Pension Trust Fund For Operating Engineers v. DeVry Education Group, Inc. et al

Northern District of Illinois, ilnd-1:2016-cv-05198

REPLY by Defendants DeVry Education Group, Inc., Richard M. Gunst, Patrick J. Unzicker, Timothy J. Wiggins to motion to dismiss 91

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Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 1 of 18 PageID #:1827 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION PENSION TRUST FUND FOR OPERATING) ENGINEERS, Individually and on Behalf of) All Others Similarly Situated,)) Plaintiff,)) v.)) Case No. 1:16-cv-05198 DEVRY EDUCATION GROUP, INC.,) Hon. Jorge L. Alonso DANIEL HAMBURGER, RICHARD M.) GUNST, PATRICK J. UNZICKER, and) TIMOTHY J. WIGGINS,)) Defendants.) DEFENDANTS' REPLY MEMORANDUM IN SUPPORT OF THEIR MOTION TO DISMISS THE THIRD AMENDED COMPLAINT Michael Dockterman Terance A. Gonsalves Jeffrey W. Sanford STEPTOE & JOHNSON LLP 115 S. LaSalle Street, Suite 3100 Chicago, Illinois 60603 (312) 577-1300 Attorneys for Defendants Adtalem Global Education, Inc., Richard M. Gunst, Patrick J. Unzicker, and Timothy J. Wiggins Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 2 of 18 PageID #:1828 Defendants Adtalem Global Education Inc. f/k/a DeVry Education Group Inc. ("Adtalem"), Richard M. Gunst, Patrick J. Unzicker, and Timothy J. Wiggins1 submit this reply memorandum in support of their motion to dismiss lead plaintiff Utah Retirement Systems' ("Plaintiff") Third Amended Class Action Complaint ("TAC").2 INTRODUCTION This Court's December 6, 2017 decision diagnosed numerous infirmities in Plaintiff's Second Amended Complaint ("SAC"). After 230 pages and 518 separate paragraphs, the TAC does not manage to cure a single one. The new material in the TAC—comprised of vague allegations from 13 additional CWs and government allegations plucked from documents obtained under the Freedom of Information Act—amounts to more of the same wild speculation about the Individual Defendants' states of mind and unfounded inferences drawn from diffuse examples of alleged misclassification among a few DVU campuses and degree programs. In its opposition brief, Plaintiff doubles down on these allegations, tone-deaf to the Court's concerns that led ineluctably to dismissal of the SAC. The house of cards Plaintiff has erected remains as flimsy now as it ever was. After three failed attempts to meet the PSLRA's heightened pleading requirements, it is apparent that Plaintiff cannot do so. The Court should dismiss the TAC with prejudice. ARGUMENT I. PLAINTIFF FAILS TO ALLEGE A STRONG INFERENCE OF SCIENTER This Court has already found that the SAC's allegations fell well short of pleading scienter. See Pension Tr. Fund for Operating Eng'rs v. DeVry Educ. Grp., Inc., 2017 WL 6039926, at *13 1 Defendant Hamburger is submitting a separate reply memorandum that addresses two points in Plaintiff's opposition brief that are unique to Defendant Hamburger. Defendant Hamburger incorporates by reference this reply memorandum in support of Defendants' motion to dismiss the TAC. 2 Unless otherwise noted, capitalized terms have the same meanings as was ascribed to them in Defendants' memorandum of law in support of their motion to dismiss (ECF No. 92) (hereinafter "Def. Br."). 1 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 3 of 18 PageID #:1829 (N.D. Ill. Dec. 6, 2017). The prolix new allegations in the TAC are more of the same and do not provide the "particularized allegations" needed to demonstrate when, if ever, Defendants knew or recklessly disregarded that the 90% Statement was false. Id. at *12. The two categories of allegations added in an attempt to remedy the flaws in the SAC are: (i) a sampling of second- hand allegations from three government agencies and (ii) allegations from 13 additional CWs whose information is benign, unreliable, or so remote as to say nothing about Defendants' states of mind. These allegations do not improve Plaintiff's case because they do not state with particularity facts giving rise to a strong inference that each named defendant3 acted with "actual knowledge of the statement's falsity or reckless disregard of a substantial risk that the statement is false." 