Law School Grads’ Fraud Suit Against Alma Mater Dismissed (Part II of II)

depaul (photocredit: Google Images; www.nationaljurist.com (visited 11.13.14))

The former law students’ suit also failed in Phillips v. DePaul University, 2014 IL App (1st) 122817, because they couldn’t establish proximate cause or compensable damages under Illinois law.

The plaintiffs claimed they were economically harmed by their reliance on DePaul’s deceptive employment data.  They said this information was vital to their decision to enroll and stay enrolled in the school.

Proximate Cause – Cause-In-Fact vs. Legal Causation

A fraud plaintiff must show proximate cause: that the false statement caused damage to the plaintiff.  Proximate cause has two elements: (1) cause-in-fact and (2) legal causation.  Cause-in-fact means “but for” causation (“if  x never happened, then y wouldn’t have happend”, e.g.) and legal cause means the injury was a foreseeable consequence of an alleged misrepresentation.

The Court found that the students failed to adequately allege cause-in-fact – that “but for” DePaul’s allegedly misleading employment data, the plaintiffs wouldn’t have enrolled in DePaul, would have gone to another school and  obtained the high-paying legal jobs they wanted.  Since the Complaint was devoid of these allegations, the students couldn’t show proximate cause. (47-48, ¶ 51)

Yet, even if the students did allege that they could have gone to other law schools with better job and salary prospects, the court ruled they still wouldn’t meet the cause-in-fact test.  That’s because there are so many variables outside a school’s control that impact a law graduate’s career and salary success.  Some of these factors cited by the court include the general state of the economy, job availability, the student’s academic record, any practical work experience,  geographic locale, practice areas, and continued economic conditions. (¶ 53).

Since so many unique forces – other than choice of school and grades – contribute to a law student’s post-graduate success, the plaintiffs couldn’t say that “but for” the published employment data, they would have obtained their desired jobs and salaries even if they graduated from a school other than DePaul.

Plaintiffs also failed to plead legal causation.  The critical legal causation element is foreseeability: is it foreseeable that a plaintiff would be injured by relying on a defendant’s false statement?  Here, the same unpredictable factors that defeated plaintiffs’ cause-in-fact allegations prevented them from establishing legal causation.  The plaintiffs couldn’t show it was foreseeable (from DePaul’s vantage point) that plaintiffs would sustain monetary loss in reliance on DePaul’s published stats.

The obvious uncertainties inherent in trying to divine economic conditions, fluctuations in a future job market and the vagaries of a student’s interviewing skills and practical experience all made it impossible for the plaintiffs to claim it was foreseeable (to DePaul) that they would financially suffer based on the job/salary data.  (¶¶ 54-55)

Damages

The former students also failed to adequately plead damages – another fraud element.  A consumer fraud plaintiff must plead measurable money damage that may not be based on mere speculation or hypothesis.  ¶ 57

Here, the plaintiffs’ claimed damages were: (1) the difference between what they paid in tuition in reliance on DePaul’s published jobs stats and the “true” value of a DePaul degree in a depressed market and (2) additional lifetime income the plaintiffs claimed they would have earned had published data been accurate.

The court held that since the plaintiffs received exactly what they paid for (the J.D. degrees), they couldn’t show compensable money damages.  ¶ 58

Moreover, plaintiffs failed to plead a reliable basis for calculating the actual value of their law degrees because of the alleged jobs and salary prospects misrepresentations.

Another flaw in the plaintiffs’ damages claims was their reliance on only generalized historical data for three specific class years supplied by DePaul.  The court held that publishing summarized historical data for specific past graduating classes didn’t equate to DePaul making affirmative promises that the plaintiffs could expect the same employment and compensation prospects enjoyed by previous graduating. ¶¶ 59-60.

Finally, the First District agreed with the lower court’s assessment that the diffuse factors (see above) that impact an attorneys’ lifetime earnings can’t be forecast with reasonable certainty.  As a result, the plaintiffs’ damages allegations were too speculative to be actionable under a consumer fraud claim.  ¶¶ 64-65

Afterwords: The case illustrates that a consumer (and common law) fraud plaintiff has to plead actual monetary harm and a reasonable basis for the claimed damages to survive a motion to dismiss.  Phillips also shows how difficult it is for a fraud claimant to show proximate cause where there are multiple possible causes of the alleged damages.  Finally,  the case underscores that where a plaintiff gets what he pays for (like a law degree), it will be difficult for him to prove damages.

