Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-00722/USCOURTS-azd-2_11-cv-00722-4/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 28:1331 Fed. Question

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Darlene Smith, derivatively on behalf of 

Apollo Group, Inc., 

Plaintiff, 

v. 

John G. Sperling, Peter V. Sperling, Charles 

B. Edelstein, Gregory W. Cappelli, Terri C. 

Bishop, Dino J. Deconcini, Samuel A. 

Dipiazza, Jr., Stephen J. Giusto, Roy A. 

Herberger, Jr., Ann Kirschner, K. Sue 

Redman, James R. Reis, Manuel F. Rivelo, 

George Zimmer, Joseph D’Amico, Gregory 

J. Iverson, Brian L. Swartz, Brian Mueller, 

P. Robert Moya, Robert W. Wrubel, 

William J. Pepicello, 

 Defendants, 

vs. 

Apollo Group, Inc., an Arizona corporation, 

 Nominal Defendant. 

No. CV 11-722-PHX-JAT

ORDER 

 Pending before the Court are (1) the Individual Defendants’ Motion to Dismiss 

(Doc. 71), and (2) Nominal Defendant Apollo Group, Inc.’s Motion to Dismiss Plaintiff’s 

Derivative Complaint (Doc. 74). The Court now rules on the Motions. 

I. BACKGROUND 

Plaintiff brings this shareholder derivative lawsuit against various officers and 

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directors of Apollo Group, Inc. (“Apollo”), alleging violations of federal securities laws 

and state law claims for breaches of fiduciary duties, abuse of control, gross 

mismanagement, unjust enrichment, corporate waste, and insider trading. This Court 

presided over related putative securities class action In re Apollo Group, Inc. Securities 

Litigation, No. CV-10-1735-PHX-JAT (AApollo II@). Apollo II was a shareholder class 

action suit against Apollo Group, Inc. and nine officers and directors of Apollo Group, 

Inc. for violations of federal securities laws. The nine officer and director Defendants in 

Apollo II were among the twenty-one individual Defendants in this case.1

 

Apollo is an Arizona-based-company that owns and operates proprietary 

postsecondary education institutions and is one of the largest private education providers 

in the United States. Students enrolled in Apollo institutions are entitled to receive 

financial assistance pursuant to Title IV of the Higher Education Act, 20 U.S.C. § 1070, 

et seq. (“Title IV”). Institutions that receive Title IV funds must comply with 

regulations, including a limit on the ratio of government loan funds to cash revenue (the 

“90/10 Rule”) and limits on the percentage of student borrowers who default on their 

loans (the “Cohort Default Rate”). Violations of these regulations could result in the 

possible loss of Title IV accreditation. 

A. Securities Fraud Allegations 

Plaintiff alleges that Apollo’s officers and directors targeted students with 

deceptive marketing techniques, knowing that those students were “not suitable 

candidates for higher education” and did so with the intention of tapping into “Title IV’s 

vast reservoir of federal funds.” (Complaint, Doc. 1 at ¶ 4). Plaintiff alleges that these 

hard-sell tactics resulted in increased enrollment at Apollo institutions, but Apollo falsely 

attributed the increased enrollment to valuable service offerings and commitment to 

academic quality. (Id.). To support her allegation that Defendants engaged in deceptive 

 1

 The nine individual Defendants named in both actions are Gregory W. Cappelli, Joseph L. D’Amico, Charles B. Edelstein, Gregory J. Iverson, Brian Mueller, 

William J. Pepicello, John Sperling, Peter V. Sperling, and Brian L. Swartz. 

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recruiting practices, Plaintiff points to examples in a report issued by the United States 

General Accounting Office (the “GAO”) that Plaintiff alleges show that Apollo 

representatives lied about the graduation rate to prospective students and encouraged 

them to take the full amount of loans available to them, even if taking the full amount 

was not necessary. (Id. at ¶¶ 53-55). Plaintiff also points to a Bloomberg Report of April 

30, 2010 that reported that University of Phoenix (an Apollo campus) recruiters went to 

homeless shelters and marketed educational opportunities to homeless people. (Id. at ¶ 

56). 

