Wiggins et al v. Daymar Colleges Group, LLC et al
Filing
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MEMORANDUM OPINION & ORDER dismissing 5 Motion to Compel; dismissing 6 Motion to Dismiss for Failure to State a Claim; dismissing 7 Motion to Dismiss for Failure to State a Claim; granting 8 Motion for Discovery; granting 8 Motion ( Discove ry due by 1/4/2012.; dismissing 21 Motion to Dismiss for Failure to State a Claim; dismissing 23 Motion to Dismiss for Failure to State a Claim; dismissing 24 Motion to Compel; granting 25 Motion ; Discovery due by 1/4/2012. Telephonic Status Conference set for 2/10/2012 at 12:00 PM before Chief Judge Thomas B. Russell. Signed by Chief Judge Thomas B. Russell on 10/26/2011. cc:counsel (KJA)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
CASE NO. 5:11-CV-00036-R
KEVIN WIGGINS, ET AL.
PLAINTIFFS
v.
DAYMAR COLLEGES GROUP, LLC, ET AL.
DEFENDANTS
MEMORANDUM OPINION AND ORDER
This matter is before the Court upon Plaintiffs’ Motions to Hold Defendants’ Dispositive
Motions in Abeyance Pending Resolution of Plaintiffs’ Remand Motion and Motion to Conduct
Discovery (Docket #8, 25) and Plaintiffs’ Motion to Remand (Docket #9). Defendants have
responded (Docket #12, 13, 26). Plaintiffs have replied (Docket #14, 22). This matter is now
ripe for adjudication.
BACKGROUND
Plaintiffs seek to bring a class action on behalf of themselves and as representatives of a
proposed Plaintiff class. According to Plaintiffs’ Amended Complaint, the proposed plaintiff
class includes “current and prior attendees of the various Daymar Colleges (the “Class”) in
Kentucky, Indiana and Ohio.” Am. Compl., DN 19, ¶ 8.
The Class is composed of present and former students of Daymar in Kentucky,
Indiana and Ohio who have been fraudulently solicited to attend Daymar
educational institutions with the promise of receiving Degrees transferrable to the
vast majority of institutions of higher learning, and for whom these
representations were both false and the Degrees and credits non-transferrable.
Further, Plaintiffs seek to represent a class of those individuals who secured loans
to pay for Degrees fraudulently solicited by Daymar, and these Degrees, although
promised by Daymar, were not transferrable to the vast majority of other
institutions of higher learning and had little or no value for the purposes to which
Daymar induced or promised to the Plaintiffs.
Further, Plaintiffs seek to represent a class of those individuals who were
promised jobs in their field of study following graduation from Daymar
institutions in Kentucky, Indiana and Ohio, but who received no such jobs and
received no assistance from Daymar in finding employment in their field of study.
Plaintiffs also seek to represent a class of those individuals who attended Daymar
in Kentucky, Indiana and Ohio and who were misled and deceived about the
terms and availability of financial aid.
Id. at ¶¶ 8-11. Plaintiffs’ claims are “based on violations of KRS Chapter 165A et seq., the
Kentucky Consumer Protection Act, Kentucky antitrust laws, and common law
misrepresentation, fraud, fraudulent inducement, breach of contract, breach of implied contract,
conspiracy, and injunctive and declaratory relief.” Pl.’s Mot. Abeyance, DN 8, p. 1.
Plaintiffs filed suit in McCracken Circuit Court on February 17, 2011, against Daymar
Colleges Group, LLC, Daymar Learning of Paducah, Inc., Daymar Learning of Ohio, Inc., Mark
A.. Gabis, Daymar Learning, Inc., and The Daymar Foundation, Inc. Defendants removed the
case to this Court on March 14, 2011, on the basis of diversity jurisdiction under the Class
Action Fairness Act. Defendants also filed a motion to compel arbitration and a motion to
dismiss The Daymar Foundation, Inc., as a party. In lieu of responding to these motions,
Plaintiffs filed a motion to remand and a motion to hold Defendants’ dispositive motions in
abeyance and to allow jurisdictional discovery. The Court considered Plaintiffs’ motions in its
July 19, 2011, Memorandum Opinion and Order. The Court held that Defendants had proven the
jurisdictional amount of $5 million for removal under the Class Action Fairness Act (“CAFA”)1
and the case was properly removed to federal court.
1
The Class Action Fairness Act (“CAFA”) provides that “[t]he district courts shall have
original jurisdiction of any civil action in which the matter in controversy exceeds the sum or
value of $5,000,000, exclusive of interest and costs, and is a class action in which . . . any
member of a class of plaintiffs is a citizen of a State different from any defendant . . . .” 28
U.S.C. § 1332(d)(2)(A).
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The Court could not determine, however, whether one of the CAFA exceptions applied
because the definition of the class was ambiguous. Accordingly, the Court directed Plaintiffs to
amend their Complaint and allowed the parties to file supplemental briefs. The Court now
considers whether the “home state controversy” or “discretionary” exceptions apply to this case
such that remand is warranted.
DISCUSSION
Under the “home state controversy” exception, the Court must decline to exercise
jurisdiction when “two-thirds or more of the members of all proposed plaintiff classes in the
aggregate, and the primary defendants, are citizens of the State in which the action was
originally filed.” 28 U.S.C. § 1332(d)(4)(B). For this exception to apply, all of the primary
defendants must be citizens of the forum state. Morrison v. YTB Int’l, Inc., Nos. 08-565-GPM,
08-579-GPM, 10-305-GPM, 2010 WL 2132062, at *2 (S.D. Ill. May 26, 2010) (citations
omitted). The burden is on Plaintiffs to establish that an exception to the CAFA applies.
