WHATLEY et al v. EASTWICK COLLEGE et al

Filing 32

OPINION. Signed by Judge William J. Martini on 7/23/15. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

UNITED STATES OF AMERICA ex rel.
SUEDA WHATLEY and JOHN and JANE
DOE, individually,

Civ. No. 2:13-1226 (WJM)

OPINION
Plaintiff,
v.
EASTWICK COLLEGE, et al.,
Defendants.

WILLIAM J. MARTINI, U.S.D.J.:
Plaintiff/Relator Sueda Whatley filed this case against Defendants Eastwick
Education, Inc., E.L.M. Eastwick Education, Inc., M. Eastwick Education, Inc., and
Thomas Eastwick. Defendants Eastwick Education, Inc., E.L.M. Eastwick Education,
Inc., and M. Eastwick Education, Inc. are for-profit educational institutions. The Court
will refer to them collectively as “Hohokus Schools.” Plaintiff, a former student of the
Hohokus Schools, seeks to recover damages and penalties on behalf of the United States
as a qui tam relator under the False Claims Act, 31 U.S.C. § 3729 et seq. (“FCA”). She
also asserts several state law claims.
Defendants move to dismiss under Federal Rule of Civil Procedure 12(b)(6).
Plaintiff moves to file an amended complaint. There was no oral argument. Fed. R. Civ.
P. 78(b). For the reasons explained below, Defendants’ motion to dismiss is
GRANTED, and Plaintiff’s motion to amend is DENIED.
I.

BACKGROUND

Plaintiff Sueda Whatley is a former student of Hohokus Schools. Defendant
Thomas Eastwick owns Hohokus Schools. The following facts are alleged in the First
Amended Complaint (the “FAC”).

