GOMEZ-JIMENEZ v. NEW YORK LAW 652226/11.
36 Misc.3d 230 (2012)
943 N.Y.S.2d 834
2012 NY Slip Op 22071
ALEXANDRA GOMEZ-JIMENEZ et al., on Behalf of Themselves and All Others Similarly Situated, Plaintiffs, v. NEW YORK LAW SCHOOL et al., Defendants.
Supreme Court, New York County.
March 21, 2012.
Venable LLP, New York City ( Michael J. Volpe of counsel), for defendants. David Anziska , Jesse Strauss and Frank Raimond , New York City, for plaintiffs.
OPINION OF THE COURT
MELVIN L. SCHWEITZER, J.
This is a motion to dismiss a complaint brought by nine graduates of New York Law School (NYLS) who allege that data published by their school pertaining to the school's graduates' employment and salaries is misleading and, in fact, fraudulent.
NYLS enrolls approximately 1,500 students. Tuition is $47,800 per annum. (Amended complaint ¶ 10.) According to plaintiffs, NYLS has been able to attract a large number of applicants and charge an expensive price for its educational services because the school has disseminated this misleading information about its graduates' employment profiles. Allegedly, the misleading information has caused prospective students to misjudge postgraduate employment prospects and commit to earning a NYLS degree which has less marketplace currency than they reasonably had expected. Plaintiffs allege that many of the school's working graduates in the legal sector hold part-time or temporary employment, paying barely enough to service the debt incurred to finance their law school tuition and expenses. (Id. ¶¶ 3-5.)
Plaintiff Alexandra Gomez-Jimenez attended NYLS between 2004-2007 and is currently a member in good standing of the New York bar. After graduating in 2007, Ms. Gomez-Jimenez secured full-time, permanent employment in April 2008. However, in 2009 she decided to open her own firm and now "enjoys a thriving practice as an immigration attorney." (Id. ¶ 17.)
Plaintiff Chloe Gilgan attended NYLS between 2005-2008. Ms. Gilgan used to be a member in good standing of the New York bar "until she voluntarily assumed inactive status due to
Plaintiffs Scott Tiedke and Gergana Miteva attended NYLS between 2006-2009 and are both currently members in good standing of the New York bar. Since graduating from law school, Mr. Tiedke has worked as a legal compliance officer at an investment management firm, and Ms. Miteva worked as a contract attorney and has recently found permanent employment. (Id. ¶¶ 18, 24.)
Plaintiffs Katherine Cooper, Matthew Crawford, Geoffrey Corisdeo and Soline McLain attended NYLS between 2007-2010. Mrs. Cooper is currently a member in good standing of the New York bar. Since graduating from law school, she was unable to find any type of legal position until August 2011 when she found temporary, contract work. Mr. Corisdeo is currently a member in good standing of both the New York and New Jersey bars. He currently works as an associate at a New Jersey law firm. Both Mr. Crawford and Ms. McLain are currently waiting to be admitted to the New York bar. Since graduating from law school, Mr. Crawford has been "unable to find a permanent position in the legal industry." Ms. McLain was unable to find "steady employment" for seven months after graduation, despite being on NYLS Law Review, a dean's scholar and a John Marshall Harlan scholar, and a member in good standing of the Louisiana bar. (Id. ¶¶ 19-22.)
Plaintiff Renee Rivas attended NYLS between 2008-2011. Ms. Rivas took the New York bar exam in July 2011, and is currently working as a paralegal at a small Manhattan law firm. She is the only graduate of the nine plaintiffs to have chosen to enter NYLS in 2008, the year the Great Recession began, which according to the complaint, "decimated the legal industry." (Id. ¶¶ 23, 50.) With the exception of Ms. Gomez-Jimenez who graduated before the Great Recession hit and is now in a "thriving" practice, the remaining seven plaintiffs all entered NYLS before the Great Recession and graduated right into it.
The allegedly misleading information was disseminated for the entering classes 2005-2010. (Id. ¶¶ 17-25.) According to the complaint, the NYLS data allegedly omitted facts which, in plaintiffs' view, would have given prospective students a more
The data allegedly inflated graduate mean salaries by reporting them based on a small, deliberately selected, intensely solicited, subset of graduates. The subset of graduates ranged from 22% to 26%, and the circumstances relating to its composition were not disclosed by NYLS. In two years, 2005 and 2006, NYLS did not report the percentage of graduates on which the compensation statistic was based at all. (Id. ¶ 43.)