Plaintiff alleges that, while Apollo Group’s Officers and Directors were making 

these false and misleading statements, Defendants John Sperling, Peter Sperling, Charles 

B. Edelstein, Gregory W. Cappelli, Terri C. Bishop, Dino J. Deconcini, Ann Kirschner, 

K. Sue Redman, James R. Reis, Joseph D’Amico, Gregory J. Iverson, Brian L. Swartz, P. 

Robert Moya, Robert W. Wrubel, William J. Pepicello (the “Insider Selling Defendants”) 

sold over $470 million of their privately held stock at artificially inflated prices and 

caused the Company to repurchase over $1.3 billion of its own stock at artificially 

inflated prices. (Id. at ¶¶ 6, 38). Plaintiff alleges that the Board improperly authorized 

Apollo’s senior officers to repurchase outstanding shares of Apollo Group common stock 

at artificial prices that were the result of the false and misleading statements regarding 

Apollo’s growth and recruitment. (Id. at ¶¶139-145). 

Plaintiff alleges that, as a result of unqualified students enrolling in Apollo’s 

schools, many students had to drop out and were unable to repay their Title IV loans. (Id.

at ¶ 5). Plaintiff alleges, that, as a result, Apollo’s compliance with the Cohort Default 

Rate was jeopardized and, in response, Apollo’s officers and directors resorted to 

manipulative practices to maintain regulatory compliance with Title IV. (Id.). Plaintiff 

alleges that Apollo was required to return the unearned portion of the proceeds of the 

student’s Title IV loans to the lender, but, to maintain compliance with the Cohort 

Default Rate, Apollo returned the entirety of the Title IV funds to the lender, even though 

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the student was entitled to have the earned portion of the funds credited to their tuition. 

(Id.). Plaintiff alleges that Apollo then billed the student for the full amount of the 

tuition. (Id.). Plaintiff alleges that this return of student money to the lenders also helped 

them comply with the 90/10 Rule because these students, who were no longer recipients 

of Title IV funds, were counted toward the 10% of revenues that had to be derived from 

non-Title IV sources. (Id. at ¶ 65). 

Plaintiff alleges that the 90/10 calculation and the Cohort Default Rate were 

deliberately false and misleading because Apollo did not disclose that it was allegedly 

violating Title IV regulations as described above. (Id. at ¶ 67). 

Plaintiff also alleges that Apollo evaluated and compensated its recruiters based on 

the number of students they enrolled in violation of Title IV. (Id. at ¶ 57). Plaintiff 

alleges that, on August 3, 2010, the GAO issued a report that for-profit educational 

institutions, “like Apollo Group” had engaged in illegal and fraudulent conduct. (Id. at ¶ 

7). Plaintiff alleges that as a result of the GAO report, Apollo’s shares declined from 

$47.14 per share on August 2, 2010 to $38.94 on August 13, 2010. Plaintiff alleges that, 

on October 13, 2010, Apollo withdrew its previous 2011 fiscal year outlook and stated 

that it would be changing admissions personnel, evaluation and compensation systems, 

adding a new orientation program, and would reduce its emphasis on third-party affiliates 

for lead generation and otherwise enhance its marketing approach. (Id. at ¶ 131). Apollo 

also stated that the Company expected a decline in new degreed enrollment in the fourth 

quarter of 2010 to the first quarter of 2011. (Id. at ¶ 7). 

