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Patricia Lee v. Southern California University For Professional Studies


December 22, 2010


Appeal from orders of the Superior Court of Orange County, (Super. Ct. No.05CC00274) David C. Velasquez, Judge.

The opinion of the court was delivered by: Moore, J.

Lee v. South. Cal. Univ. for Prof. Studies



California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.



This is an appeal from the trial court's denial of the second petition to compel arbitration filed by Southern California University for Professional Studies (SCUPS) in this case and from the court's order certifying a class action. In the appeal from the denial of SCUPS's first motion to compel arbitration, we held that simply because some members of a potential class (not including the named plaintiff) signed an arbitration agreement, it was improper to require those who did not sign such an agreement to arbitrate their claims. (Lee v. Southern California University for Professional Studies (2007) 148 Cal.App.4th 782, 784 (Lee I).)

While this case has been through many procedural maneuverings since, the trial court ultimately certified a class that only included students who did not sign arbitration agreements. We conclude this was not an abuse of discretion and the class was properly certified. Given the composition of the class, no students who signed arbitration agreements were before the court, and the motion to compel arbitration was therefore properly denied.


We review the facts from our prior opinion. "Southern California University for Professional Studies (SCUPS) is a private post-secondary institution in Santa Ana, California. It operates under the Bureau for Private Post-secondary and Vocational Education (the Bureau), part of the California Department of Consumer Affairs. SCUPS provides educational programs, primarily through distance learning, which may lead to a number of different degrees. "In July 2000, Lee enrolled as a student in SCUPS's four-year juris doctorate program. According to the catalog in effect at the time, SCUPS had a cancellation and refund policy that permitted refunds only during an eight-day cancellation period. Lee paid a total of $2,800 to enroll, comprising one year's tuition and a $100 application fee.

"After the eight-day cancellation period had expired, Lee became ill and was incapable of completing any coursework. She alleges that she notified SCUPS of her illness and asked to be placed on a non-bar track, to continue her studies but not for the sake of obtaining a degree. Lee claims SCUPS did not act on this request.

"In November 2002, SCUPS sent a letter to Lee informing her she was not making satisfactory academic progress and was being administratively withdrawn from SCUPS. In 2004, Lee filed a complaint with the Bureau, alleging she had been unjustly terminated from the juris doctor program and that SCUPS had refused to refund her prepaid tuition. After a number of administrative proceedings, Lee alleges the Bureau ultimately found, among other things, that SCUPS was required to use the statutory formula for refunds if a student had completed less than 60 percent of an educational program. The Bureau also found problems with SCUPS's student complaint procedures.

"Based on the Bureau's findings, Lee filed a civil complaint alleging violation of the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.) (CLRA) and the unfair competition law (Bus. & Prof. Code, § 17200 et seq.) (UCL). She filed the case as a putative class action under the CLRA, seeking to represent consumers similarly situated. The complaint proposed to define the class as, 'All adult student consumers who enrolled in and paid the tuition charged for the materials and services supplied in a course program with SCUPS and who subsequently either voluntarily withdrew or were administratively withdrawn by SCUPS and who did not receive a refund of their paid tuition from SCUPS upon their dismissal.'

"In response to the complaint, SCUPS filed a petition to compel arbitration and to stay the trial court proceedings. SCUPS claimed that 519 students had been dropped or dismissed from its program during a four-year period, and of those, 408 (none of whom were law students) had signed enrollment agreements containing arbitration clauses. The remaining 111, like Lee, were law students whose enrollment agreements did not include arbitration clauses." (Lee I, supra, 148 Cal.App.4th at pp. 784-785.)

We affirmed the trial court's denial of SCUPS's motion to compel arbitration. (Lee I, supra, 148 Cal.App.4th at p. 784.) SCUPS argued that because some potential class members had signed an arbitration agreement, Lee was required to arbitrate, even though she had never signed such an agreement. (Id. at p. 786.) We disagreed, noting, among other principles, that "arbitration requires consent; the parties must mutually agree to resolve their disputes in an alternate forum. 'The strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement, and a party cannot be compelled to arbitrate a dispute that he has not agreed to resolve by arbitration. [Citation.]' [Citations.] Very limited circumstances exist under which a nonparty to an arbitration agreement can be bound by someone else's consent (e.g., agency, a spousal relationship or parent/minor child relationship), and none of those exist here. [Citation.]" (Ibid.)

