Law Graduates’ Consumer Fraud Claims Squeak Past Alma Mater’s Motion to Dismiss

By Joan C. Rogers  


Graduates of Widener University School of Law may proceed with their class action alleging that the school disseminated misleading and incomplete graduate employment rates in violation of the New Jersey and Delaware consumer fraud acts, the U.S. District Court for the District of New Jersey ruled March 20 (Harnish v. Widener University School of Law, D.N.J., Civ. No. 2:12-cv-00608 (WHW), 3/20/13).

Roundup of Fraud Cases Against Law Schools: Some Thrown Out, Others Still Pending

Out of 15 lawsuits against law schools that allegedly manipulated job and salary data to lure potential attendees, six have been dismissed. Dismissal has been denied in six cases, and dismissal motions are still pending in three others.

Three New York attorneys, Jesse Strauss, David Anziska, and Frank Raimond, are representing the plaintiffs in all of the suits except a case against Thomas Jefferson School of Law.

Dismissal Granted. In New York state court, the Gomez-Jimenez case against New York Law School was dismissed. The dismissal was affirmed by an intermediate court, and New York's high court decided not to grant review.

Also in New York state court, the Austin action against Albany Law School of Union University was dismissed. The plaintiffs put in an appeal but have not perfected it, plaintiffs' counsel Jesse Strauss told BNA April 5.

In Illinois state court, cases against DePaul law school, IIT Chicago-Kent College of Law, and John Marshall Law School were dismissed. Appeals will be filed shortly in those cases, Strauss said.

A Michigan federal district court dismissed the MacDonald case against Thomas M. Cooley Law School. An appeal is pending in the Sixth Circuit, where oral argument is scheduled for June 12.

Dismissal Denied. The Harnish action against Widener University School of Law survived a motion to dismiss in New Jersey federal district court.

California state courts refused to dismiss complaints against California Western School of Law, Golden Gate University School of Law, University of San Francisco School of Law, and Southwestern Law School. The case against Southwestern is delayed but discovery is being exchanged in the others, according to Strauss.

A lawsuit in California state court against Thomas Jefferson School of Law also survived a motion to dismiss.

Dismissal Motions Not Yet Decided. Motions to dismiss in New York state court against Brooklyn Law School and Maurice A. Deane School of Law at Hofstra University are pending.

An action against Florida Coastal Law School was removed to federal district court in Florida. The Southern District denied a motion to dismiss without prejudice when it transferred the case to the Middle District.

Judge William H. Walls denied the defendants' motion to dismiss. He emphasized the broad remedial nature of the New Jersey statute, which extends to purchases made for business purposes and does not require proof of reliance. The Delaware Act has virtually identical pleading requirements, he said.

In a similar case against New York Law School, plaintiffs recently hit a dead-end when New York's highest court, with one judge dissenting, denied leave to appeal the dismissal of their suit. See Gomez-Jimenez v. New York Law Sch., No. 8110, 29 Law. Man. Prof. Conduct 37 (N.Y. App. Div. 2012), appeal denied, No. 2013-190 (N.Y. March 28, 2013).

More than a dozen similar lawsuits are underway against other law schools. (See box.)

Consumer Fraud Acts Invoked

The plaintiffs in the case are eight Widener University law school alumni who graduated between 2008 and 2011. According to the court, the plaintiffs failed to assert any common law fraud causes of action, and they voluntarily dismissed their cause of action alleging violation of Delaware's Deceptive Trade Practices Act.

The two remaining causes of action, the court said, assert that Widener violated the New Jersey and Delaware consumer fraud acts by:

• stating that approximately 90-95 percent of Widener graduates secured employment within nine months of graduation;

• manipulating employment data to give the appearance that the overwhelming majority of recent graduates secure full-time, permanent employment for which a J.D. is required or preferred;

• disseminating false post-graduate employment data and salary information to various third parties such as the ABA and U.S. News & World Report;

• making deceptive and misleading statements and omissions about Widener's reputation with potential employers, the value of a Widener degree, and the pace at which recent graduates can obtain gainful employment in their chosen field; and

• causing students to pay inflated tuition based on materially misleading statements and omissions.

Taking these allegations at face value, the court concluded that the plaintiffs have stated plausible claims under the consumer fraud acts.

Disagreement With New York

Looking at the New Jersey consumer fraud act, the court said the plaintiffs adequately alleged that the 90-95 percent “employment rate” displayed on Widener's website was misleading.

Although that statistic may have been technically true, Walls said, it was plausible that a prospective law student would believe that the figures referred to law-related employment. The court emphasized that the information appeared in a class “profile” that was sandwiched between “judicial clerkships” and “full time legal employers.”

In similar cases against two other law schools, New York courts held that no reasonable person could be misled into believing that an “employment rate” refers to legal employment only. See Gomez-Jimenez, supra; Austin v. Albany Law Sch. of Union Univ., 957 N.Y.S.2d 833 (N.Y. Sup. Ct. 2013).

Walls disagreed, emphasizing that Widener's website is intended to persuade students to get a law degree, and that the employment rate was sent to third-party evaluators to establish Widener's standing.

“Within this context, it is not implausible that a prospective law student making the choice of whether or which law school to attend, would believe that the employment rate referred to law related employment,” Walls wrote, adding: “While the thread of plausibility may be slight, it is still a thread.”

Walls agreed with Hallock v. Univ. of San Francisco, No. CGC-12-517861 (Cal. Super. Ct. July 19, 2012), which emphasized that that law school's disputed statements were made in the context of attracting and retaining law students.

And With Michigan

Walls likewise rejected the conclusion of a Michigan federal district court that “basic deductive reasoning” informs a reasonable person that the employment statistic includes all employed graduates, not just those who obtain or started full-time legal positions. See MacDonald v. Thomas M. Cooley Law Sch., 2012 BL 183672, 28 Law. Man. Prof. Conduct 464 (W.D. Mich. 2012).

That decision is distinguishable for two reasons, Walls said. First, he noted that the plaintiffs' claims under the Michigan Consumer Protection Act were thrown out because the act does not cover purchases made for business or commercial purposes. Unlike that statute, the New Jersey consumer fraud act does apply to purchases intended for business use, he said.

Second, Walls pointed out that the Michigan court applied the standards for common law fraud and found that reliance on the law school's data was unreasonable. In contrast, Walls noted, New Jersey consumer fraud only requires proof of a causal nexus, not proof of reliance.

Walls also found that in the present case the plaintiffs adequately alleged that when Widener posted and disseminated the 90-95 percent employment rate, the law school knowingly omitted material information, such as notice that the employment rate refers to all types of employment and may selectively disregard some employment data. It was plausible, the court found, that these alleged omissions misled the plaintiffs into believing that the employment rate referred to their post-graduate employment prospects in the legal sector, and not to employment generally.

Delaware Law

With little additional discussion, the court concluded that the plaintiffs also pleaded enough information to withstand the defendants' motion to dismiss their cause of action under the Delaware consumer fraud act.

The plaintiffs made the same allegations under the Delaware act as under the New Jersey act, and the pleading requirements of both statutes are virtually identical, Walls said.

David S. Stone of Stone & Magnanini in Short Hills, N.J., is counsel of record for the plaintiffs.

James C. Orr and Eric T. Evans of Wilson, Elser, Moskowitz, Edelman & Dicker in Florham Park, N.J., represents Widener University.

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