Twelve graduates of Thomas M. Cooley Law School filed a lawsuit against the school, claiming it provided misleading employment statistics that influenced their decision to enroll. The plaintiffs argued that they relied on these statistics, which exaggerated their post-graduation job prospects, leading them to believe they would secure full-time attorney positions. After graduating, many found the actual job market significantly less favorable than represented, with some unable to find employment at all. They sought partial reimbursement of tuition, estimating a total of $300 million for their class. The court affirmed the district’s dismissal of their complaint, reasoning that the Michigan Consumer Protection Act was inapplicable, one of the statistics was objectively true, and the graduates’ reliance on the statistics was deemed unreasonable. The opinion noted the extensive nature of the graduates' amended complaint and detailed the law school’s operational context, including its enrollment figures and tuition costs.
In fiscal year 2009, Cooley Law School reported total operating revenue of $117,577,686, with $108,979,296 derived from tuition. Its operating costs amounted to $97,196,760, including $47,158,197 in employee compensation. Dean Don LeDuc received total compensation of $523,213 for fiscal year 2009, making him one of the highest-paid law school deans in the U.S., while former Dean Thomas Brennan was compensated $370,245 in the same year. Cooley's other eleven highest-paid employees earned between $200,225 and $249,999.
According to an amended complaint, Cooley has the lowest admissions standards among accredited law schools, with an acceptance rate of 83% in 2010, significantly higher than the next least selective institution. The mean Law School Admissions Test score for incoming students was 146, and the mean undergraduate GPA was 2.99, indicating low academic standards. Retention rates are also low, with nearly 32% of first-year students not progressing to their second year in 2008 and 10% of second-year students not continuing to their third year. Of the third-year students in 2008, around 3% either failed or dropped out.
The twelve plaintiffs, who graduated between 2006 and 2010, reported an average student loan debt of $105,798. They decided to enroll at Cooley to enhance their employment prospects in the legal field, relying on the “Thomas M. Cooley Law School Employment Report and Salary Survey” provided by the school. The plaintiffs included multiple Employment Reports and Salary Surveys for graduating classes from 2004 to 2010, which detailed employment outcomes, including employment percentages and average starting salaries across various sectors. Cooley gathered these statistics via graduate surveys, with 83% of 2010 graduates responding; however, the school has not audited these responses.
The graduates allege that Cooley consistently misrepresents two key statistics in its Employment Reports: the percentage of graduates employed (76% as stated in the 2010 report) and the average starting salary of graduates. The employment distribution reported for 2010 included 50% in private practice, 15% in government, 2% in public interest, 3% in academic roles, 3% in judicial clerkships, and 18% in business.
In the 2010 Employment Report, Cooley Law School reported an average starting salary of $54,796 and a misleading percentage of graduates employed, which the plaintiffs relied on when deciding to apply to or remain enrolled at the school. However, these figures did not reflect the plaintiffs' actual job prospects post-graduation; many struggled to secure full-time legal positions. Notable cases include graduates like Anders Christensen, who found work as a law clerk, and Carrie Kalbfleisch, who established her own law firm. Others, such as Shawn Haff and Dimple Kumar, resorted to temporary contract work before opening their own firms, while some, like Chelsea A. Pejic and Steven Baron, faced prolonged unemployment despite significant efforts to find work. The amended complaint asserts that the plaintiffs, along with other law graduates, entered a challenging job market, highlighted by a study showing a significant surplus of bar exam passers compared to available legal jobs. The plaintiffs sued Cooley for violations of Michigan’s Consumer Protection Act, common-law fraud, and negligent misrepresentation. Cooley's motion to dismiss the amended complaint was granted by the district court.
In MacDonald v. Thomas M. Cooley Law Sch., the district court determined that the Michigan Consumer Protection Act (MCPA) does not apply to the purchase of a legal education aimed at employment, ruling that the graduates could not claim relief under the Act. The court found that the graduates attended law school to improve their employment prospects and thus made a purchase for a "business purpose," which falls outside the MCPA's protections. The MCPA applies only to purchases made primarily for personal, family, or household purposes, as established by precedent. The court also dismissed counts two and three of the complaint, concluding that the graduates did not adequately state a claim, particularly regarding a statistic about employment rates that was deemed "literally true," and that their reliance on these statistics was unreasonable. On appeal, the graduates argued that the district court improperly exempted legal education purchases from the MCPA and incorrectly ruled that they could not have reasonably relied on the law school's employment statistics without discovery. The court affirmed the district court's ruling, emphasizing the MCPA's limitations concerning purchases made for business purposes.
