DAVID F. SUGERMAN ATTORNEY, PC 707 5\'1;1 Washington St., Suite Portland, Oregon (503)

Transcription

1 5/16/2017 1::10 PM IN THE CIRCUIT COURT OF THE STATE OF OREGON IN AND FOR THE COUNTY OF MULTNOMAH NATHAN SURRETT, individually and on behalf of all other similarly-situated individuals, and on behalf of herself only, 12 JENNIFER ADAMS fka JENNIFER 13 SCHUSTER, 14 Plaintiffs, 15 vs. WESTERN CULINARY INSTITUTE, LTD; 16 LE CORDON BLEU NORTH AMERICA, INC; and CAREER EDUCATION 17 CORPORATION, 18 Defendants. Case No PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL CLASS ACTION- DAMAGES! EQUITABLE RELIEF (UNLAWFUL TRADE PRACTICES ACT (ORS , and FRAUD), Claims Not Subject to Mandatory Arbitration Plaintiffs allege: PRELIMINARY STATEMENT 1. This is an action for money damages and equitable relief brought by Jennifer Adams individually and by Nathan Surrett individually and on behalf of all similarly situated persons. Plaintiffs allege claims for violation of the Unlawful Trade Practices Act, ORS , el seq. Page I - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 5\'1;1 Washington St., Suite Portland, Oregon (503)

2 1 and for fraud. To the extent allegations other than the certified allegations are alleged, Ms. Adams 2 alleges them solely on her own behalf. 3 Plaintiffs allege that defendants operated a trade school, Western Culinary Institute now 4 known as Le Cordon Bleu College of Culinary Arts in Portland ("WCI") and that defendants 5 induced plaintiffs and similarly-situated students to enroll at, attend, and incur financial 6 obligations, by making uniform misrepresentations common to plaintiffs and the class regarding 7 the value of the education, benefit of the degree, exclusivity of the degree, nature of ongoing 8 career placement, job placement rates, and by uniformly omitting to disclose to plaintiffs and the 9 class information about post-graduate salaries. Plaintiffs initially filed the case for equitable 10 relief, giving written notice of the intention to seek damages as required by ORCP 32H. More 11 than 30 days after giving notice, plaintiffs filed an amended complaint adding claims for 12 damages for themselves and the proposed class. 13 PARTIES Plaintiff Jennifer Adams attended WCI and paid tuition and incurred financial obligations 16 to do so as a result of misrepresentations and omissions made to plaintiff by defendants. Plaintiff 17 Adams attended WCI in 2006 and 2007, graduating in June, Plaintiff Nathan Surrett 18 enrolled and began attending WCI in May 2007 and graduated in September Plaintiff 19 Surrett paid tuition and incurred financial obligations as a result of misrepresentations and 20 omissions made to plaintiff and the class by defendants Defendant Western Culinary Institute, Ltd. is a foreign corporation that operated Western Culinary Institute, now known as Le Cordon Bleu College of Culinary Arts in Portland, an 24 Oregon trade school, located in Multnomah County. Defendant Western Culinary Institute, Ltd is registered to do business in Oregon. Defendant-Western Culinary Institute, Ltd is a wholly- Page 2 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW \'('ashington St., Suite Pordand, Oregon (503) 228 6~ 7 4

3 owned subsidiary of defendant Career Education Corporation. After the commencement of this action, defendant Western Culinary Institute, Ltd. merged into Le Cordon Bleu North America, LLC. Defendant Le Cordon Bleu North America, LLC is a foreign corporation. 4. Defendant Career Education Corporation (CEC) is a foreign corporation that provides support and oversight to defendant Western Culinary Institute, Ltd. and Le Cordon BIeu North America, LLC in its subsidiary's operations ofwci. JURSIDICTION AND VENUE 5. WCI operates in Multnomah County. Some of the acts complained of in this action took place in Multnomah County. CLASS ALLEGATIONS 6. The class consists of all current and former students who enrolled at Western Culinary Instituenow known as Le Cordon Bleu College of Culinary Arts in Portland-on or after March 5, 2006 (up to and including March 1,2010), who attended Western Culinay Institute/Le Cordon Bleu College of Culinary Arts in Portland on or after March 5, 2006 (up to including March I, 20 I 0) and who made tuition payments or incurred financial obligations, excluding where applicable, all officers and directors of defendants, attorneys for the class, any judge orjllror who sits on the case, and any student who did not continue his or her studies due to academic ineligibility. Based on information and belief, plaintiff estimates that the class consists of approximately 2,000 people. Regardless of the exact number, the class is so numerous that joinder is impracticable because of the large size and geographic dispersion of the class. Page 3 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR SW Washington St., Suite Portland, Oregon (503)

