Melvin Murphy v. Capella Education Company , 589 F. App'x 646 ( 2014 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-2265
MELVIN MURPHY,
Plaintiff – Appellant,
v.
CAPELLA EDUCATION COMPANY,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Claude M. Hilton, Senior
District Judge. (1:13-cv-00655-CMH-TRJ)
Argued: October 29, 2014 Decided: December 5, 2014
Before NIEMEYER, WYNN, and THACKER, Circuit Judges.
Affirmed by unpublished per curiam opinion. Judge Wynn wrote a
separate opinion concurring in the result.
ARGUED: John Chapman Petersen, SUROVELL ISAACS PETERSEN & LEVY
PLC, Fairfax, Virginia, for Appellant. Brendan David O’Toole,
WILLIAMS MULLEN, Richmond, Virginia, for Appellee. ON BRIEF:
Jason Frank Zellman, Stephen Patrick Pierce, SUROVELL ISAACS
PETERSEN & LEVY PLC, Fairfax, Virginia, for Appellant. Todd R.
Sorensen, CAPELLA EDUCATION COMPANY, Minneapolis, Minnesota, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Melvin Murphy (“Appellant”) appeals the district
court’s dismissal of his amended complaint (the “Amended
Complaint”), which purports to bring fraud-based claims against
Appellee Capella Education Co. (“Capella”). The district court
dismissed the Amended Complaint pursuant to Rule 9(b) of the
Federal Rules of Civil Procedure because Appellant failed to
allege fraud with sufficient particularity.
The Amended Complaint alleges that Appellant paid
large sums of tuition in pursuit of a Ph.D., only to fail the
comprehensive examinations, which was a required step on the
path to earning a Ph.D. He does not allege with particularity
that anyone at Capella assured him he would pass such
examinations, that he would complete the program in a certain
period of time, or that statements in the published materials
sent by Capella made any such representations. He also alleges
that an unspecified number of nameless individuals shared the
same experience, and thus Capella is essentially a “diploma mill
without the diplomas.” J.A. 103 (internal quotation marks and
punctuation omitted). 1 Such allegations must meet the heightened
1
Citations to the “J.A.” refer to the Joint Appendix filed
by the parties in this appeal.
2
pleading standard set forth in the Federal Rules. Because
Appellant fails to meet this standard, we affirm.
I.
The Amended Complaint, which we are obliged to view in
the light most favorable to Appellant, see Anand v. Ocwen Loan
Servicing, LLC, 754 F.3d 195, 198 (4th Cir. 2014), contains the
following allegations.
A.
Murphy, a resident of Fairfax County, Virginia,
received a bachelor’s degree from American University and an
M.B.A. from the University of Phoenix. He then sought to obtain
a Ph.D. for purposes of his professional development in the
business management field. Having seen several online
advertisements for Capella’s doctoral programs in business
management, Appellant contacted Capella and expressed an
interest. Capella “aggressively responded” to Appellant,
“calling and emailing him and providing him with brochures and
other marketing materials in an effort to enroll him in its
doctoral program.” J.A. 104.
In response to his inquiries, Capella sent two
publications to Appellant: the 2008 University Guide (the
“Guide”) and the “What Can I Do?” Brochure (the “Brochure”).
The Guide is a 40-page color booklet that, inter alia, describes
the Ph.D. program in Organization and Management with a
3
specialization in Leadership (the “Leadership Ph.D.”). The
Guide includes the following description of the Leadership Ph.D.
program:
Enhance your ability to manage and lead in
today’s fast-paced, global business
environment with the Leadership PhD
specialization. The curriculum offers a
strong foundation in key business functions,
along with focused leadership courses that
allow you to carve your niche in such areas
as global leadership, leadership
development, entrepreneurial leadership, and
upper-echelon leadership. You will also
conduct and apply advanced doctoral research
to the actual challenges facing complex,
21st-century organizations. People who
choose this specialization are often
pursuing faculty positions or leadership or
consulting roles in a variety of military,
government, business, and nonprofit
settings.
J.A. 176. The Guide also contains testimonials and photographs
of individuals purporting to be Capella students. One of these
purported students is Sidney Wynn, who, like Appellant, is an
African-American veteran. The Guide indicates that Wynn earned
a master’s degree and was enrolled in the Organization and
Management Ph.D. program at Capella. The statement below his
picture reads, “I chose the Capella master’s degree program as a
way to move myself forward and provide an edge when I return to
civilian life.” Id. at 164.
