Supreme Court, New York County Index No. 652226/2011

STATE OF NEW YORK

COURT OF APPEALS __________________________________________________________________

ALEXANDRA GOMEZ-JIMENEZ, SCOTT TIEDKE,

KATHERINE COOPER, MATTHEW CRAWFORD, GEOFFREY CORISDEO,

SOLINE McLAIN, RENEE RIVAS, GERGANA MITEVA,

and CHLOE GILGAN, on behalf of themselves and all others similarly situated,

Plaintiffs-Appellants-Appellants

-against-

NEW YORK LAW SCHOOL, and

DOES 1-20,

Defendants-Respondents-Respondents

MOTION FOR PERMISSION TO APPEAL

David Anziska Law Offices of David

Anziska

305 Broadway, 9th Fl. New York, NY 10007 Phone (914) 216-3540 facsimile (212) 822-1407

Jesse Strauss Strauss Law PLLC 305 Broadway, 7th Fl. New York, NY 10007 Phone (212) 822-1496 facsimile (212) 822-1407

Frank Raimond

Law Offices of Frank

Raimond

305 Broadway, 9th Fl. New York, NY 10007 Phone (212) 323-7417 facsimile (212) 822-1407

February 5, 2013

2

STATE OF NEW YORK COURT OF APPEALS -----------------------------------------------------------------------X ALEXANDRA GOMEZ-JIMENEZ, SCOTT TIEDKE, KATHERINE COOPER, MATTHEW CRAWFORD, GEOFFREY CORISDEO, SOLINE McLAIN, RENEE RIVAS, GERGANA MITEVA, and CHLOE GILGAN, on behalf of themselves and all others similarly situated,

Plaintiffs-Appellants-Appellants

-against-

NEW YORK LAW SCHOOL, and DOES 1-20, Defendants-Respondents-Respondents

-----------------------------------------------------------------------X

N.Y. County Clerk’s Index No. 652226/2011

NOTICE OF

MOTION FOR

LEAVE TO

APPEAL

PLEASE TAKE NOTICE that, upon the annexed Statement in Support of

Motion for Leave to Appeal, the order of the Appellate Division, First Department

entered on December 20, 2012 (Exhibit A), and served, with notice of entry by

Defendants-Respondents-Respondents on January 7, 2012, and the briefs and

record filed in the Appellate Division, First Department on the prior appeal in this

action, and upon all the papers and prior proceedings in this action, the Plaintiffs-

Appellants-Appellants ALEXANDRA GOMEZ-JIMENEZ, SCOTT TIEDKE,

KATHERINE COOPER, MATTHEW CRAWFORD, GEOFFREY CORISDEO,

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SOLINE McLAIN, RENEE RIVAS, GERGANA MITEVA, and CHLOE

GILGAN, will move this Court at the courthouse of the Court of Appeals, 20 Eagle

Street, Albany, New York on the 19th Day of February, 2013, for an order:

a. Pursuant to CPLR §§5602(a) and 5516, and Section 500.22 of the Rules of this Court, granting Appellants leave to appeal to the Court of Appeals from the order of the Appellate Division, First Department, entered on December 20, 2012 and served by Defendants-Respondents-Respondents with notice of entry on January 7, 2013; and b. Granting such other and further relief as the Court may deem just and proper.

Dated: New York, New York

February 5, 2013

-------------------------------- Jesse Strauss STRAUSS LAW PLLC 305 Broadway, 9th Floor New York, New York 10007 (212) 822-1496 (tel.) (212) 822-1407 (fax.) jesse@strausslawpllc.com Counsel for Plaintiffs-Appellants-

Appellants

To: Michael J. Volpe, Esq. VENABLE LLP Rockefeller Center 1270 Avenue of the Americas, 24th Floor New York, NY 10020 (212) 307-5500 (tel.) (212) 307-5598 (fax) Counsel for Defendants-Respondents-Respondent

Via Federal Express overnight delivery service

4

STATE OF NEW YORK COURT OF APPEALS -----------------------------------------------------------------------X ALEXANDRA GOMEZ-JIMENEZ, SCOTT TIEDKE, KATHERINE COOPER, MATTHEW CRAWFORD, GEOFFREY CORISDEO, SOLINE McLAIN, RENEE RIVAS, GERGANA MITEVA, and CHLOE GILGAN, on behalf of themselves and all others similarly situated,

Plaintiffs-Appellants-Appellants

-against-

NEW YORK LAW SCHOOL, and DOES 1-20, Defendants-Respondents-Respondents

-----------------------------------------------------------------------X

N.Y. County Clerk’s Index No. 652226/2011

STATEMENT IN

SUPPORT OF

MOTION FOR

LEAVE TO

APPEAL

PRELIMINARY STATEMENT

This request for leave to appeal arises due to the failure of the trial court and

the Appellate Division, First Department, to hold Respondent New York Law

School (“Respondent”) accountable for its deceptive practices that have resulted in

thousands of law school students and graduates – including the nine named

Appellants – paying millions of dollars in inflated tuition because of material

misrepresentations made by Respondent in its reported post-graduate employment

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data. The First Department recognized Respondent’s deceptive marketing and

admonished Respondent for (a) “unquestionably less than candid and incomplete”

disclosures; (b) publishing employment and salary statistics for former classes that

“likely left some consumers with an incomplete, if not false, impression of the

schools’ job placement success,” (Exhibit A, p. 6); and (c) making “misleading

representations that give the impression that a full-time job is easily ascertainable

when in fact it is not” (Exhibit A, p. 10).

After issuing that admonishment, the First Department went on to affirm the

dismissal of the Complaint. By so doing, the First Department identified a wrong

but stifled the remedy. Appellants – nine recently admitted members of this

State’s bar harmed by Respondent’s alleged deceptive practices – deserve better.

Appellants deserve the opportunity to prove their claims.

The Complaint’s allegations are galling: in New York State in 2009, 9,787

applicants were qualified for admission to the bar, although the State’s market for

legal services only provided for the employment of approximately 2,100 new

attorneys. (Record on Appeal (“ROA”) 60-61, 72-73). In 2009, alone, Respondent

enrolled 736 students, the vast majority of whom graduated in 2012 into the

current job market which had hardly improved since 2009. (ROA 45). For the

privilege of participating in this saturated job market, Respondent charged $47,800

per year in tuition, which is in addition many thousands of dollars in living and

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relocation expenses. (ROA 74). The Complaint alleges that Respondent’s

graduates begin their professional careers with, on average, $119,437 in debt. Id.

Appellants are nine such graduates and each has incurred substantial debt due to

their enrollment in Respondent. (ROA 49-58). The Complaint alleges that several

of the Appellants have been unable to find any employment in the legal sector. Id.

The Complaint alleges that to entice Appellants to take on this life-altering

debt Respondent falsely advertised that between 90% and 92% of Respondent’s

graduates from past years were “employed” within nine months of graduation.

(ROA 62-64). And not only did Respondent report that employment was

abundant, but it was also lucrative: Appellant reported that the average salary for

graduates in private practice for the class of 2009 was $120,197. (ROA 79, 118).

For graduates of its class of 2007, Respondent reported a median salary of those in

private practice of $160,000. (ROA 79, 119).

The Complaint further alleges that these statistics were false and misleading,

that Respondent was aware of their falsity, but disseminated them anyhow.

Respondent was aware, for example, that its reported median salaries were falsely

inflated due to the disproportional presence of high earners who were specifically

solicited to respond to surveys. (ROA 79). Respondent was also aware that the

majority of the employment it reported was temporary and part-time and much of

the permanent full time employment found by graduates did not require a law

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degree (or any degree). (ROA 67). Respondent was also aware that it counted

students employed by it in short term “fellowships” as employed and that a not

insignificant percentage of its prior year’s graduates were employed as waiters,

babysitters, baristas and retail workers. However, the Complaint alleges that

despite having this information and knowing that its employment reports were

false and misleading, Respondent disseminated them without disclosures in an

effort to entice Appellants to enroll and remain enrolled when they otherwise

would not have. (ROA 61, 77-79). There can be little doubt that these facts state a

GBL §§ 349 and 350 claim, as well as a claim for fraud, fraudulent concealment

and negligent misrepresentation. However, despite these allegations, the First

Department immunized Respondent from the discovery process – whereby

Appellants would have been able to prove their allegations – by quashing the

Complaint.

