1 Complaint

Case 5:16-cv-01535 Document 1 Filed 07/14/16 Page 1 of 39 Page ID #:1
1 ANNE RICHARDSON – SBN 151541

2 arichardson@publiccounsel.org
MAGDALENA REYES BORDEAUX – SBN 195671
3 mbordeaux@publiccounsel.org
4 CHARLES EVANS – SBN 251780
cevans@publiccounsel.org
5 L. ADELAIDE ANDERSON – SBN 270966
6 aanderson@publiccounsel.org
PUBLIC COUNSEL
7 610 South Ardmore Avenue
8 Los Angeles, CA 90005
Tel.: (213) 385-2977 | Fax: (213) 385-9089
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10 Counsel for Plaintiff and Proposed Classes

[Additional Counsel List Follows Caption]
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UNITED STATES DISTRICT COURT
12 CENTRAL DISTRICT OF CALIFORNIA, EASTERN DIVISION
13
DEBORAH TERRELL, an individual, Case No.
14 on behalf of herself and similarly
15 situated persons, CLASS ACTION COMPLAINT
16 FOR:
Plaintiffs, 1) Class Violations of the Fair
17 Debt Collection Practices Act;
v. 2) Class Violations of the
18
Rosenthal Fair Debt Collection
19 UNIVERSITY ACCOUNTING Practices Act;
SERVICE, LLC; a Wisconsin limited 3) Class Violations of the
20 liability company; BALBOA Consumer Legal Remedies Act;
21 STUDENT LOAN TRUST, a Delaware 4) Class Violations of Cal. Bus. &
statutory trust; TURNSTILE CAPITAL Prof. Code § 17200, et seq.;
22 MANAGEMENT, a Delaware limited 5) Declaratory Judgment under 28
23 liability company; and DOES 1 through U.S.C. § 2201;
10, inclusive, 6) Individual Violations of the
24
Fair Debt Collection Practices
25 Defendants. Act; and
26 7) Individual Violations of the
Rosenthal Fair Debt Collection
27 Practices Act.
28 JURY TRIAL DEMANDED
CLASS ACTION COMPLAINT

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1 Additional Counsel for Plaintiff and Proposed Classes

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FREDRIC D. WOOCHER – SBN 96689
3 fwoocher@strumwooch.com
JENNA L. MIARA – SBN 305703
4
jmiara@strumwooch.com
5 DALE LARSON – State Bar No. 266165
dlarson@strumwooch.com
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STRUMWASSER & WOOCHER LLP
7 10940 Wilshire Boulevard, Suite 2000
Los Angeles, California 90024
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Tel.: (310) 576-1233 | Fax: (310) 319-0156
9
DAN STORMER – SBN 101967
10
dstormer@hadsellstormer.com
11 CAITLAN MCLOON - SBN 302798
cmcloon@hadsellstormer.com
12
HADSELL STORMER & RENICK LLP
13 128 N. Fair Oaks Avenue
Pasadena, California 91103
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Tel.: (626) 585-9600 | Fax: (626) 577-7079
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1 Plaintiff Deborah Terrell brings this proposed class action against University
2 Accounting Service, LLC (“UAS”), the Balboa Student Loan Trust (“Balboa”), and
3 Turnstile Capital Management, LLC (“Turnstile”), individually and on behalf of all
4 similarly situated individuals (“Class Members”) who were fraudulently induced to
5 take out student loans now owned and serviced by Defendants. Plaintiff alleges that
6 Defendants’ efforts to collect on these loans violate the Fair Debt Collections Practices
7 Act, California’s Rosenthal Debt Collection Practices Act, California’s Consumer
8 Legal Remedies Act, and California’s Unfair Competition Law. This Court has
9 jurisdiction over the federal statutory claims pursuant to 28 U.S.C. § 1331, and
10 supplemental jurisdiction over the claims under California law. Plaintiff hereby
11 alleges the following:
12 INTRODUCTION
13 1. This case involves the unlawful attempt to collect on private loan debt that
14 thousands of students were fraudulently induced to incur in order to attend Corinthian
15 Colleges, Inc. (“Corinthian”), a now defunct for-profit chain of schools. Corinthian
16 deliberately and systematically took advantage of low-income and vulnerable
17 Californians who had dreams of unlocking job opportunities and improving their lives
18 through a college education. Corinthian induced these students into enrolling in
19 Corinthian’s programs by making false promises to them about its job-placement rates,
20 the earnings of its graduates, and the kinds of career-services assistance it would
21 provide to graduates. Although they gained little in return, the students paid a high
22 price for their time at Corinthian because they were left saddled with large federal and
23 private student loan debts that many struggle to pay off.
24 2. To succeed as a business, Corinthian depended on a continuous influx of
25 new students, most of whom needed federal government financial aid and private
26 student loans to pay at least some of their tuition. In order to maximize its profits,
27 Corinthian intentionally recruited and enrolled vulnerable individuals who were
28 isolated and suffered from low self-esteem; who were in dire financial straits; who

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1 lacked sophistication in financial transactions such as loans; who had poor or no credit
2 history; and who had few people in their lives able to advise or support them. Single
3 parents, formerly homeless youth, children of the working poor, young adults coming
4 from troubled families, and even the homeless were among the groups specifically
5 targeted by Corinthian.
6 3. During recruitment, Corinthian preyed on these individuals by
7 misrepresenting the benefits of its programs. Among other deceptions, Corinthian
8 consistently made false promises of job-related training and internship opportunities,
9 distorted the job-placement rates of past students, and offered phony assurances of job-
10 placement assistance. It convinced students that their Corinthian education would
11 allow them to work in careers where they would earn substantially more than they
12 were able to earn before enrolling. It also misled students about the true cost of its
13 programs, the amount and nature of the loans for which Corinthian signed them up,
14 and the likelihood that students would get jobs after graduation that would make it
15 possible for them to repay those loans.
16 4. Corinthian repeatedly and consistently set its prices high enough to ensure
17 that the cost of student attendance always exceeded the maximum federal financial aid
18 award available. This meant that students who depended on financial aid to cover the
19 entire cost of attending Corinthian—as many Corinthian students did—had to also take
20 out private student loans to cover the gap between the cost of attendance and the
21 maximum financial aid award. When the 2008 recession motivated lenders to reduce
22 their private student lending, Corinthian created its “Genesis Loan Program” to ensure
23 continued receipt of both federal aid and private funds without changing its pricing
24 scheme. Through the Genesis Program, private lenders provided student loans to
25 Corinthian students according to Corinthian’s terms but without revealing to students
26 the lenders’ connections to Corinthian. Frequently, Corinthian ultimately bought back
27 the loans from the private lenders so that Corinthian became the holder of many of the
28 Genesis loans.

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1 5. Federal and state government agencies ultimately uncovered Corinthian’s

2 phony promises and inflated job-placement rates and opened investigations into its
3 practices, resulting in judgments against Corinthian for defrauding its students in
4 several states. Corinthian’s fraud was so widespread that the federal Department of
5 Education has approved the forgiveness of the federal loans made to former Corinthian
6 students who attended hundreds of specified programs.
7 6. The governmental investigations and disciplinary actions against
8 Corinthian expanded in number and scope throughout 2014, ultimately resulting in
9 Corinthian declaring bankruptcy on May 4, 2015.
10 7. Before Corinthian filed for bankruptcy—but long after Corinthian’s
11 pervasive fraud was made public—Corinthian sold its Genesis student loans to third
12 parties. In August 2014, Defendant Turnstile bought over 505 million dollars of
13 Genesis student loans from Corinthian for pennies on the dollar. Turnstile then created
14 Defendant Balboa to hold the student loan notes on Turnstile’s behalf.
15 8. At the time Turnstile bought these sham loans, 24 states’ attorneys general
16 and the federal Consumer Financial Protection Bureau (“CFPB”) were investigating
17 Corinthian for deceptive acts and practices when recruiting students, several states’
18 attorneys general had already sued Corinthian for defrauding students, and the
19 Department of Education had found that Corinthian misled its students and would no
20 longer be allowed to receive federal money.
21 9. In February 2015, Defendant Balboa entered into an agreement by which
22 it promised to refrain from suing or threatening to sue on the Genesis loans it holds.
23 10. Also in 2015, Balboa retained Defendant UAS to collect on the Genesis
24 student loan debts held by Balboa. Beginning in 2015 and continuing to the present,
25 UAS has taken aggressive steps to collect on these loans, despite knowing that the
26 former students only borrowed the money at all because of Corinthian’s fraud and
27 misrepresentations. In addition, UAS has implicitly threatened to take collection
28