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A. Individual Allegations Related to Plaintiff Sueda Whatley
The following represents the Court’s best attempt at creating a cohesive summary
of Plaintiff’s lengthy, disorganized, and repetitive FAC. Plaintiff attended Hohokus
Schools from August 2011 through October 2012. FAC ¶ 16, ECF No. 7. When Plaintiff
applied for admission, she paid a fee of $125 to be credited against tuition of $22,350.
Id. ¶ 184. She passed an entrance exam and then enrolled in the 18-month Bilingual
Licensed Practical Nursing (“BLPN”) program. Id. ¶ 186-88. Despite enrolling in and
attending the BLPN program, Plaintiff claims she did not need it, because she did not
speak Spanish. Id. ¶ 194. Defendants drew down federal funds to pay for her tuition and
fees. Id. ¶ 197. For instance, her account was charged a registration fee of $100 and
$2,650 for books. Id. ¶ 192-93. And her account was charged a lab fee of $1,250 even
though she did not have a lab course during her first module. Id. ¶ 196.
Two of the classes Plaintiff took during the first module – “Medical Terminology”
and “English” – were taught by a teacher with limited English-speaking abilities. FAC
¶ 198. Plaintiff failed a course and claims she could not review or challenge the grade on
her final exam. Id. ¶ 200. The Director of Hohokus Schools told her that she did not
belong in the BLPN program and told her that she could transfer to the 12-month
Licensed Practical Nursing (“LPN”) program to repeat her failed course with tuition
adjustments instead of out-of-pocket costs. Id. ¶¶ 201-02. She agreed to transfer into the
LPN program. Id. ¶¶ 202-03.
In late October 2011, Plaintiff began her second module. FAC ¶ 206. Defendants
again drew down federal funds for her tuition and fees. Id. ¶ 208. Although she only
took two courses during her second module, she was billed the same amount as in her
first. Id. ¶ 208. Additionally, she was charged a second time for books even though she
had already received her LPN books when she first enrolled in the BLPN program. Id. ¶
209. She was also charged a second time for lab fees. Id. ¶ 210. She eventually received
a partial refund check for $1,957 from the federal government for her second module. Id.
¶ 214. That check was delivered to Defendants. Id. ¶¶ 216, 222. Upon Defendants’
request she endorsed it over to them for future costs, such as if she failed a course. Id.
In February 2012, Plaintiff began her third module. FAC ¶ 212. Defendants again
drew down full federal loans and grants for her education. Id. ¶ 213. Plaintiff was told
that she failed the final exam in “Fundamentals of Nursing” and thus the course, but was
not permitted to challenge her grade. Id. ¶¶ 217-18. She claims that 50-66% of the class
failed that course. Id. ¶ 219. Defendants told her that she had to repeat the failed course
or would have to drop out of the LPN program. Id. ¶ 221. Defendants used the partial
refund from her second module to pay for her to retake the course. Id. ¶¶ 221-27.
Defendants also required that she pay an additional $880 in her own personal funds. Id. ¶
224. Plaintiff retook the failed course, along with three new courses, during her fourth
module. Id. ¶ 225. Defendants again drew down federal funds for her education. Id. ¶
227.
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Plaintiff subsequently had an accident, could not attend school or work, and went
on medical leave from school. FAC ¶ 228. After her leave, Defendants told her that she
had to complete four courses during her fifth module to continue in the LPN program. Id.
¶ 229. “Other students” told her about failure rates of “as much as 50% or more” for
students enrolled in some of those courses. Id. ¶¶ 230-31. She complained to Defendants
that “she was being set up for failure,” but Defendants said she could not take a less
demanding schedule due to financial aid requirements. Id. ¶ 231-32. On October 25,
2012, she orally notified Defendants of her decision to withdraw from the LPN program.
Id. ¶ 233. The next day, she executed documents to confirm her withdrawal at the
financial aid office and was told that no financial obligations were incurred due to her
timely withdrawal. Id. ¶¶ 234.
Although she did not attend any classes after October 25, 2012, Defendants again
drew down federal funds on her behalf. FAC ¶¶ 235-36. She received no refund or
payment for the charges. Id. ¶ 237. In early December 2012, Plaintiff received a phone
message from Defendants stating that she had not been attending classes and that finals