The Michigan Supreme Court determined that the plaintiffs' claim failed as a matter of law because obtaining medical records for litigation purposes does not meet the requirement of being for "personal, family, or household use" under the relevant Act. The court referenced two Michigan Court of Appeals cases that correctly interpreted the Act, emphasizing that purchases made for business purposes are excluded from its protections. In one case, a plaintiff who purchased a truck primarily for business use was denied protection under the Act, and in another, plaintiffs who bought electricity for their business likewise did not qualify for protection. The graduates in the case bought their legal education for the purpose of advancing their careers in law, which did not align with the personal use requirement. The district court noted that the graduates did not seek a legal education for leisurely purposes but intended to use it to secure employment. Consequently, since the graduates acknowledged the business purpose of their education in their complaint, the court concluded that they failed to state a claim under the Act. The court did not need to address an alternative argument from Cooley regarding regulatory exemptions. Additionally, the graduates alleged that Cooley committed fraudulent misrepresentation by inaccurately presenting employment statistics and average starting salaries in its Employment Reports, specifically contesting the claim that seventy-six percent of graduates were employed within nine months of graduation as stated in the 2010 report.
The 2010 Employment Report indicated that 50% of law graduates were employed in private practice, 15% in government, 2% in public interest, 3% in academia, 3% in judicial clerkships, and 18% in business. Graduates claimed this statistic implied full-time, permanent positions requiring a law degree. However, they contended the statistic was misleading as it included jobs unrelated to the legal field, such as temporary or part-time positions like working as a barista, which did not necessitate a law degree. The district court ruled that the graduates did not sufficiently establish a fraud claim under Michigan law, determining that the employment statistic was "literally true" and not objectively false. Additionally, the court found the graduates' interpretation of the statistic as only representing full-time legal jobs was unreasonable.
To prove fraudulent misrepresentation under Michigan law, six elements must be established: (1) a material representation by the defendant, (2) which is false, (3) made with knowledge of its falsehood or recklessly, (4) intended for the plaintiff's reliance, (5) which the plaintiff relied upon, and (6) caused injury to the plaintiff. Furthermore, the reliance must be reasonable. Case law, including Novak v. Nationwide Mutual Insurance Co., emphasizes that unreasonable reliance on false statements precludes recovery for misrepresentation. The graduates' amended complaint did not demonstrate that the employment statistic was false, paralleling a precedent case, Hord v. Environmental Research Institute of Michigan, where the plaintiff similarly failed to prove fraud based on misrepresentation.
The plaintiff alleged that the defendant misrepresented its financial stability, leading to a lawsuit based on fraudulent misrepresentation and silent fraud. Initially, the jury ruled in favor of the plaintiff, but this decision was reversed by the Michigan Supreme Court. The court determined that the plaintiff did not prove that the financial statement was false or misleading, emphasizing that a subjective misunderstanding cannot constitute fraudulent misrepresentation if the information itself is not objectively false. The court specifically noted that the graduates could not demonstrate that the employment statistic provided by Cooley was inaccurate, as it did not clarify the nature of the employment. The graduates claimed the district court incorrectly assessed their reasonable reliance on employment statistics, but Michigan law allows courts to evaluate the reasonableness of reliance based on the complaint itself. A precedent case involved a plaintiff who claimed fraudulent misrepresentation based on contradictory statements made by the employer, despite a written employment agreement that contradicted those statements. The court ruled that reliance on the employer's statements was unreasonable due to the clear terms of the written contract, thus precluding a misrepresentation claim.
A court may assess, at the pleading stage without discovery, whether a plaintiff's reliance on certain statistics was unreasonable. In this case, graduates' reliance on the “percentage of graduates employed” statistic was deemed unreasonable because it included all employed graduates, not just those in full-time legal positions, as noted by the district court. Consequently, the graduates could not substantiate a claim of fraudulent misrepresentation under Michigan law regarding this statistic.
Similarly, the claim regarding the “average starting salary for all graduates” was also unreasonable. The graduates contended that Cooley misrepresented this average, stated as $54,796 in the 2010 Employment Report. However, the term “all graduates” was misleading, as the figure was based only on those who responded to the survey, not the entire graduating class of 934. Since only 780 graduates had known employment statuses, the statistic was “objectively untrue.” The graduates’ reliance on this figure was unreasonable because it contradicted other statements in the report, including the number of graduates with known employment status.
Thus, their claims for fraudulent misrepresentation failed, leading to the district court’s dismissal of the case. The document also mentions the concept of silent fraud, or fraudulent concealment, recognized in Michigan, which involves harm from the suppression of the truth.
Michigan courts support recoveries for silent fraud when there is intentional suppression of truth. Graduates of Cooley Law School allege silent fraud due to the school's failure to disclose critical details about employment statistics, specifically regarding the nature of jobs held by graduates and the methodology of calculating average starting salaries. For a silent fraud claim, a plaintiff must demonstrate that the defendant had a legal duty to disclose material information, which typically arises from incomplete but truthful responses to inquiries made by the plaintiff. The graduates did not allege they made any specific inquiries to Cooley that would create such a duty, which undermines their silent fraud claim.
Regarding negligent misrepresentation, the Michigan Supreme Court has only recognized this tort in the context of title searches. While the Michigan Court of Appeals has acknowledged negligent misrepresentation in broader contexts, the Supreme Court has not adopted this wider application, leaving its applicability in this case uncertain. Moreover, the graduates have not established a claim for negligent misrepresentation because they failed to assert that Cooley had a duty to provide accurate employment statistics. In Michigan, a claim for negligent misrepresentation hinges on the existence of such a duty.