The First Department’s holding is irreparably flawed. As set forth below, the

First Department failed to follow this Court’s precedent and created divergent,

inconsistent and confusing authority regarding the standards for pleading an

omission-based fraud and pleading an omission-based General Business Law

(“GBL”) § 349 and § 350 violation. The trial court’s and the First Department’s

error and overreach requires the granting of this application to appeal.

8

This application to appeal should also be granted for the independent reason

that it presents new and emerging issues of great importance to the legal

profession. The proposed appeal allows this court to elucidate its authority to

regulate the legal academy through the application of the State’s consumer

protection statutes to Respondant’s deceptive marketing, which is an inextricable

component of this Court’s broad authority to regulate the admission of attorneys to

practice. See N.Y. Jud. Law 53. Thus, by accepting this appeal this Court will send

a clear message to New York’s 163,798 resident, active attorneys as well as the

tens of thousands of prospective attorneys and the nation as a whole that New

York’s Court system will police misleading marketing practices by New York’s

law schools. Also, by accepting this appeal, this Court will have the opportunity to

demonstrate that the State’s broad prophylactic consumer protections apply to the

legal academy, just as they apply to every business and institution in the State of

New York.

Finally, by granting this appeal, this Court will be able to determine whether

Respondent’s encouragement, stewardship, and benefit from the tens of thousands

of dollars in government-backed student loans taken by each Appellant creates a

fiduciary duty from Respondent to Appellant necessary to support a fraud by

concealment claim, as well as a negligent misrepresentation claim, another

emerging issue of great public importance due to the one trillion dollars in

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outstanding student loan debt, some of which was incurred due to the allegedly

false and misleading representations made by the institutions such as Respondent

who benefited from that debt.

Practical considerations also warrant granting this appeal. This action is the

first filed of four lawsuits against law schools in this State currently pending in

three of the four departments of the Appellate Division. See Austin v Albany Law

Sch. of Union Univ., Case No. A00014/2012 (Sup. Ct. Albany County Feb. 1,

2012); Bevelacqua v. Brooklyn Law School, Case No. 500175/2012 (Sup. Ct.

Kings County Feb. 1, 2012); Richins v. Hofstra University, Case No. 600138/2012

(Nassau County Feb. 1, 2012). These suits were filed collectively by twenty-one

recent laws school graduates requesting to represent their classmates against their

alma maters. Thus far, three courts have issued decisions dismissing these lawsuits

at the pleading stage rather than allowing plaintiffs to move their cases into

discovery to prove their claims. Unfortunately, each court has used different

reasoning to terminate these suits prior to discovery, and the reasoning is

inconsistent and unsupported by this Court’s precedent. Absent action by this

Court, these cases will work their way through the appellate courts for a

determination of issues that can be more efficiently determined in this proceeding.

Review should also be granted because the reluctance of the courts in New

York to allow Appellants to prove their claims places New York courts out of step

10

with courts in the State of California, which have allowed graduates of three law

schools to prove their claims for violations of California’s analogue to New York’s

General Business Law §§349 and 350. See Arring v. Golden Gate Univ., No.

CGC-12-517837 (Ca. Superior Ct. July 19, 2012); Hallock v. University of San

Francisco, No. CGC-12-517861 (Ca. Superior Ct. July 19, 2012); Alaburda v.

Thomas Jefferson School of Law, No. CU-FR-CTL-00091898 (Ca. Superior Court

Nov. 29, 2012). Therefore, to rationalize these conflicting rulings among the

Courts in this State, to prevent additional appeals on issues that can be decided in

this proceeding, and to prevent inconsistency between California, the State with the

largest bar in the nation, and New York, the State with the second largest bar in the

nation, this Court should grant leave to appeal.

The bar, the bench, and the legal academy require leadership from the

State’s highest court regarding the issues proposed to be presented in this appeal.

Appellants filed this case expecting to have the chance to prove their claims and

New York’s court system – like Appellants – should not shirk from that challenge.

PROCEDURAL HISTORY

This motion is timely made. The order of the Appellate Division from which

leave to appeal is sought was entered on December 20, 2012. The order with

notice of entry was served by Court Electronic Filing and U.S. Mail upon

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Appellants on January 7, 2013. A copy of the order with notice of entry is annexed

hereto as Exhibit A.

This motion is being made within thirty days of the service of notice of

entry of the Appellate Division’s order affirming the trial court’s granting of

summary judgment, it is, therefore, timely made pursuant to CPLR 5513(b).

JURISDICTION

This Court has jurisdiction to entertain this appeal pursuant to CPLR

5602(a)(1)(i), which permits the Court to grant leave to appeal in “an action

originating in the Supreme Court,” where the “order of the appellate division [is

one] which finally determines the action and which is not appealable as of right.”

This action originated in the Supreme Court of the State of New York,

County of New York. ROA 40-103. The order of the Appellate Division is final in

that it disposes of all issues in this action. It dismissed the entirety of the complaint

in this action. The order of the Appellate Division States: “Accordingly, the order

of the Supreme Court, New York County (Melvin L. Schweitzer, J.) entered March

21, 2012, which granted defendant New York Law School’s motion to dismiss the

complaint, should be affirmed, without costs.” (Exhibit A, p. 12).

There were no counterclaims. ROA 175. Therefore, the order of the

Appellate Division was one that “finally determines the action.”

QUESTION PRESENTED FOR REVIEW

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(1) In light of this Court’s holding in Oswego Laborers’ Local 214

Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20 (1995) was the First

Department correct in concluding that the subject misstatements were non-

actionable under GBL §§ 349 and 350 and that the Appellants are not entitled to

the broad prophylactic protections of the State’s consumer protection laws because

Respondent did not make any “express representations” that were “actually false”?

This issue was preserved for review by Appellants in their opening brief to the

First Department on pages 21- 26 and pages 4 - 9 of Appellants reply brief to the

First Department, included with this motion.

(2) Should this Court rationalize the decisions of the Appellate Division,

First Department, the Supreme Court, New York County, and Supreme Court,

Albany County, which terminated similar actions by recent graduates of law

schools prior to discovery on different and inconsistent grounds and should the

Court address issues common to all these claims now or allow potentially recurrent

appeals in other courts?

(3) Should this Court bring New York’s treatment of these cases into

conformity with California, which has allowed three suits brought by alumni

against law schools to proceed into discovery?

(4) Was the First Department correct to determine that there is no

fiduciary duty on the part of Respondent toward Appellants to support a fraud by

13

concealment claim or negligent misrepresentation claim where Respondent, an

academic institution, encouraged, stewarded, and benefitted from tens of thousands

of dollars in Appellants’ student loans that would not have been taken but for

Respondents misrepresentations? This issue was preserved for review by

Appellants in their opening brief to the First Department 53-63and pages 26-27 of

Appellants’ reply brief to the First Department.

(5) Did the trial court err in holding, without a record, that Appellants, as

“sophisticated consumers” could not have reasonably relied on Respondent’s false

statements because they had the opportunity to discover additional information

from third parties? This issue was preserved for review by Appellants in their

opening brief to the First Department on pages 31-36 and 55-62 and pages 9-11

and 22-25 of Appellants’ reply brief to the First Department, included with this

motion. This issue was not considered by the First Department.

(6) Did the trial court err when it required Appellants to plead a reliable

methodology for calculating damages and ignored the availability of statutory

damages? This issue was preserved on pages 40-53 in Appellants opening brief to

the First Department and on pages 11-19 of Appellants’ reply brief to the First

Department, included with this motion. This issue was not considered by the

First Department.

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(7) What powers does the Court of Appeals have pursuant to Judiciary

law § 53 in coordination with the State’s consumer protection statutes to regulate

deceptive statements and omissions by the State’s law schools?

