SHIRLEY POLANCO, ETC. VS. STAR CAREER ACADEMY (L-0415-13, CAMDEN COUNTY AND STATEWIDE) ( 2018 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3756-15T2
SHIRLEY POLANCO, individually
and on behalf of all others
similarly situated,
Plaintiff-Respondent/
Cross-Appellant,
v.
STAR CAREER ACADEMY, SC ACADEMY
HOLDINGS, INC. and SC ACADEMY,
INC.,
Defendants-Appellants/
Cross-Respondents.
_____________________________________
Argued May 15, 2018 – Decided July 26, 2018
Before Judges Fisher, Sumners and Natali.
On appeal from Superior Court of New Jersey,
Law Division, Camden County, Docket No.
L-0415-13.
David Jay argued the cause for appellants/
cross-respondents (Greenberg Traurig, LLP,
attorneys; David Jay, Jason H. Kislin and
Paige S. Nestel, on the brief).
Patricia V. Pierce and Thomas More Marrone
argued the cause for respondent/cross-
appellant (Greenblatt Pierce Funt & Flores,
LLC, and MoreMarrone, LLC, attorneys; Patricia
V. Pierce and Thomas More Marrone, on the
brief).
Joseph B. Schmit (Phillips Lytle, LLP) of the
New York bar, admitted pro hac vice, argued
the cause for intervenor Summer Street Capital
Partners, LLC (John R. Altieri and Joseph B.
Schmit, attorneys; Joseph B. Schmit, of
counsel; John R. Altieri, on the brief).
Laurence B. Orloff argued the cause for
intervenors Andrew Kaplan and Quad Partners
LLC (Orloff, Lowenbach, Stifelman & Siegel,
PA, and Arthur H. Aufses III (Kremer Levin
Naftalis & Frankel, LLP) of the New York bar,
admitted pro hac vice, attorneys; Laurence B.
Orloff, Xiao Sun and Arthur H. Aufses, III,
on the brief).
Stephen M. Orlofsky argued the cause for
intervenors Gemini Investors IV, LP, Gemini
Investors V, LP, James Rich and Robert Menn
(Blank Rome LLP, attorneys; Stephen M.
Orlofsky, David C. Kistler and Michael A.
Iannucci, of counsel and on the brief).
PER CURIAM
This class action alleges violations of the New Jersey
Consumer Fraud Act (Act), N.J.S.A. 56:8-1 to -20. After an adverse
jury verdict, defendants Star Career Academy, SC Academy Holdings.
Inc. and SC Academy, Inc. (Star) appeal from the final judgment
and several pre- and post-trial orders. Star claims:
POINT I
THE TRIAL COURT'S REFUSAL TO INTERPRET THE
[SURGICAL TECHNOLOGY] LAW ON SUMMARY JUDGMENT
WAS REVERSIBLE ERROR.
2 A-3756-15T2
POINT II
THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY
PRECLUDING STAR FROM PRESENTING EVIDENCE TO
SHOW THAT PLAINTIFF HAD NOT ESTABLISHED THE
ELEMENTS OF THE NJCFA CLAIM THAT SHE WAS
ASSERTING ON BEHALF OF THE CLASS.
A. IT WAS REVERSIBLE ERROR TO PRECLUDE
STAR FROM PRESENTING JOBS EVIDENCE AND
"REASONS FOR UNEMPLOYMENT EVIDENCE" TO
SHOW THAT PLAINTIFF HAD NOT PROVEN HER
NJCFA CLAIM.
B. IT WAS REVERSIBLE ERROR TO PRECLUDE
STAR FROM PRESENTING "VALUE" EVIDENCE TO
SHOW THAT PLAINTIFF HAD NOT PROVEN HER
NJCFA CLAIM.
POINT III
THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY
REFUSING TO DECERTIFY A CLASS EVEN THOUGH
COMMON ISSUES DID NOT PREDOMINATE OVER
INDIVIDUAL ONES.
Plaintiff Shirley Polanco, individually and as the class
representative, seeks to affirm the final judgment, and she cross-
appeals claiming the court improperly reduced her statutorily
authorized attorney fee award. She also appeals from the court's
order denying her motion for leave to file a second class action
complaint to add intervenor Andrew Kaplan (Kaplan) and
unidentified defendants as parties. Specifically, she claims:
3 A-3756-15T2
POINT I1
THE TRIAL COURT COMMITTED REVERSIBLE ERROR
WHEN IT DENIED PLAINTIFF'S TIMELY MOTION TO
ADD A SINGLE INDIVIDUAL DEFENDANT, AND
CORPORATE AND INDIVIDUAL "DOE" DEFENDANTS.