Following our decision in Lee I, the case was remanded to the trial court. SCUPS answered the complaint, and discovery proceeded. In August 2008, SCUPS filed motions to strike the class allegations and for judgment on the pleadings. The basis for these motions was that Education Code section 94820, upon which Lee had predicated her claims under the CLRA and UCL, had expired.*fn1 The trial court found that while the pertinent code section had expired, she could maintain claims based on unfair or deceptive practices based on misrepresentations in SCUPS's literature. Several months later, SCUPS again filed motions to strike the class allegations and for judgment on the pleadings, which the trial court denied, characterizing them as "untimely motions for reconsideration of identical issues previously ruled upon by the court."

In November 2008, Lee filed a motion for class certification, proposing a class definition that excluded students with arbitration clauses. SCUPS's opposition argued the class definition was too narrow, claiming "The class should properly include all former students equally affected by the University's alleged conduct, including those who agreed to arbitration." SCUPS argued that if Lee's proposed class was certified, its due process rights would potentially suffer. (In Lee's opinion, this assertion waived any arbitration rights.)

The trial court's tentative ruling apparently saw merit in SCUPS's argument, and included all former students in the potential class. But SCUPS quickly clarified that it was not waiving arbitration. In SCUPS's opinion, whether such cases should be consolidated into a class "is a question for the arbitrator to decide[,] not for the court. . . ." After argument, the trial court concluded it would be best to continue the hearing on class certification to permit further briefing, and requested from SCUPS "a supplemental brief on the implications o[f] expanding . . . the class definition as it pertains to the due process issue[.]"

On April 16, SCUPS filed its supplemental brief, which largely restated its earlier arguments regarding due process. The next day, prior to the continued hearing on the motion to certify the class, SCUPS filed its second motion to compel arbitration. SCUPS argued that if the trial court certified a class including students bound by arbitration agreements, that it was required to compel arbitration as to those students, and stay the case until arbitration was completed. It further argued that the trial court could not certify a class of only those students who did not sign an arbitration agreement, because it would "violate[] both the due process rights of the excluded students and the University." Lee disagreed, arguing that SCUPS sought to misapply the applicable legal doctrines.

After the continued hearing, the trial court entered an order certifying a class similar to Lee's original proposal, specifically excluding students who had signed arbitration agreements. The court denied SCUPS's petition to compel arbitration, noting that students who had signed arbitration agreements were not included in the class, and therefore, not before the court. SCUPS also brought a writ petition addressing class certification issues, which we have already denied. (Southern California University for Professional Studies v. Superior Court (Nov. 12, 2009, G042800) [nonpub. order].) SCUPS now appeals.


A. Issues on Appeal

While the order denying SCUPS's motion to compel arbitration is appealable, the order granting class certification is not appealable as of right. (Shelley v. City of Los Angeles (1995) 36 Cal.App.4th 692, 696 ["An order certifying a class is subject to modification at any time, and is appealable after final judgment"].) SCUPS argues that the issues regarding arbitration and class certification are so interwoven that they cannot be separated, and the order certifying the class is therefore appealable under Code of Civil Procedure section 906,*fn2 which states that "Upon an appeal pursuant to Section 904.1 or 904.2, the reviewing court may review the verdict or decision and any intermediate ruling, proceeding, order or decision which involves the merits or necessarily affects the judgment or order appealed from or which substantially affects the rights of a party . . . ." But section 906 refers to appeals pursuant to section 904.1 or 904.2. Section 904.1, governing appeals to the Courts of Appeal, lists specific orders, in addition to a final judgment, that may be appealed from. Nowhere in that list is an order granting class certification included, and therefore, section 906 does not apply.

SCUPS next looks to section 1294.2, which states that upon review of an order relating to arbitration, "the court may review the decision and any intermediate ruling, proceeding, order or decision which involves the merits or necessarily affects the order or judgment appealed from, or which substantially affects the rights of a party." (Italics added.) Because the order granting class certification "necessarily affects the order or judgment appealed from," we exercise our discretion to consider it. In doing so, we keep in mind that this case is an ongoing litigation, that is still, despite its age, at a relatively early stage. We shall refrain from opining on issues the trial court has not yet had the opportunity to decide.

