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.

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PaulP

Litigation attorney at Bielski Chapman, Ltd. representing businesses and individuals in business litigation, post-judgment enforcement, collections and real estate litigation.