9 23(a), and seeks class certification under Rule 23(b)(3). Defendants, in response, 10 argue: (1) students enrolled on or after May 18, 2007 should be excluded from the class 11 because they are subject to an arbitration provision; (2) certification of a nationwide 12 class under California law is improper; (3) the proposed class lacks commonality; and 13 (4) class treatment is not proper because individual issues will predominate in 14 determining liability. 3 4 5 6 7 15 Rule 23(b)(3) requires the court to find “that the questions of law or fact 16 common to class members predominate over any questions affecting only individual 17 members.” “The predominance inquiry focuses on ‘the relationship between the 18 common and individual issues’ and ‘tests whether proposed classes are sufficiently 19 cohesive to warrant adjudication by representation.’” Vinole v. Countrywide Home 20 Loans, Inc., 571 F.3d 935, 944 (9th Cir. 2009). “When common questions present a 21 significant aspect of the case and they can be resolved for all members of the class in 22 a single adjudication, there is clear justification for handling a dispute on a 23 representative rather than on an individual basis.” In re Infineon Tech. AG Sec. Litig., 24 266 F.R.D. 386, 395 (N.D. Cal. 2009). In contrast, when “claims require a fact- 25 intensive, individual analysis,” then class certification will “burden the court” and be 26 inappropriate. Vinole, 571 F.3d at 947; Zinser v. Accufix Research Inst., Inc., 253 F.3d 27 1180, 1189 (9th Cir. 2001) (“[I]f the main issues in a case require the separate 28 adjudication of each class member’s individual claim or defense, a Rule 23(b)(3) action - 23 - 11cv69 1 would be inappropriate[.]”). 2 Rule 23(b)(3)’s predominance and superiority requirements were added to cover cases in which a class action would achieve economies of time, effort, and expense, and promote . . . uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results. Accordingly, a central concern of the Rule 23(b)(3) predominance test is whether adjudication of common issues will help achieve judicial economy. Vinole, 571 F.3d at 944 (internal quotation marks and citations omitted). 3 4 5 6 7 Though there is substantial overlap between Rule 23(a)(2)’s commonality and 8 Rule 23(b)’s predominance tests, the latter is a “far more demanding” standard. Wolin 9 v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1172 (9th Cir. 2010) (quoting 10 Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623-24 (1997)). To determine whether 11 questions of law or fact common to the class predominate, the court must analyze each 12 claim separately. Berger v. Home Depot USA, Inc., 741 F.3d 1061, 1068 (9th Cir. 13 2014) (citing Erica P. John Fund, Inc. v. Halliburton Co., — U.S. —, 131 S. Ct. 2179, 14 2184 (2011)). 15 “Plaintiffs must also demonstrate that a class action is ‘superior to other 16 available methods for fairly and efficiently adjudicating the controversy.’” Otsuka, 251 17 F.R.D. at 448 (citing Fed. R. Civ. P. 23(b)(3)). “Where classwide litigation of common 18 issues will reduce litigation costs and promote greater efficiency, a class action may be 19 superior to other methods of litigation,” and it is superior “if no realistic alternative 20 exists.” Valentino v. Carter-Wallace, Inc., 97 F.3d 1227, 1234-35 (9th Cir. 1996). The 21 following factors are pertinent to this analysis: (A) the class members’ interest in individually controlling the prosecution or defense of separate actions; 22 23 (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; 24 (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and 25 26 27 (D) the likely difficulties in managing a class action. Fed. R. Civ. P. 23(b)(3). 28 // - 24 - 11cv69 1 A. Ascertainability 2 “As a threshold matter, and apart from the explicit requirements of Rule 23(a), 3 the party seeking class certification must demonstrate that an identifiable and 4 ascertainable class exists.” Mazur v. eBay, Inc., 257 F.R.D. 563, 567 (N.D. Cal. 2009). 5 Certification is improper if there is “no definable class.” See Lozano v. AT & T 6 Wireless Servs., Inc., 504 F.3d 718, 730 (9th Cir. 2007). 7 “A class should be precise, objective, and presently ascertainable,” though “the 8 class need not be so ascertainable that every potential member can be identified at the 9 commencement of the action.” O’Connor v. Boeing N. Am. Inc., 184 F.R.D. 311, 319 10 (C.D. Cal. 1998) (internal quotation marks omitted). “A class is ascertainable if it is 11 defined by ‘objective criteria’ and if it is ‘administratively feasible’ to determine 12 whether a particular individual is a member of the class.” Bruton v. Gerber Prods. Co., 13 No. 12-CV-02412-LHK, 2014 WL 2860995, at *4 (N.D. Cal. June 23, 2014). 14 However, “[a] class definition is inadequate if a court must make a determination of the 15 merits of the individual claims to determine whether a person is a member of the class.” 