Law Grads Lose Class Certification
Class certification was recently denied in Harnish v. Widener University School of Law, No. 12-608 (D.N.J. July 1, 2015), a proposed $75 million class action filed in New Jersey federal court against Widener University School of Law over allegedly misleading employment statistics. The Court held that the plaintiffs failed to show typicality under Federal Rule of Civil Procedure 23(a), as well as predominance of common questions under Rule 23(b)(3).
This class action was brought by six alumni of Widener, who failed to find legal jobs after graduation. They claimed that Widener violated the consumer fraud statutes of New Jersey and Delaware by inflating students’ career outlook in order to attract and keep students, drive up tuition costs, and boost the law school’s ranking in U.S. News & World Report. Between 2005 and 2011, Widener advertised that over 90% of its alumni found jobs involving their law degrees within nine months of graduation. The plaintiffs cried foul because Widener did not disclose that “jobs involving their law degrees” included part-time legal, law-related and non-legal positions. That meant that a Widener graduate working as a bartender six months after graduation would have been counted in the 90% success rate. Moreover, Widener allegedly failed to disclose that many graduates did not even respond to the law school’s employment surveys.
To certify the proposed class of Widener alumni, the plaintiffs had to satisfy the four elements under Rule 23(a), which are commonly referred to as the numerosity, commonality, typicality, and adequacy requirements. In addition, at least one of the provisions under Rule 23(b) had to be satisfied. The plaintiffs invoked Rule 23(b)(3), which involves the predominance and superiority requirements.
Although finding that some requirements for class certification were easily satisfied, such as numerosity and commonality, the Court took issue with the typicality requirement under Rule 23(a) and the predominance requirement under Rule 23(b)(3).
First, the problem with typicality was that Widener advertised its allegedly misleading employment statistics between 2005 and 2011, but the proposed class included law students who enrolled in Widener through 2014. Widener allegedly changed its reporting practices (to include more comprehensive employment data) in 2012. Therefore, the plaintiffs, who all graduated between 2008 and 2011, had very different factual circumstances than members of the proposed class who enrolled at Widener after 2011. The Court further noted that typicality was defeated because some Widener alumni, particularly those pursuing full-time legal careers, might not want their alma mater to be found liable for consumer fraud as it would devalue their law degrees.
Second, the Court found the predominance requirement unmet because the plaintiffs could not prove damages under the New Jersey and Delaware consumer fraud statutes using common, classwide evidence. The plaintiffs’ damages theory was that Widener’s misleading job statistics inflated its tuition prices, and the plaintiffs intended to use expert price inflation analysis to show the amount of inflation. The Court reasoned that the plaintiffs’ damages theory was akin to the “fraud on the market” theory, which New Jersey courts limit to the federal securities fraud context because securities markets theoretically reflect material public information in security prices. The Court was not persuaded that law school tuition costs follow the same market dynamic with regard to advertised employment statistics. Moreover, the plaintiffs’ damages theory did not account for the differences between students who obtained the kind of legal jobs they wanted, and those who did not.
It is worth noting, however, that the Court did find satisfied the ascertainability element that the Third Circuit has read into Rule 23. We recently blogged about the ascertainability requirement (here), which requires only that class members can be identified at some point, not that plaintiffs be able to actually identify class members at the certification stage. Here, the Court rejected Widener’s argument that the proposed class was overbroad and could not be ascertained. The Court held that whether class members were actually exposed to, or harmed by, Widener’s alleged misrepresentations was irrelevant. The fact that Widener had records of all enrolled, tuition-paying students during the class period was enough to satisfy the ascertainability requirement.
The full opinion is available here.