15 U.S.C. § 78u-4(b)(2). A. The New Government Allegations Do Not Support a Strong Inference of Scienter. In the TAC, Plaintiff relied on a series of allegations from government agencies to make actionable scienter allegations: (i) it recharacterized company documents described by the DoE in an appellate brief; (ii) it inferred from "correspondence" between the FTC and Adtalem in which the FTC designated "executive officers" of Adtalem as custodians of documents potentially related to its investigation; and (iii) it extrapolated from the MA AG's $455,000 settlement with DVU in July of 2017. (Opp. Br. at 12-18.) None of these new allegations move the needle to establish scienter. i. The DoE allegations fail to support scienter. Plaintiff contends that three Adtalem documents drawn from the DoE's appellate brief—all of which predate the class period and do not involve the Individual Defendants—support a strong inference of scienter: (i) a 2008 presentation regarding DVU's Careers campaign that allegedly "posed questions about the 3 Notwithstanding Plaintiff's improper group pleading, Plaintiff's opposition brief never mentions defendants Gunst and Unzicker, and only once passingly references defendant Wiggins, in an apparent concession that the claims against them should be dismissed. 2 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 4 of 18 PageID #:1830 sources" of the 90% Statement; (ii) an early 2009 email sent on behalf of non-party David Pauldine in which he posited whether DVU "should be looking at alternative messaging such that it brings the ultimate credibility to our employment claims;" and (iii) a November 2009 email from DVU's advertising agency Leo Burnett in which the agency allegedly questioned "certain details" of the 90% Statement. (Opp. Br. at 13-14.) Before turning to the three documents, it is telling that out of the "113,486 bates stamped pages" purportedly received by the DoE from DVU, Plaintiff finds only these three benign documents to be indicative of DVU's alleged inability to substantiate the 90% Statement properly. (TAC at ¶ 270.) Plaintiff's characterization of these documents, stripped of context in the DoE books-and-records proceeding, hardly supports a "strong inference" of scienter. The 2008 presentation does not imply what Plaintiff insists on inferring. The alleged "questions" the presentation supposedly raises about the sources of the 90% Statement are never identified, and this scant reference to the 2008 presentation constitutes nothing more than a vague gesture at internal information already rejected by this Court. Pauldine's email—which is so ambiguous as to be nearly unintelligible—does not identify which "employment claims" he is referencing, and it does not tie clearly to the only statement at issue here, the 90% Statement. See DeVry Educ. Grp., Inc., 2017 WL 6039926, at n.5. The 2009 exchange with Leo Burnett supports an inference opposite to what Plaintiff intends: it shows that DVU "dug into these numbers 8 ways to Sunday" and concluded that they were accurate. And none of the documents involves any of the Individual Defendants, nor does Plaintiff allege that any of the Individual Defendants ever saw them. (TAC at ¶ 393.) Allegations based on these documents cannot constitute sufficiently particularized allegations of scienter to satisfy the PSLRA. See DeVry 3 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 5 of 18 PageID #:1831 Educ. Grp., Inc., 2017 WL 6039926, at *13 (rejecting allegations that "gesture[] in vague terms at internal information"). ii. The FTC "correspondence" fails to support scienter. Plaintiff next argues that "internal correspondence" between FTC and DVU showing that certain "executive officers" were "designated as custodians who agreed to produce documents on a range of topics" means that those officers "were specifically targeted" by an FTC investigation, which, according to Plaintiff, equates to "an inference of knowledge or recklessness[.]" (Opp. Br. at 15.) Of course, the fact that individuals are document custodians does not reveal anything, let alone meet the PSLRA's requirements. Plaintiff's effort to turn a document custodian list into a scienter allegation is typical of Plaintiff's last-ditch efforts in its Opposition, and ignores the practical implications if that were actually the law: in Plaintiff's world, any document custodian for any governmental