16 Hanni v. Am. Airlines, Inc., No. C 08-00732, 2010 WL 289297, at *9 (N.D. Cal. Jan. 17 15, 2010). “It is not fatal for a class definition to require some inquiry into individual 18 records, as long as the inquiry is not so daunting as to make the class definition 19 insufficient.” Herrera v. LCS Fin. Servs. Corp., 274 F.R.D. 666, 673 (N.D. Cal. 2011) 20 (internal quotation marks omitted). 21 The ascertainability issue presented to the Court is what effect arbitration 22 provisions included in student enrollment agreements beginning on May 18, 2007 have 23 on class treatment. Defendants argue that the fact that the Court has found that the 24 enrollment agreements are enforceable in Rosendahl coupled with evidence that over 25 96% of the proposed class would be subject to the arbitration provision should end the 26 class-certification inquiry. 27 Defendants’ argument contending Defendants are re-arguing already-rejected 28 arguments and that they fail to meet their burden to demonstrate any valid arbitration (Defs.’ Opp’n 12:27–14:16.) - 25 - Plaintiff dismisses 11cv69 1 agreements with potential absent class members. (Pl.’s Reply 1:19–4:5.) 2 On August 23, 2013, relying on Herrera, the Court concluded that “[a]lthough 3 discovery may reveal that some unnamed class members in this case signed an 4 enforceable arbitration agreement, [it] does not find that this fact demonstrates an 5 overbroad or unascertainable class that forecloses certification at this stage of the 6 proceedings.” (Aug. 23, 2013 Order 6:9–27 (emphasis added).) Though the Court was 7 presented with substantially similar arguments and evidence, the Court did not exclude 8 the possibility of revisiting the issue following discovery. Upon reviewing the 9 arguments presented and the circumstances of this case, revisiting the effect of the 10 arbitration provisions at this juncture of litigation is appropriate. In Herrera, the district court stated: 11 15 The fact that some members of a putative class may have signed arbitration agreements or released claims against a defendant does not bar class certification. Other courts presented with this issue have held that “class certification should not be denied merely because some class members may be subject to the defense that their claims are barred by valid documents releasing the defendant from liability.” 16 Herrera, 274 F.R.D. at 681 (quoting Coleman v. GMAC, 220 F.R.D. 64, 91 (N.D. 17 Tenn. 2004)) (emphasis added). It is worth noting that the district court did not 18 identify, of the 4,746 potential class members, how many may be subject to an 19 arbitration provision. See id. Thus, the extent of “some” is unclear. See id. That said, 20 the district court in Pablo v. Servicemaster Global Holdings Inc., No. C 08-03894 SI, 21 2011 WL 3476473, at *3 (N.D. Cal. Aug. 9, 2011), directly addressed Herrera’s 22 proposition and determined that class certification was not proper under the 23 circumstances presented in its case because, “[a]lthough it is not clear how many 24 putative class members signed arbitration agreements, the evidence . . . support[ed] an 25 inference that a significant number did.” The Pablo Court noted that defendants had 26 filed 37 motions to compel arbitration in eight related cases, all of which were granted. 27 Pablo, 2011 WL 3476473, at *1. 28 // 12 13 14 - 26 - 11cv69 1 The circumstances presented here are not as overwhelming or compelling as the 2 circumstances described in Pablo. 3 case—Rosendahl—in which a motion to compel arbitration was granted. However, 4 Defendants present the Declaration of Kirk Morrison, Ashord’s University Registrar 5 and a Vice President (Morrison Decl. ¶ 1), who attaches eight exhibits of template 6 enrollment agreements dating back from May 18, 2007 (Morrison Decl. ¶¶ 10–17; 7 Morrison Decl. Exs. 1–8). There has only been one related 8 Before comparing the arbitration provisions in those eight templates, it is 9 important to provide context and first consider the arbitration provisions in Rosendahl 10 contained in enrollment agreements signed by the named plaintiffs in January 2009 and 11 June 2009, which stated: 12 13 14 15 16 17 18 Any disputes or controversies between the parties to this Agreement arising out of or relating to the student’s recruitment, enrollment, attendance, education, billing, financial aid, financing options, student finance agreement, disbursement of funds, excess funds and other payments or career service assistance by Ashford . . . shall be resolved by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect or in accordance with procedures that the parties agree to in the alternative. . . . . Any such arbitration shall be the sole remedy for the resolution of any disputes or controversies between the parties to this agreement. 19 . . . . You and Ashford University may bring claims against the other only in your or its individual capacity, and not as a plaintiff or class member in any purported class or 21 representative proceeding (including, but not limited to, class actions and class arbitrations). 