The Brochure is a four-page brochure stating the
following:
4
The Leadership specialization prepares
leaders for today’s fast-paced and complex
global enterprise system . . . .
Executives, mid-level managers, and those in
the initial stages of their careers are
prepared to develop real-world answers to
the challenges of the twenty-first century
organization. This specialization prepares
doctoral leaders to lead, consult, or teach
in the area of leadership from an informed,
strategic viewpoint, creating practical
solutions to real-world problems.
J.A. 199. The Brochure also lists “[c]ommon job titles” for
graduates of the Leadership Ph.D. program, including faculty
member, dean, leadership consultant, CEO, CFO, president, and
director. Id.
In addition to the Guide and the Brochure, Capella
enrollment counselors also confirmed to Appellant that the
Leadership Ph.D. existed, that he “would earn that degree once
he had fulfilled the requisite coursework,” and that “the degree
would be useful in his chosen profession.” J.A. 108-09.
B.
Based on the representations made in the Guide, in the
Brochure, and by enrollment counselors, Appellant applied to
Capella’s Leadership Ph.D. program in late 2008 and enrolled in
the program in 2009. From 2009 to 2011, he performed well and
was very involved in school activities. He communicated with
his advisor and took classes on a quarterly basis. He attended
three residency programs or “colloquia,” where he met other
5
Capella students. J.A. 110. Throughout the program, Appellant
was “in regular contact” with his advisors about progress,
course selection, and difficulties with his studies. Id.
Appellant estimates he emailed and called such advisors twice a
month. Appellant earned a GPA of 3.75, along with a $5,000
scholarship to apply toward his tuition. He was even selected
as a “Capella Ambassador,” and in that capacity he discussed the
school’s academic offerings with new and potential students.
Id.
After finishing his course work, in the fall of 2011,
Appellant took the comprehensive examinations, or “Comps,” which
is the last step before a Capella Ph.D. student begins to write
his or her dissertation. According to the Amended Complaint,
the Comps are “purportedly . . . written exam[s] which feature[]
multiple essay questions in which the doctoral candidate
demonstrates knowledge of the subject matter, as well as
writing, research, and critical thinking proficiency.” J.A.
111. If a student fails the Comps on the first try, he or she
may try again, but on the second failed attempt, the student is
dis-enrolled. The Comps term is treated as a course, requiring
approximately $4,000 in tuition per term. Students are
permitted to receive feedback during the process of writing the
Comps and, in response, perform a “rewrite,” but this process
6
normally lengthens the Comps process, adding more to the tuition
bill. Id. at 112-13.
Appellant’s initial attempt at passing the Comps was
in the fall of 2011. As the “author of several books and
multiple published articles,” he “expected to pass the writing
skills portion.” J.A. 112. However, after submitting a draft
for feedback, he received “arbitrary and pretextual” negative
criticism, and thus exercised his option to perform a rewrite.
Id. After completing the rewrite, in December 2011, Capella
informed Appellant that he failed the Comps. He thus decided to
take an intervention writing class, a remedial course that cost
an additional $4,000. He received an “A” in that class.
In the summer of 2012, Appellant once again attempted
to take the Comps, paying another $4,000 to do so. After being
subject to “technical and arbitrary criticism,” Appellant’s
essay was flagged for plagiarism, “apparently because he failed
to enclose a direct quote in quotation marks.” J.A. 113. The
essay was returned to him ungraded, and he was again given the
option of a rewrite. He did so, and was later informed that he
failed the Comps for a second time, meaning that he would be
dis-enrolled. After Appellant appealed his second failed
attempt, Capella informed Appellant that he could take the Comps
a third time if he re-enrolled in the Comps course at an
additional cost of $4,000. At this point, Appellant had spent
7
over $70,000 in tuition. He elected not to pay the additional
$4,000 “for what experience had shown him to be a fruitless
endeavor.” Id. at 114. Capella also informed him that he could
use the coursework thus far completed to earn a master’s degree,
but only if he paid an additional $4,000 toward a capstone
course. Appellant rejected this offer because he already held a
master’s degree. Appellant never received a degree from
Capella.