THE COURT DENIED PLAINTIFF'S REQUEST MORE THAN
ONE YEAR BEFORE TRIAL AND EVEN BEFORE CLASS-
WIDE MERITS DISCOVERY HAD COMMENCED, DESPITE
NO SHOWING OF ANY PREJUDICE TO THE PROPOSED
INDIVIDUAL MUCH LESS TO ANY "DOE," WHOSE
IDENTITY WAS UNKNOWN AT THAT STAGE.
A. THE LEGAL STANDARD APPLICABLE TO A
MOTION FOR LEAVE TO AMEND.
B. THE TRIAL COURT ABUSED ITS DISCRETION
BY DENYING PLAINTIFF'S MOTION FOR LEAVE
TO AMEND.
POINT II
THE TRIAL COURT COMMITTED REVERSIBLE ERROR IN
CONNECTION WITH ITS FEE AWARD TO CLASS COUNSEL
A. THE APPLICABLE LEGAL STANDARD FOR
AWARDING FEES AND COSTS.
B. THE REQUESTED FEES ARE APPROPRIATE
UNDER THE RENDINE/WALKER2 FACTORS.
1. THE TIME SPENT AND RATES
REQUESTED ARE REASONABLE.
C. A 75% FEE ENHANCEMENT IS APPROPRIATE.
1
We have renumbered plaintiff's appellate points for ease of
reference.
2
Rendine v. Pantzer, 141 N.J. 292 (1995); Walker v. Giuffre, 209
N.J. 124 (2012).
4 A-3756-15T2
After a thorough review of the record, we affirm the court's
order denying Star's motion for summary judgment as genuine issues
of material fact existed with respect to Star's misrepresentations
and omissions regarding its "programmatic" accreditation for
surgical technologists. But, because we agree with Star that
common questions of law or fact did not predominate over questions
affecting individual members as required by Rule 4:32-1(b)(3), we
vacate the court's order certifying the class. We also conclude
that the court's evidentiary rulings in which it materially limited
Star from introducing evidence that was relevant to Star's defenses
under the Act and to challenge plaintiff's and the class members'
damages were erroneous and provide an independent basis to reverse
the jury’s verdict.
Finally, because the court's decision denying plaintiff's
request to amend the pleadings to add new parties was based, in
large part, on the belated nature of the application we also vacate
that order as our opinion decertifying the class removes those
concerns. Accordingly, we vacate the final judgment, and any
attorney fee award, and remand for proceedings in accordance with
this opinion.
I.
Star and its affiliates are owners of for-profit schools,
including the institution at issue that trains surgical
5 A-3756-15T2
technicians (ST).3 Star's mission is to provide "performance-
based occupational training to prepare students for entry-level
employment" in various fields, including allied health fields.
In 2011, N.J.S.A. 26:2H-12.63 (the ST law) was passed
addressing five routes for employment as a surgical technologist
in a New Jersey health care facility. One route was successful
completion of a "nationally or regionally accredited educational
program for surgical technologists." N.J.S.A. 26:2H-12.63(a). An
alternative route was to obtain a "certified surgical technologist
credential administered by the National Board of Surgical
Technology and Surgical Assisting or its successor, or other
nationally recognized credentialing organization." N.J.S.A.
26:2H-12.63(b).
There are two types of higher education accreditation:
programmatic and institutional. The Commission on Accreditation
of Allied Health Education Programs (CAAHEP) and the Accrediting
Bureau of Health Education Schools (ABHES) are the only nationally
recognized accreditors of ST programs. Star did not receive
programmatic accreditation from CAAHEP or ABHES. The Accrediting
Commission of Career Schools and Colleges (ACCSC) is approved by
the United States Department of Education (USDOE) to give
3
The terms surgical technician and surgical technologist are
used interchangeably in this opinion.
6 A-3756-15T2
institutional accreditation, but is not authorized to give
programmatic accreditation to an ST program. In August 2010,
ACCSC recognized Star as an accredited institution.
Plaintiff enrolled in Star's ST program in July 2011. Her
tuition was $18,213. While enrolled in the program, plaintiff
asked the director of Star's ST program whether the newly passed
ST law would affect her ability to gain employment as a ST. The
director assured her that graduating from Star's program would
qualify her under the ST law. The director of externships for
Star's Clifton campus also told plaintiff that Star's ST program
was accredited.
Other students questioned Star admissions officers as to how
the ST law would affect them. Admissions officers discussed the
issues surrounding Star's program accreditation under the ST law
with their subordinates, but instructed them to "sell the program
as best as [they] could."
A year after the ST law was enacted, an entire class of ST
students withdrew from the program "in protest" because the
Association of Surgical Technologists (AST), a national
organization representing the profession, told them that the
program was worthless. According to a Star administrator,
admissions officers gave inaccurate information to students on the
ST law and accreditation requirements.