FACTS ALLEGED IN THE COMPLAINT

Nature of Action

Enrolling roughly 1,500 students annually, Respondent is one of the largest

and most expensive law schools in the country, its class size having risen by 270

students between 2000 and 2009 and its tuition more than doubling to its current

price of $47,800. ROA 47, 60. In 2009 alone Respondent increased its first-year

class by over 30 percent, enrolling an astounding 736 students – by far its largest

class ever – and the second largest class in the country. Respondent’s students

graduate with, on average, $119,437 in non-dischargeable debt. ROA 60, 74.

The Complaint alleges that in order to charge its high tuition, Respondent

reported, and continues to report, materially deceptive and misleading statistics

that inflate the number of its graduates who obtain full-time, permanent legal

employment and the salaires earned by those graduates. ROA 62-66. Specifically,

the Complaint alleges that for at least the past six years, Respondent reported with

“Madoff”-like consistency that, depending on the year, between 90 and 92 percent

of its graduates secured employment within nine months of graduation. Id. The

context of these representations makes it appear to reasonable consumers, such as

15

Appellants, that the jobs reported are full-time, permanent positions for which a

law degree is required. Id. However, Respondent, despite knowing the truth,

falsely and misleadingly failed to disclose that these placement rates include any

type of employment, including jobs that have absolutely nothing to do with the

legal industry, do not require a JD degree, or are temporary, part-time or voluntary.

Id. The Complaint alleges that if Respondent had disclosed the number of

graduates who secured full-time, permanent positions for which a JD degree was

required or preferred – which it knew but failed to disclose – the reported numbers

would drop dramatically. The Complaint alleges that the actual rate of

employment in full time jobs that require a law degree is lower than 40 percent

throughout the Class period. ROA 44-45, 68-70.

Second, the Complaint alleges that Respondent inflates its graduates’

reported mean salaries by calculating them based on a small, deliberately selected

subset of graduates who submit their salary information. ROA 44. To that end,

Respondent already concedes that a paltry 25 percent of 2007 graduates, 20 percent

of 2009 graduates and 22 percent of 2010 graduates disclosed any type of salary

information, while failing to break down the percentage of graduates who

disclosed salary information in other years. ROA 77-78. However, the small

sample size is not the claimed falsity in the reported salary data. Rather, the

Complaint alleges that Respondent inflates its reported median salaries information

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by omitting salary information provided by graduates in part-time, temporary or

non-legal positions and purposefully solicits salries from high earning graduates,

thus making those high earning graduates disproportionately overrepresented in the

reported salary information and nominally employed or underemployed graduates

disproportionately underrepresented. ROA 79.

As evidence that Respondent’s statements were misleading, the Complaint

alleges that the American Bar Association (“ABA”) has recently adopted

guidelines that bar the exact practices that Appellants allege Respondent engaged

in. ROA 89. Specifically, Respondent is now required to break down its

employment data to indicate whether a position is full-time or part-time, permanent

or temporary, funded by the law school or an affiliated university, and whether bar

passage or a JD degree is required or preferred. Id. Clearly, such information is

material to any applicant when deciding whether to attend law school.

Fraudulent statements

The Complaint alleges that Respondent published false and misleading

employment reports on its website and in marketing materials from at least August

of 2005 forward.1 ROA 61. For example, until July 2011 – right before the filing

1 Respondent also supplied employment information to various third-party

data clearinghouses and publications, such as the ABA and US News & World

Report (“US News”), which the Complaint alleges is riddled with the same legerdemain, dubious calculations and deliberate omissions as found in the

17

of this lawsuit – Respondent posted false and misleading employment data for the

Class of 2009 claiming that approximately 90 percent of the class was employed

nine months after graduation, including 46 percent allegedly working in private

practice, 24 percent in “business,” eight percent in government, 16 percent in

public interest, and three percent both in judicial clerkship and “academia.” ROA

62. Based on the 20 percent of the entire class who reported salary information,

the average salary for graduates in private practice was $120,197, $75,167 for

those in “business,” and $56,054 for those in government. ROA 63. The

Complaint alleges that the salary data was false because it was collected

disproportionately from the highest earning graduates. ROA 79.

For the Class of 2007, Respondent misleadingly reported that 92 percent of

the class was employed, including 48 percent allegedly working in private practice,

22 percent in “business,” 12.5 percent in government, five percent in public

interest, three percent in judicial clerkships and 2.4 percent in “academia,” while,

based on the 25 percent of the class who actually reported salary information, the

median salary for graduates in private practice was $160,000 and $85,000 for those

in “business.” ROA 63. The Complaint alleges that 2007 was the first year in

which Respondent disclosed that its salary data was based on a small subset of the

employment information posted and marketed by Respondent on its website and brochures. ROA 66.

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class. ROA 115-123. The Complaint alleges that the salary data was false because

it was collected disproportionately from the highest earning graduates. ROA 79.

For the Class of 2006, Respondent misleadingly reported that approximately

92 percent of the class was employed, including 52 percent allegedly working in

private practice, 18 percent in “business,” 11 percent in government, four percent

in public interest, five percent in judicial clerkships and two percent in “academia,”

while the median salary for those graduates working in firms with more than 100

attorneys was $128,000 and $74,000 for those in “business.” ROA 63-64. The

Complaint alleges that the salary data was false because it was collected

disproportionately from the highest earning graduates. ROA 79. For the Class of

2005, Respondent misleadingly reported that approximately 92 percent of the class

was employed, including 51 percent allegedly working in private practice, 17

percent in “business,” nine percent in government, three percent in public interest,

seven percent in judicial clerkships and one percent in “academia.” ROA 64.

However, beginning in July 2011, right before the filing of this lawsuit,

Respondent released its employment report for the Class of 2010, which paints a

different and more accurate picture as to the employment outcomes for

Respondent’s graduates than the previous reports, demonstrating that it was always

possible for Respondent to provide this information, but chose not to. Respondent

disclosed, for the first time, that 5.6 percent of its employed graduates were in

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temporary positions funded by the “NYLS Fellowship” program, while only 80

percent of graduates were in positions that either required or preferred a JD degree.

ROA 62. Respondent also disclosed that, based on the 22 percent of the class who

reported salary information, the average salary for graduates in private practice

was $107,343, $86,667 for those in “business,” and $56,910 for those in

government. ROA 63. For the first time, Respondent revealed that graduates

working in large firms, where they earn significantly more than typical first-year

attorneys, were disproportionately overrepresented in the salary survey, while

those in small firms were disproportionately underrepresented. ROA 77-78. The

Complaint alleges that Respondent had this information for prior years, but

misleadingly failed to disclose it. ROA 48. However, Respondent’s revised

employment rates were also misleading because it included part time and

temporary work as “employment” without disclosing it was doing so. ROA 115.

The Complaint cites to numerous articles or publications from 2010 or 2011.

This information was only publically available well after most of the Appellants

had graduated from Respondent and therefore could not have possibly influenced

Appellants’ reasonable understanding of the employment and salary data reported

by Respondent:

• An article by Professor Paul Campos of the University of Colorado Law School, published on April 25, 2011 in The New Republic, which is based on an exhaustive analysis of NALP’s 2009 Employment Report and concludes that the true percentage of law

20

school graduates who have obtained full-time, permanent legal employment could be lower than 40 percent (ROA 16; ROA 69);

• The 2009 NALP Employment Report, which was published in June

2010, and 2010 NALP Employment Report, which was published in June 2011 (ROA 16; ROA 67);

• A memo from the ABA subcommittee which regulates the law school industry, dated July 27, 2011, announcing the enactment of new guidelines which would require greater reporting transparency for employment data starting in 2012, and a letter from NALP to the ABA, dated July 28, 2011, urging that the two organizations work together in implementing these reforms (ROA 17; ROA 85-87);

• A letter from the editor-in-chief of U.S. News to law school deans, published in March 2011, which acidly notes that the “entire law school sector is perceived to be less than candid” when reporting employment data, and that many schools appear “not to treat the ABA reporting rules with the seriousness one would assume” (ROA 18; ROA 66);

• A New York Times article, dated July 16, 2011, which quotes a NYLS professor as acknowledging that “[a]t a school like New York Law, which is toward the bottom of the pecking order, it’s long been difficult for our students to find high-paying jobs” (ROA 19; ROA 60-61);