Plaintiffs also recite, without any factual reference, a litany of additional allegedly false representations and omissions of material facts, including false employment rates, employment data which falsely gave the appearance that most graduates had secured full-time permanent employment for which a law degree was required, grossly inflated salaries, and false statements regarding the value of a NYLS degree. Plaintiffs claim the employment and salary data reported by NYLS were at odds with national legal employment statistics reported and made available to the public by the National Association for Law Placement (NALP) and with the reality of NYLS's ranking by the U.S. News & World Report (U.S. News). (Id. ¶¶ 4, 5.)
According to plaintiffs, the data for the graduating classes 2005-2009 differed in critical respects from the class of 2010 data in that data for the former years reported the percentage of graduates employed after nine months but did not report the percentage of graduates who held positions which required or preferred a law degree, or were funded by a NYLS fellowship program. Also, in some cases the data for 2005-2009 gave the average salary for graduates working for law firms, thus allegedly implying that most of the employed graduates were, in
Plaintiffs assert three causes of action. They allege that NYLS's actions (i) constitute unlawful, unfair, deceptive and fraudulent practices under General Business Law § 349, (ii) are fraudulent in that NYLS disseminated information which contained numerous false representations and omissions of material facts, and (iii) constitute negligent misrepresentation. (Id. ¶¶ 107-130.)
Standard of Review
NYLS's motion to dismiss is under CPLR 3211 (a) (1) and (7). A CPLR 3211 (a) (7) motion must be denied if the factual allegations contained in the complaint constitute a cause of action cognizable at law. (Guggenheimer v Ginzburg, 43 N.Y.2d 268 .) In considering a CPLR 3211 (a) (7) motion, the court
A complaint may be dismissed based upon documentary evidence pursuant to CPLR 3211 (a) (1) only if the factual allegations are definitively contradicted by the evidence submitted. (Yew Prospect v Szulman, 305 A.D.2d 588 [2d Dept 2003].) Ambiguous documents cannot form the basis for a dismissal because a CPLR 3211 (a) (1) dismissal "may be appropriately granted only where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law." (Goshen v Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326 .)
General Business Law § 349 Claim
To state a cause of action under General Business Law § 349, a plaintiff must allege: (1) that the defendant's conduct was consumer oriented; (2) that the defendant's conduct was deceptive or misleading in a material way; and (3) that plaintiff suffered injury as a result. (Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 N.Y.2d 20, 25 ; Small v Lorillard Tobacco Co., 94 N.Y.2d 43, 55 .) While the statute does not require an assertion of justifiable reliance, or the defendant's intent to deceive or mislead, a plaintiff must allege that defendant's consumer-oriented, deceptive acts or practices "resulted in actual injury to [the] plaintiff." (Blue Cross & Blue Shield of N.J., Inc. v Philip Morris USA Inc., 3 N.Y.3d 200, 206 ; Oswego, 85 NY2d at 26; Baron v Pfizer, Inc., 42 A.D.3d 627, 629 [3d Dept 2007].)
ABA Standards for Legal Education
Defendants assert what they believe to be a complete defense to plaintiffs' General Business Law § 349 claim, pursuant to
The Higher Education Act of 1965 (HEA) (20 USC § 1001 et seq.) sets forth the framework for student assistance in institutions of higher education. NYLS, which is such an institution, is subject to its mandates. 20 USC § 1092 (a) provides for information dissemination activities for prospective and enrolled students in such institutions, and 20 USC § 1092 (a) (1) (R) provides for the accurate description of "the placement in employment of, and types of employment obtained by, graduates of the institution's degree or certificate programs." Further, 20 USC § 1094 (a) (8) provides:
20 USC § 1221e-3, in turn, authorizes the U.S. Department of Education (DOE) to adopt regulations governing law schools and other institutions of higher education. The applicable regulations are set out in 34 CFR 668.41 (d). Paragraph (d) (5) of this regulation provides that "[a]n institution must make available to any enrolled student or prospective student ... [t]he placement of, and types of employment obtained by, graduates of the institution's degree or certificate programs." Additionally, the regulations provide that the information provided may be obtained from alumni or student satisfaction surveys, that the institution must identify the source of the information and that the institution must disclose any placement rates it calculates. (34 CFR 668.41 [d]  [i], [ii], [iii].)