investigation not only did something wrong, but acted with scienter. The Court already rejected a similar argument based on the inclusion of defendant Gunst and non-party Pauldine in the Rule 26(f) report submitted in the FTC action. See DeVry Educ. Grp., Inc., 2017 WL 6039926, at *11. These new allegations are even weaker; the purported custodian list does not mention any of the Individual Defendants by name. Instead, it broadly defines "executive officers" to include some of the Individual Defendants' alleged job titles. Plaintiff then draws the specious conclusion that including "executive officers" as document custodians means the Individual Defendants were "specifically targeted" by the FTC's investigation. (Opp. Br. at 15.) This leap of logic renders Plaintiff's accusation of "[p]ure speculation about the FTC's legal strategy" quite ironic (Opp. Br. at 16), and, in any event, inferences from these allegations add nothing to establish Defendants' scienter. 4 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 6 of 18 PageID #:1832 iii. The MA AG allegations fail to support scienter. The last new, non-CW allegations added to the TAC are extrapolations from DVU's settlement with the MA AG. As described in Defendant's opening brief, the MA AG settlement was announced 18 months after the end of the proposed class period. (MA AG Press Release, Ex. J.) Thus, like the other regulatory settlements, "it provides no help to plaintiff with respect to notice of a risk of falsity that might support a strong inference of scienter." DeVry Educ. Grp., Inc., 2017 WL 6039926, at *11. Plaintiff tries to sweep away this fact by stating it is "wrong on the law." (Opp. Br. at 17.) Yet, it is Plaintiff who misconstrues both Defendants' argument and the Court's decision on this point. Just as with the FTC's investigation, the MA AG investigation "[a]t most. . . put defendants on notice of 'accusations' of falsity, not falsity itself." DeVry Educ. Grp., Inc., 2017 WL 6039926, at *11. The settlement, on the other hand, was consummated after the proposed class period ended, and Plaintiff may not extrapolate from the settlement that Defendants were on notice of a substantial risk of falsity during the class period.4 DeVry Educ. Grp., Inc., 2017 WL 6039926, at *11 ("As for the [FTC] settlement, it came long after the class period had ended, so it provides no help to plaintiff with respect to notice of a risk of falsity."). Similarly, Plaintiff touts "strong evidence" of Defendants' recklessness based on the MA AG's allegations regarding placement rates being less than 90% for graduates of one DVU degree program over a three-year period. (Opp. Br. at 16-17.) But, again, Plaintiff fails to connect these discrete examples to DVU's overall placement rates. See In re Career Educ. Corp. Sec. Litig., 2006 WL 999988, at *8 (N.D. Ill. Mar. 28, 2006) (allegations concerning six schools out of "seventy-eight campuses world-wide" did not "raise an inference of fraud on a nation- 4 Like DVU's settlement with the FTC, the MA AG settlement did not contain an admission of wrongdoing, so the settlement itself offers nothing with respect to whether Defendants were on notice of a serious risk that the 90% Statement was false. (MA AG Assurance of Discontinuance, Ex. K at ¶ 11.); see also DeVry Educ. Grp., Inc., 2017 WL 6039926, at *11. 5 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 7 of 18 PageID #:1833 wide level such that [defendant's] statements and omissions regarding its starts, student population, and job placement numbers nationally were false or misleading"). As in Career Educ. Corp., Plaintiff may not extrapolate from placement rates at one school that overall placement rates across DVU were the same, let alone that Defendants knew or knowingly misstated these rates. B. The New CW Allegations Fail To Establish Scienter. As detailed in Defendants' opening brief, the allegations from 13 new CWs contribute nothing to Plaintiff's deficient scienter allegations. In response, Plaintiff attempts to rehabilitate its CW allegations on three separate grounds: (i) allegations from CW8, a former employee whose position was unrelated to DVU but who believed the 90% Statement was not sufficiently substantiated; (ii) allegations from some CWs that the Individual Defendants generally discussed