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Rangel v. Adtalem Global Education, Inc

United States District Court, W.D. Texas, San Antonio Division

December 13, 2019

MR. LUIS RANGEL, SETH ADOMAKO, CHRISTINA CABELLO, ELISABETH NGUYEN, JOSE SANCHEZ, CHRISTAL TURNER, MELISSA WILSON, MARTIN OLOYEDE, NATHALIE YEKA, TRISTEN WILSON, TERRELL WHITE, DAVID W. JESSOP, DENAIRIUS ROBINSONII, EMRAN ALHYASAT, TERESA ANAYA, TIFFANY BROWN, MED CULLINS, KEVIN D. EARLS, TYHESSIA ELLIS, CRYSTAL HAYDEN, RHONDA JAMES, EMMANUEL MAKARI, CHRISTOPHER MARTIN, CATHERINE MCCARTY, ROSHAWN SAMPSON, VICTOR SEKGANTSO, MARK DAVIS, CANDACE D. SMITH, LATASHA SOLOMON, ALAN TA, GEORGE VAN-LARE, SAUL VEGA, ROSALINDA A VELA ESCOBAR, JUSTIN WIGGINS, PATRICK ACHEAMPONG, JOANNA AGUILERA, SHAWN J. AUSTIN, KINNEY BARCUCH, YOUNGHEE BERMINGHAM, NINA BURNS, CHRISTIAN BURROW, MIKE DEAN, FRANKIE EARLYJR., SHARONDA FORD, JAYSON FOX, COURTNEY FRAZIER, JENNIFER GAILLEY, RYAN GRIZZLE, JEREMY HENGY, LISA HOWARD, NATHANIEL JONES, DERRICK KEITH, PROSPER KISWAGA, NORMA MARTINEZ-CANTU, KASANDRA MCGHEE, GODFREY MOMANYI, MICHELLE ORR, LAWRENCE OWONIKOKO, ANDRES SALAZAR, KIMBERLY SEARCY, LACHANNA SNEED, SCOTT SULLIVAN, JULIO VALENCIA, MIRANDA VAN COLEN, EDWARD WATTS, WAYNE CARL WILLIAMS, SEAN WILLIAMS, GLADYS BERISTAIN, WILLIE GARRET, RICHARD SHAW, TREVOR REED, HEATHER MICHELLE EMMONS, Plaintiffs,
v.
ADTALEM GLOBAL EDUCATION, INC., FORMERLY KNOWN AS DEVRY EDUCATION GROUP, INC.; AND DEVRY UNIVERSITY, INC., Defendants.

          REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          ELIZABETH S. ("BETS Y") CHESTNEY UNITED STATES MAGISTRATE JUDGE

         To the Honorable United States District Judge Jason K. Pulliam:

         This Report and Recommendation concerns Defendants' Motion to Dismiss Plaintiffs' Second Amended Class Action Complaint [#64]. The case was referred to the undersigned for a report and recommendation on Defendants' Motion and the entry of a new scheduling order [#68]. The undersigned has authority to enter this recommendation pursuant to 28 U.S.C. § 636(b)(1)(B).

         The Court held a status conference on November 20, 2019, at which all parties appeared through counsel and presented argument on the Motion to Dismiss. Having considered Plaintiffs' Second Amended Complaint in light of the arguments raised in Defendants' Motion, the response and reply thereto [#65, #66], the supplemental authority provided by Plaintiffs [#71], Defendants' response [#74], and the arguments of counsel at the hearing, the undersigned will recommend that the District Court deny the motion. The Court will enter an Amended Scheduling Order by separate order.

         I. Background

         This case was originally filed by over seventy Texas graduates of DeVry University who allege that Defendants Adtalem Global Education, Inc. (“Adtalem”) and DeVry University, Inc. (“DeVry”) misrepresented the benefits of graduating from DeVry by advertising false employment and income rates of graduates with the purpose of inducing potential students to purchase educational products and services. (Compl. [#1].) Adtalem is the parent company of DeVry, its subsidiary. Plaintiffs' Original Complaint asserts claims of fraud and negligent misrepresentation and violations of the Texas Deceptive Trade Practices Act (“DTPA”) and seeks restitution for the unjust enrichment of Defendants. (Id. at ¶¶ 91-121.) Defendants moved to dismiss the Complaint pursuant to Rule 12(b)(6), and Plaintiffs responded with an Amended Complaint. The Court denied Defendants' motion to dismiss as moot but without prejudice to filing a new motion with respect to Plaintiffs' amended pleading, and Defendants filed a second motion asking the Court for dismissal.