7 A-3756-15T2
In August 2012, John A. Calabria of the New Jersey Department
of Health (DOH) issued a memorandum addressing programmatic
accreditation under the ST law that stated, "If a[n] [ST] program
is listed as accredited [by the USDOE] . . . , then it is compliant
with [the ST law]." Two months after Calabria's memorandum, an
AST representative emailed Star that, to comply with the ST law,
programmatic accreditation was necessary and that an ST program
should only be considered regionally or nationally accredited for
purposes of the ST law if it was accredited by CAAHEP or ABHES.
Star's CEO and president disagreed with AST's understanding of the
ST law, explaining that it was sufficient if a school had
institutional accreditation rather than programmatic accreditation
and that accreditation by ABHES or CAAHEP was unnecessary.
According to plaintiff, the National Center for Competency
Testing (NCCT) administered testing to graduates of ST programs,
but was not nationally recognized as required by N.J.S.A. 26:2H-
12.63(b). NCCT recognized Star's ST program as approved for the
"tech in surgery-certified" certification exam; in other words,
graduates of the Star ST program were eligible for the exam.
However, because NCCT was not nationally recognized under the ST
law, they added a disclaimer to their website indicating that
their exam was not accepted in New Jersey. Star's director of
clinical externships contacted NCCT asking them to remove the
8 A-3756-15T2
disclaimer and "stop making such a definitive statement that [the
NCCT certification] is not accepted" in New Jersey.
Star also asked the DOH to confirm that Star's accreditation
from ACCSC met the requirements of the ST law. Star represented
to DOH that its ST program was accredited by the ACCSC. The DOH
responded, "A[n] [ST] program offered in New Jersey that is
accredited by any accrediting agency recognized by the [USDOE]
meets the requirements of the [ST law]." However, while Calabria's
2012 memorandum reflected his understanding that institutional
accreditation was sufficient and programmatic accreditation was
not necessary, he later recognized that institutional
accreditation was not sufficient and programmatic accreditation
was necessary. A supplemental memorandum reflecting Calabria's
change in knowledge was never issued.
Despite uncertainty about whether Star's ST program met the
requirement of the ST law, Star continued to enroll students. In
February 2014, Star began to provide current and prospective
students with a disclosure indicating that the law was in flux and
Star disagreed with any interpretation of the ST law finding that
its ST program did not comply with the law.
Approximately three years after enrolling, plaintiff filed a
class action complaint naming Star as the sole defendant and
alleging that Star violated the Act by misrepresenting information
9 A-3756-15T2
about the accreditation of its ST program in connection with the
ST law. Plaintiff specifically claimed Star failed to disclose:
(a) the requirements and consequences of New
Jersey's [ST] Law . . .;
(b) that [Star] was not a nationally or
regionally accredited educational program for
surgical technologists within the meaning of
the [ST] Law;
(c) that [Star's] [ST] [p]rogram graduates
would not be permitted to obtain a [ST]
credential administered by the National Board
of Surgical Technology and Surgical Assisting
or its successor, or other nationally
recognized credentially organization;
(d) that because the [Star] [ST] [p]rogram did
not comply with the [ST] Law, [Star] [ST]
Program graduates would not be permitted to
be employed in the State of New Jersey as
Surgical Technologists, under the terms of the
[ST] law; and
(e) that [Star's] [ST] [p]rogram did not
otherwise qualify [p]laintiff and other [Star]
students to practice surgical technology upon
completion of the Program.
She also described her, and the other class members', ascertainable
loss as tuition and loan costs. The proposed class was comprised
of "all individuals who were enrolled in [Star's] [ST] [p]rogram
for surgical technician training to take place in the State of New
Jersey as of June 29, 2011 and thereafter."
Star filed two unsuccessful motions for summary judgment. In
its second motion, the court rejected Star's request for a
10 A-3756-15T2
definitive interpretation of the ST statute concluding that
material factual questions existed surrounding Star's knowledge
of the ST law and the accreditation of its ST program. The court
also denied Star's motion for reconsideration.
Over Star's objection, the court certified a class consisting
of individuals enrolled in Star's ST program after June 29, 2011,
and appointed plaintiff class representative. The court denied
Star's subsequent motion to decertify the class. We denied Star’s
motion for interlocutory review of that determination and its
motion for reconsideration. The Supreme Court also denied Star's
motion. Also, plaintiff's motion to amend the pleadings to add
various defendants was denied by the court as untimely.
Prior to trial, the parties filed various in limine motions
surrounding the admissibility of evidence pertaining to class
members' employment, reasons for class members' unemployment, and
the value of the Star ST program degree. In finding that the
claims of the class addressed Star's misrepresentations and
omissions, rather than jobs, the court precluded Star from
including the jobs, reasons for unemployment, and value evidence
for liability purposes.