22 Chen Decl. Exs. A & B, Rosendahl, No. 11-cv-61-BAS(WVG), ECF No. 25-2. The 20 23 Rosendahl named plaintiffs appear to have signed enrollment agreements including the 24 exact same arbitration provision. Id. 25 The eight template enrollment agreements attached to the Morrison Declaration 26 all include arbitration provisions that also prohibit participation in class actions. In 27 fact, the template used beginning in May 2007 appears to be identical to the arbitration 28 provision in Rosendahl. (See Morrison Decl. ¶ 10, Ex. 1.) However, the remaining - 27 - 11cv69 1 seven templates used after July 2010 include a significant difference, an arbitration opt- 2 out provision. (Morrison Decl. Exs. 2–8.) 3 The following is opt-out language contained in six of the seven post-July 2010 4 enrollment-agreement templates: “You may reject the arbitration provisions included 5 in this Section, but not the requirement to participate in the Grievance Procedure for 6 Students prior to asserting a Claim against the University in any other manner, by 7 faxing a signed rejection notice to the University Registrar . . . within fifteen (15) 8 calendar days after you sign this Agreement.” (See Morrison Decl. Exs. 3–8.) The July 9 2010 template’s language differs slightly from the later templates and allows up to 30 10 days to opt out, but is otherwise the same. (See id. Ex. 2.) Missing from all of the 11 templates that include the opt-out language is the language stating, “Any such 12 arbitration shall be the sole remedy for the resolution of any disputes or controversies 13 between the parties to this agreement[,]” contained in the Rosendahl enrollment 14 agreements and the July 2010 template. (See id. Ex. 1.) 15 According to Defendants, “12,778 students enrolled [at Ashford] between March 16 1 and May 18, 2007, whereas 395,206 students have enrolled since May 18, 2007.” 17 (Morrison Decl. ¶ 3.) And according to Plaintiff, Bridgepoint had 67,744 students 18 enrolled as of June 2010, 42,025 students as of March 2009, and 19,509 students at the 19 end of the first quarter of 2008. (SAC ¶¶ 26–27.) Though it is not definitive that the 20 students as of June 2010 signed a pre- or post-May 2007 enrollment agreement, it is 21 safe to surmise that they did not sign a post-July 2010 enrollment agreement with the 22 opt-out language. Assuming for the sake of argument that none of the students 23 attending a Bridgepoint institution as of June 2010 signed a pre-May 2007 enrollment 24 agreement, almost 68,000 students would be bound by arbitration provisions just as the 25 named plaintiffs in Rosendahl. The number of students enrolled from March 2005 to 26 the commencement of this action totals almost 408,000 students based on the 27 28 - 28 - 11cv69 1 enrollment numbers provided by Defendants.11 (See Morrison Decl. ¶ 3.) Using these 2 values, at least 16% of potential class members are probably bound by arbitration 3 provisions, thereby precluding their participation in this or any other class action. And 4 this value could increase significantly depending on the proportion of students who did 5 not actually opt out. 6 This uncertainty leads this Court to conclude that the proposed class as currently 7 defined is neither precise nor presently ascertainable. See O’Connor, 184 F.R.D. at 8 319. Contrary to Plaintiff’s position, there is evidence supporting Defendants’ 9 contention that post-May 2007 students signed enrollment agreements with arbitration 10 provisions. But it is not clear what proportion of the students opted out. What is 11 problematic is that for over 300,000 students who enrolled after May 2007, and more 12 likely for students enrolled after July 2010, the Court is left with making a 13 determination of the merits of the individual claims—namely, whether students are 14 bound by the arbitration provision or whether they opted out—to determine whether 15 students may participate as members of the class in this action. See Hanni, 2010 WL 16 289297, at *9. 17 Accordingly, the Court finds that based on the proposed class definition as 18 currently constructed, Plaintiff fails to demonstrate an identifiable and ascertainable 19 class in light of evidence suggesting that up to 96% of the proposed class may not even 20 be eligible to participate in this class action.12 See Mazur, 257 F.R.D. at 567. This 21 22 23 24 25 26 27 28 11 The 408,000 value is the result of adding the 12,778 value of students enrolled between March 2005 and May 2007 with the 395,206 value of students enrolled after May 2007. (See Morrison Decl. ¶ 3.) 