C.
On April 30, 2013, Appellant filed suit against
Capella in the Circuit Court of Fairfax County, Virginia,
alleging violation of the Virginia Consumer Protection Act (the
“VCPA”). Capella removed the matter to the Eastern District of
Virginia and soon thereafter filed a motion to dismiss pursuant
to Rule 12(b)(6). The district court granted the motion on July
25, 2013, explaining that the complaint did not state a VCPA
violation with sufficient particularity, but giving Appellant 14
days to amend his complaint. On August 8, 2013, Appellant filed
the Amended Complaint alleging (1) violation of the VCPA; (2)
fraud; and (3) constructive fraud.
In the Amended Complaint, Appellant claims he enrolled
in Capella because of the “false advertising” and “false
statements” made by Capella and its representatives. J.A. 107.
He avers that he contacted over 50 other Capella students,
8
“[m]ost” of whom were “pursuing a [Leadership Ph.D.] degree,”
and “[e]ach person” stated that he or she received similar
enrollment brochures; did not know about the Comps requirement
or the overall low rate of passage; enrolled, took classes, and
received a high GPA without any indication or warning of
deficiency; took the Comps and failed them based on “arbitrary
and subjective reasons unrelated to the substance of the
subject”; took remedial classes or retook the Comps and thus
paid more tuition; and finally, became dis-enrolled without
receiving a Ph.D. after having paid at least $60,000 in tuition.
Id. at 114-15.
Appellant also alleges Capella awards a “miniscule
number of doctoral degrees (less than 10% of enrolled
candidates)” and awards no degrees at all in the Leadership
Ph.D. program. J.A. 115. He also avers that Capella
administers the Comps in such a way as to maximize its financial
yield (that is, by “requiring every candidate to use at least a
‘second’ quarter to complete the Comps”), and uses the Comps to
“systematically dismiss doctoral candidates who have otherwise
completed the course work.” Id. at 116; see also id. at 117
(The Comps were used “as a pretext to punitively dis-enroll
students (after they spend all their available funds).”).
9
Appellant categorizes Capella’s alleged falsities as
“False Statements” and “Material Omissions.” The alleged False
Statements are the following:
(1) “the existence of the Leadership Ph.D.
degree”;
(2) “the existence of successful graduates
who had obtained the Leadership Ph.D.
degree”; and
(3) “the existence of satisfied customers
like Mr. Wynn[.]”
Id. at 107. These statements were allegedly “repeated and
reiterated by Capella enrollment counselors.” Id. (internal
quotation marks omitted). The alleged Material Omissions are
the following:
(1) “[T]here was no doctoral degree
available in the [Leadership Ph.D. program]
and thus no ‘graduates’ of that program”;
(2) “[S]tudents like Mr. Wynn . . . did not
actually exist and/or were not enrolled in
the represented programs and never made the
statements attributed to them”;
(3) “[A] doctoral candidate in any subject
must pass the [Comps] in order to be
eligible for the Ph.D. and most candidates
fail these exams”; and
(4) “[T]he overwhelming majority of doctoral
‘candidates’ (at least 90%) did not actually
obtain their desired degree and NO
candidates in the Leadership Ph.D. program
actually obtained that degree in that
field.”
10
Id. at 108. Appellant also alleges that no one from Capella
informed him that his progress was subpar, that he was unlikely
to pass the Comps, or that he would fail to complete the program
for any other reason.
D.
Capella filed a motion to dismiss the Amended
Complaint on August 26, 2013. On September 20, 2013, the
district court ordered the case be stricken from the docket.
The court entered a three-page memorandum opinion granting
Capella’s motion on October 4, 2013. The district court
reasoned that Appellant’s claims were not “supported with . . .
particularity” pursuant to Rule 9(b) of the Federal Rules of
Civil Procedure, explaining, “[Appellant] rather attributes the
same indefinite statements to [Capella’s] various promotional
materials and unidentified agents at indefinite times.” Murphy
v. Capella Educ. Co., No. 1:13-cv-655, 2013 WL 5525688, at *1
(E.D. Va. Oct. 4, 2013) (J.A. 259-60). Appellant timely noted
this appeal.
II.