The jury returned a $2.969 million verdict in favor of the
class. In accordance with the Act, the court trebled the damages
and entered final judgment, plus interest, in the amount of
11 A-3756-15T2
$9,091,941.35. Pursuant to plaintiff's motion for attorneys' fees
and costs, the court awarded the class $1.7 million in attorneys'
fees.
II.
Star argues in its first point that the court twice erred in
refusing to grant its motions for summary judgment and, more
specifically, to interpret the ST law in its favor. We disagree
and conclude that the summary judgment record established the
existence of genuine and material factual questions that precluded
summary judgment.
In ruling on a summary judgment motion, a trial court must
"consider whether the competent evidential materials presented,
when viewed in the light most favorable to the non-moving party,
are sufficient to permit a rational factfinder to resolve the
alleged disputed issue in favor of the non-moving party." Brill
v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). An
appellate court reviews a grant of summary judgment de novo, using
the same standard as the trial court. Turner v. Wong, 363 N.J.
Super. 186, 198-99 (App. Div. 2003). Thus, we must determine
whether a genuine issue of material fact is present and, if not,
evaluate whether the trial court's ruling on the law was correct.
Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162,
167 (App. Div. 1998). To assess whether the facts in the motion
12 A-3756-15T2
record created a genuine and material dispute, we briefly discuss
the elements and principles underpinning the Act.
The Act is to be construed broadly to meet its remedial
purpose and root out consumer fraud. Lemelledo v. Beneficial
Mgmt. Corp. of Am., 150 N.J. 255, 264 (1997). The Supreme Court
has emphasized that it is the "capacity to mislead [that] is the
prime ingredient of all types of consumer fraud." Cox v. Sears
Roebuck & Co., 138 N.J. 2, 17 (1994). See also Fenwick v. Kay Am.
Jeep, Inc., 72 N.J. 372, 378 (1977).
The Act provides treble damages when a person suffers an
"ascertainable loss" as a result of:
[t]he act, use or employment by any person of
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. . . .
[N.J.S.A. 56:8-2.]
Thus, a claim under the Act is comprised of three elements:
"(1) unlawful conduct . . .; (2) an ascertainable loss . . .; and
(3) a causal relationship between the defendants' unlawful conduct
and the plaintiff's ascertainable loss." Int'l Union of Operating
Eng'rs Local No. 68 Welfare Fund v. Merck & Co., Inc., 192 N.J.
13 A-3756-15T2
372, 389 (2007) (quoting N.J. Citizen Action v. Schering-Plough
Corp., 367 N.J. Super. 8, 12-13 (App. Div. 2003)). Unlawful
practices under the Act fall into three categories: affirmative
acts, knowing omissions, and regulation violations. Cox, 138 N.J.
at 17.
To suffer an ascertainable loss, a plaintiff must "suffer a
definite, certain and measurable loss, rather than one that is
merely theoretical." Bosland v. Warnock Dodge, Inc., 197 N.J.
543, 558 (2009). "The certainty implicit in the concept of an
'ascertainable' loss is that it is quantifiable or measurable."
Ibid. (quoting Thiedemann v. Mercedes-Benz U.S., LLC, 183 N.J.
234, 248 (2005)). Moreover, the ascertainable loss requirement
has been understood generally in terms making it equivalent to
"any lost 'benefit of [the] bargain.'" Ibid. (alteration in
original) (quoting Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 11-
13 (2004)).
The ST law provides five routes for an individual to become
eligible to "practice surgical technology in a health care
facility." N.J.S.A. 26:2H-12.63. Only two have relevance here:
the successful completion of "a nationally or regionally
accredited educational program for surgical technologists,"
N.J.S.A. 26:2H-12.63(a), and the maintenance of a "certified
surgical technologist credential administered by the National
14 A-3756-15T2
Board of Surgical Technology and Surgical Assisting or its
successor, or other nationally recognized credentialing
organization," N.J.S.A. 26:2H-12.63(b).
According to Star, it is undisputed that it possessed a
credential from ACCSC, a "nationally recognized credentialing
organization," ibid., and therefore Star graduates, by the clear
and unambiguous language of the ST statute (as informed and
supported by the relevant legislative history) were eligible to
take any necessary licensing exam and otherwise practice as
surgical technologists. Thus, Star argued before the court and
before us that it could not have violated the Act because it did
not misrepresent its ability for its graduates to be certified as
surgical technologists.
The court, in denying Star's second motion for summary
judgment, considered interpretation of the ST Law irrelevant,
stating that the critical issue was whether, beginning in 2011,
Star representatives failed to disclose the widespread
disagreement with its interpretation of the ST law.