12 Incorporating Federal Rule of Civil Procedure 8(c)(1)’s designation of statute of limitations and “arbitration and awards” as affirmative defenses, Plaintiff cites Cameron v. E. M. Adams & Co., 547 F.2d 473, 477-78 (9th Cir. 1976) for the proposition that “the presence of ‘individualized issues’ based on a defense ‘does not defeat the predominance of the common questions.’” (Pl.’s Reply 3:6–16.) However, Cameron does not make such a broad assertion. Rather, it limits its holding regarding “the presence of individualized issues” to “compliance with statute of limitations.” Cameron, 547 F.2d at 478-79. Though Plaintiff’s argument may have some merit, without additional legal authority stating otherwise, this Court construes the Ninth Circuit’s holding in Cameron narrowly, limiting it to “individual issues of compliance with statute of limitations.” - 29 - 11cv69 1 finding does not incorporate the foreseeable Rule 23(b)(3) problem involving 2 predominance of common factual questions to determine which students opted out of 3 the arbitration provisions. 4 5 B. Choice of Law 6 “A federal court sitting in diversity must look to the forum state’s choice of law 7 rules to determine the controlling substantive law.” Zinser, 253 F.3d at 1187. “Under 8 California’s choice of law rules, the class action proponent bears the initial burden to 9 show that California has ‘significant contact or significant aggregation of contacts’ to 10 the claims of each class member.” Mazza v. Am. Honda Motor Co. Inc., 666 F.3d 581, 11 589 (9th Cir. 2012) (quoting Wash. Mut. Bank, FA v. Superior Court, 24 Cal. 4th 906, 12 921 (2001)). Once the class-action proponent makes this showing, the burden shifts 13 to the other side to demonstrate “that foreign law, rather than California law, should 14 apply to class claims.” Wash. Mut. Bank, 24 Cal. 4th at 921. 15 California law may only be used on a classwide basis if “the interests of other 16 states are not found to outweigh California’s interest in having its law applied[.]” 17 Wash. Mut. Bank, 24 Cal. 4th at 921. To determine whether the interests of other states 18 outweigh California’s interest, the court looks to a three-step governmental interest 19 test: 20 21 22 23 24 25 26 27 28 First, the court determines whether the relevant law of each of the potentially affected jurisdictions with regard to the particular issue in question is the same or different. Second, if there is a difference, the court examines each jurisdiction’s interest in the application of its own law under the circumstances of the particular case to determine whether a true conflict exists. Third, if the court finds that there is a true conflict, it carefully evaluates and compares the nature and strength of the interest of each jurisdiction in the application of its own law to determine which state’s interest would be more impaired if its policy were subordinated to the policy of the other state and then ultimately applies the law of the state whose interest would be more impaired if its law were not applied. - 30 - 11cv69 1 Mazza, 666 F.3d at 590 (quoting McCann v. Foster Wheeler LLC, 48 Cal. 4th 68, 87-88 2 (2010)). 3 Defendants argue that Plaintiff fails to carry her initial burden, relying on the 4 inadequate “mere fact” that Bridgepoint’s headquarters is in California while also 5 pointing out that Plaintiff had never been to California prior to the commencement of 6 this lawsuit. (Defs.’ Opp’n 15:10–15:16.) They alternatively argue that even if 7 Plaintiff carried her burden, California law still cannot apply because the circumstances 8 of this case fail Mazza’s three-step governmental-interest test. (Id. at 15:17–19:1.) 9 Plaintiff responds by arguing Defendants fail to: (1) show that any differences in state 10 laws are material in this case; and (2) meet their burden showing that the interests of 11 other states outweigh California’s interest. (Pl.’s Reply 4:8–5:20.) 12 13 1. Conflict of Laws 14 “The fact that two or more states are involved does not in itself indicate there is 15 a conflict of laws problem.” Wash. Mut. Bank, 24 Cal. 4th at 919-20. “A problem only 16 arises if differences in state law are material, that is, if they make a difference in this 17 litigation.” Mazza, 666 F.3d at 590. 18 Plaintiff contends that Defendants have “utterly failed” to show that the 19 differences in state laws are material in this case. (Pl.’s Reply 4:8–21.) Specifically, 20 citing In re PM Wonderful LLC Marketing & Sales Practices Litigation, No. ML 10- 21 02199 DDP (RZx), 2012 WL 4490860, at *3-4 (C.D. Cal. Sept. 28, 2012) (“POM I”), 22 Plaintiff dismisses references to the Declaration of Rachel Yourtz, which contains two 23 charts summarizing research regarding the differences between state laws, because the 24 research is “not evidence and does not show why these differences are material in this 25 case.” (Id. (emphasis in original).) 26 In POM I, the circumstances in which the district court rejected the defendant’s 27 reliance on a similar chart as those submitted in this case differ from the means in 28 which the charts are used in this case. The POM I Court noted that a chart - 31 - 11cv69 1 summarizing each state’s consumer-protection law’s provisions regarding elements 2 such as scienter, reliance, and timeliness, as well as remedies and defenses was 3 provided, but the defendant failed to “indicate which of these foreign laws differ from 4 California’s laws.” POM I, 2012 WL 4490860, at *3. This criticism of the defendant’s 5 failure is particularly evident when examining the defendant’s brief opposing the 6 plaintiff’s class-certification motion. See Brief in Opp’n to Class Certification at 7 12:11–14:3, POM I, No. 10-ml-02199 (C.D. Cal. June 25, 2012), ECF No. 92. 