Thomas M. Cooley Law School v. Kurzon Strauss, LLP

Citations: 759 F.3d 522; 42 Media L. Rep. (BNA) 1965; 2014 FED App. 0139P; 2014 WL 2959066; 2014 U.S. App. LEXIS 12518Docket: 13-2317

Court: Court of Appeals for the Sixth Circuit; July 2, 2014; Federal Appellate Court

Original Court Document: View Document

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Thomas M. Cooley Law School filed a lawsuit against Kurzon Strauss, LLP and its partners David Anziska and Jesse Strauss, alleging defamation that resulted in $17 million in damages. The United States District Court for the Western District of Michigan granted summary judgment in favor of the defendants, determining that Cooley was a limited-purpose public figure and that there was insufficient evidence for a jury to find that the defendants acted with actual malice. Cooley Law School, the largest in the nation, claimed that Anziska published defamatory statements on the JD Underground website, accusing the school of manipulating employment data and failing to disclose high loan default rates. The court's ruling was affirmed by the Sixth Circuit, which concurred with the lower court's findings regarding the public figure status and the absence of actual malice in the defendants' statements.

On June 13, 2011, defendants received a cease-and-desist letter from the plaintiff regarding a post on JD Underground, which the plaintiff claimed was false and defamatory. On the same day, Anziska spoke with the plaintiff's general counsel about the allegations. Following these discussions, on June 15, 2011, Strauss issued a retraction on JD Underground, stating that certain allegations in the post titled "Investigating the Thomas Cooley School of Law" were incorrect and that information regarding the school's student loan default rate was also erroneous.

Between June 17 and July 13, 2011, Anziska distributed a draft proposed class action complaint to twenty individuals, most of whom were former or current students. The complaint accused the plaintiff of manipulating employment statistics and inflating graduates' reported salaries, likening these actions to "Enron-style" accounting. This draft was shared further, ultimately becoming publicly accessible online. 

Defendants subsequently filed a proposed class action against the plaintiff, alleging deception regarding post-graduation employment prospects, but the district court dismissed the complaint for failure to state a claim. On July 14, 2011, the plaintiff filed a lawsuit against the defendants, asserting state-law claims of defamation, tortious interference, breach of contract, and false light. The district court granted summary judgment in favor of the defendants, leading to a timely appeal by the plaintiff.

In reviewing the case, the court noted that summary judgment is appropriate when there are no genuine disputes over material facts. The plaintiff identified specific statements made by the defendants in both the JD Underground post and the draft complaint as defamatory, including allegations of inflated employment statistics and misrepresentation of loan default rates. The district court's prior rulings were affirmed in subsequent legal proceedings.

Under Michigan law, a defamation claim requires: 1) a false and defamatory statement about the plaintiff; 2) an unprivileged communication to a third party; 3) fault amounting to at least negligence by the publisher; and 4) the statement's actionability regardless of special harm (defamation per se) or the presence of special harm. If the plaintiff is a public figure, they must also demonstrate that the defendant acted with 'actual malice,' meaning the statement was published with knowledge of its falsehood or with reckless disregard for the truth. A plaintiff must prove actual malice by clear and convincing evidence, and whether evidence supports such a finding is a legal question. There are two types of public figures: 'limited-purpose' public figures, who engage in a specific public controversy, and 'general-purpose' public figures, who attain widespread fame or notoriety. The district court determined the plaintiff is a limited-purpose public figure in the controversy over the value of a law degree and found insufficient evidence of actual malice for a jury to consider. The plaintiff challenges the court's conclusions on several grounds: 1) claiming actual malice is unnecessary because the statements constituted unprotected commercial speech; 2) arguing it is not a limited-purpose public figure; 3) asserting that it has enough evidence to support a jury submission if actual malice is required; 4) contesting the court's classification of certain statements as nonactionable exaggerations; and 5) requesting summary judgment regarding specific statements about student loan defaults and a DOE investigation. The parties dispute whether to consider the plaintiff's commercial speech argument, which Cooley raised for the first time on appeal, with the plaintiff asserting that it preserved the claim that the statements lacked heightened First Amendment protection and can present any supporting argument on appeal.

