Lachman v. Cabrillo Pacific University

Citations: 123 Cal. App. 3d 941; 177 Cal. Rptr. 21; 1981 Cal. App. LEXIS 2175Docket: Civ. 22652

Court: California Court of Appeal; September 18, 1981; California; State Appellate Court

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The case involves multiple plaintiffs, led by Diane Lachman, suing Cabrillo Pacific University for breach of contract and fraudulent misrepresentations aimed at inducing enrollment in the San Diego College of Business. The trial court dismissed the complaint, asserting that the plaintiffs, specifically Privett, failed to exhaust administrative remedies prior to filing the lawsuit. The plaintiffs sought injunctive relief and damages, alleging various claims including breach of contract, fraud, negligent misrepresentation, and violations of the Education Code.

The appellate court considered whether sections 94321 and 94332 of the Education Code required plaintiffs to exhaust administrative remedies before pursuing their civil action. Section 94321 outlines prohibited activities by educational institutions and stipulates that such violations prevent the institution from enforcing related contracts, obligate them to refund tuition, and allow the student to seek damages, including treble damages and attorney fees, in civil court. The court interpreted this provision as granting a right to adjudicate claims in civil court rather than through administrative channels.

Section 94332 allows individuals claiming damages from a postsecondary institution to file a verified complaint with the superintendent but does not limit the right to pursue civil remedies. Ultimately, the court found that the explicit language of the statutes indicated intent for claims to be addressed in civil court, contradicting the trial court's ruling.

The complaint must detail the alleged violation and include any additional information required by the superintendent. The superintendent is tasked with investigating the complaint and may seek to resolve it through persuasion and conciliation. A complaint will be considered after a 10-day written notice sent via registered mail to the relevant institution or its agent. If evidence at a hearing reveals that the institution or its agent has violated relevant provisions, the superintendent is obligated to report this to the Attorney General and may initiate action to revoke the institution's operating approval or the agent's permit. 

The code section allows individuals, such as the plaintiffs, to file a verified complaint detailing violations. It mandates investigation by the superintendent, who has discretion to attempt settlement. However, the section notably does not provide for an administrative process to adjudicate a plaintiff's right to damages, nor does it suggest that filing a complaint for revocation is a prerequisite for seeking damages under a separate section. 

The power granted to the superintendent includes investigation and potential revocation of licenses, but it lacks the authority to adjudicate or award damages. This absence is significant, as established by California Supreme Court rulings, which state that general investigatory power does not equate to an 'administrative remedy' unless a clear procedure for resolving complaints is specified. Courts have affirmed that such power does not interfere with claims for damages under other sections, as seen in the Shernoff case, where the court held that the Insurance Commissioner's authority did not extend to awarding damages for past injuries.

The Superintendent of Public Instruction lacks the authority to award the damages sought by the plaintiffs, as clarified by section 94332 of the Education Code. The Shernoff court established that there is no requirement to exhaust administrative remedies prior to pursuing a civil claim when the administrative process is irrelevant to the claim. Cabrillo's reference to Bennett v. Borden, Inc. is misplaced, as that case involved a statute that explicitly provided a remedy through a formal complaint and investigation process, which is not available in this context regarding the superintendent of public schools. Consequently, the exhaustion doctrine does not apply since no effective administrative remedy exists. Additionally, seeking injunctive relief does not invalidate the damages claim, as supported by Potrero Homes v. Western Orbis Co. The judgment has been reversed.