The graduates failed to establish that Cooley had a duty to ensure the accuracy of its Employment Reports and Salary Surveys, resulting in the dismissal of their negligent misrepresentation claim. Under Michigan law, a plaintiff must prove six elements for fraudulent misrepresentation, including that the defendant made a false material representation and that the plaintiff reasonably relied on it, suffering injury as a result. Intermediate appellate court decisions, particularly Novak, assert that reliance must be reasonable; unreasonable reliance negates entitlement to damages for misrepresentation. In this case, the graduates could not prove that the "percentage of graduates employed" statistic was false, similar to the plaintiff’s failure in Hord v. Environmental Research Institute of Michigan, where the Supreme Court reversed a jury verdict due to insufficient evidence of a false representation. The court emphasized that simply misinterpreting information does not meet the standard for fraudulent misrepresentation. The district court's judgment is affirmed.
A plaintiff's subjective misunderstanding of non-false or misleading information cannot establish a claim for fraudulent misrepresentation. The graduates could not demonstrate that Cooley Law School's statistic regarding the "percentage of graduates employed" was false, as it did not specify that this employment was in full-time, permanent positions requiring a law degree. The graduates' interpretation of "employed" as referring exclusively to such positions was subjective and insufficient to support their claim. The court can determine, based on the complaint, whether a plaintiff's reliance on advertised employment rates was unreasonable, as illustrated in the case of Novak. In Novak, the plaintiff's reliance on contradictory statements made by his employer was deemed unreasonable due to the clear, written terms of his employment agreement. The appellate court affirmed that reliance on those statements could not support a misrepresentation claim. Similarly, the graduates’ assumption that the employment statistic only included full-time legal positions was unreasonable, as basic reasoning indicates it encompassed all employed graduates. Consequently, the graduates failed to assert a valid claim for fraudulent misrepresentation under Michigan law concerning the employment statistic.
Graduates' claims for fraudulent misrepresentation based on the "average starting salary for all graduates" were deemed unreasonable. They alleged that Cooley misrepresented this statistic in its Employment Report, citing a 2010 average starting salary of $54,796. However, the phrase "all graduates" misleadingly implied it referred to all graduates, while in reality, it pertained only to those who responded to the survey. With 934 graduates and only 780 providing employment status, the reported average was not representative of all graduates. The district court found the statement objectively false and noted that reliance on it was unreasonable, especially given the report’s title and contradictory data within the same report. Unreasonable reliance is established when a plaintiff relies on a misrepresentation contradicted by statements in a contract they reviewed. Consequently, the graduates' claim for fraudulent misrepresentation was dismissed as a matter of law. Additionally, the graduates' claim of silent fraud, or fraudulent concealment, is recognized in Michigan law, which holds that suppression of the truth can be as harmful as false assertions, suggesting potential grounds for further legal action.
The graduates alleged that Thomas M. Cooley Law School committed silent fraud by not disclosing critical information related to employment statistics of its graduates. Specifically, they contended that Cooley failed to reveal the percentage of graduates employed in part-time or temporary positions and whether those jobs required law degrees. Additionally, they claimed that the reported "average starting salary" was misleading because it was based solely on a subset of graduates who provided their salary information, rather than all graduates. To substantiate a claim for silent fraud, plaintiffs must demonstrate that the defendant had a legal duty to disclose omitted information, which typically arises when the defendant responds incompletely to specific inquiries from the plaintiff. In this case, the graduates did not allege that they had inquired about the employment reports, which negated any legal duty for Cooley to disclose further details. The district court noted that the graduates admitted they did not specifically request additional information. Consequently, the lack of inquiry undermined their silent fraud claim. Furthermore, the graduates' claim of negligent misrepresentation was questioned, as the Michigan Supreme Court has only recognized this tort in the context of title searches, leaving its applicability to the graduates' situation uncertain. The Michigan Court of Appeals has acknowledged negligent misrepresentation in other contexts, but it remains unclear if the graduates' circumstances would fall under such recognition.
In Alfieri v. Bertorelli, the Michigan Court of Appeals established that a claim for negligent misrepresentation necessitates proof of justifiable reliance to the detriment of the plaintiff on information prepared without reasonable care by a party who owed a duty of care. This principle was first articulated in a 1989 case and reaffirmed in subsequent rulings. Notably, the court highlighted that the Cooley graduates failed to demonstrate the requisite justifiable reliance for their negligent misrepresentation claim, which was also reflected in their fraudulent misrepresentation allegations. Additionally, the court addressed Cooley's cross-appeal, which included arguments regarding the necessity of joining the American Bar Association and the National Association for Law Placement, and claims of federal preemption of state-law consumer law and tort claims. The court concurred with the district court's dismissal of these arguments and affirmed its judgment.