8 Nowhere in the defendant’s briefing does it explain that any material differences exist 9 between California’s and other states’ laws. See id. Rather, the chart in question is 10 merely cited in a footnote with a parenthetical explanation stating that the “chart [was] 11 prepared to assist the Court in identifying state law variations in consumer protection 12 and deceptive trade practices laws.” Id. at 13 n.20. 13 The district court in Mazza—which also involved claims brought under 14 California’s UCL, FAL, and CLRA—was also presented with a table of examples 15 demonstrating variations in state law, which was used to support extensive briefing 16 explaining the differences in state laws. See Brief in Opp’n to Class Certification at 17 8:6–13:8, Mazza v. Am. Honda Motor Co., Inc., No. 07-cv-07857 (C.D. Cal. July 14, 18 2008), ECF Nos. 45, 45-2. However, in concluding that “at least some of the 19 differences that [the defendant] identifies are material,” the Ninth Circuit implicitly 20 suggests that charts or tables may be considered when supported with adequate 21 briefing. See Mazza, 666 F.3d at 591. At the very least, the Ninth Circuit does not 22 outright remove the possibility of courts considering charts detailing purported 23 differences in state consumer-protection laws. See id. 24 In one example presented in Mazza, the Ninth Circuit observed that California 25 consumer-protection laws “have no scienter requirement, whereas many other states’ 26 consumer protection statutes do require scienter.” Mazza, 666 F.3d at 591. The court 27 identified scienter requirements for three states—Colorado, New Jersey, and 28 Pennsylvania—as examples to highlight the differences between state consumer- 32 - 11cv69 1 protection laws. See id. Interestingly, the three state laws identified by the Ninth 2 Circuit were not explicitly discussed by the defendant in its opposition brief in the 3 district court; in fact, scienter is not discussed anywhere in the brief. See Brief in 4 Opp’n to Class Certification at 8:6–13:8, Mazza, No. 07-cv-07857 (C.D. Cal. July 14, 5 2008), ECF Nos. 45, 45-2. Rather, scienter is almost exclusively mentioned in the 6 table included in support of the defendant’s opposition. Id. That fact suggests that the 7 Ninth Circuit believed the district court was presented with adequate briefing and 8 support to conclude that there were material differences between state consumer- 9 protection laws. See Mazza, 666 F.3d at 591. 10 Between the spectrum of possibilities ranging from POM I’s chart-only 11 presentation to Mazza’s extensive briefing coupled with a table, this case falls 12 somewhere between the two. Upon reviewing the POM I chart, it is worth noting that 13 the POM I chart is strikingly similar to the one included in this case. See Exhibit 21, 14 POM I, No. 10-ml-02199 (C.D. Cal. June 25, 2012), ECF No. 92-3. But unlike POM 15 I, Defendants’ opposition brief is not completely devoid of any explanation of the 16 differences between California and other states’ consumer-protection laws. (See Defs.’ 17 Opp’n 16:5–24.) Referencing their chart, Defendants provide several, albeit brief, 18 examples of how California’s consumer-protection laws are materially different from 19 other states’ laws. (Id.) A few examples that Defendants provide include: (1) 20 “California’s UCL, FAL, and CLRA require that a plaintiff has suffered injury as a 21 result of defendant’s unlawful conduct, other states do not”; (2) “[s]tates’ consumer 22 protection statutes also vary to the extent scienter is a required element and whether 23 reliance is required”; (3) “statute of limitations vary significantly from one year to ten 24 years”; and (4) “[s]ome states do not permit class actions under their consumer 25 protection laws.” (Id.) Each example provided also cites the Yourtz Declaration and 26 the included charts. 27 Even though Defendants provide more briefing on the material differences 28 between state laws than the defendant in POM I, they do not provide the same level of - 33 - 11cv69 1 extensive briefing that the defendant in Mazza did on the same subject. In Mazza, the 2 defendant explained in great detail the differences between state laws in its briefing to 3 the district court. See Brief in Opp’n to Class Certification at 8:6–13:8, Mazza, No. 07- 4 cv-07857 (C.D. Cal. July 14, 2008), ECF Nos. 45, 45-2. Comparatively, Defendants’ 5 explanation in its opposition brief here explaining the material differences in state 6 consumer-protection laws is sparser. (Cf. Defs.’ Opp’n 16:5–24.) Nonetheless, though 7 Defendants’ charts may not be evidence, as Plaintiff contends, they are available to this 8 Court to consider in light of the fact that Defendants provide some explanation to guide 9 the Court in understanding that material differences may exist in the relevant state 10 consumer-protection laws. 11 The two charts that Defendants provide are titled “Material Differences in State 12 Consumer Protection and Deceptive Trade Practices” (Yourtz Decl. Ex. A) and 13 “Variations in State Intentional / Negligent Misrepresentation Laws” (Yourtz Decl. Ex. 14 B). Both charts provide information regarding the laws of the remaining 49 states in 15 the Union and the District of Columbia. Citing Mazza and the Yourtz Declaration, 16 Defendants generally contend that “[s]tates’ consumer protection statutes also vary to 17 the extent scienter is a required element and whether reliance is required.” (Defs.’ 18 Opp’n 16:5–24.) 19 As previously mentioned, in Mazza, the Ninth Circuit observed that California 20 consumer-protection laws “have no scienter requirement, whereas many other states’ 21 consumer protection statutes do require scienter.” 666 F.3d at 591. Defendants’ chart 22 includes two identical comparisons made in Mazza, Colorado and Pennsylvania, 23 observing that Colorado’s Consumer Protection Act requires that certain violations be 24 made “knowingly” and Pennsylvania’s Unfair Competition, Acts or Practices requires 25 plaintiffs to show all elements of common-law fraud, including knowledge. (Yourtz 26 Decl. Ex. A at 9, 43 (citing Colo. Rev. Stat. § 6-1-105(1)(e), (g), (u); Debbs v. Chrysler 27 Corp., 810 A.3d 137, 155 (Pa. Super. 2002)).) 28 Connecticut has no scienter requirement, but Alaska, Arizona, and Arkansas do. See - 34 - The chart also indicates that 11cv69 1 Cheshire Mortg. Serv., Inc. v. Montes, 223 Conn. 80, 106 (1992) (“[A] party need not 2 prove an intent to deceive to prevail under CUTPA.”); Alaska Stat. § 45.50.471(b)(12) 3 (requiring intent); Ariz. Rev. Stat. § 44-1522(A) (requiring intent); Ark. Code § 4-88- 4 107(a)(1) (knowingly). This sample of state laws appears accurate based on the 5 Court’s independent verification. 6 With regard to reliance, Mazza observed that California “requires named class 7 plaintiffs to demonstrate reliance, while some other states’ consumer protection statutes 8 do not,” citing examples to laws in Florida, New Jersey, and New York. 666 F.3d at 9 591. Indeed, states such as Connecticut, Delaware, Florida, and Montana, among 10 others, do not require reliance. See Izzarelli v. R.I Reynolds Tobacco Co., 117 F. Supp. 11 2d 167, 176 (D. Conn. 2000); Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1074 12 (Del. 1983); Davis v. Powertel, Inc., 776 So. 2d 971, 973 (Fla. Ct. App. 2000); Durbin 13 v. Ross, 916 P.2d 758, 762 (Mont. 1996). 14 Differing statutes of limitations provide another material difference between 15 states’ consumer-protection laws. The statute of limitations for California’s consumer- 16 protection laws range between three to four years. See Cal. Civ. Code § 1783 (three 17 years); Cal. Bus. & Prof. Code § 17208 (four years); Cal. Bus. & Prof. Code § 17500 18 (three years via Cal. Civ. Proc. Code § 338). However, statutes of limitations from 19 other states range anywhere from one to ten years. See La. Rev. Stat. § 51:1409(E) 20 (one year from date of allegedly deceptive act); Me. Rev. Stat. tit. 14, § 752 (six years 21 from discovery of violation); R.I. Gen. Laws § 9-1-13 (ten years from time the 22 violation took place). Given that the class period begins in March 2005, almost six 23 years prior to the commencement of this case, the differing statutes of limitations could 24 have a material effect on a former student’s rights to pursue certain claims against 25 Defendants. 26 Similar material differences exist between the states’ intentional and negligent 27 misrepresentation laws. For example, California requires knowledge of the falsity and 28 intent to induce reliance for intentional and negligent misrepresentation. See Bowers - 35 - 11cv69 1 v. AT & T Mobility, LLC, 196 Cal. App. 4th 1545, 1557 (2011); Nat’l Union Fire Ins. 2 Co. of Pittsburgh, PA v. Cambridge Integrated Servs. Grp., Inc., 171 Cal. App. 4th 35, 3 50 (2009). 4 requirement for negligent misrepresentation. See Gaelick v. Conn. Gen. Life Ins. Co., 5 No. 11-2464(SRC), 2011 WL 3794228, at *5 (D.N.J. Aug. 25, 2011) (“The elements 6 of negligent misrepresentation are essentially the same as those of common law fraud 7 except negligent misrepresentation does not require scienter.”); Angle v. Mortg. Elec. 8 Registration Sys., No. 4:11CV352, 2011 WL 4370969, at *1 (E.D. Tex. Sept. 19, 2011) 9 (“Unlike common law fraud, negligent misrepresentation does not require knowledge 10 of the falsity or reckless disregard of the truth or falsity of the representation at the time 11 it was made.”). Material differences also exist between states’ misrepresentation laws 12 in their standards of proof as well as statutes of limitations. See, e.g., Rosener