BFV Perspectives, BFV Videos, Corporate Matters, | Mar 18, 2019

Full House of Defendants: Colleges Face Consumer Protection Claims

The college admissions scam a/k/a “Operation Varsity Blues,” has dominated U.S. headlines over the past week.  Beyond the Department of Justice’s criminal charges, two Stanford University students have filed a civil, class-action lawsuit against the universities implicated in the scandal—USC, Stanford, UCLA, UC San Diego, UT Austin, Wake Forest, Yale, and Georgetown—for racketeering, negligence, and two separate types of consumer protection violations: deceptive trade practices unfair competition.

Deceptive Trade Practices

The California Consumers Legal Remedies Act (“CLRA”), as does Georgia’s Fair Business Practices Act and a number of other states’ consumer protection acts, provides that it is a deceptive trade practice for a seller of goods or services to represent that “goods or services have sponsorship, approval,  characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that he or she does not have.”  According to the students, each university violated this portion of the CLRA because each of their websites state that admissions are based solely upon the student’s merit, when in fact each of “the admissions processes at these universities have been tainted by corruption, such that those parents with children who had mediocre grades and test scores were allowed admission based upon the amount of bribery money they paid to university insiders.” The students claim that they were damaged because they paid admission application fees based upon the universities’ representations that their application processes were fair, neutral, and based on the applicant’s merit. 

 Unfair Competition

As its name implies, the California Unfair Competition Law (“UCL”) restricts people and/or companies from engaging in unfair competition. The UCL defines unfair competition as:

  1. An “unlawful” business act or practice;
  2. An “unfair” business act or  practice;
  3. A “fraudulent” business act or practice;
  4. “Unfair, deceptive, untrue or misleading advertising”; or
  5. False advertising, as prohibited by Sections 17500 through 17577.5 of the California Business and Professions Code.

These definitions are disjunctive, meaning that a practice may be prohibited as “unfair” or “fraudulent,” even if not “unlawful.” The students claim that the universities’ conduct in representing that their application processes are based on merit while simultaneously turning a blind eye to the bribery of prominent university employees constitutes a violation of the UCL because it fits within the initial four definitions of unfair competition.  The students further allege that the failure of each university to have audits and other quality control mechanisms in place to ensure this behavior did not occur is, in itself, an unfair business practices.

The students’ first challenge will be to obtain the class certification necessary to proceed with their lawsuit.  If their attorney’s initial creativity in casting the scandal in terms of consumer protection issues is any indication, this should be an interesting case to follow.  Regardless of whether it moves forward, this lawsuit serves as a reminder that businesses and other institutions cannot hold themselves out as being or doing one thing, while in truth, doing something very different.  Those who do, may find themselves the subject of a variety of legal issues, including consumer protection claims. 


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BFV Perspectives, BFV Videos, Corporate Matters, | Mar 18, 2019