Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Cal.: Kaplan proceeds with claims that Themis misrepresented bar passage rates, (Mar 28, 2016)

By Greg Hammond, J.D.

Kaplan, Inc. can proceed with a false advertising counterclaim against Themis Bar Review, LLC, for purportedly misrepresenting its student bar passage rates. In denying cross-motions for summary judgment, the federal district court in San Diego concluded that: (1) the false advertising issue was not moot based on Themis’ claim it permanently ceased circulating the ad; and (2) there were material questions of fact in whether Themis’ ad was literally false and/or had a tendency to mislead (Themis Bar Review, LLC v. Kaplan, Inc., March 24, 2016, Lorenz, M.).

Themis sought declaratory judgment that its advertising was accurate and non-misleading. The ad at issue contains fine print stating that the Themis pass rates and state pass rates in the ad are “Based on Themis first-time takers who completed 75% or more of their course assignments and on state bar exam first-time takers.” Kaplan filed a counterclaim alleging false advertising against Themis, which was the subject of the parties’ cross-motions for summary judgment.

Mootness. The court first rejected Themis’ argument that the false advertising counterclaim was moot because it had permanently ceased circulating the ad. The problem with Themis’ argument, according to the court, was that there was nothing obstructing Themis from recirculating the advertisement at a future time. Themis therefore failed to make it “absolutely clear that the allegedly wrongful behavior could not reasonably be expected to occur.”

Literal falsity. Summary judgment was denied as to both parties with regard to Kaplan’s argument that the ad was literally false. An expert’s report, submitted by Kaplan, created a material dispute of fact as to the soundness of Themis’ data collection processes and the pass rate thus derived. The report concluded that Themis’ practice of individually contacting students in states that did not publish pass lists was problematic because the study of human psychology suggests that relying exclusively on the self-reporting of students might 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.

Tendency to mislead. Lastly, the court denied the cross-motions for summary judgment based on Kaplan’s allegations that the ads had a tendency to mislead. An expert report submitted by Kaplan created a material dispute of fact with regard to whether the Themis Ad had a tendency to mislead law students, because the court gave weight to a number of cases and an academic article that suggested the “memory test” methodology employed by Kaplan’s expert was the ideal research design for testing consumer perception of advertising. The court did not grant summary judgment in favor of Kaplan, however, because the court could not hold, as a matter of law, that a law student was unlikely to read a footnote signaled by an asterisk when evaluating which expensive bar review course to choose to prepare for “one of the most important tests of their lives,” especially in light of evidence that no student has ever complained of being misled.

The case is No. 3:14-cv-00208-L-BLM.

Attorneys: Kenneth M. Fitzgerald (Fitzgerald Knaier LLP) for Themis Bar Review, LLC. David S. Greenberg (Davis and Gilbert LLP) and Douglas Quinton Hahn (Stradling Yocca Carlson and Rauth PC) for Kaplan, Inc.

Companies: Themis Bar Review, LLC; Kaplan, Inc.

Cases: Advertising CaliforniaNews