Summary
holding that a damages calculation based on the difference between what graduates paid in tuition based on alleged misrepresentations and the true value of the degrees was speculative and required dismissal
Summary of this case from Phillips v. DePaul Univ.Opinion
2012-12-20
Alexandra GOMEZ–JIMENEZ, et al., Plaintiffs–Appellants, v. NEW YORK LAW SCHOOL, Defendant–Respondent, Does 1–20, et al., Defendants.
Strauss Law, PLLC, New York (Jesse Strauss of counsel), David Anziska, New York, and Frank Raimond, New York, for appellants. Venable LLP, New York (Michael J. Volpe, Edmund M. O'Toole, and Michael C. Hartmere of counsel), for respondent.
Strauss Law, PLLC, New York (Jesse Strauss of counsel), David Anziska, New York, and Frank Raimond, New York, for appellants. Venable LLP, New York (Michael J. Volpe, Edmund M. O'Toole, and Michael C. Hartmere of counsel), for respondent.
DAVID FRIEDMAN, J.P., ROLANDO T. ACOSTA, SHEILA ABDUS–SALAAM, SALLIE MANZANET–DANIELS, NELSON S. ROMÁN, JJ.
ACOSTA, J.
This appeal involves the propriety of the disclosures of post-graduate employment and salary data by defendant New York Law School to prospective students during the period August 11, 2005 to the present. Plaintiffs allege that the disclosures cause them to enroll in school to obtain, at a very high price, a law degree that proved less valuable in the market-place than they were led to expect. We hold that defendant's disclosures, though unquestionably incomplete, were not false or misleading. We thus affirm the dismissal of the complaint.
Plaintiffs are graduates of the law school who attended the school between 2004 and 2011. They assert, individually and on behalf of all others similarly situated, a claim for deceptive acts and practices in violation of General Business Law (GBL) § 349 and claims for common-law fraud and negligent misrepresentation. These claims are based on allegations that the employment and salary information published by defendant during the relevant time period concealed, or failed to disclose, that the employment data included temporary and part-time positions and that the reported mean salaries were calculated based on the salary information submitted by a deliberately small selected subset of graduates. In addition, plaintiffs allege that defendant enhanced its numbers by, among other things, hiring unemployed graduates as short-term research assistants so that they could be classified as employed. Plaintiffs assert that defendants engaged in this fraud to increase its class size and use the high tuition demanded of its students to lavish perks and exorbitant salaries on its administration and large faculty. The complaint seeks damages and equitable relief, including refund and reimbursement of plaintiffs' tuition.
Defendants moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and CPLR 3211(a)(7), arguing, among other things, that its employment reports were not materially misleading because they 1) complied with the then applicable disclosure rules of the American Bar Association (ABA); 2) made no representation or implication that they included only full-time, permanent employment that required or preferred a law degree; and 3) explicitly revealed that the reported salary ranges were based on a small sample of graduates.
Supreme Court granted the motion to dismiss the complaint. With respect to the GBL 349 claim, the court first rejected defendant's argument that it had a complete defense pursuant to GBL 349(d) because, although the regulations with which it complied were written by the United States Department of Education, the interpreting party, the Council of the Section of Legal Education and Admissions to the Bar of the ABA, is not an “official department, division, commission or agency of the United States.” The court then found that defendants' post graduate employment statistics were not misleading in a material way and that the salary data was not misleading because the school disclosed the sample size upon which the data was based. The court further found that the GBL 349 claim failed to identify the actual injury sustained by each plaintiff as a result of the allegedly misleading statements. With respect to the fraud claim, the court found that defendant had no duty to clarify its marketing materials. Further, while the court rejected defendant's argument that plaintiffs failed to plead reliance on the alleged misrepresentations, it found any reliance unreasonable as a matter of law. With respect to the claim for negligent misrepresentation, the court again found that any reliance would have been unreasonable. This appeal followed.
When considering a motion to dismiss pursuant to CPLR 3211(a)(7), “the court must accept the facts as alleged in the complaint as true and accord the plaintiff the benefit of every possible favorable inference, and must determine whether the facts as alleged fit within any cognizable legal theory” ( Phillips v. City of New York, 66 A.D.3d 170, 174, 884 N.Y.S.2d 369 [1st Dept. 2009] [internal quotation mark omitted]; see alsoCPLR 3026). Pursuant to CPLR 3211(a)(1), dismissal may be “granted only where the documentary evidence [tendered by defendant] 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, 746 N.Y.S.2d 858, 774 N.E.2d 1190 [2002] ).
