EVELYM GUZMAN VS. SC ACADEMY HOLDINGS, INC. (L-0780-15, CAMDEN COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: April 18, 2019
• Docket: A-3028-17T4
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ."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-3028-17T4

EVELYN GUZMAN, ALYSSA CAPALDI, AMBER CARFAGNO, KAMEISHA JOHNSON, KAREEMA JOHNSON, I'YAHNA LEWIS, SHEMAIAH PRICE, KIARA BROOKS, JESSICA SILVA, NACHALEE ANDUJAR, KIANNA MARQUEZ, and EUGENIA SANTIAGO,

Plaintiffs-Appellants,

v.

SC ACADEMY HOLDINGS, INC., STAR CAREER ACADEMY, QUAD PARTNERS, CULINARY ACADEMY OF LONG ISLAND, INC., CULINARY ACADEMY OF NEW YORK, INC., MICHAEL IANNACONE, MICHAEL S. LEVITT, TIM JAMES, ROBERT EMME, COLEEN LEARD, MCHELLE MUMMA, RICHARD LINCOLN, CAROL HANNON, JENNIFER DIMEDIO, RHONDA TERWILLIGER, RON PINO, SHEILA STOKES, CHERYL ACKEY, and AMY TORRES, Defendants-Respondents. _____________________________

Submitted March 19, 2019 – Decided April 18, 2019

Before Judges Fisher and Geiger.

On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-0780-15.

Robert J. O'Shea, Jr., attorney for appellants.

Greenberg Traurig, LLP, attorneys for respondents SC Academy Holdings, Inc., Star Career Academy, Culinary Academy of Long Island, Inc., Culinary Academy of New York, Inc., Michael Iannacone, Michael S. Levitt, Tim James, Robert Emme, Colleen Leard, Michele Mumma, Richard Lincoln, Jennifer DiMedio, Rhonda Terwilliger, Ron Pino, Sheila Stokes, Cheryl Ackey, and Amy Torres (David Jay, Jason H. Kislin and Paige S. Nestel, on the brief).

Orloff, Lowenbach, Stifelman & Siegel, PA and Arthur H. Aufses, III (Kramer Levin Naftalis & Frankel LLP) of the New York Bar, admitted pro hac vice, attorneys for respondent Quad Partners, LLC (Laurence B. Orloff, on the brief).

PER CURIAM

Plaintiffs appeal from several Law Division orders dismissing their claims

against defendants Star Career Academy, SC Academy Holdings, Inc., Culinary

Academy of Long Island, Inc., Culinary Academy of New York, Inc.

(collectively Star), fourteen individual Star employees (collectively the Star

A-3028-17T4 2 individual defendants), and Quad Partners, LLC (Quad), for violation of the

Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, breach of contract, breach

of warranty, misrepresentation, and strict liability. All claims relate to plaintiffs'

enrollment in Star's surgical technician (ST) program. For the following

reasons, we affirm in part and vacate and remand in part.

Star and its affiliates own and operate for-profit schools, including the

institution at issue that trains students to become employed as STs. In 2011, the

Legislature enacted N.J.S.A. 26:2H-12.63 (the ST law), addressing five paths

for employment as an ST by a health care facility in New Jersey. One path is

successful completion of a "nationally or regionally accredited educational

program for surgical technologists." N.J.S.A. 26:2H-12.63(a). Another path is

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

A-3028-17T4 3 did not receive programmatic accreditation from either CAAHEP or ABHES.

The Accrediting Commission of Career Schools and Colleges (ACCSC) is

approved by the United States Department of Education (USDOE) to give

institutional accreditation, but is not authorized to give programmatic

accreditation to an ST program. In August 2010, the ACCSC recognized Star

as an accredited institution.

The Polonco Class Action.

Because our recent ruling in a related class action impacts the decisions

rendered by the trial court in this matter, we briefly discuss the pertinent facts

and procedural history in that separate class action, Polonco v. Star Career

Academy, No. A-3756-15 (App. Div. July 26, 2018).1 Shirley Polonco enrolled

in Star's ST program before the ST law was enacted. Id. at 7. After the law was

enacted, Polonco asked the director of the program if the ST law would affect

her ability to gain employment as a ST. Ibid. The director assured her

graduating from Star's program would qualify her under the ST law. Ibid. The

director of externships also told Polonco that Star's ST program was accredited.

