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Media Alerts - John Harnish v. Widener University School of Law - Third Circuit
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September 12, 2016
  John Harnish v. Widener University School of Law - Third Circuit
Headline: Third Circuit finds law students did not sufficiently comprise a class in misrepresentation suit against their law school.

Area of Law: Consumer Fraud

Issue(s) Presented: Did the district court err in denying class certification to the plaintiff law students?

Brief Summary: Plaintiff law students sued Widener University School of Law for alleged misrepresentation of employment statistics for recent graduates. The students alleged that this misrepresentation caused a price inflation in tuition, resulting in the students paying more in tuition than the degree was actually worth at the time. Students sought certification as a class, including all Widener University School of Law students from 2005-2011, alleging that all these students were victims of the inflated tuition.

The district court denied certification to the class, finding that the evidence did not support predominately class-wide questions but rather called for individual analysis. Students appealed this decision, arguing that the district court: (1) improperly viewed the limited evidence against a burdensome standard; (2) improperly considered the different employment outcomes of the students, ignoring the theory that the damages were unrelated to actual outcomes; and (3) improperly found that the evidence did not support a class-wide theory for relief. The Third Circuit affirmed the decision of the district court, finding that the court properly viewed the evidence against the required standard and that the students failed to present evidence to support a cognizable theory that would show that the students suffered the same injury similarly as a whole.

Extended Summary:[/B Plaintiff law students brought suit against Widener University School of Law, alleging fraud and misrepresentation. The students alleged that between 2005 and 2011, Widener misrepresented their graduate employment statistics in print, online publications, and oral presentations targeting potential students. The students alleged that Widener published statistics depicting graduate employment rates of 90-97%, when in reality only 50-70% of graduates held full-time legal positions. The students argued that Widener improperly reflected part-time and non-legal employment in their published statistics and credited unreliable student employment reports, while ignoring reports of unemployment. The students alleged that this misrepresentation allowed the school to charge higher tuition than it would have received if it had published the correct information. The students argued that this tuition price inflation violated the New Jersey Consumer Fraud Act (NJCFA) and the Delaware Consumer Fraud Act (DCFA). The students sought to sue the school as class, including all students who attended Widener during the 2005-2011 period and were subjected to the higher tuition rates.

The district court denied certification, finding that the evidence did not support the students' suit against Widener because they could not show that they were all similarly affected by the inaccurate information, citing to the different employment outcomes and the students enrolling at different times. The students filed an appeal, alleging that the district court (1) improperly viewed the limited evidence against a burdensome standard; (2) improperly considered the different employment outcomes of the students, ignoring the theory that the damages were unrelated to actual outcomes; and (3) improperly found that the evidence did not support a class-wide theory for relief.

The Third Circuit affirmed the decision of the district court, finding that based on the evidence presented, the common questions in this case were not predominate over the individual questions. On the students' first claim, the Court found that the district court properly reviewed the evidence in this case under a rigorous standard. In determining whether the students were similarly impacted by this inaccurate information, the court must examine the evidence to evaluate whether the group can present the same evidence or whether each student would have to present his or her own evidence on an individual basis in order to prove each issue. Under the NJCFA and DCFA, the issues the students would have to prove included an unlawful practice resulting in an ascertainable loss and a causal relationship between the two. The Court noted that the district court had to carefully consider how each issue would be presented and was required to take more than a threshold look on a plausible theory. The Court found that this inquiry may overlap with the merits of the case, and ultimately agreed with the district court's finding that the students would not be able to show ascertainable loss or causation class-wide because of the differences in experiences of all the students over the six-year period. For example, some of the students were enrolled after Widener made changes to their reporting practices and others had varying tuition obligations.

The Third Circuit also rejected the argument that the district court improperly considered the different employment outcomes of the students in accessing the theory for damages. The students argued that the different employment outcomes were irrelevant under their theory of damages, which focused solely on the difference between what they paid in tuition and what the education was actually worth. The Third Circuit agreed with the students, finding that the actual value of the education was based on the probability of full-time employment rather than the actual outcome. The Court noted, however, that this mischaracterization of the damages theory was harmless as the evidence still did not support a class-wide theory for relief.

On the final claim, the Third Circuit found that students failed to raise a cognizable theory of relief. The students argued that Widener charged more for tuition than the accurate information would have allowed (price inflation), therefore empowering Widener to charge more across the whole market regardless of the students' actual reliance on the inaccurate information. The Third Circuit rejected this as both New Jersey and Delaware have stated that the ascertainable loss and causation elements are not met by the price inflation theory outside of a federal securities fraud context. Therefore, state law removes the theory as a common question entirely and leaves only individual questions in how diverse members of the class reacted to the alleged fraud.

The full opinion can be found at http://www2.ca3.uscourts.gov/opinarch/151692p.pdf

Panel: Chagares, Krause, and Barry, Circuit Judges 

Argument Date: June 6, 2016

Date of Issued Opinion: August 16, 2016

Docket Number: No. 15-3888

Decided: Affirmed

Case Alert Author: James Shygelski

Counsel: Danielle F. Moriber, Esq., Rachel E. Simon, Esq., David S. Stone, Esq., (Argued), Counsel for Appellants; Suna Lee, I, Esq., Thomas F. Quinn, Esq., (Argued), Dennis J. Drasco, Esq., Counsel for Appellees

Author of Opinion: Circuit Judge Chagares

Circuit: Third Circuit

Case Alert Circuit Supervisor: Prof. Mary E. Levy

    Posted By: Susan DeJarnatt @ 09/12/2016 09:27 AM     3rd Circuit  

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