were approaching. Id. ¶ 238. After she called and faxed letters confirming that she had
withdrawn, Defendants sent her an attendance record consisting of sign-in sheets for
various classes. Id. ¶ 239. Plaintiff alleges that the attendance record was altered to
indicate that she had attended a course during the instant module. Id. ¶ 241.
Whatley alleges that although Defendants told her credits could be transferred to
“any other LPN program” in New Jersey, her credits are not transferrable. FAC ¶¶ 24849. Finally, Whatley alleges Defendants “overcharged students for coursework by
charging them private tuitions while also collecting loans and grants from the federal
government. Id. ¶¶ 248-49.
B. General Allegations Concerning the Programs
The FAC also contains various allegations regarding Defendants’ general
treatment of students in their Medical Assistant (“MA”), LPN, and BPLN programs
(together, the “Programs”).
i. Incentive Compensation Program
The FAC alleges that Defendants instituted a system under which admissions
counselors/sales personnel (“AC/SRs”) had quotas of students they had to enroll to avoid
termination. FAC ¶ 84. Mr. Easwick informed AC/SRs of those quotas and then fired
individuals who did not make quotas. Id. ¶ 85-86. Defendants allegedly fired Natalie
Lopez, Vinnie Jazenbach, and Norris Brown for not meeting new nursing student quotas.
Id. ¶ 87.
Defendants reported on recruitment in newsletters, ranked AC/SRs, and tracked
student enrollment numbers. Id. ¶¶ 89, 92. Mr. Eastwick paid cash incentives to AC/SRs
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that enrolled “the most students.” Id. ¶ 90. Additionally, Defendants gave “positive
incentives” to AC/SRs based upon the number of recruitments. Id. ¶ 91. For example,
“an AC/SR who recruited a greater number of students would be publicly rewarded with
cash bonuses at the . . . annual holiday party, of $300, $500, or $1000.” Id. ¶ 91. Due to
Defendants’ practices, Hohokus Schools allegedly accepted unqualified students who had
little chance of completing the Programs or the required third party certification tests. Id.
¶ 95-96. For instance, the AC/SRs accepted students who could not adequately speak or
write English even though the third-party certification tests for becoming a nurse are
administered only in English. Id. ¶¶ 92-96. The AC/SRs also accepted mentally
challenged and special needs students, who had “little or no chance of completing the
[P]rograms.” Id. ¶ 97. Plaintiff thus alleges, upon information and belief, that
Defendants falsely certified compliance with the prohibition on compensation incentives.
Id. ¶ 88.
ii. Enrollment in, and Transfer Among, the Programs
The FAC alleges that the MA and BLPN programs were used to recruit students
who were not qualified for the LPN program. AC/SR’s recruited students into the MA
program with the explanation that it was easier to qualify for the MA program than the
LPN program. FAC ¶ 37. Defendants told students that credits would transfer from the
MA program to the LPN program and to other schools, which was untrue. Id. ¶¶ 40.
Defendants promised the students that there would be adequate federal funds and
federally subsidized loans from them to complete the MA and LPN programs, without
out-of-pocket costs. Id. ¶ 43. This was untrue because students routinely failed courses
and were forced to retake core courses at their own expense. Id. ¶¶ 43-44.
The BLPN program also had easier standards for admission than for the LPN
program. FAC ¶ 47. Thus, students who desired to be LPN’s were often placed in the
BLPN program so that Defendants could enroll students who might not be able to pass
the entrance exam for the LPN program. Id. ¶ 49. Additionally, Defendants enrolled
English-speaking students in the BLPN program. Id. ¶ 51. Finally, prospective students
were sometimes told that the LPN program had a waiting list and that the MA or BLPN
program would allow them begin their course of study immediately. Id. ¶ 50, 55.
Students who did not pass the “less difficult” standardized test for admittance into
the MA and BLPN programs were “often recruited” by Defendants anyway. FAC ¶¶
103-04. And Defendants offered a special needs program to students, even if “special
needs and/or disabilities doomed their chances to complete the nursing programs in
which they were enrolled.” Id. ¶ 105.
Teachers who questioned a student’s ability to be enrolled in a Program were told
“[t]hat’s not your problem.” FAC ¶ 106. Teachers were also told that the objective of
the Programs was “to get as many students as possible into the [P]rograms and then to

