Law school deans and private placement memorandums (or, "Forbes' advice")

[SECOND UPDATE: Dean Katz (or someone at DU) has now made even more extensive edits to clarify that the principal source that Katz relies upon is Shawn O'Connor. For example, the particularly egregious phrase "Forbes' advice" has been deleted. While Katz's article still blurs the point a couple of times, it is much more accurate after the two rounds of edits.]

[UPDATE: Dean Katz has lightly edited his article to address the issues discussed in the fourth point below, but Katz's article still misrepresents its source.]

Two steps forward, two steps back  . . . .

Almost since this blog began, I've been noting that law schools have been misleading applicants and that we now have a generation of students and alums who are deeply skeptical about the truthfulness of law school deans -- which is a pretty amazing development. At the same time, we've seen other forces at play and law schools have gotten considerably better at providing factual information to the market.

Dean Katz of Denver offers this piece to correct what he sees as "myths" about attending law school. A few things struck me about the piece. First, hard data has become the coin of the realm. Loose rhetorical claims -- "the JD is so versatile!" -- don't work anymore and almost all the deans know it. That's good. Second, there were enough qualifying statements in the piece that it made me wonder if it was reviewed by the legal department at DU. It's not at the level of a private placement memorandum, but these sorts of statements may be moving that way. Maybe that wouldn't be a bad idea: law schools should issue a tightly written PPM every time they mail out an acceptance and the acceptance should include an affirmance that the enrollee has read the PPM. [edit: In the comments I clarify that I'm not actually calling for law degrees to fall under securities laws.]

On the other hand  . . . 

Third, the first thing I did upon reading the piece was to hit Control+F and search for the words "debt" and "borrow." They aren't there. (True, I did eventually find the word, "loan" used in some sentences about how various programs make it easy to pay back loans.) How can you examine the myths of law school economics without using the word "debt"?

Fourth, over and over again Dean Katz misrepresents his principal source. Eight times, Katz invokes the say-so, reputation, and advice of Forbes magazine itself, as in these examples:

Last year, Forbes magazine – a respected source on value investing – touted the value of a legal education, referring to law school as a "relatively low-risk investment that will have in impact on your future and can pay exceptional dividends over a lifetime."

This advice seems to fly in the face of the chorus of critics of legal education who would have you believe that going to law school today would be a terrible investment. So who is right? Forbes or the critics?

Though popular perceptions might lead you to follow the critics, the smart money should follow Forbes’ advice. Now might well be an excellent time for you to attend law school – at least in Denver.

When it comes to a career in law, as Forbes says, the significant, “lifelong returns justify the investment for the vast majority of applicants." 

Forbes provides an accurate comparative analysis.

To Forbes, this not only justifies the cost of law school, it is an excellent investment.

Well, if that's "Forbes' advice" -- if that's what Forbes magazine, a "respected source," is "tout[ing]" -- it must be true, right?  But Forbes isn't saying that. Katz is actually quoting the personal views of some guy named Shawn O'Connor, an executive of a test-taking prep course company. O'Connor published his piece in Forbes, but it's just an op-ed that aligns with O'Connor's economic self-interest. (We're all aware of the plummeting numbers of LSAT takers -- exactly the people who in other years might have paid for the kinds of test-taking prep courses that O'Connor's company offers.) I hit Control+F and searched for the words, "Shawn" and "O'Connor," but they appear in Dean Katz's piece only embedded in dense URLs in the footnotes.

To carry out the analogy of a private placment memorandum, imagine how much fun it would be at deposition or trial to walk Dean Katz through his claims about "Forbes' advice."  (For more criticism of Katz's piece, see this post by Prof. Deborah Jones Merritt, which addresses the Shawn O'Connor issue.)

[UPDATE: As noted at the top of this post, Dean Katz has now added the words, "Shawn O'Connor" to his article. Katz's revised sentence is ungrammatical; the clumsily written edit continues to suggest, falsely, that Forbes "touted" law school. It now says, "Last year, contributing writer Shawn O’Connor wrote an article for Forbes magazine – a respected source on value investing – touted the value of a legal education, referring to law school as a "relatively low-risk investment that will have in impact on your future and can pay exceptional dividends over a lifetime." [sic]

Katz continues to claim, falsely, that he is quoting from "Forbes' advice." As is noted in a disclaimer next to the article Katz relies upon, the opinions expressed in the article are O'Connor's. Under Dean Katz's reasoning, one could truthfully state that the "New York Times' advice" is to "Let Detroit Go Bankrupt."]