Plaintiff alleges that “based on this news,” shares in Apollo dropped 23% to a four 

year low of $38. (Id. at ¶ 8). Plaintiff alleges that Yahoo! Finance, Reuters, and the Wall 

Street Journal reported that Apollo was being sued for securities fraud, being investigated 

by the Florida Attorney General for deceptive enrollment practices, and being 

investigated by the SEC for insider trading between October 19 and October 26. (Id. at 

¶¶ 9-11, 132-135). Plaintiff alleges that, as a result of these disclosures, Apollo’s stock 

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fell from $47.14 on August 2, 2010 to $36.94 on October 26, 2010. (Id. at ¶ 135). 

Plaintiff alleges that the following statements were false and misleading: 

 In a May 22, 2007 10-Q, Apollo attributed its enrollment growth to 

“product development,” “marketing,” and “lead generation.” (Id. at ¶ 71). 

 In a May 22, 2007 Annual Report, Apollo falsely attributed enrollment and 

revenue growth to “comprehensive service,” “quality educational content,” 

“teaching resources, and “customer service.” (Id. at ¶ 73). 

 In May 22, 2007 10-Qs, Apollo stated that increases in New Degreed 

Enrollment and increases in revenue helped fund investment in “product 

development and marketing and lead generation to ensure our continued 

growth and viability in the future.” (Id. at ¶¶ 75, 77). 

 In a May 22, 2007 conference call, Apollo attributed improvement on 

retention rates to lead quality and delivery models. (Id. at ¶ 78). 

 In a May 27, 2007 10Q-A, Defendant Mueller was quoted as saying that 

enrollment and revenue growth were attributable to “further productivity 

improvements from new enrollment hires, enhanced retention strategies,” 

“efficiencies’” in advertising spending and a branding campaign. (Id. at ¶ 

80). 

 Plaintiff alleges that Apollo Officers and Directors made similar false and 

misleading statements through the remainder of 2007, throughout 2008, 2009, and 

continuing through June 2010. (Id. at ¶¶ 81-126). Plaintiff alleges that, based on the 

above statements, Apollo created the false public impression that the Company’s 

increased enrollment revenue resulted primarily from Apollo’s ability to attract new 

students through enhanced and expanded educational services and improvements in 

academic quality, when, in truth, the increased revenue resulted from Apollo’s deceptive 

and unsustainable business model. (Id. at ¶ 126). 

 Plaintiff alleges that, on August 6, 2010, Apollo announced that it received a 

request for information from the U.S. Senate Committee on Health, Education, Labor, 

and Pensions relating to for-profit colleges receiving Title IV student financial aid. (Id. at 

¶ 129). Plaintiff alleges that, on August 16, 2010, Apollo disclosed that it had received a 

letter from the Higher Learning Commission (“HLC”) requiring Apollo to provide certain 

information and evidence of compliance with HLC accreditation standards. (Id. at ¶ 

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130). 

 B. Breach of Fiduciary Duty Allegations 

Plaintiff alleges that Defendants breached their fiduciary obligations of trust, 

loyalty, good faith, and due care by failing to disseminate accurate and truthful 

information regarding the Company’s operations, performance, management, projections, 

and forecasts. (Id. at ¶165). Plaintiff alleges that members of the Audit Committee 

breached their duties under the Audit Committee Charter because they reviewed the 

financial statements with the allegedly false information and approved of those 

statements. (Id. at ¶ 166). Plaintiff alleges that Defendants breached their duties arising 

from their positions of control and authority and access to improper representations of 

Apollo Group, including information regarding the student admissions rate and future 

growth rate. (Id. at ¶¶ 167-169). Plaintiff alleges that Defendants breached their duty to 

exercise reasonable and prudent supervision over the management, policies, practices, 

and internal controls over the company. (Id. at 170). 

 C. Conspiracy, Aiding and Abetting, and Concerted Action Allegations 

Plaintiff alleges that the individual Defendants aided and abetted and assisted each 

other in breaching their respective duties by disguising their breach of fiduciary duty, 

misrepresenting Apollo’s future business prospects, and making it appear that Apollo was 

in compliance with the Cohort Default Rate and the 90/10 Rule (Id. at ¶¶ 173-177). 