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1 actions that are only possible through litigation even though such threats are barred by
2 Balboa’s agreement to not sue.
3 11. Plaintiff now seeks, for herself and on behalf of Class Members, all
4 available damages for UAS’s unfair debt collection practices, cancellation of the
5 Balboa-held Genesis student loans, and restitution of the monies paid to Defendants
6 Balboa and Turnstile on these loans that were fraudulently obtained by Corinthian.
7 Plaintiff further seeks the costs of litigation and attorneys’ fees.
8 JURISDICTION & VENUE
9 12. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331
10 because the action arises from violations of the Fair Debt Collection Practices Act, 15
11 U.S.C. §§ 1692, et seq., with supplemental jurisdiction over state law claims pursuant
12 to 28 U.S.C. § 1367.
13 13. Venue is proper in this district under 28 U.S.C. § 1391(b)(2) because the
14 events at issue substantially occurred in San Bernardino and Riverside Counties,
15 California.
16 14. This Court has personal jurisdiction over Defendants because they have
17 significant minimum contacts with California, or they otherwise availed themselves of
18 the laws and markets of California through the purchasing, holding, and attempting to
19 collect on debts owned by consumers in California. Defendants all transact business
20 affairs in California and with California consumers, and a substantial part of the events
21 giving rise to the claims occurred in California.
22 PARTIES
23 15. Plaintiff Deborah Terrell is a resident of Riverside County, California.
24 She is a former student of Everest College, a d/b/a of Corinthian.
25 16. Defendant UAS is a wholly owned subsidiary of NCO Group, Inc., a
26 holding company for a number of debt-collection companies. The primary business of
27 UAS is to collect student loan debts on behalf of UAS/NCO Group, Inc. customers
28

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1 using mail and telephone communications. UAS is a Wisconsin limited liability

2 company.
3 17. Defendant Turnstile is a Delaware limited liability company. Its primary
4 business is owning and collecting student loan debt. It purchased the promissory notes
5 of Plaintiff’s and Class Members’ private student loans from Corinthian. Turnstile
6 then created Balboa and transferred its ownership of the notes to Balboa. Turnstile is
7 the sole owner and controller of Balboa. Turnstile’s principal office is in California.
8 18. Defendant Balboa is a Delaware statutory trust. It is the current holder of
9 the promissory notes for the student loans at issue in this action. Balboa hired UAS to
10 attempt to collect the student loan debts of Plaintiff and Class Members.
11 19. Plaintiff and Class Members are ignorant of the true names and capacities
12 of Defendants sued herein as Does 1 through 10, inclusive, and therefore sues these
13 Defendants by such fictitious names. Does 1 through 5 are debt-collection companies
14 that collect student loan debts using mail and telephone communications, and who
15 service loans currently owned by Balboa that originated with Corinthian. Does 6
16 through 10 are current or previous holders of the promissory notes for the student loans
17 at issue in this action and the creditors who either received payment on the promissory
18 notes and/or on whose behalf Defendant UAS or Does 1 through 5 engaged in
19 collection activity against Plaintiff and Class Members.
20 20. Plaintiff is informed and believes, and thereon alleges, that Defendant
21 Balboa was at all times an agent of, servant of, fiduciary of, or wholly controlled
22 subsidiary in joint enterprise with Defendants Turnstile and Does 6 through 10. At all
23 times relevant, Defendant Balboa was acting within the course and scope of said
24 agency, service, or enterprise. Balboa has operated at all times relevant for the sole
25 benefit of, and in complete unity of interests with, Defendants Turnstile and Does 6
26 through 10. On information and belief, Defendant Turnstile ratified the conduct of
27 Defendant Balboa alleged herein.
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1 FACTUAL ALLEGATIONS
2 Corinthian’s Business Model and Loan Program
3 21. Corinthian was once one of the largest chains of for-profit colleges in the
4 United States and Canada. It operated campuses across North America and online,
5 through its wholly owned and directly controlled subsidiaries, under the Everest
6 College, Everest College Phoenix Online, Everest Institute, Everest University Online,
7 Heald College, and Wyotech labels. Corinthian operated over 30 campuses in
8 California alone.
9 22. Due to their limited financial means, most Corinthian students had to pay
10 at least some of their education expenses with financial aid. Corinthian students were
11 generally eligible for federal financial aid, also known as Title IV funds.
12 23. Federal regulations mandate that for-profit schools such as Corinthian can
13 only receive 90% of their revenue from Title IV funds. The remaining 10% must
14 come from another source, such as funds provided by the students or private student
15 loans. This is commonly referred to as the 90/10 rule.
16 24. Because of the 90/10 rule, every dollar that students borrowed from
17 private lenders to attend a Corinthian school unlocked nine dollars’ worth of potential
18 federal funding. Private loan funds therefore represented an enormous source of
19 revenue for Corinthian—not only because of their face value, but also because of the
20 Title IV funding that Corinthian could then access from the federal government.
21 25. In fact, Corinthian deliberately and artificially raised education prices to
22 levels approximately 10-15% greater than the maximum amount of federal aid that
23 students were eligible to receive. Corinthian’s actions forced low-income students to
24 borrow all they could from the government and finance a portion of their education
25 expenses in some other way. This led to more tuition money for Corinthian, and a
26 greater debt burden for its students.
27 26. In 2008, Corinthian created its Genesis Loan Program to provide private
28 student loans to enrolling students and continue satisfying the 10% private-funding

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1 requirement for receiving federal funds. Corinthian representatives assisted enrolling

2 students in applying for financial aid and automatically signed up students for Genesis
3 loans as part of that assistance.
4 27. The Genesis loans were originated by lenders who had a connection to
5 Corinthian and who specialized in extending credit to subprime borrowers. The
6 Genesis lenders lent money to students according to Corinthian’s terms, and
7 Corinthian handled all loan-related negotiations and person-to-person interactions with
8 the borrowers.
9 28. After the private lender originated the Genesis loans, the loans would be
10 sold either to Corinthian or to a third-party investor. When the loans were sold to an
11 investor, Corinthian was obligated to buy back the promissory notes for the loans if
12 borrowers became 90 or more days late in making their payments. This scheme meant
13 that, although Corinthian could not make Genesis loans directly to its students, it often
14 became the creditor on the loans.
15 29. In order to induce students to enroll at Corinthian and to borrow through
16 Corinthian’s Genesis Loan Program, Corinthian grossly misrepresented the benefits of
17 its programs. Among other deceptions, Corinthian systematically made false promises
18 of job-related training and internship opportunities, distorted the job-placement rates of
19 past students, and offered phony assurances of job-placement assistance. It convinced
20 students that Corinthian’s programs would allow students to work in careers where
21 they would earn substantially more than they were able to earn prior to enrolling. It
22 also misled students about the true cost of their programs, the amount and nature of the
23 loans that Corinthian signed them up for, and about the likelihood that students would
24 be able to get jobs after graduation that would allow them to repay those loans.
25
The Federal & State Investigations That Led to Corinthian’s Closure Were Made
26 Public and Put Defendants on Notice of Corinthian’s Fraud.
27 30. By the time Turnstile and Balboa acquired the loans at issue in this case in
28 August 2014, Corinthian had been under investigation for years by multiple

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1 governmental agencies in regards to Corinthian’s fraudulent inducement of students to