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retain students as long as possible,” so that Hohokus Schools could continue to receive
federal funds. Id. ¶ 107.
BLPN students took English and English as a Second Language courses even if
they were native English speakers. FAC ¶ 51. BLPN students also took basic courses,
which were paid for with financial aid, even though those course did not advance their
medical careers. Id. ¶ 52. Contrary to Defendants’ representations to students, the basic
courses were not transferable. Id. ¶ 53; see also ¶¶ 248-49.
Plaintiff alleges that Defendants utilize the BLPN program to charge for
unnecessary classes and then to charge double fees upon a student’s transfer to the LPN
program. English-speaking students were first enrolled in the BLPN program and then
“flipped” (i.e. transferred) to the LPN program, enabling Defendants to double charge for
certain fees, such as “lab fees” and “book fees.” Id. ¶ 56, 111.
iii. Wrongful Treatment of Students to Maximize Receipt of Federal
Funds
Defendants processed FAFSA applications to maximize available federal funds for
student eligibility, failed to inform students about loans they incurred, provided no
“published guidelines” to explain federal financial aid to students, did not provide
financial statements, and inflated program costs. FAC ¶¶ 58-73. Additionally, lab fees,
book, and other fees were too high. Id. ¶¶ 78-81. When students withdrew or failed out
before completing a Program, Defendants improperly refused to refund any of the various
fees. Id. ¶ 83. And Defendants arranged to have students’ refund checks sent to
Defendants instead of directly to students so that Defendants could “keep the money.”
Id. ¶ 45.
Defendants made false and misleading statements to students that 71% of LPN and
77% of BLPN students graduated on time and that 77% of LPN graduates obtained jobs.
FAC ¶ 73-74, 127. Defendants also misrepresented the time to complete programs,
stating that the LPN program took 12 months. Id. ¶¶ 64-65.
Students were “arbitrarily failed” or “arbitrarily retained.” FAC ¶¶ 119-20.
Defendants changed and increased grades to retain students. Id. ¶ 108. Additionally,
students were told that they failed final exams – and therefore entire courses – but
Defendants did not allow them to review the final exams for accuracy in grading. Id. ¶
128. As many as 40% to 67% of the class would fail some courses. Id. ¶ 130.
Defendants told students that tutoring was available, but directed professors not to
provide tutoring. Id. ¶¶ 134-36.
Plaintiff also alleges that Defendants required students to pay from their private
resources to repeat courses, so that Defendants could satisfy federal guidelines requiring
that a specific percentage of tuition payments be paid with private funds. FAC ¶ 126.
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Finally, an administrator told staff that if a student who completed a Program was
unlikely to pass a certification test, then that student should be discouraged from taking
the test. Id. ¶ 113.
II.