We begin our analysis by first considering plaintiffs' GBL 349 claim. To state a cause of action under that statute, a plaintiff “must, at the threshold, charge conduct that is consumer oriented. The conduct need not be repetitive or recurring but defendant's acts or practices must have a broad impact on consumers at large; [p]rivate contract disputes unique to the parties ... would not fall within the ambit of [GBL 349]” ( New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 320, 639 N.Y.S.2d 283, 662 N.E.2d 763 [1995], quoting Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20, 25, 623 N.Y.S.2d 529, 647 N.E.2d 741 [1995] ). “If a plaintiff meets this threshold, its prima facie case may then be established by proving that defendant is engaging in an act or practice that is deceptive in a material way and that plaintiff has been injured by it” ( id.). Whether a representation or omission is a “deceptive act or practice” depends on the likelihood that it will “mislead a reasonable consumer acting reasonably under the circumstances” ( Oswego, 85 N.Y.2d at 26, 623 N.Y.S.2d 529, 647 N.E.2d 741). “In the case of omissions in particular ... [GBL 349] surely does not require businesses to ascertain consumers' individual needs and guarantee that each consumer has all relevant information specific to its situation” ( id.). However, “[o]mission-based claims under Section 349 are appropriate ‘where the business alone possesses material information that is relevant to the consumer and fails to provide this information’ ” ( Bildstein v. MasterCard Int'l, Inc., 2005 U.S. Dist. LEXIS 10763, *10–11, 2005 WL 1324972, *4 [S.D.N.Y.2005], quoting Oswego, 85 N.Y.2d at 26, 623 N.Y.S.2d 529, 647 N.E.2d 741).
Here, the challenged practice was consumer-oriented insofar as it was part and parcel of defendant's efforts to sell its services as a law school to prospective students ( see Chais v. Technical Career Insts., 2002 N.Y. Slip Op. 30082[U], *11–12, 2002 WL 34433891 [Sup.Ct., N.Y. County 2002] ). Nevertheless, 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 schools' job placement success, Supreme Court correctly held that 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. First, with respect to the employment data, defendant made no express representations as to whether the work was full-time or part-time. Second, with respect to the salary data, defendant disclosed that the representations were based on small samples of self-reporting graduates. While we are troubled by the unquestionably less than candid and incomplete nature of defendant's disclosures, a party does not violate GBL 349 by simply publishing truthful information and allowing consumers to make their own assumptions about the nature of the information ( see Andre Strishak & Assoc. v. Hewlett Packard Co. 300 A.D.2d 608, 609–610, 752 N.Y.S.2d 400 [2nd Dept. 2002];St. Patrick's Home for Aged & Infirm v. Laticrete Intl., 264 A.D.2d 652, 655–656, 696 N.Y.S.2d 117 [1st Dept. 1999];see also Corcino v. Filstein, 32 A.D.3d 201, 202, 820 N.Y.S.2d 220 [1st Dept. 2006] ). Accordingly, we find that defendant's disclosures were not materially deceptive or misleading ( id.). Because plaintiffs have not adequately pleaded that defendant's practice was misleading, we need not consider whether plaintiffs' have alleged cognizable injuries. We also decline to consider defendants' argument that GBL 349(d) provides a complete defense.
See ABA Letter to Law School Deans and Career Services Officers regarding Reporting Placement Data on Annual Questionnaire, July, 27, 2011 (http:// www. americanbar. org/ content/ dam/ aba/ administrative/ legal_ education_ and_ admissions_ to_ the_ bar/ council_ reports_ and_ resolutions/ 2011_ questionnaire_ memo_ deans_ career_ services_ officers. authcheckdam. pdf).
We next address plaintiffs' fraud and negligent misrepresentation claims. To state a cause of action for fraudulent misrepresentation, “a plaintiff must allege a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury” ( Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 178, 919 N.Y.S.2d 465, 944 N.E.2d 1104 [2011][internal quotation marks omitted] ). “A cause of action for fraudulent concealment requires, in addition to the four foregoing elements, an allegation that the defendant had a duty to disclose material information and that it failed to do so” ( P.T. Bank Cent. Asia, N.Y. Branch v. ABN AMRO Bank N.V., 301 A.D.2d 373, 376, 754 N.Y.S.2d 245 [1st Dept. 2003] ). “In addition, in any action based upon fraud, the circumstances constituting the wrong shall be stated in detail” ( id., citing CPLR 3016 [b] ). To state a cause of action for negligent misrepresentation, in turn, the plaintiff must allege “(1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information” ( Mandarin Trading, 16 N.Y.3d at 180, 919 N.Y.S.2d 465, 944 N.E.2d 1104 [internal quotation marks omitted] ).