20 USC § 1099b authorizes the DOE to select "accrediting agencies or associations" to ensure that consumer information
In 1996, the Council approved revised Standards and Rules of Procedure for Approval of Law Schools which were then adopted by the American Bar Association (ABA) House of Delegates. Standard 509 requires accredited law schools to publish basic consumer information in a fair and accurate manner, reflective of actual practice. Interpretation 509-1 (8) provides that placement rates and bar passage data are considered basic consumer information. Interpretation 509-4 requires a law school to fairly and accurately report basic consumer information wherever and whenever that information is published.
In accordance with 34 CFR 668.41 (d) (5), the ABA's annual questionnaire sets out the ABA's requisites for data collection and reporting. The questionnaire requires that the data be taken from the annual National Association for Law Placement Graduate Survey. This protocol dictates the manner in which law schools must collect and report post-graduation employment and salary data.
Defendants argue that they have rigorously complied with the rules and regulations of an agency of the United States — the DOE — as such rules and regulations are interpreted by that agency and thus are accorded the defense of General Business Law § 349 (d). They are mistaken.
The rules and regulations with which they have arguably complied were written by the DOE pursuant to a grant of authority in the HEA. However, they have not been interpreted by that government agency but, rather, by an "association," i.e., a national bar association akin to a private self-regulatory organization, receiving a delegation of authority from the DOE. As an association, it is clear that the interpreting party is not an "official department, division, commission or agency of the United States" and, therefore, the defense provided by General Business Law § 349 (d) is not available to defendants. If the
Deceptive Acts and Practices: "The Reasonable Consumer"
The New York Court of Appeals, concerned about what it termed a "tidal wave of litigation against businesses that was not intended by the Legislature" pursuant to General Business Law § 349, adopted "an objective definition of deceptive acts and practices, whether representations or omissions, limited to those likely to mislead a reasonable consumer acting reasonably under the circumstances." (Oswego, 85 NY2d at 26 [emphasis added]; Goshen, 98 NY2d at 324.) Therefore, plaintiffs must plead that NYLS has engaged "in an act or practice that is deceptive or misleading in a material way ... [to] a reasonable consumer." (85 NY2d at 25-26; Stutman v Chemical Bank, 95 N.Y.2d 24, 29 .)
Also, to the extent that allegations are not fact supported, they fail to state a General Business Law § 349 claim. (Freefall Express, Inc. v Hudson Riv. Park Trust, 16 Misc.3d 1135[A], 2007 NY Slip Op 51702[U], *4 [Sup Ct, NY County, Sept. 7, 2007].) Here, the only fact-supported, allegedly misleading statements are (1) NYLS's failure to differentiate among types of employment when publishing its employment statistics and (2) NYLS's publication of salary data based on a small group of students.
The NYLS employment statistics for each year show data based on the graduates reporting their employment information. NYLS reported that 92% of its 2005 and 2006 classes reporting their employment information were employed within nine months of graduation. For the classes of 2007, 2009, and
Plaintiffs allege that these statistics somehow deceptively make it appear that the jobs reported are all full-time permanent positions for which a law degree is required or preferred. They contend that in the circumstances where all applicants want a full-time law job, and are willing to take on in excess of $100,000 of debt to be eligible for one, any reasonable consumer would infer NYLS's data was reporting full-time, permanent employment for which a law degree was required or preferred, thus purporting to demonstrate success at finding employment. No such statement is made by NYLS in its marketing materials, however.
The court does not view these postgraduate employment statistics to be misleading in a material way for a reasonable consumer acting reasonably. By anyone's definition, reasonable consumers — college graduates — seriously considering law schools are a sophisticated subset of education consumers, capable of sifting through data and weighing alternatives before making a decision regarding their post-college options, such as applying for professional school. These reasonable consumers have available to them any number of sources of information to review when making their decisions.
