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Tort/Negligence – Fraud & Negligent Misrepresentation – Breach of Contract – Defunct Law School

Tort/Negligence – Fraud & Negligent Misrepresentation – Breach of Contract – Defunct Law School

The court gives defendants’ former law students a chance to amend their complaints to state claims for fraud and negligent misrepresentation arising from defendants’ statements and omissions about the defendant-law school’s conformity with American Bar Association standards.

Defendants’ motions to dismiss are granted in part and denied in part.

Plaintiffs were students at the now-defunct defendant Charlotte School of Law, LLC (CSL). Plaintiffs allege various claims arising out of their disappointment with their education at CSL.

Plaintiffs’ breach of contract claim fails because they fail to sufficiently allege that CSL made any specific promise, beyond the general promise of providing a legal education, sufficient to support a cognizable contract claim. CSL’s website advertisements are not sufficient to establish a general policy or specific promises that demonstrate a mutual agreement between CSL and plaintiffs that CSL would always be in compliance with ABA standards.

Plaintiffs’ constructive fraud claim also fails. Plaintiffs cannot cite to any authority to support their assertion that defendants owed plaintiffs a fiduciary duty. In fact, CSL could not act exclusively for plaintiffs’ benefit. CSL had loyalties to the public and a duty to ensure that only qualified lawyers graduate from its program. Additionally, CSL had an interest in ensuring that the rules and regulations of the school and the ABA were followed.

Plaintiffs must amend their misrepresentation-based claims to comply with N.C. R. Civ. P. 9(b).

Since defendants did not owe a fiduciary duty to CSL’s students, in order to establish a duty to speak, plaintiffs must demonstrate that defendants took affirmative steps to conceal material facts from CSL’s students or that they were aware of a latent defect that the students would not be able to discover through reasonable diligence.

Plaintiffs allege that CSL Dean Jay Conison affirmatively represented to students that a decision issued by the ABA in January 2015 was “very positive,” notwithstanding that the ABA had stated it had reason to believe that CSL was not in compliance with certain ABA standards. Defendants resisted the ABA’s directive to disclose their decisions to CSL students because CSL knew that disclosure “would have an adverse impact on [CSL’s] ability to retain high-performing students,” and “would make applicants much less likely to enroll.” These allegations, when taken in a light most favorable to plaintiffs, are sufficient to allege that defendants had a duty to disclose and failed to disclose material information to plaintiffs, supporting their claims for fraud by concealment.

However, plaintiffs make no allegations that, after the U.S. Department of Education removed CSL from its financial aid program, defendants represented that CSL students could receive financial aid. Plaintiffs have not stated a fraud claim based on their allegation that defendants misrepresented that plaintiffs would be eligible to receive financial aid.

Plaintiffs contend that defendants falsely stated that “a graduate of CSL is trained at a level of a second year associate attorney,” and that “CSL graduates will be highly sought for legal jobs.” Since these statements are opinions rather than facts, plaintiffs must allege that defendants did not believe the statements to be true at the time they were made.

Plaintiffs allege that defendants knew that their bar passage rates were low, which would directly affect students’ ability to obtain legal jobs, and that the ABA was questioning the sufficiency and rigor of CSL’s curriculum, making it unlikely that CSL’s training was equivalent to a second year associate’s training. While the adequacy of these allegations is questionable, the court will defer further consideration of these alleged misrepresentations pending a further amended complaint.

As to the alleged misrepresentation that “CSL’s bar passage rates were consistently at or above the state average,” the court concludes that plaintiffs have sufficiently alleged a claim for fraud based on this statement.

Plaintiffs allege that defendants continued to represent that CSL was in compliance with all ABA standards, even after the ABA concluded that CSL was not in compliance with the standards. Plaintiffs allege that defendants had information concerning the ABA’s findings that plaintiffs were not able to obtain on their own. These allegations, taken as true, may be sufficient to state a claim for negligent misrepresentation.

However, to the extent plaintiffs’ negligent misrepresentation claims rely on defendants “omitting material facts to Plaintiffs,” the claim must be dismissed because North Carolina does not recognize a claim for negligent omission.

Motion granted in part, denied in part.

Herrera v. Charlotte School of Law, LLC (Lawyers Weekly No. 020-033-18, 45 pp.) (James Gale, C.J.) Gary Jackson, Hoyt Tessener, James Farrin, Christopher Bagley, Sidney Fligel, and Lawrence Serbin for plaintiffs; Debbie Harden, Johnny Loper, Sarah Stone, David Mills and Michael Hays for defendants. 2018 NCBC 34


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