2 enroll and to take on private student loans through Corinthian’s Genesis Loan
3 Program. The existence and substance of these investigations had been made public
4 through Corinthian’s publicly available filings with the Securities and Exchange
5 Commission (“SEC”), announcements by the investigating agencies, and various
6 judicial and administrative complaints filed against Corinthian.
7 31. Between October 2010 and March 2014, 24 states’ attorneys general
8 scrutinized Corinthian’s business practices related to enrollment and student loans. At
9 the federal level, the CFPB began investigating Corinthian in or about April 2012,
10 when it served Corinthian with a Civil Investigative Demand to determine whether
11 Corinthian was engaging in unlawful acts or practices relating to the advertising,
12 marketing, or origination of private student loans.
13 32. In October 2013, the Attorney General of California filed a complaint
14 against Corinthian and its various subsidiaries. The complaint alleged that Corinthian:
15 a. made untrue or misleading representations relating to job
16 placement;
17 b. advertised for programs and courses that Corinthian did not offer
18 and then induced students who came for those programs to attend
19 different programs;
20 c. engaged in unlawful debt collection practices related to the private
21 student loans (those practices included pulling students out of class
22 if they were late on loan payments); and
23 d. failed to disclose Corinthian’s role in the private student loan
24 program.
25 33. In January 2014, Corinthian reported in a public SEC filing that the CFPB
26 had provided official notification of a possible enforcement action against Corinthian
27 for violations of the Consumer Financial Protection Act of 2010, 12 U.S.C. § 5536.
28

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1 34. Similarly, in January 2014, the Iowa Attorney General’s office notified
2 Corinthian that it was leading an investigation of Corinthian on behalf of its citizenry
3 and residents of 12 other states related to practices including, among other things,
4 Corinthian’s job-placement statistics, the enrollment qualifications of its students,
5 licensing rates for its graduates, and the origination of student loans. Over the next
6 few months, three more states joined the investigation.
7 35. Also in January 2014, the federal Department of Education
8 (“Department”) informed Corinthian that any new locations or programs would have to
9 be approved by the Department in advance.
10 36. In April 2014, after three years of investigation, the Attorney General of
11 Massachusetts filed suit against Corinthian. That suit alleged unfair and deceptive
12 business practices including the misrepresentation of how many graduates found
13 employment in their field of study, and how much graduates earned. According to the
14 complaint, students “received no benefit from their loans.” Complaint,
15 Commonwealth of Massachusetts v. CCI Colleges, Inc., No. 14-cv-01093 at ¶ 6
16 (emphasis added).
17 37. On June 12, 2014, the Department restricted Corinthian’s ability to
18 receive and spend Title IV funds. When it became clear that Corinthian could not
19 continue operations without immediate access to federal funds, it entered into an
20 agreement with the Department whereby Corinthian was allowed to obtain limited
21 Title IV funds in exchange for agreeing to sell or close a majority of its campuses
22 under oversight of an independent monitor.
23 38. On August 22, 2014, the Department informed Corinthian that one of its
24 schools, Everest Institute, would no longer be eligible to receive federal Title IV
25 funding because Everest Institute communicated false job-placement data to its
26 accreditors and to its current and prospective students. A true and correct copy of the
27 Department’s enforcement letter is attached hereto as Exhibit A.
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1 39. According to the Department’s enforcement letter, to inflate its post-

2 graduation job-placement rates, Corinthian paid employers $2,000 for each Everest
3 Institute graduate that they promised to employ for at least 30 days, and “knowingly
4 counted” placements that were for less than 30 days as “sustainable” employment.
5 Corinthian also counted as “employed” Everest Institute students who were merely
6 interviewed, employed for less than a day, or briefly employed but unpaid for their
7 work. Exhibit A, p. 8-10.
8 40. In late August 2014, Corinthian received a Civil Investigative Demand
9 from the United States Department of Justice for potential False Claims Act violations
10 related to Corinthian’s misrepresentations regarding, among other things, graduate job-
11 placement rates and Corinthian’s private student loan program.
12 41. On September 3, 2014, Corinthian received a grand jury subpoena from
13 the United States Attorney’s Office in the Middle District of Florida.
14 42. On September 10, 2014, Corinthian received a grand jury subpoena from
15 the United States Attorney’s Office in the Northern District of Georgia.
16 43. On September 16, 2014, the CFPB filed suit against Corinthian in the
17 Northern District of Illinois. Complaint for Permanent Injunction and Other Relief,
18 Consumer Financial Protection Bureau v. CCI Colleges, Inc., No. 14-7194 (N.D. Ill.
19 Sept. 16, 2014). The CFPB’s complaint quoted Corinthian employees and officials
20 who described their students as:
21 a. “individuals who have ‘low self-esteem’ and ‘[f]ew people in their
22 lives who care about them’; who are ‘isolated,’ ‘stuck, unable to see
23 and plan well for future;’” and
24 b. “having ‘[m]inimal to non-existent understanding of basic financial
25 concepts,’ as well as poor or no credit history.”
26 Balboa’s Acquisition of the Corinthian Loans
27 44. By mid-2014, as a result of the mounting investigations and in particular
28 because of the Department’s restrictions limiting Corinthian’s ability to open new

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1 campuses or receive federal financial aid dollars, Corinthian was on the brink of
2 financial collapse.
3 45. On August 19, 2014, Corinthian’s creditors gave it permission to sell off
4 assets to obtain 20 million dollars to cover Corinthian’s operational expenses and use
5 the proceeds to keep school doors open.
6 46. On or about August 20, 2014, Corinthian sold student loan promissory
7 notes (the “Loan Pool”) with a face value of 505 million dollars to Turnstile in
8 exchange for 19 million dollars (or less than $.04 per dollar of debt). According to the
9 complaint in the CFPB case, the Loan Pool represented “virtually all” of the private
10 student loans Corinthian owned.
11 47. The sale of the Loan Pool to Turnstile took place after Corinthian had
12 agreed to wind down operations in most of its campuses, and after 24 states’ attorneys
13 general and the CFPB had launched investigations in Corinthian’s fraudulent conduct.
14 The existence of all of the state and federal investigations and allegations described
15 herein were public knowledge at the time of the sale. Nearly all of that information
16 was contained in Corinthian’s 2014 SEC filings. The remainder could be found in
17 press releases and public court filings.
18 48. Balboa came into existence and was registered with the state of Delaware
19 on October 10, 2014. Turnstile subsequently transferred ownership of the Loan Pool
20 to Balboa.
21 ECMC’s Payment to Balboa
22 49. On February 2, 2015, ECMC Group, Inc. and Zenith Education Group
23 (collectively “ECMC”) entered into an agreement with Corinthian by which ECMC
24 acquired most of Corinthian’s remaining assets and operations as part of Corinthian’s
25 winding down of operations.
26 50. On the date that ECMC acquired Corinthian’s assets, it entered into an
27 agreement with the CFPB. The agreement limited ECMC’s liability in the CFPB case
28

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1 against Corinthian. A true and correct copy of the letter confirming the agreement is
2 attached hereto as Exhibit B. That agreement states that ECMC would:
3 a. Reduce the loan principal of affected students by 40%, equaling
4 total debt relief of 480 million dollars;
5 b. Remove all previous negative credit reporting about these loans;
6 c. Refrain from suing or threatening legal action against borrowers
7 when seeking payment on any remaining balances; and
8 d. Make arrangements with third-party holders of those loans
9 previously sold by Corinthian to follow these same guidelines.
10 51. As Balboa was a third-party holder of Corinthian student loans, ECMC
11 was required to ensure that Balboa followed the requirements of the agreement with
12 the CFPB.
13 52. In exchange for Balboa’s cooperation, ECMC paid Balboa 7.5 million
14 dollars. Plaintiff is informed and believes, and thereon alleges, that this payment was
15 compensation for Balboa performing the required debt reduction and in exchange for
16 Balboa’s agreement to abide by the terms of the contract between ECMC and CFPB,
17 including the prohibition against taking legal action to enforce the remaining private
18 student loan balances. The 7.5 million dollar payment equals just under 40% of what
19 Turnstile paid Corinthian for the loan pool (19 million dollars). See Exhibit B, section
20 (1).
21
Findings of Fraud, Unlawful Debt Collection, and Unfair Business Practices
22 against Corinthian after sale of the Loan Pool
23 The Department of Education’s Findings re: Corinthian’s Heald Colleges
24 53. On April 14, 2015, after a year-long investigation, the Department of
25 Education informed Corinthian that it intended to fine Corinthian 30 million dollars for
26 the actions of Corinthian at its Heald Colleges. According to the Department,
27 Corinthian had “misrepresent[ed] its [job] placement rates to current and prospective
28

