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Law schools sued by alumni for misleading jobs data

Law schools sued by alumni for misleading jobs data

A team of attorneys filed 12 separate lawsuits seeking class action status on behalf of alumni against law schools in five states accusing the schools of misleading the former students about their job prospects after graduation.

In all, 15 law schools have been sued over allegedly inflated or falsified job placement statistics since the beginning of the year. The litigation's conceptual architect, New York-based attorney David Anziska, said he and his co-counsel—attorneys from four prominent regional law firms—are planning to file claims against as many as 20 additional schools by the end of February, and possibly dozens more by year-end.

The mere fact that lawsuits against higher learning institutions are materializing at all signals a growing frustration among recent graduates struggling to find jobs, experts said. And while it is unclear if the claims actually will be litigated (see related story), experts advised risk managers at small and midsize colleges—particularly professional schools—to treat their sudden proliferation as an invitation to evaluate any marketing campaigns in which job placement statistics are used to entice prospective students or boost rankings among competitors.

“I'm sure that more law schools, and other types of professional schools that are hurting from a down economy, will see similar kinds of claims,” said Louis Castoria, the San Francisco-based chair of Wilson Elser Moskowitz Edelman & Dicker L.L.P.'s specialty professional risk practice. “Schools need to be ready to defend against those claims.”

For starters, data demonstrating employment trends for graduates should be updated regularly to reflect changes in the job market, experts said. Common allegations among Mr. Anziska's clients are that data reported by certain schools obfuscates the recent economic downturn by sampling too few students or using too broad a time period, or does not differentiate between degree-relevant positions and ordinary work.

“What we've found, by way of some of these allegations, are some inconsistencies in how they're deriving their data and how they're qualifying it,” said Chris Schwyter, a Philadelphia-based senior vp at Willis North America.

Particularly at smaller schools, and especially in regions saturated with larger institutions, those disconnects often are attributable to insufficient communication between a school's top-level administrators, its marketing department and its risk management personnel, experts said.

“If all of those interests aren't on the same page, you have an opportunity for defects in the end product,” Mr. Schwyter said.

Any statistical marketing strategy should be vetted through a school's general counsel or risk manager to ensure proper sourcing and qualification, experts said. Schools are encouraged to work with their insurance broker to develop marketing compliance procedures and designate either their risk manager or legal counsel to monitor adherence to those procedures.

A clear disclaimer advising students that reported data should not be used to predict their actual post-graduate employment outcomes also can reduce a school's exposure to allegations of misrepresentations.

“It's very similar to advertising in the investment community, where customers are told that past performances are not an indication of future results,” said J.C. Wileman, a Los Angeles-based senior vp of Lockton Insurance Brokers L.L.C.'s higher education practice. “That's almost common sense, but we've never really been in a position before now where we'd need to spell out that economic conditions may affect future hiring conditions and placement statistics.”

Alongside an examination of their marketing operations, law schools and other professional institutions should work with their brokers to assess any gaps or deficiencies in their insurance portfolios.

Most schools carry some combination of trustees and officers liability coverage and educators' legal liability coverage—the education equivalents of directors and officers and errors and omissions liability insurance in the private sector—that likely would provide defense costs for a lawsuit alleging the use of misleading data. Such litigation also could trigger an advertising injury claim under a school's general liability coverage.

However, because most underwriters have their own distinct version of these policies, careful attention must be paid to the specific policy terms and conditions to ensure adequate protection, experts said.

“If there's going to be a coverage problem, it's probably going to be something related to a specific definition,” said Edward Joyce, a New York-based partner at Jones Day L.L.P.

For instance, management and professional risk policies are generally broad in their definition of a claim event. Quite often, Mr. Joyce said, claims can include any written demand for monetary or nonmonetary relief.

“The insurance company is likely to argue that the clock on a policyholder's notice obligations started running with receipt of that demand, regardless of whether a suit's been filed,” Mr. Joyce said. “These schools have to keep a close watch on the materials they're receiving.”

Definitions pertaining to the losses and wrongful acts covered under the policy, as well as which parties are insured, also are key areas that could present problems in defense of a misleading marketing lawsuit, Mr. Joyce said.

Beyond mitigating their financial risks, experts advise law schools and other professional institutions to prioritize protection of their brand. Several underwriters recently have introduced policy endorsements to provide public relations support in the event of a crisis.

“From a reactive standpoint, the focus should really be on the public reputation of the institute,” Mr. Schwyter said.

“There is no single form policy for this coverage, so it would be good for school risk managers to sit down with their brokers and look at their policy's hypothetical response to misrepresentation or a false advertising claim,” Mr. Castoria said. “The answer is not always going to be yes.”

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  • More lawsuits against law schools likely, but trial unlikely

    Attorneys representing the more than 70 law school graduates who recently sued their alma maters over allegedly misleading job placement statistics say they plan to pursue dozens of other cases by year-end, but some legal and insurance experts doubt many of those claims will make it to trial.