Student-Consumers: the Application of Chapter 93A to Higher Education in Massachusetts

by Robert E. Toone and Catherine C. Deneke

Legal Analysis

While the value of a college education used to be (pardon the expression) a no-brainer, some have begun to question it. College graduates have generally fared better in the Great Recession than others, but unemployment remains high and many have had to take jobs that traditionally did not require a college degree. Student loan debt obligations now exceed $1 trillion and continue to burden the economy by making it harder for Millennials to buy homes, start businesses, and invest for retirement.

Some students, dissatisfied with the financial value of their education, have turned to the courts for relief. Perhaps not surprisingly, law students have led the way, filing a variety of claims against their alma maters.[1] Other students have sued colleges and universities for, among other things, making misleading claims about job placement or earned qualifications, program accreditation, failure to describe admission standards, and grade disputes. In many of these lawsuits, students have asserted consumer protection claims, on the theory that they are consumers of the institutions they are suing.

In addition to having a celebrated and diverse collection of colleges and universities, Massachusetts has one of the most powerful consumer protection laws in the nation, Chapter 93A.[2] Enacted in 1967 and amended several times since, the statute gives the Attorney General broad authority to implement regulations, investigate potential violations, and file enforcement actions. It also establishes a cause of action for consumers who have been subjected to unfair or deceptive acts or practices. Prevailing plaintiffs may obtain injunctive relief, and recover compensatory damages, multiple damages in the event of a willful and knowing violation, and reasonable attorneys’ fees and costs.

Over the years, a variety of consumer-fraud lawsuits have been brought against Massachusetts colleges and universities. The resulting decisions show that even though liability under 93A is generally expansive, it has significant limits in higher education. It remains to be seen whether a shifting perception of consumerism in the college setting will change this area of the law.

Scope of Chapter 93A’s Application

The most frequently litigated limitation on Chapter 93A’s scope involves its requirement that challenged acts and practices occur in the conduct of “trade or commerce.” In applying this requirement, courts ask whether a challenged act or practice occurred “in a business context,” a fact-specific inquiry that involves the character, activities, and motivations of the parties involved. See Kraft Power Corp. v. Merrill, 464 Mass. 145, 155-56, 981 N.E.2d 671, 682-83 (2013). While considerable attention has been paid in recent years to the experience of students at “for profit” colleges,[3] it is a mistake to assume that an institution’s charitable status under the tax code will shield it from liability under Chapter 93A. In fact, a number of nonprofit colleges and universities have been successfully sued under this statute.

In 1997, for example, the Supreme Judicial Court upheld the finding of a 93A violation against Boston University in a dispute involving the provision of education and training programs at a satellite facility owned by the university. The court found that the university’s contractual relationship with the plaintiff corporation was not merely for services “incidental to [its] educational mission,” but rather was driven by a strong desire to increase the university’s revenues and expand its reach to the corporate market. Linkage Corp. v. Trustees of Boston Univ., 425 Mass. 1, 23-25, 679 N.E.2d 191, 207-08 (1997).

Colleges and universities are less likely to be found to have engaged in “trade or commerce” for activities undertaken in furtherance of their core educational mission. In one case, for example, the U.S. District Court ruled that a student could not proceed with a misleading advertisement claim concerning Harvard Law School’s administration of student financial aid. Thornton v. Harvard Univ., 2 F. Supp. 2d 89, 95 (D. Mass. 1998). Chapter 93A lawsuits have also been dismissed against MIT, Salem State University, and the New England School of Law on the ground that the challenged activities were part of or incidental to their educational missions and, therefore, not in “trade or commerce.” See Thomas v. Salem State Univ. Found., Inc., No. 11-10748-DJC, 2011 U.S. Dist. LEXIS 121036, at *23-25 (D. Mass. Oct. 18, 2011) (dismissing 93A claim alleging racial discrimination because university was carrying out its statutory mandate to deliver educational services); Brodsky v. New England Sch. of Law, 617 F. Supp. 2d 1, 7 (D. Mass. 2009) (law school’s alleged refusal to allow student to retake courses he failed or readmit him after expulsion implicated setting and enforcement of academic standards – “part of any university’s core mission”); see also Shin v. Mass. Inst. of Tech., No. 020403, 2005 Mass. Super. LEXIS 333, at *22-23 (Mass. Super. Ct. June 27, 2005) (university’s provision of medical care was “purely incidental to the university’s educational mission”).

Even for those acts and practices that implicate “trade or commerce,” one university system remains out of Chapter 93A’s reach. In 2011, U.S. District Judge Patti Saris ruled that the Commonwealth’s sovereign immunity shields the University of Massachusetts from suit under Chapter 93A. Max-Planck-Gesellschaft Zur Foerderung Der Wissenschaften E.V. v. Whitehead Inst. for Biomedical Research, 850 F. Supp. 2d 317, 331 (D. Mass. 2011). Although the statute provides broadly that “legal entities” may be sued as defendants, Judge Saris ruled that the Commonwealth’s sovereign immunity must be waived explicitly, not merely by implication. This ruling involved a patent dispute, but its reasoning appears to apply to all disputes in which the University of Massachusetts is involved. It remains to be decided whether the Commonwealth’s public community colleges are also immune to suit.[4]

Unfairness in the University Setting

A different hurdle for college students filing 93A claims is proving that the act or practice they challenge is “unfair” or “deceptive.”