• An op-ed by the President of the California Bar Association, published in February 2011, in which he exhorts law school deans to adopt more rigorous reporting standards by disclosing the type of detailed employment and salary data that would allow students to get a realistic picture of their post-graduate financial situation (ROA 20; ROA 82);

• A letter from Senator Charles Grassley to the President of the ABA, dated July 11, 2011, in which he demanded that the organization answer 31 detailed questions pertaining to its regulation of law schools (ROA 27; ROA 81);

• A study by the consulting company, Economics Modeling Specialist, Inc. (“EMSI”), which was published by the New York Times on June

27, 2011, stating that nationwide there were twice as many people who passed the bar exam in 2009 as there were job openings (ROA 27-28; ROA 72-73);

• Six letters sent by three United States Senators to the ABA and Department of Education (“DOE”), dated between March 31, 2011 and October 13, 2011, decrying the systemic lack of transparency in

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the reporting of employment data by law schools to prospective and current students ( ROA 80-81);

• Proposed legislation sent by a coalition of 55 law school student body presidents to Congress, published in May 2011, that would, among other things, create new reporting standards for employment data, require law schools to submit annual employment reports to the Department of Education, and empower the DOE to audit these reports (ROA 81);

• An article in the Wall Street Journal, dated November 14, 2011, reporting that U.S. Senate staff members were in the process of gathering a “trove” of information about the law school industry, and that the Senate was likely to hold hearings into the law school industry’s failure to report accurate post-graduate employment data and air concerns over the amount of debt being racked up by law students (ROA 81);

• An op-ed by the previous President of the California Bar Association, published in May 2010, in which he pointedly criticized law schools for the way they tabulate and report employment information to prospective students (ROA 82); and

• A speech given by Richard Matasar, the former dean of NYLS, which was first reported in January 2009 by an obscure website -- well after all of the Appellants had either graduated from or were enrolled in NYLS -- in which he took his fellow law school deans to task for failing to take “ownership” of their students’ employment “outcomes” (ROA 76-77). These publications and documents are a retroactive acknowledgement that

Respondent’s employment reports and salary data were misleading and fraudulent.

The record is silent regarding whether Appellants were informed or had access to

any of the above at the time they were enrolling or deciding to enroll in

Respondent. Each Appellant alleges that they were misled by Respondent’s

reported employment and salary data, and was unaware of any third party

22

information demonstrating Respondent’s misstatements and omissions. ROA 49-

58.

Appellants

Appellants are nine Respondent graduates who attended Respondent

between 2004 and 2011. Alexandra Gomez-Jimenez attended Respondent between

2004 and 2007, and expressly relied on employment reports posted on

Respondent’s website, asserting that 97 percent of 2002 graduates and 91 percent

of 2003 graduates secured employment within nine months of graduation and the

reported median salaries, while remaining enrolled at Respondent based on its

representations that 90 percent of 2004 graduates and 92 percent of 2005 graduates

secured employment within nine months of graduation and the reported median

salaries. ROA 8. Chloe Gilgan attended Respondent between 2005 and 2008, and

expressly relied on employment reports posted on Respondent’s website asserting

that 91 percent of 2003 graduates and 90 percent of 2004 graduates secured

employment within nine months of graduation and the reported median salaries,

while remaining enrolled in Respondent based on its representations that 92

percent of 2005 and 2006 graduates secured employment within nine months of

graduation and the reported median salaries. ROA 57.

Scott Tiedke and Gergana Miteva attended Respondent between 2006 and

2009, and expressly relied on employment reports posted on Respondent’s website

23

asserting that 92 percent of 2005 graduates secured employment within nine

months of graduation and the reported median salaries, while remaining enrolled at

Respondent based on its representations that 92 percent of 2006 and 2007

graduates secured employment within nine months of graduation and the reported

median salaries. ROA 50,56.

Katherine Cooper, Matthew Crawford, Geoffrey Corisdeo and Soline

McLain attended Respondent between 2007 and 2010, and expressly relied on

employment reports posted on Respondent’s website asserting that 92 percent of

2005 and 2006 graduates secured employment within nine months of graduation

and the reported median salaries, while remaining enrolled at Respondent based on

its representations that 92 percent of 2007 and 2008 graduates secured employment

within nine months of graduation and the reported median salaries. ROA 51-52.

Renee Rivas attended Respondent between 2008 and 2011, and expressly relied on

employment reports posted on Respondent’s website asserting that 92 percent of

2006 and 2007 graduates secured employment within nine months of graduation

and the reported median salaries, while remaining enrolled at Respondent based on

its representation that 92 percent of 2008 graduates secured employment within

nine months of graduation and the reported median salaries. ROA 55-56.

Damages

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In addition to statutory damages allowable pursuant to GBL §349(h), which

Appellants are entitled to if they decide to pursue this matter individually, the

Complaint requests the following damages on a class wide basis, to be measured

by the difference between the value of Respondent’s degree with the actual

employment rates and average salaires, as opposed to the misleading ones

reported:

• “Had [Plaintiff] been aware that NYLS’s reported placement rates included temporary and part-time employment and/or employment for which a JD was not required or preferred, she would have elected to either pay less to NYLS or perhaps not attend the school at all.” ROA 49-58.

• “The unfair and deceptive trade acts and practices have directly, foreseeable and proximately caused. . .Appellants and other members of the Class . . . to have paid inflated tuition based on the material misrepresentation that approximately 90-92 [%] of Respondents graduates secure gainful employment.” ROA 93.

• For restitution and disgorgement [of an amount] totaling $225 million, which is the difference between the inflated tuition paid by Class member based on the misrepresentations . . . and the true value of an NYLS degree.” ROA 101. As set forth below, the trial court ignored Appellants’ entitlement to

statutory damages and also found Appellants’ claims could not proceed past the

pleading stage because such a measure of damages is too speculative. ROA 38.

The First Department did not reach this issue.

Procedural History

25

On August 10, 2011, Alexandra Gomez-Jimenez, Scott Tiedke and

Katherine Cooper filed a proposed class action complaint against Respondent. On

November 21, 2011, six additional Appellants joined the original three named

Appellants. ROA 40-103. On March 21, 2012, nine days after holding oral

arguments, Justice Melvin Schweitzer issued an order dismissing the Complaint.

ROA 4-39. In dismissing Appellant’s GBL § 349 claim, Judge Schweitzer held

that Appellants, as college graduates, were “sophisticated” consumers who should

have realized that Respondent’s post-graduate employment data was false and

deceptive. Id. In reaching this conclusion, Judge Schweitzer referenced

documentary evidence cited in the Complaint that supposedly demonstrated the

dearth of employment opportunities for recent law school graduates, even though

nearly all of the referenced documentary evidence was published in 2011, well

after 8 out of 9 Appellants had already graduated from Respondent and one

Appellant was on the verge of graduating. Id. Judge Schweitzer further held that

Appellants’ alleged damages were “remote and speculative” because “the

complaint does not allege facts from which pecuniary damages can be inferred as a

direct result of the alleged wrong.” Id. Judge Schweitzer did not address the

availability of statutory damages.

On September 5, 2012, Appellants submitted their appellate papers to the

First Department. On December 20, 2012, the First Department unanimously

26

affirmed Judge Schweitzer’s dismissal on the ground that Respondent’s published

employment reports were not materially deceptive, because (a) Respondent never

represented that its 90-92 percent placement rates included only full-time,

permanent employment for which a JD-degree is required, although it failed to

disclose the inclusion of non-perminant, part time and non JD required

employment and (b) Respondent disclosed that only a small percentage of

graduates actually reported salary information although it failed to disclose that

high earners were disproportionately represented in its median salary calculations.

See Exhibit A. The First Department refrained from ruling on whether Appellants’

alleged damages were remote and speculative. Id. The First Department also did

not reach the issue of whether Appellants were acting reasonably in believing

Respondent’s misleading and deceptive job placement data despite the purported

availability of third party information demonstrating deception and falsity. Id.