B. Standard of Review

With respect to the factual issues surrounding class certification, we afford the trial court "great discretion in granting or denying certification." (In re Tobacco II Cases (2009) 46 Cal.4th 298, 311.) "[A] trial court ruling supported by substantial evidence generally will not be disturbed 'unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made . . . .'" (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435-436.) Any valid, pertinent reason will be sufficient to uphold the trial court's order. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326-327.) Any pure questions of law or statutory interpretation are reviewed de novo. (In re Tobacco II Cases, supra, 46 Cal.4th at p. 311.)

As was the case in Lee I, the question of whether the motion to compel arbitration was properly denied is a matter of law, which we review de novo. (Lee I, supra, 148 Cal.App.4th at p. 785.)

C. Class Certification Issues

Section 382 sets forth the requirements for certifying class actions. Under that section, a class action is authorized when "the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court . . . ." The party seeking class certification must establish the existence of both an ascertainable class and a well-defined community of interest among the class members. (Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 913; Linder v. Thrifty Oil Co., supra, 23 Cal.4th at p. 435; Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470.) SCUPS asserts that the trial court certified a class that did not satisfy the prerequisites for a class action.

1. Ascertainable Class

SCUPS argues that the trial court abused its discretion by determining the class was ascertainable, arguing that each class member would have to "litigate substantial questions of fact to establish both liability and the right to recover damages." These questions are irrelevant to ascertainability.

Whether a class is "ascertainable" within the meaning of section 382 "is determined by examining (1) the class definition, (2) the size of the class, and (3) the means available for identifying the class members. [Citations.]" (Reyes v. Board of Supervisors (1987) 196 Cal.App.3d 1263, 1271.) "'"Class members are 'ascertainable' where they may be readily identified without unreasonable expense or time by reference to official records. [Citation.]"' [Citation.] In determining whether a class is ascertainable, the trial court examines the class definition, the size of the class and the means of identifying class members. [Citation.] A class is not inappropriate merely because each member at some point may be required to make an individual showing as to eligibility for recovery. [Citation.]" (Lee v. Dynamex, Inc. (2008) 166 Cal.App.4th 1325, 1334.)

The trial court found that the class was "reasonably ascertainable from the examination of the defendant's business records over the class period -- primarily the standard or uniform enrollment agreements signed by the students during the class period, and the records of student participation in the programs, including the dates of participation in a program and whether the students' files contain a written request for all course material." The trial court's finding was supported by substantial evidence, and therefore not an abuse of discretion.

2. Community of Interest

The community of interest requirement involves three factors: "(1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class." (Richmond v. Dart Industries, Inc., supra, 29 Cal.3d at p. 470.)

a. Typicality

SCUPS argues that the trial court erred by certifying a class that excluded students who had signed an arbitration agreement as "atypical." This is the heart of SCUPS's argument. If the class must include students who agreed to arbitrate, then SCUPS will accomplish what has been its primary goal from the outset of this case: forcing all students, including those who never agreed to do so, to arbitrate. Yet if a class cannot be certified that excludes such students, then those who did not agree to arbitrate are precluded from proceeding as a class, creating a perfect conundrum that effectively prevents any student, whether he or she signed an arbitration agreement or not, from ever having their day in court as part of a class.

Fortunately, the conundrum does not exist. There is no authority requiring the certification of the broadest possible class. (Mace v. Van Ru Credit Corp. (7th Cir. 1997) 109 F.3d 338, 341.)*fn3 Specifically, defining a class to exclude potential claimants who are subject to arbitration agreements is not error, and has been acknowledged by California courts. (Mitchell v. American Fair Credit Assn. (2002) 99 Cal.App.4th 1345, 1349 [noting that claims for damages and restitution by those who had signed arbitration agreements had been excluded from class].) Further, refining a class to exclude members that have signed arbitration agreements is a fairly typical practice around the country. (See, e.g., In re Currency Conversion Fee Antitrust Litig. (S.D.N.Y. 2009) 263 F.R.D. 110, 116 ["All cardholders whose agreements contained arbitration clauses . . . were excluded from the certified classes"]; Anderson v. Boeing Co. (N.D. Okla. 2004) 222 F.R.D. 521, 538 ["Plaintiffs' putative subclasses do not include employees who have signed a mutual arbitration agreement"]; Dienese v. McKenzie Check Advance of Wis., LLC (E.D. Wis. Dec. 11, 2000, No. 99-C-50) 2000 U.S. Dist. LEXIS 20389 ["[T]his court will not permit those who have signed the Agreement to participate in the class]".)