4 There are questions offact and law common to the class in that each class member has 3 suffered an injury as a result of defendants' conduct. Common questions oflaw and fact 4 predominate over any questions affecting only individual class members. 5 Common questions include: 6 A. Whether defendants violated the Unlawful Trade Practices Act by representing 7 that WCI had characteristics, benefits, or qualities that it did not have. ORS ( I )(e); 8 B. Whether defendants violated the Unlawful Trade Practices Act, ORS (1 )(t) when, concurrent with delivery of services, defendants failed to disclose known 10 defects or material nonconformity; 11 C. Whether defendants violated the Unlawful Trade Practices Act by falsely 12 representing the nature of the transaction or obligation. ORS ( I )(k); 13 D. Whether plaintiff and members of the class may state a claim for equitable relief 14 under the UTPA for violations ofors ; E. F. Whether defendants acted willfully as defined by ORS (1); Whether, by making uni form misrepresentations and omissions to the class, 17 defendants violated the Oregon Administrative Rules, including: G. 1. OAR (8)(d); 2. OAR (9); 3. OAR (11 )(e); 4. OAR ( 12); 5. OAR ( 12)(a); 6. OAR (20); Whether the mandatory arbitration clause in the students' form contract is unconscionable and unenforceable; Page 4 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW Washington St., Suite Portland, Oregon (503)

5 1 H. Whether CEC can claim the benefits of the mandatory arbitration clause when 2 CEC was not a signatory of the contract; 3 I. Whether defendants made false representations regarding the value of the 4 education, benefit of the degree, exclusivity of the degree, nature of ongoing career placement, 5 and job placement rates to members of the class; 6 7 J. K. Whether such representations were material; Whether plaintiffs and members of the class had a right to rely on such statements 8 for their fraud claims; 9 L. Whether plaintiff and members ofthe class may prove reliance on a class-wide 10 basis; 11 M. Whether the defendants knew, but failed to provide to the plaintiffs and the class, 12 information about post-graduate salaries that should have been disclosed; 13 N. Whether defendants made representations and/or promises regarding the value of 14 the education, benefit of the degree, exclusivity of the degree, nature of ongoing career 15 placement, and job placement rates; 16 o. Whether defendants fraudulently concealed from plaintiffs and the class that they 17 made misrepresentations and omitted material facts The claims of the named plaintiff are typical of the claims of the class in that: 20 A. The fraud and UTPA claims involve identical conduct in making uniform 21 representations and misrepresentations and omissions about the characteristics and value of the 22 WCI program; 8. Defendants operated WCI in a standardized manner with respect to 24 representations and omissions to prospective students, and defendants set policies for WCI and oversaw its operations; Page 5 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 S\'\' Washington St., Suite Portland, Oregon (503)

6 1 C. The injuries suffered by the named plaintiff and the class members differ only in 2 the amount of damage; and 3 D. The named plaintiff's claims for relief are based upon the same legal theories as 4 are the claims of the class members The named plaintiff will fairly and adequately protect and represent the interests of the 7 class in that: 8 9 A. S. His claims are typical of the claims of the class members; He is represented by attorneys who are qualified and competent counsel who will 10 vigorously prosecute this litigation; and 11 C. His interests are not antagonistic to or in conflict with the interests of the class 12 members. 13 II. 14 A class action is superior to other available methods for the fair and efficient adjudication 15 of this case in that: 16 A. Common questions oflaw and fact predominate over factors affecting only 17 individual members; 18 B. As far as plaintiff knows, no class action that purports to include WCI students 19 has been commenced; 20 C. Individual class members have little interest in controlling the litigation due to the 21 high cost of each individual action, the risk of fees and costs, and because plaintiff and his 22 attorneys will vigorously pursue the claims; D. The forum is desirable as defendants do business here; 24 Page 6 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW Washington St., Suite Pordand, Oregon (503)

