Bar review question: is this false advertising?

Themis Bar Review, LLC v. Kaplan, Inc., 2016 WL 1162624, No.
14-cv-00208 (S.D. Cal. Mar. 24, 2016)
 
Themis, a relative newcomer to the bar review business,
advertised its students’ bar passage rates; a 2013 ad listed passage rates for
2012.  The left column of the ad listed a
jurisdiction, and the two columns to the right showed Themis’ students’ passage
rates for that jurisdiction and the overall state passage rate for that
jurisdiction. At the top of both of those columns was a small asterisk,
corresponding to fine print language reading “Based on Themis first-time takers
who completed 75% or more of their course assignments and on state bar exam
first-time takers.”  Themis filed a
declaratory judgment action and Kaplan counterclaimed for false advertising.
 

Ad as shown in Themis’ declaratory judgment action

Ad as shown in Kaplan’s counterclaim

The court declined to grant cross-motions for summary
judgment.  Themis argued that Kaplan’s
claim was moot because Kaplan sought only injunctive relief and Themis
permanently ceased circulating the relevant ad. But voluntary cessation doesn’t
guarantee mootness, and Themis failed to provide adequate assurances it wouldn’t
run similar ads in the future.  Its CEO
said that it voluntarily changed the format “to make the explanation larger and
more prominent, in the hopes of eliminating any argument over the issue, and
because I favor full disclosure to students choosing between bar exam
providers.”  But a present intent that
could later change isn’t enough.
 
Kaplan argued that the pass rate was literally false, even
coupled with the footnote, because Themis’ data collection methods were
problematic. The court rejected a literal falsity argument based only on the
main text, because “the proper focus is on the advertisement as a whole rather
than an isolated section. Thus, the pass rates are literally false only if they
are inaccurate with respect to the population defined in the footnote: first
time takers who complete 75% or more of the course.”  RT: This reasoning wrongly assumes that the
ad, taken as a whole, actually conveys the message in the footnote to
consumers.  If the footnote doesn’t work
as a disclosure, then Themis shouldn’t get to convert a literal falsity claim
into a more difficult to prove implicit falsity claim by including an element
in the ad that consumers don’t actually perceive as part of the ad context.

As to the footnote-modified claim, Kaplan submitted an expert report concluding
that Themis’ practice of individually contacting students in states that do not
publish pass lists is problematic. Self-reporting “may result in a systematic
response bias such that students who failed the exam might be ashamed of the
fact and therefore lie when asked whether they passed.” Themis argued that
there wouldn’t be misreporting because (1) law students are honest, and (2) it
was in students’ self-interest to report failure because they could get a free
repeat course if they failed.  A
reasonable jury could go either way on this.
 
Likewise, as for the misleadingness claim, summary judgment
was inappropriate.  Law students are the
relevant audience.  Kaplan’s survey gave
the ad to 331 current law students, allowed them to look at it for as long as
they wanted, and then took it away from them before asking various questions. The
test group received the actual Themis ad. The control group received a modified
version that displayed the footnote text more prominently.

Kaplan control ad with disclosure in column text

Both groups were
asked whether the pass rates on the ad represented all Themis test takers or
only a certain subgroup of test takers. In the test group, 15.7% of the
students answered correctly and 69.3 % answered incorrectly. In the control
group, 64.8% of students answered correctly and only 17.6% answered
incorrectly.


Themis’ study was essentially the same, except that it didn’t use a control
group and allowed respondents to keep the ad and refer to it while answering
the questions.  And it tested two
different ads with significantly more prominent footnotes.  (So, completely different.) About 84.5% of the
801 students tested correctly answered that the pass rates referred to a
certain subgroup of Themis students, while about 12% incorrectly said that the
pass rates covered the entire population of Themis students.
 

Ad tested by Themis

Another ad tested by Themis

Themis argued that “in high-level involvement purchasing
decisions such as choosing a bar prep company, a reading test, where the
subject can reference the ad while answering questions, is more appropriate
than a memory test,” given that humans have bad short-term memories.  Kaplan responded that memory wasn’t the issue;
if a student noticed the footnote, short-term memory issues wouldn’t prevent them
from answering correctly a very short time later.  Moreover, Kaplan argued, a memory test was
more realistic, because consumers look at an ad as long as they need to and
form their impressions during this time period. “Thus, if a student did not
notice the footnote after looking at the advertisement but before being asked
about it, that suggests that the advertisement would be misleading in a real
life scenario.”  Asking specific
questions while the student is reviewing the ad causes them to pay more
attention to the footnote than they otherwise would have.  (Repeating court’s use of singular
“they” because I support it
.) 
 

Screenshot from Themis survey

Another screenshot from Themis survey

Also, the presentation of Themis’ survey emphasized the
disclaimer. As Kaplan’s expert said: “When respondents scrolled down to reach
the question, they were left with a view of the ad that is heavily focused on
the disclaimer. If respondents read the question and then looked back up to the
ad, the disclaimer is the first thing they would see (and possibly the only
part of the ad they would see).” The court found Kaplan’s arguments “highly
probative” (noting in passing that it saw no reason to distinguish a trademark
case accepting Kaplan’s position from a false advertising case).
 
Themis argued that, in any event, the ad was factually true
and facially unambiguous and therefore survey evidence of misleadingness couldn’t
be considered, apparently trying to invoke the Mead Johnson/Havana Club line of cases, but the court noted that
there was no “binding” authority supporting Themis’ argument.  (Also, if you need a footnote to clarify your
claim, your claim is not “facially” unambiguous.)  In any event, Themis failed to establish that
the pass rates were literally true.
 
Themis’ study, however, didn’t suffice to defeat Kaplan’s
motion, because it didn’t test the Themis ad at issue.  “Given this disparity in footnote prominence,
it is possible that a substantial number of the students who correctly answered
the question would not have answered correctly if presented with the much
smaller footnote of the actual Themis Ad at issue here.”  (Which makes my point about facial ambiguity.)  Themis argued that law students were trained
to read “fine print,” especially given the expense of bar prep and the
importance of passing the bar.  (I
routinely ask my students how many of them have read the full agreement between
them and the law school, or them and their landlords.  Spoiler: always some, never a lot.)  Moreover, “[n]o Themis student has ever
complained to Themis that Themis’ advertisements are misleading or deceptive.”  Those arguments were enough to reject Kaplan’s motion for summary judgment.  The court would not hold, as a matter of law,
that law students were unlikely to read footnotes signaled by asterisks “when
evaluating which expensive bar review course to choose to prepare for one of
the most important tests of their lives, especially when there is evidence that
no student has ever complained of being misled.”
 
Kaplan also argued that, even assuming that students read
the footnote, Themis’ ads were still misleading with respect to some
jurisdictions because of a lack of statistical significance.  (I think Kaplan should be arguing about practical significance,
but this is a common lawyers’ problem.)  For
example, Themis advertised that 100% of its students who were first time takers
and completed 75% or more of the course passed the July 2013 Washington D.C.
bar exam, compared to the DC-wide average of 71%. But that 100% pass rate was
based a population of four students, which couldn’t realistically show any
Themis advantage.  The court agreed that
comparing Themis pass rates to state/district-wide averages might imply that
the Themis pass rates were based on a sample size large enough to show significance
(statistical or practical).  A reasonable
jury could go either way.
 

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