Plaintiffs argue that they stated causes of action for common law fraud and negligent misrepresentation based on their allegations that defendant knowingly published misrepresentations about its graduates' employment rates and salaries, and fraudulently concealed the fact that the employment rates included temporary, part-time, voluntary or non-JD-required/preferred employment. However, as previously discussed, the employment and salary data disclosed by defendant was not actually false (even if it was incomplete). Thus, the fraud claim fails insofar as it is based on fraudulent misrepresentations ( see Pappas v. Harrow Stores, Inc., 140 A.D.2d 501, 504, 528 N.Y.S.2d 404 [2nd Dept. 1988];see also MacDonald v. Cooley, 2012 WL 2994107, *6 [W.D.Mich.2012] [dismissing a law suit against a law school on the grounds that plaintiff's “subjective misunderstanding of information that is not objectively false or misleading cannot mean that (defendant) has committed the tort of (fraud)”] ). Furthermore, because plaintiffs have not alleged any special relationship or fiduciary obligation requiring a duty of full and complete disclosure from defendants to its prospective students, we dismiss plaintiff's claim to the extent that it is based on fraudulent concealment ( see Dembeck v. 220 Cent. Park S., LLC, 33 A.D.3d 491, 492, 823 N.Y.S.2d 45 [1st Dept. 2006] [“A fiduciary relationship does not exist between parties engaged in an arm's length business transaction”] and Jana L. v. West 129th St. Realty Corp., 22 A.D.3d 274, 277–279, 802 N.Y.S.2d 132 [1st Dept. 2005] ), and negligent misrepresentation ( see U.S. Express Leasing, Inc. v. Elite Tech. [NY], Inc., 87 A.D.3d 494, 497, 928 N.Y.S.2d 696 [1st Dept. 2011];United Safety of Am., Inc. v. Consolidated Edison Co. of N.Y., 213 A.D.2d 283, 285–286, 623 N.Y.S.2d 591 [1st Dept. 1995] ).
We are not unsympathetic to plaintiffs' concerns. We recognize that students may be susceptible to misrepresentations by law school. As such, “[t]his Court does not necessarily agree [with Supreme Court] that [all] college graduates are particularly sophisticated in making career or business decisions” ( MacDonald, 2012 WL 2994107, at *10). As a result, they sometimes make decisions to yoke themselves and their spouses and/or their children to a crushing burden because the schools have made misleading representations that give the impression that a full time job is easily obtainable when in fact it is not.
Given this reality, it is important to remember that the practice of law is a noble profession that takes pride in its high ethical standards. Indeed, in order to join and continue to enjoy the privilege of being an active member of the legal profession, every prospective and active member of the profession is called upon to demonstrate candor and honesty. This requirement is not a trivial one. For the profession to continue to ensure that its members remain candid and honest public servants, all segments of the profession must work in concert to instill the importance of those values. “In the last analysis, the law is what the lawyers are. And the law and the lawyers are what the law schools make them.”
Defendant and its peers owe prospective students more than just barebones compliance with their legal obligations. Defendant and its peers are educational not-for-profit institutions.
Letter from Felix Frankfurter, Professor, Harvard Law School, to Mr. Rosenwald 3 (May 13, 1927) (Felix Frankfurter papers, Harvard Law School library), quoted in Rand Jack & Dana C. Jack, Moral Vision and Professional Decisions: The Changing Values of Women and Men Lawyers 156 (1989).
They should be dedicated to advancing the public welfare.
See New York Department of State, Division of Corporations, Corporation & Business Entity Database, New York Law School http:// appext 9. dos. ny. gov/ corp_ public/ CORPSEARCH. ENTITY_ INFORMATION? p_ nameid= 134944& p_ corpid= 109732& p_ entity_ name= new% 20 york% 20law % 20school&p_n ame_type=A&p_ search_type= BEGINS&p_sr ch_results_p age=0.
In that vein, defendant and its peers have at least an ethical obligation of absolute candor to their prospective students.
See E. Lisk Wyckoff, Jr., Practice Commentaries, McKinney's Not–For–Profit Corporation Law, Book 37, Cons Law of N.Y. § 201 (“This type of corporation is established primarily to benefit society in general as opposed to the members of a not-for-profit corporation”).
Accordingly, the order of the Supreme Court, New York County (Melvin L. Schweitzer, J.), entered March 21, 2012, which granted defendant New York Law School's motion to dismiss the complaint, should be affirmed, without costs.
Order, Supreme Court, New York County (Melvin L. Schweitzer, J.), entered March 21, 2012, affirmed, without costs.