Plaintiffs' own complaint confirms the court's view. Plaintiffs cite NALP's employment reports and various studies, initiatives and news articles. (See amended complaint ¶¶ 5, 64-65.) According to NALP, the percentage of graduates who found full-time
Plaintiffs' complaint also compares NYLS with its law school peers as reflected in the rankings of U.S. News. Notwithstanding that plaintiffs do not challenge the quality of the education they received, the complaint asserts that because NYLS finds itself in the bottom tier of the U.S. News law school rankings, "logic dictates that NYLS's true employment rate would be below the statistical mean of the bell curve." (Amended complaint ¶ 58.) One would think that reasonable consumers, armed with the publicly available information from U.S. News that plaintiffs cite, thus would avail themselves of plaintiffs' own logic as stated in their complaint when it comes to evaluating their chances of obtaining the full-time legal job of their choice within nine months postgraduation.
Indeed, the court takes judicial notice (see People v Darby, 263 A.D.2d 112, 114 [1st Dept 2000]) that U.S. News, in addition to its general law school rankings to which plaintiffs themselves refer in their complaint, has published a plethora of information ranking law schools, including NYLS, in a number of job-related categories including: "Whose graduates are the most and least likely to land a job?," "Whose graduates earn the most? The Least?," "Where do graduates work?," "Who's the priciest? Who's the cheapest?," "Whose graduates have the
As to the salary data being misleading because it allegedly was based on a "deliberately selected" small sample of graduates, the relatively small percentage of responding students was disclosed whenever the salary data included the average salary statistic. Namely, for the years 2010, 2009 and 2007, the NYLS marketing material clearly stated that the salary statistic was based on approximately 26%, 20% and 25%, respectively, of employed graduates. (See amended complaint, exhibits 2, 3, 4.) For 2005 and 2006, the NYLS marketing materials merely disclosed a median or average range of salaries depending on employment settings graduates chose to work in and qualified the disclosure with the limiting phrase, "based upon salaries reported." (Amended complaint, exhibits 5, 6.) The reported salaries for 2005 and 2006 ranged between $35,000 to $128,000. (See id.) In addition, the materials cautioned that the highest reported salary for those years "is not the typical salary for most law school graduates — in New York City and nationwide." (Id.) Finally, there is simply no representation in NYLS's marketing materials that the sample of the reported salaries is in any way representative of the salaries earned by all the employed graduates in a given year. The court thus finds that the documentary evidence of statements presenting salary data do not violate the prohibition against deceptive business practices as "there can be no [General Business Law § 349] claim when the allegedly deceptive practice was fully disclosed." (Broder v MBNA Corp., 281 A.D.2d 369, 371 [1st Dept 2001]; see also Sands v Ticketmaster-N.Y., Inc., 207 A.D.2d 687 [1st Dept 1994] ["`the challenged business practices' do not `violate the prohibition against deceptive business practices under General
In researching law school options, it also should have come as no surprise to these law school consumers that the most lucrative law jobs often are associated with having attended a high ranking law school. Indeed, plaintiffs also characterize in their complaint NYLS's "lackluster ranking and reputation" (amended complaint ¶ 9) and even quote one NYLS professor as acknowledging that "[a]t a law school like [NYLS], which is toward the bottom of the pecking order, it's long been difficult for [NYLS] students to find high-paying jobs." (Amended complaint ¶ 32.) These statements constitute further documentary evidence that a reasonable consumer who is seriously considering NYLS is more likely to appreciate the nexus between higher law school rankings and commensurate employment and earning expectations. It is also difficult for the court to conceive that somehow lost on these plaintiffs is the fact that a goodly number of law school graduates toil (perhaps part time) in drudgery or have less than hugely successful careers. NYLS applicants, as reasonable consumers of a legal education, would have to be wearing blinders not to be aware of these well-established facts of life in the world of legal employment.