DISCUSSION

Defendants move to dismiss all claims against them for failure to state a claim.
Plaintiff seeks leave to file a proposed supplemental amended complaint (the “SAC”).
The proposed SAC adds ten class-action Plaintiffs. The additional Plaintiffs, together
with Plaintiff Whatley, assert a putative class action based on several New Jersey state
law claims. Defendants argue that the proposed SAC fails to state a claim. The Court
will first consider the motion to dismiss and will then move to the motion to amend.
A. MOTION TO DISMISS
The FAC asserts the following claims:
(1) Counts One through Five: Violations of the FCA
(2) Count Six: Breach of Contract
(3) Count Seven: Breach of the Covenant of Good Faith and Fair Dealing
(4) Count Eight: Unjust Enrichment
(5) Count Nine: Consumer Fraud
(6) Count Ten: Fraud
(7) Count Eleven: Tort
Defendants move to dismiss the FAC for failure to state a claim under Federal
Rule of Civil Procedure 12(b)(6).
i. Legal Standard
Rule 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if the
plaintiff fails to state a claim upon which relief can be granted. The moving party bears
the burden of showing that no claim has been stated. Hedges v. United States, 404 F.3d
744, 750 (3d Cir. 2005). In deciding a motion to dismiss under Rule 12(b)(6), a court
must take all allegations in the complaint as true and view them in the light most
favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels
& Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998).
Although a complaint need not contain detailed factual allegations, “a plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual allegations
must be sufficient to raise a plaintiff’s right to relief above a speculative level, such that it
is “plausible on its face.” See id. at 570; see also Umland v. PLANCO Fin. Serv., Inc.,
542 F.3d 59, 64 (3d Cir. 2008). A claim has “facial plausibility when the plaintiff pleads
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factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 556). While “[t]he plausibility standard is not akin to a
‘probability requirement’ . . . it asks for more than a sheer possibility.” Id.
Pursuant to Rule 9(b), a plaintiff alleging fraud must state the circumstances of the
alleged fraud with sufficient particularity to place the defendant on notice of the “precise
misconduct with which [it is] charged.” Frederico v. Home Depot, 507 F.3d 188, 200 (3d
Cir. 2007) (quoting Lum v. Bank of America, 361 F.3d 217, 223-24 (3d Cir. 2004))
(internal quotations omitted). To satisfy this standard, the plaintiff must plead or allege
the date, time and place of the alleged fraud or otherwise inject precision or some
measure of substantiation into a fraud allegation. Id.
ii. Plaintiff’s FCA Claims
The bulk of Plaintiff’s claims are rooted in Plaintiff’s allegation that Defendants
made misrepresentations to the Department of Education (“DOE”) that wrongfully
enabled it to secure student financial aid in the form of loans and grants from the federal
government. When an educational institution wishes to receive federal subsidies under
Title IV of the Higher Education Act of 1965, as amended (“HEA”), 20 U.S.C. § 1070 et
seq., it must enter into a Program Participation Agreement (“PPA”) with the DOE. U.S.
ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1168 (9th Cir. 2006). Under the
PPA, the institution agrees to abide by numerous statutory, regulatory, and contractual
requirements.
The FCA allows the government to recover losses that it incurs due to fraud.
United States v. Edu. Mgmt. Corp., 871 F. Supp. 2d 433, 445 (W.D. Pa. 2012). The FCA
imposes liability on:
[A]ny person who—
(A) knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false
record or statement material to a false or fraudulent claim[.]
31 U.S.C. § 3729(a)(1). The FCA provides a qui tam enforcement mechanism, under
which a private party – the relator – may bring a lawsuit on the government’s behalf
against an entity to recover money the government paid on the fraudulent claims. Edu.
Mgmt. Corp., 871 F. Supp. 2d at 445.
In the FAC, Plaintiff alleges that Defendants knowingly caused false claims to be
presented to the government and made or used false statements to get false claims paid by
the government. 31 U.S.C. § 3729(a)(1)(A)-(B). Plaintiff alleges that Defendants
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knowingly caused false claims to be filed by making misrepresentations to the DOE, its
accrediting agencies, and students that wrongfully enabled Defendants to secure student
financial aid pursuant to Title IV of the HEA. Specifically, Plaintiff claims that
Defendants knowingly violated Title IV requirements in two ways. First, Defendants
falsely certified compliance with their PPA. Second, Defendants knowingly continued to
submit students’ applications for financial aid – which included certifications that the
students were eligible for Title IV financial aid – even though Defendants were in
violation of numerous PPA requirements.
The FAC includes five FCA counts based on alleged violations of Defendants’
PPA. In Count One, Plaintiff alleges that Defendants deliberately transferred students
from one Program to another so that they could double charge for lab, book, and other
fees. Count One further alleges that Defendants did not refund students who failed or
withdrew from the Programs even though those students had not used the lab facilities or
received certain books. Count Two alleges that Defendants’ incentive compensation
program violates the incentive compensation ban under Title IV of the HEA and 34
C.F.R. § 668.14(b)(22), which was contained within Defendants’ PPA. Count Three
alleges that Defendants charged fees to process students’ FAFSA applications. Count
Four alleges that Defendants falsely represented to the federal government that they had
established and were maintaining a satisfactory academic progress (“SAP”) policy as
required by 34 C.F.R. § 668.34. Finally, Count Five alleges that Defendants’ overall
treatment of Plaintiff violated the FCA. Specifically, Plaintiff takes issue with
Defendants’ failure to provide Plaintiff with a copy of her student account ledger,
employment of an English teacher with limited English-speaking abilities, failure to let
Plaintiff review academic records, improper grading procedures, improper disbursement
and retention of Title VI funds, inadequate classroom instruction, failure to withdraw
Plaintiff and return Title IV funds consistent with regulatory requirements, and
falsification of attendance records
A prima facie claim under the FCA requires a plaintiff to show that “(1) the