 D. The Counts of the Complaint 

 As a result of the above allegations, Plaintiff alleges claims of (1) violations of 

section 10(b) of the Securities and Exchange Act and Securities and Exchange Rule 10b5 against certain individual Defendants (Count I); (2) violations of section 20(a) of the 

Securities and Exchange Act against the Director Defendants (Count II), (3) breach of 

fiduciary duty against all Defendants (Count III), (4) breach of fiduciary duty for insider 

selling and misappropriation of information against certain individual Defendants (Count 

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IV), (5) breach of fiduciary duty for authorizing and failing to halt the company’s stock 

purchases against the director Defendants (Count V), (6) waste of corporate assets against 

all Defendants (Count VI), and (7) unjust enrichment against certain individual 

Defendants (Count VII). 

 D. The Demand 

Plaintiff alleges that, pursuant to Arizona Revised Statutes section 10-742, 

Plaintiff made a written litigation demand on the Board of Directors on December 9, 

2010, and did not receive a response. (Id. at ¶¶ 12, 182-184). 

II. THE MOTIONS TO DISMISS AND STANDING

Both Apollo and the Individual Defendants have filed Motions to Dismiss. 

Apollo’s Motion to Dismiss solely challenges Plaintiff’s standing to bring this action on 

behalf of Apollo. The Individual Defendants challenge the Complaint on several 

grounds, including standing. After initial review of the Parties’ arguments regarding 

standing, this Court found that, under the circumstances of this case, Plaintiff had failed 

to adequately allege standing. (Doc. 83; Smith ex rel. Apollo Group, Inc. v. Sperling, No. 

CV 11-722-PHX-JAT, 2012 WL 1745594, at * 1 (D. Ariz. May 16, 2012)).2

 Although 

Plaintiff failed to respond to the Motions to Dismiss with any evidence of her standing, 

the Court nonetheless allowed Plaintiff an additional opportunity to allege her standing to 

 

2

 At the pleading stage, the Complaint must “allege that the plaintiff was a shareholder at the time of the transaction complained of, or that the plaintiff’s share or 

membership later devolved on it by operation of law.” Fed.R.Civ.P. 23.1(b)(1); Baca v. 

Crown, No. 10-16718, 458 Fed.Appx. 694, 696 (9th Cir. Nov. 21, 2011 (stating that it was necessary for Plaintiff to show that he was a shareholder at the time of the 

transaction/events complained of because a derivative plaintiff may only complain about actions that allegedly occurred during the period for which he held shares). 

After considering Plaintiff’s arguments that she need not allege with specificity the dates that she was a shareholder in Apollo, the Court found that, under the 

circumstances of this case, such specificity is required. See Smith, 2012 WL 1745594, at 

*2 (“where, as here, Plaintiff has claims that span over three years and Defendants have challenged Plaintiff’s standing/contemporaneous ownership, the Court has no way to adequately analyze whether Plaintiff has standing to assert all of her claims . . . 

[a]ccordingly, the Court will give Plaintiff one final chance to establish that she has 

standing to assert the derivative claims [and] such supplement shall solely address the 

standing issue discussed herein.”) (emphasis added). 

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bring this case on behalf of Apollo and ordered Plaintiff to supplement her response to 

the Motion to Dismiss. (Id. at *2). 

Plaintiff filed a supplement to her Response. (Doc. 84). However, rather than 

directly allege standing, Plaintiff chose to use four of the five pages allotted to reargue 

that she had no obligation to allege standing, citing to the same cases she previously cited 

to in her Response to the Motion to Dismiss. It is improper procedurally for Plaintiff to 

use the Court’s allowance of a supplement, which the Court specified should be used 

solely to allege standing, as the opportunity to assert what is essentially a Motion for 

Reconsideration. 