The concept of unfairness under 93A is notoriously hard to pin down and can only be discerned from the circumstances of each case. Courts used to ask whether the challenged conduct entailed “a level of rascality” or the “rancid flavor of unfairness,” but the SJC has since described these standards as “uninstructive.” Mass. Emp’rs Ins. Exch. v. Propac-Mass. Inc., 420 Mass. 39, 43, 648 N.E.2d 435, 438 (1995). Instead, it advises courts to “focus on the nature of challenged conduct and on the purpose and effect of that conduct as the crucial factors in making a [Chapter 93A] fairness determination.” Id.

In the context of higher education, courts applying 93A have been reluctant to find unfairness in institutions’ generally applicable rules and practices. In one case, the Court of Appeals affirmed the denial of relief to a student whose cumulative GPA fell below the requirement for a law degree. It was “neither arbitrary nor unfair,” the court observed, for the law school to include failing course grades in its GPA calculations, even when a student repeated the course and obtain a passing grade on the second attempt. Essigmann v. W. New England Coll., 11 Mass. App. Ct. 1013, 1013-14, 419 N.E.2d 1047, 1048-49 (1981). In another case, the court dismissed a claim challenging the fairness of an admission system that favorably considered recommendations from the school’s “alumni, students and friends” because “such a policy, if proved, would not constitute an unfair or deceptive practice.” Donnelly v. Suffolk Univ., 3 Mass. App. Ct. 788, 788, 337 N.E.2d 920, 921 (1975).

Deception

Given courts’ general unwillingness to interfere in university-student disputes involving grades, curricula, and discipline, the strongest 93A claims against colleges and universities may involve allegations of deceptive marketing. In an enforcement action filed in April 2013 against Sullivan & Cogliano Training Centers, a for-profit school based in Brockton, the Massachusetts Attorney General alleged that the school misrepresented, among other things, the employment opportunities available in students’ field of study and percentages of students successfully placed in those fields.[5]

In general, conduct is regarded as deceptive under 93A if it has a tendency or capacity to deceive; a plaintiff need not show her reliance on the representation or the defendant’s intent to deceive. See Aspinall v. Philip Morris Cos., Inc., 442 Mass. 381, 394, 813 N.E.2d 476, 486-87 (2004), abrogated in part on other grounds by Tyler v. Michaels Stores, Inc., 464 Mass. 492, 502 n.15, 984 N.E.2d 737, 745 n.15 (2013). A plaintiff bringing an action for damages, however, must allege and ultimately prove that she suffered a distinct injury or harm as a result of the claimed unfair or deceptive act. Tyler v. Michaels Stores, Inc., 464 Mass. 492, 503, 984 N.E.2d 737, 745-46 (2013).

One issue that has arisen in other jurisdictions is the extent to which the relative sophistication of students or graduates should be considered in assessing deceptive marketing claims. In one “law school scam” case, the trial court in New York held that publicized employment figures were not materially misleading in part because “reasonable consumers – college graduates – seriously considering law schools are a sophisticated subset of education consumers, capable of sifting through data and weighing alternatives before making a decision regarding their post-college options, such as applying for professional school.” Gomez-Jimenez v New York Law Sch., 943 N.Y.S.2d 834, 843 (N.Y. Sup. Ct. 2012). On appeal, the Appellate Division agreed that the law school’s “statistical gamesmanship” did not give rise to a claim under New York’s consumer protection statute; it was not a violation to “simply publish[]truthful information and allow[] consumers to make their own assumptions about the nature of the information.” Gomez-Jimenez v New York Law Sch., 956 N.Y.S.2d 54, 59 (N.Y. App. Div. 2012). Nevertheless, the court noted its disagreement with the view that “college graduates are particularly sophisticated in making career or business decisions”; to the contrary, it observed, “they sometimes make decisions to yoke themselves and their spouses and/or their children to a crushing burden because the schools have made misleading representations that give the impression that a full time job is easily obtainable when in fact it is not.” Id. at 60. Recently, the Sixth Circuit affirmed the district court’s dismissal of a similar suit, holding in part that Michigan’s consumer protection law did not apply because the graduates’ reliance on the law school’s employment statistics was unreasonable. MacDonald v. Thomas M. Cooley Law Sch., No. 12-2006/2130, 2013 U.S. App. LEXIS 15444, *2 (July 30, 2013).

In addition to contesting misrepresentation claims on their merits, schools accused of deceptive marketing may have a defense under section 3 of Chapter 93A, if the representations at issue were authorized by regulation. Institutions of higher education in the Commonwealth are subject to extensive regulations by both the U.S. Department of Education and the Massachusetts Department of Elementary and Secondary Education, and this regulation includes dozens of consumer-related disclosure and reporting requirements on such topics as textbook prices, graduation rates, and credit transfer policies. Liability under 93A does not override the complex and nuanced judgments of regulators charged with overseeing the work of higher education.