graduate employment data and the government investigations on some occasions; and (iii) a retread of the argument that alleged reporting errors pervaded the company based on a smattering of accounts from a small fraction of DVU's campuses. (Opp. Br. at 18-25.) None of these allegations, individually or collectively, support a strong inference of scienter. i. The CW allegations are unreliable and should be steeply discounted. As an initial matter, Plaintiff's reliance on its CWs is out of step with the general skepticism toward anonymous CW allegations shared by the Seventh Circuit and courts around the country. Plaintiff criticizes Defendants' reliance on Higginbotham, in which the Seventh Circuit announced the general rule that "allegations from 'confidential witnesses' must be 'discounted' rather than ignored" and "[u]sually that discount will be steep." 495 F.3d 753, 757 (7th Cir. 2007). Higginbotham remains good law,5 and none of the cases Plaintiff cites disturbs its 5 See, e.g., Rossy v. Merge Healthcare Inc., 169 F. Supp. 3d 774, 782 (N.D. Ill. 2015) (relying on Higginbotham to apply a "steep" discount to CW allegations). 6 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 8 of 18 PageID #:1834 holding. Rather, Plaintiff's authority reinforces that CW allegations should be discounted on an allegation-by-allegation basis where there is a lack of detailed information sufficient to establish that the CWs have first-hand knowledge of the content of their allegations. See Van Noppen v. InnerWorkings, Inc., 136 F. Supp. 3d 922, 935 (N.D. Ill. 2015) ("[W]here particular [CW] allegations lack a sufficient foundation, they will be discounted on an allegation-by-allegation basis."); Makor Issues & Rights, Ltd. v. Tellabs Inc., 513 F.3d 702, 712 (7th Cir. 2008) (requiring sufficient information to support that CWs were "in a position to know at first hand the facts to which they are prepared to testify") (emphasis added); City of Sterling Heights Gen. Emps. Ret. Sys. v. Hospira, Inc., 2013 WL 566805, at *17 (N.D. Ill. Feb. 13, 2013) (noting that the court "will consider the allegations attributed to confidential witnesses and discount them as appropriate"); cf. Zucco Partners, LLC v. Digimarc Corp., 445 F. Supp. 2d 1201, 1207 (D. Or. 2006), aff'd, 552 F.3d 981 (9th Cir. 2009) (rejecting CW allegations that were not based on personal knowledge, "but instead on something more like gossip or speculation, which is not sufficient evidence of scienter"); In re Ferro Corp., 2007 WL 1691358, at *12 (N.D. Ohio June 11, 2007) (rejecting CW allegations amounting to "water-cooler gossip, irrelevant speculation, and gratuitous criticism") (internal quotations omitted). As detailed at length in Defendants' opening brief, the vast majority of Plaintiff's CW allegations are based on second- (or third-) hand information, speculation, office gossip, innuendo, or some combination thereof. (Def. Br. at 12-19.) With few exceptions (addressed below), Plaintiff does not even attempt to address these shortcomings in the new CW allegations, let alone link these allegations to an inference of scienter. Plaintiff's CW allegations should be so steeply discounted that the Court rejects them as a cure for the SAC's infirmities. 7 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 9 of 18 PageID #:1835 ii. CW8's allegations do not support an inference of scienter. Plaintiff relies heavily on so-called "whistleblower" allegations from CW8, who allegedly served as a "Senior Director of Academic Effectiveness" for only six months and who did not work for DVU, the only institution that made the 90% Statement at issue. (Opp. Br. at 18-21; TAC at ¶¶ 308-09.) To distract from the fundamental problems with CW8's allegations, Plaintiff accuses Defendants of impermissibly attacking CW8's credibility. (Opp. Br. at 18-19.) Defendants, however, have merely identified the issues with CW8's allegations that undermine their reliability and plausibility, an inquiry the Court must undertake when construing allegations from confidential sources. See, e.g., In re Bally Total Fitness Sec. Litig., 2007 WL 551574, at *6 (N.D. Ill. Feb. 20, 2007) (when assessing confidential witness allegations, a court should examine "the coherence and plausibility of the allegations" and "the reliability of