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1 students.” A true and correct copy of the Department’s enforcement letter is attached
2 hereto as Exhibit C.
3 54. For example, Corinthian had deemed that up to 58% of graduates from
4 one of its Heald Colleges programs had “deferred employment,” such that they were
5 not currently “employable.” Excluding all of these unemployed (voluntarily or
6 otherwise) students from its job-placement calculations created misleading job-
7 placement rates of up to 100%. Exhibit C, p. 5-6.
8 55. In addition, the Department found that “Heald [Colleges] failed to
9 disclose that it counted as placed graduates those former students who had obtained
10 their jobs prior to graduation from the school, and in some cases, graduates who had
11 obtained their jobs prior to the date they commenced their studies at Heald.” Exhibit C,
12 p. 7. This practice accounted for up to a third of Corinthian’s alleged “placements” of
13 Heald Colleges graduates. Id.
14 56. Corinthian also paid employers to hire Heald Colleges graduates for as
15 little as two days of work, then counted those students as having found employment in
16 their fields. Exhibit C, p. 7-8.
17 57. Corinthian reported that Heald Colleges students had found employment
18 in their fields of study, when they had not. For example, Corinthian counted a student
19 as “placed in-field” when she worked in food service at Taco Bell after obtaining an
20 accounting degree. Exhibit C, p. 8-9.
21 58. With respect to its medical assistant program at one Heald Colleges
22 campus, Corinthian misrepresented its job-placement rate as 78% instead of the actual
23 33% placement rate. Exhibit C, p. 9-10.
24 The CFPB Case
25 59. On October 27, 2015, the District Court for the Northern District of
26 Illinois entered default judgment in the CFPB case against Corinthian. A copy of that
27 judgment is attached hereto as Exhibit D (“Default Judg.”). The court found that
28

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1 Corinthian fraudulently induced students to take out the Genesis loans, and then
2 engaged in unlawful and unfair collection of those loans.
3 60. Specifically, “[f]rom at least July 2011 to July 2014, Corinthian induced
4 students to take out [private] loans through a series of misrepresentations about the
5 likely employment outcomes for Corinthian students.” Default Judg. ¶ 18. “Corinthian
6 made these misrepresentations to borrowers and prospective borrowers of [private]
7 loans in order to induce them to take out the loans.” Default Judg. ¶ 21.
8 61. Corinthian misrepresented outcomes by, inter alia: (1) calculating job-
9 placement rates by including employment that had lasted for only one day; (2)
10 “fudging” or “simply misreporting” job-placement statistics; (3) undercounting how
11 many of its graduates were “employable,” thereby increasing the overall percentage of
12 employed graduates in the pool of “employable” graduates; and (4) paying employers
13 to hire its graduates temporarily. Default Judg. ¶ 19.
14 62. With respect to unlawful and unfair debt collection, Corinthian harassed
15 students who fell behind on loan payments. Default Judg. ¶ 29. This harassment
16 included: (1) “prevent[ing] enrolled students from attending class;” (2) “pull[ing]
17 students out of class in front of their classmates;” and (3) “den[ying] students access to
18 computers and other educational materials.” Id.
19 The Department of Education’s Most Recent Findings
20 63. In conjunction with the Attorneys General of California, Massachusetts,
21 and other states, the Department broadened its investigation into Corinthian’s practice
22 of using falsified job-placement rates to recruit students. In November 2015, the
23 Department issued explicit findings that various programs at Corinthian campuses in
24 California had falsified the job-placement rates it showed to prospective students in
25 specific years. Subsequently, the Department announced new findings that falsified
26 job-placement rates were shown to prospective students at other Corinthian schools
27 around the country, bringing the total number of Corinthian campuses covered by the
28 findings to 91.

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1 Corinthian Closes its Doors

2 64. On April 26, 2015, Corinthian announced that it was closing its last
3 remaining campuses effective April 27, 2015. At the time of the closing, Corinthian
4 still operated approximately 28 campuses hosting over 10,000 students.
5 65. On May 4, 2015, Corinthian filed for bankruptcy.
6 FACTS REGARDING NAMED PLAINTIFF
7 66. Plaintiff Deborah Terrell is a 55-year-old mother of two. Up until late
8 2013, Plaintiff worked for a home restoration company called “Start to Finish.” She
9 had to undergo knee surgery in September 2013, and stopped working during her
10 recovery.
11 67. On June 10, 2014, while still unemployed, Plaintiff drove her 19-year-old
12 daughter to an Everest campus so that her daughter could enroll in a program there.
13 While she was there, a recruiter spoke to Plaintiff and tried to convince her to enroll
14 herself as well. The recruiter asked Plaintiff a few questions about her situation and
15 recommended that she enroll at a Corinthian school. Prior to the visit, Plaintiff had no
16 desire or intention to enroll at Everest.
17 68. Corinthian’s recruiter told Plaintiff that a Medical Administrative
18 Assistant diploma from one of Corinthian’s Everest College campuses would enable
19 Plaintiff to get a better job with a higher salary than she would be able to get
20 otherwise. The Corinthian recruiter also claimed that the school’s career services
21 office would help her get a job after graduation, and would provide job-search support
22 such as interview preparation and job listings forwarded from local employers with
23 whom Corinthian supposedly had relationships. The recruiter told Plaintiff that the
24 school had a 90% success rate in placing graduates in jobs within their fields of study.
25 69. The Corinthian recruiter also told Plaintiff that Plaintiff would earn good
26 money as a medical administrative assistant in her first year after graduating, and that
27 she would earn even more after obtaining a further certification.
28

17
1 70. Corinthian’s recruiter then told Plaintiff that she would need to enroll
2 immediately in order to secure a slot in the program and pressured her to sign up the
3 same day. Based on the recruiter’s representations about the post-graduation job
4 opportunities and earnings and the need to act quickly, Plaintiff enrolled that day, June
5 10, 2014, in the medical administrative assistant program at Everest College.
6 71. At the time she enrolled, Plaintiff did not have a clear understanding of
7 how much debt she would ultimately owe, or of the differences between her federal
8 student loans and her private ones. She believed, based on the representations made to
9 her by the Corinthian recruiter that she would soon become a medical administrative
10 assistant and her income would increase sufficiently to allow her to pay off all her
11 loans.
12 72. The total cost of tuition for Plaintiff’s nine month program was over
13 $19,000. Corinthian arranged for Plaintiff to obtain a state grant of around $5,000,
14 around $9,000 in federal student loans, and a private loan with an original principal
15 balance of $4,947.09. The original interest rate for the private loan was 8.9%.
16 73. Plaintiff took her program extremely seriously and strove to succeed in
17 every way she could. She got straight A’s in all her classes. She received various
18 awards for achievements including perfect attendance and honor roll recognition. She
19 also took advantage of multiple opportunities to complete additional trainings and
20 certifications, including training in medical billing practices and compliance with
21 health industry regulations. She was even chosen to serve as her school’s
22 “Ambassador” in a program that involved peer mentoring, tutoring, and hosting school
23 events and fundraisers, including for Ronald McDonald House.
24 74. At Corinthian’s direction, Plaintiff paid an estimated $2,600 for
25 supposedly required schoolbooks when she began her program. She ultimately did not
26 use many of these books, and never even opened some of them.
27 75. When Plaintiff was recruited to enroll, Corinthian promised it would place
28 her in an externship that would provide skills relevant to her desired medical

18
1 administrative assistant career, as well as contacts with potential employers. Plaintiff