The complaint also cites NYLS's statements on its Web site which address the fact that many students who have no intention of practicing law choose to attend law school and pay a significant sum to do so: "While the course of study leading to the Juris Doctorate degree is designed to prepare students to become practicing lawyers, the program is also ideal preparation
In addition, every plaintiff alleges that in "deciding to remain enrolled at NYLS," he/she relied on the salary data and employment information posted on NYLS's Web site, marketing material and/or disseminated to third-party data clearinghouses and publications. (Amended complaint ¶¶ 17-25.) Given the impact of the 2008 Great Recession on the legal job market as described in plaintiffs' complaint (see discussion infra), NYLS's statements could not have been materially misleading to a reasonable consumer acting reasonably under the circumstances, i.e.,
In sum, reasonable consumers would have considered and compared the NYLS statements on employment and compensation along with other "decision factors" such as other sources of data cited in the complaint, career preference cited in the complaint, i.e., obtaining a law degree for purposes other than practice of law, available financial resources, and economic circumstances in the law business cited in the complaint, all of which would have had to play an important part in reasonable consumers' investigation when deciding whether to commit to attend NYLS and to complete their legal education there. (See Lincoln Life & Annuity Co. of N.Y. v Bernstein, 24 Misc.3d 1211[A], 2009 NY Slip Op 51421[U], *7 [Sup Ct, Onondaga County, June 29, 2009] ["the reasonable consumer does not mean the least sophisticated consumer"].) In that context, NYLS's acts and practices complained of by these plaintiffs do not fit the objective definition of "deceptive" when viewed through the lens of the "reasonable consumer acting reasonably under the circumstances." (Oswego, 85 NY2d at 26.)
Damages: Remote and Speculative
The court is also of the view that plaintiffs' General Business Law § 349 claim fails to satisfy the statute's requirement that the actual injury each plaintiff sustained as a result of the misleading statements be identified. (See Stutman, 95 NY2d at 29; Matter of Coordinated Title Ins. Cases, 2 Misc.3d 1007[A], 2004 NY Slip Op 50171[U], *8 [Sup Ct, Nassau County Jan. 8, 2004], citing Small, 94 NY2d at 55.) In their opposition memorandum, plaintiffs claim they "enrolled in NYLS to obtain full time, permanent employment in the legal industry." (Opposition mem at 12.) However, as they explained on oral argument, their claim for damages is not based on NYLS's job guarantees, but on NYLS's mislabeled product.
In their argument for damages, plaintiffs are essentially asking the court to "accept ... as true" (Leon, 84 NY2d at 87) their allegation that a NYLS degree is worth less than what NYLS allegedly represented it to be in its marketing materials. Then, they purport to measure their damages as the difference in value between "a degree where a high paying, full-time, permanent job was highly likely and ... [a] degree where full-time, permanent legal employment at any salary, let alone a high salary, is scarce, as is the case in the legal market." Accordingly, plaintiffs seek "restitution and disgorgement of all
As the court noted earlier, plaintiffs' sole objection to the degrees they earned at NYLS is purely in employment terms. To show that the value of a NYLS degree was inflated, plaintiffs allege that "many NYLS graduates are ... working in dead-end jobs, doing document review and other menial, mindless drudgery, essentially functioning as glorified paralegals or secretaries with little control over their careers." (Amended complaint ¶ 82.) This type of work is said not to provide compensation and a lifestyle worthy of the time, money and sacrifice plaintiffs invested in earning a NYLS degree. (Amended complaint ¶ 70.)
Plaintiffs try to distinguish Mihalakis by arguing that "plaintiff in Mihalakis was suing for $345,324,000 in lost earnings caused by alleged deficient, yet unquantifiable, `characteristics' in the defendant's internship program." (Mem in opposition at 24.) In other words, plaintiff in that case claimed she gave up an opportunity to complete an internship program having the characteristics that defendant hospital allegedly represented its program had but did not, in exchange for the "true
Despite the factual differences between this case and Mihalakis, the court is of the opinion that the general rule set forth in Mihalakis is applicable here. Namely, the court there refused to speculate as to both the "true value" of an internship program and the value of an internship program having the characteristics that defendants allegedly misrepresented. (See Mihalakis, supra.) Other courts have also declined to entertain similarly speculative propositions. For example, in Barrows v Forest Labs., Inc. (742 F.2d 54 [2d Cir 1984]), plaintiffs sold their pharmaceutical business valued at $550,000 to defendant Forest Laboratories, Inc. (Forest) in exchange for 22,000 shares of Forest's common stock. After the sale, Forest publicly disclosed that its officers had engaged in a scheme to misstate Forest's financial condition and earnings. Plaintiffs then filed a suit against Forest seeking, inter alia, damages based on the difference between the actual value of the stock at the time of the sale and the "grossly inflated" value as a result of the fraud perpetrated by plaintiffs. The Second Circuit ruled:
This is precisely the sort of impermissible speculation plaintiffs are asking the court to engage in here.