Timely and reasoned presentation of non-jurisdictional issues is required to avoid forfeiture in court appeals. This circuit adheres to the principle that only issues raised before the district court are eligible for appeal; post-judgment arguments are not considered. The forfeiture rule is based on two policy goals: facilitating appellate review and ensuring fairness by preventing surprise issues at the appellate level. The court declined to address the commercial-speech issue raised by the plaintiff because it was not presented in the district court, which is a deviation from established practices that only allows for exceptions in rare cases or to prevent a miscarriage of justice. The plaintiff failed to justify why the commercial-speech issue was not raised earlier, nor did they provide grounds for an exception to the forfeiture rule. Additionally, the commercial speech theory was not included in the plaintiff's original complaint or developed during discovery, leaving the defendants unaware of this potential argument.

The plaintiff contends they are not a limited-purpose public figure, arguing that the statements made by defendants did not relate to any public controversy regarding the value of a law degree or the alleged loan default rates of their graduates. They assert that without a relevant public controversy at the time of the statements, they should be considered a private figure. Defendants counter that the plaintiff's definition of 'public controversy' is overly narrow and should encompass broader issues than just the plaintiff’s employment data and loan repayment rates.

The key issue revolves around the public debate regarding the accuracy of law schools' post-graduate employment data and the ability of graduates to secure meaningful employment to repay substantial student loans, which are federally backed. Defendants argue that the plaintiff qualifies as a limited-purpose public figure in this controversy due to its active participation in the public discourse. The analysis follows a two-pronged test established in Gertz: first, a public controversy must be identified, and second, the plaintiff’s involvement in that controversy must be assessed.

A public controversy is characterized as a significant dispute that impacts the general public or specific segments of it, receiving public attention due to its broader ramifications. The court must focus on the particular controversy related to the defamatory statements. The second prong considers three factors: the voluntary nature of the plaintiff's participation, access to communication channels to counter falsehoods, and the prominence of the plaintiff's role.

In this case, evidence indicates that two significant public debates existed before the defendants' statements: one regarding the accuracy of law school employment data and another about graduates' ability to repay loans. Notable publications and criticisms from influential figures preceded the defendants’ statements, highlighting an existing public controversy, despite the plaintiff not being specifically named in those discussions. Furthermore, the plaintiff acknowledged the ongoing public dialogue about legal employment issues since the recession, supporting the claim of a public controversy. Additionally, the presence of numerous "law school scam" blogs indicates widespread public discourse on the financial challenges faced by law school graduates.

The record includes an article stating that only 36% of the plaintiff’s graduates were actively repaying their loans, alongside testimony from Anziska and Strauss regarding a post on the website 'All Education Matters,' which cited an anonymous whistleblower claiming a 41% default rate among recent graduates. Additionally, the same website featured posts from April 2011 indicating that the Department of Education (DOE) was investigating the plaintiff for serious Title IV violations. These elements demonstrate a public controversy regarding the accuracy of law schools' post-graduate employment data and the affordability of loan repayment for graduates. 

The plaintiff, Cooley, has actively engaged in this public debate by: (1) responding to questions about the output of law schools in Michigan; (2) addressing the DOE investigation; and (3) releasing its own report to counter the negative narrative propagated by bloggers and certain media, asserting that the claims about law school financial ruin are largely anecdotal and unsupported by factual data. Cooley's Report One aims to provide authoritative employment statistics to inform the public discourse, which has been dominated by negative assertions about job prospects for law graduates. 

Cooley has utilized various communication channels, including its website and publications, to assert that critics are misinformed. As the largest accredited law school, Cooley plays a significant role in the debate and has effectively positioned itself within the public controversy, qualifying it as a limited-purpose public figure. Consequently, the court does not need to consider the alternative classification of the plaintiff as a general-purpose public figure. 