Plaintiff aggravated this improper course by failing to even attempt to meet the 

high standard for reconsideration. See Motorola, Inc. v. J.B. Rodgers Mechanical 

Contractors, Inc., 215 F.R.D. 581, 586 (D. Ariz. 2003) (finding that reconsideration is 

only appropriate when there are material differences in fact or law, material facts arose 

after the Court’s decision, or the movant makes a convincing showing that the court 

failed to consider material facts and warning that “[n]o motion for reconsideration shall 

repeat in any manner any oral or written argument made in support of or in opposition to 

the original motion.”). Rather, Plaintiff continues to rely on a distinguishable, nonbinding 1944 Second Circuit decision, which she previously cited in her original 

Response to the Motion to Dismiss.3

 This does not constitute an intervening change in 

controlling law or any showing that the Court failed to consider material facts in its initial 

decision. 

Further, the Second Circuit opinion suggests that a more proper challenge to a 

23(e) violation would be a motion for a more definite statement under Rule 12(e). See 

 3

 Notably the Second Circuit’s opinion seems to suggest a pleading standard that is inconsistent with the United States Supreme Court’s decisions in Iqbal and Twombly. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 

544, 555 (2007) (holding that to survive a motion to dismiss, a complaint must contain sufficient factual matter, which, if accepted as true, states a claim to relief that is 

“plausible on its face.”). 

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Galdi v. Jones, 141 F.2d 984, 992 (2nd Cir. 1944). Plaintiff cites to this very language 

from Galdi in her supplement to the Motion to Dismiss, but appears to completely ignore 

the fact that, by allowing her to supplement her Response to the Motion to Dismiss, this 

Court essentially ordered Plaintiff to make a more definite statement, to avoid having this 

case dismissed for lack of standing.4

 

Finally, it appears that Plaintiff makes this argument because, when required to 

actually allege standing with some specificity, Plaintiff’s allegation in her Complaint that 

she “was a shareholder of Apollo Group at the time of the transactions and events 

complained of herein, and has continuously held the stock” is patently false. Plaintiff 

admits in her Supplement that she became an Apollo stockholder on August 19, 2009 and 

the events and transactions alleged in her complaint allegedly occurred throughout 2007, 

2008, 2009, and 2010. Such a false allegation in the Complaint cannot be saved by 

Plaintiff’s ongoing contention that contemporaneous ownership is not a requirement. 

That is a legal argument and has little to do with Plaintiff’s false factual allegation 

(whether legally required to allege standing or not) that she did indeed own Apollo stock 

at the “time of the transactions and events complained of herein.” Based on the 

 

4

 Plaintiff also argues that it is improper for the Court to require Plaintiff to plead additional facts in a pleading and the Court should only review the four corners of the 

Complaint in deciding the Motion to Dismiss. If the Court confined its review to the four 

corners of the Complaint, Plaintiff’s Complaint would be dismissed for lack of standing. The Court made this clear in its Order allowing Plaintiff to supplement her Response to the Motion to Dismiss. See Smith, 2012 WL 1745594, at *2 (“If Plaintiff fails to file a 

supplement within 10 days of the date of this Order, the Motions to Dismiss pending before this Court will be granted without further warning.”). 

The Court will assume that Plaintiff’s argument that the Court should confine its review of the sufficiency of the Complaint to the four corners of the Complaint is not a concession that Plaintiff’s Complaint should be dismissed for lack of standing. If the Court did confine its review to the Complaint, however, the Court would have no choice 

but to grant the Motions to Dismiss for lack of standing. The Court allowed a 

supplement to give Plaintiff an opportunity to avoid dismissal based on a deficiency that Plaintiff may have been able to cure without significant further motion practice. If anything, Defendants have been prejudiced by the Court’s willingness to look outside the four corners of the Complaint to determine whether Plaintiff has adequately asserted standing. However, Defendants have not objected to this equitable procedure, so the Court will consider Plaintiff’s supplement for the purposes of considering the Motions to Dismiss. 