Despite concluding that Respondent’s published employment data did not

violate the General Business Law or constitute fraud, the First Department

nevertheless acknowledged that “there is no question that the type of employment

information published by defendant (and other law schools) during the relevant

period likely left some consumers with an incomplete, if not false, impression of

the schools’ job placement success,” and that “we are troubled by the

unquestionably less than candid and incomplete nature of defendant’s disclosures.”

27

Id. The First Department even raised the possibility that Respondent

administrators, in publishing such deceptive and misleading data, violated their

ethical obligations as attorneys and educators. Id. These findings of fact are not

reviewable by this Court.

As set forth below, this Court should grant leave to appeal to (1) correct the

First Department’s erroneous holding that Respondent’s omissions and

misstatements, as a matter of law, are not actionable as a GBL §§ 349 and 350

violation or as common law fraud; (2) to address whether third party disclosures

have an impact on Appellants’ reasonableness in believing Respondent’s

employment reports and whether that issue can be determined at the trial stage; (3)

to determine whether a fiduciary duty exists between an academic institution such

as Respondent that encourages, stewards and benefits from tens of thousands of

dollars in government backed student loans used by Appellants to finance their

education and the students who take those loans; (4) to determine whether

Appellants were required to present a reliable methodology for calculating

damages at the pleading stage, an issue reached by the trial court but not by the

First Department; (4) to elucidate this Court’s power pursuant to § 53 of the

Judiciary Law and the State’s General Business Law to regulate deceptive

marketing by members of the legal academy in this State, a novel issue of public

importance; and (5) to rationalize the holdings of the First Department, Supreme

28

Court, New York County, and Supreme Court Albany County, which terminated

substantially similar Complaints by alumni against law schools on different and

inconsistent grounds, to prevent the same issues from being litigated in two other

departments of the Appellate Division, and to bring New York’s treatment of these

cases into conformity with California’s.

POINT I: RESPONDENT’S EMPLOYMENT DATA IS FALSE AND

DECEPTIVE AND THEREFORE ACTIONABLE UNDER

GBL § 349 AND AS FRAUD

The First Department’s opinion is confusing, contradictory and at odds with

established authority from this Court. In affirming Judge Schweitzer’s dismissal of

Appellants’ claims, the First Department tries to have it both ways. On the one

hand, it curtly concludes that Respondent’s employment reports were not

materially deceptive because they were technically true and did not contain

objectively false information. Exhibit A, p. 6-7. On the other hand, it concedes

that “there is no question that the type of employment information published by

defendant (and other law schools) during the relevant period likely left some

consumers with an incomplete, if not false, impression of the schools’ job

placement success,” and that “we are troubled by the unquestionably less than

candid and incomplete nature of defendant’s disclosures.” Exhibit A, p. 6, 7. The

First Department’s holdings are contradictory and require review by this court.

29

The First Department’s opinion is also at odds with established authority

from this Court. The First Department held Respondent’s statements were not

actionable because Respondent never represented that its 90-92 percent placement

rates included only full-time, permanent employment for which a JD-degree is

required or preferred. Exhibit A, p. 7. However, this reasoning ignores that this

Court has consistently recognized that omission-based misstatements are

actionable under both GBL § 349 and as common law fraud. Oswego, 85 N.Y.2d

at 26; Junius Constr. Corp. v. Cohen, 257 N.Y. 393, 400 (1931) (Cardozo, J.)

(holding that once a party makes a representation, he “could not fairly stop half

way,” listing those facts he found important only and keeping silent as to others).

The Complaint alleges that Respondent’s failure to disclose that the majority of its

graduates were not employed in full-time, permanent positions for which a JD

degree is required or preferred is a material omission. ROA 85. Indeed, none less

than the ABA agree, as evidenced in its revised guidelines that expressly mandates

that law schools are now obligated to break down placement rates into more

relevant, disaggregated data so that this information is provided. Id. The

Complaint also alleges that the ABA forbids Respondent’s past practice of

presenting a flat placement rate because it understands that such information is

deceptive and provides prospective students with a false impression of their

employment prospects. Id.

30

The First Department found that Respondent’s reported median salaries, as a

matter of law, could not deceive a reasonable consumer acting reasonably because

for the classes of 2007, 2009 and 2010 Respondent disclosed that only a subset of

all graduates – roughly 20-25 percent – have reported salary information. Exhibit

A, p. 7. However, this analysis ignores Appellants’ allegations that the school

inflated its average salary by deliberately omitting salary information provided by

nominally employed or underemployed graduates, such as those in part-time,

temporary or non-legal positions, and, as such, reported objectively false

information. ROA 79. Appellants further allege that Respondent inflated salary

information by specifically directing – through a barrage of phone calls and

follow-up emails – the choice few graduates in high-paying jobs to respond to its

job survey, thereby ensuring that graduates working in larger firms making

significantly more money were overrepresented in its salary survey. ROA 78-79.

Respondent’s disclosure that its salary information is based on a small sample of

self-reporting graduates in no way mitigates its failure to include salary

information provided by graduates in part-time, temporary or non-legal positions.

That the Appellate Division ignored such a lynchpin allegation underscores its

determination to shield law schools from civil liability.

The First Department’s holding that Respondent’s advertised placement

rates of 90-92 percent and its inflated median salaries are not actionable is a

31

repudiation of this Court’s holding in Oswego that omission-based misstatements

are actionable under GBL § 349. In Oswego case, two large union funds sued a

bank under GBL § 349 for failing to properly disclose that their deposits had not

been placed in interest bearing savings accounts. The plaintiff waited seven years

before realizing that no interest was being paid and there was also a factual dispute

regarding whether the lack of interest payments was disclosed. 85 N.Y.2d at 23.

In reversing the dismissal of the complaint in Oswego, this Court held that

defendant’s omission-based statements were actionable under GBL § 349 because,

while “the statute surely does not require businesses to ascertain consumers’

individual needs and guarantee that each consumer has all relevant information

specific to its situation,” the “scenario is quite different [] where the business alone

possesses material information that is relevant to the consumer and fails to provide

this information.” Id. at 26. This Court reasoned that because there was a dispute

as to whether plaintiff received documentation from the defendant bank informing

it of the limitations of interest on its accounts and there was a dispute regarding

whether the documentation provided referenced the fact that nonprofit entities like

the plaintiff were ineligible for interest-bearing accounts, plaintiff could properly

maintain its claim under GBL § 349. Id; see also Gaidon v. Guardian Life Ins.

Co., 94 N.Y.2d 330, 345-346 (1999) (finding a violation of GBL § 349 where

“depict[ed] vanishing dates” were tied to a “milestone in the policyholder’s near

32

future” when the Defendant was alleged to have been aware that “the premiums

were unlikely to vanish as projected because they allegedly knew or should have

known that the opposite was true: dividend/interest rates were not sustainable at

the illustrated level”). Oswego’s holding that omission-based misstatements fall

within the ambit of GBL § 349 has repeatedly been affirmed by this Court.

Accordingly, other courts have universally followed this Court’s precedent in cases

analogous to this. See e.g. Servedio v. State Farm Ins. Co., 814 F. Supp. 2d 214,

219 (E.D.N.Y. 2011); Woods v. Maytag Co., No. 10-CV-0559(ADS)(WDW),

2010 U.S. Dist. LEXIS 116595, at *43 (E.D.N.Y. Nov. 2, 2010); Watts v. Jackson

Hewitt Tax Serv., 579 F. Supp. 2d 334, 347-48 (E.D.N.Y. 2008); Bildstein v.

MasterCard Int’l, Inc., No. 03 Civ. 9826, 2005 U.S. Dist. LEXIS 10763, at *10-11

(S.D.N.Y. June 7, 2005); People v. GE, 302 A.D.2d 314, 315 (1st Dep’t 2003);

Zurakov v. Register.Com, Inc., 304 A.D.2d 176, 182 (1st Dep’t. 2003).

In Gotlin v. Lederman, a recent decision regarding a GBL § 349 omission

claim, it was alleged that the defendant physicians had misrepresented the efficacy

of their cancer treatment. No. 10-3244-cv, 2012 U.S. App. LEXIS 8790 (2d Cir.

