STATE OF MINNESOTA COUNTY OF HENNEPIN State of Minnesota, DISTRICT COURT FOURTH JUDICIAL DISTRICT Case Type: Civil Other/Misc. Court File No. 27-CV-14-12558 Judge James A. Moore vs. Plaintiff, ORDER FOR RESTITUTION Minnesota School of Business, Inc. d/b/a Minnesota School of Business, and Globe University, Inc. d/b/a Globe University, Defendant. The above-entitled matter came before the undersigned Judge of District Court at the Hennepin County Government Center on the parties post-trial submissions. Pursuant to its September 9, 2016 Findings of Fact, Conclusions of Law and Order, the Court determined that Defendants violated and are liable under Minn. Stat. 325F.69 (Consumer Fraud Act ( CFA )) and 325D.44 (Deceptive Trade Practices Act ( DTPA )). The Court requested additional submissions and proposed orders from the parties and took this matter under advisement upon receipt of the parties submissions. Based upon a thorough review of the parties submissions regarding civil penalties, the Court orders the following civil penalties pursuant to Minn. Stat. 8.31, subd. 3: ORDER 1. Victims to Receive Restitution. The 15 witnesses identified in the Court s Findings of Fact, Conclusions of Law, and Order ( FFCLO ) who enrolled in Defendants criminal justice program under false pretenses are entitled to a restitution amount as calculated pursuant to this Order. Pursuant to a consumer claims process as set forth in this Order, restitution shall also be made available to any person who, at any time on or after January Page 1 of 8
1, 2009, (a) enrolled in Defendants criminal justice program at a Minnesota campus or (b) was a Minnesota resident who enrolled in Defendants online criminal justice program (referred to herein collectively as eligible claimants ). 2. Notification to Testifying Students. The Attorney General s Office shall notify the 15 students whom the Court found credibly testified to being injured by [Defendants ] false and misleading practices that they are entitled to restitution to be determined as provided herein. (FFCLO 111-13.) The State and Defendants ( the parties ) shall meet and confer and determine those students restitution amounts consistent with this Order. Any dispute shall be resolved in accordance with the provisions of paragraph 6 hereof. 3. Notification to Other Students. Defendants shall provide the State with the names and last-known addresses, phone numbers, and email addresses of eligible claimants who enrolled or re-enrolled in Defendants criminal justice program on or after January 1, 2009, and update information that Defendants have previously provided regarding student payments of tuition and other expenses. Defendants shall provide this information in electronic sortable spreadsheet form within 15 days of this Order. The Attorney General s Office shall notify each such student that they may be entitled to restitution by, at a minimum, making available to such students the form attached as Exhibit A. 4. Submission of Claims. Eligible claimants shall have 45 days from the date they receive Attachment A to send an executed claim form in the form of Attachment B to the Attorney General s Office to be considered for restitutionary relief. The Attorney General s Office shall submit the list of participating claimants to the Special Master and Defendants and provide copies of executed forms and other supporting documents to Defendants. 5. Substantive Guidelines. For any eligible claimant who files a claim form representing that they enrolled in Defendants criminal justice program based on an understanding they could become (a) a police officer in Minnesota or (b) a parole or probation officer in Minnesota with an associate s degree, there shall be a rebuttable presumption of injury and causal nexus. (See FFCLO at pp. 112, 17-20 (finding causal nexus established for consumers; SJ Ord. at 18-19 (recognizing a presumption of actual reliance [in FTC enforcement cases] where the FTC has demonstrated that the defendant made material misrepresentations, that they were widely disseminated, and that consumers purchased the defendant s product ); see Group Health Plan, Inc. v. Philip Morris Inc. et al., 621 N.W.2d 2, 14 n.9, 11 (Minn. 2001) (providing for establishment of causal nexus for group of consumers through circumstantial evidence or presumptions). The restitution amount for such claimants shall include (a) the amount of tuition paid to Defendants by or on behalf of the claimant, (b) payments to Defendants by or on behalf of the claimant for books, enrollment or student expenses or fees, and (c) any interest or finance charges incurred by the claimant for student loans taken out to pay for such tuition, expenses, or fees. 6. Process. The parties shall oversee the claims review process and mutually agree on whether a claimant should receive restitution and in what amount consistent with this Page 2 of 8