2 was also assured that most students were able to secure permanent employment
3 positions with their externship host. However, the externship that Corinthian placed
4 her with involved only mass billing work that was entirely unrelated to her area of
5 study, and did not require her to utilize any of the skills that she was supposed to learn
6 as part of her medical administrative assistant program. When Plaintiff complained
7 that her externship was not what Corinthian had promised and requested a transfer to a
8 more career-relevant position, Corinthian refused.
9 76. Plaintiff completed the final requirements of her program in March of
10 2015. In April of 2015, Corinthian shut down all its remaining California campuses,
11 including the Everest campus that Plaintiff attended. Students did not receive any
12 notice whatsoever of the impending closure. Plaintiff’s scheduled graduation
13 ceremony was canceled. At first, she was unable to obtain copies of her transcript or
14 diploma. When she initially requested her diploma, a Corinthian representative told
15 her that the diploma was “worthless” because the school had “lost its accreditation.”
16 Although she subsequently was able to obtain her diploma, she still has been unable to
17 obtain a copy of her transcript.
18 77. Contrary to the recruiter’s promises, Plaintiff received no career services
19 or job-search assistance from Corinthian. Without any help from Corinthian and
20 despite searching diligently for work and applying for every position she could find,
21 Plaintiff has been unable to obtain a job as a medical administrative assistant. Plaintiff
22 makes less now than she was making before she attended Corinthian and substantially
23 less than what Corinthian told her she would make, and there are no opportunities for
24 advancement in her current position.
25 78. Plaintiff’s private student loan was among those covered by the CFPB’s
26 agreement with ECMC. Pursuant to the CFPB’s requirements and as a result of
27 ECMC’s payment of 7.5 million dollars to Turnstile/Balboa, Plaintiff’s balance due
28

19
1 was reduced by 40%. In addition, Balboa was prohibited from taking or threatening
2 legal action against Plaintiff to collect the balance owed on the loans.
3 79. Defendant UAS began servicing Plaintiff’s student loan on behalf of
4 Defendant Balboa on June 1, 2015, and sent Plaintiff a number of collection letters
5 over the next several months. UAS’s collection letters to Plaintiff include the
6 following statements:
7 a. On July 30, 2015: “Your agreement with BALBOA STUDENT
8 LOAN TRUST requires prompt payment. Please pay the total
9 amount due or tell us why payment should not be due at this time.”
10 b. On September 18, 2015: “WARNING … You have defaulted on
11 your obligation to pay this loan … Payment of the total amount due
12 on this debt is required immediately.”
13 c. On October 3, 2015: “WARNING OF DEFAULT …Your seriously
14 delinquent account requires immediate attention. If you do not
15 respond to this notice, you will have defaulted on your obligation to
16 repay this debt. Send payment of the total amount now due or
17 contact us immediately.”
18 d. On November 17, 2015: “NOTICE … Your severely past due
19 account requires immediate attention … Failure to resolve this
20 delinquency may require us to place your account with a collection
21 agency. You may be required to pay the full balance of your loan
22 plus the costs of collection.”
23 80. Almost immediately after being hired by Balboa, UAS began a pattern of
24 persistent telephone harassment of Plaintiff. By August 2015, Plaintiff was receiving
25 up to five calls a day from UAS. She often received two to four calls from UAS each
26 day, several days every week. At times the calls were be back-to-back. Other times,
27 the calls would be every thirty minutes. Some days the calls began in the morning then
28 lapsed for the afternoon, only to begin again in the early evening.

20
1 81. In October 2015, a UAS representative told Plaintiff during one of these
2 phone calls that UAS could “come after [her] house” because of her student loan debt.
3 The same UAS representative also threatened to “come after” Plaintiff’s bank account
4 and wages to collect on the debt.
5 82. A few weeks later, in approximately early November 2015, another UAS
6 representative told Plaintiff by phone that UAS could and would “go after” her house.
7 CLASS ACTION ALLEGATIONS
8 83. Plaintiff brings this action on her own behalf and on behalf of all other
9 persons similarly situated pursuant to Rule 23(b)(2) and (b)(3) of the Federal Rules of
10 Civil Procedure.
11 84. Plaintiff requests certification of two distinct classes. The Classes are
12 defined as follows:
13
CLASS NO. 1 [The Debt Collection Class]: All persons who
14 attended a Corinthian Colleges, Inc. college in California within
the last four (4) years, who took out private loans to fund his or
15
her Corinthian education, whose private loans were subsequently
16 assigned to Defendant Balboa, whose loans are currently
serviced by Defendant UAS, and to whom UAS has sent one or
17
more debt collection notices.
18
CLASS NO. 2 [The Balboa Debt Discharge Class]: All persons
19
who attended a Corinthian Colleges, Inc. college in California
20 within the last four (4) years, who took out private loans to fund
his or her Corinthian education, and whose private loans were
21
subsequently assigned to Defendant Turnstile and then to
22 Defendant Balboa.
23 85. The members of the Classes are so numerous that joinder of all members
24 is impracticable. Although the exact number of members of each Class is known only
25 to Defendants at this time, the number and identity of Class Members can be easily
26 determined from Defendants’ records. Plaintiff is informed and believes, and thereon
27 alleges, that well over 1,000 Corinthian students who attended school in California in
28 the last four years have taken out loans that are currently held by Balboa. The Balboa

21
1 Debt Discharge Class is thus believed to include more than 1,000 members. Plaintiff
2 is also informed and believes, and thereon alleges, that UAS is servicing a large subset
3 of the Balboa loans. The Debt Collect Class is thus believed to include at least several
4 hundred members.
5 86. There are questions of law and fact common to each Class.
6 87. For the Debt Collection Class, the common questions include but are not
7 limited to:
8 a. Whether UAS sought collection of student loan debts that it was on
9 notice were obtained by Corinthian through fraud;
10 b. Whether UAS continued to report the student loans as delinquent
11 on class members’ credit reports, despite knowing that the debt was
12 obtained by Corinthian’s fraud;
13 c. Whether UAS’s actions were willful, knowing, and with notice of
14 Corinthian’s wrongdoing;
15 d. Whether UAS’s actions violated the Fair Debt Collection Practices
16 Act;
17 e. Whether UAS’s actions violated the Rosenthal Fair Debt Collection
18 Practices Act; and
19 f. Whether Defendants’ actions violated the California Business and
20 Professions Code section 17200, et seq.
21 88. For the Balboa Debt Discharge Class, the common questions include but
22 are not limited to:
23 a. Whether Corinthian fraudulently induced Class Members into
24 borrowing the loans currently held by Balboa and Turnstile;
25 b. Whether Corinthian misrepresented to Class Members the nature of
26 the education and job-placement services it would provide in
27 violation of the Consumer Legal Remedies Act;
28

22
1 c. Whether Turnstile and Balboa are liable for Corinthian’s violations

2 of the law because of the contract term subjecting holders of the
3 debts to claims assertable against Corinthian;
4 d. Whether Turnstile and Balboa were on notice of Corinthian’s
5 wrongdoing when they acquired Class Members’ loans, barring
6 them from claiming “holder in due course” immunity to Plaintiff’s
7 and Class Members’ claims;
8 e. Whether Class Members’ loans held by Balboa are voidable as the
9 result of Corinthian’s fraud;
10 f. Whether Class Members are entitled to forgiveness or discharge of
11 their loans held by Balboa due to Corinthian’s violations of the
12 Consumer Legal Remedies Act;
13 g. Whether Class Members are entitled to restitution of amounts
14 already paid on their Balboa-held student loans as the result of
15 Corinthian’s illegal practices; and
16 h. Whether Defendants’ actions violated the California Business and
17 Professions Code section 17200, et seq.
18 89. These common questions of fact and law predominate over questions that
19 affect only individual class members. Proof of a common set of facts will establish the
20 right of each Class Member to recover, and there are ascertainable classes of
21 individuals entitled to relief.
22 90. Prosecution of separate actions by individual members of the Classes
23 would create a risk that inconsistent or varying adjudications with respect to individual
24 members of the Classes would establish incompatible standards of conduct for the
25 parties opposing the Classes.
26 91. Plaintiff’s claims are typical of those of absent Class Members of each
27 Class.
28

23
1 92. Plaintiff can and will fairly and adequately represent and protect the
2 interests of the proposed Classes. Plaintiff has no interest that conflicts with, or is
3 antagonistic to, the interests of the proposed Classes.
4 93. Plaintiff has employed attorneys who are experienced and competent in
5 consumer and civil rights litigation and class actions, and are able to adequately and
6 vigorously pursue this class action on behalf of all Class Members and to provide
7 notice to Class Members.
8 94. Plaintiff is informed and believes, and thereon alleges, that Defendants
9 have acted on grounds generally applicable to the Classes, thereby making appropriate
10 final injunctive relief or declaratory relief with respect to the Classes as a whole.
11 95. A class action under Rule 23(b)(3) is superior to other available methods
12 for the fair and efficient adjudication of the claims asserted herein given that:
13 a. The common issues of law and fact, as well as the relatively small
14 size of the individual Class Members’ claims, substantially
15 diminish the interest of members of the Classes in individually
16 controlling the prosecution of separate actions;
17 b. Many Class Members are unaware of their rights to prosecute these
18 claims and lack the means or resources to secure legal assistance;
19 c. No unusual difficulties are likely to be encountered in the
20 management of these Classes in that questions of law or fact to be
21 litigated at the liability stage are common to the Classes, as are
22 injunctive, declaratory, and restitutionary relief issues;
23 d. A class action will avoid the heavy burden of multiple, duplicative
24 lawsuits and will allow the Court to adjudicate the claims of all
25 class members at once and enter an appropriate order regarding
26 monetary relief with respect to the Class as a whole; and
27
28