Indeed, courts are encouraged to define classes in a matter that allows the class action procedure to be used. (Richmond v. Dart Industries, Inc., supra, 29 Cal.3d at p. 474.) In this case, if the trial court permitted only a class that included all potential students, it would force those students who never agreed to arbitration to submit to it rather than having their day in court. As we discuss in Lee I, such an outcome would be inconsistent with the "fundamental principle" of compelled arbitration -- consent. (Lee I, supra, 148 Cal.App.4th at p. 786.)

SCUPS's arguments on this point are wholly unpersuasive. The act of refining a class definition is an essential part of the process of class certification. As we noted in Lee I, the plaintiff is not bound by the initial definition in the complaint. (Lee I, supra, 148 Cal.App.4th at p. 786.) To bind either the plaintiff or the court at such an early stage of the case would be nonsensical and subvert the policy in favor of using class action procedures in appropriate cases. Here, refining the class to exclude the members who are required to use a specific procedure -- arbitration -- to litigate their claims was entirely sensible, legally permissible, and well within the court's discretion.

b. Adequate Representative

SCUPS argues that Lee is not an adequate representative because the certified class "precludes nearly two-thirds of the original putative class members from obtaining relief," and because the trial court did not engage in the proper analysis. The issue of an adequately defined class, however, is separate from whether Lee is an adequate representative of it, and SCUPS's objection on this ground is therefore misplaced.

Contrary to SCUPS's apparent belief, the trial court is not required to raise and explain why it rejects each of SCUPS's arguments in its ruling. The trial court's ruling adequately explained that Lee was sufficiently interested to be a forceful advocate, and that her proposed counsel was qualified. With respect to the factual issues SCUPS raises regarding reliance, the facts are disputed, and we defer to the trial court's findings of fact.

3. Additional Issues

SCUPS argues that the court erred by certifying a class that foreclosed relief for students who did sign arbitration agreements. While SCUPS's sudden concern for the rights of these students is commendable, it is not a legal basis for reversing the court's order. (See Linder v. Thrifty Oil Co., supra, 23 Cal.4th at pp. 435-436.) As a practical matter, any difficulty faced now by the arbitration students would be identical if class certification was denied altogether. They are in no worse position because a class that did not include them was certified, and we have already rejected the notion that the only proper class would include the students who signed arbitration agreements.

SCUPS next argues that "a stay" is required to protect its due process rights, but this argument is unfounded. SCUPS claims that the trial court's rulings would have a "preclusive effect on the arbitration, but not vice versa, it is imperative that superior court proceedings be stayed pending arbitration. . . . Otherwise, [SCUPS] would be subject to the 'one-way intervention' effect of collateral estoppel . . . . "

The problem of one-way intervention occurs when "not-yet-bound absent plaintiffs may elect to stay in a class after favorable merits rulings but opt out after unfavorable ones." (Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1074.) Thus, "trial courts in class action proceedings should decide whether a class is proper and, if so, order class notice before ruling on the substantive merits of the action." (Ibid.) The doctrine is designed to prevent class members from taking advantage of favorable rulings while avoiding any res judicata effect of unfavorable ones, essentially picking and choosing how to proceed based on how the merits of the class litigation unfold. It does not apply where potential members of a class are ultimately not included in the class definition at the certification stage.

Further, while SCUPS spends pages and pages insisting that federal and state arbitration law require staying any trial court proceeding pending arbitration, it neglects to point out that no arbitration is pending, and therefore no stay is required. The mere possibility of a collateral estoppel effect based on the trial court's ultimate findings in this action does not, itself, present a due process violation. SCUPS is present in the trial court, defending itself. Prior to any collateral estoppel effect, SCUPS will have had both notice and a chance to be heard. Indeed, the rules of collateral estoppel are designed to prevent due process violations. (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 875 ["[C]ollateral estoppel may be applied only if due process requirements are satisfied"].) Put simply, the possibility of multiple actions is always a possibility, and that mere possibility itself does not implicate due process.*fn4

In sum, we find the court did not abuse its discretion by certifying the class as defined in its order.

D. Petition to Compel Arbitration

As the trial court noted, given the class definition, no students who signed arbitration agreements were before the court. Therefore, for the reasons discussed in Lee I, the petition to compel arbitration was properly denied. Further, because there is no arbitrator or arbitration involved, the trial court did not "deprive[] the arbitrator of his or her authority" to rule on class certification issues.


The court's orders are affirmed. Lee is entitled to her costs on appeal.




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