We review a district court’s dismissal of a complaint
pursuant to Rule 12(b)(6) de novo. See United States ex rel.
Oberg v. Pa. Higher Educ. Assistance Agency, 745 F.3d 131, 136
(4th Cir. 2014). Appellant argues that the dismissal was error
because the Amended Complaint satisfies the pleading standards
11
of both Rule 8(a) 2 and Rule 9(b) of the Federal Rules of Civil
Procedure. We assume arguendo that the Amended Complaint is
sufficiently “plausible on its face” pursuant to Rule 8(a),
i.e., that Appellant “plead[ed] 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); see also Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007). We thus proceed to discuss the Amended
Complaint’s viability pursuant to Rule 9(b). See United States
ex rel. Ahumada v. NISH, 756 F.3d 268, 280 (4th Cir. 2014)
(Allegations of fraud must “meet the more stringent
‘particularity’ requirement of Federal Rule of Civil Procedure
9(b)” in addition to the requirements of Rule 8). 3
2
Rule 8(a) provides, “A pleading that states a claim for
relief must contain . . . a short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed. R.
Civ. P. 8(a)(2).
3
Although Ahumada was a False Claims Act case, its holding
-- that both Rule 8(a) and 9(b) hurdles must be jumped at the
motion to dismiss stage -- applies equally to all fraud cases.
See United States ex rel. Nathan v. Takeda Pharms. N. Am., Inc.,
707 F.3d 451, 456 (4th Cir. 2013) (“The multiple purposes of
Rule 9(b) . . . are as applicable in cases brought under the
[FCA] as they are in other fraud cases.”); see also United
States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d
1047, 1055 (9th Cir. 2011) (“[C]laims of fraud or mistake . . .
must, in addition to pleading with particularity, also plead
plausible allegations.”); Am. Dental Ass’n v. Cigna Corp., 605
F.3d 1283, 1290 (11th Cir. 2010) (“[T]he Twombly plausibility
(Continued)
12
III.
Rule 9(b) provides, “In alleging fraud . . . , a party
must state with particularity the circumstances constituting
fraud . . . . Malice, intent, knowledge, and other conditions
of a person’s mind may be alleged generally.” Fed. R. Civ. P.
9(b) (emphasis supplied). We have explained that the purpose
of this higher pleading standard is to “provid[e] notice to a
defendant of its alleged misconduct, . . . prevent[] frivolous
suits, . . . eliminat[e] fraud actions in which all the facts
are learned after discovery, and . . . protect[] defendants from
harm to their goodwill and reputation.” United States ex rel.
Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 456 (4th
Cir. 2013) (internal quotation marks omitted).
In order to satisfy Rule 9(b), a plaintiff must “at a
minimum, describe the time, place, and contents of the false
representations, as well as the identity of the person making
the misrepresentation and what he obtained thereby.” Nathan,
707 F.3d at 456 (internal quotation marks omitted) (emphasis
supplied). He or she must set forth “the who, what, when,
where, and how of the alleged fraud” before access to the
standard applies to all civil actions[.]”); United States ex
rel. Grubbs v. Kanneganti, 565 F.3d 180, 186 (5th Cir. 2009)
(“Rule 9(b) supplements but does not supplant Rule 8(a)’s notice
pleading.”).
13
discovery process should be granted. United States ex rel.
Wilson v. Kellogg Brown & Root, 525 F.3d 370, 379 (4th Cir.
2008) (internal quotation marks omitted). Against this
backdrop, we proceed to analyze the Amended Complaint.
A.
Alleged Fraud and Constructive Fraud
Counts Two and Three of the Amended Complaint purport
to allege Virginia common law fraud and constructive fraud. In
order to succeed on such claims, a plaintiff must prove (1)
false representation of a material fact; (2) made intentionally,
in the case of actual fraud, or negligently, in the case of
constructive fraud; (3) reliance on that false representation to
plaintiff’s detriment; and (4) resulting damage. Caperton v.
A.T. Massey Coal Co., Inc., 740 S.E.2d 1, 9 (Va. 2013). In the
Amended Complaint, Appellant asserts that the false
representation element is satisfied by the alleged False
Statements and Material Omissions. 4 Therefore, we look to each
of these items to determine if a particularized fraud claim has
been pleaded.