defendant presented or caused to be presented to an agent of the United States a claim for
payment; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was
false or fraudulent.” U.S. ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 305
(3d Cir. 2011) (quoting U.S. ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 242 (3d Cir.
2004)). A plaintiff must plead FCA claims with particularity in accordance with Rule
9(b). Wilkins, 659 F.3d at 301 n.9. Thus, a FCA complaint must contain enough specific
factual context to interject precision and some measure of substantiation into the
allegations of a claim of fraud. Seville Indus. U.S. ex rel. Staniszewski v. Washington &
Jefferson Coll., No. 05-1098, 2008 WL 2987213, at *1 (W.D. Pa. July 31, 2008) (citing
Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984)).
Each of Plaintiff’s five FCA counts fails to state a claim. At the outset, the Court
notes that that the FAC is largely speculative and lacks the detail necessary when
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pleading allegations of fraud. More specifically, Count One fails because Plaintiff does
not explain how book and other fees were “grossly inflated” with particularity or
sufficiently allege that Defendants acted with the requisite scienter in charging upfront
fees or billing students who transferred students from one Program to another. Plaintiff
also fails to explain why Defendants were required to provide books to students at cost.
In Count Two, Plaintiff alleges that Defendants violated the incentive
compensation ban by terminating AC/SRs for “failing to make their quotas.” FAC ¶ 87.
But the incentive compensation ban does not prohibit institutions from terminating
employees based on their recruitment numbers. United States v. Corinthian Colleges,
655 F.3d 984, 992 (9th Cir. 2011). Plaintiff also alleges that Defendants “instituted quota
systems” and that “an AC/SR who recruited a greater number of students would be
publicly rewarded with cash bonuses at the . . . annual holiday party, of $300, $500, or
$1000.” FAC ¶¶ 84-85, 91. However, these allegations fail to meet the requirements of
Rule 9(b). U.S. ex rel. Sobek v. Educ. Mgmt., LLC, No. 10-131, 2013 WL 2404082, at
*18 (W.D. Pa. May 31, 2013) (“To satisfy [Rule 9(b)], the plaintiff must plead or allege
the date, time and place of the alleged fraud or otherwise inject precision or some
measure of substantiation into a fraud allegation.”).
In Count Three, Plaintiff alleges, upon information and belief, that Defendant
charged fees “to process students’ [FAFSAs], “to cover FAFSA costs” and “to cover the
cost of that service.” These speculative, unsupported allegations fail to satisfy even the
more lenient pleading standard under Federal Rule of Civil Procedure 8(a). See Iqbal,
556 U.S. at 678.
In Count Four, Plaintiff fails to explain which SAP regulations Defendants
violated or how that resulted in the improper distribution of funds. See Urquilla-Diaz v.
Kaplan Univ., 780 F.3d 1039, 1055 (11th Cir. 2015). And Plaintiff provides no examples
of the alleged misconduct (i.e. specific student grades changed, specific teachers
pressured to change grading practices, or an instance where the school certified that a
student was making SAP but the student was not). See United States v. Chubb Inst., No.
06-3562, 2010 WL 1076228, at *9 (D.N.J. Mar. 22, 2010). Thus, Plaintiff once again
fails to satisfy Rules 8(a) and 9(b).
Finally, in Count Five, Plaintiff makes numerous allegations related to her own
experience with the Programs. But Count Five lacks facts demonstrating that Defendants
acted with the requisite scienter with respect to the described conduct. See U.S. ex rel.
Pilecki-Simko v. Chubb Inst., 443 F. App’x 754, 761 (3d Cir. 2011) (“Appellants’ SAC
does not state facts supporting a reasonable inference that TCI knew, acted in reckless
disregard, or deliberately ignored that its submissions were false due to their alleged
violation of the incentive compensation ban, and therefore did not survive Appellees'
motion to dismiss under Rule 12(b)(6)”). For example, Plaintiff challenges the failing
grades she received in certain courses, but provides no details as to how or why that was
done to make a false claim to the government.
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The Court will thus dismiss Counts One, Two, Three, Four, and Five for failure to
state a claim under Rule 12(b)(6). Having granted Defendants’ motion to dismiss as to
the FAC’s federal claims, the Court declines to exercise supplemental jurisdiction over
Plaintiff’s remaining state law claims. Clements v. Hous. Auth. of the Borough of
Princeton, 532 F. Supp. 2d 700, 713 (D.N.J. 2007) (citing 28 U.S.C. § 1367(c)).
B. MOTION TO AMEND
The Court next turns to Plaintiffs’ motion for leave to file the SAC. Counts One
through Four of the SAC contain amended FCA claims. Additionally, the SAC adds 10
individuals as class-action Plaintiffs. In Counts Five through Nine, the new Plaintiffs,
together with Plaintiff Whatley, assert a putative class action based on several New
Jersey state law claims.
The Court finds that the 523-paragraph1 SAC does not cure many of the defects
described above and that Plaintiffs’ FCA claims still fail under Rule 12(b)(6). The
alternative grounds for this Court’s jurisdiction over the SAC is the Class Action Fairness
Act of 2005, codified in 28 U.S.C. § 1332(d). However, Plaintiffs’ putative class action
is largely based on violations of the HEA. Damage suits based upon state law –
including consumer fraud actions – cannot be predicated (directly or indirectly) upon
violations of the HEA or its regulations. Morgan v. Markerdowne Corp., 976 F. Supp.
301, 319 (D.N.J. 1997); Thomas v. Nova Southeastern Univ., Inc., 2011 WL 3205298 at
*3 (D.N.J. 2011) (“The Court agrees with Defendant that the HEA does not create a
private right of action . . . .”), aff’d, 468 F. App’x 98 (3d Cir. 2012).
Further, each state law count is individually deficient. Count Five asserts a New
Jersey Consumer Fraud Act (“NJCFA”) claim. However, Plaintiff fails to sufficiently
allege an unlawful practice within the meaning of the NJCFA.2 For instance, while
Plaintiffs allege that they were overcharged for books, the FAC includes no indication
that Defendants told Plaintiffs that they would receive their books at cost or that the
books had no value to Plaintiffs. See Quigley v. Esquire Deposition Servs., LLC, 975
A.2d 1042, 1048 (N.J. Super. Ct. App. Div. 2009). It also does not set forth the specific
books for which Plaintiffs were double-charged or indicate that Plaintiffs never received
credits after being double-charged for those books. See Fed. R. Civ. P. 9(b). Nor does
1

