Wiggins v. Daymar Colleges Group, LLC, 5:11-cv-00036-TBR,2011 WL 5122673 (W.D. Ky. Oct. 27, 2011).

In this case, a District Court in Kentucky agreed with other district courts who have considered affidavits from attorneys, telephone surveys of a random sample of proposed class members, and addresses and phone numbers on medical records as a mode of discovery to establish that more than two-thirds of the class members are citizens of a particular state.

In thisclass action lawsuit against the defendants, Daymar Colleges Group, the plaintiffs sought to represent present and former students of Daymar who have been fraudulently solicited to attend Daymar educational institutions with false promises. The plaintiffs asserted violations of, inter alia, KRS Chapter 165A et seq., the Kentucky Consumer Protection Act, Kentucky antitrust laws, and common law misrepresentation, fraud, fraudulent inducement, breach of contract, and conspiracy.

Daymar removed the action to the federal court pursuant to CAFA. 

The plaintiffs moved to remand and also sought to allow jurisdictional discovery. In July 2011, the Court held that Daymar had properly removed the case to federal court. The Court could not determine, however, whether one of the CAFA exceptions applied because the definition of the class was ambiguous. Accordingly, the Court directed the plaintiffs to amend their Complaint and allowed the parties to file supplemental briefs.  (Editors’ Note: See the CAFA Law Blog analysis of the court’s July 2011 order posted on September 12, 2011. Additionally, See the CAFA Law Blog analysis of Lancaster, another Daymar College action, posted on September 27, 2011.)

Consequently, the plaintiffs amended the complaint, wherein the class is composed of present and former students of Daymar in Kentucky, Indiana and Ohio who have been fraudulently solicited to attend Daymar educational institutions with the promise of receiving degrees transferable to the vast majority of institutions of higher learning, and for whom these representations were both false and the degrees and credits non-transferable.  The plaintiffs also sought to represent a class who secured loans to pay for degrees, who were promised jobs in their field of study following graduation, and who were misled regarding the terms and availability of financial aid. 

Pursuant to the amended complaint, the Court considered whether the “home state controversy” or “discretionary” exceptions applied to this case such that remand was warranted. The only issue for the Court’s consideration was whether two-thirds or more of the members of the proposed class are citizens of Kentucky. Daymar asserted that the plaintiffs could not meet this burden because the class covered thousands of members attending Daymar Colleges in three states during an open-ended time frame. Thus, any attempt to demonstrate that two-thirds of the members are citizens of Kentucky would be pure speculation, Daymar argued.

Daymar submit an affidavit of the Vice President of Information Technology for Daymar Colleges Group, LLC. The affidavit indicated that during the five year time period, 63.2% of students were residents of Kentucky. Although Daymar recognized that this summary did not account for students who may have changed addresses since their last contact with Daymar and was merely “guesswork,” Daymar believed this provided further evidence that the plaintiffs could not establish that two-thirds of the class members were citizens of Kentucky.

The plaintiffs relied upon information from the National Center for Educational Statistics and the Kentucky State Board for Proprietary Education, which showed that in 2008-2009, Daymar colleges enrolled over 3,886 students. According to the plaintiffs, 65.95% of these students were citizens of Kentucky at that time. The plaintiffs assert that this data provided support for its claim that more than two-thirds of the class members are citizens of Kentucky, especially in light of the fact that the Kentucky campuses have operated longer than the campuses in Ohio and Indiana. 

The plaintiffs also stated that Daymar’s data was inaccurate as Daymar excluded few campuses and did not provide a campus-by-campus breakdown of the residency of its students.  Moreover, Daymar limited its data to the past five years instead of fifteen years.  

The Court remarked that the amount of speculation involved in determining the citizenship of the class members was troubling especially because of the plaintiffs’ intention to include Daymar students from the past fifteen years.

The plaintiffs asserted, however, that discovery would permit them to establish by a preponderance of the evidence that more than two-thirds of the class members are citizens of Kentucky. The Court remarked that although the plaintiffs failed to describe how they intended to conduct such discovery, other courts have considered affidavits from attorneys, telephone surveys of a random sample of proposed class members, and addresses and phone numbers on medical records.

Accordingly, the Court permitted the plaintiffs to conduct limited jurisdictional discovery as to whether two-thirds of the proposed class are citizens of Kentucky.