Finally, the court will assess whether there is clear and convincing evidence that the defendants published the contested statements with actual malice, defined as knowing the statements were false or acting with reckless disregard for the truth.

A statement made with reckless disregard for the truth requires that the defendant had a high awareness of probable falsity or serious doubts about the truth of the publication. A plaintiff must prove actual malice with clear and convincing evidence, the highest standard in civil cases, which demands a firm belief in the truth of the allegations. The sufficiency of evidence to support a finding of actual malice is a legal question, emphasizing the importance of protecting the free exchange of ideas under the Constitution. In this case, the defendants conducted a thorough investigation into law schools' employment data, including reviewing various resources and engaging with knowledgeable individuals before publishing statements they believed to be true. The plaintiff claims that the defendants acted with actual malice based on an admission of ignorance regarding the truth of the statements and subsequent retraction followed by republication. However, the evidence does not support a genuine issue of material fact regarding actual malice, as Anziska's admission of not knowing pertained solely to a specific investigation and did not imply doubt about the statements made in the draft complaint.

Plaintiff's assertion that defendants believed their employment and salary data statement in the JD Underground post was false does not demonstrate actual malice, as it merely reflects plaintiff's belief. Strauss retracted the statement only regarding its factual presentation, while maintaining the opinion that plaintiff misrepresented employment statistics, evidenced by their filing of a class action against plaintiff. Plaintiff’s critique of defendants’ investigation fails to provide grounds for a jury to conclude that defendants acted with actual malice or intentionally avoided the truth. The objective truth of the employment data was uncertain, and defendants were actively investigating rather than evading the truth. Their investigatory efforts, even if not exhaustive, counter arguments of purposeful avoidance. Furthermore, plaintiff's evidence is not compelling enough to convince a factfinder that defendants published the employment statements with actual malice. Defendants’ statements regarding a DOE investigation and graduates' default rates were based on information from the All Education Matters website, although one relevant post is missing due to a web hosting change. Defendants also referenced an article claiming that only 36% of plaintiff’s graduates were repaying loans. Plaintiff contends that a reasonable jury could infer actual malice due to the lack of supporting evidence for the default rates and DOE investigation claims, noting defendants’ prior knowledge of plaintiff’s denial of the investigation rumors and their reliance on dubious sources.

Cooley's response fails to provide evidence that a reasonable jury could find actual malice in the defendants' publication. The plaintiff’s critique of the defendants’ investigative efforts does not meet the standard of recklessness as defined in Milligan, which emphasizes the defendant's subjective doubts about the truth of their statements rather than a failure to conduct a thorough investigation. The plaintiff's claims of intentional avoidance of the truth are unsupported by evidence, as the legal focus is on the defendants' efforts to discover the truth, not merely on the investigation's depth.

Even if it is inferred that defendants were aware of a post from the plaintiff’s general counsel, this only indicates they knew the plaintiff lacked knowledge of a DOE investigation but does not confirm the absence of such an investigation. The defendants' reference to "reports" of a DOE investigation does not assert that an investigation was occurring, which is a crucial distinction. Furthermore, the mere existence of false reports does not imply knowledge of that falsity by the defendants, as belief in the truth of those reports was expressed by Anziska at the time of publication.

Without evidence of subjective doubt regarding the truth of the statements, the plaintiff cannot meet the clear and convincing standard necessary for a public figure defamation claim, leading to the conclusion that the defendants did not act with actual malice. Consequently, the district court's determination that Cooley is a limited-purpose public figure and that no reasonable jury could find actual malice is affirmed. The court also notes that since the defamation claim fails, related claims such as tortious interference and breach of contract are likewise dismissed. Additionally, the request for appellate sanctions by Strauss is procedurally improper as it was not filed as a separate motion, leading the court to decline consideration of it. The judgment of the district court is affirmed.