May 1, 2012). The subject misrepresentation was that the defendants had

published a “success rate” of greater than 90% for treating pancreatic cancer. Id. at

*11-13. These same advertisements at certain points defined “success” in a very

limited manner, circumscribing its definition to cases where the tumor simply

33

stopped growing or shrunk, but still remained but did not dispel the overall

impression that the treatment was effective. Id. at *13-14. Much more than

surviving a motion to dismiss, these claims went through trial, only after which the

district court granted summary judgment. Id. at *3-4. The Second Circuit held the

district court erred in granting summary judgment after trial, because there existed

“genuine issues of material facts as to whether defendants’ marketing of [the

treatment’s] ‘success rates’ was materially deceptive.” Id. at *15.

The circumstances here are also strikingly similar to Karlin v. IVF Am., Inc.,

where the complaint alleged that the defendants violated GBL § 349 by:

“…disseminating false success rates and misrepresenting health risks associated with IVF. In particular, plaintiffs’ claim that defendant ‘exaggerated success rates, excluding certain subsets of failed treatment procedures, emphasizing numerically false and misleading overall success rates and conceal[ing] and misrepresent[ing] significant health risks, high miscarriage rates and excessive neonatal deaths and abnormalities of infants even if a birth resulted from the treatment rendered by defendants.’”

93 N.Y.2d 282, 289 (1999). In Karlin, this Court, after accepting an appeal by

permission, reversed the Appellate Division’s granting of a motion to dismiss a

GBL § 349 and § 350 claim, reviving those claims.

Appellants, in accordance with Oswego, Karlin, and its progeny, alleged that

Respondent omitted certain facts it alone knew but failed to disclose – namely, the

true percentage of its graduates who have obtained full-time, permanent

employment for which a JD degree is required or preferred, and that its salary data

34

was based on a small and unrepresentive subset of graduates. The Complaint

clearly alleges Respondent was aware that its employment reports were not

representative of the actual experience and salaries of its graduates because:

• Respondent reported to the National Association of Law Placement (“NALP”), each year, the number of Respondent graduates employed in jobs that did not require or prefer a law degree or was part-time in nature;

• Respondent maintains its own internal tracking system, including the original surveys returned by graduates, indicating whether the employment reported was part-time, temporary and whether the graduate was working in a job that required a law degree, but misleadingly failed to disclose this information;

• Respondent knew that it was “employing” its own graduates to boost its employment rate;

• Respondent deliberately miscalculated its raw employment data in direct violation of ABA standards, by tabulating it in a slipshod manner, cynically choosing to omit or ignore critical statistical data that would substantially lower both placement rates and salary information; and

• Respondent was aware that the salary it collected was disproportionately skewed toward high earners because those graduates were specifically targeted and directed to respond to salary surveys.

ROA 65, 67, 70, 77-79.

Thus, much like Oswego, Karlin, Servedio, Watts, Bildstein, Zurakov,

Gaidon and Gotlin, the case at bar is a textbook example of an omission-based

misstatement that is actionable under GBL § 349. The Complaint alleges that

Respondent made specific representations about its product – namely, that 90-92

percent of its graduates secured employment within nine months of graduation –

35

while failing to include critically important information, such as that the majority

of its graduates fail to obtain full-time, permanent employment for which a JD-

degree is required or preferred, and many graduates are in positions that are either

part-time, temporary, voluntary, school-funded or non-legal in nature. The ABA,

in promulgating new standards expressly mandating that law schools break down

their placement rates into disaggregated data, concedes that Respondent’s practice

of publishing flat placement rates is false and misleading. ROA 85. In fact, the

First Department concedes this as well, noting that “there is no question that the

type of employment information published by defendant (and other law schools)

during the relevant period likely left some consumers with an incomplete, if not

false, impression of the schools’ job placement success,” and that “we are troubled

by the unquestionably less than candid and incomplete nature of defendant’s

disclosures.” Exhibit A, p. 8-7.

The cases cited by the First Department in support of its conclusion that the

false statements plead in the Complaint are not actionable are inapposite to the

present circumstances. See Exhibit A, p. 7. In Corcino v. Filstein, 32 AD 2d 201,

202 (1st Dep’t. 2006), the defendant did not even make any representations about

its product, such as that 90-92 percent of its graduates secure employment within

nine months of graduation. Id. (“…nothing in this advertisement has been shown

to be false or misleading, such as a guarantee of results, misleading statistics on

36

success rates or an assertion that there are no risks to the procedure;” the

advertisement Stated: “If the size of your penis torments you, we have the

solution . . . Our specialized doctors will widen or make bigger the penis . . .

[D]on’t feel frustrated or ashamed of intimacy because your problem now has a

solution.”) (emphasis supplied).

St. Patrick’s Home for the Aged and Infirm v. Laticrete Int’l, 264 A.D.2d

652, 655 (1st Dep’t. 1999) is distinguishable on the ground that the defendant

made statements that it believed to be true when made, which is very different than

the allegation here that Respondent made statements it knew were false. ROA 65,

67, 70, 77-79; Patrick’s Home for the Aged and Infirm at 656 (“there is no

evidence in the record to refute Laticrete’s assertion that it believed that the epoxy

resin coating rendered Duripanel suitable for exterior use.”). In Andre Strishak &

Assoc. v. Hewlett Packard Co., 300 AD2d 608, 609-10 (2d Dep’t. 2002) the

defendant printer manufacturer made absolutely no representations about the “the

amount of ink contained in the cartridge,” or “specific language regarding the size

or description of the cartridges on the boxes or in the advertisements.” Here, of

course, Respondent made specific representations regarding the employment rate

and salaries earned by prior graduates, representations that contained material

omissions.

37

Relying on the cherry picked and inapposite authority cited above, and

ignoring Oswego, Karlin, Servedio, Watts, Bildstein, Zurakov, Gaidon and Gotlin,

the First Department incorrectly found that Respondent’s “unquestionably less than

candid and incomplete” data that gives consumers a “false” impression is not

actionable under the State’s consumer protection law. Affirming the Appellate

Division’s decision will mark a sharp departure from this Court’s precedent.

In sum, it is manifestly clear that had this case involved an “ordinary” – i.e.

non-law school – defendant, the First Department would have never dismissed it at

the pleading stage. Yet, to shield law schools from civil liability, the First

Department has issued a decision at odds with long established authority regarding

omission based GBL § 349 and § 350 claims that will have potentially calamitous

consequences for all New York consumers, not just graduates of New York-based

law schools. If the First Department’s decision is not reviewed, businesses will be

incentivized to publish and market highly misleading consumer data that bears

little semblance to reality and omits crucial, material information. Under no

circumstance should this Court endorse the First Department’s gutting of GBL §

349 and the broad prophylactic protections it provides to every New Yorker.

POINT II: THIS COURT SHOULD GRANT REVIEW TO

RATIONALIZE THE HOLDINGS OF THE

DIFFERENT TRIAL COURTS IN THIS STATE

AND PREVENT THE RECURRENCE OF ISSUES

THAT CAN BE BETTER ADDRESSED IN THIS

APPEAL

38

This is the first filed of four lawsuits alleging violations of the State’s

consumer protection statutes, common law fraud, and negligent misrepresentation.

See Austin v Albany Law Sch. of Union Univ., Case No. A00014/2012 (Sup. Ct.

Albany County Feb. 1, 2012); Bevelacqua v. Brooklyn Law School, Case No.

500175/2012 (Sup. Ct. Kings County Feb. 1, 2012); Richins v. Hofstra University,

Case No. 600138/2012 (Nassau County Feb. 1, 2012). This is the first of the four

lawsuits to have reached the State’s appellate courts. The lawsuits, including this

one, are filed in three of the four departments of the Appellate Division.

Additional appeals are inevitable.

The three decisions dismissing these actions – two from trial courts and one

from the First Department – each ground themselves differently. For example, the

First Department found Respondent’s employment statistics were deceptive but

were not actionable because they were not “actually false,” even it was incomplete.

See Exhibit A, p. 7. In contrast, the Supreme Court, New York County, looking at

the same set of facts determined that “these post-graduate employment statistics

[were not] misleading in a material way for a reasonable consumer acting

reasonably.” ROA 16. Supreme Court, Albany County, also looked at similar

facts, but without a factual record, found that Albany Law School’s published

employment data was not actionable because of the “elaborate and somewhat

subjective nature of plaintiffs’ definition of ‘employment.’” Austin v Albany Law

39

Sch. of Union Univ., 2013 N.Y. Misc. LEXIS 3 (Sup. Ct. Albany Ctny. Jan. 3,

2013).