24
1 e. There has been no litigation already commenced against

2 Defendants by the members of the Classes to determine the
3 questions presented.
4 96. Pursuant to Rule 23(c)(2)(B), Plaintiff requests that notice be sent to the
5 Debt Collection Class of all claims in the First, Second and Fourth Causes of Action,
6 and to the Balboa Debt Discharge Class of all claims in the Third, Fourth, and Fifth
7 Causes of Action in a form to be determined by the parties and the Court upon class
8 certification.
9 FIRST CAUSE OF ACTION
10 CLASS VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES
ACT, 15 U.S.C. §§ 1692, et seq.
11 (Brought on behalf of members of the Debt Collection Class against Defendants UAS
12 and Does 1 through 5, inclusive)
13 97. Plaintiff incorporates by reference the preceding paragraphs as if fully
14 alleged herein.
15 98. The Fair Debt Collection Practices Act (“FDCPA”) was enacted in 1968
16 to counter abusive debt collection practices, prevent abusive debt collectors from
17 having an unfair advantage over responsible debt collectors, and to make consumer
18 protections with regard to debt collection more consistent. 16 U.S.C. § 1692(e). These
19 protections apply regardless of whether the consumer actually owes the underlying
20 debt.
21 99. Class Members are natural persons who Defendants allege are obligated
22 to pay student loan debt arising out of their enrollment in a Corinthian program in
23 California.
24 100. Class Members’ student loans were used to pay for their personal
25 education, which they sought for the personal and household purpose of improving
26 their ability to obtain better paying and more fulfilling jobs.
27 101. Defendants are “debt collectors” within the meaning of 15 U.S.C.
28 § 1692a(6) as a consequence of the facts alleged above.

25
1 102. Defendants, through their behavior described herein, violated the

2 restrictions of 15 U.S.C. § 1692e, which prohibits false, deceptive, or misleading
3 representations. False, deceptive, or misleading representations include any threats to
4 take any action that cannot legally be taken or are not intended to be taken.
5 Defendants violated this restriction through their behavior described herein, including
6 but not limited to sending collection notices that imply that UAS will take legal action
7 to collect on the debts if they remain unpaid. Such legal action is prohibited by the
8 terms of the ECMC agreement.
9 103. Defendants, through their behavior described herein, also violated the
10 restrictions of 15 U.S.C. § 1692f, which prohibits unfair or unconscionable means to
11 collect on a debt. Unfair or unconscionable means include the collection of any
12 amount not authorized by the contract and by law. Defendants violated this restriction
13 through their behavior described herein, including but not limited to:
14 a. attempting to collect debts that are uncollectable as the result of
15 Corinthian’s fraud and failure to deliver the promised job training
16 and job-placement services, of which Defendants were on notice;
17 and
18 b. continuing to report the student loans as delinquent on Class
19 Members’ credit reports, despite knowing that the debt was
20 obtained by Corinthian’s fraud.
21 104. Defendants’ behavior described herein has damaged Plaintiff and Class
22 Members by negatively affecting their credit without cause, causing them anxiety
23 resulting from the threats of legal action, and requiring them to take time away from
24 work to address the collection attempts. The amount of the damages will be proven at
25 trial.
26 105. Defendants’ actions described herein were willful, knowing, and with
27 notice of Corinthian’s wrongdoing.
28

26
1 106. Plaintiff and Class Members are entitled to statutory damages, costs, and
2 attorney’s fees, in addition to actual damages.
3 Whereas Plaintiff and Class Members pray for relief as follows:
4 1. For an award of actual damages to Plaintiff and Class Members to be
5 proven at trial;
6 2. For an award of statutory damages to Plaintiff and Class Members;
7 3. For an award of costs of suit and attorney’s fees as allowed by 15 U.S.C.
8 § 1692k(a)(3); and
9 4. For such other relief as this Court deems proper.
10 SECOND CAUSE OF ACTION
11 CLASS VIOLATIONS OF THE ROSENTHAL FAIR DEBT COLLECTION
PRACTICES ACT, California Civil Code § 1788, et seq.
12 (Brought on behalf of members of the Debt Collection Class against Defendants UAS
13 and Does 1 through 5, inclusive)
15 alleged herein.
16 108. The Rosenthal Fair Debt Collection Practices Act, California Civil Code §
17 1788 et seq. (“Rosenthal Act”) was enacted in 1976 to protect consumers from the
18 oppressive and over-reaching debt collection practices of creditors and professional
19 debt collectors. Civil Code § 1788.1(b). 1 The Legislature found that “unfair or
20 deceptive debt collection practices undermine the public confidence which is essential
21 to the continued functioning of the banking and credit system and sound extensions of
22 credit to consumers.” Civil Code § 1788.1(a)(2). The Rosenthal Act as originally
23 passed set forth a list of proscribed collection practices. Then, in 1999, the California
24 Legislature expanded creditor liability even further, by incorporating violations of the
25 FDCPA as violations of the Rosenthal Act. Civil Code § 1788.17.
26
27
1
28 All references to the “Civil Code” herein are to the California Civil Code unless
otherwise stated.
27
1 109. The student loans at issue herein are each a “consumer debt” as defined
2 by Civil Code § 1788.2(f) because Plaintiff and Class Members are natural persons and
3 they obtained the student loans to pay for services obtained for personal and household
4 purposes, as described above.
5 110. Defendants at all times relevant herein were “debt collectors” within the
6 meaning of Civil Code § 1788.2(c), as a consequence of the facts alleged above.
7 111. Defendants’ actions described herein that were in violation of the
8 FDCPA are also violations of Civil Code § 1788.17.
9 112. Defendants’ behavior described herein has damaged Plaintiff and Class
10 Members by negatively affecting their credit without cause, causing them anxiety over
11 the threats of legal action, and requiring them to take time away from work to address
12 the collection attempts. The amount of the damages will be proven at trial.
13 113. Defendants’ violations of the Rosenthal Act were willful and knowing,
14 thereby entitling plaintiff to statutory damages pursuant to Civil Code § 1788.30(b).
15 114. Plaintiff and Class Members are entitled to statutory damages, costs, and
16 attorney’s fees, in addition to actual damages.
18 1. For an award of actual damages to Plaintiff and Class Members to be
19 proven at trial;
20 2. For an award of statutory damages to Plaintiff and Class Members;
21 3. For an award of costs of suit and attorney’s fees as allowed by Civil Code
22 § 1788.30(c) and 15 U.S.C. § 1692k(a)(3); and
24
25
26
27
28

28
1 THIRD CAUSE OF ACTION

2 CLASS VIOLATIONS OF THE CONSUMERS LEGAL REMEDIES ACT,
California Civil Code § 1750, et seq.
3 (Brought on behalf of members of the Balboa Debt Discharge Class against
4 Defendants Turnstile, Balboa, and Does 6 through 10, inclusive)
6 alleged herein.
7 116. Plaintiff is informed and believes, and thereon alleges, that Plaintiff’s and
8 Class Members’ student loan contracts include a term substantially equivalent to the
9 following:
10
ANY HOLDER OF THIS CONSUMER CREDIT
11 CONTRACT IS SUBJECT TO ALL CLAIMS AND
DEFENSES WHICH THE DEBTOR COULD ASSERT
12
AGAINST THE SELLER OF GOODS OR SERVICES
13 OBTAINED WITH THE PROCEEDS HEREOF. RECOVERY
HEREUNDER BY THE DEBTOR SHALL NOT EXCEED
14
AMOUNTS PAID BY THE DEBTOR HEREUNDER.
15
117. Pursuant to such contract language, Defendants are subject to liability for
16
all claims that Plaintiff and Class Members could assert against Corinthian.
17
118. Even if the above-mentioned contract terms were not included in the
18
contracts, Defendants Turnstile and Balboa were on notice of Corinthian’s wrongdoing
19
when they each acquired Plaintiff’s and Class Members’ loans, barring them from
20
claiming “holder in due course” immunity to Plaintiff’s and Class Members’ claims.
21
119. The Consumer Legal Remedies Act is a California consumer protection
22
statute that prohibits unfair or deceptive acts or practices in the advertising, marketing,
23
and representation of goods or services offered. Specifically, the Act prohibits a
24
vendor from representing that the services it offers are of a particular quality or grade
25
when they are not, from advertising services it does not intend to provide, and from
26
representing that the services it offers have characteristics, uses, or benefits that they
27
do not have.
28