Order. The parties may provide or make reasonable requests for documents regarding a claim, and shall act promptly in conferring and determining claims. Upon written agreement of any restitution sum, Defendants shall make payment to the claimant within 7 days of the written agreement. If the parties cannot resolve a dispute, the matter shall be submitted to the Special Master pursuant to the Special Master s instructions. The parties may agree that the Special Master s decisions on disputed claims is binding. The Special Master shall review each disputed claim and issue a written decision to the parties determining the amount of restitution for that student. 7. Report of the Special Master. The Attorney General s Office shall quarterly file with the Court a report until the restitution process is completed. The report shall include a summary of the process completed and identify the Special Master s decisions on claims for the Court s review and acceptance. Unless the parties agree that the Special Master s decision is binding, the parties may object pursuant to Rule 53.07 to the Special Master s resolution of disputed claims as stated in the report. The Court will issue an order on the Special Master s report that includes determinations regarding any claims subject to objection. Within 7 days of the Court s order, Defendants shall make payment to any student pursuant to that order. 8. Judgment. The Attorney General s Office may request that judgment be entered as to any unpaid claim that has been agreed to, determined by the Special Master and not objected to, or determined by the Court. 9. Amendment. This Order may be modified by the Court for good cause. 10. The attached Memorandum is hereby incorporated into this Order. LET JUDGMENT BE ENTERED ACCORDINGLY. Dated: January 4, 2017 BY THE COURT: James A. Moore Judge of District Court Page 3 of 8
MEMORANDUM I. Introduction The State initially filed this action on July 22, 2014. The State s Complaint asserted two counts against Defendants for alleged violations of the Consumer Fraud Act ( CFA ) and the Deceptive Trade Practices Act ( DTPA ). The two counts were based on allegations involving four areas of Defendants business: (1) the criminal justice program; (2) the admissions process; (3) accreditation and transferability of credits disclosures; and (4) job placement services. The State filed a Corrected Amended Complaint on March 20, 2015, which included two new counts against the Schools for violations of Minn. Stat. 56.01 and 334.01 (the Institutional Loan Claims ). The Court granted summary judgment in favor of Defendants on the Institutional Loan Claims on December 29, 2015. The State s remaining claims for trial were under the CFA and DTPA, which were based on four separate areas of Defendants business. On September 9, 2016, the Court issued its Findings of Fact, Conclusions of Law and Order ( FFCLO ), which found Defendants violated the CFA and DTPA. The Court concluded that the causal nexus between Defendants fraudulent representations [was] established by the evidence offered by the State at trial and that the damage that flows from such fraud is inevitable and foreseeable. (Findings of Fact 111-117.) In its findings and before trial, the Court recognized that a subsequent remedies phase would determine relief pursuant to Minn. Stat. 8.31, including restitution. (Findings of Fact 130-31.) In its FFCLO, the Court ordered the parties to file post-trial memoranda explaining why or why not the State is entitled to pursue a restitutionary process whereby individuals who claim to have been harmed by Defendants deceptive trade practices can seek restitution. (Order 3.) 1 1 Defendants arguments, summarized here, repeat arguments that they have previously made about an alleged lack of the proof of individual harm as a result of their fraud. The Court rejects these argument anew, for the reasons set Page 4 of 8
II. Analysis a. Legal Standard The Consumer Fraud Act allows restitution provided that the party seeking it can show a causal nexus between the alleged deception and harm. Grp. Health Plan, Inc. v. Philip Morris, Inc., 621 N.W.2d 2 (Minn. 2001) ( Grp. Health I ). Minn. Stat. 8.31 provides that the Attorney General may sue for equitable relief as determined by the court, including restitution, for any person injured by a violation of the consumer protection laws. Minn. Stat. 8.31, subd. 3(a). The statute also provides that a sum awarded for the benefit of injured persons should be reasonably distributed to the victims or deposited in the State s general fund. Minn. Stat. 8.31, subd. 2(c). The authority of the Attorney General to seek broad remedies solely available to the State include equitable restitution and may occur without obtaining class certification. Curtis v. Altria Grp., Inc., 813 N.W.2d 891, 898-99 (Minn. 2012). b. Restitutionary Process Minnesota courts have awarded restitution when liability is found in Attorney General enforcement actions. See, e.g., State v. Alpine Air, 490 N.W.2d 888, 896 (Minn. App. 1992), aff d 500 N.W.2d 788 (Minn. 1993) (affirming order for restitution); State v. Ri-Mel, Inc., 417 N.W.2d 102, 112-13 (Minn. App. 1987) (affirming