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foregoing, the Court is compelled to remind Plaintiff’s counsel that Federal Rule of Civil 

Procedure 11 requires factual contentions alleged in the complaint (or any other pleading) 

to have evidentiary support. See Fed. R. Civ. P. 11. 

Nonetheless, the Court will now consider whether Plaintiff has standing to allege 

the claims made on behalf of Apollo. Plaintiff argues that, although she did not own 

stock at the times of all of the transactions and events complained of, as alleged in her 

Complaint, she still has standing to bring these claims under the continuing wrong 

doctrine. 

 A. Legal Standard

The Ninth Circuit Court of Appeals has held that, to meet the continuous 

ownership requirement in Federal Rule of Civil Procedure 23.1(a), a shareholder must be 

a shareholder at the time of the alleged wrongful acts and must retain ownership of the 

stock for the duration of the lawsuit. Quinn v. Anvil Corp., 620 F.3d 1005, 1012 (9th Cir. 

2010) (internal citation omitted). Likewise, under Arizona law, 

A shareholder may not commence or maintain a derivative 

proceeding unless the shareholder both: 

1. Was a shareholder of the corporation at the time of the act 

or omission complained of or became a shareholder through transfer by operation of law from one who was a shareholder 

at that time. 

2. Fairly and adequately represents the interests of the 

corporation in enforcing the right of the corporation. 

Ariz. Rev. Stat. Ann. § 10-741. 

 Delaware has recognized a limited exception to the continuous ownership 

requirement, which, under certain circumstances, allows a Plaintiff to maintain a 

derivative suit for certain violations that began before the Plaintiff held stock in the 

corporation and continued into Plaintiff’s acquisition of stock. The Delaware Court of 

Chancery has noted that this exception “has never been defined by Delaware courts with 

much precision,” but it is clear that “the doctrine is a narrow one that typically is applied 

only in unusual situations, such as where a plaintiff acquires his stock after a particular 

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transaction has begun but before it is completed.” Desimone v. Barrows, 924 A.2d 908 

(Del Ch. 2007). Further, under Delaware law, “the continuing wrong doctrine does not 

bestow standing upon a stockholder to challenge transactions occurring before he bought 

his stock simply because they are similar or related to transactions or other conduct that 

occurred later.” Id. 

Plaintiff has not cited to any authority in the Ninth Circuit or in Arizona 

suggesting that the Ninth Circuit or Arizona have adopted the continuing wrong doctrine 

or any doctrine of equivalence. However, the Court finds that, even if the continuing 

wrong exception was applicable in these jurisdictions, this narrow exception does not 

apply to the claims currently before the Court. In this case, Plaintiff alleges a variety of 

separate false and misleading statements made over a period of years that were allegedly 

slowly revealed to the public, causing Apollo’s stock price to drop on several different 

occasions. These allegations do challenge transactions occurring before Plaintiff bought 

her stock. While these allegations are similar to the allegedly false statements Plaintiff 

alleges that Defendants made after she owned Apollo stock, such similarity does not 

confer standing on Plaintiff to challenge transactions that occurred before she owned such 

stock. Accordingly, even if the continuing wrong doctrine did apply as an exception to 

standing in the Ninth Circuit and/or Arizona, Plaintiff has not shown that the continuing 

wrong doctrine applies to this case. 

 Accordingly, Plaintiff has failed to satisfy the contemporaneous/continuous 

ownership requirement of Rule 23.1, and therefore lacks standing to bring a shareholder 

derivative suit based on alleged acts that occurred prior to her stock ownership. The 

Court will not undertake to parse Plaintiff’s Complaint to try to determine which alleged 

acts she might have standing to assert. Accordingly, the Court will grant Plaintiff leave 

to amend her Complaint to make allegations that she actually has standing to assert. 