The final paragraph of the SAC is incorrectly listed as paragraph 420.
“To state a claim under the NJCFA, a plaintiff must allege that the defendant engaged in an unlawful practice that
caused an ascertainable loss to the plaintiff.” Frederico v. Home Depot, 507 F.3d 188, 202 (3d Cir. 2007) (citing
Cox v. Sears Roebuck & Co., 647 A.2d 454, 462-465 (N.J. 1994). The NJCFA defines an unlawful practice as:
2

any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation,
or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon
such concealment, suppression[,] or omission, in connection with the sale or advertisement of any
merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not
any person has in fact been misled, deceived[,] or damaged thereby.
N.J. Stat. Ann. 56:8-2 (emphasis added).
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the SAC indicate that Defendants made misrepresentations to Plaintiffs about the book
charges or concealed the book charges from Plaintiffs. And while Plaintiffs allege that
Defendants misrepresented job statistics, they do not ever specify how those job statistics
were incorrect (i.e. how many students actually received jobs following the LPN
program). Similarly, while Plaintiffs claim that Defendants falsely stated that credits
earned at Hohokus Schools were transferrable, they provide no examples of institutions
that refused to accept their credits.
Moving to Plaintiffs’ other state law claims, in Count Six they assert a claim for a
breach of the covenant of good faith and fair dealing. This Count fails because Plaintiffs
do not sufficiently allege that they entered into a contract with Defendants. “In the
absence of a contract, there can be no breach of an implied covenant of good faith and
fair dealing.” Noye v. Hoffmann-La Roche Inc., 570 A.2d 12, 14 (N.J. Super. Ct. App.
Div. 1990). The Court will also dismiss Count Seven, which asserts a claim for unjust
enrichment based on “unlawful and/or unconscionable provisions in applicable
contracts.” Once again, Plaintiffs fail to sufficiently allege the existence of a contract.
See VRG Corp. v. GKN Realty Corp., 641 A.2d 519, 526 (N.J. 1994) (“The unjust
enrichment doctrine requires that plaintiff show that it expected remuneration from the
defendant at the time it performed or conferred a benefit on defendant and that the failure
of remuneration enriched defendant beyond its contractual rights.”). They also do not
specifically explain which provisions in the alleged contract are unlawful or
unconscionable. Finally, in Counts Eight and Nine, Plaintiffs seek recovery for
intentional tort and tort, respectively. Counts Eight and Nine are deficient due to
Plaintiffs’ failure to identify which specific tort Defendants allegedly committed. Davis
v. Two Unknown Named Agents of the F.B.I., No. 07-2135, 2009 WL 2049565, at *2 n.7
(D.N.J. July 8, 2009).
Thus, because the SAC fails to state a claim under Rule 12(b)(6), the Court will
not allow Plaintiff to file the proposed SAC. Further, the Court will deny Plaintiff’s
motion to amend. The deficiencies noted above – particularly the lack of specificity with
respect to the FCA claims – were described in Defendants’ papers in support of their
motion to dismiss. Despite receiving notice of these deficiencies, Plaintiff filed a
proposed SAC that failed to cure them. Accordingly, the Court finds that further
amendments would be futile. See Grayson v. Mayview State Hosp., 293 F.3d 103, 108
(3d Cir. 2002) (citing Foman v. Davis, 371 U.S. 178, 182 (1962) (noting that leave to
amend may be denied where the amendment would be futile). The Court will thus deny
Plaintiff’s motion to amend and dismiss the FAC with prejudice.
III.

CONCLUSION

For the reasons stated above, Defendants’ motion to dismiss is GRANTED.
Plaintiff’s motion to amend is DENIED. The FAC is DISMISSED WITH
PREJUDICE. An appropriate order follows.

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/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: July 23, 2015

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