Similarly, Chapter 93A does not supplant traditional principles of contract and tort law. Many aspects of the student-college relationship are contractual in nature, involving admission agreements, student manuals, and other materials. Even though Chapter 93A is “not subject to the traditional limitations of preexisting causes of action,” Slaney v. Westwood Auto, Inc., 366 Mass. 688, 704, 322 N.E.2d 768, 779 (1975), there is no indication that it was intended to serve as a gap-filling cause of action for students who cannot prove that the university breached its contractual obligations. See, e.g., Showell v. Trs. of Boston Univ., No. 935815, 1994 Mass. Super. LEXIS 594, at *3 (Mass. Super. Ct. June 30, 1994) (summarily dismissing 93A claim after concluding that student alleging that university failed to inform her about prerequisite for professional classes failed to state claim for breach of contract). Nor does 93A change the general rule that university officials do not owe a fiduciary duty of disclosure to current or prospective students. See Morris v. Brandeis Univ., 60 Mass. App. Ct. 1119, 2004 WL 369106, at *4 (Mass. App. Ct. Feb. 27, 2004) (citing Sullivan v. Boston Architectural Ctr., Inc., 57 Mass. App. Ct. 71, 774, 786 N.E.2d 419, 421 (2003)).

Conclusion

Under existing law, substantial barriers stand in the way of students who file Chapter 93A and other consumer-protection claims against colleges and universities. Courts have traditionally deferred to the good-faith judgments of college and university administrators and declined to find that acts involving normal university operations either occurred in “trade or commerce” or constituted unfair or deceptive conduct. This reluctance reflects both limitations imposed by the statute and a general skepticism about the idea that students are consumers. Higher education has long been perceived as a long-term process of discovery and human development – far more complex than the satisfaction of a consumer’s immediate needs and desires.

This perception, however, may be changing. College ranking guides published by U.S. News & World Report and others have revolutionized how high school students select institutions of higher learning. New federal initiatives allow prospective students to research those institutions where, in President Obama’s words, “you can get the most bang for your educational buck.”[6] In their competition for applicants and tuition dollars, colleges and universities have implemented sophisticated marketing and branding campaigns. Some have invested in “consumption amenities” like climbing walls, pools, and luxury dormitories. Many institutions, often partnering with private companies, have begun to implement “massively open online courses,” or MOOCs, as a less expensive, though less intimate, way of delivering knowledge to students.

These developments have the potential to transform American higher education. They may also end up fundamentally changing the student-university relationship. If that happens, courts may be inclined to reexamine their traditional deference to institutions of higher learning. At least for now, however, institutions that do not abuse their trust or lose sight of their primary responsibility as educators will have strong defenses to claims under 93A.

Robert Toone is a partner at Foley Hoag focusing on financial and commercial litigation, education, and government investigations. He can be reached at rtoone@foleyhoag.com.

Catherine Deneke is an associate at Foley Hoag with a practice focus in education and complex commercial litigation. She can be reached at cdeneke@foleyhoag.com.

[1] So far, all but one of these “law school scam” suits has been dismissed. In March 2013, a federal judge in New Jersey allowed a suit against Widener University School of Law to proceed based on allegations that the school published misleading and incomplete post-graduate employment data. See Harnish v. Widener Univ. Sch. of Law, No. 2:12-cv-00608, 2013 U.S. Dist. LEXIS 38514 (D.N.J. Mar. 20, 2013). [2] A survey by the National Consumer Law Center found that Chapter 93A is one of the strongest consumer protection laws in the nation, with its only perceived weakness being its requirement that consumers submit a demand letter to a defendant 30 days before suit. [3] In 2010, Tom Harkin, chairman of the U.S. Senate Committee on Health Education Labor & Pensions, launched a two-year investigation into for-profit colleges. The following year, a number of state attorneys general, including Massachusetts’s Martha Coakley, initiated their own investigations into the industry. [4] Courts in other jurisdictions have grappled with whether community colleges are immune for suit under consumer protection statutes. See, e.g., Meyer v. Cmty. Coll. of Beaver Cnty., 30 A.3d 587 (Pa. Commw. Ct. 2011) (holding that immunity does not apply to consumer fraud claims sounding in contract against community college), appeal granted in part, 51 A.3d 177 (Pa. 2012). [5] This enforcement action is pending. Although there are important procedural differences between 93A actions brought the Attorney General and by private plaintiffs, the same substantive standards for determining whether an act or practice is unfair or deceptive apply. [6] In his 2013 State of the Union, the President Obama announced a “college scorecard” web site designed to inform students about different colleges’ cost, value and quality. In an effort to promote “transparency in college tuition for consumers,” Congress also requires that each college and university receiving federal student aid post a “net price calculator” that compares the costs of attendance and the average aid received.