the sources"). CW8's allegations are problematic for a number of reasons that make them neither plausible nor reliable. For instance, CW8 worked in the Office of Institutional Effectiveness6 at Chamberlain College of Nursing—not DVU—and Plaintiff offers no information that CW8 had first-hand information regarding DVU's graduate placement statistics save for a vague reference to a "survey project" he worked on to collect "statistical data" for Adtalem schools. (TAC at ¶ 309.) That a short-term employee of Chamberlain with no DVU access had sufficient first-hand knowledge of DVU's graduate placement rates to opine on the overall accuracy of those rates is implausible, and CW8's allegations should be treated accordingly. Even if CW8's allegations were true, they would not support an inference of scienter. The bulk of CW8's allegations concern the accuracy of Chamberlain's employment statistics, which are not at issue here. (TAC at ¶¶ 311, 313-315, 317-320.) CW8 does not allege that he 6 According to CW9, the Office of Institutional Effectiveness was created to "evaluate that [sic] effectiveness of the curriculum at all the Chamberlain College of Nursing campuses." (TAC at ¶ 320.) 8 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 10 of 18 PageID #:1836 ever dealt directly with any of the Individual Defendants regarding DVU's placement rates. (TAC ¶¶ 309-320.) CW8 also does not allege that he informed the Individual Defendants that the employment statistics were unsubstantiated or false. (Id.) CW8's only link to an Individual Defendant, Hamburger, comes third-hand through CW8's supervisor Susan Groenwald, the President of Chamberlain, who allegedly told CW8 that Hamburger "definitely knew" about CW8's conclusions that the 90% Statement was unsubstantiated,7 and that CW8 "understood" (for reasons unspecified) that Hamburger had reviewed a report that included data "related to admissions, academics, and 'outcomes.'" (TAC at ¶¶ 310-311.) These speculative, third-hand accounts from a six-month employee at Chamberlain do not support an inference of scienter. See In re Intelligroup Sec. Litig., 527 F. Supp. 2d 262, 361 (D.N.J. 2007) (discounting CW allegations that were "not providing firsthand information," but were merely repeating statements the witnesses heard); Zucco Partners, LLC, 552 F.3d at 997 (rejecting CW allegations based on "vague hearsay"). iii. CW allegations regarding the occasional discussion of employment statistics and government investigations do not demonstrate scienter. Plaintiff also relies on allegations from CW18, CW19, and CW20,8 who claim to have attended unspecified meetings with one or more of the Individual Defendants where the general topics of graduate employment metrics or the FTC and DoE investigations were discussed. (Opp. Br. at 21-24.) Plaintiff fails, however, to identify when these meetings occurred or what was supposedly discussed in connection with these broad topics. Nor does Plaintiff even pretend that the meetings involved discussions that somehow support the notion that anyone believed the 90% Statement was false. See, e.g., TAC 7 CW8 does not provide any details of his discussion with Groenwald, Groenwald's discussion with Hamburger, or any other information that would provide insight into the nature of these conversations. (TAC at ¶ 311.) 8 As with CW8, CW20 also worked for Chamberlain—not DVU—undermining the reliability and plausibility of his allegations. 9 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 11 of 18 PageID #:1837 at ¶¶ 41, 43-44 (claiming only that there were meetings "during which the 90% enrollment rate was discussed," where "employment metrics was a topic of discussion," and where "issues related to job placement and accreditation at DeVry were discussed"). Without any allegations that the Individual Defendants had knowledge of specific information that would have put them on notice that the 90% Statement was false, Plaintiff provides nothing more than insufficient "must have known" allegations. In re Bally Total Fitness Sec. Litig., 2006 WL 3714708, at *9 (N.D. Ill. July 12, 2006) (rejecting plaintiff's "must have known" theory). Contrary to Plaintiff's misreading of the case law, generalized allegations that CWs discussed topics related to the alleged misrepresentations at issue do not support a finding of scienter. In Boca Raton Firefighters' & Police Pension Fund v. DeVry Inc., the court actually rejected a CW's allegation that "she made career-placement presentations to [defendant] Hamburger" because she did "not describe the contents of those presentations." 