Evidence of California's Regulatory Vacuum

August 3, 2009

As officials in California have grappled for more than two years with a structure and law for regulating for-profit colleges in the state, there has been much speculation about hypothetical ways in which the expiration of the law governing for-profit regulation could limit the ability of students to seek redress from career colleges for perceived wrongs. But examples of actual effects have been hard to come by.

The U.S. Court of Appeals for the Ninth Circuit offered one on Friday, though. A three-judge panel of the court tossed out a former student's lawsuit against DeVry University, saying that it could not consider an appeal of a lower court's decision October 2007 against him because the California Private Postsecondary and Vocational Education Reform Act, "on which all of [the student's] claims are based, was repealed" without a clause that continued its enforcement. California has not passed a new law to succeed the expired one. "Because we cannot grant any effective relief, we lack jurisdiction to entertain this appeal."

DeVry officials played down the significance of the appeals court's ruling, noting that the lower court judge had fully rejected Saro Daghlian's accusations that DeVry had violated California law by failing to provide written disclosure explaining that credits he earned there might not transfer to other colleges. California's private postsecondary law, which was in effect at the time of Daghlian's suit, required such disclosure.

"If you're asking if this opinion illuminates the extent to which [the sunsetting of California's private postsecondary law] creates an absence of means" for students, "it would be incorrect to focus on this" appeals court ruling rather than the lower court judge's original decision, Gregory S. Davis, senior vice president and general counsel of DeVry Inc., said in an interview Friday.

"DeVry got sued for a huge number over a disclosure that it was never appropriate for it to have had to make, and made anyway. The court looked at it extremely carefully" and found that DeVry was right. "The guy had his recourse," Davis added, "and justice was done."

J. Mark Moore, a lawyer for Daghlian, the former student, said that the absence of an enforceable California law absolutely impaired his client's ability to benefit from the full legal protections due to him.

"We believe that the trial court judge made constitutional errors that resulted in summary judgment, and that we had a good chance of winning that issue," Moore said. "And we were arguing that the lower court also made decisions that resulted in the improper denial of class certification," which would have greatly expanded the potential claims against DeVry.

"Yet his ability to establish that on appeal is basically over, because the State of California let these statutes get repealed without a savings clause. It wiped out our case," and with it Daghlian's recourse to legal remedies in California, Moore said.

If lawyers for DeVry and Daghlian disagree on whether the lack of a law and vibrant for-profit regulatory structure denied this one particular former student, they agree that the state's continued failure to put in place such a system is a problem.

"California's lack of regulatory structure has caused confusion for students and institution," said Sharon Thomas Parrott, senior vice president for government and regulatory affairs and chief compliance officer at DeVry. That's why "we have been working in support of legislation that does give California the regulatory structure to have oversight over all of the institutions" -- legislation that consumer advocates and for-profit college officials continue to view through different lenses, but that appears (again) to be creeping toward a resolution.

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