order for restitution); State v. AFLP, No. A11-1848, 2012 WL 2505843, *4 (Minn. App. July 2, 2012) ( AFLP ) (affirming order for restitution); State v. Directory Pub. Servs., Inc., No. C1-95-1470, 1996 WL 12674, *7 (Minn. App. Jan. 16, 1996) (affirming order for restitution); State v. Heritage P ners LLC, SJ Ord., 27- forth in the FFCLO. However, the State s proposed order sought restitution for any loss incurred by affected students for delay in their education or professional career as a result of the fraud. As to this element of individual harm, the Court finds that the State s requested relief goes too far. The record does not establish any uniformity in what sort of affect each individual student felt. Nor does the record establish any benchmark by which such claims of damages could be evaluated by the special master or the Court. Providing for such damages would infuse speculation into the calculation of individual restitution. Consequently, the Court declines to include loss of opportunity as an element of individual restitution. Page 5 of 8
CV-14-1563, pg. 37 (Minn. 4th Dist. Feb. 13, 2015) (ordering restitution); State v. Minimum Rate Pricing, Inc., No. 62-C1-97-008435, 1998 WL 35986716, *4 (Minn. 2d Dist. Nov. 6, 1998) (affirming order for restitution); State v. Std. Oil Co., 568 F. Supp. 556, 564-66 (D. Minn. 1983) (affirming order for restitution). Appointment of a third-party neutral to administer this process is authorized by statute and Minnesota Rules. Minn. Stat. 8.31 provides that courts are vested with jurisdiction to appoint an administrator in actions brought by the attorney general under this section, for purposes of... collecting, administering, and distributing judgments obtained by the attorney general for the benefit of persons. Minn. Stat. 8.31, subd. 3c. Rule 53 of the Minnesota Rules of Civil Procedure further authorizes the Court to appoint a special master, and the Court s order establishing a special master provides for objection rights under Rule 53.07. Defendants offer no argument that the Court cannot appoint a special master for administering the restitution process. Defendants argue, instead, that in the cases cited by the State are inapplicable because the courts based findings of restitution on evidence of harm that was actually presented at trial. (Defs. Mem. Concerning the State s Entitlement to Restitution, pg. 7-8). The majority of Defendants arguments in opposition to the State s restitutionary process fall under the following headings: The State did not prove deception of every student The State did not prove what portion of students were harmed The State did not prove the amount of harm for every student (See gen. Defs. Mem. Concerning the State s Entitlement to Restitution.) Defendants argue that because of the State s failure of proof, the Court cannot find that the causal nexus between the deception and the harm in this case extends to a larger population. Defendants concede that the Court made a finding that the harm to the 15 students who testified at trial was inevitable and Page 6 of 8
foreseeable and therefore established causal nexus. However, Defendants aver that the causal nexus finding is limited to the students who actually testified. Defendants argument centers around the contention that the students in the affected class are not all similarly situated such that the Court can infer harm from the Defendants deceptive practices for the purpose of awarding restitution. In essence, Defendants seek to minimize the extent of the public harm by arguing that the State did not and could not prove that the entire group of criminal justice program students were defrauded because only sixteen criminal justice program students testified at trial. Thus, Defendants argue, there is no evidence of widespread public injury. Defendants argument ignores the Court s finding that the harm suffered by those students was foreseeable and inevitable. Defendants attempt to understate the breadth of that finding cherry-picks the Court s Order and misreads its intent. There can be no question that Defendants fraudulent practices caused significant public injury to any students a who enrolled in the criminal justice program with the goal of becoming a Minnesota police or probation officer. It stands to reason that if the Court adopts Defendants interpretation of the relevant case law, then only consumers that are perfectly similarly-situated are entitled to restitution even though there has been a finding of fraud under the CFA and DTPA related to a specific class of persons. Here, the State has proven that Defendants violated the CFA and DTPA with respect to the marketing of its criminal justice program. A restitutionary process, as requested by the State, is necessary in this case to determine the appropriate amount of restitution for each affected student while giving Defendants an opportunity to respond to claims for restitution. Page 7 of 8
