Fuller v. Bloom Institute of Technology

Background

Jessica Fuller and three other former Bloom students filed a putative class action in San Francisco Superior Court. They alleged that Bloom Institute of Technology, formerly known as Lambda School, and Austen Allred, Bloom’s founder and chief executive officer, violated California consumer-protection statutes. The alleged misrepresentations concerned Bloom’s job-placement rates, its approval status with California, and whether its income-share agreements and other tuition plans created debt.

The plaintiffs sought to represent current and former Bloom students who entered into specified income-share agreements, retail installment contracts, deferred tuition plans, or other tuition payment plans. They requested declarations that the agreements were unlawful and unenforceable, an injunction cancelling the agreements and stopping collection or enforcement, refunds of payments, and attorney’s fees.

Defendants removed the case to federal court under the Class Action Fairness Act, or CAFA. CAFA gives federal courts jurisdiction over qualifying class actions with more than 100 members, minimal diversity between the parties, and more than $5 million in controversy. The plaintiffs moved to remand the case to state court or, alternatively, requested permission to conduct discovery about federal jurisdiction. The only disputed issue was whether the amount-in-controversy requirement was met.

Parties’ positions

Defendants initially relied on the complaint, the proposed class definition, and the requested class-wide relief. In opposing remand, they also submitted a declaration from Stephen Will, Bloom’s Data Science and Analytics Manager. Defendants argued that the case placed at least $40,828,509 in controversy, excluding attorney’s fees. Their calculation included $1,947,272 paid under qualifying income-share agreements or retail installment contracts, $34,166,138 outstanding under fully vested such agreements, and $4,715,100 paid under other tuition payment plans. They also argued that attorney’s fees could be included.

The plaintiffs did not challenge including the $1.9 million in payments under qualifying income-share agreements and retail installment contracts. They challenged the $34.2 million in outstanding balances as speculative because repayment depended on students meeting employment conditions. They also argued that defendants had not shown that the agreements underlying the $4.7 million in other payments were included in the proposed class. The plaintiffs contended that the amount in controversy was at most about $1.9 million plus attorney’s fees.

Court’s analysis

Because the complaint did not state an amount in controversy, defendants had to prove by a preponderance of the evidence—that is, show that it was more likely than not—that the amount exceeded $5 million. The court explained that the amount in controversy measures the amount at stake based on all relief sought in the complaint, not the amount of liability that is likely or certain. For requests for declaratory or injunctive relief, the court measures the value of what the requested judgment would accomplish for either side.

The court agreed that the $4.7 million paid under non-income-share and non-retail-installment agreements could not be counted. Defendants had not sufficiently shown that those agreements met the proposed class definition, and their evidence relied on an assumption about whether the agreements contained a qualifying arbitration provision. Defense counsel also acknowledged that defendants did not possess the agreements and lacked visibility into whether they contained the required provision.

The court nevertheless held that the amount in controversy exceeded $5 million. The complaint sought to cancel existing income-share agreements and retail installment contracts and to prevent future enforcement and collection. Defendants’ evidence showed approximately $34,166,138 outstanding under fully vested agreements entered into from March 2020 onward, involving approximately 1,549 students. The court treated those outstanding balances as part of the amount at stake because the requested relief could prevent defendants from collecting them and could relieve class members of those obligations. The court also included the $1,947,272 already paid under qualifying agreements.

The court further noted that the plaintiffs requested attorney’s fees and that fees were available under the California Consumer Legal Remedies Act. The plaintiffs agreed that attorney’s fees could be included and did not dispute defendants’ use of a 25-percent fee estimate.

Disposition

The court found that defendants had met their burden of showing that more than $5 million was in controversy under CAFA. It denied plaintiffs’ motion to remand. It also denied plaintiffs’ alternative request for leave to conduct jurisdictional discovery. This order addressed federal jurisdiction over the removed case, not the merits of the plaintiffs’ consumer-protection claims.

Judge Alex Tse signed the order as a United States magistrate judge.