Classified Class Action Blog

  • All Topics
  • Contributors
  • About
  • Contact
  • Subscribe

Third Circuit Rejects Inflated-Value Theory of Damages, Declines to Certify Law School Tuition Class

August 31, 2016 by Carlton Fields

The Third Circuit recently affirmed the denial of class certification in a suit alleging that a law school made misrepresentations about the employment status of its graduates, thereby inducing students to pay inflated tuition in violation of the New Jersey and Delaware consumer fraud statutes. Much of the decision centered on damages; plaintiffs claimed they could show damages on a class-wide basis by estimating the amount by which tuition was inflated due to the misleading statistics. The district court denied class certification, finding, in part, that plaintiffs could not meet the predominance requirement of Federal Rule of Civil Procedure 23(b)(3). In particular, the district court held that plaintiffs had not shown that damages could be proven by common evidence in light of the fact that students experienced different employment outcomes.

On appeal, the Third Circuit panel first clarified that the district court had not erred in scrutinizing plaintiffs’ evidence regarding damages, citing both Supreme Court and Third Circuit precedent requiring courts to engage in a rigorous analysis of Rule 23’s requirements before certifying a class, even when this analysis overlaps with the merits. The Third Circuit panel then considered whether plaintiffs’ “price inflation” damages theory met the ascertainable loss and causation requisites to prove consumer fraud under the relevant state consumer fraud statutes. In essence, plaintiffs claimed they did not have to show that the school’s misrepresentations induced each putative class member to pay an inflated tuition; rather, by showing the existence of an efficient market for law school tuition, they could prove that the misrepresentations allowed the school to charge everyone inflated rates.

The Third Circuit agreed with the district court that plaintiffs’ price inflation damages theory was akin to a “fraud-on-the-market” theory, which enables a party to invoke a presumption of reliance (i.e. that the misrepresentation affected price, the purchaser relied on price to determine value, and such reliance was reasonable). The panel opinion noted that “recognizing ‘price inflation’ as a ‘cause’ of ‘ascertainable loss’ is essentially the same as extending the fraud-on-the-market presumption to all consumer-fraud cases.” The panel noted that – like the fraud-on-the-market theory – the price-inflation theory of damages has been rejected by courts in New Jersey and Delaware outside the context of securities fraud.

Because plaintiffs had not shown they could prove an ascertainable loss causally connected to the school’s alleged misrepresentations on a class-wide basis, the Third Circuit panel affirmed the district court’s holding that individual issues would predominate and the class could not be certified.

Harnish v. Widener Univ. School of Law, No. 15-3888 (3d Cir. Aug. 16, 2016).

Print Friendly, PDF & Email

« Previous Article

Lawyers Sanctioned for Seeking to Settle Federal Court Class Action in State Court

Next Article »

Seventh Circuit Strikes Again – Rejects Settlement In Shareholder Deal Litigation
Avatar

About Carlton Fields

Get Weekly Updates!

2020 Class Action Survey – Now Available!

DOWNLOAD NOW
Carlton Fields Logo A blog focused on the latest class action developments and trends by the attorneys of Carlton Fields.

Search

Topics

Industries/Practices
  • Construction
  • Consumer Finance & Banking
  • Food & Beverage
  • Health Care
  • Insurance
  • Labor, Employment & ERISA
  • Manufacturing & Products
  • Pharmaceutical
  • Privacy & Technology
  • Securities
  • Telecommunications

Substantive/Procedural
  • Arbitration
  • CAFA
  • Certification
    • Adequacy
    • Ascertainability
    • Commonality
    • Numerosity
    • Predominance
    • Superiority
    • Typicality
  • Decertification
  • Settlements
  • Standing
  • Striking of Class Allegations

Courts/Jurisdiction
  • Federal District Courts
  • Federal Circuit Courts of Appeal
  • United States Supreme Court
  • State Courts

Monthly Archives

Recent Articles

  • MDL Court Denies Class Certification of Proposed “NAS Babies” Class
  • What’s Good for Trial Is Good for Class Certification: Fifth Circuit Rules That Daubert Applies at Class Certification Stage
  • One Game, One Stadium: Eleventh Circuit Spikes Collateral Challenge to Tampa Bay Buccaneers Proposed Class Action Settlement

Get Weekly Updates!

Carlton Fields

  • carltonfields.com
  • Practices
  • Industries
  • Class Action Survey

Related Industries/Practices

  • National Class Actions
  • National Trial Practice
  • Appellate & Trial Support
  • Our Class Action Experience

Classified: The Class Action Blog

  • All Topics
  • Contributors
  • About
  • Contact

Classified Logo
© 2014–2021 Carlton Fields, P.A. · Carlton Fields practices law in California as Carlton Fields, LLP · All Rights Reserved · Privacy Policy · Disclaimer

Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please contact us. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites. This site may be considered attorney advertising in some jurisdictions.