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Court of Appeal Upholds Judgment Against Online University
Opinion Says Civil Penalties May Be Based on Each Misrepresentation Even Where Multiple Misrepresentations Were Made to Same Victim
By a MetNews Staff Writer
Div. One of the Fourth District Court of Appeal has affirmed a judgment for civil penalties against an online university that solicited persons to become students through boiler-room telephone solicitations that included material false representations, rejecting the contention that the judge erred by counting each deceptive phone contact, even if there were multiple contacts with the same victim, as a separate offense.
The unpublished opinion by Justice Truc T. Do, filed Tuesday, orders a trimming of the judgment by nearly $1 million, but that only means lowering the amount from $22,375,782 to $21,442,329. Some of the contacts, Do determined had taken place beyond the limitations period.
The Office of Attorney General obtained the judgment under the Unfair Competition Law (“UCL”) and the False Advertising Law (“FAL”) against Ashford University, LLC, and others. The university signed up students—typically low-income persons, about half of them minorities, with an average age of 35 to 37—by misrepresenting such matters as the costs involved, the prospects of future employment, and the availability of loans.
“[D]efendants fail to show that the trial court acted outside the scope of its discretion by counting each misleading call as a separate violation of the UCL and FAL,” Do wrote. “No statutory authority prohibited it from doing so….”
No Error
Do said it is not clear that the defendants are correct in asserting that victims engaged in a telephone conversation over prospective enrollment an average of six times, but concluded that even if this is so, San Diego Superior Court Judge Eddie C. Sturgeon was on solid ground in counting each phone call as a violation, explaining:
“Each phone call was an oral marketing communication….The court’s findings support the inference the communications addressed the personal financial, career, and educational concerns of individuals who were contemplating enrolling in Ashford. Moreover, the court’s findings demonstrate the admissions counselors who delivered the communications were under pressure to increase enrollment numbers.”
She continued:
“The ‘highly individualized’…and ‘highly targeted’…nature of the communications, together with the pressure placed on admissions counselors, support counting each deceptive call as a separate violation.”
Supreme Court Decision
The defendants pointed to the California Supreme Court’s 1973 decision in People v. Superior Court (Jayhill) in which it was held that each misrepresentation by a door-to-door encyclopedia seller did not give rise to a separate $2,500 statutory penalty under the FAL. Justice Stanley Mosk wrote:
“[W]e believe the Legislature intended that the number of violations is to be determined by the number of persons to whom the misrepresentations were made, and not by the number of separately identifiable misrepresentations involved. Thus, regardless of how many misrepresentations were allegedly made to any one potential customer, the penalty may not exceed $2,500 for each customer solicited by a defendant.”
Do wrote that “in subsequent decisions courts have limited Jayhill to its facts.” In addition to citing Court of Appeal opinions, she noted that the California Supreme Court, in its 2020 decision in Nationwide Biweekly Administration, Inc. v. Superior Court, held that trial courts have “equitable authority...in determining...the number of violations for which a defendant may properly be held responsible.”
The justice declared:
“Thus, no legal authority required the trial court to count violations on a per-victim rather than a per-communication basis.”
Extraterritorial Effect
Addressing a separate contention, Do said:
“[D]efendants fail to persuade us that the trial court violated principles of extraterritoriality by awarding penalties based on their deceptive statements to non-residents of California.”
Although both the UCL and the FAL specify that suits seeking civil penalties are to be brought “in the name of the people of the State of California,” she wrote, “the Legislature did not signal an intent to limit the Attorney General’s authority to prosecute violations of the UCL or FAL to cases involving false or misleading statements directed at California residents.”
Not Excessive
Spurning the contention that the $22 million-plus award was an excessive penalty, Do said:
“[T]he nature of defendants’ misrepresentations, the overwhelming number of violations, and the length of time over which they were committed, all indicate a serious level of culpability that was not substantially diminished by the mitigators the court identified. We conclude that this factor weighs against a finding of excessiveness.”
The case is People v. Ashford University, D080671.
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