2012 WL 1030474, at *11 (N.D. Ill. Mar. 27, 2012). Similarly, in Bally II, the court discarded allegations that a CW attended meetings with the individual defendants during which financial results were discussed because the CW did not allege that the individual defendant "had knowledge of any specific reports or materials that [he] reviewed that would have put him on notice of improper accounting." 2007 WL 551574, at *8 (N.D. Ill. Feb. 20, 2007). There is nothing in the allegations attributed to these CWs that warrants a different result here. iv. The new CW allegations do not establish sufficient pervasiveness of alleged misclassifications. The new CW allegations do nothing to remedy the lack of particularized allegations providing "a sufficient basis for a strong inference that the misclassification problem was so pervasive and widespread." DeVry Educ. Grp., Inc., 2017 WL 6039926, at *14. Plaintiff contends that because it has included additional CWs from "across the country," its allegations 10 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 12 of 18 PageID #:1838 establish that "fraudulent practices pervaded the organization." (Opp. Br. at 24.) These flimsy allegations, however, do not withstand the slightest scrutiny: a lot of nothing is still nothing. The majority of the new CWs did not work for DVU and were not in a position to have direct access to DVU graduate statistics.9 (Def. Br. at 12.) Those who purportedly did have such access failed to provide "specific allegations of misclassification." See TAC at ¶¶ 325-331 (CW10); 346-351 (CW13); 352-354 (CW14); 355-360 (CW15); 364-365 (CW17). At best, these "nationwide"10 allegations merely establish the uncontroversial and public fact that DVU implemented its own methodical process to collect and report graduate employment data. CW3 remains the only CW to allege misclassification specifically, and the Court has already rejected his allegations as too "isolated" to withstand a motion to dismiss. DeVry Educ. Grp., Inc., 2017 WL 6039926, at *14. v. A non-fraudulent inference is most compelling. The Court "must weigh the strength of the plaintiffs' inferences in comparison to plausible nonculpable explanations for the defendants' conduct." Pugh, 521 F.3d at 693. Taken together, the most compelling inference to be drawn from the TAC is that the Individual Defendants "believed that the 90% Statement was true in reliance on the work of subordinates, without any knowledge of a substantial risk that the subordinates who collected the data or calculated the statistics were doing their work improperly." DeVry, 2017 WL 6039926, at *13. Plaintiff's new allegations actually provide additional support for this inference, suggesting DVU's uniform, methodical process to collect and report graduate employment data in the face of an uncertain regulatory landscape. (Def. Br. 9 Only five of the new CWs allege that they were both employed by DVU and worked in a position that provided them with direct access to graduate outcome data: CW10, CW13, CW14, CW15, and CW17. 10 According to Plaintiff's map attached in support of its opposition brief, the CWs were located at only eight of more than 50 DVU campuses nationwide—hardly a "widespread" sampling. (Opp. Br. at Ex. A.) 11 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 13 of 18 PageID #:1839 at 20-22.) Plaintiff quibbles with the "small print" and purported vagueness of DVU's methodological disclosures to investors, but that does not alter the fact that the information was publicly available to those investors, nor does it suggest that DVU's calculations were anything but sound. (Opp. Br. at 29-30.) The Court has concluded that the SAC did not establish a cogent inference of scienter; the same is true for the TAC.11 II. PLAINTIFF FAILS TO DEMONSTRATE MATERIAL FALSITY In their opening brief, Defendants established that the TAC fails to plead material falsity under the PSLRA. (Def. Br. at 26-32.) Plaintiff's main response is that the Court "already determined that the 