The complaint alleged that Brooklyn Law School published misleading post-graduate employment and salary information on its website, on which plaintiffs relied when choosing to enroll and stay at Brooklyn. The school allegedly lumped graduates who got permanent, full-time JD preferred/required employment together with graduates who got JD-irrelevant, temporary, part-time, school-funded, or voluntary jobs (where the graduate works a regular nonlegal job and then volunteers with a government agency to get legal experience), or started their own nonremunerative solo practices out of desperation. Plaintiffs speculated that if the reported employment numbers included only permanent legal jobs, the reported numbers would drop dramatically, and could be lower than 40–50 percent throughout the class period.
In addition, plaintiffs alleged that the school reported misleading median salaries based on a small pre-selected group of well-compensated graduates that the school actively pursued to respond to its annual graduate survey. They specifically alleged reliance on representations that, depending on the year, well over 90 percent of Brooklyn graduates secured employment within nine months of graduation.
As a result, plaintiffs alleged, they were prevented “from realizing the obvious—that attending [Brooklyn] and forking over nearly $150,000 in tuition payments is a terrible investment which makes little economic sense and, most likely, will never pay off.” The plaintiffs had varying, low levels of success in finding law-related employment. They alleged that they would have elected to either pay less or perhaps not attend the school at all had they been aware of the kinds of positions the reported placement rates included.
Plaintiffs brought claims under NY GBL §§ 349 & 350, common-law fraud, and negligent misrepresentation. They sought damages and equitable relief, including refund and reimbursement of a portion of their tuition. The court granted the motion to dismiss.
Plaintiffs also alleged that Brooklyn provided the same misleading statistics to US News and the ABA, the two primary sources of law school information. Both count as employed those who secure employment in any capacity in any kind of job. Plaintiffs further contended that Brooklyn violated the ABA's reporting standards, but conceded that the criteria by which the ABA measures compliance with those standards is “virtually meaningless and nonexistent.” Brooklyn also provided employment and salary information to the National Association for Law Placement (NALP), which requires a specific breakdown of types of employment. But it doesn’t publish the data for specific schools, and Brooklyn didn’t present the disaggregated data to prospective and current students.
As evidence of the questionable nature of Brooklyn’s data, plaintiffs alleged various facts, including that reported placement rates remained “eerily steady” at about the 90% level despite the Great recession; that generally reporting on law jobs indicated that twice as many people passed the bar as there were job openings, and the ratio was worse in New York; that only 40% of Brooklyn’s 2010 class supplied salary information, suggesting that the true employment rate was below 50%, let alone 95%; and that other estimates are that under 40% of law school graduates nationally have obtained full-time permanent employment, a number likely even lower for Brooklyn given its “relatively lenient admissions standards, lackluster ranking by U.S. News and … location in a highly-saturated legal market.”
GBL §§ 349 and 350 are consumer protection statutes that bar materially misleading, consumer oriented conduct. The standard for deceptive acts and practices is objective: representations or omissions must be limited to those likely to mislead a reasonable consumer acting reasonably. The court found the challenged statements not objectively deceptive.
They were nowhere alleged to be literally false, and the court found that the exhibits attached to the complaint gave more information than plaintiffs acknowledged. Brooklyn broke down employment data into 6 employer types, including Law Firm, Judicial Clerkship, Corporation, Government, Public Interest and Academia, and provided the percentage of responding graduates who were employed in each category. Except for Law Firm and Judicial Clerkship, the court couldn’t see why plaintiffs assumed that the remaining categories were JD-required. “Indeed, it has long been conventional wisdom that a law degree affords its owner much greater flexibility than most other graduate degrees and that many people pursue a law degree without ever intending to practice law.”
Previous New York courts have ruled that plaintiffs’ interpretation of a generalized employment statistic, which didn’t differentiate among legal and nonlegal or fulltime and temporary positions, was unreasonable as a matter of law. To the contrary, “basic deductive reasoning, informs a reasonable person that the employment statistic includes all employed graduates, not just those who obtained or started full-time legal positions.”
Relying on Gotlin v. Lederman, 483 Fed. App’x 583 (2d Cir. 2012), plaintiffs argued that the misleadingness of “employment” was a question of fact that couldn’t be resolved on a motion to dismiss. But there, the defendants touted a successful cancer treatment and the problem wasn’t just their definition of “success,” but rather that there was expert testimony that the treatment had no potential to cure plaintiffs’ condition, and that defendants made many hyperbolic statements that suggested “broader successes than merely arresting the growth of cancer.” Here, plaintiffs’ decision to enroll and remain in school solely on the strength of a “bare-bones” employment statistic was unreasonable under the circumstances.
