The opinion of the court was delivered by: ANITA B. BRODY
Before me is defendant's motion for summary judgment in this class action brought under 18 U.S.C. § 1964(c), the provision of the Racketeer Influenced and Corrupt Organizations Act ("RICO") that confers a private right of action on any person whose business or property is injured "by reason of" another's violation of that Act. The principal issue to be decided here is whether, as a matter of law, the causal connection between defendant's alleged actions and plaintiffs' claimed injuries is insufficient to satisfy RICO's proximate cause requirement. I conclude that it is not and that the causation issue must therefore be submitted to the trier of fact. Accordingly, I will deny defendant's motion for summary judgment.
The following facts are either undisputed or represent plaintiffs' version of events underlying this litigation. Plaintiffs are students who were admitted without a high school diploma or its equivalent to one of three trade schools operated by a corporate entity defendant controlled called Educom, which later changed its name to CareerCom. Plaintiff class members allege that, by reason of defendant's fraud on the United States Department of Education ("DOE"), they enrolled in a course of study at defendant's schools that left them saddled with tuition debt but without the training and job placement services they were promised.
Under federal law, a student may not attend a trade school using the federal financial assistance provided by the guaranteed student loan ("GSL") program unless both the student and the school meet certain requirements. 20 U.S.C. § 1077. Among these requirements is the mandate that students who, like plaintiffs, are admitted to a school without having obtained a high school diploma or a general education diploma ("GED") be determined to have the "ability to benefit" from the school's courses. 20 U.S.C. § 1091. This "ability to benefit" determination is made by the school, 20 U.S.C. § 1085, and is arrived at by administering "a nationally recognized, standardized or industry developed test, subject to criteria developed by the appropriate accrediting association." 20 U.S.C. § 1091(d)(3)(A).
Plaintiffs claim that defendant fraudulently certified to DOE that his schools complied with these "ability to benefit" requirements and were thus eligible to participate in the GSL program when in fact the schools were using artificially low cut-off scores on their entrance examinations and thereby qualifying for assistance students who, like plaintiffs, did not have the "ability to benefit" from the schools' courses. Based on this fraudulent certification, plaintiffs contend, DOE guaranteed student loans to be incurred by plaintiffs for the purpose of attending defendant's schools. Plaintiffs then incurred such loans to pay tuition to defendant's schools for what plaintiffs allege was worthless training and job-placement assistance.
The named plaintiffs here, Rebecca Rodriguez and Tene Freeman, were students at one of defendant's schools, the Watterson School of Business and Technology. Rebecca Rodriguez, who enrolled in a medical assistant's course there in 1988, had not yet earned a high school diploma or GED, and was admitted as an "ability to benefit" student based on her score of 10 out of 40 on the "ASSET" admissions test. She withdrew from the course after only six weeks and later obtained a GED. At the time of this suit, she had an outstanding GSL debt of $ 1600 from her enrollment in Watterson. Tene Freeman enrolled in the same course at Watterson in 1991, and was also admitted as an "ability to benefit" student based on her score of 118 on the "CPAT" test. She completed her course work, but Watterson closed before she received any placement services. At the time of this suit, she had not found work in her chosen field and owed $ 2625 from her enrollment at Watterson.
Plaintiffs have brought suit under RICO's private action provision, 18 U.S.C. § 1964(c), alleging that defendant's conduct amounts to a pattern of racketeering in violation of 18 U.S.C. § 1962(c). The predicate racketeering acts alleged are principally acts of mail fraud, although plaintiffs also allege wire fraud and bank fraud. As relevant here, plaintiffs claim that the false certifications and subsequent steps in defendant's fraud were accomplished through multiple mailings in violation of the mail fraud statute, 18 U.S.C. § 1341, including mailings of: (i) eligibility certification forms and responses to evaluations and program reviews, all sent by defendant's schools to DOE; and (ii) checks representing guaranteed student loans, all sent by various GSL lenders to plaintiffs. Plaintiffs have also pleaded violations of RICO's conspiracy provision, 18 U.S.C. § 1962(d).
I addressed plaintiffs' motion for class certification in my Memorandum of June 6, 1994. Rodriguez v. McKinney, 156 F.R.D. 112 (E.D. Pa. June 6, 1994). On July 8, 1994, I certified this claim as a class action pursuant to Fed. R. Civ. P. 23(b)(3). Rodriguez v. McKinney, 156 F.R.D. 118 (E.D. Pa. 1994). Now I take up defendant's summary judgment motion, which contends chiefly that the causal nexus between defendant's alleged fraud on DOE and plaintiffs' enrollment in defendant's schools is so attenuated that, as a matter of law, proximate cause cannot be established. I first consider, and reject, defendant's proximate cause argument. Afterwards, I list, for completeness' sake, defendant's remaining contentions in support of his motion, which, because they are without merit, I dispose of summarily.
Summary judgment may be granted only if the pleadings, supporting papers, affidavits, and admissions on file, when viewed with all inferences drawn in favor of the nonmoving party, demonstrate that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). An issue is "genuine" if a reasonable trier of fact could possibly find in the nonmoving party's favor with respect to that issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). A fact is material if it influences the outcome under governing law. Id. at 248. If there is any doubt as ...