90% Representation is plausibly false or misleading." (Opp. Br. at 32.) Defendants respectfully suggest that Plaintiff has misread this Court's opinion. Sensitive to information asymmetries, the Court did not conclusively hold that Plaintiff sufficiently alleged that the 90% Statement was materially false. Instead of deciding that issue, the Court treated the allegations in the SAC as if they were sufficient to establish falsity in order to move on to the Court's dispositive scienter analysis. DeVry, 2017 WL 6039926, at *7-9, 11 (observing the "considerable force" of Defendants' argument regarding falsity and noting "at this stage the Court assumes that the 90% Statement is false"). The Court's assumption of falsity is therefore not the "law of the case" but rather the launching pad for an analysis of scienter. See Brengettcy v. Horton, 423 F.3d 674, 680 (7th Cir. 2005) (law-of-the-case doctrine applies only where the court is "presented with 'precisely the same question in precisely the same way'"); see Ross v. Cty. of Lake, 764 F. Supp. 1308, 1311 (N.D. Ill. 1991) ("Prior to the entry of judgment, 11 Plaintiff's argument that the non-fraudulent inference is undermined by Adtalem's settlements with the government agencies and expanded disclosures in its 2014 10-K is easily dispatched. See Pugh, 521 F.3d at 695 (drawing a fraudulent inference from remedial measures "does not comport with Federal Rule of Evidence 407"); DeVry Educ. Grp., Inc., 2017 WL 6039926, at *11 (same). 12 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 14 of 18 PageID #:1840 this court may certainly re-examine its own nonfinal orders."). To the extent Plaintiff has tried to establish material falsity in the TAC, it has failed. In the TAC, Plaintiff relied almost exclusively on government allegations that in turn relied on "diffuse" and "isolated" examples of misclassification. (Opp. Br. at 32-33.) As this Court held, such allegations are insufficient. DeVry, 2017 WL 6039926, at *7 (collecting cases). Neither the MA AG allegations regarding the placement rates of graduates from one DVU program over the course of just three years nor the vaguely described Adtalem documents used by the DoE in its agency appeal brief cure the deficiencies that courts regularly find in such non sequiturs. See Yourish v. Cal. Amplifier, 191 F.3d 983, 995-96 (9th Cir. 1999) ("When one of the circumstances indicating falseness is the alleged existence of contemporaneous information inconsistent with a particular statement that was allegedly known only to the defendants, some detail about the alleged information, other than that its substance contradicted the substance of the identified statement, must be provided."); Boca Raton, 2012 WL 1030474, at *4 ("Even concrete allegations of wrongdoing may be deficient if they do not allege a problem of sufficient magnitude to undermine the defendants' public statements."). Plaintiff again touted CW3's anecdotal estimates of the "true job placement rate" at two DVU campuses as a cure, but the Court has already rejected these allegations as an insufficient base from which to extrapolate DVU-wide misconduct. DeVry, 2017 WL 6039926, at *8. Nor does Plaintiff provide any particularized allegations of the actual employment statistics, depriving the Court of any basis to determine whether Defendants' representations were materially false to investors. See In re ITT Educ. Servs., Inc. Sec. & S'holder Derivatives Litig., 859 F. Supp. 2d 572, 580 (S.D.N.Y. 2012) ("Because placement rates are not directly related to revenue, Plaintiff must show an especially egregious discrepancy between 13 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 15 of 18 PageID #:1841 [Defendant's] disclosed rate and its actual rate, in order for Defendants' nondisclosure of the alleged incidents of 'stretching' to be material to investors."). Finally, Plaintiff appears to concede the force of Defendants' argument regarding Adtalem's statement that the average starting salary of DVU graduates was $43,000, which no government agencies have ever challenged. (Def. Br. at 31.) Only the 15% Statement came under the FTC's scrutiny, and that statement is not at issue in this case. Plaintiff does not provide any basis in the TAC or its opposition brief for concluding that the $43,000 average