We agree that in light of the significant evidence submitted
by plaintiff establishing that Star made material
misrepresentations to students regarding the lack of programmatic
accreditation and its failure to inform its students that it was
aware of concerns regarding Star's lack of such accreditation, it
15 A-3756-15T2
was unnecessary for the court to interpret N.J.S.A. 26:2H-12.63
for plaintiff's consumer fraud claim to survive summary judgment. 4
Factual questions abound in the summary judgment record on
this point. For example, employees of Star acknowledged that
Star's ST program lacked program accreditation and Star was
unprepared to seek such accreditation. Also, in sworn
certifications, students of Star's ST program alleged that Star
failed to disclose that relevant organizations and members of the
healthcare field questioned Star's compliance with the ST law.
The summary judgment record also established that Star attempted
at multiple times to thwart the AST from publicly interpreting the
ST statute as requiring programmatic accreditation.
From these facts we conclude that an individual seeking an
education from a for-profit school like Star has the inherent
right to know, prior to enrollment, that the school does not hold
both programmatic and institutional credentials if for no other
reason than to give students the choice to attend another
institution that possesses both accreditations. Students who
attend Star and similar vocational institutions are primarily
4
We note that for reasons not sufficiently explained in the
record, and despite the undisputed controversy regarding the
interpretation of the ST law, Star never sought declaratory relief
in accordance with N.J.S.A. 2A:16-50 to -62.
16 A-3756-15T2
interested in obtaining a degree to advance their professional
careers and increase their earning potential. That Star was not
programmatically credentialed, giving plaintiff all reasonable
inferences from the summary judgment record, influenced certain
potential employers of Star graduates. In light of these concerns,
it is not unreasonable to conclude that a student deciding to
enroll at Star, if informed that it did not have programmatic
approval, would elect to enroll elsewhere and thus we cannot ignore
that Star's potential and "capacity to mislead" plaintiff on this
point is of material concern. Cox, 138 N.J. at 17.5 Also, while
the record contains allegations of multiple misrepresentations
made by Star to certain class members unrelated to its programmatic
accreditation — which affects the propriety of class
certification, as discussed in Section III — based on just these
genuine and material factual questions, summary judgment was
appropriately denied.
5
We note that the record contains evidence that such alternatives
did exist for students interested in becoming surgical
technologists. Indeed, Bergen Community College's surgical
technology program possessed both programmatic and institutional
accreditation.
17 A-3756-15T2
III.
Star also argues that the court improperly certified the
class because common issues did not predominate over individual
ones. We agree.
Class actions are governed by Rules 4:32-1 and -2.
Specifically, Rule 4:32-1(a) dictates:
One or more members of a class may sue or be
sued as representative parties on behalf of
all only if (1) the class is so numerous that
joinder of all members is impracticable, (2)
there are questions of law or fact common to
the class, (3) the claims or defenses of the
representative parties are typical of the
claims or defenses of the class, and (4) the
representative parties will fairly and
adequately protect the interests of the class.
New Jersey courts "have consistently held that the class
action rule should be liberally construed." Myska v. New Jersey
Mfts. Ins. Co., 440 N.J. Super. 458, 475 (App. Div. 2015). In
order to bring a class action lawsuit, it is well established that
the named representative must individually possess standing to
bring their claims. Rosen v. Continental Airlines, Inc., 430 N.J.
Super. 97, 107 (App. Div. 2013).
Regarding the commonality of questions of law or fact, "[a]ll
of the factual and legal questions in the case need not be
identical for all of the proposed class members." Goasdone v. Am.
Cyanamid Corp., 354 N.J. Super. 519, 528 (Law Div. 2002). In
18 A-3756-15T2
fact, "a single common question" satisfies the requirement of Rule
4:32-1(a)(2). Id. at 529. The threshold for commonality of
questions of law or fact is relatively low. Ibid.In addition to the requirements of Rule 4:32-1(a), a class
action may be maintained when "the court finds that the questions
of law or fact common to the members of the class predominate over
any questions affecting only individual members, and that a class
action is superior to other available methods for the fair and
efficient adjudication of the controversy." R. 4:32-1(b)(3). The
proposed class must be "sufficiently cohesive to warrant
adjudication by representation." Illiadis v. Wal-Mart Stores,
Inc., 191 N.J. 88, 108 (2007) (quoting Amchem Prods. v. Windsor,
521 U.S. 591, 623 (1997)). The court should conduct a pragmatic
assessment of numerous factors, including:
[T]he significance of the common questions .
. . [which] involves a qualitative assessment
of the common and individual questions rather
than a mere mathematical quantification of
whether there are more of one than the other.
. . . [W]hether the "benefit" of resolving
common and presumably some individual
questions through a class action outweighs
doing so through "individual actions." . . .