[I've done some light editing to the piece since first publishing it and added the parenthetical to the title.]

Comments

[Richard W. Painter]

Here is a "modest proposal":

Abolish federal subsidies for student loans and end bank loans for tuition. Require law schools to lend the money to students themselves. Then the law schools can put the loans into pools, and sell interests in the pools to banks and other investors. The government can then provide a partial guarantee and perhaps an interest rate subsidy. A private placement memorandum would be required. The securites fraud laws would apply to the material representations in the memo.

Better yet, make the law school file a registration statement for a public offering under Section 5 of the 1933 Act. Check out Section 11 of the Act for what will happen if they screw that one up. At least there will be job openings in plaintiffs' law firms.

[Andrew Perlman]

Provocative post, John. As you know, I sympathize in principle with a lot of what you have written: http://legalethicsforum.typepad.com/blog/2005/04/andrew_perlman__1.html

I have a few questions. First, do you think this issue arises less frequently in other educational units (undergraduate institutions, professional schools, etc.)? Second, if not (or perhaps even if so), should those units be similarly careful about what they say? Or do you think law schools have a special obligation in this regard?

[John Steele]

As a grad of Bucknell, I sadly have to admit it happens in undergrad institutions! (Do a google news search to see what I'm referring to.) Whether or not it happens more frequently in law schools I cannot say.

I believe that law schools have a distinct obligation because we're training the professionals who are supposed to facilitate compliance with law -- including compliance with reporting statutes, financial disclosures, etc. I worry that we've been teaching by example that once you become a lawyer, your job is to juke the stats. (I say "distinct" obligation because I assume that every school has a general obligation not to mislead.)

[Andrew Perlman]

I tend to agree with you, John, that law schools should be especially careful, because we should be setting a good example for the future lawyers of America. But if we are going to impose new legal obligations, I don't see why law schools should be held to a higher standard than any other type of educational institution. If misleading statements are widespread in other educational contexts (and I tend to agree with you that they are), any solutions should apply generally and not just to law schools. I fear that, although there is a lot of deserved criticism directed at law schools, law schools are taking disproportionate blame for behavior that is widespread throughout higher education.

[John Steele]

Andy I see your point and it carries a lot of weight. I'm no fan of increased legalism and adversarialism and regulation. I'd love to get to the point where we could all just trust the schools. It brings to mind this admonition from the Preamble: "To the extent that lawyers meet the obligations of their professional calling, the occasion for government regulation is obviated."

[Milan Markovic]

A law degree is not a security so misleading claims about its value and alike would not be subject to federal securities laws. This being said, I'd be curious to know whether John and others believe that the Dean's repeated references to Forbes are otherwise actionable. I don't think there is an affirmative duty for law schools to discredit positive claims made about them, but are we to view the conflation of Mr. O'Connor and Forbes as an accident?

[John Steele]

Milan, agreed that law degrees aren't securities. I'd hate to get even close to that point and I'm not actually calling for regulations like that to be enacted by anyone. On the other hand, I do like the idea of sending law school admittees a carefully written disclosure. I'd like that to be voluntary. (I seem to recall that Miami sent a thoughtful letter to its admittees about the economics of enrolling.)

As for the Dean's article, I don't see any private cause of action there. What I see is yet another erosion of trust in what law schools say. (As a matter of diction, is "conflation" the right word? It's not combining the sources, it's more "passing off." And I certainly don't think it's an accident that the views of Shawn O'Connor were passed off as "Forbes' advice.")

[Doug Richmond]

Dean Katz is admitted to the Colorado bar. Why not report him to the bar for violating Rule 8.4(c)?

[Mike Hike]

I am so shocked that a lawyer would not be honest. Next thing you know, used car salesman may not be 100% truthful.