Tens of millions sought as federal court buys into myth of law school brochures

In what may be the first such success outside the state of California, a federal judge in late March denied a motion to dismiss by Widener Law School against a claim by several graduates the School defrauded them. Senior District Judge Walls’ full opinion can be read here.

As with other suits, the students claim that aggregate employment statistics suggesting that more than 90% of Widener graduates were employed nine months after law school fooled them into borrowing more than $100,000 to attend law school.

The decision is notable because it makes clear how much money may be at stake in these lawsuits. In this case, the plaintiffs are seeking $75 million in “disgorgement and restitution.” If cases like this were to be successful on a national scale, class action attorneys might be looking at a payday in the hundreds of millions of dollars.

In his opinion, Federal Judge Walls makes clear he buys the idea that law school brochures, admittedly literally accurate, could be the basis for such lawsuits.

I argued here that it is a myth to think that law school brochures could be considered responsible for the flood of students into law school in the mid-2000’s any more than they were responsible for the drop in law school enrollment in the early 2000’s. Something more powerful was at work, namely rational students making rational decisions about when and whether to attend law school in response to changing macroeconomic conditions. I explore this issue more fully in my review essay on Brian Tamanaha’s book here.

Nonetheless, Judge Walls concluded:

“Here, an employment rate upwards of 90 percent plausibly gave false assurance to prospective students regarding their legal employment opportunities upon investment in and attainment of a Widener degree. While the thread of plausibility may be slight, it is still a thread. At this motion to dismiss stage, under New Jersey’s broad remedial statute, Plaintiffs have sufficiently pled an unlawful affirmative act under the NJCFA.”

Where the case may run into difficulty over the long run is the way in which Judge Walls attempts to differentiate his conclusion from those of several other courts in New York and Michigan. I discuss one of those lawsuits more fully here.

He admits “there was a wealth of information outside the Widener website that would have indicated that the employment rate portrayed by Widener referred to an aggregate employment statistic.”

But the standard required by the statutes in question – Delaware and New Jersey Consumer Fraud Acts – does not require law students to look beyond the material on the website. Widener has a campus in each state.

Judge Walls writes: “The NJCFA recognizes ‘the fact that the [advertisements are] literally true does not mean they cannot be misleading to the average consumer.’”

And therefore, “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.”

As examples of the way in which labeling can mislead the “average consumer” Judge Wall cites to cases involving soup can labels and magazine subscription solicitations.

Are recent college graduates who are aspiring lawyers to be considered “average consumers” no different than consumers of soup or readers of mass-market magazines? Are they incapable of reading a law school brochure or website with anything more than the potential gullibility of the average consumer? Somehow I doubt the drafters of these consumer protection statutes, many lawyers themselves, had law students in mind when they put them on the books.

At the motion to dismiss stage a court may feel it has some obligation to bend over backwards to see if there is any reasonable basis to allow a fraud claim to move forward, but one has to agree with Judge Walls that indeed the “thread of plausibility” here appears to be “slight.”