One way to deal with the lawyer surplus Doug French mentioned earlier is for unemployed lawyers to discover new ways of generating legal activity. To that end, recent law school graduate Joel F. Murray released a working paper earlier this month demanding the Federal Trade Commission investigate law schools for false advertising practices. Murray claims law schools use “false or misleading employment statistics” to lure potential students into enrolling. Somehow, he thinks adding more lawyers to the fray will somehow result in a more honest marketplace.
Murray claims that law schools misreport data regarding the employment of their graduates to media outlets, notably U.S. News and World Report‘s annual rankings survey, and that this constitutes advertising subject to the FTC’s jurisdiction. Unfortunately, Murray’s examples of this alleged misreporting are weak. Consider his first example:
In 2007, the Tulane University Law School reported a starting median private-sector salary of $135,000 per year for 2005 graduates based on a survey that only 24% of graduates completed. The school amended the figure after the Wall Street Journal cited the school’s use of the survey in marketing materials in a front-page article on poor job prospects for recent law school graduates. While law schools are increasingly disclosing the percentage of graduates who respond to the surveys that they use to calculate employment statistics, listing average and median salaries based on such an unrepresentative sample is potentially misleading, if not dishonest, to prospective students. Furthermore, because there is no standardized methodology for schools to release employment statistics, the statistics reported by schools vary widely.
This doesn’t exactly sound like a federal crime. Tulane selectively reported data, but Murray exaggerates when he claims this was “potentially misleading, if not dishonest, to prospective students.” If potential law students are that easily swayed by incomplete data, I’d say the fault lies with them.
Murray next said there were “questions about the veracity of the employment statistics that” the University of California-Davis law school reported to U.S. News. Again, he can’t really show there were any false statistics; in a footnote Murray said that a partial response to a freedom of information request showed that “the law school considered individuals who were studying for the bar exam full-time” to be employed. Granted, that might be misleading, but it’s still a stretch to consider this false advertising.
Beyond that, Murray does little more than cite academic concerns about the general veracity of law school employment statistics. He cites one survey from University of Colorado law professor Paul Campos:
Despite the fact that nearly all ABA accredited law schools previously reported employment rates of over 90% nine months after graduation to U.S. News and World Report, Professor Campos found that only 45% of graduates of top 50 law schools had non-temporary, legal full-time positions nine months after graduation.72 Professor Campos’ inquiry regarding law school employment statistics raises further questions about the veracity of the statistics that law schools report to U.S. News and Report. In fact, even U.S. News and World Report questions the legitimacy of law school’s reported employment statistics. In March 2011, editor Brian Kelly sent a letter to law school deans requesting that they ensure that their school is reporting accurate employment statistics.
Now, I suspect Campos is right, and that there is quite a bit of inaccuracy in law school post-graduation employment figures. That still doesn’t explain why the FTC needs to get involved. Murray himself noted the American Bar Association is already considering amending its own accreditation rules to require “fair, accurate, and not misleading” statistics. The media — including U.S. News — also serves as a market-based watchdog. So what can the FTC bring to the party?
Murray asserts — with absolutely no supporting arguments — that “enforcement of the FTC Act for law schools would improve [sic] legal education system.” Murray claims, “Investigation and prosecution would increase accountability and transparency in the legal education system, and enable prospective law students to make a more fully informed enrollment decisions.” But that is speculative hyperbole. It’s just as likely FTC meddling would lead to less transparency, as law schools could opt not to report any employment statistics at all.
Murray also ignores — or perhaps he never learned this in law school — the full consequences of FTC intervention. His entire paper is devoted to proving the FTC has jurisdiction and should act, but he never explains what that action would entail. In theory, the FTC could investigate and issue simple cease-and-desist orders — in other words, “Don’t report false or misleading statistics in the future!” But in most false advertising cases, the FTC demands a pound of flesh, i.e. money. Typically the Commission demands a financial penalty which is first distributed as refunds to the customers allegedly harmed by the false advertising (minus expenses for the FTC’s outside contractor who administers the refunds), with the remainder deposited in the federal treasury as “disgorgement” of ill-gotten gains.
In an FTC case, it is immaterial whether any actual consumer was misled or injured. That’s not the standard. The FTC need only construct a hypothetical “reasonable” consumer and, if the Commission determines this fictional person would have been misled by a particular advertisement, then the advertisement is legally false. Murray follows this hypothetical construction in his own argument: “Employment outcomes are material in a law student’s decision to attend a law school, and false or misleading employment statistics reported by a law school misrepresents a law school’s employment outcomes.” If the FTC accepted this view, it would then conclude that employment statistics are material to every student’s decision and seek financial remedies on their behalf.
In essence, the FTC would have to order any law school deemed guilty of false advertising to refund the full tuition and fees paid by every single student who matriculated during the period when the false advertising was published. This is standard practice. Of course, normally the FTC goes after nickel-and-dime cases, such as an exaggerated health claim on a box of $5 cold medication. Demanding law schools refund millions in already paid tuition would be a far larger undertaking.
A FTC action would also open the door for civil class actions to piggyback on the Commission’s false advertising charges. Again, this is standard practice. Lawyers would demand millions in additional compensation, most of which would go to the lawyers bringing the lawsuit, not the unemployed lawyers. (Ironically, plaintiffs lawyers often divert class settlement funds to favored nonprofits, including, um, law schools.)
So the net effect of Murray’s demands for FTC intervention might not be a more transparent and accountable law school market so much as a bankrupt law school market. Which I suppose wouldn’t be the worst thing in the world.