4
“Virginia law recognizes that an omission may constitute a
false representation in certain circumstances.” Weiss v.
Cassidy Dev. Corp., No. 206766, 2003 WL 1563425 at *4 (Vir. Cir.
Ct. 2003) (citing Van Deusen v. Snead, 441 S.E.2d 207, 211 (Va.
1994)).
14
1.
False Statements
a.
The first alleged False Statement set forth in the
Amended Complaint is that Capella represented that the
Leadership Ph.D. degree actually “exist[ed],” when in reality
the program was a “sham” and Capella was a “diploma mill without
the diplomas.” J.A. 107, 110, 103 (internal quotation marks and
punctuation omitted). More specifically, Appellant claims that
the Brochure and the Guide “consciously gave the impression that
a Capella student could enroll, take the requisite classes and
obtain a Ph.D. in the Leadership program.” Id. at 107. This
“was a false statement” because Capella “has never awarded a
Leadership Ph.D. in Organization and Management and it never
will, as the program itself has been discontinued.” Id.
After examining the specific allegations underlying
these general assertions, we conclude that Appellant has failed
to plead “the who, what, when, where, and how of the alleged
fraud.” Wilson, 525 F.3d at 379 (internal quotation marks
omitted). First, Appellant states broadly that Capella “had no
track record of producing doctoral graduates,” and attempts to
support this claim by stating that of the 5,018 students
enrolling in doctoral programs in 2008, “not a single one had
earned a degree through 2010.” J.A. 103. But he does not link
15
the two by alleging that any doctoral student enrolling in 2008
should have earned such a degree in two years. To the contrary,
the Amended Complaint shows that Appellant himself was not
eligible to take the Comps until two years after he enrolled,
and one cannot write his or her dissertation and earn a degree
until finishing the Comps. Nor does Appellant allege that any
agent of Capella assured him he would have a degree in two
years.
Second, Appellant claims, of students who enrolled in
Capella seeking a doctorate degree in 2008 or 2009, “less than
10% would actually receive such a degree.” J.A. 103; see also
id. at 115 (“Capella awards a miniscule number of doctoral
degrees . . . and it awards no Ph.D. degrees in the fraudulent
‘Leadership Ph.D. program.’”). But again, Appellant does not
allege that students enrolling in 2008 and 2009 should have
received their degrees by the time the Amended Complaint was
filed in August 2013. In fact, he appears to have relied only
on his own vague investigative work. See id. at 115 n.3 (“In
his investigation, Mr. Murphy has not contacted a single student
in the Leadership Ph.D. program that actually obtained a
Ph.D.”).
Third, Appellant explains that the Comps evinced an
effort to “weed out” students after “they have paid the maximum
possible tuition.” J.A. 115. He claims Capella administers the
16
Comps “in such a manner as to maximize its financial yield,
i.e., by requiring every candidate to use at least a ‘second’
quarter to complete the Comps” and alleges that his failed Comps
were based on “arbitrary and pretextual” criteria. Id. at 116,
112. These allegations, too, fail for lack of particularity.
Appellant does not provide the specific criteria used to
evaluate his Comps, does not explain how it is arbitrary, and
does not provide any specific instances of anyone besides
himself being “weed[ed] out” and/or having to use a second
quarter to take the Comps. J.A. 115. 5 Cf. Kohler v. Hirst, 460
F. Supp. 412, 420 (E.D. Va. 1978) (“[P]laintiff has merely
5
Even if Appellant did provide the criteria used for the
Comps review, we are certainly not in the business of reviewing
academic determinations, nor should we be. See Regents of the
Univ. of Mich. v. Ewing, 474 U.S. 214, 225 n.11 (1985)
(“University faculties must have the widest range of discretion
in making judgments as to the academic performance of students
and their entitlement to promotion or graduation.” (internal
quotation marks omitted)); Sandlin v. Johnson, 643 F.2d 1027,
1029 (4th Cir. 1981) (“Decisions by educational authorities
which turn on evaluation of the academic performance of a
student as it relates to promotion are peculiarly within the
expertise of educators and are particularly inappropriate for
review in a judicial context.”); Clark v. Whiting, 607 F.2d 634,
638 (4th Cir. 1979) (review of “denial of academic promotion
premised on purely academic considerations . . . is
inappropriate”); see also Bd. of Curators of Univ. of Missouri
v. Horowitz, 435 U.S. 78, 90 (1978) (“Like the decision of an
individual professor as to the proper grade for a student in his
course, the determination whether to dismiss a student for
academic reasons requires an expert evaluation of cumulative
information and is not readily adapted to the procedural tools
of judicial or administrative decisionmaking.”).