III. Conclusion Based upon the foregoing, the Court determines that the restitutionary process, as ordered above, is narrowly tailored and appropriate in this case. J.A.M. Page 8 of 8
EXHIBIT A Notice to Eligible Claimants Dear [Name]: [Attorney General Letterhead] You are receiving this letter because you enrolled in the Minnesota School of Business ( MSB ) or Globe University s criminal justice program on or after January 2009 and are eligible to submit a claim for monetary restitution from those schools based on misrepresentations determined in a lawsuit brought by the Minnesota Attorney General. You must complete and sign the attached form within 45 days of receiving it if you wish to file a claim for compensation. Misrepresentations by MSB and Globe University. The lawsuit was brought by the Minnesota Attorney General on behalf of the State of Minnesota against MSB and Globe University. On September 9, 2016, the Court found that the schools misrepresented that their criminal justice program provided education and training for these careers: 1. Police Officer. MSB and Globe University falsely marketed their criminal justice program as providing education or training to become a Minnesota police officer and recommended the program to students who wanted to become Minnesota police officers. But the neither of the schools was certified by Minnesota s police licensing board nor accredited to allow a student to obtain additional training to become a police officer and provided no education or training toward becoming a Minnesota police officer. 2. Probation or Parole Officer. MSB and Globe University falsely marketed and recommended their two-year associate s criminal justice degree to students who wanted to become probation or parole officers in Minnesota. But the schools knew that at least a four-year bachelor s degree is required to be a probation or parole officer in Minnesota and thus the program did not provide the advertised training. Restitution to Students Who Were Misled. The Court ordered the schools to pay restitution to students who were misled in one or more of the ways detailed above. Restitution is a form of monetary compensation that can be ordered by a Court. It compensates victims for losses incurred because of the misrepresentation. For this case, restitution includes: a) the amount of tuition paid to the schools, including amounts paid through student loans, GI Bill benefits, or other payments on your behalf, b) payments to the schools for books, enrollment or student expenses or fees, c) any interest or finance charges incurred for student loans taken out to pay for such tuition, expenses, or fees, and Claim Process. If you wish to file a claim for compensation, you must complete and send the enclosed claim form to the Attorney General s Office within 45 days of receiving
this letter. You may send, fax, or email the completed form within 45 days from receipt of this letter to: Minnesota Attorney General s Office c/o Minnesota School of Business/Globe Claims 445 Minnesota Street, Suite 1200 St. Paul, MN 55101 Email: globemsbclaims@ag.state.mn.us Fax: 651.282.5832 If you have questions, please contact Assistant Attorney General Adam Welle at 651-757-1425. [Salutation]
EXHIBIT B Claim Form Please fill in the following information: NAME: ADDRESS: CITY: STATE: ZIP CODE: DAYTIME TELEPHONE: EMAIL ADDRESS: IF YOU BELIEVE YOU ARE ELIGIBLE FOR COMPENSATION AND WISH TO MAKE A CLAIM, PLEASE ANSWER THE FOLLOWING TO THE BEST OF YOUR ABILITY: 1. I believe that Globe University/Minnesota School of Business misled me about my ability to use my criminal justice degree for any of the following careers (check all that apply): To become a Minnesota police officer To become a Minnesota probation or parole officer by completing a two-year associate s degree IF YOU CHECKED EITHER OF THE BOXES LISTED IN RESPONSE TO QUESTION 1, PLEASE ANSWER QUESTIONS 2 AND 3. 2. Please briefly state how Globe University/Minnesota School of Business misled you into believing you could use your criminal justice degree to enter the career(s) you checked in response to question 1: (NOTE: You will receive the opportunity to further explain the basis of your claim and supply documents in support of your claim over the course of the process.)
3. Please check the applicable boxes below if you incurred any of the following losses because of your enrollment (check all that apply): tuition paid to the schools, including through student loans, GI Bill benefits or other payments on your behalf; payments to the schools for books, enrollment or student expenses or fees; interest or finance charges for student loans taken out to pay for tuition, expenses, or fees; and/or (NOTE: You will receive the opportunity to explain the basis of your losses and supply documents in support of those losses over the course of the process. Also, the schools have records of payments made to them that are accessible to the Minnesota Attorney General s Office.) BY SIGNING BELOW, YOU CERTIFY THE ACCURACY OF THE INFORMATION YOU PROVIDED AND REQUEST TO PARTICIPATE IN THE RESTITUTION PROCESS. Printed Name Signature Date