John MacDonald, Jr. v. Thomas M. Cooley Law School
2013 WL 3880201, 2013 U.S. App. LEXIS 15444, 724 F.3d 654 (2013)
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Rule of Law:
A claim for fraudulent misrepresentation fails if the alleged misrepresentation is objectively true, or if a plaintiff's reliance on it is unreasonable. Reliance is unreasonable when a plaintiff subjectively misunderstands information or when other information provided in the same document contradicts the alleged misrepresentation.
Facts:
- Thomas M. Cooley Law School published an annual “Employment Report and Salary Survey” containing statistics on its graduates' employment outcomes.
- The reports included a “percentage of graduates employed” statistic, which counted any form of employment, including non-legal, part-time, or temporary jobs.
- The reports also included an “average starting salary for all graduates,” though the document title and data indicated the statistic was derived from a survey of a subset of graduates, not the entire class.
- The twelve plaintiffs, graduates of Cooley, relied on these statistics in deciding to enroll and continue their education, believing they represented prospects for full-time, permanent legal employment.
- After graduating between 2006 and 2010, the plaintiffs struggled to find such employment, with many taking temporary contract work, opening their own firms out of necessity, or leaving the legal profession.
- The plaintiffs stated they enrolled in law school for the business purpose of obtaining “full-time employment in the legal sector.”
Procedural Posture:
- Twelve graduates sued Thomas M. Cooley Law School in the U.S. District Court for the Western District of Michigan.
- The complaint alleged violations of the Michigan Consumer Protection Act, common-law fraud, and negligent misrepresentation.
- Cooley filed a motion to dismiss for failure to state a claim upon which relief can be granted.
- The district court granted Cooley's motion to dismiss all claims.
- The graduates, as appellants, appealed the dismissal to the U.S. Court of Appeals for the Sixth Circuit.
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Issue:
Does a law school commit fraudulent misrepresentation under Michigan law by publishing employment statistics that, while literally true or accompanied by contradictory data, are interpreted by prospective students as guaranteeing specific employment outcomes?
Opinions:
Majority - Boyce F. Martin, Jr.
No, a law school does not commit fraudulent misrepresentation under these circumstances. The court found that the graduates' claims failed because they could not establish essential elements of fraud. The claim regarding the 'percentage of graduates employed' statistic failed because the statement was literally true; 'employed' does not exclusively mean full-time legal work, and a plaintiff’s subjective misunderstanding of an objectively true statement cannot support a fraud claim. The claim regarding the 'average starting salary for all graduates' statistic failed because reliance on it was unreasonable. Although the statement was objectively false, the report itself contained contradictory information—namely, its title as a 'Salary Survey' and data showing that responses were not received from all graduates—which rendered reliance on the 'all graduates' claim unreasonable as a matter of law. Furthermore, the claim under the Michigan Consumer Protection Act was invalid because the graduates purchased their education for a business purpose (to get a job), which is not covered by the Act.
Analysis:
This decision solidifies the high bar for pleading fraudulent misrepresentation, particularly the element of reasonable reliance in the context of sophisticated consumers like law school applicants. It establishes that plaintiffs cannot sustain a fraud claim based on their own subjective, optimistic interpretations of objectively true data. The ruling places a significant burden of due diligence on prospective students to critically analyze marketing materials and scrutinizes claims of reliance where contradictory information is readily available. This precedent makes it more difficult for students to sue educational institutions over disappointing post-graduation outcomes based on allegedly misleading, but not outright false, employment statistics.