v. Sears, 13 Roebuck & Co., 110 Cal. App. 3d 740, 756 (1980) (“[F]raud need be proved by a 14 ‘preponderance of the evidence’ rather than ‘clear and convincing evidence.’”); Daines 15 v. Vincent, 190 P.3d 1269, 1279 (Utah 2008) (“To prevail on a claim of fraudulent 16 inducement, [the plaintiff] must present clear and convincing evidence . . . .”); Jardine 17 v. Brunswick Corp., 423 P.2d 659, 663 (Utah 1967) (also requiring clear and 18 convincing evidence for negligent misrepresentation); see also, e.g., 12 Vt. Stat. tit. 12, 19 § 511 (six-year statute of limitations); Cal. Civ. Proc. Code § 338(d) (three-year statute 20 of limitations); Winn Fuel Serv., Inc. v. Booth, 34 So. 3d 515, 519 (La. Ct. App. 2010) 21 (one-year statute of limitations). However, states such as New Jersey and Texas have no scienter 22 The Ninth Circuit pointed out that differences in scienter and reliance 23 requirements between states’ consumer-protection laws are “not trivial or wholly 24 immaterial,” explaining that “[i]n cases where a defendant acted without scienter, a 25 scienter requirement will spell the difference between the success and failure of a 26 claim,” and “[i]n cases where a plaintiff did not rely on an alleged misrepresentation, 27 the reliance requirement will spell the difference between the success and failure of the 28 claim.” Mazza, 666 F.3d at 591. The court continued that “[c]onsumer protection laws - 36 - 11cv69 1 are a creature of the state in which they are fashioned,” and “[t]hey may impose or not 2 impose liability depending on policy choices made by state legislatures or, if legislators 3 left a gap or ambiguity, by state supreme courts.” Id. This reasoning undoubtedly also 4 applies 5 CLRA—compared in this case. The same can also be said for intentional and negligent 6 misrepresentation laws, many of which developed through states’ common law. to the consumer-protection laws—California’s UCL, FAL, and 7 Upon reviewing the relevant state laws, it is apparent to this Court that at least 8 some material differences exist between states’ consumer-protection and 9 misrepresentation laws.13 The Court would normally proceed to the test’s second step, 10 determining whether a true conflict exists, but Plaintiff appears to concede that point. 11 Consequently, the Court proceeds to the test’s third step. 12 2. 13 Which State Interest Is Most Impaired 14 Plaintiff argues that Defendants fail to meet their burden of showing that the 15 interests of other states outweigh California’s interest because California is the “place 16 of the wrong.” (Pl.’s Reply 5:2–20.) She elaborates by explaining that all class 17 members, herself included, “were exposed to Defendants’ misrepresentations, 18 omissions, and high-pressure recruiting tactics solely via Defendants’ websites and 19 telephone calls with [enrollment advisors][,]” with all of this conduct taking place in 20 San Diego, where Bridgepoint is headquartered, the enrollment advisors are located, 21 and the advertising and marketing operations are maintained. (Id. (emphasis in 22 original).) 23 // 24 25 26 27 28 13 Relying on POM I and Forcellati v. Hyland’s, Inc., 876 F. Supp. 2d 1155, 1161 (C.D. Cal. 2012), Plaintiff suggests that the first step of the governmental-interest test is a fact-intensive analysis. (Pl.’s Reply 4:19–21.) However, neither case requires rigorous application of the facts of the case in the conflict-of-laws step of the governmental-interest test. In fact, the Ninth Circuit in Mazza strictly compares requirements imposed by certain state laws without any reference to the facts of the case. See Mazza, 666 F.3d 590-91. As a result, the Court rejects Plaintiff’s suggested analytical framework for the conflict-of-laws step of the governmental-interest test. - 37 - 11cv69 1 Mazza recognized that “California considers the ‘place of the wrong’ to be the 2 state where the last event necessary to make the actor liable occurred.” 666 F.3d at 3 593-94 (citing McCann, 48 Cal. 4th at 94 n.12; Zinn v. Ex-Cell-O Corp., 148 Cal. App. 4 2d 56, 80 n.6 (1957)). But when the liable conduct occurred, for example, over the 5 telephone where there are two people speaking at fixed points in two different states, 6 it is not as clear where the “place of the wrong” is. Plaintiff suggests that the “place 7 of the wrong” is where the speaker makes, for example, the fraudulent representations 8 over the telephone. 9 In Does v. Geller, 533 F. Supp. 2d 996, 1004 (N.D. Cal. 2008), the court faced 10 a situation where a misrepresentation occurred over long-distance communication. The 11 Geller Court opined that “[f]ollowing common law tort principles, the court might be 12 inclined to rule that the situs of the act is the place where a fax or email was received, 13 not sent. But the best support for that statement is found not in any recent, binding 14 precedent but rather in the First Restatement of Conflict of Laws, published in 1934.” 15 Gellar, 533 F. Supp. 2d at 1004. 