1 While unpublished opinions do not constitute precedent and are not binding on any court, Rule 1:36-3, we cite our unpublished opinion in Polonco because it vacated the trial court's order certifying the class in that action. The class certification in Polonco was the basis for the dismissal of the majority of the claims raised in the Guzman and Silva actions. A-3028-17T4 4 Ibid. Other students also questioned Star admissions officers regarding how the

ST law would affect them. Ibid. The admissions officers discussed the

accreditation issues with their subordinates and "instructed them to 'sell the

program as best as [they] could.'" Ibid. (alteration in original).

As we described in Polonco:

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.

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.

A-3028-17T4 5 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. . . .

. . . [Calabria] 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.

[(Id. at 7-9).]

Three years after enrolling, Polonco filed a class action complaint against

Star alleging Star violated the CFA by misrepresenting information about the

accreditation of its ST program. Id. at 9-10. The proposed class was comprised

of "all individuals who were enrolled in [Star's ST program] for surgical

technician training to take place in the State of New Jersey as of June 29, 2011

and thereafter." Id. at 10. The trial court certified the proposed class over Star's

objection, and appointed Polonco class representative. Id. at 11. The court

denied Star's subsequent motion to decertify the class. Ibid.

A-3028-17T4 6 The case proceeded to trial and the jury returned a verdict in favor of the

class. Ibid. Star appealed, arguing the trial court improperly certified the class

because common issues did not predominate over issues affecting individual

class members as required by Rule 4:32-1(b)(3). Id. at 18. We agreed,

concluding "the individualized factual inquiries surrounding Star's

misrepresentations and the nexus between those misrepresentations and

omissions and the class members' ascertainable loss compels decertification."

Id. at 22. We decertified the class, vacated the final judgment and remanded for

retrial. Id. at 27, 31.

The Guzman and Silva Actions.

Evelyn Guzman, Alyssa Capaldi, Amber Carfagno, Kameisha Johnson,

Kareema Johnson, I'Yahna Lewis, Shemaiah Price, and Kiara Brooks filed their

action against defendants on February 25, 2015 (the Guzman Action). On March

17, 2015, additional former Star students Jessica Silva, Nachalee Andujar,

Kianna Marquez, and Eugenia Santiago filed a similar complaint against

defendants and Quad (the Silva Action).

The trial court consolidated the Guzman and Silva Actions. Star and the

Star individual defendants filed several rounds of Rule 4:6-2(e) dismissal

motions before any discovery was undertaken.

A-3028-17T4 7 Star moved to dismiss the Guzman Action under Rule 4:6-2(e); it argued

plaintiffs were part of the Polanco class and could not file a separate action.

Plaintiffs asserted they were not Polanco class members because they did not

receive notice of the class action and, thus, were not advised of their right to opt

out of the class. The trial court denied the motion to dismiss without prejudice.2

One month later, Star again moved to dismiss plaintiff's claims in the

Guzman and Silva Actions under Rule 4:6-2(e). On September 18, 2015, the

trial court granted the motion in part, dismissing the claims against Star with

prejudice as to all plaintiffs – except Guzman – because they were members of

the class in Polanco, and their claims were deemed duplicative.3 Plaintiffs'

motion for reconsideration was denied on December 4, 2015.

In January 2016, Star again moved for dismissal of the Guzman and Silva

Actions.4 The motion also sought dismissal of plaintiffs' claims against certain

sales representatives. On March 11, 2016, the trial court entered a handwritten

order addressing various motions. Despite its prior dismissal order, the trial

2 The record does not include a copy of the order. 3 The parties acknowledge Evelyn Guzman was not a member of the Polanco class. 4 The record does not include the moving papers. A-3028-17T4 8 court dismissed the claims brought by Capaldi, Carfagno, both Johnsons, Lewis,

Price, Brooke, Silva, Andujar, Marquez, and Santiago against Star; the contract

claims brought by Guzman and others against the Star individual defendants;

and all strict liability and educational malpractice claims. With respect to the

breach of contract claims against the Star individual defendants, the trial court

found the contracts were with "SC Academy or Star Academy or some corporate

entity," rather than with the individual employees. Next, the court dismissed

any claims based upon strict liability and educational malpractice, explaining

that such causes of action were not recognized under New Jersey law.

