Metter v. Capella Univ., LLC

JONATHAN METTER v. CAPELLA UNIVERSITY, LLC, et al.

CIVIL ACTION NO. 20-6405

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

April 20, 2021

AMENDED MEMORANDUM RE MOTION TO DISMISS AMENDED COMPLAINT

Baylson, J.

I. Introduction

As alleged, Plaintiff Jonathan Metter is a licensed therapist who needed supplemental credits to continue his practice when he moved to Pennsylvania. He discussed that need with an enrollment specialist at Capella University, who recommended three classes of four credits each. Metter enrolled in those classes but, upon their completion, learned that he had received only "quarter credits" and would need to complete additional classes before receiving his Pennsylvania license. Doing so delayed his return to practice by six months. He sued Capella for negligent and fraudulent misrepresentation, negligent nondisclosure, and unfair trade practices.

Capella¹ now moves to dismiss Metter's complaint, arguing that Metter improperly packaged contract law injuries as tort law claims. Metter argues that he asserts a tortious injury — he was injured after he justifiably relied on Capella purportedly misrepresenting the value of his course credits. Given updated guidance by the Third Circuit on Pennsylvania law, Metter's framing is correct: the parties' contract controlled and released Capella's obligation to ensureMetter received his licensure, but it did not control its duty to honestly disclose the nature of the credits he would receive in his enrollment. Because Metter's claims arise from a non-contractual duty, they are properly framed as tort claims, and the Court will DENY Capella's motion to dismiss on all counts.

II. Factual Allegations

For the purposes of a motion to dismiss, the court will assume as true all factual allegations in Metter's Amended Complaint. ECF 11.

Metter is a marriage and family therapist licensed in California. Id. at ¶ 10. Beginning in Summer 2018, he began preparations to move to Pennsylvania, including confirming with the Pennsylvania licensing board that he needed eleven additional credits of education to practice in the Commonwealth. Id. at ¶ 11. To do so, Metter contacted Capella. Id. Metter spoke to one or more of Capella's enrollment specialists, informing them that he needed those eleven credits to become a Licensed Marriage and Family Therapist in Pennsylvania. Id. at ¶¶ 12, 14.

In May 2018, an enrollment specialist emailed Metter with course information for three courses in his field, each identified as being worth "4.0 credit(s)." Id. at ¶ 15. Metter received two more emails from Capella in July 2018, each of which reiterated the course descriptions and the value of "4.0 credit(s)" each. Id. at ¶ 17. Relying on these emails, Metter enrolled in those three courses, expecting a sufficient total of twelve credits upon their completion. Id. at ¶ 21.

In December 2018, Metter learned that these twelve credits were, in fact, twelve "quarter credits," based on a Capella system, and were worth less than he expected. Id. at ¶¶ 23, 24. Metter did not complete his licensure requirements in the time period he had anticipated and had to enroll in additional courses to meet them. Id. at ¶ 25. This causes a six-month delay in his ability to begin practicing in the Commonwealth. Id. at ¶ 26.

Metter was not informed that Capella's system used "quarter credits," the enrollment counselor did not advise him on the quarter credit system, and he was not aware that enrollment only in those three classes would result in delay in his licensure. Id. at ¶ 29. Metter claims that, had he known about the quarter credit system, he would have enrolled in more or different classes to ensure timely completion of his licensing requirements. Id.

III. Procedural History

Metter initially sued Capella in the Pennsylvania Court of Common Pleas of Philadelphia County. ECF 1. Capella removed to the Eastern District of Pennsylvania under diversity jurisdiction. Id. Metter moved to remand, ECF 7, and Capella moved to dismiss, ECF 8.

Metter then amended his complaint, ECF 11, mooting both pending motions. In his Amended Complaint, Metter retained four of his initial claims, but he dropped his "Breach of Contract" claim. Id. The four remaining claims are (1) negligent misrepresentation, (2) fraudulent misrepresentation, (3) negligent nondisclosure, and (4) unfair trade practices.