While not denying that they received a quality education at NYLS, plaintiffs are asking this court to measure the "true value" of a NYLS degree which allegedly misrepresented the chances that NYLS graduates could obtain full-time, permanent employment for which a J.D. degree was required or preferred. On oral argument, plaintiffs emphasized:
The starting point of any such measurement is beyond this court, and perhaps this is why plaintiffs fail to allege any method by which any theoretical damages ever could be calculated.
Measuring damages the way plaintiffs would have it would be speculative for another reason as well. As noted earlier, eight of the nine plaintiffs here graduated NYLS between 2008-2011, directly into the Great Recession and its aftermath with the exception of Ms. Gomez-Jimenez who graduated in 2007. Plaintiffs' own complaint acknowledges that one would have to "bury [his/her] head in the sand" to miss the "brutal reality of the current economic environment," and that we are witnessing "one of the grimmest legal job markets in decades." (Amended complaint ¶¶ 60-62.) In their complaint, plaintiffs describe the dire situation of these supervening circumstances in detail:
Another illustrative example is plaintiffs' exhibit 14, which is a letter from United States Senator Charles E. Grassley to the president of the ABA regarding, inter alia, an article published by the ABA on law school graduates' employment prospects:
For a good summary of the "bleak" employment prospects for all law school graduates, including NYLS's, the court is again compelled to cite plaintiffs' own words in opposition to defendants' motion:
In these new and troubling times, the reasonable consumer of legal education must realize that these omnipresent realities of the market obviously trump any allegedly overly optimistic claims in their law school's marketing materials. Under New
To plead a fraud under New York law, plaintiffs must allege (i) a false representation of material fact or material omission, (ii) scienter, (iii) reliance, and (iv) damages.
On a motion to dismiss a fraud claim, the court takes the alleged facts "in the light most favorable to the nonmoving party, and according that party the benefit of every possible favorable inference, ... determine[s] only whether the facts as alleged are cognizable within the claim asserted to [CPLR] 3016 (b)'s satisfaction." (Pludeman v Northern Leasing Sys., Inc., 10 N.Y.3d 486, 493 .)
CPLR 3016 (b) provides that when the cause of action is based in fraud, "the circumstances constituting the wrong shall be stated in detail." (Mandarin Trading Ltd. v Wildenstein, 16 N.Y.3d 173, 178 .) However, the New York Court of Appeals has cautioned that
As a result, "section 3016 (b) may be met when the facts are sufficient to permit a reasonable inference of the alleged conduct." (Pludeman, 10 NY3d at 492.)
False Representation of Material Fact or Omission
The only alleged misrepresentations which the court considers specific enough to analyze are those already discussed in the court's decision with respect to General Business Law § 349. They were found wanting there, and they are equally so here. In their opposition memorandum, however, plaintiffs argue that NYLS also committed fraudulent concealment. In New York, "[a]lthough a cause of action for fraud may be predicated on acts of concealment, there must first be proven a duty to disclose material information." (Dembeck v 220 Cent. Park S., LLC, 33 A.D.3d 491, 492 [1st Dept 2006].) A duty to disclose exists where "defendant ha[s] special or superior knowledge of the facts not available to the other party, or where the defendant has communicated a half-truth or made some other misleading, partial disclosure." (M & T Bank Corp. v Gemstone CDO VII, Ltd., 23 Misc.3d 1105[A], 2009 NY Slip Op 50590[U], *10 [Sup Ct, Erie County Apr. 7, 2009], citing Dembeck, 33 A.D.3d 491 ; Williams v Sidley Austin Brown & Wood, L.L.P., 38 A.D.3d 219, 220 [1st Dept 2007].) According to plaintiffs, NYLS had a duty to clarify in its marketing materials
Plaintiffs' arguments are unpersuasive. First of all, as the court already discussed, the complaint clearly establishes that plaintiffs had access to publicly available information pertaining to the realities of the legal job market. Second, NYLS's statements
With respect to reliance, defendants argue that the complaint is flawed because it is "wholly devoid of details concerning [p]laintiffs' individual choices to attend NYLS." (Mem in support at 19.) Namely, defendants argue that plaintiffs do not allege what salary data they saw or read, when and where they saw or read it, and what impact the data had on their respective decisions to enroll at NYLS. The absence of these allegations, they claim, is fatal to plaintiffs' case. (Id.)