The court denied the motion to dismiss the CFA and common law fraud

claims against the Star individual defendants. The trial court also denied

dismissal of the breach of contract and fraud claims brought against Star by the

remaining plaintiffs, finding it inappropriate to decide the breach of contract

claim because it was "necessarily interwoven with the fraud claim." The trial

court stated it would allow discovery to proceed after which Star could renew

its application as a summary judgment motion.

The court carried the following aspects of the motions to April 8, 2016:

the CFA claims, the common law fraud claims, the vicarious liability claims

against Quad, and the exceptions to administrative dismissals due to service of

A-3028-17T4 9 process issues. The record does not contain a transcript of any proceedings on

April 8, 2016.

On May 13, 2016, the court entered a five-part order. In pertinent part,

the order: (1) dismissed with prejudice all breach of contract and warranty

claims against the Star individual defendants; (2) dismissed without prejudice

all CFA and common law fraud claims against the Star individual defendants

and Quad; (3) dismissed with prejudice all claims brought by plaintiffs included

in the Polanco class list except the claims against Quad; (4) confirmed the

plaintiffs in the Guzman and Silva Actions voluntarily dismissed with prejudice

all claims against Quad except the CFA and common law fraud claims; and (5)

continued Quad's motion to dismiss claims brought by plaintiffs who were

Polanco class members to May 23, 2016. While the order states the court placed

it reasons on the record on May 13, 2016, the transcript consists of a brief

colloquy and does not contain any factual findings or conclusions of law by the

trial court.

On May 23, 2016, the trial court granted Quad's motion to dismiss based

on res judicata, connecting Quad to the Polanco class action. The court found:

(1) the judgment in the Polanco action was valid, final, and on the merits; (2)

A-3028-17T4 10 plaintiffs' complaint alleged Quad was in privity with the Polanco defendants;

and (3) the current action arose from the same transaction and occurrence.

A subsequent June 3, 2016 order dismissed the claims of all plaintiffs in

the Guzman and Silva Actions against Quad with prejudice, except the claims

made by Guzman, which had been previously dismissed on May 13, 2016.

On January 23, 2018, Guzman executed a stipulation of dismissal,

dismissing all of her claims with prejudice.

This appeal followed. Plaintiffs challenge the March 11 and June 3, 2016

orders and the January 23, 2018 stipulation of dismissal.

Plaintiffs argue: (1) defendants misled the trial court regarding

dissimilarities between the Guzman and Silva complaints and the Polonco class

action complaint; (2) the Polonco class action did not divest the trial court of

jurisdiction over the Guzman Action as to Star; (3) the Polonco class action did

not divest the trial court of jurisdiction over the Guzman Action as to Quad and

the Star individual defendants who were not named defendants in the class

action; (4) defendants did not meet their burden of proving the Polonco trial

court had exclusive jurisdiction over the Guzman and Silva Actions or that the

Polonco opt out notice complied with due process by providing the best

practicable notice; (5) the trial court erred by considering unverified evidence

A-3028-17T4 11 submitted by Star in deciding Star's Rule 4:6-2(e) motion to dismiss; (6) the trial

court's ruling overlooked New Jersey's strong policy interest in eradicating

fraud; and (7) the trial court erred by dismissing all claims brought by the

Guzman Action plaintiffs other than those brought by Evelyn Guzman.

Defendants moved to dismiss the complaint under Rule 4:6-2(e) for

"failure to state a claim upon which relief may be granted." "In considering a

motion to dismiss under Rule 4:6-2(e), courts search the allegations of the

pleading in depth and with liberality to determine whether a cause of action is

'"suggested" by the facts.'" Rezem Family Assoc., LP v. Borough of Millstone,

423 N.J. Super. 103, 113 (App. Div. 2011) (quoting Printing Mart-Morristown

v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)). The court should "ascertain

whether the fundament of a cause of action may be gleaned even from an obscure

statement of claim, opportunity being given to amend if necessary." Ibid.