[W]hether a class action presents "a common
nucleus of operative facts."
[Lee v. Carter-Reed Co., L.L.C., 203 N.J. 496,
519-20 (2010) (citations omitted).]
19 A-3756-15T2
A plaintiff need not show an "absence of individual issues
or that the common issues dispose of the entire dispute."
Illiadis, 191 N.J. at 108. The basic question is "whether the
potential class, including absent members, seeks 'to remedy a
common legal grievance.'" In re Cadillac V8-6-4 Class Action, 93
N.J. 412, 431 (1983) (quoting 3B James W. Moore et al., Moore's
Federal Practice ¶ 23.45[2] at 23-332 (1982)).
Among the concerns related to certifying a class based upon
violations of the Act are the inherent individualized causation
inquiries related to the class' ascertainable loss. As recently
observed by the Third Circuit, the "fact of damage," separate and
apart from the amount of damages, is "an element of liability
requiring plaintiffs to prove that they have suffered some harm
traceable to the defendant's conduct — in other words, the
'ascertainable loss' and 'causal relationship' requirements under
the [Act]." Harnish v. Widener Univ. Sch. of Law, 833 F.3d 298,
305 (3d Cir. 2016).6 At the class certification stage, and while
analyzing predominance, a court must "formulate some prediction
as to how specific issues will play out" and may not rely upon a
"mere 'threshold showing' that a proposed class-wide method of
6
As Rule 4:32 is modeled after Federal Rule of Civil Procedure
23, construction of the federal rule has been described as
"helpful, if not persuasive, authority." Muise v. GPU, Inc., 371
N.J. Super. 13, 31 (App. Div. 2004).
20 A-3756-15T2
proof is 'plausible in theory.'" Id. at 304 (quoting In re
Hydrogen Peroxide, 552 F.3d 305, 311, 321, 325 (3d Cir. 2008)).
Also, "[a]lthough the computation of damages among the members of
the class would differ, [and] this factor alone is not sufficient
in itself to justify dismissal of a class action," Lusky v. Capasso
Bros., 118 N.J. Super. 369, 373 (App. Div. 1972), a class "'must
first demonstrate economic loss' — that is, the fact of damage —
'on a common basis,'" Harnish, 833 F.3d at 306 (quoting Newton v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 189 (3d
Cir. 2001)).
In Morgan v. Markerdowne Corp., 201 F.R.D. 341, 345 (D.N.J.
2001), the court found that individualized causation issues
precluded class certification based on a consumer fraud claim. In
that case, the putative class alleged that the defendant, a
computer training school, made numerous misrepresentations about
the school's job-placement rate and the ability of students to
obtain employment. Ibid. Specifically, the class alleged that
the school made misrepresentations through oral statements,
brochures, and false alumni testimonials. Ibid.The court acknowledged that, although proof of reliance is
not required under the Act, the plaintiff was still required to
establish that an ascertainable loss was caused by an unlawful
action attributable to the defendant. Id. at 350. In denying
21 A-3756-15T2
class certification, the court concluded that many of the proposed
class members "suffered no ascertainable loss whatsoever" because
they found work after attending the school and, thus, "typicality,
commonality, and predominance" failed to exist. Ibid. The court
further explained that, as to those class members who suffered an
ascertainable loss as a result of unemployment, they too could not
maintain a class action as they "[could not] speak with one voice
in declaring an unlawful practice of [the defendant] to be the
cause of such loss" because of the varying misrepresentations and
reasons for enrollment. Ibid.
Here, the individualized factual inquiries surrounding Star's
misrepresentations and the nexus between those misrepresentations
and omissions and the class members' ascertainable loss compels
decertification.
Plaintiff's complaint alleged that Star misrepresented and
failed to disclose the requirements of the ST law in relation to
Star's ST program. As noted, the class was subsequently defined
as "all individuals who were enrolled in [Star's] Surgical
Technology Program for surgical technicians training to take place
in the State of New Jersey as of June 29, 2011 and thereafter."
At a hearing on Star's motion for reconsideration, plaintiff's
counsel confirmed the narrow scope of the class stating that the
"case is about" the "fact that Star didn't notify [the class
22 A-3756-15T2
regarding] . . . potential issues about how the statute was being
interpreted" and the "failure of Star to . . . make everybody
aware . . . [t]hat [Star] was stuck in this muddle of . . . what
[the ST law] means." In terms of damages, counsel explained that
the class pursued an "expectation interest[s]" theory in terms of
the value of the education they thought they were receiving, which
was to be numerically based upon the tuition paid.