All three of these decisions share a common desire to terminate these actions

before the plaintiffs had an opportunity to prove their claims through discovery,

but little else. However, what these decisions also each have in common is that

each overlooked and misconstrued the same law, discussed above, that omissions

are actionable under GBL § 349 and §350 and the law, discussed below, that the

reasonableness of a plaintiffs behavior cannot be determined on a motion to

dismiss. These decisions are not supported by this Court’s authority and the

current confused state of the law provides little guidance for the two other trial

courts in the Second Department, as well as the Third Department of the Appellate

Division, which have yet to rule on similar cases. These cases also do not provide

the predictability that Appellants, the other plaintiffs in these actions, Respondent,

and every other law school in the state require and deserves. Thus, this appeal

should be granted to rationalize the holdings of the Supreme Court, New York

County, the Supreme Court, Albany County, and the First Department and bring

those cases back into line with this Court’s prior holdings regarding GBL §§ 349

and 350.

Moreover, addressing these issues in this proceeding may prevent recurrent

appeals in the Third and Second Departments of the Appellate Division. The

40

parties to substantially similar actions in courts in those departments will likely

seek appellate review.

POINT III: REVIEW SHOULD BE GRANTED TO BRING

NEW YORK’S TREATMENT OF THESE CASES

INTO CONFORMITY WITH CALIFORNIA’S

In California, where two dozen alumni have sued their law schools for

violations of that state’s consumer protection statutes, three cases substantially

similar to this are now in discovery. See Arring v. Golden Gate Univ., No. CGC-

12-517837 (Ca. Superior Ct. July 19, 2012); Hallock v. University of San

Francisco, No. CGC-12-517861 (Ca. Superior Ct. July 19, 2012); Alaburda v.

Thomas Jefferson School of Law, No. CU-FR-CTL-00091898 (Ca. Superior Court

Nov. 29, 2012).

The facts alleged in the California cases are substantially similar to those

alleged in this case. Students who are enticed to enroll in New York based law

schools, such as Respondent, should be provided the full protections of New

York’s consumer protection statutes, which are robust as any in the nation. Indeed,

the consumer protection regime in New York is no less robust than that of

California, and this Court should grant review to bring New York’s treatment of

these cases into conformity with California’s.

POINT IV: REVIEW SHOULD BE GRANTED SO THIS

COURT CAN DETERMINE WHETHER A

FIDUCIARY DUTY EXISTS BETWEEN

EDUCATIONAL INSTITUTIONS WHO

41

ENCOURAGE, STEWARD AND BENEFIT FROM

STUDENT LOANS, AND THE STUDENTS WHO

TAKE THOSE LOANS

The First Department held that there is no fiduciary duty between the

Respondents and the Appellants to support Appellants’ negligent misrepresentation

claim and fraud by concealment claims. Exhibit A, p. 9-10. However, in so

finding, the First Department ignored Respondent’s encouragement, stewardship,

and benefit from the tens of thousands of dollars in government backed non-

dischargeable loans that each Appellant incurred to attend Respondent’s program.

Such a relationship is analogous to others where this court has found that a

fiduciary duty exists, or at the very least have permitted the plaintiff to establish

the existence of such a duty through discovery. See RBE N. Funding, Inc. v. Stone

Mtn. Holdings, LLC, 78 A.D.3d 807, 809-810 (2d Dep’t 2010) (possession of

“unique or specialized expertise” created a duty to “impart correct information” to

support negligent misrepresentation claim); Smith v. Ameriquest Mtge. Co., 60

A.D.3d 1037, 1040 (2d Dep’t 2009) (“triable issue of fact as to whether the nature

of the relationship between the parties imposed a duty of care upon the defendants”

where defendant “personally solicited the plaintiff to refinance her mortgage . . .”

and came to her home twice to provide her with information about the transaction

in an effort to convince her that the transaction was in her best interests”); see also

Caprer v. Nussbaum, 36 A.D.3d 176 (2d Dep’t. 2006) (finding a fiduciary duty

42

where one “handles money or property, which is not his own or for his own

benefit, but for the benefit of another person”). Courts in this State have already

found fiduciary relationships in the educational context. See Blank v. Bd. of

Higher Educ. of the City of New York, 273 N.Y.S2d 796 (Sup. Ct. Kings Cnty.

1966) (holding that administrators and faculty members who advised a student

regarding graduation requirements had a fiduciary relationship with the student);

Healy v. Larsson, 323 N.Y.S.2d 625 (Sup. Ct. Schenectady Cnty 1971).

There is over a trillion dollars of educational debt outstanding. See

http://www.consumerfinance.gov/blog/too-big-to-fail-student-debt-hits-a-trillion/

(last visited January 30, 2013). Educational institutions have encouraged this

borrowing by reporting misleading graduate employment outcomes to applicants

and current enrollees. Once the applicant takes out the loans to attend the

institution based on these representations, the institutions steward and benefit from

the borrowing. However, because of the purported lack of a fiduciary duty, the

institution can attempt to disclaim any liability when borrowers cannot find

employment sufficient to service the debt. This court should grant permission to

appeal to determine whether such a financial relationship between an educational

institution and its students creates a fiduciary duty necessary to support negligent

misrepresentation and fraudulent concealment claims.

POINT V: REVIEW SHOULD BE GRANTED BECAUSE THE

TRIAL COURT WAS INCORRECT TO FIND AS A

43

MATTER OF LAW THAT APPELLANTS WERE

NOT ACTING REASONABLY WHEN THEY

ENROLLED AND REMAINED ENROLLED

BASED ON RESPONDENT’S REPORTED

EMPLOYMENT RATES AND SALARY DATA

The trial court based its dismissal of Appellants’ GBL § 349 and §350

claims, in part, by determining as a matter of law that Appellants were not acting

reasonably when they enrolled and remained enrolled at Respondent based on

Respondent’s reported employment rates and salary information. ROA 21. The

First Department did not reach these issues but this Court should nevertheless

review it because the trial court’s holding – and the First Department’s decision not

to address it – departs radically from the previously understood pleading standards

for GBL § 349 and § 350 claims.

The trial court’s finding the Appellants’ were acting unreasonably in basing

their decision to enroll and remain enrolled in Respondent is a factual conclusion

that is prohibited at this stage of the litigation. Wiener v. Lazard Freres & Co.,

241 A.D.2d 114, 120 (1st Dep’t 1998) (reversing the granting of a CPLR 3211

motion where there were “improper findings of fact”). It is axiomatic that a court,

in considering a motion to dismiss pursuant to C.P.L.R. § 3211(a)(7), must accept

the plaintiff’s allegations as true and accord them the benefit of every possible

favorable inference. See Gaidon, 94 N.Y.2d at 345 (“The issue before us is not

whether, as a matter of law, reasonable consumers would be misled in a material

44

way, but whether that prospect is enough to create a question of fact ... or to State a

claim . . .”). This is especially true when assessing the reasonable consumer

standard under GBL § 349. See e.g. Zurakov, 304 A.D.2d at 181 (“A record that is

inconclusive as to whether a reasonable consumer might be misled precludes

summary dismissal” [citations omitted]); Wilner, 893 N.Y.S. 2d at 217 (“Under

the circumstances of this case, the reasonableness of the plaintiffs’ belief as to their

responsibilities under the contract of insurance is a question of fact, and should be

determined by the fact finder”).

This Court has held that reliance and reasonableness are issues of fact that

cannot be determined on a CPLR § 3211 motion even where there were express

disclaimers regarding the omission of material information. See Gaidon, 94

N.Y.2d 330 (even where there were express disclaimers dismissal was reversed

because whether a reasonable consumer would be misled is an issue of fact).