29
1 120. Plaintiff and Class Members are each a “consumer” as defined by Civil
2 Code § 1761(d) because the student loans at issue were used by them to pay for their
3 personal educations, which they sought for the personal and household purpose of
4 improving their ability to obtain a better paying and more fulfilling jobs.
5 121. Corinthian, a limited liability company, was a “person” as defined by
6 Civil Code § 1761(c), as that definition includes both individuals, limited liability
7 companies, and “other group[s], however organized.”
8 122. The student loans at issue herein were each a “transaction” as defined by
9 Civil Code § 1761(e) because they were agreements between a consumer and a person
10 for the performance of education and job-placement services.
11 123. Corinthian violated Civil Code § 1770 through the behavior described
12 above, including but not limited to:
13 a. representing to Plaintiff and Class Members that Corinthian had
14 higher rates of historical success placing its graduates in careers in
15 their field than it actually had;
16 b. representing to Plaintiff and Class Members that Corinthian would
17 provide meaningful assistance in placing them with jobs, when in
18 fact it did not;
19 c. representing to Plaintiff and Class Members that students could
20 expect salaries and wages after graduating that they did not have
21 realistic chances of earning;
22 d. representing to Plaintiff and Class Members that their educations
23 with Corinthian would have characteristics, such as relevant
24 externship placement, that their educations did not have, as
25 described above; and
26 e. representing to Plaintiff and Class Members that obtaining their
27 educations with Corinthian had benefits, such as employer contacts
28

30
1 and prospective employers’ respect for a Corinthian education, that

2 their educations did not have, as described above.
3 124. As described above, government investigations have repeatedly found that
4 Corinthian’s misrepresentations, which were made in violation of Civil Code § 1770,
5 were intended to induce students like Plaintiff and Class Members to enroll with
6 Corinthian and enter into the related student loan contracts.
7 125. As the result of Corinthian’s actions, Plaintiff and Class Members have
8 been damaged by the negative effects on their credit without cause, the anxiety
9 resulting from not being able to obtain the types of jobs and employment incomes they
10 were promised, and the anxiety resulting from struggling to repay their loans without
11 the employment opportunities and incomes they were promised by Corinthian.
13 1. For an order declaring that the promissory notes evidencing the student
14 loan obligations at issue are void and of no legal effect;
15 2. For an order instructing Defendants to restore to Plaintiff and Class
16 Members all sums paid on the disputed student loans;
17 3. For an order instructing Defendants to remove all negative credit
18 information regarding Plaintiff and Class Members that was furnished to consumer
19 reporting agencies and is related to the voided student loans;
20 4. For an injunction barring all future attempts to collect on or otherwise
21 enforce the student loan obligations at issue; and
23 FOURTH CAUSE OF ACTION
24
CLASS VIOLATIONS OF CALIFORNIA BUS. & PROF.
CODE § 17200, et. seq.
25 (Brought on behalf of members of both Classes against All Defendants)
27 alleged herein.
28

31
1 127. California Business and Professions Code § 17200 et seq. is known as the
2 Unfair Competition Law. It prohibits businesses from using any unlawful, unfair, or
3 fraudulent act or practice in the conduct of its business.
4 128. Defendants’ business acts and practices within the last four years, as
5 described above, violated multiple federal and state laws, including but not limited to
6 the Fair Debt Collection Practices Act and the Rosenthal Fair Debt Collection
7 Practices Act.
8 129. Corinthian’s business acts and practices within the last four years, as
9 described above, violated multiple federal and state laws, including but not limited to
10 the Consumer Legal Remedies Act, California contract law, and Department of
11 Education requirements for receiving federal financial aid. Defendants, who seek to
12 reap the benefits of Corinthian’s unlawful actions, are also liable for Corinthian’s
13 unlawful business practices to the degree allowed by the contract and equitable
14 principles, as described above.
15 130. Defendants’ business acts and practices within the last four years, as
16 described above, offend public policy and are substantially injurious to consumers, in
17 that Defendants seek to collect a debt known to have been procured by fraud and have
18 relied upon unfair means to collect that debt.
20 described above, offend public policy and are substantially injurious to consumers, in
21 that Corinthian procured the loans at issue herein through fraud and used unfair means
22 to collect those debts. Defendants, who seek to reap the benefits of Corinthian’s
23 actions, are liable for Corinthian’s unfair business practices to the degree allowed by
24 the contract and equitable principles, as described above.
25 132. Defendants’ unfair and unlawful conduct, as described above, is typical of
26 how Defendants regularly interact with consumers like Plaintiff and Class Members.
27 As a result, Defendants’ business acts and practices injure or threaten to injure in the
28

32
1 future other consumers who—like Plaintiff and Class Members—Corinthian

2 defrauded.
4 described above, included deliberate misrepresentations intended to mislead consumers
5 into enrolling at Corinthian colleges, as described above. Defendants, who seek to
6 reap the benefits of Corinthian’s actions, are liable for Corinthian’s fraudulent business
7 practices to the degree allowed by the contract and equitable principles, as described
8 above
9 134. Defendants’ business acts and practices, as described above, are likely to
10 deceive affected consumers as to their legal rights and obligations, and by use of such
11 deception, may preclude affected consumers from exercising legal rights to which they
12 are entitled.
13 135. Defendants’ acts and practices described herein have damaged Plaintiff
14 and Class Members by negatively affecting their credit without cause, causing them
15 anxiety over unauthorized legal action, and requiring them to take time away from
16 work to address the collection attempts.
17 136. Pursuant to Business & Professions Code § 17203, Plaintiff and Class
18 Members seek an order enjoining Defendants from engaging in the acts and practices
19 as hereinabove alleged, and ordering that Defendants disgorge all ill-gotten gains and
20 provide appropriate restitution to all affected consumers.
21 137. Plaintiff and Class Members seek recovery of attorneys’ fees incurred in
22 the filing and prosecution of this action pursuant to Code of Civil Procedure § 1021.5
23 and any other applicable law.
25 1. For an order instructing Defendants to restore to Plaintiff and Class
26 Members all sums paid on the student loans at issue;
28 enforce the student loan obligations at issue;

33
1 3. For an injunction barring Defendants from collecting on Plaintiff’s and

2 Class Members’ student loans and any similar loans known to have been procured
3 through the fraud of Corinthian;
5 information furnished to consumer reporting agencies related to Plaintiff’s and Class
6 Members’ student loans known to have been procured through the fraud of Corinthian;
7 5. For an award of attorney’s fees as allowed by Code of Civil Procedure
8 § 1021.5; and
10
FIFTH CAUSE OF ACTION
11 CLASS REQUEST FOR DECLARATORY JUDGMENT
UNDER 28 U.S.C. § 2201
12
(Brought by members of the Balboa Debt Discharge Class against all Defendants)
14 alleged herein.
15 139. As described above, government investigations have repeatedly found that
16 Corinthian made knowingly false representations that were intended to induce students
17 such as Plaintiff and Class Members to rely on those false statements, to enroll with
18 Corinthian, and to enter into the related student loan contracts.
19 140. Plaintiff and Class Members justifiably relied upon the representations of
20 Corinthian’s representatives because Corinthian was in a position of control over
21 information about its educational programs and services, and because it marketed itself
22 as an institution that provided students with services including job-training and job-
23 placement services useful in improving one’s work-related earnings.
24 141. As the result of Corinthian’s actions, Plaintiff and Class Members have
25 been damaged by the negative effects on their credit without cause, the anxiety
26 resulting from not being able to obtain the types of jobs and level of employment
27 income for which they enrolled in Corinthian’s programs, and the anxiety resulting
28 from not being able to repay their loans.
34
1 142. The actions of Corinthian as described above constitute fraud in inducing