However, as Star predicted, and what was borne out at trial,
the class' claims under the Act devolved into a multitude of
individualized inquiries. Indeed, plaintiff's counsel argued at
trial that, "[t]his case is not limited to what Star said about
the [ST] [l]aw or didn't say about the [ST] [l]aw. It's broader
than that." Counsel elaborated that, rather than a single
fraudulent scheme, in addition to the issues surrounding the ST
law, Star failed to advise the class about: (1) their ineligibility
to sit for the necessary certification test; (2) Star's "sham
externship program" that failed to enable eligibility for the NCCT
certification; and (3) Star's failure to "come clean" about its
job statistics.
Consistent with this expansive nature of the class, the
parties stipulated at trial (after Star twice objected to class
certification) that the class consisted of certain sub-groups: 219
members who did not pay tuition due to government grants (group
23 A-3756-15T2
one); 125 members who ceased attending Star prior to the passage
of the ST law (group two); 150 members who began attending Star
on or after Star issued its disclosure to current and prospective
ST students (group three); 162 members who were dismissed or
voluntarily withdrew from the Star ST program (group four); and
99 members who graduated from Star's ST program and found jobs
with the ST field (group five). The sub-groups were formed to
analyze "the impact of total amounts paid based on certain facts
and circumstances of specific class members."7
The class claims thus pertained to an array of
misrepresentations and omissions surrounding the ST law and Star's
ST program, externship program, and job statistics in violation
of the Act. A class based upon these disparate series of alleged
misrepresentations simply cannot satisfy the predominance
requirement of Rule 4:32-1(b)(3) because innumerable
individualized inquiries are necessary to address the causal
7
Although plaintiff based its damages claim on the tuition paid
by the class, counsel repeatedly claimed during trial that the
class member also sustained damages based on the wasted time spent
in the Star ST program. No evidence, other than the paid tuition,
was submitted to quantify that alleged loss and which class members
sustained it.
24 A-3756-15T2
connection between Star's actions and the class' ascertainable
loss.8
We acknowledge that a plaintiff need not show an "absence of
individual issues or that the common issues dispose of the entire
dispute." Illiadis, 191 N.J. at 108. But here the class seeks to
address differing actions on the part of Star that require us to
consider on an individualized basis the causal connections between
Star's varying violations under the Act and the wildly different
class members' ascertainable losses. The individualized inquiries
necessary to evaluate the CFA claim include: (1) whether each
category of misrepresentation or omission actually occurred; (2)
what precise misrepresentation or omission was communicated to
each class member; and (3) whether each class member suffered an
ascertainable loss that was caused by the alleged
8
Any doubt regarding the broad scope of the class as ultimately
constituted is answered by reviewing the first question of the
verdict sheet in which the jurors were permitted to impose
liability upon Star upon finding it "engaged in either . . . an
unconscionable commercial practice of affirmative representation
regarding getting plaintiffs to enroll or to remain enrolled in
defendant's surgical technology program or a knowing concealment
of material information made with the intent to deceive regarding
getting plaintiffs to enroll or to remain enrolled in the
defendant's surgical technology Program." That question invited
the jurors to find liability on behalf of the class exactly as
plaintiff sought — not on a common question that predominated but
on a host of disparate misrepresentations with different
consequences concerning the causative loss, if any, to certain
class members.
25 A-3756-15T2
misrepresentation or omission. Similar to the class in Morgan,
the present class "cannot speak with one voice in declaring an
unlawful practice" of Star to be the cause of their losses. By
way of example, sub-group three of the class — those who enrolled
after Star's disclosure surrounding the ST law and its lack of
program accreditation — demonstrates the significant causation and
ascertainable loss barriers precluding class certification because
this group admittedly enrolled after Star addressed in February
2014, or at least attempted to address, the concerns underlying
the class' initial misrepresentation claims.
While we acknowledge the court divided the class into the
aforementioned sub-groups to analyze the total paid by the class
in relation to the differing circumstances of certain class
members, in our view that segregation nevertheless demonstrates
the significant individualized issues related to the nexus between
Star's misrepresentations and the class members' damages. And,
although the class members' damage calculations may differ, see
Lusky 118 N.J. Super. at 373, our concerns relate to the fact that
the class, as evidenced by the sub-groups, cannot "demonstrate
economic loss . . . on a common basis," Harnish, 833 F.3d at 306.9
9
The court's final judgment further illustrates the defective
nature of the class. That order directs distribution of over nine
million dollars "to the [c]lass [m]embers on a pro rata basis."
Thus, damages could be awarded to class members who were not harmed
26 A-3756-15T2
While we find that the class must be decertified, our decision
should not be interpreted to conclude that a class is not an
appropriate vehicle to address Star's purported misrepresentations
and omissions surrounding the ST law for those who have paid
tuition fees or other ascertainable losses. Such a class action
may further the goals of judicial economy, cost-effectiveness,
convenience, and consistent treatment of class members, Iliadis,
191 N.J. at 104. However, any certified class must satisfy the
relevant Rules governing class actions. That simply did not occur
here.