Law School Grads’ Fraud Suit Dismissal Against Chicago Law School Upheld (Part I of II)

imageSeveral former law students sued their alma mater (DePaul) under consumer fraud and common law fraud theories when their job prospects weren’t as promising and their salaries not as high as they were led to believe.

In Phillips v. DePaul University, 2014 IL App (1st) 122817, the plaintiffs claimed they relied on DePaul’s published job and salary stats by staying enrolled at the school for three years and that they suffered monetary damages by paying thousands of tuition dollars and taking out loans that will fiscally shackle them for decades.

The plaintiffs sought to recover a percentage of their tuition payments plus the additional lifetime income they would have earned had they obtained employment and salaries congruent with the school’s published data.  The trial court granted the school’s motion to dismiss on multiple grounds.

Held: Affirmed.

Reasons: The Court agreed with the trial court that the plaintiffs’ consumer fraud claim failed.  To state a consumer fraud claim, a complaint must set forth specific facts showing: (1) a deceptive act or practice by the defendant; (2) the defendant’s intent that the plaintiff rely on the deception; (3) the deception occurred in the course of trade or commerce; and (4) the consumer fraud proximately caused the plaintiff’s injury.

A consumer fraud claimant must also plead and prove ‘actual damages.’  Unlike common law fraud, reliance is not an element of statutory consumer fraud.

A deceptive act or practice under the Consumer Fraud Act includes the use or employment of any false promise, misrepresentation or concealment of a material fact, with intent that others rely on the deception in the conduct of any trade or commerce. 815 ILCS 505/2.

Here, the plaintiffs failed to pinpoint which specific jobs or salary information disseminated by DePaul was false.  The law alums’ conclusory allegations that DePaul’s jobs data was false were not detailed enough to plead a deceptive act or practice by the school. (¶¶ 32-33).

The Court also cited record evidence that plaintiffs knew the school’s jobs and salary information was based on surveys that DePaul sent to recent graduates and their voluntary survey responses. 

The plaintiffs argued that DePaul deceived them by hiding that “only a small percentage” of the graduate surveys were returned and so the statistics were based on a limited number of completed surveys. 

The Court rejected this argument as the plaintiffs failed to plead facts showing the actual percentage of surveys returned versus the number of surveys the school sent out.  Absent more factual specificity on this point, the Court found the plaintiff’s claims too conclusory under Illinois’ heightened fraud pleading rules.

The Court also rejected plaintiffs’ claims that DePaul committed a deceptive act by failing to inform them of the percentages of graduates employed in nonlegal or part-time legal positions versus full-time law jobs.  The Court found that while DePaul could have been more specific about the types of employment (e.g. law and non-law jobs) it included in its stats, the plaintiffs still failed to identify an affirmative misrepresentation by DePaul concerning those figures.  

Two other bases for the Court’s decision were (1) the absence of any allegations that DePaul promised the plaintiffs they would earn at or above the average salaries listed in the published data coupled with (2) an American Bar Association (ABA) publication that expressed hat “[t]he highest-paying jobs were the exception rather than the rule.” ¶ 47

The Court found that plaintiffs could have easily cross-referenced DePaul’s data with the ABA’s information and noted that one published ABA source specified that recent law graduates obtained “legal, nonlegal, administrative and full-and part-time jobs.”  Because the ABA’s jobs and salary data was equally accessible to the plaintiffs, the Court found that they were on notice that DePaul’s information shouldn’t be taken as gospel. (¶¶ 43-45).

Another reason the Court found the plaintiffs’ consumer fraud claim lacking was because the plaintiffs got what they bargained for: a legal education and a J.D. degree.  Plaintiffs pointed to no promises made to them by DePaul about their post-graduation job prospects or any guaranty of full-time legal employment report or a set salary.

Afterwords: Consumer fraud requires heightened factual specificity – especially in the context of a lawsuit against a higher-education defendant.  A colorable fraud claim requires specific factual allegations that a defendant made an affirmative representation or omitted crucial information he was under a duty to dispense.  Conclusory allegations without factual and (here) numerical back-up will doom a consumer fraud claim that’s premised on flawed salary and job statistics.  In addition, the case shows that a Court won’t imply a promise where an express one doesn’t exist.