Moreover, the trial court’s gloss that the plaintiffs were unreasonable because they

were a sophisticated subset of education consumers is wholly without precedential

support. For GBL § 349 purposes, sophisticated parties are ordinarily large entities

or businesses, usually represented by counsel, who themselves have specific

expertise with the service or product being purchased, thereby giving the parties

equal bargaining power. For example, in New York Univ. v. Cont’l Ins. Co., 87

N.Y.2d 308, 321 (1995), the parties were found to be sophisticated for GBL § 349

45

purposes because “each side was knowledgeable and received expert

representation and advice.” See also Waverly Props., LLC v. KMG Waverly, No.

09 Civ. 3940 (VM) (FM), 2011 U.S. Dist. LEXIS 106410, at *47 (S.D.N.Y. Aug.

15, 2011) (“a successful businessman is hardly the type of inexperienced or

unsophisticated consumer whom the statute was designed to protect”), citing Teller

v. Bill Hayes, Ltd., 630 N.Y.S.2d 769, 774 (2d Dept. 1995); Kramer v. Lockwood

Pension, 653 F. Supp. 2d 354, 385 (S.D.N.Y. 2009) (no GBL § 349 claims where

the parties include sophisticated insurance brokers); Exxonmobil Inter-America v.

Advanced Info. Eng’g Servs., 328 F. Supp. 2d 443, 450 (S.D.N.Y. 2004) (no GBL

§ 349 protection where “Exxon and AIES are both sophisticated contracting

entities with equal bargaining power”); Pfizer, Inc. v. Stryker Corp., No. 02 Civ.

8613 (LAK), 2003 U.S. Dist. LEXIS 11974, at *10-11 (S.D.N.Y. July 15, 2003).

Clearly, Plaintiffs in their 20s with college degrees do not satisfy this

understanding.

Each Appellant alleges they believed Respondent’s employment data and

salary information. The Complaint alleges that there were no warnings that the

data was incomplete or otherwise misleading. The reasonableness of Appellants’

assumptions should not have been determined as a matter of law and the trial

court’s holding – and the First Department’s refusal to review it – should be

reviewed by this Court.

46

POINT VI: REVIEW SHOULD BE GRANTED BECAUSE THE

TRIAL COURT WAS WRONG TO IGNORE THE

AVAILABILITY OF STATUTORY DAMAGES

AND REQUIRE APPELLANTS TO PLEAD A

RELIABLE METHODOLOGY FOR

CALCULATING DAMAGES AT THE PLEADING

STAGE

The trial court determined that Appellants were required to plead a reliable

methodology for damages in the Complaint and, because the damages as plead

were deemed to be too “remote and speculative,” the Complaint was dismissed.

ROA 24-25. The First Department did not reach this issue. However, this Court

should review because the trial court’s holding is a radical departure from the

commonly understood pleading standard that Appellants are not required to plead a

reliable methodology for calculating damages, only a plausible theory of damages.

See Daukas v. Shearson, Hammill & Co., 26 A.D.2d 526 (1st Dep’t. 1966) (“it is

immaterial that the complaint fails to disclose the method or the detail of

computing the general damages sought by plaintiffs or that the allegations fail to

justify a recovery for the sums claimed as damages. There is no requirement that

the measure of damages shall be correctly set forth in a complaint, the test

being merely whether or not the complaint sets forth allegations from which

damages can properly be inferred”); Zuckerwise v. Sorceron Inc., 289 A.D.2d 114,

115 (1st Dep’t. 2001); CAE Indus. v. KPMG Peat Marwick, 193 A.D.2d 470, 472-

73 (1st Dep’t. 1993).

47

Appellants’ request for relief and damages allegations clearly state a

plausible theory of damages: the inflated price of Respondent’s degree due to the

misrepresentations Respondent made in its marketing materials. And even if

Appellant’s price inflation theory fails at a subsequent stage of this litigation

(although it cannot fail at the pleading stage, as noted above) both the trial court

and First Department failed to address the availability of statutory damages

pursuant to GBL § 349(h). See Burns v. Volkswagen of America, Inc., 118 Misc.

2d 289, 293 (N.Y. Sup. Ct. 1982) (deferring the issue of whether the action would

proceed on a class wide basis for actual damages, or as an individual action for

statutory damages, until the class certification stage); Super Glue Corp. v. Avis

Rent A Car System, Inc., 132 A.D.2d 604, 606 (2d Dep’t 1987).

Therefore, the trial court’s finding that damages could not be stated at the

pleading stage despite the availability of statutory damages – and the First

Department’s failure to review this error – merits this Court granting permission to

appeal.

POINT VII: THIS COURT SHOULD GRANT REVIEW TO

ELUCIDATE ITS POWER TO REGULATE LAW

SCHOOL MARKETING PURSUANT TO ITS

POWERS UNDER JUDICIARY LAW § 53 AND

THE GENERAL BUSINESS LAW, A NOVEL

LEGAL ISSUE OF GREAT PUBLIC

IMPORTANCE

48

In recent years the legal academy has engaged in dubious marketing

practices, something the First Department, the ABA, U.S Senators, and countless

others has recognized. See Exhibit A (finding that Respondent published

employment and salary statistics for former classes that “likely left some

consumers with an incomplete, if not false, impression of the schools’ job

placement success,” finding that respondent made “misleading representations that

give the impression that a full-time job is easily ascertainable when in fact it is not”

and finding that Respondent’s employment reporting disclosures was

“unquestionably less than candid and incomplete”). The First Department even

suggested that Respondent’s marketing practices constitute violations of New

York’s Rules of Professional Conduct. Id. However, the First Department excused

these transgressions and did not exert any authority over Respondent.

The First Department’s holding that there was deception without a remedy is

untenable. “Power of admission to or exclusion from the bar is within control of

courts.” In re Sugarman, 380 N.Y.S. 2d 12 (1st Dept., 1976), app den 39 N.Y. 2d

707. A necessary component of the Court system’s power to control admission to

the bar is regulating law schools through the state’s General Business Law. The

regulation of law schools is an issue of pressing importance to the bench, the bar,

and the public at large in light of the deception identified by the First Department.

The legal profession in the State of New York needs leadership to resolve these

49

issues and maintain confidence in both the bench and the academy. Thus, this

Court should grant this appeal to elucidate the Court system’s powers pursuant to

Judiciary Law § 53, in conjunction with the General Business Law, to regulate the

legal academy.

CONCLUSION

For the foregoing reasons, Appellants respectfully request that their motion

be granted, that they be given permission to appeal to the Court of Appeals, and

that this Court grant such other and further relief as may be just and proper.

Dated: New York, New York February 5, 2013

-------------------------------- Jesse Strauss STRAUSS LAW PLLC 305 Broadway, 9th Floor New York, New York 10007 (212) 822-1496 (tel.) (212) 822-1407 (fax.) jesse@strausslawpllc.com Counsel for Plaintiffs-Appellants-

Appellants

To: Michael J. Volpe, Esq. VENABLE LLP Rockefeller Center 1270 Avenue of the Americas, 24th Floor New York, NY 10020 (212) 307-5500 (tel.) (212) 307-5598 (fax) Counsel for Defendants-Respondents-Respondents

50

STATE OF NEW YORK COURT OF APPEALS -----------------------------------------------------------------X ALEXANDRA GOMEZ-JIMENEZ, SCOTT TIEDKE, KATHERINE COOPER, MATTHEW CRAWFORD, GEOFFREY CORISDEO, SOLINE McLAIN, RENEE RIVAS, GERGANA MITEVA, and CHLOE GILGAN, on behalf of themselves and all others similarly situated,

Plaintiffs-Appellants-Appellants

-against-

NEW YORK LAW SCHOOL, and DOES 1-20, Defendants-Respondents-

Respondents

-----------------------------------------------------------------X

N.Y. County Clerk’s Index No. 652226/2011

CERT I F I CAT ION

UNDER 22 N.Y.C.R.R.

§130-1.1a

Pursuant to 22 N.Y.C.R.R. § 130-1.1a, the undersigned, an attorney duly

admitted to practice law before the Courts of the State of New York, certifies that, upon information and belief formed after reasonable inquiry under the circumstances, the contents of the annexed document(s) are not frivolous. Dated: New York, New York

February 5, 2013

-------------------------------- JESSE STRAUSS

51