As a higher NY court held, “although there is no question that the type of employment information published by defendant (and other law schools) during the relevant period likely left some consumers with an incomplete, if not false, impression of the school's job placement success, … this statistical gamesmanship, which the ABA has since repudiated in its revised disclosure guidelines, does not give rise to a cognizable claim under [GBL] § 349.”
So too with claims based on published salary data. While plaintiffs alleged that they couldn’t discern from the statistics whether attending Brooklyn made “economic sense,” the exhibits refuted their claims: a reasonable person would be able to determine that most graduates were earning modest incomes, because Brooklyn reported salary ranges (25th-75th percentile) for various categories of employment, and also reported the percentage of its graduates who reported being in those categories. “From a cursory review of these figures and their accompanying pie charts, one can (if so inclined) easily calculate that for those graduates outside of private practice, which was 44.5% of the class of 2009 … , the median starting salary was less than $79,000.” Likewise, almost half of the class in private practice were in firms of less than 100 attorneys, for which the median starting salary was $75,000. It was therefore clear from the information Brooklyn provided that for over 2/3 of 2009 graduates, the starting salary was “significantly less than $138,000—the number that plaintiffs allege a graduate ‘needs to make ... to repay [the average debt of] $100,000 without enduring financial hardship.’”
Plus, the limitations of the salary data were clearly disclosed. For 2009, Brooklyn disclosed that it received salary information from 71% of graduates in private practice, “implicitly acknowledging what plaintiffs accuse it of hiding—that it was not reporting ‘the overall percentage of graduates who reported salary information and exact percentage of graduates in each job category who reported salary information.’” Brooklyn also stated that the figures varied from year to year based on market conditions and number of graduates reporting salary information. It warned readers that the salaries were just an approximate guideline. “[T]hese disclaimers are sufficient to warn off a reasonable purchaser of a legal education from drawing any conclusions about the earning capacity of all graduates in any particular year or from using the information as a springboard from which to derive his or her own expected income.” In particular, no one could reasonably have relied on the data to expect a six-figure salary on graduation. Claims based on the 2010 salary data were even less convincing, since Brooklyn disclosed that the 2010 information was based on “40% of employed graduates overall.”
A reasonable college graduate simply could not conclude that Brooklyn was making a representation about all its employed graduates’ salaries. Reasonable college graduates would also recognize the impact that Brooklyn’s ranking and their own GPAs would have on their employment options and salary expectations.
Even assuming that plaintiffs’ interpretation of the employment rate was reasonable, they’d face insuperable difficulties in establishing damages. Regardless of the allegations, the court couldn’t overlook the impact that the severe economic downturn had on plaintiffs’ employment prospects: they “graduated into what is universally recognized as one of worst job markets in recent memory.” They simply would be unable to prove that their damages were a result of Brooklyn’s conduct. Plus, the claimed measure of damages—the difference between the inflated tuition they paid because of Brooklyn’s material representations and the true value of a Brooklyn degree—added another layer of improper speculation.
For similar reasons, their fraud claims failed. Plaintiffs argued that Brooklyn had an affirmative duty to disclose the disaggregated employment data. But absent a fiduciary relationship between the parties, a duty to disclose arises only where one party's superior knowledge of essential facts renders a transaction without disclosure inherently unfair. Here, “had plaintiffs exercised reasonable diligence, they could have uncovered other sources of information” against which to evaluate Brooklyn’s claims. The publicly available information identified in the complaint would have shown that Brooklyn was reporting an aggregate rate including nonlegal and part-time or temporary positions. The NALP report would have alerted a college-educated reader to the fact that Brooklyn’s published rate was “likely” an overall figure “and that the rate for full-time legal employment might be markedly lower.”
Nor was the relationship between an institution of higher education and its students fiduciary, rather than contractual, though matters may differ with elementary school students. The existence of Brooklyn’s financial aid office didn’t create a special relationship between it and its students, even if “lenders” may generally have a special relationship with borrowers. Without a special or confidential relationship between them, Brooklyn had no affirmative duty of disclosure.
Furthermore, plaintiffs’ reliance on Brooklyn’s published statistics as the sole criterion on which they allegedly based their decision to enroll and remain in school was unreasonable as a matter of law, given the other sources of available information.
Similar problems defeated the negligent misrepresentation claim.