Four graduates of the Albany Law School sued for violations of
General Business Law §§ 349 and 350, common law fraud and negligent
misrepresentation. The court dismissed
the complaint.
The plaintiffs alleged that they paid tens of thousands of
dollars in tuition and fees to the school while incurring tens of thousands of
dollars more in debt, in reliance on salary and employment information posted
on ALS’s website and material disseminated to third parties such as the ABA and
US News. They alleged that they
specifically relied on ALS’s representations that approximately 95 percent of
its graduates were employed within nine months of graduation. They weren’t aware that the school's reported
placement rates included temporary and part-time employment and/or employment
for which a JD was not required or preferred.
Had they been aware of this, they alleged, they would either have paid
less for ALS or not attended the school at all.
ALS currently stated on its website that 91 percent of the Class of 2010
was employed nine months after graduation, with 71 percent working in positions
for which a JD is required, 19 percent in positions for which a JD is preferred
and ten percent in positions that neither require nor prefer a JD, but these
figures were allegedly based upon “unaudited, unverified and self-reported”
data. Before September 2011, plaintiffs alleged, ALS disclosed “even less
accurate and more deceptive information regarding [its] graduates' job
prospects, by failing to disclose the percentage of graduates who were in jobs
that do not require or prefer a JD degree.”
Further, plaintiffs alleged that ALS disseminated false or
misleading information to third parties such as the ABA and US News, since
those “simply require law schools to report an overall employment number, and
do not require schools to distinguish between part-time and full-time jobs” ALS would allegedly “satisfy th[e ABA's]
virtually meaningless and non-existent criterion by reporting jobs that are
temporary or part-time or have absolutely nothing to do with obtaining a JD
degree as employment.” By contrast, the National
Association of Law Placement requires a specific breakdown of part-time and
full-time jobs and JD-required jobs. But
it doesn’t make these data public.
Plaintiffs argued that, despite the fact that it had this disaggregated
data on hand, ALS presented misleading aggregated data to prospective and
current students.
Plaintiffs also argued that the employment data were misleading because they included research assistants and fellows funded by the law school, graduates who were employed within nine months of graduation, but who were not employed on the reporting date of the survey, and graduates who have been forced to start solo practices due to their inability to find other employment. In addition, they alleged that ALS “calculates and tallies the raw data inputted in the job surveys filled out by recent graduates in a shoddy, slipshod manner, cynically choosing to omit or ignore critical statistical data that would substantially lower placement rates.” Moreover, they alleged that the school’s reported employment rates remained “eerily steady” despite the overall downturn in the legal market following the “Great Recession” of 2008, “leaving the misimpression that the value of an ALS degree is recession proof,” that the published data were “at odds” with the data reported to NALP, and that the “true” percentage of law school graduates that obtain full-time, permanent legal employment was only 40%.
A section 349 claim requires (1) consumer-oriented conduct
that is (2) materially misleading and that (3) injures the plaintiff as a
result. To be misleading, the challenged
representation or omission must be likely to mislead a reasonable consumer
acting reasonably under the circumstances.
Here, the allegedly deceptive acts were directed principally
at college graduates deciding on a career and a law school: “a reasonably
well-educated (though not necessarily sophisticated) group of consumers who are
called upon to make major life decisions.” Moreover, the plaintiffs didn’t seriously
contend that the published employment rates were literally false. The employment figures didn’t state or imply
that they were anything more than the number of people who were doing work for
pay. “There simply is nothing in the
challenged representations that would lead reasonable consumers acting
reasonably to believe that ALS's published ‘employment’ rate carved out
compensated positions for which a JD is not required or preferred, part-time
employment, temporary employment, contract employment, post-graduate
fellowships, research assistantships and/or certain types of solo legal
practices.”
Indeed, the court continued, “given the elaborate and somewhat
subjective nature of plaintiffs' definition of ‘employment,’ it is difficult to
envision how they could reasonably have expected any single published statistic
to comport with all of their assumptions and expectations regarding legal
employment.” Excluding law school grads
who started solo practices with little result because they couldn’t find other
employment, for example, would require “a multi-factor test requiring
individualized consideration of the extent to which starting a solo practice
was the graduate's preference, the other employment options available to the
graduate, and the financial success of the graduate's new venture.” The court characterized what plaintiffs were
asking for as a demand that ALS “ascertain these types of individualized needs
and guarantee that its published employment statistics suit each prospective or
current student.” Rather, “it was
incumbent upon plaintiffs to ascertain whether ALS's published data fit their
particular assumptions and met their specific needs.”
The plaintiffs alleged that they reviewed the ALS data
disseminated to third parties, but couldn’t find “real” numbers. “While it is true that disaggregated
employment data for ALS generally was not available for much of the period at
issue in this action, examination of the highly disaggregated categories of
employment data compiled by NALP and the considerable variance between NALP's
national percentage of law school graduates employed in positions for which a
JD is required or preferred and the employment data published by ALS (which
include a comparison to national averages) would have made it apparent that ALS
was publishing an aggregated rate.”
This wasn’t about reliance (not required under the GBL), but
rather about the objective standard of whether a reasonable consumer acting
reasonably would have been deceived. “Reasonable
college graduates grappling with major life decisions concerning a career and
the pursuit of a professional degree would not read a host of assumptions about
legal employment into the unembellished ‘employment rate’ published by ALS
without confirming that this summary statistic fit their specific needs.” (But would they have even known to ask the
questions necessary to distinguish among types of employment?)
Thus, failure to disclose disaggregated data wasn’t
deceptive or misleading. ALS had no duty
to ascertain consumers’ individual needs and guarantee that they had all
relevant information specific to their situations, especially when reasonable
diligence would have aided the consumers. ALS was relying on the commonly understood
meaning of “employment,” not some made-up definition it cooked up itself, “and it is the
plaintiffs who seek to add a layer of gloss to the term reflective of their
particular hopes, aspirations and expectations regarding legal employment.”
In a footnote, the court also cast doubt on plaintiffs’
theory of damages. Though they mentioned
a price inflation theory, they were actually seeking damages based on alleged
diminution in the “true value” of their degrees. “Even assuming that the ‘true
value’ of an ALS degree could be ascertained with reasonable certainty, a point
that seems doubtful, weighing the tuition charged by ALS against the value of
the resulting degree is an apples to oranges comparison that impermissibly
seeks to inject a ‘benefit of the bargain’ theory of damages into the case.”
This wasn’t an ordinary commercial transaction, but an educational opportunity,
and the court didn’t see any allegation that the legal education they received was “diminished or devalued in any
way by the alleged deceptive practices” (even if its market value declined).
Naturally, the § 350 and common law fraud claims failed for
the same reasons. ALS didn’t have any
fiduciary duty to disclose to its students and prospective students, only
contractual relations. A duty to
disclose would then only exist if one party’s superior knowledge of essential
facts rendered a transaction without disclosure inherently unfair, and if the
facts were peculiarly within ALS’s knowledge and couldn’t have been discovered
through the exercise of ordinary intelligence.
Here, plaintiffs “could have ascertained the true nature of the
employment statistics published by ALS and the limitations associated therewith
through the exercise of reasonable diligence.”
In addition, information “concerning the changing nature of the practice
of law in this day and age, the economic realities facing the legal profession
and the impact of downward economic cycles upon the short-term employment
market for new attorneys” was also available to them. Plaintiffs couldn’t have reasonably relied on
the general “employment” statistics to fit their particular definitions of
employment. The negligent
misrepresentation claim also failed.
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