An Unlikely Bellwether Trial
*[A bellwether trial is a case that the court and the parties select to test their arguments, with the goal of moving the overall litigation towards resolution]
One of our more interesting cases in recent years was a case in which we represented students of a culinary school. The students claimed that the school misrepresented the jobs which students could potentially be qualified for and hired into after graduating, and the compensation that would be available to them. The graduates claimed that they took out substantial student loans based on the school’s misrepresentations, and were not only unable to find the represented employment opportunities, but also could not service their loans with the low- level job opportunities actually available to them after graduation.
The case was hotly litigated for five years, with no potential resolution in sight. The defendants moved to compel arbitration of all of the claims by all students. However, the Court found that the arbitration agreement used by defendants was “unconscionable” and invalidated it, because it contained one-sided requirements prejudicial to the students – like requiring that any arbitrator have “experience in for-profit education,” i.e. be an insider in defendants’ own industry. However, approximately 48 of 1,300 cases were sent to arbitration, because the arbitration agreements for those specific students had been cleaned up and did not contain the prejudicial requirements.
Many of the cases were lined up for arbitration, and the first to go to arbitration was the case of Anna Berkowitz. Ms. Berkowitz claimed that the school’s admissions representatives – essentially aggressive recruiters – had misled her and her father by stating that, if she attended the school and borrowed the $40,000 required to pay for 8 months of training there, that her culinary degree would make her a “shoe in” to land a job as a Pastry Chef earning at least $75,000 per year, to start. After multiple days of arbitration hearings, Arbitrator Samuel G. Jackson awarded Ms. Berkowitz $217,000 in total damages and attorneys’ fees. Mr. Jackson specifically found that the culinary school committed fraud when they recruited Ms. Berkowitz out of high school and convinced her and her father to borrow the money required to attend their school, based on the misrepresentations about her ability to get a Pastry Chef job and pay back her loans with the salary she would obtain. His award to Ms. Berkowitz included damages for tuition paid, earnings lost while Ms. Berkowitz attended the culinary school, damages for lost opportunity for the months she unsuccessfully sought employment as a Pastry Chef after graduating from the school, and for emotional distress damages and attorneys’ fees.
Following the overwhelming success we were able to achieve at the Berkowitz arbitration, we were also then able to successfully settle the vast majority of remaining cases by other students against the culinary school, at terms favorable to our clients.