17
stated a conclusion; she has not alleged, even briefly, how or
why defendants’ conduct was arbitrary and capricious.”).
Although he generally refers to “over fifty other Capella
students” who had a similar experience, this alone is not
sufficient. J.A. 114. He does not describe the “time, place,
and contents of the false representations,” nor does he identify
the people making such representations or the people receiving
them. 6 United States ex rel. Owens v. First Kuwaiti Gen. Trading
& Contracting Co., 612 F.3d 724, 731 (4th Cir. 2010).
Finally, we cannot ignore Capella’s citation to the
National Center for Education Statistics (“NCES”) Digest of
Education Statistics, which shows that from 1999-2009, Capella
awarded 3,421 doctoral degrees and was ranked 41st among the 60
institutions conferring the most doctoral degrees in the nation.
See Digest of Educational Statistics, National Center for
Education Statistics, http://nces.ed.gov/programs/digest/d10/
tables/dt10_336.asp (last visited Nov. 14, 2014) (saved as ECF
opinion attachment). 7 These statistics contradict Appellant’s
6
Indeed, per his own allegation, these unnamed 50 people
were not all enrolled in the program about which Appellant
complains. See J.A. 114 (“Most of these [50] were pursuing a
doctoral degree in the [Leadership Ph.D.] program.” (emphasis
supplied)).
7
We can take judicial notice of the statistics available on
this website. See Fed. R. Evid. 201(c)(1) (authorizing a court
to take judicial notice without a request from a party); Philips
(Continued)
18
assertion that Capella is simply a diploma mill without the
diplomas.
b.
The second alleged False Statement is based on the
following allegations: the Guide featured “individuals . . .
identified as . . . successful graduates of Capella,” when they
were not, J.A. 105; and over 50 other Capella students received
enrollment brochures with people “falsely portrayed as
‘successful’ . . . graduates[] of the Leadership Ph.D. program,
or a similar doctoral program,” id. at 114-15. These
allegations likewise fail to reach the level of particularity
required under Rule 9(b). Except for Wynn (who was never
actually portrayed as a Ph.D. “graduate” in the Guide),
Appellant does not mention anyone specifically who was portrayed
as a Capella graduate, let alone a Leadership Ph.D. graduate;
indeed, a close review of the Guide and the Brochure
demonstrates the opposite -- there are no statements or pictures
of anyone purporting to be a graduate of the Leadership Ph.D.
program.
v. Pitt Cnty. Mem’l Hosp., 572 F.3d 176, 180 (4th Cir. 2009)
(“In reviewing a Rule 12(b)(6) dismissal, we may properly take
judicial notice of matters of public record” including “publicly
available statistics.” (internal quotation marks and alteration
omitted)).
19
Therefore, Appellant’s claims relating to the second
alleged False Statement also fail to allege with particularity
that Capella made a false representation to Appellant.
c.
As to the third alleged False Statement, Appellant
claims that enrollment counselors and the Guide portrayed
certain students and graduates as “satisfied with the
[Leadership Ph.D.] program,” when in fact, such satisfied
students did not “exist[].” J.A. 121, 107. On this point,
Appellant also alleges that when Capella sent the Guide to him,
Wynn was no longer a Capella student, much less pursuing the
Leadership Ph.D. Further, Appellant alleges, the statement in
the Guide attributable to Wynn was “fabricated,” “deceptive,
dishonestly [sic] and openly false.” Id. at 105-06. Indeed,
Appellant goes so far as to allege that Wynn was “mythical,”
despite the fact that he acknowledges his existence by alleging
that Wynn had not been a student since 2007. Id. at 116, 106.
However, Appellant fails to describe accurately the
“contents of the false representations.” Nathan, 707 F.3d at
455-56 (internal quotation marks omitted). Again, the only
student he mentions by name is Wynn. He claims that Wynn
“endorsed Capella’s academic program” and was “a current student
in the Leadership Ph.D. program,” both of which he claims were
false. J.A. 105. However, a close examination of Wynn’s quote
20
in the Guide belies these claims: Wynn’s quote reads, “I chose
the Capella master’s degree program as a way to move myself
forward and provide an edge when I return to civilian life.”