7 1 E. A class action will be an efficient method of adjudicating the claims of the class 2 members who have suffered monetary damages as a result of the same type of conduct by 3 defendants; and 4 F. In the aggregate, class members have claims for relief that are significant in scope 5 relative to the expense of the litigation More than 30 days before seeking damages, plaintiff complied with the requirements of 8 ORCP 32H by delivering notice and demand on defendants in writing by service on their 9 registered agent and by certi tied or registered mail, return receipt requested. 10 ALLEGATIONS OF FACT Defendants' WCI purports to provide trade school education to plaintiffs and class 13 members that will prepare them for careers in the food service and hospitality industries Defendants made uniform misleading representations and omissions common to 16 plaintiffs and the class regarding the value of the WCI education, benefit of the degree, 17 exclusivity of the degree, nature of ongoing career placement, job placement rates, post-graduate 18 salaries, and its operation under the regulations of Oregon's Office of Degree Authorization, in 19 violation of the Oregon Unlawful Trade Practices Act, including: 20 A. Offering student admission without receipt of evidence that the applying student 21 could reasonably expect to benefit from the education obtained in violation of duties under OAR (9) and in violation of OAR (12); OAR oo35(12)(a); OAR (20) and ORS (1)(e), \(k), and (I)(t); 24 B. Affirmatively representing in the WCI catalog that the Le Cordon Bleu curriculua gives students greater opportunities to acquire the knowledge and skills necessary to excel in the Page 7 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW Washington St., Suite Portland, Oregon (503)?'8 6474

8 1 culinary/hospitality world, when in fact Le Cordon Bleu training does not provide those benefits 2 in violation of OAR (12); OAR (12)(a); OAR (20) and 3 ORS (1)(e), I (k), and (I)(t); 4 C. Affirmatively representing in the WCI school catalog that the school trains 5 students for entry level jobs, but failing to disclose that those entry level jobs do not require that 6 training in violation of OAR (12); OAR (12)(a); OAR (20) and ORS (1)(e), I(k), and (I)(t); 8 D. Affirmatively representing in the WCI catalog that the school trains students for 9 entry level positions but failing to disclose that their training would not improve students' 10 qualifications for entry level positions in violation of OAR (12); OAR (12)(a); OAR (20) and ORS (1 )(e), 1 (k), and (I )(t); 12 E. Knowing, but failing to disclose, that WCI training would qualify graduates for 13 mostly low paying, poverty-wage jobs in violation of OAR ( 12); OAR (12)(a); OAR (20) and ORS (1)(e), I(k), and (I)(t); 15 F. Knowing, but failing to disclose, that WCI students will incur debts that cannot be 16 repaid with low paying jobs for which their education qualifies them in violation of OAR (12); OAR (12)(a); OAR (20) and ORS (1)(e), 18 1 (k), and (I )(t); 19 G. Knowing, but failing to disclose, that most WCI graduates will not eam enough to 20 allow them to pay off school loans in violation of OAR (12); OAR (12)(a); OAR (20) and ORS (1)(e), 1 (k), and (I)(t); 22 H. Knowing, but failing to disclose, that defendants were so concemed about loan defaults given the imbalance between WCI tuition and expected wages that CEC paid to Sallie 24 Mae percent or more of sub-prime loans that Sallie Mae made to WCI students in violation of Page 8 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW Washington St., Suite Pordand, Oregon (503)

9 1 OAR (12); OAR (12)(a); OAR (20) and ORS (1)(e), I (k), and (I)(t); 3 1. Knowing, but failing to disclose, that students who attend WCI would not obtain 4 material benefit from the course of study in violation of OAR oo35(8)(f), OAR (9), OAR (12); OAR oo35(12)(a); OAR (20) and 6 ORS (1)(e), I (k), and (I)(t); 7 J. Calculating job placement rates in a manner inconsistent with that required by the 8 State of Oregon's governing regulations in violation of the standards set forth in OAR (8)(d);OAR (12); OAR (12)(a); OAR (20) and 10 ORS (1)(e), I (k), and (I)(t); Jl K. As part of the enrollment process, providing each student with graduate job 12 placement rates that affirmatively represented that it places over 90 percent of its students in 13 jobs, but failing to disclose that their placement rate calculations violated Oregon regulations and 14 the placement those rates were composed mostly of jobs that do not require culinary training like 15 prep cook and line cook in violation of OAR (8)(d); OAR (12); OAR (12)(a); OAR (20) and ORS (1)(e), I (k), and (I)(t); 17 L. Defendants failed to disclose that their representations about the value of the 18 education, benefit of the degree, exclusivity of the degree, nature of ongoing career placement, 19 and job placement rates, were false and misleading in violation of OAR (12); OAR (12)(a); OAR (20) and ORS (1)(e), I(k), and (I)(t); 21 M. Defendants affirmatively represented that they provide post-graduation career 22 placement assistance, but by inflating job placement figures to include jobs for which a culinary degree is unnecessary, they misrepresented the nature of career services that they would provide 24 in violation of OAR (11)( e); OAR ( 12); OAR ( 12)(a); OAR (20) and ORS (1)(e), I (k), and (\)(t); Page 9 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 S\\I Washington St., Suite Pordand, Oregon (503)

