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College Bribery Class Case Has Novel Theory That Just Might Work

March 20, 2019, 8:55 AM

The first class action filed over the college admissions scandal presents a novel legal argument: that schools promised a fair admissions process and applicants were injured when the schools failed to monitor the process.

The suit, filed in the guise of a consumer fraud claim, “is really creative,” David Noll, a civil procedure scholar at Rutgers Law School in Newark, N.J., told Bloomberg Law. “You have to admire that,” he said.

College students sued eight universities—University of Southern California, Stanford University, Yale University, Georgetown University, and others—on behalf of themselves and others who applied but weren’t admitted to the schools.

The complaint has changed slightly over the past week, but the students still look to hold the schools accountable for failing to monitor the admissions process to prevent coaches from admitting students in exchange for bribes.

Although the argument is novel, that’s not to say the students won’t succeed.

“I hesitate to say no court will buy it because the California Unfair and Deceptive Trade Practices Act is an area of great innovation,” and the suit was filed in the Northern District of California, which is known for being friendly to consumer class actions, Noll said.

If the schools are found liable, they could be required to pay millions of dollars to reimburse $50 to $100 application fees to hundreds of thousands of prospective students.

‘Institutions Are Victims, Too’

The case raises the question of how culpable the eight colleges are for enrolling students who applied with falsified credentials and rigged test scores.

There’s no question the scandal hurt colleges’ reputations as well, said Peter McDonough, general counsel for the American Council on Education.

“I am not prepared to believe that the institutions themselves knew or should have known what was going on,” he said. “The institutions are the victims, too.”

A student denied acceptance would have a difficult time proving in court that the school harmed them, especially if the student enrolled at another college, said David Hawkins, executive director for educational content and policy with the National Association for College Admission Counseling.

Bad Optics

The firms who filed the suit, Medler Law Firm APC and Zimmerman Reed LLP, have already filed two subsequent versions of the complaint to finesse their legal theory and avoid the bad optics the suit first attracted.

The first version of the case was filed by two Stanford students March 13—the day after the U.S. Attorney in Massachusetts charged 50 people for their involvement in a long-running, nationwide conspiracy to bribe their kids’ way into top universities.

The students were ridiculed on social media for implying that they had to settle for Stanford when they were denied admission to Yale, and for alleging their Stanford degrees were worth less because they were tainted by scandal.

The next day, their attorneys filed an amended complaint dropping one of the Stanford students and adding four more students from other schools. It also dropped the language about the value of a Stanford degree.

The following day the plaintiffs voluntarily dismissed the case and refiled it on behalf of just two plaintiffs who go to Rutgers and an unnamed community college.

The plaintiffs aren’t arguing that they are worse off at the schools they ended up attending or that the scandal is the direct reason that they weren’t accepted to any of the eight schools implicated, contrary to the public perception of the suit.

Instead, they argue that the schools put out promotional materials promising a fair admissions process and injured the applicants by allowing the process to be tainted.

Simple Damages, Tough Theory

“What’s attractive is the damages they are claiming is the admissions fee, which is really simple to calculate,” Noll said. “If you’re talking about everyone who applied to Yale or Stanford, that’s a really big number and a really big dollar amount at the end of the day.”

The plaintiffs don’t have an exact number of students rejected from the eight schools from 2012 to 2018 while the alleged cheating occurred. But, as a starting point, they allege that Stanford rejected 36,000 applicants in 2017 alone.

The difficulty is that the plaintiffs rely on an implied duty imposed on the schools based on their representation of the quality of the service the admissions offices would provide, Noll said.

“I’ve never seen a consumer fraud case that goes that far—that says because of what you are representing to the buying public, you have an obligation to follow certain corporate governance practices to make sure that the service you’re providing is really good,” he said.

Defense attorney Andrew J. Trask said it will be hard for the students to prove a concrete injury because the argument that the schools committed fraud is very indirect.

“It’s a real bank-shot” because the scandal alleges people defrauded colleges to get in, Trask of Shook, Hardy & Bacon LLP in San Francisco said. But here the students are suing the colleges on the theory that they knew or should have known that the system was rigged, he said.

Getting a class certified could also be difficult, he said. The students will have to show all class members think their application fee was worth less than they were led to believe.

First of Many?

It seems likely that this will be the first of many class actions filed over the scandal, Noll said. “The defendants are very attractive because they have deep pockets and everybody is kind of grossed out that they allowed this to happen,” he said.

In fact, another class action has already been filed in California state court seeking $5 billion in damages against all conspirators listed in the criminal indictment.

Noll and Trask both predict that complaints will start to trickle into courts, but the more prestigious plaintiffs’ law firms won’t file until they have done some economic modeling and legal research to craft a viable theory of liability.

The lawyers who filed the pending “dibs” class action, as Trask called it, haven’t yet figured out exactly how to include the defendants they need to get to someone with deep pockets “but at the same time actually hang it on liability,” he said.

“It’s a case in which the folks who are actually liable for what’s been reported so far don’t have any money, and the people who have money don’t have any liability,” he said.

Even if colleges aren’t found to be responsible for failing to monitor their admissions processes, many will likely adjust their practices to avoid being duped by similar scams, Hawkins said.

“This is a first for just about all of us,” he said. “What has surprised us in the admission community was this such a brazen, naked bribery attempt, where we focus on the smaller ways that people try to game the system.”

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com; Emily Wilkins in Washington at ewilkins@bgov.com

To contact the editors responsible for this story: Cheryl Saenz at csaenz@bloombergtax.com; Jo-el J. Meyer at jmeyer@bloomberglaw.com