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04/25/96 CONSTANCE WILSON AND WILLIE FERGUSON v.

April 25, 1996

CONSTANCE WILSON AND WILLIE FERGUSON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
CHRISTOPHER CHISM, D/B/A LOOP ACADEMY OF BUSINESS, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. 92 CH 5065. Honorable Edwin M. Berman, Judge Presiding.

As Corrected May 17, 1996.

The Honorable Justice Cahill delivered the opinion of the court: Hoffman, P.j., and Theis, J., concur.

The opinion of the court was delivered by: Cahill

The Honorable Justice CAHILL delivered the opinion of the court:

The Loop Academy of Business is a private vocational school. Plaintiffs are students who attended the school but never completed a course of study there. They filed this class action in 1992 alleging that the defendant violated the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 1992)). They allege that Loop Academy falsely certified to the federal government that they had the ability to benefit from the school's course of instruction. Plaintiffs were admitted to the school after January 1989 and enrolled in the school's automated office assistant training program. All plaintiffs received federally guaranteed student loans to pay the school's tuition. The trial court ruled that plaintiffs' state action was preempted by federal law and granted defendant summary judgment (735 ILCS 5/2-1005(c) (West 1992)). We affirm.

The Higher Education Act of 1965 (the Act) (20 U.S.C. § 1001 et seq. (1994)) regulates vocational schools that receive tuition from federally guaranteed student loans. The Secretary of Education administers the loan program under the Act. Vocational schools must comply with federal regulations to receive tuition derived from federally guaranteed funds. 34 C.F.R. § 600.7 et seq. (1994). The regulations implement a loan guarantee program under which a state or private loan guaranty agency may insure loans made to students by private lenders. The United States, in turn, reinsures the loans. 34 C.F.R. § 683.100 (1994). Students who lack a high school or general education diploma and who attend a vocational school may be eligible to borrow federally guaranteed funds for tuition if they have the "ability to benefit" from the training. 34 C.F.R. § 682.402(e)(13) (1994). The school must certify that a student borrower is eligible for the federally guaranteed loan. To do this, the school must test the students to measure aptitude to complete the educational program. 34 C.F.R. § 600.11 (1994).

Plaintiffs allege they are part of a class of students who failed to achieve the minimum score required on the admission test, but were admitted nonetheless. Plaintiffs further allege that Loop Academy knew, based on test scores, that the plaintiffs lacked ability to benefit from Loop's course of instruction. Plaintiffs then allege that when Loop Academy certified to the federal government that the students had an ability to benefit based upon the test scores, the school violated the Consumer Fraud Act because the certification "contravened federal regulations." Plaintiffs seek as damages the tuition paid to the school because they remain obligated to pay the federally guaranteed loans. They also ask for punitive damages.

The issue presented was properly framed by the trial court: whether the state cause of action is preempted by the federal Higher Education Act and the remedies available under federal law for just such circumstances as alleged in plaintiffs' complaint.

We review a grant of summary judgment de novo. Golla v. General Motors Corporation, 261 Ill. App. 3d 143, 147, 633 N.E.2d 193, 198 Ill. Dec. 731 (1994).

The supremacy clause of the United States Constitution invalidates a state law that interferes with, or is contrary to, federal law. Article VI of the Constitution provides that the laws of the United States "shall be the supreme Law of the Land; * * * any Thing in the Constitution or Laws of any state to the Contrary notwithstanding." U.S. Const., art. VI. State law that conflicts with federal law is "without effect." Maryland v. Louisiana, 451 U.S. 725, 746, 68 L. Ed. 2d 576, 595, 101 S. Ct. 2114, 2129 (1981).

Preemption of a state law may be expressed or implied. Kerker v. Elbert, 261 Ill. App. 3d 924, 634 N.E.2d 482, 199 Ill. Dec. 643 (1994). We find no language in the Higher Education Act that expressly preempts state consumer protection claims.

Absent an express statement of preemption, state law is preempted only to the extent that it conflicts with federal law. A conflict is found and preemption implied when compliance with both federal and state law is impossible, or state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." California v. ARC America Corp., 490 U.S. 93, 100-01, 104 L. Ed. 2d 86, 94, 109 S. Ct. 1661, 1665 (1989).

We must examine the statutory language and the structure and purpose of the statute to ascertain congressional intent when the Act is silent on the subject of preemption. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 137-38, 112 L. Ed. 2d 474, 483, 111 S. Ct. 478, 482 (1990).

Plaintiffs' claim under the Consumer Fraud Act is based upon the allegation that Loop Academy falsely certified to the federal government that they had the ability to benefit from the defendant's instruction and so became eligible to borrow federally guaranteed funds. Plaintiffs acknowledge they have a federal remedy in that "they could request and receive administrative discharge from the Secretary of Education" if a claim of false certification is sustained. But, plaintiffs argue, nothing in the Act or the federal regulatory scheme prohibits them from the alternative they have ...


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