The court disagrees. Each plaintiff here has specified that he/ she relied on NYLS's reported salary data and representations that approximately 90% of NYLS graduates were employed within nine months of graduation, that these statements were posted on NYLS's Web site, in NYLS's marketing materials, and in various publications by third-party data clearinghouses, and that these statements were made each year during the 2005-2009 period. (Amended complaint ¶¶ 17-25.) That is, plaintiffs have sufficiently pleaded which representations they allege to be fraudulent, when those misrepresentations were made, where they were made, and that they relied on these misrepresentations in deciding to enroll and remain enrolled at NYLS. This is sufficient to clearly "inform [the] defendant[s] with respect to the incidents complained of." (Pludeman at 491; Knight Sec., 5 AD3d at 174 ["(plaintiff) obviously knows what it represented
Plaintiffs' pleading of reliance, however, is defective for a different reason. Reliance must be reasonable. (See Arias v Women in Need, 274 A.D.2d 353, 354 [1st Dept 2000]; Miller v Doniger, 272 A.D.2d 73, 74 [1st Dept 2000].) Even though "the reasonableness of [plaintiffs'] reliance [generally] implicates factual issues whose resolution would be inappropriate at this early stage" (Knight Sec., 5 AD3d at 173), reasonableness may under certain circumstances be determined as a matter of law. (See Colasacco v Robert E. Lawrence Real Estate, 68 A.D.3d 706, 708 [2d Dept 2009] [the court dismissed the fraud cause of action because "plaintiffs' supposed reliance upon (the defendant's) alleged misrepresentations ... was unreasonable as a matter of law" since "(t)here was no allegation in the complaint that the dimensions and boundary lines of the subject property were within the exclusive knowledge of the defendants" and "the plaintiffs could easily have ascertained these facts through the use of ordinary means"]; Cohen v Cohen, 773 F.Supp.2d 373, 385 [SD NY 2011].) "[R]easonable reliance `is a condition which cannot be met where ... "a party ha[d] the means to discover the true nature of the transaction by the exercise of ordinary intelligence, and fail[ed] to make use of those means."'" (Arfa v Zamir, 76 A.D.3d 56, 59 [1st Dept 2010], quoting New York City School Constr. Auth. v Koren-DiResta Constr. Co., 249 A.D.2d 205, 205-206 [1st Dept 1998]; Small, 252 A.D.2d 1, 8 , affd 94 N.Y.2d 43  ["Reliance on defendants' misrepresentations will not be presumed where plaintiffs had a reasonable opportunity to discover the facts about the transaction beforehand by using ordinary intelligence ..., or where a variety of factors could have influenced a class member's decision to purchase"]; Peach Parking Corp. v 346 W. 40th St., LLC, 42 A.D.3d 82, 87 [1st Dept 2007].)
Measuring reasonableness is done in the context of circumstances. Here, plaintiffs were among the select segment of students accepted into an American law school. They were making a substantial economic commitment, for which most of them would incur substantial debt, and they had ample opportunity to discover their realistic post-graduation employment prospects by consulting the many sources of information they cite in their complaint, and cannot claim that it was reasonable to confine their research and reliance solely on what amounts to just two sentences in NYLS's marketing materials. This is especially
Negligent Misrepresentation Claim
With respect to plaintiffs' claim for negligent misrepresentation (J.A.O. Acquisition Corp. v Stavitsky, 8 N.Y.3d 144 ), as the court has already discussed, the documentary evidence in the complaint itself demonstrates that plaintiffs cannot have reasonably relied upon the statements alleged to be misrepresentation here, especially given the other information readily available to them. (See Colasacco, 68 AD3d at 709 [the cause of action for negligent misrepresentation dismissed because, "as with the fraud cause of action, the complaint fails to allege circumstances under which the plaintiffs' reliance upon (the defendant's) alleged misrepresentations could be considered reasonable or justifiable"].)