10 1 N. Defendants affirmatively represented that they provide post-graduation career 2 placement assistance, but failed to disclose that this assistance focused largely on compiling 3 posted job openings from publicly available sources like Craig's List and local help wanted ads 4 that were accessible to anyone, whether enrolled at the school or not in violation of OAR (11)(e); OAR (12); OAR (12)(a); OAR (20) 6 and ORS (1)(e), I (k), and (I)(t); 7 O. Defendants affirmatively represented that they would provide ongoing career 8 placement services to graduates in violation of duties created by OAR (11)(e); 9 OAR (12); OAR (12)(a); OAR (20) and ORS (1)(e), I (k), and (I)(t). 11 FRAUDULENT CONCEALMENT Defendants are estopped from relying on a statute of limitations defense because they 14 intentionally lulled plaintiffs and the class, by affirmative inducement and wrongful, active 15 concealment of material facts, into delaying the filing of a cause of action. Defendants had 16 continuing common law and regulatory duties to correct the alleged misrepresentations and 17 omissions and disclose the true character, quality, and nature of their programs, but they 18 intentionally failed to do so. As a result, neither plaintiffs nor any class member could have 19 discovered all elements of the alleged torts until, at the earliest, seeking employment after 20 completing their education at WCI Defendants made the representations and failed to make disclosures knowingly and intentionally in an effort to induce prospective students to enroll at, attend, and incur financial 24 obligations to pay WCI and in order to retain the tuition money of plaintiff and the class. Page 10 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW Washington St., Suite Portland, Oregon (503) m

11 1 PLAINTIFF'S FIRST CLAIM FOR RELIEF 2 UNLAWFUL TRADE PRACTICES ACT 3 FIRST COUNT-REFUND DAMAGES Defendants willfully violated ORS (1)(e), I(k), and I (t), and as a result of their 6 misrepresentations and failures to disclose, plaintiffs and members of the class suffered 7 ascertainable losses of money Plaintiffs seek certification of an issue class to address common issues of fact and law set 10 forth in ~~8A-F; 81-J; 8M-O; 14A-O; 15; and Plaintiffs and members of the class are entitled to full refunds, together with prejudgment 13 interest and repayment of sufficient funds to satisfy the debts they incurred to attend WeI in 14 amounts to be proved at trial. ORS ; ORS ~ 16 Plaintiffs and members of the class are entitled to recover damages in the form of student 17 loan principal and/or tuition payments made, plus interest. In addition, plaintiffs and members of 18 the class are entitled to recover relocations expenses and lost wages incurred during their periods 19 of attendance at school in amounts to be proven at trial. Plaintiffs and the class are entitled to 20 recover attomeys' fees and costs. ORS (3) Plaintiffs and members of the class are entitled to an order certifying an issue class for refunds and economic damages, with subsequent adjudications of indivjdual questions of 24 causation, and damages. Plaintiffs and members of the class are also entitled to equitable relief, Page II - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW Washington St., Suite Portland, Oregon (503)

12 1 including an accounting and production of papers and information sufficient to calculate actual 2 sums of money due to them Defendants acted for their own financial benefit and with malice or have shown a 5 reckless and outrageous indifference to a highly unreasonable risk of harm and have acted with a 6 conscious indifference to the welfare of others. As a result, plaintiffs and the class are entitled to 7 recover punitive damages in an amount not to exceed $50 million. 8 SECOND COUNT-DIMINISHED VALUE Plaintiff re-incorporates Til 1-17; The education and training sold by defendants were worth less than the price charged on 13 account of the previously-alleged violations Defendants charged plaintiffs and the class varying amounts, but in no case more than 16 $47,000 per plaintiff and class member for these educational programs. Due to the previously- 17 described characteristics, the educational programs had an actual value of no more than $9, I Plaintiffs and members of the class are entitled to recover diminished value damages in amounts 19 to be proved at trial, and which will not exceed $61 million, plus interest. Plaintiffs and 20 members of the class are also entitled to equitable relief, including an accounting and production 21 of papers and information sufficient to calculate actual sums of money due to them. 22 SECOND CLAIM FOR RELIEF FRAUD n. 24 Plaintiff re-incorporates 'IMI1-16; 18-22; and. Page 12 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW Washington St., Suite Pordand, Oregon (503)