IV.
Star also argues that the court committed reversible error
by precluding it from introducing evidence at trial related to:
jobs that class members held (jobs evidence); efforts of class
members to get positions (reasons for unemployment evidence); and
the value of the Star diploma to members of the class (value
evidence). We agree. We address this issue because it serves as
an independent basis to reverse the jury's verdict and to provide
guidance with respect to any future trial proceedings.
A court's evidentiary rulings are entitled to substantial
and despite the absence of predominant class issues. Such an
award is inconsistent with class action compensation principles.
See Lewis v. Casey, 518 U.S. 343, 349 (1996).
27 A-3756-15T2
deference. Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202
N.J. 369, 374 (2010). A court's determination to admit evidence
will not be reversed absent a finding of abuse of discretion.
State v. Wakefield, 190 N.J. 397, 491 (2007). Under that standard,
substantial latitude is afforded to a trial court in deciding
whether to admit evidence, and "an appellate court should not
substitute its own judgment for that of the trial court, unless
the trial court's ruling was so wide of the mark that a manifest
denial of justice resulted." Id. at 491 (quoting State v. Brown,
170 N.J. 138, 147 (2001)).
Star maintains that the court erred in failing to permit jobs
evidence which would have established that members of the class
were employed as surgical technologists or in related fields. Star
also argues that the court erred in not admitting value evidence
that would have proven that for many graduates the Star diploma
was not worthless. Star also sought to establish that its ST
program compared positively with other similar programs and that
its graduates were employed in jobs similar to the graduates of
other programs.
The court admitted jobs evidence only in relation to Star's
reporting requirements and reasons for unemployment evidence only
to assess class members' credibility. Value evidence was deemed
largely inadmissible. We find that the jobs, reasons for
28 A-3756-15T2
unemployment, and value evidence were relevant to the materiality
of the purported misrepresentations, the issue of causation under
the CFA and to the quantum of any damages. We therefore conclude
that the court abused its discretion in failing to admit such
evidence.
N.J.R.E. 401 defines relevant evidence as evidence "having a
tendency in reason to prove or disprove any fact of consequence
to the determination of the action." Unless otherwise prohibited,
"all relevant evidence is admissible." N.J.R.E. 402.
First, regardless of whether the class sought damages based
upon out-of-pocket expenses or an expectation theory, the value
evidence was directly relevant to mitigate the class' damages.
Indeed, such evidence could have established what plaintiff and
the class received in return for attending Star's program. The
class cannot seek damages based upon the tuition paid to Star
while precluding Star from establishing that the education had
some value.
The jobs evidence established that members of the class were
working as surgical technologists or in related fields and was
relevant to the mitigation of the class' damages. It also tended
to "prove or disprove" whether Star's actions caused the class to
suffer an ascertainable loss. And, the reasons for unemployment
evidence directly related to the causation issue under the Act as
29 A-3756-15T2
it would have permitted Star to demonstrate that certain members
of the class withdrew or were dismissed from the ST program for
reasons unrelated to the ST law.
Plaintiff successfully thwarted the introduction of this
evidence by maintaining that its damages theory was based on the
class members' loss of tuition not lost wages or other job related
damages and therefore the case was fundamentally different than
the damages sought in Harnish or Markerdowne. But a party's stated
theory of a case cannot serve as the basis to preclude an adverse
party from introducing evidence to defend a claim, particularly
when the evidence has the tendency in reason "to prove or disprove
any fact of consequence to the determination of the action."
N.J.R.E. 401. Here, the excluded evidence related to materiality,
causation and ascertainable loss. We acknowledge a trial court's
authority under N.J.R.E. 403 to exclude otherwise relevant
evidence. However, our review of the trial record leads us to
conclude that the preclusion of the value, jobs, and reasons for
unemployment evidence resulted in a manifest denial of justice.
V.
We also vacate the court's order denying plaintiff's motion
to amend the complaint to add new parties. The court's decision
to deny plaintiff's request to amend was largely based on the
belated nature of the application as it was filed after the initial
30 A-3756-15T2
summary judgment motion and after the class was certified and
shortly before the then scheduled trial date. As we have vacated
both the class certification order and the jury verdict, those
concerns no longer exist. Accordingly, plaintiff may refile the
motion to amend on remand. We do not pass on the merits of any
such application.
Finally, because we have vacated the final judgment, which
incorporated the jury's verdict and the award of attorney's fees
under the Act, we need not address plaintiff's challenges to the
court's fee award.
Affirmed in part, reversed and vacated in part and remanded
for trial proceedings consistent with this opinion. We do not
retain jurisdiction.
31 A-3756-15T2