16 Like the court in Gellar, this Court also faces determining the place of the 17 wrong with alleged wrongful conduct committed over long-distance communication 18 without any recent, binding precedent. To start, the First Restatement of Conflict of 19 Laws does indeed define the “place of wrong” as “in the state where the last event 20 necessary to make an actor liable for an alleged tort takes place.” See Zinn, 148 Cal. 21 App. 2d at 80 n.6 (citing Restatement (First) of Conflict of Laws § 377 (1934)). And 22 Note 4 of the Restatement further elaborates that “[w]hen a person sustains loss by 23 fraud, the place of wrong is where the loss is sustained, not where fraudulent 24 representations are made.”14 Given that Mazza, Zinn, and to some extent Gellar have 25 26 27 28 14 Accompanying the Restatement’s Note 4 is the following illustrations: (1) “A, in state X, makes false misrepresentations by letter to B in Y as a result of which B sends certain chattels from Y to A, in X. A keeps the chattels. The place of the wrong is in state Y where B parted with the chattels”; and (2) “A, in state X, owns shares in the M company. B, in state Y, fraudulently persuades A not to sell the shares. The value of the shares falls. The place of wrong is X.” - 38 - 11cv69 1 accepted the Restatement’s definition for the “place of wrong,” and the Restatement 2 being the Court’s best available guidance, it is reasonable to accept the Restatement’s 3 Note 4, setting the place of wrong where the loss is sustained in fraudulent- 4 misrepresentation cases. 5 Here, Plaintiff alleges that misrepresentations and omissions to herself and other 6 class members all occurred over long-distance communications through websites and 7 telephone calls with Defendants’ enrollment advisors. (Pl.’s Reply 5:2–14.) But 8 applying the Restatement’s principle articulated in Note 4, it is not where the 9 communications originate—in this case, San Diego, California—but rather where 10 Plaintiff or other potential class members sustained their loss—which is likely the state 11 where the former students are domiciled at the time they signed up for enrollment. 12 Focusing on Plaintiff’s circumstances, the place of wrong would be in Indiana, from 13 where Plaintiff presumably communicated with Defendants. 14 More importantly, there is evidence before this Court that almost 90% of 15 potential class members resided outside of California when they enrolled. (Morrison 16 Decl. ¶ 4.) This fact is important because “courts should not attempt to apply the laws 17 of one state to behaviors that occurred in other jurisdictions.” See Mazza, 666 F.3d at 18 593 (internal quotation marks omitted). With almost 90% of potential class members 19 having enrolled outside of California, imposing California law on those members 20 would undoubtedly impair the foreign states’ interests. See id. California law also 21 recognizes as much given that it emphasizes that “the place of the wrong has the 22 predominant interest.” See Hernandez v. Burger, 102 Cal. App. 3d 795, 802 (1980). 23 And here, not to belabor the point, but almost 90% of the wrongs alleged occurred 24 outside of California. See id. 25 Following the analytic framework emphasized in Mazza, this Court concludes 26 that each potential class member’s consumer-protection and misrepresentation claims 27 should be governed by the laws of the jurisdiction in which the loss was sustained. See 28 Zinn, 148 Cal. App. 2d at 80 n.6; see also Restatement (First) of Conflict of Laws § - 39 - 11cv69 1 377 (1934). Under the facts and circumstances of this case, applying California law 2 for a potential nationwide class is inappropriate. See Wash. Mut. Bank, 24 Cal. 4th at 3 921. 4 5 IV. CONCLUSION & ORDER 6 It should be emphasized that this order does not make any determination 7 regarding the merits of potential individual claims by Plaintiff or any other former 8 student, or even the possibility of pursing a class action on a smaller scale against 9 Defendants. The student complaints attached to Plaintiff’s class-certification motion 10 describe a poorly run educational institution eliciting much doubt as to whether 11 Defendants do indeed prioritize their students’ best interests. The vast sums of money 12 produced from students is particularly alarming given the circumstances described. 13 But ultimately, Plaintiff fails to satisfy ascertainability requirements for the 14 proposed class as currently constructed and Defendants successfully carry their burden 15 to demonstrate that this action is not appropriate for nationwide class treatment under 16 California law under Rule 23. 17 In light of the foregoing, the Court GRANTS Defendants’ motion for sanctions 18 and strikes the Ferguson Declaration. The Court also DENIES Plaintiff’s motion for 19 class certification. 20 IT IS SO ORDERED. 21 22 DATED: March 26, 2015 23 Hon. Cynthia Bashant United States District Judge 24 25 26 27 28 - 40 - 11cv69

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