In this court's view, the issues posed by this case exemplify the adage that not every ailment afflicting society may be redressed by a lawsuit. The action here is brought by nine plaintiffs, some of whom may be experiencing the real aftershocks that have hit the legal profession since America's Great Recession of 2008. Where before 2008 there was a seeming abundance of opportunities for lawyers at all points of entry into the profession, regardless of the law school one attended, law graduates today and over these past few years have been faced with the effects of the most severe contraction in demand for legal services that this court can recall since the early 1970s.
Layoffs in law firms of all sizes abound. Hiring in many firms has come to a virtual standstill. The days of mega firms hiring summer classes of 100 or more students to plan for enough young lawyers to meet their needs for ever more billable hours
Now it is recent law graduates who are caught in the midst of an unanticipated squeeze. They entered law school with the most optimistic of expectations and instead find themselves without work and competing in a log jam of young lawyers, none of whom have any experience to offer employers who themselves must contend with clients that are insisting they will pay full freight only for seasoned professionals they know can add real value to a representation.
While all this has happened, new, more chastened undergraduates, who previously may have given nary a thought about whether they would end up with a paying job after withstanding the rigors of three years of legal training are now asking questions and looking to the law schools, among others, for greater transparency of responses as pertains to job-related data before they decide to commit to the law at all.
But plaintiffs here are well beyond that. Essentially, as law graduates who made their decisions to go to law school before the full effects of the maelstrom hit, they now have turned their disappointment and angst on their law school for not adequately anticipating the possibility of the supervening storm and presenting the most complete job-related data that could possibly
But in dismissing plaintiffs' complaint the court takes this opportunity to state that it has personally encountered many outstanding law graduates who have passed the bar and have been unable to find work in their chosen profession. They even have been willing to volunteer their time without compensation simply to gain experience and a credential for their resume, simply to "stay sharp," as they go about their search for paying jobs as practicing lawyers. There is no question that this dearth of opportunity is an unprecedented situation in the modern history of the practice of law and it simply cannot be ignored.
If lawsuits such as this have done nothing else, they have served to focus the attention of all constituents on this current problem facing the legal profession — from the law schools and their regulators, to the compilers of data that rate the schools to assist law school consumers, to the law firms that formerly primed the pump for a steady supply-line of associate positions to be filled by each graduating class, to the judiciary who offer clerkships to the best and the brightest, to the local bar associations whose members are responsible for the continuing health and viability of the profession, and, finally, to the prospective law students themselves. All must take a long, hard look at the current situation with the utmost seriousness of purpose. To the extent law schools are turning out too many graduates for the positions available, market forces will begin to correct themselves, hopefully in short order.
But that does not itself excuse our collective responsibility to those who have been unfortunate enough to have been caught
As for those who come after them we owe the most transparent data of the state of our profession that we can possibly assemble so that they can make the most informed decisions that affect their livelihoods. The court takes judicial notice of a policy statement issued by U.S. News, by Bob Morse, entitled Making Sense of Law Schools' Jobs Data (Mar. 13, 2012) which highlights that "far more detailed placement data will be collected on the 2011 J.D. graduating class.... [in] new, more granular reporting" which will be incorporated in U.S. News methodology and law school profiles. The fact is, however, that all data collection starts with the law schools themselves, and it is this court's fervent hope that all the heat generated around this issue over this last year will be replaced with a renewed sense of responsibility to prospective applicants and students, starting at the law school level, and extending to the entire legal industry as we strive to address the concerns that have risen to the surface in this changed, challenging career environment.
With these salutary thoughts firmly in mind, the court nevertheless has determined that plaintiffs' complaint here cannot survive defendants' motion to dismiss because: (i) NYLS's statements in its marketing materials were not misleading in a material way under General Business Law § 349 to reasonable consumers acting reasonably, especially in light of plaintiffs' own documentary evidence in the complaint (both their allegations and exhibits) which identifies sources of information regarding law school graduates' realistic employment prospects — before, during and after the 2008 Great Recession — readily available to plaintiffs and used by reasonable consumers
Accordingly, it is ordered that plaintiffs' complaint is dismissed.
- No Cases Found