J.A. 164 (emphasis supplied). Thus, the endorsement was of the
master’s program, not the Leadership Ph.D. program. Appellant
fails to allege how endorsement of the master’s program served
as the basis for a false representation with regard to the Ph.D.
program. Furthermore, the Guide does not specify that Wynn was
a current student in the Leadership Ph.D. program, as Appellant
alleges; rather, it simply states that Wynn was enrolled in the
Organization and Management program, of which Leadership is but
one concentration.
Therefore, while the first and second alleged False
Statements fail for particularity, this one fails not only for
want of particularity, but also because the supporting
allegations are actually belied by the attached exhibits. See
Cooksey v. Futrell, 721 F.3d 226, 234 (4th Cir. 2013) (In
reviewing the dismissal of a complaint, “[w]e must . . .
consider documents incorporated into the complaint by
reference.” (internal quotation marks omitted)); Veney v. Wyche,
293 F.3d 726, 730 (4th Cir. 2002) (At the motion to dismiss
stage, we need not “accept as true allegations that contradict
matters properly subject to judicial notice or by exhibit.”
(internal quotation marks omitted)).
21
2.
Material Omissions
a.
Based on the above analysis, the first and second
alleged Material Omissions -- i.e., a doctoral degree was not
available in the Leadership Ph.D. program and thus there were no
“graduates” of that program, and students like Wynn did not
actually exist and/or were not enrolled in the represented
programs and never made the statements attributable to them --
likewise do not rise to the level of particularity required
under Rule 9(b) to constitute a false representation.
b.
The third alleged Material Omission -- a doctoral
candidate in any subject must pass the Comps, and most
candidates fail these exams -- is also not pleaded with
sufficient particularity to support a claim of fraud. First,
to the extent Appellant alleges he did not know that he had to
pass the Comps to earn a degree, this allegation is belied by
the Guide, which itself mentions the comprehensive examinations
in two places. See J.A. 169 (“In [Ph.D. colloquia] Track 3, you
affirm competencies, gain insight into the comprehensive
examination, and focus on advanced research methods[.]”
(emphasis supplied)); id. at 192 (listing tuition costs for
“comprehensive examination” for Ph.D. students).
22
Second, to the extent Appellant alleges that no one
told him that most candidates fail the Comps, he does not
sufficiently allege that this equates to an omission or false
representation of a “material fact.” Caperton, 740 S.E.2d at 9.
He does not specifically allege why -- even if he knew that
“most candidates” fail the exams -- he would have declined to
enroll. Indeed, Appellant himself states that he enrolled “with
expectations” of a doctoral degree, not assurances. Id. at 112.
See Supervalu, Inc. v. Johnson, 666 S.E.2d 335, 342 (Va. 2008)
(“[F]raud ordinarily cannot be predicated on unfulfilled
promises or statements regarding future events.”).
To the contrary, he admits that as an “author of
several books and multiple published articles, [he] expected to
pass the writing skills portion,” and this belief was not based
on a false representation or omission on the part of Capella,
nor does he allege it to be. J.A. 112. Appellant alleges
generally that he was doing well in his classes, keeping in
touch with his advisors, and receiving no negative feedback, but
again, he fails to link these facts with the third alleged
Material Omission. He does not specifically allege that Capella
represented that his success in the course work portion of the
program would equate to success on the Comps. To the contrary,
Capella actually provided a colloquia to “gain insight” into the
23
Comps, which implies that successfully finishing the course work
does not ensure success on the Comps. J.A. 169.
c.
The fourth alleged Material Omission -- i.e., the
overwhelming majority of doctoral candidates (at least 90
percent) did not actually obtain their desired degree and no
candidates in the Leadership Ph.D. program actually obtained
that degree in that field -- also fails for particularity, based
on the analysis set forth in Sections III.A.1.a-c, supra.
B.