Preston v. Tenet Healthsystem Mem’l Med. Ctr., Inc., 485 F.3d 804, 814 (5th Cir. 2007).
Defendants acknowledge that all of the primary defendants in this case are citizens of
Kentucky. Accordingly, the only issue for the Court’s consideration is whether Plaintiffs have
established by a preponderance of the evidence that two-thirds or more of the members of the
proposed class are also citizens of Kentucky. Defendants assert that Plaintiffs cannot meet this
burden because the class covers thousands of members attending Daymar Colleges in three states
during an open-ended time frame. Thus, any attempt to demonstrate that two-thirds of the
members are citizens of Kentucky would be pure speculation.
Defendants submit an affidavit of Michael Leathers, Vice President of Information
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Technology for Daymar Colleges Group, LLC. Mr. Leathers “composed a revised statistical
summary of the state of residency of students enrolling at Defendants’ campuses in Kentucky,
Ohio, and Indiana” from February 1, 2007, through June 30, 2011. Leathers Aff., DN 13-1, p. 1.
The cumulative summary indicates that during this five year time period, 63.2% of students were
residents of Kentucky. Although Defendants recognize that this summary does not account for
students who may have changed addresses since their last contact with Defendants and is merely
“guesswork,” Defendants believe this provides further evidence that Plaintiffs cannot establish
that two-thirds of the class members are citizens of Kentucky.
Plaintiffs rely upon information from the National Center for Educational Statistics and
the Kentucky State Board for Proprietary Education. In 2008-2009, Daymar colleges enrolled
over 3,886 students. According to Plaintiffs, 65.95% of these students were citizens of Kentucky
at that time. Plaintiffs assert that this data provides support for its claim that more than twothirds of the class members are citizens of Kentucky, especially in light of the fact that the
Kentucky campuses have operated longer than the campuses in Ohio and Indiana. Plaintiffs also
note that Defendants’ submitted data is inaccurate as Defendants excluded campuses in Bowling
Green, Russellville and Clinton and did not provide a campus-by-campus breakdown of the
residency of its students. Moreover, Defendants limit their data to the past five years instead of
fifteen years.
The amount of speculation involved in determining the citizenship of the class members
in this case is troubling. This is especially highlighted by Plaintiffs’ intention to include Daymar
students from the past fifteen years. See Nichols v. Progressive Direct Ins. Co., No. 06-146DLB, 2007 WL 1035014, at *3 (E.D. Ky. Mar. 31, 2007) (“To conclude that over this period [of
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approximately five years] at least two-thirds of these persons remained citizens of the state
would be sheer speculation at this stage.”). Plaintiffs assert, however, that discovery will permit
them to establish by a preponderance of the evidence that more than two-thirds of the class
members are citizens of Kentucky. Although Plaintiffs fail to describe how they intend to
conduct such discovery, they note that other courts have considered affidavits from attorneys,
telephone surveys of a random sample of proposed class members, and addresses and phone
numbers on medical records.2 See, e.g., In re Text Messaging Antitrust Litig., Nos. 08 C 7082,
09 C 2192, 2011 WL 305385, at *3 (N.D. Ill. Jan. 21, 2011) (phone survey results from fifteen
percent of the sample population where eighty-five percent confirmed their residence and
intention to remain in Kansas were enough to confirm that over two-thirds of the proposed class
were citizens of Kansas).
After reviewing the parties’ arguments and in the interests of justice, the Court will
permit Plaintiffs to conduct limited jurisdictional discovery as to whether two-thirds of the
proposed class are citizens of Kentucky. Accordingly, the Court GRANTS the motion for
discovery and declines to rule on the motion for remand at this time.
CONCLUSION
IT IS HEREBY ORDERED:
(1)
Plaintiffs’ Motions to Hold Defendants’ Motion to Compel Arbitration in
Abeyance Pending Resolution of Plaintiffs’ Remand Motion and Motion for
2
This is not to say that courts have accepted these methods as proof that more than twothirds of the class members were citizens of a particular state. See Preston v. Tenet Healthsystem
Mem’l Med. Ctr., Inc., 485 F.3d 793, 801 (5th Cir. 2007) (noting that primary billing addresses
contained in medical records were insufficient to demonstrate citizenship after Hurricane Katrina
because there was no evidence of the class members’ intent to remain in that state).
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Discovery (DN 8, 25) are GRANTED. The parties shall complete discovery on or
before January 4, 2012.
(2)
Plaintiff shall file an amended brief in support of their motion to remand on or
before January 13, 2012. Defendant shall respond on or before January 27, 2012.
Plaintiff shall reply on or before February 3, 2012. Plaintiff shall notify the Court
by letter with copy to opposing counsel when this matter is ripe.
(3)
A telephonic status conference is SET for February 10, 2012, at 12:00 p.m.
CST. The Court shall initiate the call.
(4)
Defendants’ motions to dismiss and motions to compel arbitration (DN 5, 6, 7, 21,
23, 24) are hereby DISMISSED. Defendants shall be granted leave to file these
motions anew should the Court decline to remand this action to McCracken
County Circuit Court.
October 26, 2011
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