John Harnish v. Widener University School of L
833 F.3d 298
| 3rd Cir. | 2016Background
- Six Widener Law graduates (2008–2011) sued under the New Jersey and Delaware Consumer Fraud Acts, alleging Widener published misleading graduate-employment statistics and charged "inflated" tuition as a result.
- Plaintiffs sought class certification for all persons who enrolled and were charged tuition during the statutory period up to class certification, and sought out-of-pocket damages equal to the tuition overpayment.
- Plaintiffs offered Dr. Donald Martin’s economic regression (64 private law schools) to show a class-wide relationship between reported employment rates and tuition, and asserted an "inflated-tuition" (price-inflation) theory of class-wide damages.
- The District Court denied class certification, finding plaintiffs failed Rule 23(b)(3) predominance because they had not shown damages could be proved with common evidence, and also found typicality problems for post-2011 enrollees.
- On interlocutory appeal, the Third Circuit affirmed: although the District Court mischaracterized parts of plaintiffs’ damages theory, the errors were harmless because plaintiffs’ only class-wide evidence supported a non-cognizable price-inflation theory under NJ/DE authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court applied improper standard at class-certification (predominance) | Harnish: court demanded conclusive proof of class-wide damages pre-discovery; only viability of method required | Widener: plaintiffs must prove by preponderance that class-wide proof will work; district court may scrutinize overlapping merits | Court: district court applied correct rigorous Rule 23 analysis; scrutiny of class-wide proof was appropriate and not a merits bar |
| Whether plaintiffs’ damages theory requires individualized proof of employment outcomes | Plaintiffs: damages are out-of-pocket (inflated tuition) tied to time-of-enrollment market value, not individual post-graduation outcomes | Widener: individual outcomes matter and create predominating individualized issues | Court: plaintiffs’ theory properly framed as out-of-pocket, so individual employment outcomes are irrelevant; any mischaracterization by district court was harmless |
| Whether price-inflation/efficient-market theory is a cognizable basis for class-wide damages under NJ/DE law | Plaintiffs: market efficiency (per Dr. Martin) lets them prove Widener charged higher tuition systemically due to misleading stats, without individualized reliance | Widener: price-inflation is equivalent to extending fraud-on-the-market beyond securities law and is not cognizable | Court: NJ and DE precedent reject price-inflation/fraud-on-the-market theories outside securities context; plaintiffs’ only class-wide evidence supports a non-cognizable theory, so predominance fails |
| Whether named plaintiffs were "typical" under Rule 23(a)(3) | Plaintiffs: named plaintiffs represent the class enrolled through certification | Widener: post-2011 enrollees experienced changed reporting practices, creating atypicality | Court: because Rule 23(b)(3) failed, court did not need to decide typicality on appeal; district court’s typicality concern was alternative ground but unnecessary to resolve here |
Key Cases Cited
- Neale v. Volvo Cars of N. Am., LLC, 794 F.3d 353 (3d Cir.) (class-certification abuse-of-discretion standard)
- Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (Sup. Ct.) (common vs. individual questions; generalized proof can suffice)
- Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184 (Sup. Ct.) (when common proof guarantees unified outcome)
- In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305 (3d Cir.) (rigorous Rule 23 analysis may overlap merits)
- Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154 (3d Cir.) (must demonstrate economic loss on a common basis)
- International Union of Operating Engineers Local No. 68 Welfare Fund v. Merck & Co., 929 A.2d 1076 (N.J.) (rejecting price-inflation as sufficient for ascertainable loss under NJCFA)
- AstraZeneca Pharm. LP, 136 A.3d 688 (Del. 2016) (rejecting market-price based damages absent individualized proof under DCFA)
- Kaufman v. i-Stat Corp., 754 A.2d 1188 (N.J.) (discussion of fraud-on-the-market linkage to efficient market)
- Lee v. Carter-Reed Co., 4 A.3d 561 (N.J.) (exception for uniformly baseless representations; otherwise individualized reliance inquiries)