13 Defendants' representations were false and material, and their omissions were material, 3 to plaintiffs' and class members' decision to enroll, attend, and incur financial obligations to 4 WCI and others. Defendants made the representations with knowledge of their falsity. Plaintiffs 5 and members of the class had a right to rely on the defendants' misrepresentations and 6 statements and actually relied upon them. 7 U. 8 As a result, plaintiffs and members of the class suffered economic damages in the form of 9 student loan principal and/or tuition payments made, plus prejudgment interest, all to their 10 economic damages in amounts to be proved at trial. Plaintiffs and members of the class are 11 entitled to recover economic damages in amounts to be proved at trial 12 ~. 13 In addition, plaintiffs and class members are entitled to recover lost wages incurred while 14 attcnding school and moving cxpenses incurred to attend school, in amounts to be proved at trial. 15 WHEREFORE, plaintiffs and the class seek relief from defendants, and each of them, as follows: a. On their UTPA Claim: Count I: Plaintiffs and members of the class are entitled to an order certifying this matter as an issue class, with a class trial on common questions of fact and law and class member trials on causation and damages consisting of full refunds, together with prejudgment-interest and repayment of sufficient funds to satisry the debts they incurred to attend WCI; relocation expenses and lost wages incurred during attendance; class-wide punitive damages in amount not to exceed $50 million; equitable relief, including an accounting and production of papers and information sufficient to calculate actual sums of money due to them; and attorneys' fees and costs. Page \3 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW Washington St., Suite Portland, Oregon (503)

14 b. c. Count 2: Plaintiffs and class members are entitled to recover diminished value damages in amounts not to exceed $61 million, plus prejudgment interest equitable relief, including an accounting and production of papers and information sufficient to calculate actual sums of money due to them; attorneys fees and costs; and class-wide punitive damages in amount not to exceed $50 million On their fraud Claim: Plaintiffs and members of the class are entitled to an order certifying this matter as an issue class, with a class trial on common questions of fact and law and class member trials on reliance and damages and damages consisting of full refunds, together with prejudgment interest, and repayment of sufficient funds to satisfy the debts they incurred to attend WCI, plus prejudgment interest, and class-wide punitive damages in amount not to exceed $50 million. Plaintiffs are also entitled to recover moving expenses and lost wages; and Such other relief as the court may deem just. 17 DATED this 16 th day of May, By: rd~a~v~i ~.~u~g=e=rm~n~,~~~~~no- DA VID F. SUGERI\tAN 520 S.W. Sixth Av St. 920 Portland, Oregon 972 Phone: (503) Fax: (503) david@davidsugerman.com Amy Johnson, OBS No SE Madison St. Portland, OR Phone: amy@savagejohnson.com Page 14 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW Washington St., Suite Portland, O regon (503)

15 Tim Alan Quenelle, OSB No TIM QUENELLE, PC 4 I 5 North State Street, Suite 132 Lake Oswego, OR Telephone (503) tim.guenelle@gmai1.com. Attorneys for Plaintiffs and the class Page 15 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW Washington St., Suite Portland, Oregon (503) 228-6~7~

16 1 2 PLAINTIFFS DEMAND A. 3 DATED this 16 1h day of May, Respectfully submitted, By: r;d:-av:l.\;;;;>";' F!"'. 'fruag~e--rm:-!. an-, --rbs;;=b~:-.""8;r6"' 29"'8' DAVID F. SUGERM TIORNEY PC 520 S.W. Sixth Ave., Ste. 920 Portland, Oregon Phone: (503) Fax: (503) david@davidsugerman.com Of Attorneys for Plaintiff and the class Tim Alan Quenelle, OS8 No TIM QUENELLE, PC 415 North State Street, Suite 132 Lake Oswego, OR Telephone (503) tim.guenelle@gmail.com. Attorney for Plaintiff Adams Page 16 - PLAINTIFF'S SEVENTH AMENDED COMPLAINT AND DEMAND FOR 707 SW Washington St., Suite Pordand, Oregon (503) l74

17 1 CERTIFICATE OF SERVICE 2 I hereby certify that I served the foregoing PLAINTIFF'S SEVENTH AMENDED 3 COMPLAINT AND DEMAND FOR on the following person(s) on this same 4 day: Il9 by electronic mail and notice of filing using the CmlECF system Stephen English Thomas R Johnson Heidee Stoller Perkins Coie 1120 NW Couch Street, Tenth Floor Portland OR SEnglish@perkinscoie.com trjohnson@perkinscoie.com HStoller@perkinscoie.com DATED this 16 1h day of May, Page 1 - CERTIFICATE OF SERVICE BY:=~~~d~ ~:::...,.=,... David F. ugerma No DA VID F. SUGER A TIORNEY, PC 520 S.W. Sixth Ave. S.9 0 Portland, Oregon 972 Phone: (503) Fax: (503) david@davidsugerman.com Attorneys for Plaintiff 707 SW Washington St., Suite Portland, Oregon (503) 228-CH74