salary statistic was false beyond the conclusory extrapolations made by CW3 and CW13, whose knowledge pertains only to three DVU campuses and does not support an inference of system-wide falsity. (Opp. Br. at 33, n.15.) III. PLAINTIFF FAILS TO ALLEGE LOSS CAUSATION To successfully plead loss causation, Plaintiff must "alleg[e] the existence of a 'corrective disclosure,' in which the truth about the previously misrepresented information was revealed and was followed by a decline in stock price." Ross v. Career Educ. Corp., 2012 WL 5363431, at *12 (N.D. Ill. Oct. 30, 2012). Plaintiff relies entirely on the announcement of the FTC and DoE actions on January 27, 2016, as its "corrective disclosure." (Opp. Br. at 34). But the FTC and DoE actions did not reveal the truth of anything. They merely publicized those agencies' allegations—or, in Plaintiff's parlance, "conclusions"— that DVU could not substantiate the 90% Statement. DVU contested these allegations and they were never proven in court. (Def. Br. at 4-5.) Lawsuit allegations are not facts, see Montgomery v. Am. Airlines, Inc., 626 F.3d 382, 389 (7th Cir. 2010) ("conclusory allegations do not constitute evidence"), and they do not amount to "corrective disclosures." Cf. Ross, 2012 WL 5363431, at *12 (corrective disclosure alleged where CEC itself announced in 8-K that it had actually discovered "improper practices" with 14 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 16 of 18 PageID #:1842 respect to placement rates). See also Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1064 (9th Cir. 2008) (loss causation not pled where disclosure only reveals "risk" or "potential" of fraud); Meyer v. Greene, 710 F.3d 1201-02 (11th Cir. 2013) (accord). To avoid the harsh result, Plaintiff misreads the case law to conjure a per se rule that the "announcement of an investigation is enough to satisfy loss causation." (Opp. Br. at 35). But in Whitehall Jewellers, the announcement of government investigations was just one of several "disclosures" plaintiff alleged, including a company press release that disclosed defendants' insider sales. 2005 WL 61480, at *5 (N.D. Ill. Jan. 10, 2005). It does not establish a per se rule that, without more, announcing an investigation satisfies loss causation.12 The TAC does not connect any disclosure of truth to a drop in Adtalem's stock price, and Plaintiff therefore fails to plead loss causation. CONCLUSION After three opportunities to amend its complaint, Plaintiff still fails to state a claim against any of the Defendants. For all the foregoing reasons and those in Defendants' opening brief, the TAC should be dismissed, this time with prejudice. See In re Bally Total Fitness Sec. Litig., 2007 WL 551574, at *14 (N.D. Ill. Feb. 20, 2007) (dismissing complaint with prejudice where amended complaint failed to cure deficiencies and "plaintiffs fail to propose another amendment that would meet the stringent pleading requirements of the PSLRA"); Miller v. Champion Enters. Inc., 346 F.3d 660, 690 (6th Cir. 2003) ("allowing repeated filing of amended complaints would frustrate the purpose of the PSLRA"). 12 Although the court in In re Gentiva Securities Litigation rejected "the idea that the disclosure of an investigation. . . is not a corrective disclosure," just as Plaintiff criticized the Eleventh Circuit's decision in Meyer, no courts in this Circuit have applied Gentiva and it is "not precedent here." (Opp. Br. 35.) 15 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 17 of 18 PageID #:1843 Dated: June 28, 2018 Respectfully submitted, By: /s/ Michael Dockterman Michael Dockterman Terance A. Gonsalves Jeffrey W. Sanford mdockterman@steptoe.com tgonsalves@steptoe.com jsanford@steptoe.com STEPTOE & JOHNSON, LLP 115 S. LaSalle Street, Suite 3100 Chicago, Illinois 60603 (312) 577-1300 Attorneys for Defendants Adtalem Global Education Inc. f/k/a DeVry Education Group, Inc., Richard M. Gunst, Patrick J. Unzicker, and Timothy J. Wiggins 16 Case: 1:16-cv-05198 Document #: 104 Filed: 06/28/18 Page 18 of 18 PageID #:1844 CERTIFICATE OF SERVICE The undersigned, an attorney, certifies that on June 28, 2018, he caused a copy of the foregoing to be electronically filed and served via the Court's ECF/electronic mailing system upon all counsel of record. /s/ Michael Dockterman 17