Recent law suits filed by graduates from several law schools, have not only garnered much publicity but are having an impact on the credit ratings of the schools involved. This may not have been on the minds of the student plaintiffs. But one suspects that administrators at the schools have probably considered the possible impact.
Moody's maintains credit ratings for eight of the fifteen schools sued, including: Southwestern Law School; California Western School of Law; Brooklyn Law School; New York Law School; Golden Gate University; DePaul University; Hofstra University; and the University of San Francisco.
A Thomson Reuter news posting states, "Class-action lawsuits recently filed against fifteen law schools for fraud are "credit negative" because they could cause reputational damage and a decline in tuition revenue, according to a report released this week by the ratings agency Moody's Investors Service."
Local graduate court cases, allege violations of Illinois Consumer Fraud and Deceptive Business Practices Act claiming fraud and negligent misrepresentation. They are seeking restitution, damages and independent audits of employment and salary data.
In the cases involving the first three law schools that were sued, Thomas M. Cooley Law School in Michigan, New York Law School and Thomas Jefferson School of Law, the schools have moved to dismiss the lawsuits, arguing that they were strictly following the American Bar Association rules on job-placement data.
In January, Moody's revised its outlook on New York Law School from "stable" to "negative,". A summary of the Moody's report found online, provides a look at what factors the rating service is considering in evaluating the law schools.
The summary indicates that the downgrade for New York Law School, is due to conditions "...reflecting recent enrollment volatility and uncertainty surrounding the outcome of a recent lawsuit and its potential impact on the school's market position and longer-term student demand..." The progress of the suits will continue to be monitored for the potential impact on the School's market position. Addressing what could make the ratings go down, the report states that, " An adverse outcome of the lawsuit which could lead to financial distress or reputational risk,"
While some of the emerging difficulties for law schools stem from structural changes in the legal marketplace , (See "Practicing Theory: Legal Education for the Twenty-First Century"). The law school graduate law suits, focus on the internal practices at the schools. Practices that may have forestalled the impact of these structural changes on law schools, but that must now be re-examined.
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