2 Plaintiff and Class Members to enroll with Corinthian and borrow the student loans at
3 issue.
4 143. For the reasons stated above, Defendants are subject to the same claims to
5 which Corinthian could be subject.
6 144. A live and active controversy exists now between Plaintiff and Class
7 Members on the one hand and Defendants on the other. Corinthian’s fraud, the legal
8 violations pled in the preceding causes of action, and the injuries sustained by Plaintiff
9 and Class Members as a result of the fraud and legal violations, justify a cancellation
10 of the student loan contracts between the parties. Defendants continue to collect on the
11 student loan contracts even though the obligations of Plaintiff and Class Members
12 under the student loan contracts should be terminated.
13 145. Plaintiff and Class Members seek a declaration that the student loan
14 contracts held by Balboa for student loans borrowed by Plaintiff and Class Members
15 for their attendance or costs at a Corinthian school are voidable and hereby cancelled.
16 Because the “benefit” received by Plaintiff and Class Members was negligible,
17 Plaintiff and Class Members do not need to restore anything to Defendants as part of
18 cancelling these contracts.
20 1. For an order declaring that the promissory notes evidencing the student
21 loan obligations at issue are cancelled as of the date of judgment and no longer of any
22 legal effect;
24 information furnished to consumer reporting agencies related to the cancelled student
25 loans;
27 enforce the student loan obligations at issue; and

35
1 SIXTH CAUSE OF ACTION

2 INDIVIDUAL VIOLATIONS OF THE FAIR DEBT COLLECTION
PRACTICES ACT, 15 U.S.C. §§ 1692, et seq.
3 (Brought by Plaintiff Deborah Terrell against Defendants UAS and
4 Does 1 through 5, inclusive)
6 alleged herein.
7 147. Defendants violated the restrictions of 15 U.S.C. § 1692e through their
8 behavior described herein, including but not limited to by threatening to seize
9 Plaintiff’s home and bank account contents if her student loan debt remains unpaid.
10 148. Defendants violated the restrictions of 15 U.S.C. § 1692d through their
11 behavior as described herein, including but not limited to by calling Plaintiff
12 repeatedly and frequently within the short time periods described.
13 149. Defendants’ behavior described herein has damaged Plaintiff by
14 negatively affecting her credit without cause, causing her anxiety resulting from the
15 threats of losing her home and her limited income, and requiring her to take time away
16 from work to address the collection. The amount of the damages will be proven at
17 trial.
18 150. Defendants’ actions described herein were willful and knowing.
19 151. Plaintiff is entitled to statutory damages, costs, and attorney’s fees, in
20 addition to actual damages.
21 Whereas Plaintiff prays for relief as follows:
22 1. For an award of actual damages to Plaintiff to be proven at trial;
23 2. For an award of statutory damages to Plaintiff;
24 3. For an award of costs of suit and attorney’s fees as allowed by 15 U.S.C.
25 § 1692k(a)(3); and
27
28

36
1 SEVENTH CAUSE OF ACTION

2 INDIVIDUAL VIOLATIONS OF THE ROSENTHAL FAIR DEBT
COLLECTION PRACTICES ACT, California Civil Code § 1788, et seq.
3 (Brought by Plaintiff Deborah Terrell against Defendants UAS and
4 Does 1 through 5, inclusive)
6 alleged herein.
7 153. Defendants violated the restrictions of Civil Code § 1788.11 through their
8 behavior as described herein, including but not limited to by calling Plaintiff
9 repeatedly and frequently within the short time periods described, and threatening to
10 seize Plaintiff’s home and bank account contents if the debt remains unpaid.
11 154. Defendants’ behavior described herein has damaged Plaintiff by
12 negatively affecting her credit without cause, causing her anxiety over the threats of
13 losing her home and her limited income, and requiring her to take time away from
14 work to address the collection. The amount of the damages will be proven at trial.
15 155. Defendants’ violations of the Rosenthal Act were willful and knowing,
16 thereby entitling plaintiff to statutory damages pursuant to Civil Code § 1788.30(b).
17 156. Plaintiff is entitled to statutory damages, costs, and attorney’s fees, in
18 addition to actual damages.
19 Whereas Plaintiff prays for relief as follows:
20 1. For an award of actual damages to Plaintiff to be proven at trial;
21 2. For an award of statutory damages to Plaintiff;
22 3. For an award of costs of suit and attorney’s fees as allowed by Civil Code
23 § 1788.30(c); and
25
26
27
28

37
1 Dated: July 14, 2016 Respectfully Submitted,

2 PUBLIC COUNSEL
Anne Richardson
3 Magdalena Reyes Bordeaux
4 Charles Evans
L. Adelaide Anderson
5
6 STRUMWASSER & WOOCHER LLP

Fredric D. Woocher
7 Jenna L. Miara
8 Dale Larson
9 HADSELL STORMER & RENICK LLP
10 Dan Stormer
Caitlan McLoon
11
12
13 By /s/ Jenna L. Miara a

Jenna L. Miara
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

38
1 JURY TRIAL DEMANDED

2 Plaintiff, individually and on behalf of the Proposed Classes, demands a jury on
3 all issues so triable.
4
5 Dated: July 14, 2016 Respectfully Submitted,

PUBLIC COUNSEL
6 Anne Richardson
7 Magdalena Reyes Bordeaux
Charles Evans
8 L. Adelaide Anderson
9
STRUMWASSER & WOOCHER LLP
10 Fredric D. Woocher
11 Jenna L. Miara
Dale Larson
12
13 HADSELL STORMER & RENICK LLP

Dan Stormer
14 Caitlan McLoon
15
16
By /s/ Jenna L. Miara a
17 Jenna L. Miara
18
19
20
21
22
23
24
25
26
27
28

39

1 Complaint

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Case 5:16-cv-01535 Document 1 Filed 07/14/16 Page 1 of 39 Page ID #:1

1 ANNE RICHARDSON – SBN 151541

10 Counsel for Plaintiff and Proposed Classes

CLASS ACTION COMPLAINT

1 Additional Counsel for Plaintiff and Proposed Classes

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

1 5. Federal and state government agencies ultimately uncovered Corinthian’s

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

1 using mail and telephone communications. UAS is a Wisconsin limited liability

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

1 requirement for receiving federal funds. Corinthian representatives assisted enrolling

CLASS ACTION COMPLAINT

1 governmental agencies in regards to Corinthian’s fraudulent inducement of students to

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

1 39. According to the Department’s enforcement letter, to inflate its post-

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

1 Corinthian Closes its Doors

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

1 administrative assistant career, as well as contacts with potential employers. Plaintiff

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

1 c. Whether Turnstile and Balboa are liable for Corinthian’s violations

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

1 e. There has been no litigation already commenced against

CLASS ACTION COMPLAINT

1 102. Defendants, through their behavior described herein, violated the

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

1 THIRD CAUSE OF ACTION

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

1 and prospective employers’ respect for a Corinthian education, that

CLASS ACTION COMPLAINT

CLASS ACTION COMPLAINT

1 future other consumers who—like Plaintiff and Class Members—Corinthian

CLASS ACTION COMPLAINT

1 3. For an injunction barring Defendants from collecting on Plaintiff’s and

1 142. The actions of Corinthian as described above constitute fraud in inducing

CLASS ACTION COMPLAINT

1 SIXTH CAUSE OF ACTION

CLASS ACTION COMPLAINT

1 SEVENTH CAUSE OF ACTION

CLASS ACTION COMPLAINT

1 Dated: July 14, 2016 Respectfully Submitted,

6 STRUMWASSER & WOOCHER LLP

13 By /s/ Jenna L. Miara a

CLASS ACTION COMPLAINT

1 JURY TRIAL DEMANDED

5 Dated: July 14, 2016 Respectfully Submitted,

13 HADSELL STORMER & RENICK LLP