Alleged VCPA Violations
Count One of the Amended Complaint alleges that
Capella violated four subsections of the VCPA:
• Va. Code Ann. § 59.1-200(A)(5)
(“Subsection 5”) (prohibiting the
misrepresentation that “goods or services
shave certain quantities, characteristics,
ingredients, uses, or benefits”);
• Va. Code Ann. § 59.1-200(A)(8)
(“Subsection 8”) (prohibiting the
advertisement of goods or services with
“intent not to sell them as advertised, or
with the intent not to sell at the price or
upon the terms advertised”);
• Va. Code Ann. § 59.1-200(A)(13)
(“Subsection 13”) (prohibiting the
enforcement of a void or unenforceable
penalty clause); and
• Va. Code Ann. § 59.1-200(A)(14)
(“Subsection 14”) (prohibiting the use of
24
deception, fraud, or misrepresentation in
connection with a consumer transaction).
Each of these claims is premised on the alleged False Statements
and Material Omissions.
By its terms, subsection 5 requires a
“misrepresent[ation],” Va. Code Ann. § 59.1-200(A)(5), and as
explained supra, Appellant does not allege with specificity
facts that would constitute a misrepresentation. This claim
fails.
As the basis for his subsection 8 claim, Appellant
alleges Capella “advertised a purported doctoral program in
[Leadership] and then provided a different, undisclosed program
with significant additional time and costs . . . without any
possibility of obtaining a degree.” J.A. 119. But Appellant
fails to allege with particularity what sort of program was
advertised (e.g., a program that should take five years, a
program in which he would pass the Comps on the first try, or a
program that should cost a certain amount). Therefore, this
claim fails as well.
Subsection 13 prohibits the use of a void or
unenforceable penalty clause in “any contract or lease,” or an
attempt to collect penalties under a void or unenforceable
clause. Va. Code Ann. § 59-1.200(A)(13). Appellant alleges no
such contract, lease, or clause at play in this matter; rather,
25
he attempts in vain to liken the remedial coursework to an
unlawful penalty clause. This claim also fails.
Finally, subsection 14 prohibits using
misrepresentation, deception, or false pretense in connection
with a consumer transaction. As explained above, Appellant has
not made sufficiently particular allegations of such deceptive
behavior. This claim likewise fails.
C.
Other Deficiencies
In addition to the deficiencies mentioned above, we
note several discrepancies and mischaracterizations in
Appellant’s case, which further weaken the Amended Complaint.
• Appellant characterized the Leadership
Ph.D. program as a “sham,” J.A. 110,
called it “fraudulent,” id. at 115, and
stated that Capella falsely portrayed that
the program “exist[ed]” at all, id. at
116. But Appellant admits that he
participated in the program for nearly
three years, earning high marks and even
encouraging others to enroll in Capella.
See id. at 110.
• Appellant used Wynn as a central character
-- indeed, the only named student -- in
the Amended Complaint, but then stated at
oral argument, “Mr. Wynn is a side issue.”
Oral Arg. at 17:07-09, Murphy v. Capella
Educ. Co., No. 13-2265, (4th Cir. Oct. 29,
2014), available at http://www.ca4.
uscourts.gov/oral-argument/listen-to-oral-
arguments#audiocurrent.
• Appellant claims Capella falsely
represented that Wynn was “satisfied with
26
the [Leadership Ph.D.] program,” J.A. 121,
but his quote in the Guide says no such
thing, see id. at 164.
• Appellant claims the list of “common job
titles” in the Brochure “confirms the
actual existence of graduates who have
completed the Ph.D. Leadership program and
found employment,” J.A. 106-07 (emphasis
in original), and shows that Capella made
false representations about “the future
employment prospects of its ‘graduates,’”
id. at 116. But the Brochure says no such
thing.
IV.
Appellant has not pleaded with particularity that
Capella made any false representations of material facts to him,
or that its conduct rises to the level of a VCPA violation.
Thus, his claims fail under Rule 9(b) of the Federal Rules of
Civil Procedure. The judgment of the district court is
AFFIRMED.
27
WYNN, Circuit Judge, concurring in the result:
Because some of the allegations in Plaintiff’s Amended
Complaint fail the test of particularity under Rule 9(b) and
others are so riddled with factual holes and inconsistencies
that they cannot support a plausible claim for relief under Rule
12(b)(6) of the Federal Rules of Civil Procedure, see Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009), I concur in the result
reached by the majority opinion.
28