 Further, Plaintiff acknowledges that In re Apollo Group, Inc. Sec. Litig., No. CV 

10-1735-PHX-JAT, 2011 WL 5101787 (D. Ariz. Oct. 27, 2011), which was released after 

Plaintiff filed her Complaint, found that allegations nearly identical to Plaintiff’s 

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allegations were not sufficient to state claims under sections 10(b), 20(a) and Rule 10b-5 

of the Exchange Act. Plaintiff requests leave to amend her Complaint to cure the 

deficiencies identified in that opinion. 

 Because the Court has found leave to amend necessary to correct any deficiencies 

with regard to Plaintiff’s standing, Plaintiff should take this opportunity to correct any 

other existing deficiencies with her Complaint. The Court notes that in any amended 

Complaint, Plaintiff must plead fraud with particularity as required by Federal Rule of 

Civil Procedure 9(b) and must include a proper verification in compliance with Federal 

Rule of Civil Procedure 23.1(b) and 28 U.S.C. §1746.5

 Further, the Court notes that 

although Plaintiff names twenty-one individual Defendants, she fails to include 

allegations related to specific Defendants. To the extent Plaintiff chooses to name 

individual Defendants in her amended Complaint, she must include specific allegations 

about that specific Defendant’s actions and she must include facts connecting those 

actions to her legal claims. Plaintiff should also carefully examine her allegations in light 

of this Court’s decisions in Apollo II. See In re Apollo Group, Inc. Sec. Litig., No. CV 

10-1735-PHX-JAT, 2011 WL 5101787 (D. Ariz. Oct. 27, 2011); In re Apollo Group, Inc. 

Sec. Litig., No. CV 10-1735-PHX-JAT, 2012 WL 2376378 (D. Ariz. June 22, 2012). 

 

5

 Plaintiff argues that 28 U.S.C. § 1746 should not apply to Federal Rule of Civil Procedure 23.1’s verification requirement because it is an evidentiary rule, not a rule of pleading and matters of evidence are never required to be stated in a Plaintiff’s 

Complaint. The Court disagrees. While it may be true that a non-verified complaint need not meet evidentiary standards, once a complaint is verified, it must meet the 

requirements for verification. This is so because a verified complaint can be used throughout the case for evidentiary purposes, such as in the summary judgment context. Accordingly, if a Complaint is required to be verified, as under Rule 23.1, it must be able 

to withstand scrutiny as a verified Complaint for any purpose throughout the case, as is 

required by 28 U.S.C. § 1746. 

Plaintiff also argues that, if the Court required 23.1 verifications to comply with 28 U.S.C. § 1746, the Court would impose a requirement not present in Rule 23.1. The Court disagrees. Plaintiff cites to no cases that support this contention. 28 U.S.C. § 1746 

unambiguously applies to “any law of the United States or . . . any rule, regulation, order, or requirement made pursuant to law, [which requires] any matter . . . required or 

permitted to be supported, evidenced, established, or proved by the sworn declaration, 

verification, certificate, statement, oath, or affidavit, in writing of the person making the same” 28 U.S.C. § 1746 (emphasis added). The Court sees no reason why Rule 23.1 would be an exception to the statute. 

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III. CONCLUSION 

Based on the foregoing, 

IT IS ORDERED that the Individual Defendants’ Motion to Dismiss (Doc. 71) is 

granted. 

IT IS FURTHER ORDERED that Nominal Defendant Apollo Group, Inc.’s 

Motion to Dismiss Plaintiff’s Derivative Complaint (Doc. 74) is granted. 

IT IS FINALLY ORDERED that Plaintiff is granted leave to amend and shall 

file an amended complaint within thirty days of the date of this Order. If Plaintiff does 

not file an amended Complaint within thirty days, the Clerk of the Court, must, without 

further notice, enter a judgment of dismissal in this action. 

 Dated this 25th day of July, 2012. 

Case 2:11-cv-00722-JAT Document 88 Filed 07/26/12 Page 13 of 13