         While the motion was pending, the District Court consolidated another cause of action into this case, Lindberg v. Adtalem Global Education, Inc., et al., 5:18-CV-649-DAE, and ordered the Lindberg Defendants to refile their motion to dismiss. After consolidation, a group of additional Plaintiffs moved for and were granted the right to intervene in this action and filed their Complaint in Intervention. There are now over 100 Plaintiffs in this action. Defendants thereafter stipulated that their pending motions to dismiss applied to the Intervenors' Complaint as well.

         Defendants' earlier motion to dismiss argued that Plaintiffs' First Amended Complaint did not meet the particularity requirements of Rule 9(b) governing allegations of fraud and failed to sufficiently allege the misconduct of Adtalem, among other bases for dismissal. The District Court agreed with Defendants and held the following: (1) Rule 9(b) applies to all of Plaintiffs' claims (fraud, negligent misrepresentation, and violations of the DTPA); (2) Plaintiffs failed to satisfy Rule 9(b); and (3) Plaintiffs failed to allege that Adtalem was in control of or benefited from DeVry's advertising practices. (Order [#59].) The Court, however, gave Plaintiffs another opportunity to plead their causes of action and ordered Plaintiffs to file an amended pleading addressing the identified deficiencies within 45 days of its Order.

         Plaintiffs timely filed their Second Amended Complaint [#62], which is now the live pleading before the Court. Plaintiffs' 181-page Second Amended Complaint adds over 100 pages of additional factual allegations but does not add any new causes of action. In response to the new Complaint, Defendants filed the motion to dismiss that is the subject of this report and recommendation. After Defendants filed their motion, this case was reassigned to the docket of the Honorable Jason K. Pulliam, who referred the motion to the undersigned for a report and recommendation. For the reasons that follow, the undersigned will recommend the District Court deny Defendants' motion to dismiss and allow Plaintiffs to proceed with their claims.

         II. Legal Standard

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “Although a complaint “does not need detailed factual allegations, ” the “allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. The allegations pleaded must show “more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678.

         In reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court “accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.” Martin K. Eby Const. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004) (internal quotation omitted). However, a Court need not credit conclusory allegations or allegations that merely restate the legal elements of a claim. Chhim v. Univ. of Tex. at Austin, 836 F.3d 467, 469 (5th Cir. 2016) (citing Iqbal, 556 U.S. at 678). In short, a claim should not be dismissed unless the court determines that it is beyond doubt that the plaintiff cannot prove a plausible set of facts that support the claim and would justify relief. See Twombly, 550 U.S. at 570.

         Rule 9(b) imposes a heightened pleading standard for claims sounding in fraud. See Fed. R. Civ. P. 9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”). The Fifth Circuit has clarified that Rule 9 requires the plaintiff to plead the “who, what, when, where, and how” of the alleged fraud. Williams v. WMX Techs., Inc., 112 F.3d 175, 179 (5th Cir. 1997) (quoting Melder v. Morris, 27 F.3d 1097, 1100 n.5 (5th Cir. 1994)). The District Court has already determined that Rule 9(b) governs all of the claims asserted in Plaintiffs' Second Amended Complaint.

         III. Analysis

         The District Court should deny Defendants' Motion to Dismiss. Defendants' motion argues that Plaintiffs' Second Amended Complaint still fails to satisfy the heightened pleading standard governing fraud claims; fails to allege viable theories of causation and damages; fails to allege consumer status under the DTPA; fails to allege a plausible claim for unjust enrichment; and fails to allege sufficient allegations against Adtalem. None of these contentions has merit in light of the additional factual allegations contained in Plaintiffs' Second Amended Complaint.

         A. Plaintiffs' Second Amended Complaint satisfies Rule 9(b).

         Defendants, in this motion, again attack the sufficiency of the allegations underlying Plaintiffs' claims of fraud, negligent misrepresentation, and violations of the DTPA. The elements of fraud include: (1) a misstatement or omission; (2) of material fact; (3) made with the intent to defraud; (4) on which the plaintiff relied; and (5) which proximately caused the plaintiff's injury. Williams, 112 F.3d at 177. Claims of negligent misrepresentation and claims arising under the DTPA both also require the pleading of false, misleading, or deceptive acts or representations causing a plaintiff's injuries. See Miller v. LandAmerica Lawyers Title of El Paso, 362 S.W.3d 842, 845 ...


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