(quoting Printing Mart-Morristown, 116 N.J. at 746). "For this purpose, 'all

facts alleged in the complaint and legitimate inferences drawn therefrom are

deemed admitted.'" Rieder v. State, 221 N.J. Super. 547, 552 (App. Div. 1987)

(quoting Smith v. City of Newark, 136 N.J. Super. 107, 112 (App. Div. 1975)).

"On appeal, we engage in a de novo review from a trial court's decision to

grant or deny a motion to dismiss filed pursuant to Rule 4:6-2(e)." Smith v.

A-3028-17T4 12 Datla, 451 N.J. Super. 82, 88 (App. Div. 2017) (citing Rezem, 423 N.J. Super.

at 114). "We owe no deference to the trial court's conclusions." Rezem, 423

N.J. Super. at 114. We will uphold the dismissal if "the factual allegations are

palpably insufficient to support a claim upon which relief can be granted."

Rieder, 221 N.J. Super. at 552.

The issues presented in this matter do not require extended discussion.

The trial court dismissed the majority of plaintiff's claims based solely on the

class certification in Polonco, concluding the class certification divested it of

jurisdiction. We subsequently decertified the class. Polonco, slip op. at 25. In

light of our ruling, defendants do not dispute that plaintiffs can pursue their

claims individually.

Assuming the facts alleged by plaintiffs in their complaints are true, and

affording them all reasonable inferences, plaintiffs adequately pleaded causes of

action for violation of the CFA, common law fraud, and misrepresentation

against Star. The trial court erred by dismissing those claims against Star.5 We

vacate the dismissal of those claims and remand this matter for the parties to

engage in discovery.

5 We further note that the record before us does not contain any factual findings, analysis, or legal conclusions by the trial court on May 13, 2016. This too was error. R. 1:7-4(a). A-3028-17T4 13 Paragraphs two and five of the May 13, 2016 order State:

#2 – All NJCFA and common law fraud claims by all plaintiffs in these consolidated cases asserted against all individual defendants and Quad Partners, LLC are dismissed without prejudice.

#5 – Plaintiffs in Guzman and Silva voluntarily dismiss with prejudice [p]laintiffs' claims against Quad other than the NJCRA and common law fraud claim, i.e., breach of contract, breach of warranty and strict liability.

The order does not state it is a consent order. On this record, we are unable to

determine if the order was consented to by counsel as to just form or also as to

entry. We vacate the dismissal of plaintiffs' CFA and common law fraud claims

against the Star individual defendants and Quad and remand those claims.

Plaintiffs shall be afforded a reasonable period to amend their complaint as to

those claims and to engage in discovery.

Plaintiffs have not briefed the dismissal of their claims for breach of

contract and breach of warranty. Nor have they briefed the dismissal of their

claims for strict liability and educational malpractice. We deem those issues

waived. See Sklodowsky v. Lushis, 417 N.J. Super. 648, 657 (App. Div. 2011)

("An issue not briefed on appeal is deemed waived."). We affirm the dismissal

of the breach of contract, breach of warranty claims, strict liability, and

educational malpractice claims.

A-3028-17T4 14 Guzman was not a member of the Polonco class. We affirm the dismissal

of her claims against Star and the Star individual defendants with prejudice

pursuant to the stipulation of dismissal she executed. We discern no basis to

overturn the dismissal of those claims as a result of the resolution of h er claims

against defendants. Guzman does not argue otherwise.

Guzman seeks a remand of her claims against Quad. We find no basis to

do so. The stipulation of dismissal states "the claims brought by Evelyn Guzman

. . . in the actions consolidated under docket number CAM-L-780-15, are

dismissed with prejudice." The stipulation of dismissal encompasses all of

Guzman's claims in the Guzman Action; it does not preserve Guzman's claims

against Quad. The stipulation of dismissal is binding and enforceable. The

dismissed claims cannot be resurrected or pursued.

In light of these rulings, we do not reach the other issues raised by

plaintiffs.

Affirmed in part and vacated and remanded in part. We do not retain

jurisdiction.

A-3028-17T4 15