Capella renewed its motion to dismiss, ECF 13; Metter responded in opposition, ECF 14; and Capella replied in support, ECF 15. This Court initially granted Capella's motion, finding that (1) Metter's tort claims impermissibly relied on a duty that arose under contractual law as to the value of Capella's credits and (2) binding Third Circuit interpretation of the economic loss doctrine precluded Capella's unfair trade practices claim. ECF 16 (also available at 2021 WL 880133). Both holdings expressly relied on Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002), a precedential Third Circuit opinion interpreting Pennsylvania state law. In its initial opinion, the Court noted "longstanding 'tension' between Werwinski and the Pennsylvania Superior Court's more recent but non-binding Knight decision" regarding the economic loss doctrine's applicability to statutory unfair trade practices claims. ECF 16 at 10. It concluded that, "until the Third Circuitor Pennsylvania Supreme Court provides further guidance to Pennsylvania's federal courts, Werwinski continues to bind this court's decision-making." Id.

Four days before the Court issued its prior opinion — and well after the close of briefing — the Third Circuit had issued a new precedential opinion addressing the conflict between Werwinski and Knight and, as a result, abrogating Werwinski. Earl v. NVR, Inc., 990 F.3d 310 (3d Cir. 2021). In light of the Earl opinion, this Court vacated its prior opinion and ordered the parties to submit supplemental briefs on the ruling. ECF 18. The parties have since done so, ECF 19, 20, and the Court will now re-address Metter's claims under the new legal landscape.

IV. Legal Standard

In considering a motion to dismiss under Rule 12(b)(6), the Court "accept[s] all factual allegations as true [and] construe[s] the complaint in the light most favorable to the plaintiff." Warren Gen. Hosp. v. Amgen, Inc., 643 F.3d 77, 84 (3d Cir. 2011) (internal quotation marks and citations omitted). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

Although a court must accept all factual allegations contained in a complaint as true, that requirement does not apply to legal conclusions; therefore, pleadings must include factual allegations to support the legal claims asserted. Id. at 678, 684. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 678 (citing Twombly, 550 U.S. at 555); see also Phillips v. Cty. of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (citing Twombly, 550 U.S. at 556 n.3) ("We caution that[,] without some factual allegation in the complaint, a claimant cannot satisfy the requirement that he or she provide not only 'fair notice,' but also the 'grounds' on which the claim rests."). Accordingly, to survive amotion to dismiss, a plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556).

As these claims arise through state law and are presented to this Court under diversity jurisdiction, Pennsylvania state law determines the substantive law of action. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938) ("Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state."); Liggon-Redding v. Estate of Sugarman, 659 F.3d 258, 262 (3d Cir. 2011) ("A federal court sitting in diversity must apply state substantive law."). In the absence of authoritative guidance from the Supreme Court of Pennsylvania, the Court considers "decisions of [Pennsylvania] intermediate appellate courts, of federal courts interpreting [Pennsylvania's] law, and of other state supreme courts that have addressed the issue." Spence v. ESAB Grp., Inc., 623 F.3d 212, 216 (3d Cir. 2010).

V. Parties' Contentions

a. Defendant's Arguments

In its initial motion to dismiss, Capella made three chief arguments. First, in reliance on Werwinski, Capella contended that the economic loss and gist of the action doctrines prohibit plaintiffs from suing for injuries that arise under a contract in the form of a tort claim. In support, Capella claimed that Metter's injuries stemmed from his belief that Capella failed to deliver the credits he needed for licensure, a responsibility that Capella disclaimed in its course catalogue, which Metter accepted during in his enrollment.

Capella University cannot guarantee licensure, endorsement, other professional credential, or salary advancement. State licensing regulations and professional standards vary; learners are responsible for understanding and complying with the requirements of the state in which they intend to work.

ECF 13-6 at 176. Second, Capella argued that the Court can and should examine language from the same course catalog, which repeatedly identifies Capella's courses as awarding "quarter credits." Capella contended that Metter signed an acknowledgment that he read the document, such that he cannot show "justified reliance" on the enrollment specialist's emails. Third, Capella argued that Metter's Amended Complaint fails to satisfy Federal Rule of Civil Procedure Rule 9(b), which requires all allegations of fraud be pleaded with particularity.

Following the Third Circuit's decision in Earl, the Court ordered...