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.
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